Bits Blog: Behind London Tech Scene, a Government Push

Bits Blog: The Numbers Behind Twitter

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Fair Game: Find the Loan Behind the Loans

Last month, for example, the New York attorney general followed other states’ regulators in suing Western Sky Financial and its affiliate Cash Call Inc. The lawsuit contended that rates charged to borrowers by the companies — from 89 to 343 percent, depending on loan size — far exceed the caps determined by the state’s civil and criminal usury laws. A borrower receiving $1,000 could wind up owing almost $5,000 in finance charges, fees and principal over two years, the complaint said.

Last Tuesday, Western Sky suspended operations, saying it was a victim of regulatory overreach, though its affiliate, Cash Call, was still functioning. Katya Jestin, a lawyer at Jenner & Block who represents the companies, said that because Western Sky operated on the Cheyenne River Indian Reservation in Eagle Butte, S.D., New York officials had no jurisdiction over it.

“We will be moving to dismiss the suit against Cash Call and the other parties,” Ms. Jestin said in an interview on Thursday. “Consumers voluntarily entered into the loans and agreed when they signed the loan agreements to be bound by the laws and the courts of the Cheyenne River tribe. The A.G.’s lawsuit is an attempt to sidestep these agreements and is an infringement on the tribe’s inherent sovereign rights and the rights of its members.”

It is unclear what more might happen with the New York attorney general’s case. But here’s a suggestion: When prosecutors pursue payday lenders, why not go further? Investigators should track down — and disclose — the institutions and individuals who make these operations possible by providing the capital that such companies need to conduct their business.

The capital needs of companies like Western Sky are crucial because, unlike banks, they don’t take in deposits that they can turn around and lend. They have to rely on financing from other sources.

According to the attorney general’s complaint, Western Sky makes loans for which Cash Call, based in Anaheim, Calif., provides funding. Cash Call also acts as the servicer on Western Sky’s loans, collecting interest and principal payments from borrowers.

The question that the complaint doesn’t answer is this: Who is willing to provide the capital that enables Cash Call to finance what regulators say are predatory loans?

When asked if the office was investigating who was financing the company, Damien LaVera, a spokesman for the New York attorney general, declined to comment. He said the investigation was continuing.

I’ve found a preliminary answer. Documents from a 2007 lawsuit show who was providing financing assistance to Cash Call in previous years. The institutions included Deutsche Bank Securities and a unit of Citigroup, known as the CIGPF 1 Corporation.

That lawsuit was brought by Cash Call against CIGPF in Federal District Court in New York. It related to a dispute over the bank’s financing arrangement with Cash Call. The suit was subsequently dismissed, but the court documents remain — and they provide a glimpse of the relationships between Cash Call and its bankers, Deutsche Bank and Citigroup.

Cash Call, the lawsuit said, obtained financing for its lending business from two credit facilities. The so-called senior facility, totaling as much as $1 billion, provided capital for about 90 percent of Cash Call’s consumer loans, the lawsuit said; a junior facility covered the rest.

Deutsche Bank Securities led the senior facility, or line of credit, which was backed by a variety of lenders, including CIGPF. The lawsuit said that this Citigroup unit had $20 million invested in this lending facility.

The smaller line of credit also involved both Deutsche Bank and the Citigroup unit. According to the suit, CIGPF invested $30 million in this facility.

Under these credit agreements, money repaid to Cash Call by its consumer borrowers first went to Deutsche Bank, which deducted “its interest and other earned fees.” It is unclear what Deutsche Bank earned from this arrangement.

After the bank deducted what it was owed, the lawsuit said, the remaining money was divvied up among other investors in the credit facility, including CIGPF.

I asked representatives of Citigroup and Deutsche Bank why the banks would want to provide backing for companies making high-cost and possibly predatory loans. Renee Calabro at Deutsche Bank said only that the bank ended the relationship with Cash Call in 2007. That was before the Cash Call unit began operating on the Indian Reservation.

A Data Broker Offers a Peek Behind the Curtain

The Acxiom Corporation, a marketing technology company that has amassed details on the household makeup, financial means, shopping preferences and leisure pursuits of a majority of adults in the United States, knows that Mr. Howe is 45, married with children, the owner of a house in the 2,500-square-foot range, and is interested, among other things, in tennis, domestic travel, cooking, crafts, sweepstakes and contests. Those intimate details, Mr. Howe says, are entirely accurate.

“I am crazy about that stuff,” he says of the sweepstakes and contests.

Mr. Howe is one of the first Americans to get a detailed glimpse of his own marketing profile because he happens to be the chief executive of Acxiom. But most consumers never learn the specific pieces of information that have been compiled about them by marketers.

That is about to change. Acxiom, one of the most secretive and prolific collectors of consumer information, is embarking on a novel public relations strategy: openness. On Wednesday, it plans to unveil a free Web site where United States consumers can view some of the information the company has collected about them, just as Mr. Howe did.

The data on the site, called AbouttheData.com, includes biographical facts, like education level, marital status and number of children in a household; homeownership status, including mortgage amount and property size; vehicle details, like the make, model and year; and economic data, like whether a household member is an active investor with a portfolio greater than $150,000. Also available will be the consumer’s recent purchase categories, like plus-size clothing or sports products; and household interests like golf, dogs, text-messaging, cholesterol-related products or charities.

Each entry comes with an icon that visitors can click to learn about the sources behind the data — whether self-reported consumer surveys, warranty registrations or public records like voter files. The program also lets people correct or suppress individual data elements, or to opt out entirely of having Acxiom collect and store marketing data about them.

With about $1.1 billion in revenue in its 2013 fiscal year, Acxiom is a leading player in an industry called data brokerage. The company collects, stores, analyzes and sells consumer data with the aim of helping its clients — including well-known banks, credit card issuers, insurance companies, department stores and carmakers — tailor marketing to their most valuable current customers or identify new customers.

