Linking Factories to the Malls, Middleman Pushes Low Costs

Now, with sweatshop disasters there drawing international scrutiny, the business is looking for the next best place — perhaps South America or sub-Saharan Africa — where it can steer apparel buyers seeking workers to stitch clothing together for a few dollars a day.

As the world’s largest sourcing and logistics company, Li & Fung plays matchmaker between poor countries’ factories and affluent countries’ vendors, finding the lowest-cost workers, haggling over prices and handling the logistics for roughly a third of the retailers found in the typical American shopping mall, including Sears, Macy’s, JCPenney and Kohl’s.

Based in Hong Kong, the merchandiser owns no clothing factories, no sewing machines and no fabric mills. Its chief asset is the 15,000 suppliers in over 60 countries that make up a network so sprawling that an order for 500,000 bubble skirts that once took six months from drawing board to store shelf now takes six weeks at a sliver of the price.

That scale gives Li & Fung tremendous clout. “They are considered the Walmart of purchasing,” said Edward Hertzman, publisher of Sourcing Journal.

But in pioneering and perfecting the global hunt for ways to produce clothing more quickly and cheaply, Li & Fung, which had $20 billion in revenue last year, has been described by critics as the garment industry’s “sweatshop locator.”

“If globalization is a race to the bottom, where lowest wages win,” said Cathy Feingold, director of international affairs for the A.F.L.-C.I.O., “Li & Fung is the sherpa showing companies the fastest route down that slope.”

The business has been tied to labor violations and deadly accidents in several countries. It has also been faulted as failing to properly investigate complaints about conditions at factories, including one in Cambodia where hundreds of workers were sickened, and accused of cheating laborers of wages in Turkey.

In Bangladesh, Li & Fung has been tied to several calamities. It arranged the production of clothing for Kohl’s at one factory where 29 workers died in a fire in 2010. It brokered some work at another in 2011 where more than 50 workers who made Tommy Hilfiger clothing were injured and at least 2 died in an explosion and a stampede.

And last year, Li & Fung was responsible for some garments produced at the Tazreen Fashions factory, when 112 workers died in November in a fire after many of them were ordered to continue working even though alarms had sounded.

Such episodes highlight the often hidden role played by sourcing companies in trying to feed the West’s seemingly insatiable demands for ever cheaper merchandise. Worker advocates say that Li & Fung and others make accountability more difficult by adding a layer of insulation between reputation-conscious retailers and often poorly treated workers, allowing businesses to avoid bad publicity and legal liability when things go wrong.

Sourcing companies face an inherent conflict: they are expected to find low-cost factories for clients, but also to blow the whistle if the factories violate safety standards. Some critics say that the scale of Li & Fung’s operations and the speed at which it shifts production from one site to another give owners less incentive to improve their factories and make it difficult for Li & Fung to deliver on its pledges of carefully vetting its suppliers.

“We make our best effort to weed out bad factories,” said Bruce Rockowitz, chief executive of Li & Fung. “But we don’t always succeed.”

Mr. Rockowitz added that Li & Fung employees conduct rigorous on-site audits — unlike many competitors — to ensure that the company does business only with factories that adhere to safety regulations. In the case of Tazreen, Li & Fung had acquired a new subsidiary that placed orders at the factory, but the changes sought by Li & Fung had not been made 11 weeks later when the fatal fire occurred, a company spokesman said.

Kitty Bennett contributed research.

Bits Blog: Tech Pushes to Keep Its Spoils in Immigration Bill

Charles Dharapak/Associated Press Steve Case, co-founder of America Online and now chief executive of the investment firm Revolution, spoke about immigration reform outside the White House on Tuesday.

Keen to hold on to its winnings in a landmark Senate immigration bill, the technology industry this week put on what one lobbyist called “a full court press” on Capitol Hill, dispatching executives and entrepreneurs to buttonhole lawmakers and rallying people in the industry to dispatch e-mails, telephone calls and Twitter messages to Congress.

Human resource department heads from eight of the country’s largest technology companies popped into the offices of more than a dozen members of Congress. A new group called Engine Advocacy, which has focused on a so-called start-up visa for foreign entrepreneurs, sent its representatives to the Hill and set up a new online platform, called www.keepushere.org, to encourage techies to send Twitter posts to members of Congress. And yet another industry-led coalition, called Partnership for a New American Economy, and supported by New York City’s mayor, Michael Bloomberg, was rallying supporters to aim at crucial senators, state by state, to support the bill with a “virtual march.”

