Foreign buyers findinga 2nd home in the U.S.
Prices attractive as the dollar declines, real estate slumps
By Leslie Wines
Associated Press, December 25, 2007
Panden Rota, a Nepalese producer of fine rugs, is about to become a Manhattanite, the owner of a sumptuous apartment in the luxurious downtown neighborhood of Battery Park City.
His primary residence will remain in Katmandu, but his new home will allow him to spend more time at U.S. showrooms that display his rugs and with a brother and sister in New York.
"I looked at many places, and I decided that a Manhattan apartment will always hold its value," he said.
Rota is part of a growing wave of foreigners who buy second homes in the U.S. for work and play and as an investment.
Cosmopolitan cities like New York and Miami have long served as second homes for affluent and accomplished foreigners. But the trend is growing. One in five American Realtors has sold a home to a foreign investor in the past year, according to the National Association of Realtors.
Severe dollar declines against the euro and pound have made U.S. homes much cheaper for Europeans. But even foreign buyers without that sort of currency advantage are benefiting from sharp drops in housing prices at a time when problems in mortgage lending are keeping many Americans out of the market.
At the same time, many foreign real estate markets, especially in Europe, have experienced sharp increases in home prices.
"There are markets like Paris and London and the south of France where some home values have gone up 100 percent," said Christian Voelkers of the Hamburg Realtor Engel & Volkers Group. "At the same time, U.S. prices have either stayed put or come down."
Engel & Volkers, which caters to wealthy clients, plans to open 300 residential sales offices across the U.S. in the next few years. The currency advantage is greatest for British citizens, given that each pound is worth well over $2. By contrast, the euro is worth about $1.45, while the Canadian dollar in recent weeks is hovering near parity with its U.S. counterpart.
"At this point, the English are more actively looking in Manhattan than American buyers," said Ivan Hakimian of New York's Itzhaki Properties.
Mia Wilkinson, a transplanted Englishwoman who works for Rubloff Residential Properties in Chicago, deals often with British and other foreign executives transferred to the U.S.
"Before, people would stay in corporate rentals," she said. "But now these same people are turning around and buying properties."
Wilkinson, who has been in the U.S. six years, has bought property in Chicago.
The expansion of foreign real-estate investment in the U.S. also means that areas that once were not popular with international buyers are receiving interest. Doug Aitkin, who works for North Carolina's World Trade Center, said the Research Triangle area, comprising the cities of Durham, Raleigh and Chapel Hill, is getting inquiries from French and Scandinavian home buyers, a new phenomenon.
In Los Angeles, demand from wealthy South Koreans for attractive condo towers and mid-level-rise buildings has helped revitalize the once-forlorn downtown neighborhood, said Johanna Gunther, a senior vice president with the Ryness Co.
And Canadian buyers eager to enjoy Arizona's dry, warm climate reportedly are giving Scottsdale's phlegmatic residential real estate market a boost.
The National Association of Realtors found that 7.3 percent of the houses sold last year in Florida went to foreign buyers. Miami, in particular, is a magnet for buyers from throughout Latin America and Europe, helping to mitigate the fallout from the area's housing slump.
Despite the news waves of foreign buyers in many U.S. markets, few suggest international investors by themselves can entirely offset the nation's housing crisis, brought on by the failure of many subprime mortgage loans made to home buyers with weak credit histories.
The fact that international investors are helping to prop up some troubled housing markets only emphasizes the level of stress in residential real estate, said Constantine Valhouli, a principal with Boston's Hammersmith Group.
"Relying on foreign real estate investors is fundamentally as risky as relying on subprime mortgages," Valhouli said, noting that both distort demand and can conceal the depths of the problem U.S. home buyers and sellers face.
"Foreign buyers aren't going to save the U.S. housing market. They're just a temporary fix like a finger in the dike. Fundamentals matter."
Wednesday, December 26, 2007
Indians' Road to Success
Indians' Road to Success
By CRAIG KARMIN and JACKIE RANGE
Wall Street Journal, December 8, 2007
Hopefuls Go to Far-Flung Test Sites Due to Chartered Analysts' Dispute
Vikash Kumar, a business student in India, took a trip to Nepal last week with four friends. To get there and back, they traveled for hours by airplane, taxi and rickshaw. They passed through border areas menaced by bandits.
They aren't adventure-seekers, or even tourists. Mr. Kumar and his friends are simply trying to take the Chartered Financial Analyst exam.
Passing the CFA -- a series of three grueling, six-hour tests covering economics, accounting and markets -- opens the door to high-paying financial jobs. India's booming economy is triggering a concurrent boom in CFAs: This year, India had been expected to produce more than 10,000 candidates, according to the U.S.-based CFA Institute, more than anywhere except North America. Just seven years ago, India produced less than 250.
