Shell Venture to Invest $1.5 Billion in New Nigeria Pipeline

 By JAMES HERRON And SARAH KENT

LONDON—A joint venture led by Royal Dutch Shell RDSB.LN -0.12% PLC said Friday it will invest $1.5 billion on a new pipeline in Nigeria in a bid to reduce oil theft that has caused serious environmental damage in the country and disrupted crude production.
The new pipeline, called the Trans Niger Pipeline Loop-line, should help reduce oil spills in the Niger Delta because it will "bypass a whole area where there has been a significant quantity of oil theft," in the Ogoniland region of Nigeria, said a Shell spokesman.
Oil theft, usually involving people siphoning oil out of pipelines through improvised connections, routinely disrupts the output of Africa's largest oil producer and spills oil into the environment. This pollution has prompted harsh criticism by environmental activists of companies operating in the Niger Delta, particularly Shell.
Shell has said thieves steal an estimated 60,000 barrels a day from its Nigerian joint venture, Shell Petroleum Development Co., or SPDC. Earlier this week, the venture was forced to shut the 150,000 barrel-a-day Trans Niger Pipeline following an explosion and fire at a point that had been targeted by oil thieves in the swampy area of Bodo West in Ogoniland.
SPDC is a joint venture between Shell, state-owned Nigeria National Petroleum Corp. and the local units of France's Total SA FP.FR -1.06% and Italy's Eni ENI.MI -0.64% SpA.
The new pipeline is a loop off the existing Trans Niger Pipeline that will pass through a swampier area, where more of the pipeline will be submerged, the Shell spokesman said. This location will make oil theft more difficult and the pipeline will also be protected by stronger intruder-detection technology, he said.
The success of the new pipeline could very much depend on the technical measures Shell puts in place to make it a more difficult target for theft, said Thomas Horn Hansen, an analyst at consultancy Risk Intelligence. While shifting the location of the pipeline could reduce theft in the short term, organized crime of the type that operates in the Delta might not be deterred in the long term, he said.
In 2010, SPDC invested $1.1 billion to replace its Nembe Creek pipeline, but leaks and fires related to crude-oil theft still forced the company to close the pipeline several times between December 2011 and May 2012. SPDC shut the pipeline in April to remove connections used to siphon off oil after incidences of theft rose to "unprecedented levels."
SPDC is also planning on investing $2.4 billion in five new Nigerian gas projects, collectively called Gbaran-Ubie Phase Two.
Shell said that, independent of its partners in SPDC, it will conduct a strategic review of its interests in Nigeria, which could result in an exit from some onshore oil and gas leases in the eastern part of the Niger Delta. Need money? Click here for revolutionary ways to make it online.

Are You Ready to Cast a Wider Net?

• By SARAH E. NEEDLEMAN

Four years ago, Sandra Harris of Lafayette, Calif., began selling lunch containers, bags and accessories she designed with eco-friendly materials at a local craft fair. The response was so positive, she figured she could easily go national or even global just by putting the fledgling business online.
But Ms. Harris, previously a Web-marketing consultant, says she didn't anticipate just how much it would cost to venture into e-commerce.

Koren Shadim

For example, within a few months she discovered she needed to hire a fulfillment company, because she couldn't fit all of her inventory in her family's home. This resulted in her having to spend an extra $7 to $15 on every item she sold for shipping and handling, depending on the product's size and weight.
"I was looking at it in a very myopic way," says Ms. Harris, adding that she managed to keep her virtual doors open only by quickly raising her prices about 20%. Today, ECOlunchboxes.com operates out of a commercial space, has five employees and last year it posted just under $1 million in sales. "You have to be looking at your margins every step of the way or you won't have a business," she says. "You'll have a hobby."
If your startup is performing well locally, you may be tempted to cast a wider net by taking it online. U.S. Web retail sales are expected to reach $262 billion this year and rise to $370 billion by 2017—sales growth that's outpacing that of physical retail stores, according to market-research firm Forrester.
Yet branching out beyond your backyard will likely require incurring additional operating expenses and making other adjustments, caution seasoned entrepreneurs and startup experts. They recommend identifying these in advance, and then creating a budget and strategy that accounts for your findings.
"You may need to consider things like shipping costs and taxes," says Caroline Daniels, a lecturer on entrepreneurship at Babson College in Wellesley, Mass.
After a decade of helping run his family's apparel and accessories business at flea markets in Oahu, Hawaii, Ronald Diep three years ago created an eBay store and an e-commerce site to complement it—SwrvHawaiianShirts.com. He says he was surprised to discover that customers have very different needs and expectations when shopping online versus in person.
For instance, they often ask more questions about product details, such as what material a shirt's buttons are made of. They also tend to be more concerned about issues such as credit-card fraud and identity theft. And they demand more attention.
"They want [a response to emails] the next day," says Mr. Diep, adding that he checks for messages from customers every 20 minutes.
Gauging writers' emotions can be challenging. "When you talk to someone face to face, you can tell if they're upset or joking," Mr. Diep says. But that's not true with email, he adds, which is mainly how he communicates with customers.
If you own a bricks-and-mortar store and want to start selling items from it on the Web, pay close attention to your inventory, advises Mark Bollman, an entrepreneur in Boston who learned that lesson the hard way.
He opened Ball and Buck, a shop that sells men's lifestyle products, in 2009 and a few months later added a shopping-cart component to its website, BallandBuck.com, to attract more customers. But he didn't take any steps to ensure that the items listed for sale on the site were in stock in his physical store.
As a result, there were a few occasions in those first few years when he disappointed customers because he couldn't fill their orders. He has since set up a cloud-based inventory-tracking system that costs roughly $100 a month.
Another tip Mr. Bollman learned from experience: Invest in a good camera to take clear, high-quality photos and video of your products—and make these the center of attention on your e-commerce site. He says he noticed a spike in sales right after he started putting more images and less text on his store's home page.
Mr. Bollman says going the extra mile is necessary because it's tough to make an emotional connection with online shoppers. In a physical store, people "smell the leather couches and hear the Americana music. It's a full sensory experience."
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'Mad Men' and Your Money

