Boscov's sites get caretaker

The fate of closed Boscov's stores at Monroeville Mall and South Hills Village now is in the hands of a court-appointed receiver.

Gregory T. Malony, CEO of Jones Lang LaSalle Americas Inc., a Chicago-based commercial real estate company, was named caretaker of the two anchor store sites closed and left vacant in the wake of Boscov's bankruptcy filing on Aug. 8.

"We will be coming to the sites in the next few days to get a better feel for their conditions and what's left there," said Malony, whose appointment was approved Thursday by Allegheny Common Pleas Court Judge Paul F. Lutty Jr.

Malony said his role will include making sure utility and other necessary bills are paid and the properties kept in good condition.

After "assessing the condition of the property," he will recommend a course of action to the court, which could include hiring a real estate company to market the property to new tenants.

Court documents say CWCapital Asset Management LLC, of Washington D.C., asked the court to appoint a receiver after H&R Real Estate Investment Trust of Toronto defaulted on a $19.8 million mortgage.

H&R owned the properties and leased them to Boscov's, the documents say. H&R won't make any future payments to CWCapital and will continue to be indefinitely in default, the documents say. H&R officials cound not be reached for comment.

The Monroeville and Upper St. Clair stores, both former Kaufmann's, reopened in 2006 as Boscov's.

Both stores were closed after liquidation sales conducted by restructuring firm Gordon Brothers Group and Hilco Merchant Resources LLC. The South Hills Village Boscov's closed on Sept. 28, and the Monroeville location was shuttered on Oct. 13, according to spokesmen for the two malls.

Despite weakening economic conditions in the U.S., there is reason to believe both the Monroeville and South Hills locations won't stay vacant for long, said Doug German, a retail real estate broker with Hanna Commercial.

"I think this will create opportunity for other retailers," said German. "I am sure there would be a number of companies who aren't yet in this market who would look at the locations," he said.

One potential department store replacement could be Nordstrom, the upscale Seattle-based retailer that just opened a new store in Ross Park Mall in Ross, German theorized.

"It's not unusual for retailers to seek sites for more than one store in a new market, and Nordstrom's has two stores in Indianapolis, which is a smaller market than Pittsburgh," he said.

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Financiers to reap billions in bonuses

Five straight quarters of losses and a 70 percent slide in its stock this year haven't stopped Merrill Lynch & Co. from allocating about $6.7 billion to pay bonuses.

Goldman Sachs Group Inc. and Morgan Stanley, still on track for profitable years, set aside a combined $13 billion for bonuses during the first three quarters of the year, 28 percent less than in the same period in 2007. Even at Lehman Brothers Holdings Inc., which declared the biggest bankruptcy in U.S. history last month, some employees will get the same bonus they received a year ago.

The worst financial crisis since the Great Depression, a $700 billion taxpayer bailout, public outcry over excessive pay and the demise of three of the biggest securities firms won't deter Wall Street from offering year-end rewards to employees on top of their salaries, compensation experts say.

"Critical producers and critical managers will be retained with the same bonus they had last year," said Robert Sloan, head of U.S. financial-services recruiting at Egon Zehnder International, a New York-based executive-search firm. "The others will see sharp cuts."

The figures are based on estimates that about 60 percent of the companies' reported expense for compensation and benefits will be paid in year-end bonuses, as occurred in past years. Average bonuses aren't an indication of how much any employee will receive, since payments range widely from assistants to top traders. Bonuses aren't paid until the end of the fiscal year, so firms could choose to reallocate the funds.

"We are in the process of determining appropriate levels of year-end compensation, and no decisions have been made," said Mark Lake, a spokesman at Morgan Stanley. Ed Canaday, a spokesman for Goldman in New York, declined to comment.

Merrill spokeswoman Jessica Oppenheim said the firm's accrued bonuses aren't down as much as those at Goldman and Morgan Stanley because the firm reduced expenses last year, when it also had a loss. Compensation costs are down 18 percent this year, compared with the first nine months of 2006, Merrill's last profitable year.

