The New Old Age Blog: For Women, Reduced Access to Long-Term Care Insurance

“This was a very, very good business for a short time, with people buying long-term care insurance like it was candy in a candy store,’’ said Michael Perry, a vice president at the Opus Advisory Group, a strategic financial planning firm in Purchase, N.Y.

No more. Mr. Perry has sold only one long-term care policy in the last six months and is “backing off from marketing’’ them as he watches this corner of the insurance business contract, raise premiums, tighten eligibility requirements and reduce key benefits. Long-term care insurance is a comparatively new product, launched in the late ’80s, and only now, as claims begin to pour in, have the actual costs to insurers become apparent.

Companies like MetLife, Prudential Financial, Allianz and Berkshire Financial (a subsidiary of Guardian) have stopped selling new policies and are hiking premiums for the ones already in place — up 37 percent, by one estimate, in 2011. Insurers are increasing elimination periods — the period during which a beneficiary must cover his or her own costs — and reducing inflation protection to 3 percent from 5 percent, once customary. They are requiring home visits instead of phone interviews from new applicants, as well as blood tests and a thorough examination of their medical records.

But the change that has generated the most public attention is so-called gender-distinct pricing, a new strategy that will raise rates for single women by as much as 40 percent beginning in April. Genworth Financial, the nation’s largest long-term care insurance provider with more than a million policy holders, is the first to win approval by state insurance commissions to raise rates for single women purchasing new policies. Women, most of them single by the time they reach advanced age, cost the company $2 of every $3 in benefits paid so far, according to Steve Zabel, Genworth’s senior vice president for long-term care insurance.

The company also will introduce what Mr. Zabel called “enhanced underwriting,” or more stringent qualifying standards, including blood testing to check for nicotine, drugs and markers of cardiovascular disease for all new applicants, regardless of gender or marital status.

Now permitted in all states except Montana and Colorado, gender-distinct pricing will not affect Genworth’s current policyholders, only new applicants. But all other carriers are likely to follow, according to Jesse Slome, executive director of the American Association for Long-Term Insurance, a trade group in Westlake Village, Calif. With the entire industry headed toward higher rates, Mr. Slome recently warned women that “the window is closing” and that now is the time to grab a policy while the price is still manageable.

Women have always paid less than men for life insurance. But because they live longer, women are the disproportionate beneficiaries of long-term care insurance, which paid out $6.6 billion in benefits in 2011. Mr. Slome expects that number to top $7 billion in 2012.

The reasons are well known:

* On average, women outlive men by five years. Among those born in 1960, the average man will live to age 67 and the average woman to age 73. And women who reach age 65 can expect to live an average of 20 more years.

* By age 75, 7 in 10 women are widowed, divorced or have never been married. Some 40 percent of them live alone, compared to 22 percent of men. Two-thirds of those past the age of 85 are women, as are 80 percent of centenarians.

* Women who live to age 65 experience on average two years of disability requiring assistance before death. Those who reach age 80 will require three years of assistance.

* In nursing homes, the most expensive form of long-term care, 7 in 10 residents are women. They represent 76 percent of the residents in assisted living facilities and two-thirds of the recipients of home care. Virtually none of this is paid for by Medicare, the government’s health plan for those 65-and-over. In nursing homes, Medicaid, a poverty program, kicks in for residents who run out of money.

“Woman live longer than men,” said Suzanna de Baca, a vice president of wealth strategies at Ameriprise Financial. “This may mean we experience a longer period of decline. Unfortunately, we are often less likely to have a partner around to help take care of us than our male counterparts.’’

Long-term care, Mr. Slome said, “is truly a women’s issue.”

While acknowledging the extra expense of caring for women, Mr. Slome said that in his view insurance carriers are being disingenuous in blaming the new policies on long-apparent gender differences. Rather he said, the culprit in the changing requirements is interest rates. “Blame the Federal Reserve,’’ he said.

Insurance carriers invest premiums and need to earn enough on that investment to pay benefits. When interest rates were higher, it was not all that difficult. Now the numbers don’t pencil out, and stockholders are fuming. But it is illegal to file for premium increases with the state insurance commissions based on changes in the financial market, Mr. Slome said.

This position does not endear Mr. Slome to his membership, at least one of whom disputes the claim. Asked if the new rate policies were related to interest rates, Mr. Zabel of Genworth, in an e-mail, replied with a succinct “no.”

Insurers say they were not able to judge the costs of care until the payouts began in earnest.

So what is a woman trying to prepare for old age supposed to do, especially after the elimination of the Class Act, a modest attempt to include long-term care in the Affordable Care Act?