• By KELLY GREENE

 

AMC/Everett Collection

Executives at the fictional Sterling Cooper agency should put any pre-IPO stock into trusts for their kids.

There is more to the television hit "Mad Men," which wraps up its sixth season Sunday night, than 1960s period detail and arch references to Heinz ketchup ads.
The show—which chronicles the saga of the fictional New York advertising firm Sterling Cooper & Partners and its executives, staff and their families—averages 2.5 million viewers each week, with nearly half of its viewers between the ages of 25 and 54 reporting household income of at least $100,000 a year, according to AMC, the show's network.
"Mad Men" also offers a treasure trove of financial lessons for families in that demographic group.
This season has explored the drug culture, riots, Nixon campaign and other events roiling the world in the late 1960s through the prism of Madison Avenue—and also the increasing complexity of the lives of a handful of women staking out their independence, both at work and in their personal lives.
The result: The characters' money choices are getting messier and their need to plan ahead more important. While the show itself doesn't dwell on financial details, a number of financial planners and lawyers devoted to "Mad Men" have given the potential mistakes of its female characters a great deal of thought and find themselves occasionally screaming advice at their screens.
Among them are the four women who make up Sandy Cove Advisors in Hingham, Mass., who often gather on Mondays to dissect the previous night's show and the characters' financial foibles.
"It's the overarching theme—emotions getting in the way of sound financial decisions for women," says Deirdre Prescott, the firm's president. "We see it a lot. The key is to give people the tools to make sound financial decisions without having them clouded by what's happening in their lives."
Here are some modern ways to tackle the personal-finance challenges facing the women, and their male counterparts, of "Mad Men":
• Make it big before marriage? Consider a prenuptial agreement.
Peggy Olson, the drama's protofeminist heroine, has done such a stellar job of maneuvering from secretary to chief copywriter at Sterling Cooper that she can buy an Upper East Side apartment with what real-estate agents refer to as a "partial river view."
But when her boyfriend starts talking about raising a family in a fixer-upper on the then-crime-ridden Upper West Side, she is quickly swayed to buy there instead.
For some lawyer fans of the show, Ms. Olson's switching gears so readily for a man underscores the need for women in her shoes preparing to marry to negotiate a prenuptial agreement.
Today, many financial planners and lawyers recommend prenuptial agreements, and even postnuptial agreements, for financially successful women. But such legal protections aren't ironclad. A New York court decision in February made it easier to challenge such documents. The New York Supreme Court's Appellate Division affirmed two lower-court decisions, ruling that a real-estate investor fraudulently induced his fiancée to sign a prenup four days before they married.
There are ways to make a prenup tougher to challenge. You should give your betrothed plenty of notice—at least a month or two—before the wedding that you want him or her to sign such an agreement. Some lawyers advise putting any possible objection into writing, including clauses that say that there aren't any oral agreements on the side.
Finally, the law says any waiver of property rights or alimony payments before the wedding has to be reached in good conscience and without unfair pressure and not be completely lopsided, says Jeffrey Landers, a certified divorce financial analyst and president of Bedrock Divorce Advisors in New York.
• When your firm is about to go public, get your estate plan in order.
Joan Harris, who is juggling life as a partner in the firm with being the divorced mother of a young son, should be looking for ways to pass along any share in the firm to him now in case it revives an attempt to go public, planners say.
Ms. Harris is trying to get ahead. In an earlier season of the show, she slept with an executive at Jaguar in exchange for a 5% interest in Sterling Cooper, and more recently cut out a co-worker from a meeting in order to land Avon Products as AVP -2.26% a client.
In her time, she was a pioneer, but she would be in good company among today's working mothers: A record 40% of all households with children under age 18 have mothers who are the sole, or primary, breadwinner, according to a Pew Research Center analysis of U.S. Census data. The share was just 11% in 1960.
Among these breadwinner moms, 63%, or 8.6 million, are single mothers like Ms. Harris. The other 37%, or 5.1 million, are married and have a higher income than their husbands.
As Ms. Harris's pay increases, she should start putting what she can into savings for her son. The contemporary vehicles that would make sense include starting with a 529 college-savings plan, which could earn her some state and federal tax benefits. Then she should consider a trust, possibly funded with a chunk of her holdings in the firm, says Linda Hirschson, a shareholder in law firm Greenberg Traurig in New York. Assuming Ms. Harris's partnership increases in value, putting whatever she can into a trust now could limit gift or estate taxes down the road.