.@senatorboxer I’m from CA. #iMarch b/c #immigration reform helps UC STEM programs & creates jobs. http://t.co/0Es5di4fsg

— Dave McClure (@davemcclure) 22 May 13

The efforts all point to a wave of unprecedented effort by Silicon Valley firms to make sure the overhaul of the federal immigration law goes in their favor. The omnibus bill, which arrived on the full Senate floor this week after intense negotiations in the Judiciary Committee, contains several provisions directed specifically at the technology sector. It makes it easier for foreign students who get science and engineering degrees at American universities to get permanent residency, creates a new temporary visa for entrepreneurs, and in the most contested clause, vastly expands how many temporary contract workers can be brought into this country under so-called H-1B visas, while also raising the minimum wages they must be paid.

I just pledged to call my Senator on June 18th to ask for support on comprehensive immigration reform http://t.co/N8vpzuv7YP #KeepUsHere

— Swaroop Kolli (@swaroopkolli) 12 Jun 13

The delicate political agreement could still fall apart, and for Silicon Valley, the temporary work visas expansion is by far the most delicate piece. Labor groups say the law should require these companies to hire Americans first. Industry groups call that undue regulatory interference. Both sides have tried to muster evidence to back their claims. And this week, the industry upped the ante by bringing human resources managers directly to Washington to persuade Congress of their need to bring in foreign workers to fill job openings. Organized by the Information Technology Industry Council, a trade group that includes companies like Apple and Oracle, the hiring managers told lawmakers that the demand for talent is so competitive that they sometimes blatantly poach from one another.

There are likely to be more calls on the Senate floor to require companies to show that they are making efforts to hire Americans.

Meanwhile, Senator Jerry Moran, Republican of Kansas, introduced an amendment Wednesday to lower the investments that an entrepreneur would need to get permanent residency. The current bill requires a foreign entrepreneur to raise $100,000 in investments to gain a temporary visa and $500,000 for permanent residency. Among other things, the amendment would lower those thresholds: anyone who raises $250,000 in investments would be eligible for permanent residence.

The biggest push is yet to come. All eyes are on what the industry’s newest, most well-financed lobby, Fwd.us, backed by Facebook’s Mark Zuckerberg, will do next. It has stepped into the immigration fight with expensive television advertisements for key Republicans who backed the immigration bill in the Senate Judiciary. Those ads included a television spot that praised the Keystone XL pipeline, a pet project of key Republican senators, and it cost Fwd.us support from some of its backers in Silicon Valley. It remains to be seen what kinds of political advertisements the group will bankroll next, and who they will back.

U.S. Pushes Agencies to Free Up Spectrum

Without additional airwaves for consumer and business use, administration officials say, the “skyrocketing demand of consumer and broadband business users” for wireless service for smartphones, tablets and other devices will soon outgrow the supply.

For consumers, the initiative could allow cellphone and wireless broadband companies to eventually increase the reliability of their networks, meaning fewer dropped calls and shorter delays in loading video and other large files.

It also could create jobs, the administration says. It cites industry studies reporting that since 2007, more than 500,000 jobs have been created in what is known as the App Economy — the business of creating and selling applications and programs that take advantage of faster Internet speeds and more advanced devices.

The administration said it would invest $40 million in the next year and $60 million more over the next five years to find ways for government agencies to share lightly used airwaves that are under federal control with private wireless communications companies.

Mr. Obama directed federal agencies to make more capacity available by enhancing the efficiency of their spectrum use and to recommend ways of using financial or other incentives to increase sharing of airwaves by government agencies.

“The number of wireless devices is exploding, and that means increasing demands on the spectrum upon which they all rely,” Gene B. Sperling, director of the National Economic Council, said in a White House blog post on Friday. “The federal government helps manage that resource, and we know we can do a better job of unleashing innovation by ensuring more of it is shared, unlicensed for innovations like Wi-Fi, and better used by our departments and agencies.”

One roadblock to that seemingly unlimited growth potential, however, is the reluctance of some parts of the government to part with any of their vast holdings of the nation’s electromagnetic spectrum — the airwaves used by cellphone and wireless communications companies.

In 2010, Mr. Obama directed government agencies to work to free up 500 megahertz of spectrum from federal and private sector sources. Those efforts have been embraced by numerous federal departments, administration officials say.

But a few others, including the Defense Department, have expressed wariness not only at sharing or giving up any of their designated frequencies, but even at revealing the amount and location of airwaves they control. Doing so could compromise national security, Pentagon officials say.