A credit card issuer, for instance, could ask Acxiom to help aim a campaign for elite-level cards with concierge services at people above a certain income who live in certain suburbs or drive luxury cars. To do that, Acxiom, like many of its competitors, often uses its own proprietary classification system to segment consumers into socioeconomic marketing categories, like “Frugal Families” or “McMansions and Minivans.”

Some federal regulators and privacy advocates warn that this kind of data-mining could be used to aim at consumers vulnerable to predatory lending practices, for instance, or to favor certain high-value consumers with instant, attentive customer service while relegating other people to interminable wait time.

Mr. Howe says he wants to counter such fears by making industry practices more transparent. A former Microsoft executive, he came to Acxiom as C.E.O. in 2011, bringing the online industry’s enthusiasm for data sharing to what had been a hermetic company.

“We are not going to get anywhere by hiding,” he said in a recent interview at Acxiom’s headquarters in Little Rock, Ark. “You have to make things visible.”

But AbouttheData.com is as much ruthlessly pragmatic as idealistic. Mr. Howe recognizes that regulation of his industry may be coming and that it’s better for Acxiom to be seen as a part of the solution than a part of the problem.

ONE afternoon in late August, Mr. Howe sat in an executive conference room at Acxiom’s headquarters overlooking the Arkansas River, demonstrating a version of AbouttheData.com that was still a work in progress. Having filled out an identity verification form that asked for his name, birth date, address and the last four digits of his Social Security number, he landed on a page that gave him a choice of six data categories to examine.

Visitors who log in may be surprised at the volume of information that may be available and the detailed picture it can give of their personal lives. The household interest section, for instance, listed Mr. Howe as interested in health and medical issues (he subscribes to health industry trade journals and founded a site called Health123.com); crafts (he periodically works with stained glass); woodworking (he paid for his undergraduate education at Princeton in part by working as an apprentice carpenter); tennis (he was on his high school team); gardening (his wife subscribes to Fine Gardening magazine); and “religious/inspirational.”

“I don’t know how inspirational I am,” Mr. Howe said. “I am Methodist. My uncle is a Methodist preacher. I go to church very regularly.”

But consumers, he said, should not expect all information to be current or correct. For instance, the site listed Mr. Howe as the father of two; in fact, he is the father of three. It had also pegged him as Italian, but he is actually of Norwegian descent. (The system predicts likely ethnicity based on surname and is clearly imperfect.)

The home section, meanwhile, which listed such details as the year his house was built and its estimated market value, had incorrect information about his mortgage. “I don’t have a loan on my house anymore. It’s drawing on old data,” Mr. Howe explained. “That’s one I would absolutely go in and change.”

The Trade: The Power Behind the Throne at the Federal Reserve

Understand the Truth Behind Your Expert's Statistics

In the field of forensic accounting and economics, experts utilize government and industry studies and statistics all the time, especially when actual information specific to an individual is unavailable.

Bits Blog: The New Economics Behind the Oracle-Dell Partnership

Kimihiro Hoshino/Agence France-Presse — Getty Images

This week, Dell and Oracle announced a partnership unique to both companies. Dell would offer Oracle software on its machines and would resell Oracle services. Much head-scratching ensued among industry analysts, largely over misunderstandings about where the industry was headed.

What bothered many of these analysts was the idea that both Dell and Oracle sell commodity servers based on Intel’s x86 reference designs. Oracle picked up that business when it acquired Sun Microsystems for $7.4 billion in 2010. Sun was never a big player in that business, however, having come to it late and grudgingly. It always preferred its own machines, which used the Sparc chip.

From the Sun deal, Oracle got many loyal (or locked-in) Sparc customers and insights to make the combined hardware and software “engineered systems” that advanced its in-memory data and analytics products. If it ever wanted to compete with Dell or Hewlett-Packard on commodity servers, it doesn’t want to now. In its third fiscal quarter, Oracle had hardware revenue of $671 million, down 23 percent. Much of that was faltering x86 sales.

What Oracle still wants, and Dell can offer, is exposure to smaller and midsize companies, which Oracle’s high-ticket sales force has trouble reaching.

“Oracle has a phenomenal engine into the top 500 enterprise accounts worldwide,” said Marius Haas, the head of Dell’s enterprise business. “They’d like to go after the broader market, and we’ve got a great relationship with companies there.”

There is also some bad blood behind this story: Mr. Haas worked at Hewlett-Packard when Mark Hurd was its chief executive. He left during Léo Apotheker’s brief tenure at the top of H.P., after Mr. Hurd’s resignation in August 2010.

So putting a little more pressure on H.P. probably sweetened the deal. Mr. Haas said this week’s announcement could lead to Dell selling even more Oracle products, both applications and databases. It appears to be the first time that Oracle has entrusted another company to sell its services. Even Oracle’s enemies like SAP and I.B.M. resell Oracle databases.

More important is what the deal says about selling hardware these days: Compared with even five years ago, companies are being forced to add more capabilities to their products.

It’s not just that Oracle is fusing high-performance hardware and software, or Dell is shipping servers preloaded with Oracle products.

At the bottom of the food chain, Taiwanese companies like Quanta and Delta, which used to make motherboards that go inside servers, now sell shrink-wrapped racks of servers for big data centers. No one there cares about the brand; they care about price. Even below any kind of systems level, Intel is increasing the capability of its chips and buying software companies.

Thanks to clouds, mobility, sensors and big networks, there is so much computing around now that it has changed everyone’s economics. For a while, that creates new alliances and tensions.

Third Circuit Keeps Ciavarella Behind Bars With Ruling

Former Luzerne County Court of Common Pleas Judge Mark A. Ciavarella Jr.'s challenge to his 28-year sentence for his involvement in the "kids-for-cash" scandal has been rejected by the U.S. Court of Appeals for the Third Circuit.

Disruptions: Even the Tech Elites Leave Gadgets Behind

Nick Bilton/The New York Times The writer’s dinner guests place their smartphones in a stack in the middle of the table.