But a long-simmering trademark spat over who has the right to use the letters "CFA" in India has thrown this year's process into disarray.
So, CFA hopefuls like Mr. Kumar are traveling the globe for alternative sites. Test-takers have ended up as far away as Sri Lanka, Oman and Nebraska.
That is, if they can get a flight. The exodus is so great that flights to Nepal in early June (an exam date there) were booked up, even though it was monsoon season, one of the worst possible times to travel in South Asia. Some CFA hopefuls trying to go to Singapore at the last minute got tripped up by the three-day waiting period for a visa, missing tests there.
Internet chat rooms are packed with frustrated CFA candidates. "Let's start off the day on a positive note and start praying to GOD" that the exams will take place, wrote someone signed "Jigz" this year in a CFA community on the social-networking Web site Orkut.
That elicited a string of sarcastic responses. Usually, people pray to pass an exam, someone retorted, but "we pray in order to sit for the exam!"
Other posts seek help finding the best test sites abroad. "ok, so who is travelling to colombo/bangkok?" asks one poster. "i am for sure....cant risk katmandu with the maoist c- happening there" -- a reference to political violence stirred up by Nepal's Mao-inspired rebels.
The notion of Maoists attacking business-school types in the Himalayas might sound far-fetched. But it is a deadly serious concern. Just ask Abhishek Verma, 26 years old, who traveled to Katmandu this year for the CFA exam only to find the city shut down by the Maoist insurgency, which is protesting government corruption and opposes the Nepalese monarchy.
Because the city was shut down, Mr. Verma had trouble finding a taxi to take him from the airport to the hotel. And once he did, he was promptly stopped by a Maoist who threatened to set the car on fire.
The taxi driver, he says, pleaded that his passengers were foreigners, not Nepalese, and was finally allowed to proceed unharmed.
"We were so afraid," Mr. Verma recalls.
The dispute over India's CFA exams boils down to this: For more than a decade, the Virginia-based CFA Institute -- which administers exams world-wide -- worked with a local licensee in India. In recent years, the local licensee broke off, launched its own certification program dubbed the Institute of Chartered Financial Analysts of India, and launched a campaign to prohibit the American firm from operating in India. The ICFAI also has opened business schools in India.
Both sides blame each other. "The fault rests with CFA alone," says S.R. Mallela, a member of the board of governors of ICFAI in Hyderabad.
The CFA says it has every legal right to operate in India, and blames the ICFAI for causing headaches for Indian students. "The burden is placed most heavily on those who don't have the means," says Jeffrey J. Diermeier, president and chief executive of the CFA Institute.
While test-takers could take the ICFA test in India, many prefer to obtain the CFA's certificate. "The ICFA doesn't even carry much weight in India," says Jasmit Singh Chandhok, a CFA candidate from New Delhi.
Which is why he flew to Bangkok a few months ago to take the CFA exam. At the test site in Thailand, he says, he was surprised to see that about a third of the 300 people in the test room there were also Indian.
"In one corner, there were four guys I knew from home," he says.
According to the CFA, Indian candidates this year have traveled to at least 16 countries to take the exam. The CFA Institute has tried to ease the financial cost by cutting a $300 check for any Indian who tested abroad. CFA registration and materials can cost more than $2,500 for all three exams needed to receive the designation, an immense sum in India, where a fairly typical urban office job might pay only $3,500 a year.
Earlier this year, Karan Mehta, a securities analyst in New Delhi, decided to take the test in Omaha, Neb., because he was going to be there anyway for a wedding. He landed a few hours before the test, bleary-eyed from the 18½-hour flight, took a quick nap, then went straight to the exam room.
Afterward, he says, he strolled around Omaha, hoping that he might bump into famed investor Warren Buffett, who lives there. "But he was too hard to find," Mr. Mehta says.
The vast majority of traveling test-takers so far have headed for Nepal, India's neighbor to the north. Nepal is close enough to India that people can get there overland, avoiding costly plane tickets and visa hassles.
Among them was Mr. Kumar, 26, the business student who went to Katmandu with his friends. While he was able to get a flight into Nepal, he wasn't able to get a round-trip ticket to fly back out.
So, after taking the test on Dec. 2, they flew to the Nepalese town of Simara, went from there to Birganj by taxi, and then by auto-rickshaw across the border. Then, it was just a seven-hour taxi ride for the five of them to Patna.
It was worth the hassle, Mr. Kumar says. "For getting into a good career, into investment banks and all, CFA's quite mandatory these days."