An administration official cited one hypothetical example where an executive department might use a certain frequency for about 12 hours a week of training activities. One agency might be willing to confine its use to prescribed hours, and allow commercial users to share the airwaves at other times, while another department might say it needs the flexibility to be able to use the airwaves at any time.

The Defense Department has said it supports the president’s goals of freeing up spectrum, but noted that an increasingly electronically armed military had its own rising needs for spectrum. The administration emphasized that any new plans to free spectrum should not interfere with “mission-critical capabilities” of military and other government departments.

Nevertheless, the intransigency of some departments has frustrated lawmakers.

“I have long called for a thorough inventory of all public spectrum assets in order to gauge usage and improve efficiency, and have been frustrated by how this debate has dragged out over the past four years,” Senator Mark Warner, a Virginia Democrat, said Friday. “Federal agencies should have the spectrum they need to protect the public, but no one should be warehousing spectrum.”

The Commerce Department has identified more than 300 megahertz of spectrum controlled by the federal government that could be set aside for other uses. The remainder of the 500 megahertz defined as the goal by the administration would come from the so-called incentive auctions that were authorized as part of the 2012 Middle Class Tax Relief and Job Creation Act.

That law provided for the government to share the proceeds of auctions of newly cleared spectrum with television broadcasters who would willingly sell some or all of their spectrum licenses.

Perhaps the most interesting and highly charged recommendation in the president’s directive is one ordering recommendations for incentives that could be used to persuade government departments to share or give up spectrum.

A study released last year by a presidential advisory council on science and technology recommended that the government create a “synthetic” currency that could be used to entice federal agencies. The system would in effect increase an agency’s budget if it gave up or shared its airwaves.

Commissioner Jessica Rosenworcel of the Federal Communications Commission, who has also been advocating such a system since joining the agency in May 2012, about the time the advisory council’s report was released, said federal spectrum policy should be built “on carrots, not sticks.”

“Our traditional three-step process for reallocating federal spectrum — clearing federal users, relocating them, and then auctioning the cleared spectrum for new use — is reaching its limits,” she said. The new initiatives, however, “are a significant step toward meeting the country’s spectrum needs.”

Markell Pushes for Public-Benefit Corporations in Delaware

Delaware Governor Jack Markell has proposed an amendment that would modify Delaware General Corporation Law to permit the creation of public-benefit corporations. Despite opposition from some members of the Delaware State Bar Association's Corporate Law Section, Markell said he is confident that his legislation will be approved by the state's General Assembly.

DealBook: Fed Governor Pushes to Strengthen Large Banks

Luke Sharrett/The New York TimesDaniel Tarullo, a Federal Reserve governor, spoke at the Peterson Institute for International Economics. 

A nagging sense seems to pervade the public’s mind that the nation’s biggest banks still pose a risk to the wider economy, despite all that has been done since the 2008 financial crisis.

It seems that disquiet persists even at the heart of the regulatory establishment. The latest call to action came on Friday from Daniel K. Tarullo, a governor at the Federal Reserve, an agency that plays a crucial role in shaping new banking rules.

In a speech before the Peterson Institute for International Economics in Washington, he described a tough, new measure that could be squarely aimed at large Wall Street firms like Goldman Sachs and JPMorgan Chase.

Mr. Tarullo may have chosen an opportune time to make his case.

His speech comes amid increasing calls to do more to deal with the so-called too-big-to-fail issue. This holds that some financial institutions are so big that, if they were to collapse, they would damage the rest of the financial system, and weigh on the economy.

Mr. Tarullo said much had been done to make the financial system safer, through the two main overhauls that came after the crisis. Those are the Dodd-Frank Act, passed by Congress in 2010, and the internationally agreed bank regulations known as Basel III. In particular, these initiatives have made banks hold more capital, a part of a bank’s balance sheet that can serve as a buffer against losses. Before the crash of 2008, banks had insufficient capital, which stoked the fears that swept the global financial system. Taxpayers had to step in and provide new capital as part of efforts to restore confidence.

Still, Mr. Tarullo sees remaining areas of concern. He focused on the markets where Wall Street banks borrow huge sums of money for short periods. They use their borrowings in these so-called wholesale markets to then buy assets. But in times of stress, like 2008, these markets can dry up. Deprived of their lifeblood, banks rush to sell off the assets they bought with their wholesale borrowings, which can set off a wider collapse.