If you were to meet 32-year-old Robin Sloan of San Francisco, you might think him a Luddite unable to get his head around new technologies. He owns an old Nokia phone with one main application: making phone calls. He takes notes using a pen and paper notepad. And he reads books printed on paper.

But Mr. Sloan is far from a Luddite. He used to work at Twitter as a media manager, teaching news outlets to use the hottest social media tools. Before that he was with Current TV as an online strategist, inventing the future of digital journalism.

Yet last year, as he set out to write his first book, “Mr. Penumbra’s 24-Hour Bookstore,” he found his iPhone and other technologies were getting in the way of his productivity, so he simply got rid of them. “I found it was more important and more productive for me to be daydreaming and jotting down notes,” he said. “I needed my idle minutes to contribute to the story I was doing, not checking my e-mail, or checking tweets.”

Even in Silicon Valley, Mr. Sloan has company.

As every aspect of our daily lives has become hyperconnected, some people on the cutting edge of tech are trying their best to push it back a few feet. Keeping their phone in their pocket. Turning off their home Wi-Fi at night or on weekends. And reading books on paper, rather than pixels.

I’ve experienced this, too.

Two years ago, when the iPhone and iPad were spiking in popularity, when I dined with other technology bloggers and reporters we enthusiastically passed our phones around the table, showing off the latest app or funny YouTube clip.

Now, even as our gadgets can hold more apps and stream faster videos, when I’m at dinner with technologists we play a new game. Attendees happily place their smartphones in a stack in the middle of the table, and the first person who touches his or her phone before the meal is over has to pay the bill.

Some couples who work in tech seem to be trying to step back the most.

“At least once a month my wife and I jump in our car and drive until cell service drops off (yes, this is possible) and spend the weekend engaged with all things analog,” Evan Sharp, a founder of Pinterest, said — on e-mail. “We read, we walk all over the California hills, we cook, we meet people who don’t work in technology.”

Other couples have told me of a “no gadgets in the bedroom” rule. (Kindles are sometimes an exception.) Some say they leave their phones at home when they go for Sunday brunch. Rather than take a picture of their bacon and eggs to post to Instagram, they can now enjoy each other’s company, and do that strange thing called talking.

There could even be a business model in products that encourage us to step away from our gadgets.

Last Tuesday, Penguin Press published “The Pocket Scavenger,” a book both physical and digital that encourages readers to go on an unusual scavenger hunt, collecting random objects, drawing and smudging on the book’s pages, then documenting them later with a smartphone.

“We’re not going to get rid of technology,” said Keri Smith, the author. “I feel like we’ve lost touch with noticing smells and tactile sensations, and I’d just like to offer some kind of antidote to what’s out there.”

As for Mr. Sloan, who has since published his book, he said his break from technology was a resounding success. He still checks his e-mail, but not while he’s getting coffee with someone or going for a stroll.

Although he isn’t rushing off to buy the next iPhone, he said he wouldn’t rule it out. But he would use such a device differently than he did before downgrading his cellphone.

“It sounds silly because we all used to do this all the time, but after getting rid of my smartphone I am now so much more comfortable just leaving the house without any phone at all,” he said. “I feel like I kind of learned how to do that again, and I would do the same thing if I had a fancy new smartphone too.”

E-mail: bilton@nytimes.com

DealBook: Strategic Posturing Behind the Suit Against Corzine

Harry Campbell

Louis J. Freeh, the bankruptcy trustee for the failed futures firm MF Global, filed a lawsuit aimed at pinning its collapse squarely on Jon S. Corzine, the former chief executive, and two of his top lieutenants. And unlike in many other suits, Mr. Freeh has not named other groups like a company’s directors.

The tale Mr. Freeh weaves in the complaint presents Mr. Corzine and the other defendants, Bradley I. Abelow, the former chief operating officer, and Henri J. Steenkamp, the former chief financial officer, as having failed to properly manage risk at MF Global while recklessly trading in European sovereign debt. It is a picture of a headlong rush into failure. Mr. Freeh asserts that the three defendants breached their fiduciary duties by allowing MF Global to take on excessive risks.

The core of the case is that the three men did not properly “develop the appropriate controls, procedures and systems needed to transform” MF Global into a full-service investment bank. Not only that, but Mr. Corzine took personal control of MF Global’s proprietary trading “without ensuring that the Company had sufficient controls and adequate liquidity to properly manage the risks inherent in such trading.”

Mr. Corzine’s representatives have vehemently denied the accusations, and question why Mr. Freeh is taking such actions while court-order mediation is still proceeding.

But regardless of the merits of the case, Mr. Freeh is clearly making a tactical move with his lawsuit. Among the questions that arise in any corporate failure is this important one: Where were the directors, who are ultimately responsible for oversight of the company? In Mr. Freeh’s version of events, it turns out they were quite active in approving the risk limits and other acts by Mr. Corzine. But they were not the primary wrongdoers in this tale, and are not named as defendants. This seems to be part of his legal strategy in this suit. He appears to feel he has a better chance at overcoming the legal hurdles to holding executives liable for business decisions than members of MF Global’s board.

Mr. Freeh’s complaint is noteworthy for adopting an all-in strategy against Mr. Corzine, Mr. Abelow and Mr. Steenkamp. Strategically, Mr. Freeh may be hoping the directors will turn on Mr. Corzine and blame him for being a pied piper who led them to approve policies that turned out to be disastrous for MF Global. In corporate litigation, it is always helpful to have someone inside the boardroom pointing the finger at a wrongdoer to help show that these were not just ordinary business decisions that turned out badly.

It may be that Mr. Freeh will settle a claim against the directors later. But by suing Mr. Corzine first, the directors should get the message that they are bit players at best in Mr. Freeh’s account.