Ms. da Baca suggests “careful and thorough budgeting,” “focusing on wellness,” and “proactive steps” to research suitable places to live when home is no longer an option. Ms. da Baca also advises women to make home modifications — incrementally, as one’s budget permits — to increase the chances that you’ll be able to stay there longer.

Mr. Perry, of the Opus Advisory Group, suggests an intriguing option: life insurance with a chronic care rider, which permits the policy-holder to spend money for such needs while alive, although doing so will reduce the tax-free death benefit. Still, not all buyers — or their survivors — are willing to sacrifice those benefits.

“The need is still there, no question about it,’’ Mr. Perry said. But long-term care insurance is likely to become much harder for everyone to find and afford, especially women.

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DealBook: R.B.S. to Pay $612 Million Over Rate Rigging

LONDON – The Royal Bank of Scotland on Wednesday struck a combined $612 million settlement with American and British authorities over accusations that it manipulated interest rates, the latest case to emerge from a broad international investigation.

In an embarrassing blow to the bank, its Japanese subsidiary also pleaded guilty to criminal wrongdoing in its settlement with the Justice Department. The R.B.S. subsidiary, a hub of rate-rigging activity, agreed to a single count of felony wire fraud to resolve the case.

The settlement reflects the Justice Department’s renewed vigor for punishing banks ensnared in the rate manipulation case. In December, a Japanese subsidiary of UBS pleaded guilty to felony wire fraud as part of a larger settlement, representing the first unit of a big bank to agree to criminal charges in more than a decade.

As authorities built the R.B.S. case, they seized on a series of incriminating yet colorful e-mails that highlighted an effort to influence the rate-setting process, a plot that spanned multiple currencies and countries from 2006 to 2010. One senior trader expressed disbelief at reaping lucrative profits from the scheme, saying “it’s just amazing” how rate “fixing can make you that much money,” according to the government’s complaint. Another trader, after pressuring a colleague to submit a certain rate, offered a reward of sorts: “I would come over there and make love to you.”

In a statement on Wednesday, the American regulator leading the case slammed the bank for manipulating benchmarks like the London Interbank Offered Rate, or Libor. The regulator, the Commodity Futures Trading Commission, noted that R.B.S. employees “aided and abetted” UBS and other firms in the rate-rigging scheme and continued to run afoul of the law, though more covertly, even after learning of a federal investigation.

“The public is deprived of an honest benchmark interest rate when a group of traders sits around a desk for years falsely spinning their bank’s Libor submissions, trying to manufacture winning trades. That’s what happened at R.B.S.,” David Meister, the enforcement director of the commission, said in the statement.

Libor Explained

The settlement represents the latest setback for Royal Bank of Scotland, which has struggled to shake the legacy of the 2008 financial crisis. The British firm already has put aside $2.7 billion to compensate customers who were inappropriately sold loan insurance over recent years. On Jan. 31, British regulators also called on the bank and other local rivals to review the sale of interest-rate hedging products after more than 90 percent of a sample were found to have been sold improperly.

The broader rate-rigging case has centered on how much the Royal Bank of Scotland and a dozen other banks, including Citigroup and HSBC, charge each other for loans. Such benchmarks, including Libor, help determine the borrowing costs for trillions of dollars in financial products like corporate loans, mortgages and credit cards.

But the Royal Bank of Scotland, like many of its competitors, corrupted the process. Government complaints filed over the last year outlined a scheme in which banks reported false rates to lift trading profits and deflect concerns about their health during the crisis.

Authorities filed the first Libor case in June, extracting a $450 million settlement with the British bank Barclays. In December, UBS agreed to a record $1.5 billion settlement with European regulators, the Justice Department and the American regulator that opened the case, the Commodity Futures Trading Commission. The Justice Department’s criminal division, which secured the guilty plea from the bank’s Japanese unit, also filed criminal charges against two former UBS traders.

Some of the world’s largest financial institutions remain caught in the cross hairs of the case. Deutsche Bank has set aside an undisclosed amount to cover potential penalties.

While foreign banks have received the brunt of the scrutiny to date, an American institution could be among the next to settle. Citigroup and JPMorgan Chase are under investigation.

In the $612 million Royal Bank of Scotland case, authorities levied the second-largest fine in the multiyear investigation into rate manipulation.

The fine included a $325 million penalty from the trading commission and a £87.5 million ($137 million) sanction from the Financial Services Authority, the British regulator, marking one of the largest financial penalties ever from British authorities. The Justice Department, for its part, imposed a $150 million fine as part of a deferred-prosecution agreement with R.B.S. In addition to wire fraud, the Justice Department cited the bank for its role in a “price-fixing conspiracy” that violated anti-trust laws.

R.B.S., based in Edinburgh, had aimed to avert the guilty plea for its Japanese subsidiary. But the Justice Department’s criminal division declined to back down, and the bank had little leverage to push back. If it had balked at a plea deal, the Justice Department could have moved to indict the subsidiary.