“Relatively little has been done to change the structure of wholesale funding markets so as to make them less susceptible to damaging runs,” he said in the speech.

To make the system safer, Mr. Tarullo floated an idea that could affect banks that make heavy use of wholesale markets. His idea is to require such banks to hold extra capital. How much extra would depend on how flush a bank’s balance sheet is. Such a program is more aimed at the major Wall Street institutions, while leaving regional lenders and even large consumer-oriented banks like Wells Fargo largely unscathed.

Under the current rules, large banks have to hold a pool of assets they can theoretically sell quickly to cover any outflows that occur in a turbulent period in the markets. Under Mr. Tarullo’s idea, the larger this pool, the less extra capital they would have to hold to cover the risk present in wholesale markets.

In reality, however, banks would probably do less wholesale borrowing to avoid the tougher capital requirements. In turn, that might prompt them to shrink their overall size, and therefore, not be so big as to require a government bailout if they failed.

“We would do the American public a fundamental disservice were we to declare victory without tackling the structural weaknesses of short-term wholesale funding markets, both in general and as they affect the ‘too big to fail’ problem,” Mr. Tarullo said.

The speech, which called for other changes to toughen regulation, follows a recently introduced bill that took aim at large banks.

The legislation, from Senator Sherrod Brown, a Democrat from Ohio, and Senator David Vitter, a Republican from Louisiana, would subject the biggest banks to much higher capital requirements than smaller banks. If the bill is passed, many large banks would probably choose to divest themselves of assets to shrink to a size where they would not be required to hold higher amounts of capital.

The bill has already generated fierce objections from the financial industry. Its critics said the capital increases would force banks to cut back on their lending, and they argued that large banks provide unique benefits to the economy.

Political analysts have said that the Brown-Vitter bill has little chance of passing, but the measure has reignited a conversation about what to do about banks whose failure could weaken the broader financial system.

Regulators like the Federal Reserve, however, do not have to wait for Congress to pass legislation to introduce new measures. The Dodd-Frank Act gave regulators substantial freedom to impose measures to strengthen the system on their own.

Mr. Tarullo mentioned that leeway in this speech on Friday. The Fed could use that authority to push forward on the measure to raise capital requirements for firms that make big use of wholesale debt markets. And it could impose another notable measure mentioned by Mr. Tarullo.

It involves something called the leverage ratio. This measures capital as a percentage of assets. It differs from other regulatory capital ratios in that it doesn’t adjust the assets for their perceived riskiness. Some analysts say they believe the “risk-based” approach is flawed and can lead a bank to hold too little capital.

They say the leverage ratio is a safer measure of capital because it doesn’t treat some assets as less risky than others. Mr. Tarullo said the Fed might set a higher leverage ratio.

Despite this call, some analysts said that Mr. Tarullo did not appear to be advocating for the much higher capital levels envisioned in the Brown-Vitter bill. The legislation requires banks with over $500 billion to have capital that is equivalent to 15 percent of their assets.

“He’s definitely not calling for a 15 percent leverage ratio like Brown-Vitter,” said Patrick Sims, a director at Hamilton Place Strategies, a policy firm that has aired objections to some of the contents in the senators’ bill.

Young Litigator Pushes the Limits in Her Private Time

By Michael Tierney All Articles 

Daily Report

November 6, 2012

Thompson hangs from a zipline during one adventurous outing, but she likes to take regular sightseeing vacations, too.

Among lawyers, Sara Thompson is hardly unique in pursuing after-work-hours endeavors to retain her zest for life.

What separates Thompson from the herd is a tendency to tackle challenges that are not her normal cup of tea. More like a cup of castor oil.

Normally disinclined to become one with nature, she roughed it during a four-day hike at the famed Milford Track in New Zealand -- and cannot wait for the sequel.

Preferring to log miles on planes to vacation spots, the travel buff recently decided to try covering long distances by running. Shin-splint trouble from training has not dissuaded her from taking on a half-marathon, with a full one on her possible to-do list.

Once intimidated by the notion of sitting at a poker table with serious players, Thompson has become a semi-regular at various casinos and aspires to stack chips at the World Series of Poker someday.

Not every venture is initially beyond her comfort zone. Thompson, reared in a cooking-minded family, prepares a mean meal while dabbling in oddities such as cupcakes and infused liquor. It should come as no surprise that the competition-minded Thompson, whose practice at Greenberg Traurig focuses on medical devices and pharmaceuticals, plans to eventually audition for television's Master Chef.