In addition, it is much easier under the law to hold officers liable for misdeeds than it is in the case of directors. Under Delaware law, where MF Global was incorporated, corporate directors cannot be sued to recover monetary damages for anything except a breach of the duty of loyalty, which usually requires showing that they gained improper benefits from their actions. To establish that directors are liable for failing to oversee the company and its risk management practices, Mr. Freeh would have to prove that “the directors demonstrated a conscious disregard for their responsibilities” and acted in bad faith.

This is an extremely high standard to meet, and Delaware courts regularly dismiss such claims. In a shareholder derivative case involving claims that Citigroup’s board failed to properly oversee the bank’s risk management before the financial crisis, for example, a Delaware court refused to find the board liable despite the bank’s near collapse and subsequent government bailout. Indeed, the court stated that under Delaware law “[t]o impose oversight liability on directors for failure to monitor ‘excessive’ risk would involve courts in conducting hindsight evaluations of decisions at the heart of the business judgment of directors.” The case against the Citigroup directors was dismissed because the plaintiffs could not show that the directors had acted in bad faith, but instead may have merely failed in their risk monitoring.

Mr. Freeh is keenly aware that Delaware law presents an almost insurmountable barrier to any suit against the directors. The board certainly looks foolhardy in trusting Mr. Corzine to take the risks that he did, but proving that they acted in bad faith would be quite difficult.

In contrast, Delaware law does not afford corporate officers the same level of protection. That means Mr. Freeh can seek to recover for a breach of the duty of due care by showing gross negligence on the part of the leaders of MF Global.

That is still a high standard, requiring something akin to proving recklessness by Mr. Corzine. But unlike a suit against the directors, which would probably be dismissed quickly, this claim has a reasonable chance of surviving a motion to dismiss that would allow it to proceed toward a trial. A public airing of MF Global’s plunge into bankruptcy is probably the last thing Mr. Corzine wants, so the settlement value of the case is higher.

Mr. Corzine was very careful to state in his Congressional testimony that he acted in good faith and that his actions were based on advice provide by others for policies that were ultimately approved by the directors. He will offer the business judgment rule, a cornerstone of Delaware corporate law, to argue that these were merely bad business decisions, which cannot create liability. Even Mr. Freeh admits that the MF Global directors signed off on much of the conduct, giving Mr. Corzine some cover for his management of the firm.

While Mr. Freeh has an uphill battle to win the case, Mr. Corzine’s more immediate problem may be the high costs of a potential trial. Because MF Global is in bankruptcy, he cannot look to the company to indemnify him for any settlement or even pay his legal expenses, something normally provided to corporate officers sued for their actions.

Instead, Mr. Corzine must rely on MF Global’s insurance – and it had two pretty hefty policies. At the time of the bankruptcy, MF Global had a “directors and officers” liability policy for $225 million and an “errors and omissions” liability policy for $150 million. The judge in the bankruptcy case has already authorized Mr. Corzine and other employees to draw up to $30 million from the policy to pay for their legal fees.

But this cap has probably been exceeded by now, given the numerous Congressional hearings about MF Global’s collapse and the criminal and regulatory investigations of the firm. The question is whether the bankruptcy court will allow Mr. Corzine and the other defendants to continue to draw on the insurance to pay for their mounting legal costs or seek to preserve the policy for payments to MF Global’s customers and claims holders.

Mr. Corzine’s biggest concern is not that he may lose the case, but that the mounting legal fees will take a significant bite out of the fortune he amassed from his days at Goldman Sachs. Mr. Freeh is clearly aiming straight at Mr. Corzine, and is not the type of opponent who can be sent packing with a quick settlement.

Book Looks Behind the Scenes at Fox

A few days before the presidential election last November, Roger Ailes, the chief executive of Fox News, ordered that Geraldo Rivera’s microphone be cut off after Mr. Rivera angrily defended the Obama administration against charges levied by others on Fox. So says a forthcoming book about the 2012 campaign by Jonathan Alter, a columnist for Bloomberg View and a contributor to MSNBC, a Fox competitor.

The book, “The Center Holds: Obama and His Enemies” (Simon & Schuster, $30), which is set to come out June 4, includes a chapter about Fox’s influence on the campaign. Mr. Alter homes in on the channel’s extensive coverage of the Obama administration’s handling of the attacks on a United States diplomatic mission and C.I.A. outpost in Benghazi, Libya.

“Roger Ailes covered the Benghazi story as if it were Watergate just before Nixon’s resignation, with almost wall-to-wall coverage,” Mr. Alter writes before describing Mr. Rivera as the only Fox anchor who was “allowed to offer a dissenting view.”

Mr. Rivera did so on the conservative morning show “Fox & Friends” on Nov. 2, the Friday before Election Day. As the three hosts criticized the administration for failing to save the ambassador Christopher Stevens and three other Americans who died in Benghazi, Mr. Rivera protested. He accused the co-host Eric Bolling of lying, calling him “a politician trying to make a political point.”

“After the argument continued for several minutes, Ailes called the control room and told the producers to cut Rivera’s mic,” Mr. Alter writes.

A spokeswoman for Fox News did not respond to a request for comment on Sunday.

Mr. Alter suggests in the book that the episode is atypical; Fox programming, he writes, generally reflected Mr. Ailes’s views without his explicit instructions.

With these anecdotes — another recounts Steve Jobs personally ordering that Apple ads be removed from Fox News — Mr. Alter is contributing to a body of work about Mr. Ailes. A friendly biography by Zev Chafets was published in March, getting ahead of another book about Mr. Ailes and Fox that had been set for publication this month. That one, by Gabriel Sherman, is now scheduled for next January.

Boom Times in Paraguay Leave Many Behind

But just a few minutes away by car one recent morning, grandmothers waded through raw sewage in the labyrinthine slum of La Chacarita, scavenging copper wire and aluminum cans to sell at scrap yards.