“Like with Barclays and UBS, the settlement with R.B.S. is much more than a slap on the wrist,” said Bart Chilton, a member of the trading commission who is critical of soft fines on big banks.

In the wake of the settlement, Royal Bank of Scotland is shaking up its management team as it moves to repair its bruised image. John Hourican, the firm’s investment banking chief, resigned on Wednesday, and agreed to forgo some of his past and current compensation totaling around $14.1 million. While Mr. Hourican was not implicated in the scandal, senior executives said he was taking blame for wrongdoing in his division.

“John is the right senior person to take responsibility for this,” the bank’s chairman, Philip Hampton, told reporters on Wednesday.

Royal Bank of Scotland, in which the government holds an 82 percent stake after providing a $73 billion bailout in 2008, also plans to claw back bonuses and other long-term compensation totaling $471 million to help pay for the rate-rigging penalty. The bank will will primarily use the figure to pay the fines from U.S. authorities, while penalties from the British regulator will be recycled back to the British government.

At a press conference in central London on Wednesday, Stephen Hester, the bank’s chief executive, condemned the illegal behavior of some of the firm’s employees, but acknowledged that Royal Bank of Scotland did not monitor its Libor submissions closely enough to catch the wrongdoing.

Mr. Hester, who has led the bank through a series of scandals and has been dogged by politicians’ demands for reductions in bonuses, admitted that the rate-rigging episode had placed the bank under a lot of strain.

“It is one of the most difficult moments over the entire period,” he said.

Mr. Hester, a former chief executive of the property developer British Land, has focused on paring back the bank’s operations. The C.E.O. has cut more than 30,000 job cuts since 2008, attempted to spin-off of the mergers and acquisitions unit and cut the size of its balance sheet by £600 billion since 2009. Mr. Hester also waved his $1.5 million bonus for 2011 after coming under pressure from British politicians.

In the Libor case, the wrongdoing at R.B.S. occurred on smaller scale than at other banks. The breach, authorities say, was limited to Libor submitters and traders who sought to bolster their bottom line. By comparison, top executives at Barclays knew the bank was lowballing its Libor rates to assuage concerns about its high borrowing costs.

R.B.S., which admitted that 21 of its employees altered the firm’s Libor submissions for financial gain on hundreds of occasions, either disciplined or fired most of the employees. The rest left before they were implicated. In the UBS case, the trading commission cited more than 2,000 instances of illegal acts involving dozens of employees.

Still, the government complaints against R.B.S. portray a permissive culture that allowed rate-rigging to persist for some four years.

The bank’s own records captured the scheme in striking detail, revealing how traders pressured other employees to submit certain Libor figures. Submitters and traders sat in earshot of each other on a trading desk in London, forming what authorities termed a “cozy ring.”

The bank eventually separated the employees, forcing them to communicate over e-mail and phone. A flurry of instant messages ensued, some more vulgar than others.

A trader noted in September 2009 that his requests for rates moved up and down, “like a whores drawers.” Another employee acknowledged that the Libor rate-setting process is “a cartel now.”

To get their way with employees who submitted Libor rates, traders promised “love” and affection. Others merely offered steak and sushi. One trader resorted to begging, invoking a plea of “pretty please.”

The collusion was not limited to inside Royal Bank of Scotland.

Between 2008 and 2009, the bank’s traders cooperated with other banks, including the Swiss financial giant UBS, and brokerage firms to manipulate Libor, according to regulatory filings. To ensure rate submissions at other banks benefited their own trading positions, some of Royal Bank of Scotland’s staff paid brokers more than a combined $300,000 in kickbacks over the time period to influence traders at other firms on their behalf.

When authorities started investigating, the traders adapted their tactics. One employee noted that federal authorities “are all over us.”

The concerns prompted a more covert approach. In September 2010, after the trading commission ordered an internal investigation at R.B.S., a derivatives trader urged a colleague who requested a higher Libor rate to send “no emails anymore.”

Two months later, a Libor submitter rebuffed an instant message request to manipulate rates. But then, the submitter spoke with the trader via telephone, explaining “we’re not allowed to have those conversations” over instant message.

Their call was recorded. The employees laughed, according to a transcript, and the submitter reassured the trader that he would fulfill the request: “Leave it with me, and uh, it won’t be a problem.”

The lobbying paid off. When employees submitted bogus rates, government authorities said, Libor was altered.

Lanny Breuer, the head of the Justice Department’s criminal division, called the actions a “stunning abuse of trust.”

He also warned of coming actions against other big banks. “Our message is clear: no financial institution is above the law.”