He had better hope the trip winds up better than it did for Nikita Sharma, 25, who traveled a similar route earlier this year. She flew to Katmandu in June to take the CFA. But traveling overland on the way back, she got stranded on her bus for 15 hours after an accident in Nepal blocked traffic.
Ms. Sharma says that she and her two friends thought about abandoning the bus and trying to hike out. But "we also got scared, if we started walking, if we would be able to save ourselves from the animals."
Instead, they stuck it out and subsisted on mango juice. At least a dozen people on the bus, including them, were also CFA candidates, she estimates.
Despite all the hassles, Ms. Sharma had no regrets -- until, that is, she learned a few weeks later that she hadn't passed the exam.
"If one had passed," Ms. Sharma says ruefully, "then one would have cherished the moment."
By CRAIG KARMIN and JACKIE RANGE
Wall Street Journal, December 8, 2007
Hopefuls Go to Far-Flung Test Sites Due to Chartered Analysts' Dispute
Vikash Kumar, a business student in India, took a trip to Nepal last week with four friends. To get there and back, they traveled for hours by airplane, taxi and rickshaw. They passed through border areas menaced by bandits.
They aren't adventure-seekers, or even tourists. Mr. Kumar and his friends are simply trying to take the Chartered Financial Analyst exam.
Passing the CFA -- a series of three grueling, six-hour tests covering economics, accounting and markets -- opens the door to high-paying financial jobs. India's booming economy is triggering a concurrent boom in CFAs: This year, India had been expected to produce more than 10,000 candidates, according to the U.S.-based CFA Institute, more than anywhere except North America. Just seven years ago, India produced less than 250.
But a long-simmering trademark spat over who has the right to use the letters "CFA" in India has thrown this year's process into disarray.
So, CFA hopefuls like Mr. Kumar are traveling the globe for alternative sites. Test-takers have ended up as far away as Sri Lanka, Oman and Nebraska.
That is, if they can get a flight. The exodus is so great that flights to Nepal in early June (an exam date there) were booked up, even though it was monsoon season, one of the worst possible times to travel in South Asia. Some CFA hopefuls trying to go to Singapore at the last minute got tripped up by the three-day waiting period for a visa, missing tests there.
Internet chat rooms are packed with frustrated CFA candidates. "Let's start off the day on a positive note and start praying to GOD" that the exams will take place, wrote someone signed "Jigz" this year in a CFA community on the social-networking Web site Orkut.
That elicited a string of sarcastic responses. Usually, people pray to pass an exam, someone retorted, but "we pray in order to sit for the exam!"
Other posts seek help finding the best test sites abroad. "ok, so who is travelling to colombo/bangkok?" asks one poster. "i am for sure....cant risk katmandu with the maoist c- happening there" -- a reference to political violence stirred up by Nepal's Mao-inspired rebels.
The notion of Maoists attacking business-school types in the Himalayas might sound far-fetched. But it is a deadly serious concern. Just ask Abhishek Verma, 26 years old, who traveled to Katmandu this year for the CFA exam only to find the city shut down by the Maoist insurgency, which is protesting government corruption and opposes the Nepalese monarchy.
Because the city was shut down, Mr. Verma had trouble finding a taxi to take him from the airport to the hotel. And once he did, he was promptly stopped by a Maoist who threatened to set the car on fire.
The taxi driver, he says, pleaded that his passengers were foreigners, not Nepalese, and was finally allowed to proceed unharmed.
"We were so afraid," Mr. Verma recalls.
The dispute over India's CFA exams boils down to this: For more than a decade, the Virginia-based CFA Institute -- which administers exams world-wide -- worked with a local licensee in India. In recent years, the local licensee broke off, launched its own certification program dubbed the Institute of Chartered Financial Analysts of India, and launched a campaign to prohibit the American firm from operating in India. The ICFAI also has opened business schools in India.
Both sides blame each other. "The fault rests with CFA alone," says S.R. Mallela, a member of the board of governors of ICFAI in Hyderabad.
The CFA says it has every legal right to operate in India, and blames the ICFAI for causing headaches for Indian students. "The burden is placed most heavily on those who don't have the means," says Jeffrey J. Diermeier, president and chief executive of the CFA Institute.
While test-takers could take the ICFA test in India, many prefer to obtain the CFA's certificate. "The ICFA doesn't even carry much weight in India," says Jasmit Singh Chandhok, a CFA candidate from New Delhi.
Which is why he flew to Bangkok a few months ago to take the CFA exam. At the test site in Thailand, he says, he was surprised to see that about a third of the 300 people in the test room there were also Indian.
"In one corner, there were four guys I knew from home," he says.