“Tell me about this growth,” said Cecilia Aguirre, 60, grasping a plastic bag holding her day’s takings, worth about $4. Squinting under the hot sun, she said she worked every day to feed the four grandchildren who live in her home. Asked about Paraguay’s robust economy, she added, “I’ve heard of no such thing in my lifetime.”

Indeed, Paraguay’s economic boom, fueled by bountiful harvests of export commodities like soybeans and corn, exists only in pockets. In parts of Asunción, showrooms are selling out of Porsches and Audis, and cranes are putting the finishing touches on luxury towers like the Ícono, a 37-story skyscraper of SoHo-inspired lofts.

Yet much of the country, which has long figured among South America’s poorest and most unequal nations, remains left behind. More than 30 percent of the population lives in poverty, according to the central bank, and Paraguay ranks near the bottom among South American countries in reducing poverty over the last decade, according to the United Nations.

Social spending for antipoverty projects is minimal, largely because taxation is lacking. Paraguay did not even have an income tax until this year, but even though the new across-the-board rate is low, at 10 percent, few people are expected to pay it, as exemptions and loopholes abound. The result: the economic boom may be accentuating the festering inequality in one of Latin America’s most politically unstable nations.

“Nearly all of the growth is driven by highly mechanized agriculture, which generates few jobs for the population,” said Andrew Dickson, an expert on Paraguay’s development policies at the University of Birmingham in Britain. “With a government that finances itself largely through value-added taxes and taxes on imports, you have a situation rather like a low-income African country.”

Paraguay is a landlocked nation about the size of California, sandwiched between southern Brazil and northern Argentina, with a population of 6.5 million. About 77 percent of its arable land is controlled by 1 percent of the nation’s landowners, according to the last agricultural census, and land disputes simmer in various parts of the country.

Activists claim that for decades large tracts of land were illegally distributed by corrupt officials, leaving many land titles in question. In one particularly bloody clash last June, 11 peasants and six police officers were killed at a soy estate in Curuguaty, in eastern Paraguay.

Legislators seized on that episode as a way to oust Fernando Lugo, the former Roman Catholic bishop who was elected president in 2008, ending six decades of one-party rule. Mr. Lugo had initially been expected to focus on reducing inequality, but faced obstacles in doing so.

Paraguay’s new president is one of the nation’s wealthiest men, the tobacco magnate Horacio Cartes, who was elected Sunday after promoting conservative, business-friendly policies during his campaign. He recognized poverty as an issue but has been vague about any plans for reducing it beyond trying to create more jobs through private investment.

The government’s economists remain bullish about growth, arguing that Paraguay, devastated by a 19th-century war that wiped out most of its male population and ruled throughout much of the 20th century by Gen. Alfredo Stroessner, one of the world’s longest-ruling dictators, is emerging from decades of ostracism in the global economy.

Paraguay sold $500 million of bonds in January in international markets, a rare source of financing for a nation overlooked by many foreign bankers for decades. Inflation and unemployment remain low, at less than 2 percent and less than 6 percent, respectively, and the overall poverty rate has fallen to about 32 percent in 2011 from 44 percent in 2003, said Roland Horst, a board member at the central bank.

“We do have a peasant issue now and then,” Mr. Horst said in an interview. “But there is less tension than 10 years ago.” He said the government had been trying to reduce poverty, noting that a program of giving small cash stipends to people in extreme poverty, begun in 2005, now included more than 75,000 families. Other economists, however, dispute such sunny assessments, arguing that the economy remains subject to wide swings, surging this year thanks in part to favorable weather conditions for certain crops, after contracting slightly in 2012 when farmers struggled with a drought.

They also contend that Paraguay’s social welfare programs remain meager compared with antipoverty projects in neighboring countries, which have lifted tens of millions of people out of abject living conditions. They blame Paraguay’s relatively weak state, with tax collection corresponding to only about 18 percent of gross domestic product, a figure lower than that of African nations like Congo and Chad.

“The statistics showing historically low unemployment are a farce,” said Luis Rojas Villagra, an economist at the National University, who estimates that as much as half of Paraguay’s work force is unemployed or underemployed in jobs with degrading wages and working conditions.

“How is it possible to reconcile the fact that hundreds of people survive each day by sifting through garbage in the municipal dump of Asunción while Paraguayans are also the biggest per-capita spenders in Punta del Este?” said Mr. Rojas Villagra, referring to the Uruguayan resort city where rich Paraguayans vacation alongside moneyed Argentines and Brazilians.

Such contrasts persist across Paraguay’s economy. Pockets of luxury, for instance, are expanding near Ciudad del Este, the city on the Brazilian border renowned as a smuggler’s haven.

One development, the Paraná Country Club, includes mansions selling for more than $3 million, largely to soybean growers or business executives from Brazil who have opened factories in Paraguay, a migration of manufacturing that is starting to resemble that of companies from the United States opening factories in low-wage Mexican border cities.

“2013 is starting to look like an amazing year,” said Thelma Amaral, an architect who designs homes near Ciudad del Este.

But elsewhere, including the soybean regions at the root of the growth, examples abound of disparities and disputes, largely over land. A small leftist rebel group, the Paraguayan People’s Army, has been picking off security forces in remote areas. Last weekend, the group killed at least one police officer and wounded several others.

In December, gunmen shot dead Vidal Vega, a leader of the peasant movement involved in the deadly clash at Curuguaty. He had been expected to be a witness at the criminal trial intended to shed light on the massacre. The inquiry into his killing, as in similar cases of peasant leaders killed in Paraguay in recent years, has turned up few leads.

DealBook: Strategic Posturing Behind the Suit Against Corzine

Harry Campbell

Louis J. Freeh, the bankruptcy trustee for the failed futures firm MF Global, filed a lawsuit aimed at pinning its collapse squarely on Jon S. Corzine, the former chief executive, and two of his top lieutenants. And unlike in many other suits, Mr. Freeh has not named other groups like a company’s directors.