Goldman, the biggest and most profitable Wall Street firm until it opted to become a bank holding company last month, has set aside about $6.85 billion for bonuses, or an average of $210,300 for each employee, down 32 percent from $339,400 a year ago. Morgan Stanley, the second-biggest securities firm until it also converted to a bank, has $6.44 billion for bonuses, or $138,700 per person, down 20 percent from last year. Both firms accrue a fixed percentage of their revenue for compensation, so the decline in bonus pools matches the drop in revenue.

The money Merrill has set aside for bonuses equates to an average $110,000 for each of its 60,900 people. That's up from $108,000 a year ago because more than 3,000 jobs have been cut.

A worldwide economic slowdown, caused in part by the financial industry's losses, and a Treasury plan to spend $250 billion of taxpayer money buying stakes in banks, have made pay a political issue this year.

"There should be a moratorium on bonuses," Barney Frank, chairman of the House Financial Services Committee, told reporters last week. "If nobody gave them, there wouldn't be a competitive aspect."

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LeNature's trustee files first round of lawsuits

The trustee overseeing the dismantling of former LeNature's Inc. in Latrobe filed two dozen lawsuits in U.S. Bankruptcy Court to recover more than $4 million in payments the company made while it was insolvent.

The lawsuits are the first in a spate of legal actions expected this week against individuals, accounting firms and financial institutions alleged to be involved in the 2006 collapse of the bottling and beverage company whose former executives are the subject of a federal criminal investigation.

Trustee Marc Kirschner has until Friday -- when the two-year statute of limitations expires -- to file legal actions to recover money and other assets.

LeNature's Inc. was forced into bankruptcy on Nov. 1, 2006. The bankruptcy ended earlier this year with the appointment of Kirschner in July. He was authorized to investigate allegations of fraud and mismanagement and to pursue claims to recover money for creditors who are owed hundreds of millions of dollars.

In his lawsuits, he alleges that LeNature's officials made payments to some companies while teetering on the brink of bankruptcy. The actions seek to void these "preferential transfers" and recover the money so it can be distributed to creditors.

Among the largest recoveries sought is more than $1.1 million paid to Owens-Illinois Inc., which makes glass bottles and containers. The other companies sued include equipment makers, packaging companies and a temporary employment company, according to the filings.

The financial collapse of LeNature's triggered a federal grand jury investigation by the U.S. Attorney in Pittsburgh, U.S. postal inspectors and criminal agents from the IRS into money laundering, bank, wire and mail fraud, according to court records.

The grand jury has been hearing testimony, and one former employee has pleaded guilty and is cooperating with prosecutors.

LeNature's executives borrowed millions of dollars based on allegedly fraudulent financial records that made the company appear to be thriving and profitable. The alleged fraud unraveled in mid-2006 when investors began to question the management of CEO Gregory Podlucky, and the company was the subject of lawsuits by investors.

In a related matter, a lawsuit filed in Los Angeles in May against Wachovia Capital Markets and the accounting firms of Ernst & Young and BDO Seidman was transferred earlier this month to U.S. District Court in Pittsburgh.

A group of 75 plaintiffs, led by CalPERS -- the California Public Employees Retirement System -- are alleging the firms misled investors and auditors about missing and bogus financial records. Other plaintiffs include union pension and retirement funds.

Wall Street’s Perfect Storm

Recession 'won't be pleasant,' but hope abounds

Ashley Seitz faces the possibility of getting her MBA from Carnegie Mellon University's Tepper School of Business and walking straight into a recession.

The corporate finance major says it could be worse.

"At least I'm not going into banking," said Seitz, 25, of Shadyside.

Seitz, who will graduate in the spring, said she was encouraged Wednesday night by a panel of economists who explained the crisis on Wall Street to about 200 Tepper School alumni and students at The Rivers Club, Downtown.

They used "plain English," she said, stripping at least some of the mystery and fear surrounding the deepening recession.

"This is not like the Great Depression," said Allan Meltzer, the Allan H. Meltzer University Professor of Political Economy and Public Policy at Carnegie Mellon University.

"It's probably going to be a garden-variety recession, with unemployment going up to around 8 percent," which would be about 2 percentage points higher than it is now, Meltzer said.

"It won't be nice. It won't be pleasant. And it probably will go on for awhile."

Stuart G. Hoffman, senior vice president and chief economist at PNC Financial Services, predicted a recovery will begin in six to nine months.