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Obama urges short-term solution to prevent steep budget cuts

WASHINGTON – President Obama on Tuesday called on Congress to come up with short-term spending cuts and revenue increases that would stave off more drastic cuts set to take effect in March.

In a brief appearance in the White House briefing room, Obama asked lawmakers to come up with a quick fix that would postpone the automatic cuts and their "devastating" effects on the economy.

The economy is in recovery, Obama said, but that won’t continue if there are “self-inflicted wounds” caused by elected officials. 

The economy shouldn’t be at risk “just because folks in Washington couldn’t come together to eliminate a few special-interest tax loopholes or government programs that we agreed need some reform,” he said.

PHOTOS: President Obama’s past

The president said he still wants to deal with deficits over the longer term, but that he doesn’t want to see workers laid off and critical programs lapse while Congress works its way to a more broad-based budget solution.

When the automatic cuts were first devised in 2011, the $1.2-trillion in so-called sequester cuts were intentionally designed to be severe. Lawmakers on all sides believed they would force Congress to come up with a better alternative for deficit reduction.

But the deadline is drawing close and the sides are nowhere near a permanent solution. Democrats want to exchange the pending across-the-board cuts for tax revenue generated in part by ending tax breaks for oil and gas companies.

Republicans, meanwhile, see the looming sequester as one of their best chances to exact steep spending cuts. They want to steer away from reductions at the Pentagon and toward Medicare, food stamps and other domestic programs.

PHOTOS: President Obama’s second inauguration

Sen. Mitch McConnell of Kentucky, the Republican minority leader, calls the Democrats' ideas “gimmicks.” House Speaker John A. Boehner (R-Ohio) argues that the public doesn’t support the idea of raising taxes in place of cutting spending.

“The president’s sequester should be replaced with spending cuts and reforms that will start us on the path to balancing the budget in 10 years,” Boehner said.

Speaking to reporters, Obama said he believes “modest reforms” in social insurance programs would eventually have to be paired with tax reform.

For the moment, he said, it appears a full budget “may not be finished” before the automatic cuts kick in. Congress can’t let that happen, he said.

QUIZ: Test your knowledge about the debt limit

“If Congress can’t act immediately on a bigger package,” he said, “they should at least pass a smaller package of spending cuts and tax reforms that would delay the economically damaging effects of the sequester for a few more months.”

After that, he said, the two sides can work together to replace cuts with a “smarter solution.”

Follow Politics Now on Twitter and Facebook

christi.parsons@latimes.com

lisa.mascaro@latimes.com

Twitter: @cparsons and @lisamascaroindc

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Hidden iPad Buttons Suggest Apple Will Bring Radio Functionality to iTunes

Files discovered in the iTunes app on jailbroken iPads suggest the tablets might be getting new radio-centric features.

The files are named variations of “radio button,” and two of them also have the word “buy” in their names, according to 9to5 Mac, which found the buttons while rooting around inside their jailbroken iPad. The icon associated with these files is reminiscent of the radio icon once found in the Mac version of iTunes.

The icons could indicate Apple is bringing the radio feature of its desktop iTunes platform to the iPad, along with an ability to easily purchase the track you’re listening to. Alternatively, Apple could be planning to take down streaming platforms like Pandora, Spotify or Rdio with a radio-like service of its own.

Late last year, reports ran rampant that Apple was hard at work on a Pandora-like streaming radio service. The Wall Street Journal said Apple was negotiating the licensing needed for such a custom radio service, with stations based around your favorite songs or artists. Bloomberg said we’d see the service debut in early 2013.

Music discovery has been a challenge for Apple. It shuttered its music-centric social network Ping at the end of September. Without integration with Facebook (a deal that reportedly fell through), Ping failed to garner devoted users eager to share what they were listening to and buying on iTunes. Ping’s prompts urging users to buy tracks also made it feel less social and more commercial.

With a radio service and a more subtle option to purchase the tracks you dig, Apple could have a more successful recipe for boosting iTunes music sales, and letting you find cool music in the process. Sales of music downloads have generally been slowing in recent years.

Apple pushed a big update to its iTunes platform, iTunes 11, back in November, but its new features centered around ease of use, search, and the ability to queue up tracks (and manage them).

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Beyonce sings, reunites Destiny’s Child at Super Bowl half-time show

(Reuters) – Singer Beyonce strutted and shimmied her way through football’s Super Bowl half-time show and thrilled fans by reuniting with her former Destiny’s Child bandmates on Sunday in New Orleans.

Beyonce, wearing a revealing black leather jacket and miniskirt combination, was surrounded by bursts of fire, smoke and silhouettes as she performed at the Mercedes-Benz Superdome. More than 100 million television viewers were tuned in to the NFL championship game between the San Francisco 49ers and Baltimore Ravens.