In the early part of the season, the firm's partners tried to go public. But they pull the plug on an initial public offering after another partner, Don Draper—the show's leading character—unaware of the IPO plan, orchestrates a merger with a rival firm to land Chevrolet as a client.
Assuming the firm might attempt another IPO down the road, Ms. Harris could put some of her hard-to-sell stock into a trust for her son now, at a presumably lower pre-IPO value, without running afoul of the federal gift-tax exclusion, currently $14,000 a year, plus a lifetime limit of $5.25 million.
For that matter, Ms. Hirschson says, "all these people have kids, so they could put their stock into dynasty trusts," a type of trust used by the wealthy to shelter assets from estate taxes and generation-skipping transfer taxes, perhaps for hundreds of years. "The price of the shares is definitely low, so they could pass some of the wealth on to their kids."
It could be hard to move a partnership interest in a service company into a trust because such assets are tough to appraise, and smaller firms sometimes simply make cash distributions each year, cautions Elyse Kirschner, a partner at law firm McDermott Will & Emery in New York. Still, "taking away all the complications, you should do the planning before the value increases," she says.
• If you hire a caregiver for your mom, keep an eye on her bank account.
Pete Campbell, Sterling Cooper's head of accounts, is at a loss as to how to care for his mother, Dorothy, who is developing dementia. Hiring an attendant referred by a colleague at first seems to be the perfect fix. But Pete becomes increasingly flustered by his mother's allusions to an affair with the aide, Manolo—his last name isn't given—and he finally fires the aide outright.
Still, his mother tells her son that he can't stop her from continuing to see Manolo socially.
If Mr. Campbell isn't already worried that his mother's aide might be trying to gain control over at least a portion of her finances, he should be, advocates for family caregivers say.
Increasing numbers of adult children these days are dealing with the strain of arranging appropriate care for their parents without missing a beat on the job. Forty-two percent of U.S. workers have provided care for a relative or friend in the past five years, and 49% expect to do so in the next five years, according to an October report by AARP, the membership group for older Americans. They, too, run into thorny issues of trust while trying to keep their loved ones safe.
Financial exploitation costs older adults an estimated $2.9 billion a year in the U.S., often due to fraud or outright theft by paid caregivers and family members, or through investment fraud, according to MetLife MET -0.18% . The typical victim, like Dorothy Campbell, is a frail white woman between the ages of 70 and 89 who is cognitively impaired, trusting and often lonely or isolated.
The Eldercare Locator, an online directory (eldercare.gov) and call center (800-677-1116) supported by the federal government, advises families to spend some time together to talk and learn about ways to prevent financial exploitation.
The website has a free consumer guide, "Protect Your Pocketbook: Tips to Avoid Financial Exploitation." Signs to look out for include inconsistent financial activity, confusion about recent financial arrangements, changes to key documents or an older adult's feeling uneasy about someone seeking control of their finances.
• When life gets complicated, protect your assets.
This season also features a classic case of a deadbeat son-in-law. Trudy Campbell, who is married to Pete, finally tires of her husband's philandering and banishes him to the Manhattan apartment she had urged him to get, secretly in the hope that he would keep his extramarital activities far from the Connecticut home where they are raising their young daughter, Tammy.
At this point, Ms. Campbell's parents should put any assets they want to go to her and Tammy into a trust.
"The main point is to make sure Pete doesn't get control of her money," Ms. Hirschson says.
There also is an international couple, a situation that calls for more sophisticated financial planning: Megan Draper, Don's second wife, is Canadian. She's breaking out as a soap-opera actress, but he still is presumably the big breadwinner.
Assuming she isn't a U.S. citizen and that they stay married until his death—despite his own philandering—he would have to create what is called a qualified domestic trust to take advantage of the marital estate-tax deduction, Ms. Hirschson says
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Tycoon Tests Africa's Business Limits

Nigerian Billionaire Seeks to Expand Cement Empire, Encountering Red Tape and Foreign Competition

By DREW HINSHAW

Reuters

Aliko Dangote, considered Africa's wealthiest industrialist, is mired in a court fight as he seeks to expand his Nigerian cement empire to Senegal.