The tale Mr. Freeh weaves in the complaint presents Mr. Corzine and the other defendants, Bradley I. Abelow, the former chief operating officer, and Henri J. Steenkamp, the former chief financial officer, as having failed to properly manage risk at MF Global while recklessly trading in European sovereign debt. It is a picture of a headlong rush into failure. Mr. Freeh asserts that the three defendants breached their fiduciary duties by allowing MF Global to take on excessive risks.

The core of the case is that the three men did not properly “develop the appropriate controls, procedures and systems needed to transform” MF Global into a full-service investment bank. Not only that, but Mr. Corzine took personal control of MF Global’s proprietary trading “without ensuring that the Company had sufficient controls and adequate liquidity to properly manage the risks inherent in such trading.”

Mr. Corzine’s representatives have vehemently denied the accusations, and question why Mr. Freeh is taking such actions while court-order mediation is still proceeding.

But regardless of the merits of the case, Mr. Freeh is clearly making a tactical move with his lawsuit. Among the questions that arise in any corporate failure is this important one: Where were the directors, who are ultimately responsible for oversight of the company? In Mr. Freeh’s version of events, it turns out they were quite active in approving the risk limits and other acts by Mr. Corzine. But they were not the primary wrongdoers in this tale, and are not named as defendants. This seems to be part of his legal strategy in this suit. He appears to feel he has a better chance at overcoming the legal hurdles to holding executives liable for business decisions than members of MF Global’s board.

Mr. Freeh’s complaint is noteworthy for adopting an all-in strategy against Mr. Corzine, Mr. Abelow and Mr. Steenkamp. Strategically, Mr. Freeh may be hoping the directors will turn on Mr. Corzine and blame him for being a pied piper who led them to approve policies that turned out to be disastrous for MF Global. In corporate litigation, it is always helpful to have someone inside the boardroom pointing the finger at a wrongdoer to help show that these were not just ordinary business decisions that turned out badly.

It may be that Mr. Freeh will settle a claim against the directors later. But by suing Mr. Corzine first, the directors should get the message that they are bit players at best in Mr. Freeh’s account.

In addition, it is much easier under the law to hold officers liable for misdeeds than it is in the case of directors. Under Delaware law, where MF Global was incorporated, corporate directors cannot be sued to recover monetary damages for anything except a breach of the duty of loyalty, which usually requires showing that they gained improper benefits from their actions. To establish that directors are liable for failing to oversee the company and its risk management practices, Mr. Freeh would have to prove that “the directors demonstrated a conscious disregard for their responsibilities” and acted in bad faith.

This is an extremely high standard to meet, and Delaware courts regularly dismiss such claims. In a shareholder derivative case involving claims that Citigroup’s board failed to properly oversee the bank’s risk management before the financial crisis, for example, a Delaware court refused to find the board liable despite the bank’s near collapse and subsequent government bailout. Indeed, the court stated that under Delaware law “[t]o impose oversight liability on directors for failure to monitor ‘excessive’ risk would involve courts in conducting hindsight evaluations of decisions at the heart of the business judgment of directors.” The case against the Citigroup directors was dismissed because the plaintiffs could not show that the directors had acted in bad faith, but instead may have merely failed in their risk monitoring.

Mr. Freeh is keenly aware that Delaware law presents an almost insurmountable barrier to any suit against the directors. The board certainly looks foolhardy in trusting Mr. Corzine to take the risks that he did, but proving that they acted in bad faith would be quite difficult.

In contrast, Delaware law does not afford corporate officers the same level of protection. That means Mr. Freeh can seek to recover for a breach of the duty of due care by showing gross negligence on the part of the leaders of MF Global.

That is still a high standard, requiring something akin to proving recklessness by Mr. Corzine. But unlike a suit against the directors, which would probably be dismissed quickly, this claim has a reasonable chance of surviving a motion to dismiss that would allow it to proceed toward a trial. A public airing of MF Global’s plunge into bankruptcy is probably the last thing Mr. Corzine wants, so the settlement value of the case is higher.

Mr. Corzine was very careful to state in his Congressional testimony that he acted in good faith and that his actions were based on advice provide by others for policies that were ultimately approved by the directors. He will offer the business judgment rule, a cornerstone of Delaware corporate law, to argue that these were merely bad business decisions, which cannot create liability. Even Mr. Freeh admits that the MF Global directors signed off on much of the conduct, giving Mr. Corzine some cover for his management of the firm.

While Mr. Freeh has an uphill battle to win the case, Mr. Corzine’s more immediate problem may be the high costs of a potential trial. Because MF Global is in bankruptcy, he cannot look to the company to indemnify him for any settlement or even pay his legal expenses, something normally provided to corporate officers sued for their actions.

Instead, Mr. Corzine must rely on MF Global’s insurance – and it had two pretty hefty policies. At the time of the bankruptcy, MF Global had a “directors and officers” liability policy for $225 million and an “errors and omissions” liability policy for $150 million. The judge in the bankruptcy case has already authorized Mr. Corzine and other employees to draw up to $30 million from the policy to pay for their legal fees.

But this cap has probably been exceeded by now, given the numerous Congressional hearings about MF Global’s collapse and the criminal and regulatory investigations of the firm. The question is whether the bankruptcy court will allow Mr. Corzine and the other defendants to continue to draw on the insurance to pay for their mounting legal costs or seek to preserve the policy for payments to MF Global’s customers and claims holders.

Mr. Corzine’s biggest concern is not that he may lose the case, but that the mounting legal fees will take a significant bite out of the fortune he amassed from his days at Goldman Sachs. Mr. Freeh is clearly aiming straight at Mr. Corzine, and is not the type of opponent who can be sent packing with a quick settlement.

DealBook: Comparing the Valuations Behind Amazon and Apple Shares

And people wonder why it’s hard to understand the stock market.