According to the CFA, Indian candidates this year have traveled to at least 16 countries to take the exam. The CFA Institute has tried to ease the financial cost by cutting a $300 check for any Indian who tested abroad. CFA registration and materials can cost more than $2,500 for all three exams needed to receive the designation, an immense sum in India, where a fairly typical urban office job might pay only $3,500 a year.
Earlier this year, Karan Mehta, a securities analyst in New Delhi, decided to take the test in Omaha, Neb., because he was going to be there anyway for a wedding. He landed a few hours before the test, bleary-eyed from the 18½-hour flight, took a quick nap, then went straight to the exam room.
Afterward, he says, he strolled around Omaha, hoping that he might bump into famed investor Warren Buffett, who lives there. "But he was too hard to find," Mr. Mehta says.
The vast majority of traveling test-takers so far have headed for Nepal, India's neighbor to the north. Nepal is close enough to India that people can get there overland, avoiding costly plane tickets and visa hassles.
Among them was Mr. Kumar, 26, the business student who went to Katmandu with his friends. While he was able to get a flight into Nepal, he wasn't able to get a round-trip ticket to fly back out.
So, after taking the test on Dec. 2, they flew to the Nepalese town of Simara, went from there to Birganj by taxi, and then by auto-rickshaw across the border. Then, it was just a seven-hour taxi ride for the five of them to Patna.
It was worth the hassle, Mr. Kumar says. "For getting into a good career, into investment banks and all, CFA's quite mandatory these days."
He had better hope the trip winds up better than it did for Nikita Sharma, 25, who traveled a similar route earlier this year. She flew to Katmandu in June to take the CFA. But traveling overland on the way back, she got stranded on her bus for 15 hours after an accident in Nepal blocked traffic.
Ms. Sharma says that she and her two friends thought about abandoning the bus and trying to hike out. But "we also got scared, if we started walking, if we would be able to save ourselves from the animals."
Instead, they stuck it out and subsisted on mango juice. At least a dozen people on the bus, including them, were also CFA candidates, she estimates.
Despite all the hassles, Ms. Sharma had no regrets -- until, that is, she learned a few weeks later that she hadn't passed the exam.
"If one had passed," Ms. Sharma says ruefully, "then one would have cherished the moment."
Friday, November 23, 2007
Monday, October 22, 2007
Claremont, Williams Mega-Gifts Finance Fight Against Ivy League
Claremont, Williams Mega-Gifts Finance Fight Against Ivy League
Bloomberg, Oct-22-07
By Matthew Keenan
Liberal arts colleges in the U.S. are attracting alumni gifts of $10 million or more at a record pace to finance their competition with Ivy League universities for the nation's premier students.
Williams College in Williamstown, Massachusetts surpassed its $400 million capital campaign goal in June. Vermont's Middlebury College is almost halfway to its $500 million target, the most ambitious yet for any liberal arts institution. Claremont McKenna College in California received a record $200 million last month from investor Robert Day.
Schools have grown savvy in reaching out to alumni for ``mega-gifts,'' Michael Schoenfeld, Middlebury's vice president for college advancement, said in an interview. ``There is a need, there is the competition and there is the capacity of donors who are able to make a gift like that.''
For colleges with less than 3,000 students to compete with larger Ivy League universities for talented high-schoolers, alumni must help fund scholarships, attract professors and improve campuses, officials at the schools said. Universities are also seeking record sums, with Stanford, near Palo Alto, California, aiming to raise $4.3 billion. Cornell University, in Ithaca, New York; and Columbia University, in New York City, each set $4 billion goals.
Middlebury has drawn $50 million from an anonymous donor and $23.5 million from Shelby M.C. Davis, founder of New York money manager Davis Advisors. The school, in the midst of a five-year campaign, assigns eight of 65 development employees to donors capable of giving $100,000 to $5 million each.
Just three officials, including President Ronald Liebowitz, solicit gifts above that amount. Volunteers such as Richard Fuld, chief executive officer of Lehman Brothers Holdings Inc. in New York, also help the school tap affluent donors. Founded in 1800, Middlebury has about 2,350 undergraduates, compared with 6,700 at Harvard University in Cambridge, Massachusetts.
Wellesley's Example
Wellesley College, the Massachusetts women's college founded in 1870 whose alumnae include U.S. Senator Hillary Clinton, set a standard for liberal arts fundraising by gathering $472.3 million in a campaign that ended in 2005.
U.S. colleges and universities gathered an all-time high of $28 billion in contributions in 2006.
When Williams President Morton Schapiro took office in 2000, he drew up a strategic plan that resulted in a 15 percent increase in faculty, a new student center and greater financial aid, said Steve Birrell, vice president for alumni relations and development.