The singer called out to the crowd several times during her first songs, “Love on Top,” “Crazy in Love,” “End of Time” and “Baby Boy,” to emphasize that she was singing live.

On Thursday, Beyonce admitted she sang along with a pre-recorded track of the national anthem at President Barack Obama‘s inauguration last month.

The lip-synching controversy threatened to derail the pop singer’s crafted comeback after giving birth to her first child with rapper and husband Jay-Z in January 2012. Beyonce will also premiere her self-directed documentary, “Life is But a Dream,” on HBO on February 16.

During Sunday’s half-time show, the 31-year-old singer stomped and shook her hips and torso while video of Beyonce dancing was projected alongside her to give the appearance of a choreographed routine.

SANDY HOOK SINGS

Beyonce rolled through four songs before Kelly Rowland and Michelle Williams, from her former girl group Destiny’s Child, ascended through trap doors in the stage to sing hits “Bootylicious” and “Independent Woman.”

It was the trio’s first public performance since 2006. Clad in black leather outfits designed by Rubin Singer, they performed three songs, including Beyonce‘s hit “Single Ladies (Put a Ring on It).”

Last month, the group released “Nuclear,” its first song in about a decade.

Beyonce finished with “Halo” from her 2008 album “I Am … Sasha Fierce.”

Last year’s Super Bowl attracted 111.3 million U.S. viewers, the largest audience for a single TV broadcast in the United States.

Before Sunday’s kickoff, singers Alicia Keys and Jennifer Hudson performed.

Hudson performed “America the Beautiful” with the chorus from Sandy Hook Elementary School, the site of December’s mass shooting in Newtown, Connecticut. Twenty children and six adults were killed in the massacre.

Keys, wearing a sleeveless maroon dress, played a stripped-down rendition of the “Star Spangled Banner” at a silver piano atop a small stage at midfield.

(Editing by Stacey Joyce)

Music News Headlines – Yahoo! News

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SciTimes Update: Recent Developments in Science and Health News

Red Bull Stratos/European Pressphoto Agency

Felix Baumgartner of Austria jumps from 24 miles up in Roswell, New Mexico.

Tuesday in science, sharks with an image problem, good teeth get more dates, dog geniuses and remembering your dreams. Check out these headlines and other science news from around the Web.

Supersonic Skydiver: Skydiver Felix Baumgartner was faster than he or anyone else thought during his record-setting jump last October from 24 miles up. The Austrian parachutist known as “Fearless Felix” reached 843.6 mph, reports The Associated Press.

Stress Through Generations: For the first time, genes chemically silenced by stress during life have been shown to remain silenced in eggs and sperm in mice, possibly allowing the effect of stress to be passed down to the next generation, reports The Washington Post.

Man Bites Shark: A new study refutes the shark’s reputation as a bloodthirsty stalker of humans, reports Reuters. There’s no basis for believing that sharks have a taste for human flesh, the study argues. Human swimmers, often dressed in black wet suits and looking like seals, are instead mistaken for sharks’ usual prey.

What Singles Want: Good teeth, grammar and humor are important to singles, a new USA Today survey reports.

The Farmer’s Workout: Farmers -- the people counted on to feed the nation -- are facing weight gains of their own, reports Gannett News.

Yes, They Do Windows: The Wall Street Journal reports on window-washing robots.

Staying In: To keep patients out of the hospital, health care providers are bringing back revamped versions of a time-honored practice: the house call.

Spill Your Secrets: Teenagers who share their secrets in confidence with parents and friends have fewer headaches and depressed moods and are more confident in social situations than those who keep secrets to themselves, according to a report in The Journal of Adolescence.

Drilling on Mars: NASA’s Curiosity rover, the S.U.V.-sized robot exploring Mars, is getting ready to spin its drill bit for the first time, reports The Christian Science Monitor.

Couch Potatoes: Men who watch a lot of television have lower sperm counts than those who don’t watch any, reports ScienceNews.org.

Dream a Little Dream: Anyone who has ever awoken feeling amazed by their night’s dream only to forget its contents by the time they reach the shower will understand the difficulties of studying such an ephemeral state of mind, reports New Scientist.

Smart Dogs: Scientific American explores the science of dog intelligence.

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DealBook: U.S. Case Details Internal Tension at S.&P.

The subprime loans packaged as complex securities for Standard & Poor’s to rate were already failing at such a fast clip in the fall of 2006 that some analysts at the firm thought they must be seeing typographical errors.

At the time, the nation’s biggest rating agency was making record profits, attaching sterling ratings to mortgage-related securities that were increasingly going bad. Inside the firm’s headquarters in Lower Manhattan, tensions were escalating. Some executives pushed to revise the firm’s rating models in hopes of preserving market share and profits, while others expressed deep concerns about the poor performance of the securities, according to court records.