Take a consumer sitting at home buying stuff on Amazon.com with his iPhone. To him, Apple’s product is a clear leader in the market, while Amazon is the retailer he uses most. Amazon’s shares are up nearly 40 percent over the last 12 months, while Apple’s are down nearly 30 percent over the same period. So why have their stock prices diverged so much when both companies appear to be at the top of their game?

Growth is the most common answer you’ll hear. When a company convinces investors that its earnings can keep going up, an enthusiasm grows around the shares, and they tend to perform well. Wall Street analysts expect Amazon’s earnings next year to be 66 percent higher than the forecast for 2013. They project a 10 percent uptick for Apple.

But there’s another conversation you need to have.

It revolves around whether the market has already factored the hoped-for growth into the stock price. It is possible to pay too much for excellence.

There are all sorts of ways to gauge how much credibility investors ascribe to a company’s “growth story.” One is to look at what investors are paying now for a company’s free cash flows, or the hard dollars it takes in from profits (minus the spending it does on plant and equipment). The results are stark. Apple’s stock market value is nine times last year’s free cash flows. On this metric, Amazon is at over 300 times. Sane investors would never touch a stock with such a dear valuation unless they felt cash flows were going to soar in the future.

And this brings us to the part of investing that usually separates winners from losers: guessing whether companies will actually do what we expect them to.

Amazon’s believers don’t mind that it’s spending such huge amounts on setting up new operations for its retail and data businesses. At some point, hopefully in the not too distant future, that spending will fall as the expansion reaches its limits. In that case, Amazon will be churning out much bigger cash flows as it enjoys near unassailable dominance.

Sure, but how wondrous will those cash flows be? Amazon’s operations produced $4.2 billion of cash flows last year. Let’s generously assume 10 percent annual growth for them, which would take them to $5.1 billion by the end of 2014.

Let’s be kind again and assume that capital expenditures fall a lot, to, say, $1 billion a year, from last year’s $3.8 billion. Free cash flows in 2014 would therefore total $4.1 billion.

Now, remember, at this future point, Amazon’s growth in free cash flow will have slowed a lot. Investors will probably decide to attach a lower valuation to the company. Being generous, let’s assume they value those hypothetical 2014 free cash flows at 21 times, Google’s multiple today. That would give Amazon a market worth of about $86 billion. That’s 30 percent lower than today.

Of course, the stock market believes what it wants to believe. It may well decide to remain starry-eyed about Amazon and give it a much higher valuation for years to come. But Apple’s recent drubbing suggests even the strongest runs can end nastily.

Understand the Truth Behind Your Expert's Statistics

In the field of forensic accounting and economics, experts utilize government and industry studies and statistics all the time, especially when actual information specific to an individual is unavailable.

Understand the Truth Behind Your Expert's Statistics

In the field of forensic accounting and economics, experts utilize government and industry studies and statistics all the time, especially when actual information specific to an individual is unavailable.

DealBook: Behind an Estimated $30 Trillion Drain on Banks, a Lot of Hypotheticals

Cliff Owen/Associated PressWarren E. Buffett, the chief of Berkshire Hathaway. In the face of new margin rules, the company said it won’t be entering any big new derivatives bets.

Imagine a situation in which the world’s banks have to find as much as $30 trillion to comply with just one new regulation. That might be something of a stretch, given that the gross domestic product of the United States is only $15.8 trillion, and the world’s 10 largest banks hold only $25 trillion of assets.

Yet a banking industry group recently looked into a new rule and sketched out a possibility in which banks were forced to come up with as much as $30 trillion in cash.

The potential cash call is outlined in a letter the International Swaps and Derivatives Association sent in September to regulators. It is the latest eye-popping number that lobbying firms and banks have produced to support their view that many new regulations will be enormously expensive — and the big, scary numbers seem to be gaining traction.

Some of the concern may be warranted, especially in Europe, where certain stressed banks have had trouble borrowing regular amounts in the markets. But a deeper look at the industry association’s $30 trillion figure suggests that many of the worries might be overdone.

The gargantuan sum relates to the market for derivatives, which are financial contracts that banks and investors use to bet on interest rates, stock prices, creditworthiness of corporations and the like.

Derivatives played a central role in the 2008 financial crisis. The market for many contracts was opaque, which stoked panic when certain players started to falter.

Before the financial crisis, big participants like large Wall Street banks were often able to avoid following certain rules intended to make the market safer. One of those practices involves something called initial margin. This is the cash or easy-to-sell assets that parties have to set aside at the outset of a derivatives trade. If one side can’t pay up, the other side can make a claim on the initial margin.

Now, regulators want to tighten up the margin rules. To do so, they are introducing regulations aimed at pushing derivatives trades through entities called central clearinghouses. These organizations effectively agree to pay out if one side of the original trade cannot pay.

Because of that pledge, clearinghouses have to make sure they can pay out if one party defaults. One way they do this is to demand margin from the parties that trade through them.

But a large number of derivatives trades won’t necessarily go through clearinghouses, even after the overhaul is in place. Such trades will still be done directly between two financial firms.

Regulators have proposed rules that force firms to supply initial margin on these so-called bilateral trades, too. These rules, which won’t apply to pre-existing trades, may not come into effect until late 2013 in the United States.

The International Swaps and Derivatives Association and many others want to stop or water down those margin rules on bilateral trades. In its paper, the association argued against initial margin rules, saying they were “likely to lead to a significant liquidity drain on the market, estimated to be in the region of $15.7 trillion to $29.9 trillion.” In other words, it believes there is a possibility that the rule could cost $30 trillion.

So, how likely is such a drain? A clue can be found in the $14 trillion range in the association’s estimates.

Under its lower estimate, the industry group assumes that many banks calculate their derivatives exposures in an advantageous manner sanctioned by the proposed regulations. Specifically, the rules allow banks to offset certain trades with each other. This has the effect of reducing a bank’s overall derivatives exposure for the purposes of calculating margin.