``We had needs coming out of the strategic plan that were of a different magnitude than we could support with so-called normal fundraising,'' which doesn't involve specially solicited mega-gifts, Birrell, 65, said in an interview from the school's campus in Williamstown.
Signature Gift
Williams, founded in 1793 with funds bequeathed by Colonel Ephraim Williams, publicly opened its campaign in the fall of 2003, after two years of preparation. The 2,000-student school's drive reached $413.3 million last week, and will continue through next year.
The signature gift was $20 million for a theater and dance center by Herbert Allen Jr., chairman of investment firm Allen & Co. in New York. The 1962 Williams graduate has a fortune valued at $2 billion by Forbes magazine.
Unlike universities more than twice their size, liberal arts colleges don't have medical schools or other research facilities that draw corporate and foundation grants, said John Lippincott, 58, president of the Council for the Advancement and Support of Education. Smaller schools rely instead on a cadre of deep-pocketed alumni.
Williams Donors
``You certainly are not going to achieve that goal in a period of five, six or seven years by accumulating small gifts,'' said Lippincott, whose Washington-based group represents marketing, communications and fundraising officials from 3,300 schools.
About 85 percent of the Williams money came from 2 percent of donors, including seven contributions of $10 million to $20 million each, Birrell said. At Middlebury, officials say a ``rule of 76'' calls for 76 gifts that together cover 76 percent of funds raised.
Claremont McKenna, with about 1,150 students, started soliciting gifts in March 2006 and plans to go public with the campaign next year.
Day's Donation
The school, founded in 1946, received $200 million in September from Day, an economics major who started TCW Group Inc., a Los Angeles-based investment firm that manages $70 billion. The gift will support students specializing in finance, accounting and leadership psychology.
His donation followed a $20 million gift by the Seattle- based Bill and Melinda Gates Foundation to fund science scholarships.
George Roberts, co-CEO of Kohlberg Kravis Roberts & Co., gave $20 million in October 2006. Roberts, a 1966 graduate, is seeking $40 million in matching gifts from other donors to create endowed faculty chairs. His initiative is more than halfway to its goal, showing that a culture of philanthropy has taken hold among alumni, said Claremont McKenna President Pamela Gann.
`Big Partner'
``People feel that they can have a high impact at a liberal arts college,'' the 58-year-old Gann said. ``A $20 million gift goes a lot further here than at a research university today. I think that matters. People feel like, `Oh, I'm a big partner.' And you are.''
Colgate University, in Hamilton, New York, launched a $400 million drive in March, and plans to reach that goal in three years, after taking in $234.4 million already.
``Our alumni are prepared to make those kinds of commitments,'' said Murray Decock, 48, vice president for institutional advancement.
Colgate got $27 million from Robert Hung Ngai Ho, a 1956 graduate, and dedicated its 121,000-square-foot science center to him last month. The school, founded in 1819, now has about 2,700 students.
Daniel Benton, the chief executive officer of hedge fund firm Andor Capital Management, in New York, gave $25 million. The 1980 graduate issued Colgate a challenge, making his gift contingent on the school's finding contributors for at least $25 million more in chunks of $1 million or greater. In March, 19 donors stepped forward with $27.9 million.
Bloomberg, Oct-22-07
By Matthew Keenan
Liberal arts colleges in the U.S. are attracting alumni gifts of $10 million or more at a record pace to finance their competition with Ivy League universities for the nation's premier students.
Williams College in Williamstown, Massachusetts surpassed its $400 million capital campaign goal in June. Vermont's Middlebury College is almost halfway to its $500 million target, the most ambitious yet for any liberal arts institution. Claremont McKenna College in California received a record $200 million last month from investor Robert Day.
Schools have grown savvy in reaching out to alumni for ``mega-gifts,'' Michael Schoenfeld, Middlebury's vice president for college advancement, said in an interview. ``There is a need, there is the competition and there is the capacity of donors who are able to make a gift like that.''
For colleges with less than 3,000 students to compete with larger Ivy League universities for talented high-schoolers, alumni must help fund scholarships, attract professors and improve campuses, officials at the schools said. Universities are also seeking record sums, with Stanford, near Palo Alto, California, aiming to raise $4.3 billion. Cornell University, in Ithaca, New York; and Columbia University, in New York City, each set $4 billion goals.
Middlebury has drawn $50 million from an anonymous donor and $23.5 million from Shelby M.C. Davis, founder of New York money manager Davis Advisors. The school, in the midst of a five-year campaign, assigns eight of 65 development employees to donors capable of giving $100,000 to $5 million each.