LAGOS, Nigeria—Three years ago, Africa's richest businessman planned to build his first factory outside his home country of Nigeria. Today, the cement plant remains a half-constructed shell on a Senegalese meadow as courts consider competing claims between the industrialist and the descendants of a Muslim holy man.
Aliko Dangote's cement company has flourished in Nigeria, helping to turn him into the continent's most wealthy industrialist. But the stalled Senegalese venture foreshadows what awaits Mr. Dangote and the rest of Africa's crop of multinational entrepreneurs as they expand beyond their home countries.
"It's not really been easy," the Dangote Group chief executive says in his office here, facing a wall-size map of Africa.
Like Africa's other aspiring multinational businessmen, Mr. Dangote is colliding with red tape and foreign competition in Africa's small-but-fast-growing markets. Their outward marches will test whether homegrown African businesses can compete against big foreign companies on the continent.
For nearly two decades, Mr. Dangote (pronounced DAHN go tay) thrived on Nigeria's tilted playing field. The country's past three presidents, whom Mr. Dangote counts as friends, restricted the flow of cement through the nation's ports. That lifted prices, along with Dangote Group's earnings. Nigerian cement sales drove Dangote's profit 24% higher last year to $1.9 billion, the company says.
Mr. Dangote wants to persuade other countries to tighten their ports, too, hoping to push up import prices and steer Africa's economic growth toward industry and away from consumption. It is a message he has taken into the roughly 20 African countries he is targeting for investment, aiming to build "the most profitable cement company ever," he says.
His expansion plans highlight a pivotal moment for business on the continent. A handful of African banks, retailers and cellphone companies are busting out of their home countries to ply products and services across the continent. South African telecom MTN Group Ltd., MTN.JO -0.02% Togo-based Ecobank Transnational Inc. and South African retailer Massmart Holdings Ltd., MSM.JO +0.01% a unit of Wal-Mart Stores Inc., WMT -1.92% lead the pack.
But industrial endeavors like Mr. Dangote's are still rare—and that is no surprise.
Kenyan power-equipment manufacturer Transcentury Ltd. opened a factory next door in Tanzania. But the operation has struggled to keep up with power cables offloaded from ships that came from China. Kenya's Bidco Oil Referies Ltd. built a cooking-oil plant in Tanzania—but that factory has been undercut by Asian imports, too.
Mr. Dangote has experienced similar setbacks. His textiles business had to close shop when Chinese garment mills began large-scale shipments to Nigeria. That worked out well for him; he turned to the cement industry in the 1990s just as construction began to boom.
Elsewhere, Africa's dictatorships were crumbling and democratic governments were abandoning socialist plans for top-down industrial development. To curry favor with foreign investors—and to appease poor voters clamoring for inexpensive imports—many governments relaxed import restrictions and unleashed a flood of goods from abroad.
But Africa's most populous—and oil-rich—country held firm to restrictions on international trade.
That has left Nigeria's retail price for cement among the world's highest, at $200 a metric ton, analysts say. Mr. Dangote says the environment has allowed him to make investments that have created jobs and made him a symbol of Nigerian aspiration.
Forbes pegs his net worth at $16 billion. A pop tune here, "Aliko Dangote Special," declares, "Cover of Forbes, he no be joke."
But Mr. Dangote so far hasn't been able to leverage that star power to persuade other African governments to ban, tax or otherwise limit cement imports from overseas.
Many countries have French-owned cement factories that are the legacy of colonial ties. Yet several of those have closed or scaled back amid a recent flood of inexpensive imports.
And restricting imports as Mr. Dangote has urged risks angering China, an important investor in Africa. China's trade with the continent hit $200 billion last year, according to Beijing.
And then there is Senegal.
Mr. Dangote has said his plant there would create 4,000 jobs. But Senegalese courts have ruled that his factory encroaches on a sacred forest owned by the grandchildren of Cheikh Amadou Bamba, whom millions of Senegalese consider a Muslim messiah. Local belief holds that he once drank tea with the Prophet Muhammad and floated across the Atlantic Ocean on a prayer rug.
Mr. Dangote ascribes the rulings to less-divine intervention. French Presidents François Hollande and Nicolas Sarkozy each lobbied his Senegalese counterpart to protect a local cement plant owned by France's Ciments Vicat, Mr. Dangote says. "The Senegalese, they dance to the tune of the French."
Abdou Abdel Thiam, a spokesman for Senegalese President Macky Sall, says the government didn't interfere in the litigation but also rules out a Nigeria-style block on imports. "Senegal is a free country," Mr. Thiam says.
In his office, Mr. Dangote predicts he soon will start selling cement in Senegal at just a razor-thin profit. "We've taken this thing very personally," he says.
On his desk a plaque reads, "Nothing Is Impossible."
—Patrick McGroarty in Johannesburg contributed to this article.
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New Tack in Preventing Hospital Infections

Germ-Killing Soap-Ointment Treatment for all ICU Patients Shown to Be More Effective Than Isolating Some After Screening

 

By LAURA LANDRO

To prevent deadly infections in intensive-care units, hospitals often screen all patients for the drug-resistant bacteria MRSA, then isolate or treat those found to carry it with germ-killing soap and ointment.