“This market is a wildly spinning top which is going to end badly,” one executive wrote in a confidential memo.

The account, culled from reams of internal e-mails, is part of civil fraud charges that the Justice Department filed late Monday against S.&P. in federal court in Los Angeles, accusing the firm of inflating ratings of mortgage investments and setting them up for a crash when the financial crisis struck.

The government is seeking $5 billion in penalties against the company to cover losses to investors like state pension funds and federally insured banks and credit unions. The amount would be more than five times what S.&P. made in 2011. S.&P. said it would vigorously defend itself against “these unwarranted claims.”

Sixteen states, including Iowa, Mississippi and Illinois, joined the federal suit, and the New York attorney general said he was taking separate actions. California’s attorney general, Kamala D. Harris, said the state pension funds lost nearly $1 billion on the soured investments. The Securities and Exchange Commission has also been investigating possible wrongdoing at S.&P.

“The action we announce today marks an important step forward in the administration’s ongoing effort to investigate — and punish — the conduct that is believed to have continued to the worst economic crisis in recent history,” said Mr. Holder. The Justice Department called its investigation “Alchemy,” after medieval alchemists’ attempts to turn lead into gold.

Standard & Poor’s defended its corporate practices on Tuesday, saying the civil lawsuit filed by the Justice Department was “meritless.”

“Claims that we deliberately kept ratings high when we knew they should be lower are simply not true. S.&P. has always been committed to serving the interests of investors and all market participants by providing independent opinions on creditworthiness based on available information,” the rating agency said in a statement on Tuesday.

The company said that at all times its actions reflected its best judgments about the investments at the heart of the suit — about 40 collateralized debt obligations, or C.D.O.’s, an exotic type of security made up of bundles of residential mortgage-backed securities, which in turn were composed of individual home loans.

“Unfortunately,” the company’s statement said, “S.&P., like everyone else, did not predict the speed and severity of the coming crisis and how credit quality would ultimately be affected.”

McGraw-Hill shares were down 5 percent to $47.51 in early afternoon trading on the New York Stock Exchange, and have lost 19 percent of their value over the last two days.

The case is the first significant federal action against the ratings industry, which during the boom years bestowed high ratings that made many mortgage-related investments appear safer than they actually were.

It was unclear whether the Justice Department was looking at the other two major ratings agencies, Moody’s Investors Service and Fitch. Mr. West said he would not discuss actions against other rating agencies. In addition to joining the suit against S.&P., James Hood, the attorney general in Mississippi, said his state had also filed lawsuit against Moody’s.

The joint federal-state suit against S.&P. claims that from September 2004 through October 2007, S.&P. “knowingly and with the intent to defraud, devised, participated in and executed a scheme to defraud investors” in certain mortgage-related securities. S.&P. also falsely represented that its ratings “were objective, independent, uninfluenced by any conflicts of interest,” the suit said.

Settlement talks between S.&P. and the Justice Department broke down in the last two weeks after prosecutors sought a penalty in excess of $1 billion and insisted that the company admit wrongdoing, several people with knowledge of the talks said. That amount would wipe out the profits of McGraw-Hill for an entire year. S.&P. had proposed a settlement of around $100 million, the people said. The government pressed for an admission of guilt to at least one count of fraud, said the people. S.&P. told prosecutors it could not admit guilt without exposing itself to liability in a multitude of civil cases.

On Monday, a spokesman for Moody’s declined to comment. A spokesman for Fitch, Daniel J. Noonan, said the agency could not comment on an action against Standard & Poor’s, but added, “We have no reason to believe Fitch is a target of any such action.”

The securities were created at the height of the housing boom, mainly for investment banks. S.&P. was paid fees of about $13 million for rating them. The firm gave the government more than 20 million pages of e-mails as part of its investigation, the people with knowledge of the process said.

Since the financial crisis in 2008, the ratings agencies’ business practices have been widely criticized, and questions have been raised as to whether independent analysis was corrupted by Wall Street’s push for profits.

A Senate investigation made public in 2010 found that S.& P. and Moody’s used inaccurate rating models from 2004 to 2007 that failed to predict how high-risk mortgages would perform, allowed competitive pressures to affect their ratings and failed to reassess past ratings after improving their models in 2006.

The companies failed to assign adequate staff to examine exotic investments, and failed to take mortgage fraud, lax underwriting and “unsustainable home price appreciation” into account in their models, the inquiry found.

“Rating agencies continue to create an even bigger monster — the C.D.O. market,” one S.&P. employee wrote in an internal e-mail in December 2006. “Let’s hope we are all wealthy and retired by the time this house of cards falters.”