Just three officials, including President Ronald Liebowitz, solicit gifts above that amount. Volunteers such as Richard Fuld, chief executive officer of Lehman Brothers Holdings Inc. in New York, also help the school tap affluent donors. Founded in 1800, Middlebury has about 2,350 undergraduates, compared with 6,700 at Harvard University in Cambridge, Massachusetts.
Wellesley's Example
Wellesley College, the Massachusetts women's college founded in 1870 whose alumnae include U.S. Senator Hillary Clinton, set a standard for liberal arts fundraising by gathering $472.3 million in a campaign that ended in 2005.
U.S. colleges and universities gathered an all-time high of $28 billion in contributions in 2006.
When Williams President Morton Schapiro took office in 2000, he drew up a strategic plan that resulted in a 15 percent increase in faculty, a new student center and greater financial aid, said Steve Birrell, vice president for alumni relations and development.
``We had needs coming out of the strategic plan that were of a different magnitude than we could support with so-called normal fundraising,'' which doesn't involve specially solicited mega-gifts, Birrell, 65, said in an interview from the school's campus in Williamstown.
Signature Gift
Williams, founded in 1793 with funds bequeathed by Colonel Ephraim Williams, publicly opened its campaign in the fall of 2003, after two years of preparation. The 2,000-student school's drive reached $413.3 million last week, and will continue through next year.
The signature gift was $20 million for a theater and dance center by Herbert Allen Jr., chairman of investment firm Allen & Co. in New York. The 1962 Williams graduate has a fortune valued at $2 billion by Forbes magazine.
Unlike universities more than twice their size, liberal arts colleges don't have medical schools or other research facilities that draw corporate and foundation grants, said John Lippincott, 58, president of the Council for the Advancement and Support of Education. Smaller schools rely instead on a cadre of deep-pocketed alumni.
Williams Donors
``You certainly are not going to achieve that goal in a period of five, six or seven years by accumulating small gifts,'' said Lippincott, whose Washington-based group represents marketing, communications and fundraising officials from 3,300 schools.
About 85 percent of the Williams money came from 2 percent of donors, including seven contributions of $10 million to $20 million each, Birrell said. At Middlebury, officials say a ``rule of 76'' calls for 76 gifts that together cover 76 percent of funds raised.
Claremont McKenna, with about 1,150 students, started soliciting gifts in March 2006 and plans to go public with the campaign next year.
Day's Donation
The school, founded in 1946, received $200 million in September from Day, an economics major who started TCW Group Inc., a Los Angeles-based investment firm that manages $70 billion. The gift will support students specializing in finance, accounting and leadership psychology.
His donation followed a $20 million gift by the Seattle- based Bill and Melinda Gates Foundation to fund science scholarships.
George Roberts, co-CEO of Kohlberg Kravis Roberts & Co., gave $20 million in October 2006. Roberts, a 1966 graduate, is seeking $40 million in matching gifts from other donors to create endowed faculty chairs. His initiative is more than halfway to its goal, showing that a culture of philanthropy has taken hold among alumni, said Claremont McKenna President Pamela Gann.
`Big Partner'
``People feel that they can have a high impact at a liberal arts college,'' the 58-year-old Gann said. ``A $20 million gift goes a lot further here than at a research university today. I think that matters. People feel like, `Oh, I'm a big partner.' And you are.''
Colgate University, in Hamilton, New York, launched a $400 million drive in March, and plans to reach that goal in three years, after taking in $234.4 million already.
``Our alumni are prepared to make those kinds of commitments,'' said Murray Decock, 48, vice president for institutional advancement.
Colgate got $27 million from Robert Hung Ngai Ho, a 1956 graduate, and dedicated its 121,000-square-foot science center to him last month. The school, founded in 1819, now has about 2,700 students.
Daniel Benton, the chief executive officer of hedge fund firm Andor Capital Management, in New York, gave $25 million. The 1980 graduate issued Colgate a challenge, making his gift contingent on the school's finding contributors for at least $25 million more in chunks of $1 million or greater. In March, 19 donors stepped forward with $27.9 million.
Saturday, October 06, 2007
How 2 Guys' Iowa Connection Took Big Telecoms for a Ride Calls
How 2 Guys' Iowa Connection Took Big Telecoms for a Ride Calls
Sent to Their Area Piled Up Access Fees Until FCC Interceded
WSJ, 4-Oct-2007
By DIONNE SEARCEY
Two-and-a-half years ago Ron Laudner was the anxious owner of a rural phone company serving this tiny town, where Main Street was emptying out as restaurants and other businesses disconnected their phones and moved to busier commercial districts.
More than 1,800 miles away, David Erickson was running a Web-based conference-calling business in Long Beach, Calif., shopping around for phone companies to be his partners.