Enlarge Image
 

Tampa Bay Times/Zuma Press

A nurse in Largo, Fla., helps a patient use chlorhexidine wipes, which have been found to protect against MRSA.

But the largest prevention study of its kind has shown it is far more effective to treat every patient in the ICU with the regimen, without any prior testing.
In the study of nearly 75,000 patients at 74 adult ICUs in 43 Hospital Corp. of America HCA -0.73% facilities, the protocol, known as universal decolonization, reduced all bloodstream infections, including those caused by other germs, by 44%, and reduced the incidence of MRSA-positive cultures in the ICU by 37%. Patients were washed with cloths containing antimicrobial soap chlorhexidine and received a nasal antibiotic ointment, mupirocin.
In contrast, there was no significant decrease in infections in a group of patients who were first screened and then isolated if they were found to carry MRSA. And in a third group in which all patients were tested and then isolated and treated with the soap-ointment combination if they tested positive for MRSA, there was only a 22% reduction in infections.
"This will save lives, and sets a new standard for preventing bloodstream infections in the intensive-care unit," says Jonathan Perlin, president, clinical and physician services group and chief medical officer at HCA. HCA is now implementing the protocol in all of its hospital ICUs. The study was published online Wednesday in the New England Journal of Medicine.
MRSA, for methicillin-resistant Staphylococcus aureus, has become resistant to a host of drugs used to treat infection. About 1% to 2% of people carry MRSA on their skin or in their nose, but they have no symptoms or signs of infection. Once they are hospitalized, however, it can enter their bloodstream during invasive procedures or spread to other patients on health workers' hands.
Though health-care-associated infections from MRSA have declined in recent years, thanks to precautions such as hand-washing and infection-prevention programs in hospitals, they still struck 62,500 patients in 2011 and killed more than 9,000.

John Jernigan, director of the Centers for Disease Control and Prevention's Office of Prevention Research and Evaluation and a co-author of the new study, says it fills important gaps in the science of prevention, which has been "murky to date." Most important, he adds, universal decolonization "reduces all bloodstream infections, not just MRSA." The CDC is in the process of determining how the findings of the study might be used in its infection-prevention recommendations. The agency doesn't now recommend screening all ICU patients but does recommend screening and isolation in certain circumstances when the incidence of MRSA in a facility isn't decreasing with more basic infection-control measures.
The cost effectiveness of the different approaches and questions about whether universal decolonization might increase resistance to the germ-killing agents are being investigated in a second phase of the study. HCA's experience is that universal decolonization is less-expensive than the other two approaches, Dr. Perlin says, and the cost of treating hospital infections is of far greater concern.
Several states now require screening all ICU patients for MRSA. But the cultures used to detect MRSA can be costly, and in the time it takes for them to come back from the lab, carriers can infect others or themselves, Dr. Perlin says. Isolating MRSA carriers also is difficult for patients and families.
The study included investigators from Harvard University and other academic institutions, as well as the CDC and the Agency for Healthcare Research and Quality. Carolyn Clancy, director of AHRQ, says because MRSA screening has been adopted by many hospitals, "it may take some time for the medical community to assess the degree to which the study findings should eliminate this practice." The state laws requiring screening also are a complicating factor, Dr. Clancy says, as are questions of cost and resistance.
The study noted that widespread use of chlorhexidine and mupirocin could possibly engender resistance, and the CDC's Dr. Jernigan acknowledges that "any health-care organization that chooses to use this approach will need to be very vigilant." At present, however, there is no strong evidence of resistance, Dr. Perlin says, "and right now we have a real-world concern about infections that can be catastrophic for patients."

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Online Currency Exchange Accused of Laundering $6 Billion

By MARC SANTORA, WILLIAM K. RASHBAUM and NICOLE PERLROTH

¶ The operators of a global currency exchange ran a $6 billion money-laundering operation online, a central hub for criminals trafficking in everything from stolen identities to child pornography, federal prosecutors in New York said on Tuesday.

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Robert Stolarik for The New York Times

“The coin of its realm was anonymity,” Preet Bharara, the United States attorney in Manhattan, said of Liberty Reserve.

¶ The currency exchange, Liberty Reserve, operated beyond the traditional confines of United States and international banking regulations in what prosecutors called a shadowy netherworld of cyberfinance. It traded in virtual currency and provided the kind of anonymous and easily accessible banking infrastructure increasingly sought by criminal networks, law enforcement officials said.

¶ The charges announced at a news conference by Preet Bharara, the United States attorney in Manhattan, and other law enforcement officials, mark what officials said was believed to be the largest online money-laundering case in history. Over seven years, Liberty Reserve was responsible for laundering billions of dollars, conducting 55 million transactions that involved millions of customers around the world, including about 200,000 in the United States, according to prosecutors.