Do you have a general philosophy about staying busy outside of your work by seeking out new activities?

I'm always looking to try new things. One advantage of being single is having more time to look for opportunities to do this. The first eight or nine years of my practice, I didn't travel a lot because I was focused on my work. In 2008, I made a point of starting to take big trips. With work, we have a hard-charging group here, but they have been very supportive of the crazy activities that I do.

When I went to New Zealand, I thought it would be controversial since it was six weeks before a big trial. I told them I was going to be gone 17 days. They won't be able to reach me by cellphone. They knew I would come back and bust my hump for four months.

Where does your interest in travel come from?

When I was a kid, we didn't take a lot of vacations. My parents built their own business and worked hard on that. If we took a vacation, it would be to visit family. So there are a million places I want to go to. I have a long list of places that I'm keeping.

Do you look for trips that are more adventurous than sightseeing?

A little bit of both. I'm more outdoorsy now than I was. When I went to New Zealand, I had to buy my first hiking boots. I think I only broke them in for a day. It was something very outside my comfort zone.

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Child Murder Case Pushes Miami Prosecutor to Become Judge

 Monica Gordo
Photo by Candace West

Miami-Dade Circuit Judge Monica Gordo knew she wanted to be a lawyer since she was a little girl. She discovered she wanted to be a judge after prosecuting the case of another little girl, killed by an AK-47 round as she played in the front yard of her Miami neighborhood Liberty City home.

Sherdavia Jenkins died in her mother's arms. She was 9 years old.

"It really affected me," Gordo said. "I thought, this shouldn't happen in America -- that children die at the front door of their house."

The case took three years. Gordo was pregnant with her second son by the time it finished. When she came back from maternity leave and stepped into a new position as a division chief in the Miami-Dade State Attorney's Office, she discovered she had a new ambition: to become a judge.

"Something happened in that process," she said. "That was when I realized that my passion was different. It changed."

Becoming a prosecutor, and eventually a judge, almost didn't happen.

"It's funny, because in law school I never even took criminal law," she said. "I went to law school thinking I would be some kind of corporate transactional type. I might not even practice law."

Gordo was born in Miami in 1975, the daughter of a doctor and one of the first woman vice presidents at Miami-based Eastern Airlines. Watching them work two and three jobs each and enduring three years of separation so her father could go to medical school in the Dominican Republic inspired her.

"He had an absolute passion for what he wanted to do in life," Gordo said. She followed his example, just not into medicine. "What I did want to do is find something I had a passion for."

Gordo graduated high school at age 16, and got her bachelor's in business at the University of Miami when she was 21. She went straight into UM's school of law. In her third year, she took a litigation skills course just to make sure her education was well-rounded. The professor pushed her into an internship at the state attorney's office.

Child Murder Case Pushes Miami Prosecutor to Become Judge

 Monica Gordo
Photo by Candace West

Miami-Dade Circuit Judge Monica Gordo knew she wanted to be a lawyer since she was a little girl. She discovered she wanted to be a judge after prosecuting the case of another little girl, killed by an AK-47 round as she played in the front yard of her Miami neighborhood Liberty City home.

Sherdavia Jenkins died in her mother's arms. She was 9 years old.

"It really affected me," Gordo said. "I thought, this shouldn't happen in America -- that children die at the front door of their house."

The case took three years. Gordo was pregnant with her second son by the time it finished. When she came back from maternity leave and stepped into a new position as a division chief in the Miami-Dade State Attorney's Office, she discovered she had a new ambition: to become a judge.

"Something happened in that process," she said. "That was when I realized that my passion was different. It changed."

Becoming a prosecutor, and eventually a judge, almost didn't happen.

"It's funny, because in law school I never even took criminal law," she said. "I went to law school thinking I would be some kind of corporate transactional type. I might not even practice law."

Gordo was born in Miami in 1975, the daughter of a doctor and one of the first woman vice presidents at Miami-based Eastern Airlines. Watching them work two and three jobs each and enduring three years of separation so her father could go to medical school in the Dominican Republic inspired her.

"He had an absolute passion for what he wanted to do in life," Gordo said. She followed his example, just not into medicine. "What I did want to do is find something I had a passion for."

Gordo graduated high school at age 16, and got her bachelor's in business at the University of Miami when she was 21. She went straight into UM's school of law. In her third year, she took a litigation skills course just to make sure her education was well-rounded. The professor pushed her into an internship at the state attorney's office.

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