One major reason he sees a recovery coming is the drop in gas prices.

"If you spend a year at $3 a gallon rather than $4 a gallon, American motorists would spend $100 billion less per year filling up their cars," said Hoffman. Noting that the average gallon of gas costs less than $3, he said, "that will put some purchasing power back in the economy."

Pittsburgh, which missed the housing and economic boom experienced in places like Southern California, likely won't be hurt as much by the bust that's going to continue in the meantime, Hoffman said.

"The tortoise has finally pulled ahead of the hare," he said.

Signs of the downturn have begun creeping into the Tepper School, said the school's dean, Ken Dunn. Alumni have increasingly turned to the school's job network, he said.

"I think fundraising is going to be down for awhile. We'll live through that," Dunn said. "It's going to be a tough job market for our students."

Many students are steering their career paths away from the stock trading floor, where as many as one-quarter of Tepper's graduates used to go, Dunn said.

"The glamour of Wall Street is gone," he said.

Andy Vicen, 23, of Shadyside, who just began studies for a master's degree in computational finance at Tepper, says the stock exchange retains some of its allure despite the crisis.

"I think people still gravitate toward it," said Vicen, whose classes will teach him the inner workings of the complex financial instruments that, in the last few months, have confounded experienced traders and knocked the wind out of some of the world's biggest banks. "People still believe if you're good enough, you can do well."

Robert Ostrowski, senior vice president and senior portfolio manager at Federated Investors, said the crisis will be transformative -- for good or ill.

"It's going to change Wall Street as we know it. There are going to be fewer players" as firms shut their doors, he said.

The $700 billion bailout passed by Congress this month, and the Federal Reserve's consecutive interest rate cuts -- including the half-point cut yesterday, which left the federal funds rate at a four-year low of 1 percent -- are starting to have an effect, Ostrowski said.

"The good news is, I think we're beginning to see some signs of this clogged credit market beginning to be unclogged," he said.

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TSA to relax rules on liquids

The federal Transportation Security Administration will ease restrictions on liquid carry-on items at major U.S. airports next year and lift them altogether by 2010, according to the agency's top executive.

Writing at www.tsa.gov/blog, TSA Administrator Kip Hawley said that new advanced technology, or "AT," X-ray equipment should be in major airports by next fall. That will allow size restrictions on carry-on liquids to be lifted, although passengers will still have to place them in a separate bin.

By late 2010, travelers will be able to keep non-hazardous fluids in any size container enclosed in their carry-on bags while passing through security.

"When it comes to liquids, everybody involved with checkpoint operations -- passengers, airlines, airports and TSA employees -- agrees there has to be a better way," Hawley wrote.

TSA in August 2006 imposed restrictions on fluids in airline carry-on luggage after authorities thwarted a plot to bomb trans-Atlantic passenger fights with liquid explosives. Since then U.S. passengers have been limited to 3.4-ounce or smaller vials of liquids that can fit into a single, one-quart plastic Ziploc bag.

TSA spokeswoman Ann Davis said the new AT equipment was being deployed first to the nation's busiest airports. She did not know when it would come to Pittsburgh International Airport, which last year ranked 45th in terms of passenger traffic.

JoAnn Jenny, spokeswoman for Pittsburgh International Airport, said local passengers would welcome the change.

"It would definitely assist those who chose not to check their bags, especially with the fees for checked baggage," Jenny said. "It would give people more options when packing, and allow them to save some money."

Area business frees time for employees to vote

Joshua Noweck plans to leave work a few minutes early Tuesday to vote near his home in Pitcairn -- then collect four hours of paid time off.

It's all fine with his employer, circuit board maker Compunetics. President and founder Giorgio Coraluppi offered the voting incentive to his workers during the last presidential election and in 2006, and will do so again this year.

While it appears few area companies provide time off for visits to the polls, "I thought it was important since Election Day is on a working day," said Coraluppi, a native of Milan, Italy, who became a naturalized American citizen in 1969. "I did recognize that for some working in the company, it was not very convenient."

The 400 area employees of Monroeville-based Compunetics and two related firms -- Compunetix, which makes teleconferencing equipment, and Chorus Call, which sells teleconferencing and meeting services -- must show voter ticket stubs to qualify. The time off can be used on Election Day, or later.