¶ Richard Weber, who heads the Internal Revenue Service’s criminal investigation division in Washington, said at the news conference that the case heralds the arrival of “the cyber age of money laundering,” in which criminals “are gravitating toward digital currency alternatives as a means to move, conceal and enjoy their ill-gotten gains.”

¶ “If Al Capone were alive today, this is how he would be hiding his money,” Mr. Weber said. “Our efforts today shatter the belief among high-tech money launderers that what happens in cyberspace stays in cyberspace.”

¶ Just as PayPal revolutionized how people shop online, making it possible to buy a microwave oven or concert tickets with the click of a button, Liberty Reserve sought to create a similarly convenient way for criminals to make financial transactions, law enforcement officials said.

¶ The charges detailed a complicated system designed to allow people to move sums large and small around the world with virtual anonymity, according to an indictment, which was unsealed in federal court in Manhattan.

¶ “As alleged, the only liberty that Liberty Reserve gave many of its users was the freedom to commit crimes — the coin of its realm was anonymity, and it became a popular hub for fraudsters, hackers and traffickers,” Mr. Bharara said at the news conference, where officials from the Justice and Treasury Departments, as well as the Secret Service and Homeland Security Investigations, also spoke. “The global enforcement action we announce today is an important step toward reining in the ‘Wild West’ of illicit Internet banking. As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth.”

¶ Liberty Reserve surfaced as a preferred vehicle to transfer money between parties in a number of recent high-profile cybercrimes, including the indictment of eight New Yorkers accused of helping to loot $45 million from bank machines in 27 countries, officials said.

¶ Liberty Reserve was incorporated in Costa Rica in 2006 by Arthur Budovsky, who renounced his United States citizenship in 2011, and was arrested in Spain on Friday. He was among seven people charged in the case; five of them were under arrest, while two remained at large in Costa Rica. All were charged with conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business, and operating an unlicensed money-transmitting business. The money laundering count carries a maximum sentence of 20 years in prison, and the other two charges carry a maximum of 5 years each.

¶ In addition to the criminal charges, five domain names were seized, including the one used by Liberty Reserve. Officials also seized or restricted the activity of 45 bank accounts.

¶ The closing of Liberty Reserve last week seemed to have an immediate chilling effect on its customers, who were suddenly unable to access their funds and who posted anxious comments in underground forums, according to law enforcement officials. Mr. Bharara said the exchange’s clientele was largely made up of criminals, but he invited any legitimate users to contact his office to get their money back.

The charges outlined how the money transfer system operated, offering a glimpse into the murky world of online financial transactions where money bounces between accounts from Cyprus to New York in the blink of an eye.

To transfer money using Liberty Reserve, a user needed only to provide a name, address and date of birth. But users were not required to validate their identity.

“Accounts could therefore be opened easily using fictitious or anonymous identities,” the indictment states. Prosecutors cited “blatantly criminal monikers” used by Liberty Reserve clients, like “Russia Hackers.”

Essentially, all a customer needed to open an account was an e-mail address.

One undercover agent was able to register accounts under names like “Joe Bogus” and describe the purpose of the account as “for cocaine” without being questioned, officials said. That no-questions-asked verification system made Liberty Reserve the premier bank for cybercriminals, prosecutors said.

The case is significant, prosecutors said, because it attacks the financial infrastructure used by many cybercriminals in much the same way that drug-money-laundering prosecutions unravel the financial underpinnings of the narcotics trade.

Dismantling the Liberty Reserve operation was “critical because transnational criminal organizations can succeed only so long as they can funnel their illicit proceeds freely and without detection,” said James T. Hayes Jr., the special-agent-in-charge for Immigration and Customs Enforcement Homeland Security Investigations.

While Liberty Reserve was incorporated outside the United States, federal officials used a provision in the Patriot Act to target the organization and other financial institutions with whom they conducted business. It was the first time the provision had been used to prosecute a virtual currency provider, officials said.

Liberty Reserve did not take or make cash payments directly and instead used “third-party ‘exchangers,’ ” according to the indictment. These exchangers would take and make payments, and then credit or debit the Liberty Reserve account, allowing Liberty Reserve to avoid collecting any banking information on its clients and not leave a “centralized financial paper trail,” the indictment said.

The exchangers, the indictment said, “tended to be unlicensed money-transmitting businesses without significant government oversight or regulation, concentrated in Malaysia, Russia, Nigeria and Vietnam.”

The people who accepted Liberty Reserve’s currency were “overwhelmingly criminal in nature,” according to the indictment.

“They included, for example: traffickers of stolen credit card data and personal identity information; peddlers of various types of online Ponzi and get-rich-quick schemes; computer hackers for hire; unregulated gambling enterprises; and underground drug-dealing Web sites,” according to the indictment.

Despite the case against Liberty Reserve, security experts said, there were plenty of online payment systems that allow users to move money without verifying their identities.