Another S.&P. employee wrote in an instant message the next April, reproduced in the complaint: “We rate every deal. It could be structured by cows and we would rate it.”

In its statement Tuesday, S.&P. said that “the e-mail that says deals ‘could be structured by cows’ and be rated by S.&P. had nothing to do with R.M.B.S. or C.D.O. ratings or any S.&P. model. The company added that “the analyst had her concerns addressed with the issuer before S.&P. issued any rating.” S.&P. said that there was robust internal debate about how a rapidly deteriorating housing market might affect the C.D.O.’s, “and we applied the collective judgment of our committee-based system in good faith.”

“The e-mail excerpts cherry-picked by D.O.J. have been taken out of context, are contradicted by other evidence, and do not reflect our culture, integrity or how we do business,” the credit rating agency said.

The three major ratings agencies are typically paid by the issuers of the securities they rate — in this case, the banks that had packaged the mortgage-backed securities and wanted to market them. The investors were not involved in the process but depended on the rating agencies’ assessments.

In a separate statement on Monday, S.&P. said it had begun stress-testing the mortgage-backed securities as early as 2005, trying to see how they would perform in a severe market downturn. S.&P. said it had also sent out early warning signals, downgrading hundreds of mortgage-backed securities, starting in 2006. Nor was it the only one to have underestimated the coming crisis, it said — even the Federal Reserve’s Open Market Committee believed that any problems within the housing sector could be contained.

The Justice Department, the company said, “would be wrong in contending that S.&P. ratings were motivated by commercial considerations and not issued in good faith.”

For many years, the ratings agencies have defended themselves successfully in civil litigation by saying their ratings were independent opinions, protected by the First Amendment, which guarantees the right to free speech. But developments in the wake of the financial crisis have raised questions about the agencies’ independence.

One federal judge, Shira A. Scheindlin, ruled in 2009 that the First Amendment did not apply in a lawsuit over ratings issued by S.&P. and Moody’s, because the mortgage-backed securities had not been offered to the public at large. Judge Scheindlin also agreed with the plaintiffs, who argued the ratings were not opinions, but misrepresentations, possibly the result of fraud or negligence.

The federal-state action is the first time a credit ratings agency has been charged under a 1989 law intended to protect taxpayers from frauds involving federally insured financial institutions, which since the financial crisis has been used against a number of federally insured banks, including Wells Fargo, Bank of America and Citigroup.

The government is taking a novel approach by accusing S.&P. of defrauding a federally insured institution and therefore injuring the taxpayer.

The lawsuit was filed in Central District of California, home to the defunct Western Federal Corporate Credit Union, among the largest corporate credit unions in the country. The credit union collapsed during the 2008 financial crisis after suffering huge losses on mortgage-backed securities rated by S.&P.

The Justice Department said it interviewed about 150 people in the investigation, including former S.&P. executives and analysts.

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Suspected child molester left L.A. archdiocese for L.A. schools

A former priest and suspected child molester left employment with the Los Angeles archdiocese to work for the L.A. Unified School District, officials confirmed Sunday.

The former clergyman, Joseph Pina, did not work with children in his school district job, L.A. schools Supt. John Deasy said. He added that, as a result of the disclosures, Pina would no longer be employed by the nation's second-largest school system.

Over the weekend, Deasy was unable to pull together Pina's full employment history, but said the district already was looking into the matter of Pina's hiring.

"I find it troubling," he said of the disclosures about Pina. "And I also want to understand what knowledge that we had of any background problems when hiring him, and I don't yet know that."

L.A. Unified itself has come under fire in the last year for its handling of employees accused of sexual misconduct.

Pina, 66, was laid off from his full-time district job last year, but returned to work episodically to organize events. One event he may have helped organize was a ribbon-cutting Saturday for a new education facility. School district officials over the weekend, however, could not confirm that. Pina did not attend the event, and the district could not confirm payment for any help he may have provided.

Pina's name emerged in documents released by the archdiocese to comply with a court order. His case was one of many in which church officials failed to take action to protect child victims and in which first consideration was given to helping the offending priests rather than their victims, according to the documentation.

A just-released, internal 1993 psychological evaluation states that Pina "remains a serious risk for acting out." The evaluation recounts how Pina was attracted to a victim, an eighth-grade girl, when he saw her in a costume.

"She dressed as Snow White ... I had a crush on Snow White, so I started to open myself up to her," he told the psychologist. "I felt like I fell in love with her. I got sexually involved with her, but never intercourse. She was about 17 when we got involved sexually, and it continued until she was about 19."

In a report sent to a top Mahony aide, the psychologist expressed concern the abuse was never reported to authorities.

Pina's evaluation also includes a recommendation "to take appropriate measures and precautions to insure that he is not in a setting where he can victimize others." Pina continued to work as a pastor as late as March 1998.