In mid-summer 2005 this unlikely duo struck a deal. They routed millions of minutes of Mr. Erickson's conference calls through the switches of Mr. Laudner's Farmers Telephone of Riceville. To do it, they used outdated federal regulations to charge telecom companies such as AT&T Inc. and Verizon Communications Inc. steep rates and collected huge profits at their expense. Together, the two made hundreds of thousands of dollars. Soon, Mr. Laudner cut other deals to generate even more traffic. At the peak, his little telephone company was facilitating conversations among everybody from Mary Kay Cosmetics employees to customers of Male Box, an "all male all gay" chat line.
"I'm not going to argue I didn't think it was amazing," Mr. Laudner says.
But the big phone companies had another term for it. "Verizon is not going to stand by while irresponsible companies use this traffic-pumping scheme to overcharge our company," says Tom Tauke, vice president of public affairs, policy and communications for Verizon.
The deal between Messrs. Laudner and Erickson illustrates how tumult in the telecom industry has given rise to opportunities -- and headaches -- as entrepreneurs exploit outdated regulation. Their arrangement, and deals like it, spawned lawsuits, blocked phone calls and triggered an investigation by the U.S. Federal Communications Commission into the high fees some rural carriers charged to the Bells. Late Tuesday, the FCC proposed rules that, if approved, are likely to prevent such deals in the future.
"We got smacked and smacked hard," Mr. Laudner says.
The partnerships benefited from the confluence of hot demand for conference calling and a proliferation of cheap long-distance plans. But the key was federal rules drafted during the 1983 break-up of Ma Bell, which required big telecom companies to pay hefty fees to small carriers to compensate for the high cost of providing service across miles of sparse farmland. Today, because of new technology, hundreds of callers can be linked at very little cost, no matter their location.
The Iowa plan worked like this: Mr. Erickson's freeconferencecall.com assigned a local Iowa telephone number to a group offering a conference call. When customers dialed the number, they went through their own carriers -- say, AT&T -- to be routed to Farmers Telephone in Iowa. Farmers Telephone then linked the callers to each other. Farmers charged the Bells steep rates to transmit their customers' calls and split the proceeds with freeconferencecall.com.
Mr. Erickson is a 42-year-old high-school graduate from Long Beach who gave up a childhood dream of becoming an architect to instead run construction companies that built machines for designing curbs and gutters. He dabbled in running insurance companies briefly before getting interested in telecom by going to a trade show with a friend and being wowed by a device that allows videoconferencing between PCs.
Mr. Erickson formed freeconferencecall.com in October 2001 working with a Boston phone company. He handled the marketing to attract customers to the service while the phone company provided the phone numbers and transmitted the calls. Mr. Erickson's business plan was to give away free conference calling and sell businesses other things, like a service that would allow users in multiple locations to work on spreadsheets simultaneously.
Other startups were doing the same thing, many of them depending on customers looking for sex chats. These customers have flocked to the free conference-call startups rather than pay costly fees associated with the 900-number sex industry, which has shrunk dramatically with the advent of inexpensive Internet-calling options and Internet-based pornography.
Mr. Erickson says he doesn't market to sex chat groups, but concedes he can't control who uses his free calling service.
Mr. Erickson realized early on there was money to be made from sharing the revenue that his phone-company partners were able to collect from the major carriers. Back in 2001, he started researching the fees and not long after recognized that rural phone companies, which could charge the Bells significantly higher fees than those in urban areas, presented an opportunity.
Mr. Laudner, a robust 49-year-old who has spiky gray hair, a goatee and an earring, was born in an apartment over a phone office his father managed in nearby Rudd, Iowa. One of his first jobs was driving through the cornfield-lined countryside in 1974 for a local phone company replacing customers' rotary-dial phones with more modern touch-tone phones. In 1995 he took over Farmers Telephone and two other rural phone companies all created in the early 1900s when isolated farmers strung wires along fences to get phone service.
In recent years, Mr. Laudner has been eager to find ways to compensate for his shrinking core business, land-line phones. He created a slogan, "Let's talk," and participated in a dozen parades through neighboring towns, decorating his company's float to resemble an iPod to reflect new consumer technologies. He dreamed of rallying his Iowa phone company friends to help build a wireless business in rural Iraq but decided the country became too violent to safely set up shop.
In the spring of 2005, Mr. Laudner bought gear to help him market new Internet-based phone services such as Internet calling, video services, conference calling and other services to businesses outside Riceville's shrinking Main Street. A consultant, Darin Rohead, who helped sell him the equipment, put Mr. Erickson and Mr. Laudner in touch. Over a phone call they soon struck a deal, with Mr. Erickson mailing him gear to install that would enable the calls.