The upshot: Less margin is needed. At one stage in its analysis, the derivatives association says using this approach might reduce by half the overall amount of derivatives in the calculation.

But why wouldn’t the reduction be far more than $14 trillion, or roughly 50 percent? After all, net exposure can be reduced quite sharply by using the offsetting method. For instance, a bank may have $50 billion on trades betting that stocks go up and $49 billion on trades betting stocks go down, leading to a $1 billion net exposure for the bank.

Steven Kennedy, a spokesman for the association, says it chose 50 percent based partly on its estimates of how many firms might have the required technology to carry out offsetting. In essence, the numbers involve a lot of hypothetical assumptions.

This weakness applies to other, lower-margin estimates from opponents of the new rules.

Last year, the Office of the Comptroller of the Currency, a federal bank regulator, estimated that initial margin rules could lead to a $2 trillion burden for banks, a smaller but still alarming figure. The number was cited in several letters and studies from lawyers and lobbyists arguing against the margin rule. The comptroller listed three factors that might lead to banks posting less than $2 trillion. But, the study added, “at present, we are unable to estimate the mitigating effects of these three factors.”

Bryan Hubbard, a spokesman for the comptroller, said the paper reflected the comptroller’s best analysis at the time. He added, “The O.C.C. is likely to update the analysis when a final rule is issued.”

Other opponents of initial margin rules have been similarly vague when gauging factors that might reduce the burden. JPMorgan Chase sent a letter last year to regulators criticizing the initial margin rule, saying it might need to collect $1.4 trillion from its trading partners if it did not use the offsetting approach. The letter did say an offsetting approach might “produce smaller initial margin amounts.” Still, it didn’t specify how much smaller.

The initial-margin rules may prompt some firms to stop doing bilateral derivatives trades. Some financial companies have even started down that path.

In the face of new margin rules, Berkshire Hathaway said this year that it would not be entering any big new derivatives bets. “We shun contracts of any type that could require the instant posting of collateral,” Warren E. Buffett, the company’s chief executive, wrote in its latest annual report.

Behind the Wheel | 2012 Tesla Model S: One Big Step for Tesla, One Giant Leap for E.V.’s

AUTOMAKERS have a favored buzzword for promoting important new models: game-changer.

Excuse me, but the game is not so easily changed.

Put simply, the automobile has not undergone a fundamental change in design or use since Henry Ford rolled out the Model T more than a century ago. At least that’s what I thought until I spent a week with the Tesla Model S.

The 2012 Model S, a versatile sedan that succeeds the company’s two-seat Roadster, is simultaneously stylish, efficient, roomy, crazy fast, high-tech and all electric. It defies the notion that electric cars are range-limited conveyances.

While driving a Model S with the biggest available battery pack — 85 kilowatt-hours — on a restrained run through Northern California wine country, I was able to wring 300.1 miles from a single charge. The E.P.A.’s rating for equivalent gasoline miles per gallon is 88 m.p.g.e. in town and 90 on the highway, with a 265-mile range.

On a more enthusiastic romp from my home base here to Santa Cruz and back, I sampled what the 362-horsepower electric drivetrain was designed to do: bolt. Tesla says the car can zip from zero to 60 in 5.6 seconds and tops out at 125 miles per hour, but it was the silent, near-instantaneous bursts from 35 to 65 along the Pacific on California Highway 1 that best demonstrated the S’s otherworldly quality.

I managed to make that 207-mile round-trip with about 25 miles of battery charge remaining when I pulled into my driveway. I never gave a second’s thought to range, batteries or kilowatt-hours. I just hauled amps. It’s probably best for my driving record that I didn’t test the performance version of the Model S, which raises the ante to 416 horsepower — and a 4.4-second dash from zero to 60 m.p.h.

The Model S, which went on sale in June, is built in a Tesla plant in Fremont, Calif., where a Toyota-General Motors joint venture once made cars.

The Model S’s sleek exterior suggests Maserati, Jaguar — or, especially in the shape of its grille, Aston Martin. “If people make that aspirational brand reference, I’m psyched,” said Franz Von Holzhausen, Tesla’s chief of design.

Perhaps the design team’s greatest accomplishment is lending James Bond styling to a five-passenger sedan that Tesla says has the lowest aerodynamic drag of any production vehicle — an impressive drag coefficient of 0.24. The seductive shape of the Model S beats even the appliancelike Toyota Prius.

Yet the S also has a practical side: an optional rear jump seat for two children increases the total capacity to seven. I loaded 30 folding chairs for a school event without needing to flip down the second-row seat. With no engine, the Model S has a sizable second trunk in front, which Tesla calls a frunk.

Tesla is all about cranking things up. From the technical side, the car’s chief characteristic is abundant power, delivered by exceptionally high currents put through a device called a drive inverter.

There a lighthearted side, too: in a nod to the 1984 mockumentary “This Is Spinal Tap,” the audio system’s volume control goes to 11. (The idea came from Elon Musk, the chief executive.) Big-hair headbangers will not be dissatisfied with the rock-concert sound quality.

If the Model S is Aston Martin on the outside, it’s Apple on the inside.

The Bauhaus-stark interior is dominated by a 17-inch touch screen — imagine a jumbo iPad embedded in the dashboard — giving digital control of nearly every automotive function. The interface is brilliant, but potentially spellbinding. Lighting, climate and music selection are intuitive. It let me do things as diverse as raising the chassis when pulling into my uneven driveway to switching the steering feel from comfortable to sporty.

There’s a high-definition backup camera, and full Web browsing is available — even when the car is in motion, a capability that safety regulators may one day frown upon. A Google-style search on the navigation screen, for addresses or a keyword, pulls up results that can be directly converted into turn-by-turn guidance. It is an ingenious improvement in automotive navigation.

Another innovation is Tesla’s ability to wirelessly push new features or software updates to cars already on the road. For instance, Tesla said it would soon be downloading a change on how much or how little the car creeps forward from a standstill.