School district officials could not verify Pina's hiring date over the weekend, but he took a job with L.A. Unified as the school system was carrying out the nation's largest school construction program. His job involved community outreach, building support for school projects, while also finding out communities' concerns and trying to address them, officials said. Such work was crucial to the program, because even though communities wanted new schools, their locations and other elements could prove controversial. Such projects frequently involved tearing down homes or businesses, environmental cleanups, and the blocking of streets and other disruptions.

"His duties were to rally community support and elicit community comments regarding schools in a neighborhood," district spokesman Tom Waldman said.

Pina's work did bring him into contact with families, frequently at public meetings organized to hear and address their concerns.

Projects that Pina worked on included a new elementary school in Porter Ranch and a high school serving the west San Fernando Valley, Waldman said. The high school, in particular, generated substantial public debate as a district team and a local charter school competed aggressively for control of the site.

The $19.5-billion building program is winding down, and, as a result, many jobs attached to it have come to an end. Pina's was among them.

The dedication he may have helped organize Saturday was for the Richard N. Slawson Southeast Occupational Center in Bell. Participants told KCET-TV, which first reported Pina's school employment, that he had assisted with community outreach on that project. The adult education and career technical education facility has 29 classrooms as well as health-career labs and child care for students. The school opened in August 2012.

Pina "was slated for some additional temporary work when the issue came to our attention last week and that work was canceled," Deasy said.

It may have been Pina who first alerted district officials that his name appeared in disclosed documents, Deasy said. Pina called a senior administrator in the facilities division. So far, no untoward issues have emerged regarding Pina's work for L.A. Unified.

howard.blume@latimes.com

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Listen to a Solar Flare Drown Out Radio Communications on Earth

Over the weekend, a tiny spot on the sun erupted into a moderately sized solar flare that was particularly loud in radio waves. With the sound of a roaring wave, it completely drowned out radio communication all over the Earth between 28 MHz and 21.1 MHz.

The recording above comes from either a short wave radio station or a Ham radio transmission, said amateur radio astronomer Thomas Ashcraft, who works with NASA’s Radio JOVE project. It’s interesting to hear the voices get “swallowed up as the solar wave passes through,” he added in an e-mail to Wired.

The sun is entering a period of high activity as it enters its solar maximum, the peak of an 11-year solar cycle. Despite this, our local star has been relatively quiet for the last few months, producing few large solar flares or coronal mass ejections — which occur when the sun throws off charged particles at millions of kilometers per hour.

The radio burst that happened on Feb. 2 accelerated electrons to high energies. This electron stream created plasma and radio waves in the sun’s atmosphere, which traveled to Earth and disrupted some communications. The event was a fairly good-sized surge, said radio astronomer James Thieman, who leads the JOVE project.

“We have seen a few this year that were larger,” he added, but this one was still quite strong. Of course, the events of the recent solar cycle are entirely dwarfed by certain past solar outbursts, like the 1859 Carrington event, which caused widespread havoc and even set telegraph stations on fire.

If similar solar activity ever interferes with your radio transmissions, Thieman recommended changing the frequency a little bit since the sun’s radio bursts tend to affect only a narrow band.

Audio: Thomas Ashcraft

Adam is a Wired Science staff writer. He lives in Oakland, Ca near a lake and enjoys space, physics, and other sciency things.

Read more by Adam Mann

Follow @adamspacemann on Twitter.

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Fall Out Boy ends three-year break with new album, tour

LOS ANGELES (Reuters) – Fall Out Boy unveiled plans for a new album and world tour on Monday, three years after the pop punk band‘s four members announced a hiatus to pursue solo projects.

“This isn’t a reunion,” the band said on its website, “because we never broke up.”

The new album, “Save Rock and Roll,” will be available worldwide on May 6-7. A tour kicks off Monday night in Chicago.

A new song, “My Songs Know What You Did In the Dark (Light Em Up),” is available on iTunes.

“When we were kids the only thing that got us through most days was music,” the band’s website statement said. “We needed to plug back in and make some music that matters to us. The future of Fall Out Boy starts now.”

Fall Out Boy soared to fame in 2005 with the album “From Under the Cork Tree.” Hit songs like “Sugar, We’re Goin Down” and “Dance, Dance” mixed energetic guitars and angst-ridden lyrics. The group released two more albums in 2007 and 2008 but went on an indefinite hiatus in 2009.

The band’s members include bassist and lyricist Pete Wentz, vocalist and guitarist Patrick Stump, guitarist Joe Trohman and drummer Andy Hurley.

(Reporting By Nichola Groom; Editing by Bill Trott)

Music News Headlines – Yahoo! News

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