Pennsylvania isn't one of the 30 states with laws that address time off to vote. In 20 of those states, employees must be paid for time spent voting, said the Business Owner's Toolkit Web site for small businesses.

Mark Wolosik, elections division manager for Allegheny County, said he knows of no other area employers with policies like Coraluppi's. A few large employers said they encourage their staffs to vote, but provide no time or other perks.

Because the polls operate from 7 a.m. to 8 p.m., there's "an opportunity to do this before or after work, depending on the time of their shifts or business hours," U.S. Steel Corp. spokesman John Armstrong said.

Coraluppi, who started his three companies in 1968, said more companies should follow Compunetics' policy, especially because Pennsylvania doesn't offer the opportunity to vote early.

"So this is a good way to remove barriers against them exercising that right," he said. Two years ago, 77 percent of his workers voted and got the four hours off.

Voters indeed may spend more time in line this year. Wolosik is projecting a 75 percent voter turnout Tuesday in Allegheny County, up from the 69.8 percent who voted in the 2004 presidential election.

Barack Obama's campaign asked supporters this week to "take the day off" to vote, in part to prevent long lines at busy times. But PNC Financial Services Chief Economist Stuart Hoffman said if widely followed, that could disrupt the economy here and abroad.

"There are too many professions you just can't walk away from," he said, adding he hopes the suggestion by the Democratic presidential nominee's staff wasn't meant literally.

Noweck is an automated assembly operator at Compunetics who programs machinery to mount parts on circuit boards. Because he lives close to the plant he doesn't need four hours off to vote, but he appreciates the time off.

"I have always voted, no matter what," he said.

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O'Neil recommends mandatory down payment

LEXINGTON, Ky. -- President Bush's first treasury secretary says Congress should scrap plans for a new economic stimulus package and instead require that no future home mortgage be awarded without a 20 percent down payment.

Paul O'Neill said Tuesday it doesn't surprise him that neither presidential candidate has endorsed his position, but he insisted it is the best way to quickly improve the nation's economic footing.

"Unfortunately we've gotten to a point where people that want to run for president don't think they can tell the truth and still get elected," O'Neill told reporters before speaking at a conference. "I'm hopeful whichever person gets elected, they'll be better than what they've said. An awful lot of presidential campaigns now are pandering to the lowest common denominator. They promise people everything."

O'Neill, who hasn't endorsed a candidate in the race and says he wouldn't be interested in serving in either administration, made a personal pitch last month to Democratic nominee Barack Obama concerning his idea to mandate down payments. He declined to characterize Obama's response.

O'Neill, a former CEO of aluminum giant Alcoa Inc., served as treasury secretary for the first two years of Bush's presidency, including leading the financial response to the Sept. 11, 2001, terrorist attacks.

While he praised aspects of the recent $700 billion financial bailout, which he says has allowed world markets to take a "deep breath," O'Neill said there should have been government action to combat faulty home loans far earlier. In 2006, he says, 30 percent of mortgages had no down payment and a larger number of those buyers defaulted on their first payment.

"That was a strong enough signal we should have shut down this ... flagrant abuse of the principles of home finance," O'Neill said. "It was bound to crater. It was absolutely bound to come down around our ears, which it has."

If every mortgage was backed by a 20 percent down payment, O'Neill said, the financial system would be protected long-term, even if some individual investments or businesses failed.

"If you can't afford a home mortgage, we shouldn't give you one," he said.

O'Neill said he is disappointed that the political response from both parties includes wide support for another economic stimulus package rather than curbing additional bad mortgages. He estimates that only 20 percent of the money pumped into the last stimulus package actually stimulated the economy, with the rest being used to pay off bills or going into savings accounts.

Should there be another one, he fears much of it will be bogged down by pet projects from lawmakers.

"In a way it's a dangerous time because every politician can imagine some additional money that they could put into a package that they believe will help them get re-elected," O'Neill said. "It's like a feeding frenzy when it looks like they're going to have more stimulus programs. It's almost as though there's no connection and understanding that at the end of the day, we the American people are going to have to pay for this."

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