“Organized crime and terrorist groups are now financing their operations through these anonymous payment systems,” said Tom Kellermann, a vice president at Trend Micro, a security firm. “The financial sector no longer has a monopoly on moving capital around the world.” 

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Counting on an Inheritance? Count Again.

The bad news: Many baby boomers are likely to get less money from Mom and Dad than they thought. The worse news: They may have to help their parents financially instead. 

By ANNE TERGESEN

Counting on an inheritance? Count again. Baby boomers may not only be getting less money than they thought, they also may have to help out their parents financially, as Anne Tergesen explains on Lunch Break. Photo: Getty Images.

Baby boomers: Get ready for a double whammy.
For years now, there's been a lot of talk about boomers getting tremendous windfalls as their parents pass on. Many boomers, in fact, have been lagging behind in their savings, betting on—hoping for—big bequests, especially since many of them suffered big losses in 2008.

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But for a growing number of boomers, things aren't going according to plan. The postwar generation is living longer—and many are spending their savings along the way. And, of course, many of them also took a hit in 2008.
The result is that, as a group, boomers likely won't be getting as much of an inheritance as they hoped. Even worse, far from receiving a bequest, a growing number are tapping some of their own savings to help their cash-strapped parents make ends meet.
For families, the result is often a lot of scrambling, dashed dreams, and conflict and angst as parents and children try to come to grips with the lean new reality—and divide up a smaller pie.

Stephen Webster

"There are way too many adult children I see who are looking at Mom and Dad's estate as their ticket to a secure retirement," says M. Holly Isdale, an estate planner in Bryn Mawr, Pa. "But with people living longer, much of the money is likely to be spent."
How much longer? Thanks to medical gains, a 65-year-old man has a 60% chance of living to age 80 and a 40% chance of reaching 85. For women, the odds are 71% and 53%, respectively. All of this has made the 85-and-over age bracket the fastest-growing segment of the population. In an era of low interest rates, volatile financial markets, and rising costs for health and long-term care, finding money to cover those years isn't always easy.
Consider the case of Nancy Becker, the co-owner of a small business in Waterbury, Conn. Her parents, Morris and Dorothy Stein, were diligent savers. "But they didn't imagine living well into their 90s," says Ms. Becker, whose father died in 2006 at 92 and whose mother died in 2011 at 97.
Ms. Becker and her two brothers inherited a house in Vermont from their father. But they spent about $180,000 of their own money—an amount that exceeds the value of the Vermont property—to cover living expenses for their mother in the final three years of her long life.
Ms. Becker, now 63, says she certainly doesn't begrudge her parents for outliving their savings. The Steins built a thriving plumbing and heating business that now employs Ms. Becker and her husband, among other family members. Still, as Ms. Becker's in-laws enter their 90s, she worries that "their money is running out, too."

Financial losses can also put a dent in the older generation's reserves. Donald Hoeller, 86, of Glendale, Wis., says he and his wife, Bernadette, 85, had hoped to bequeath "several hundred thousand dollars" to each of their six children. But an office complex in which the couple invested 60% of their retirement savings recently landed in foreclosure and litigation.
So, Mr. Hoeller says, "I don't know if they will get anything."
His daughter, Mary Hoeller, 58, says that while she never counted on an inheritance, "times are tough"—and she now has the added worry that her parents may run out of money. A divorcee who is paying college-tuition bills for the youngest of her three children and wants to help another child with medical-school tuition, Ms. Hoeller says her income has declined substantially since 2008.
"I am very frugal," says Ms, Hoeller, a mediator in Indianapolis. But "who wouldn't want an inheritance from their parents? It would be a good thing."

Scaling Back Bequests

Many parents, of course, won't exhaust their savings. The Center on Wealth and Philanthropy at Boston College estimates that baby boomers and their offspring could inherit as much as $27 trillion over the next four decades, with the progeny of the wealthiest pocketing much of the windfall.

But there are signs that expected bequests are under pressure. According to Boston College's Center for Retirement Research, from June 2006 to June 2010, falling asset values reduced projected inheritances for baby boomers an estimated 13%. Stock prices have since recovered, although house prices in most markets have not.
Even the affluent are pulling back. Among those with $250,000 or more in investible assets, only 41% said preserving inheritances was a top concern, down from 54% in 2009, according to a Merrill Lynch survey released earlier this year. Due in large part to a 22% decline in projected future bequests of $500,000 or more, the amount individuals expect to transfer fell by 19% from 2008 to 2009, according to Michael Hurd, director of the Center for the Study of Aging at Rand Corp., a nonprofit research organization.
Just as telling is a recent study from Northwestern Mutual Life Insurance Co. in Milwaukee. When asked how prepared they feel to live to various ages, one in three surveyed adults age 60-plus said they didn't feel prepared financially to live to age 85; almost one in two said the same with regard to age 95.

Suffering in Silence

Not surprisingly, many families are loath to discuss these issues.

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In addition to serving as a reminder of the older generation's mortality, a conversation about inheritance or Mom and Dad running out of money can provoke anxiety in parents. Many are uncomfortable disclosing the details of their finances in the first place, even more so when they're worried about disappointing their children.
Adult children, in turn, aren't eager to ask their parents about money for fear of coming across as greedy. Some feel guilty for thinking about their own financial needs at a time when parents could be facing steep medical or long-term-care expenses.
"Due to the new realities of longevity, adult children—who have rightfully assumed they would inherit something substantial from their parents and have lived their lives accordingly—can no longer count on that," says Lillian Rubin, a sociologist, psychologist and author. Adult children, she adds, "often feel guilty for even thinking about" inheritance.
Nonetheless, financial advisers say, it is important for families to talk—if only to establish realistic expectations.
Peter Bell, 59, says he and his parents "have always been very open about talking about finances." That frankness has helped them through some tough choices in the past few years.
Mr. Bell, the president of the National Reverse Mortgage Lenders Association in Washington, D.C., "always assumed" his father, Jerry, 87, and mother, Florence, 88, would leave a substantial inheritance.
After his parents lent his brother money several years ago, Mr. Bell says, they "decided I would get the house and everything else would be split."
But when the elder Bells decided almost two years ago to move into a continuing-care retirement community, it became apparent they would need the proceeds from the sale of their home to finance the community's $425,000 entry fee. Worse, because the depressed Florida real-estate market hindered their efforts to sell their home in Delray Beach, the couple had to borrow the $425,000 entry fee from their son.
"We have always considered our money as family money," says Jerry Bell, who anticipates repaying 85% of the loan from the proceeds of the home's recent sale. "When the kids needed help, we were there for them. And when we needed help, they were there for us."

Measures to Take

If parents anticipate running short of money—and if they and adult children are able to start a dialogue—there are several steps families should consider, financial planners say. Among them: Have parents recalibrate their budgets, downsize to a smaller residence, buy an annuity or longevity insurance to lock in a lifelong income, or take out a reverse mortgage.
In situations where children have adequate financial resources, some advisers recommend the children pay a parent's health-insurance premiums, purchase a long-term-care insurance policy for him or her, give a set amount of money each month or purchase the parent's home to generate cash for living expenses. (Before implementing a strategy, talk with your financial and tax advisers.)
The process can lead to conflict, although the tension typically remains beneath the surface, says Claudia Fine, an executive vice president at SeniorBridge, a New York-based company that provides care-management services.
Very often, she adds, she sees conflict arise over expenditures on caregiving. "Because feelings about inheritance are not expressed, families have a hard time sorting out their differences."

Siblings Sort It Out

Linda Fodrini-Johnson, 67, suspects inheritance calculations play a role in differences she and her three brothers have over managing the finances of their mother, Bernice Bidwell, 90.
Ms. Fodrini-Johnson says she and one brother, 60-year-old Craig Bidwell, "don't need to inherit" from their mother, who recently had a stroke and suffers from congestive heart failure. But disabilities have prevented the other brothers from working in recent years.
"There is tension," says Ms. Fodrini-Johnson, who lives in Walnut Creek, Calif., and runs a company that provides care-management services. "You hear it and feel it, but nobody articulates it because it would be disrespectful to Mom."
She points to a recent disagreement over her mother's hair. She wanted to take her mother to a hairdresser instead of using the one at her mother's assisted-living facility. But other siblings resisted.
No one came out and said it was about the cost, Ms. Fodrini-Johnson says, but that seemed to her to be the motivation. The siblings also debated whether to remodel and rent their mother's San Francisco home—so it could bring in some money—or allow a grandchild to serve as temporary caretaker of the place.
To avoid conflict, Ms. Fodrini-Johnson says, she solicits her brothers' opinions and explains the reasons for her decisions as well as the details of her mother's finances. But as her mother's power of attorney, she has the final say.
Her three brothers declined to comment on the hairstylist incident, or said they didn't know about it. Two brothers, Craig and 63-year-old Gary Bidwell of San Francisco, say they discussed renting their mother's house to bring in extra income to offset her expenses.

No Expectations

When it comes to the idea of an inheritance, the three brothers are of similar minds.
Robin Bidwell, a 59-year-old in Colfax, Calif., says he sustained an injury at age 48 that has prevented him from working. While he receives a pension and Social Security, "I wasn't able to put money away. I don't live the life I want to live, but I don't look to my mother's inheritance to be on top of things," he says. "I believe my mother's care is first and foremost. That, to me, is more important than anything."
"An inheritance would help, but I am not looking forward to it," says his brother Gary, a 63-year-old who retired on a disability pension in 1998. "I don't want an inheritance if I have to lose someone I love."
Like many adult children, the third brother, Craig, says he hopes to receive an inheritance—in his case to help pay for a new home he and his wife plan to build. However, the retiree says he is grateful that his mother is able to afford the high-quality care she receives.
"Whatever my mother has is hers," he says. "It's not my inheritance. I didn't work for it. My brothers didn't work for it. My parents worked for it."

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