"I'll make you as successful as you want to be," Mr. Laudner remembers Mr. Erickson telling him.
Mr. Laudner offered the firm phone numbers with the local 641 area code to use to market free conference calls and other services. Callers who dialed the 641 number would pay the long-distance charge, which is now close to free in many plans. They would then be linked to one another through telecom gear in Mr. Laudner's phone-switching center. Mr. Laudner agreed to give freeconferencecall.com a "marketing fee" based on phone traffic, which amounted to splitting the per-minute access fees roughly 50-50 for each call.
In the summer of 2005 Mr. Laudner filed standard paperwork with regulators to justify his 5.3-cents-a-minute rate by presenting evidence of his past history of handling very little phone traffic. At the time, it was unclear how dramatically the traffic would jump. The FCC as well as AT&T reviewed his filing and didn't protest.
"We were taking the rules the way the rules were intended," says Mr. Laudner. "I didn't know how much traffic I was going to get."
Several weeks later after a few technical hiccups Mr. Laudner got the system up and running at full speed. Calls to his exchanges were slowly escalating as word spread online about the services.
The big phone companies didn't initially notice the impact of Mr. Laudner and Mr. Erickson's deal.
Mr. Erickson traveled to a barbecue in Iowa to meet Mr. Laudner face to face and to try to pick up more recruits. The two men ate ribs and played a round of golf.
During this period, Mr. Laudner struck partnerships with three other conference-calling firms. Suddenly, Farmers Telephone of Riceville was processing millions of minutes of phone calls a month, earning Mr. Laudner -- and the free-calling-service companies -- hundreds of thousands of dollars in new revenue. In November 2006, Mr. Laudner's company handled 27.4 million minutes of calls, more than double the number he had processed in an entire year before he partnered with the Internet companies. AT&T traffic alone on Farmers' network spiked to 15 million minutes in December 2006 from 121,000 minutes in January of the previous year.
The same thing was happening at nearly a dozen other small Iowa phone companies that were partnering with freeconferencecall.com and other companies, processing calls for everything from an Amish conference-calling service to "Free Phone Chat," a place where callers could "meet new friends and lovers."
About the same time in Denver, at the corporate headquarters of Qwest Communications International Inc., the company's analysts began to notice a spike in the bills owed to Iowa companies. Qwest's Lisa Hensley Eckert, who reviews traffic between phone carriers, received call records from the Iowa phone companies so she could examine the jump in volume. She started plugging popular Iowa phone numbers into a search engine tracking several to Web sites such as hotlivesexchat.com, allfreecalls.net, freecalls2theworld.com.
"They all used the same three Iowa area codes," says Ms. Hensley Eckert. "To see millions of dollars going out the door -- it was much larger than anything we'd seen before."
AT&T, Verizon, Sprint Nextel Corp. and other phone companies were also taking note. In late 2006, Qwest and AT&T disputed their unusually high monthly bills and stopped paying Mr. Laudner. On Jan. 29, AT&T sued Farmers and three other Iowa companies in U.S. District Court there; Qwest and Sprint soon followed with similar lawsuits and filings to the FCC. In one filing, AT&T complained that the Iowa companies "make a mockery" of the system designed to compensate carriers for providing phone service in rural areas.
The charges to Iowa companies, including Farmers Telephone, affected Qwest's 2006 fourth-quarter earnings, and cost the company roughly $10 million to $15 million out of total profits for that quarter of $194 million.
According to phone-company records, Riceville handled nearly 2.1 million minutes in January alone of calls to Male Box as well as five million from the Chicago Blade and Chicago Alibi, which offer adult chat and a "live personals" service where callers record and select personal ads.
Mr. Laudner says sex calls made up a sliver of his business. Most of the traffic Farmers Telephone handled came from sports chat clubs, businesses and charities including a domestic-violence prevention group, he says.
Still, word got around about the sex-related traffic. It didn't go over well in Riceville, population 900, which touts its "safe environment for children" on its Web site. A resident stopped one of Mr. Laudner's workers early this year to ask whether his company was involved in the sex-call business.
In March, Mr. Laudner received a call from freeconferencecall.com saying customers' calls weren't going through.
Freeconferencecall.com initially blamed Mr. Laudner for the problems, and he checked his equipment, which he found to be working properly. Quickly Mr. Erickson learned the problem was more widespread than Farmers Telephone. Qwest had suddenly stopped routing some Iowa traffic through its network. And AT&T started blocking calls to numbers it tied to "unscrupulous carriers," the company says. The tactics in some cases affected regular phone traffic to Iowa, the Iowa carriers say.
Angry freeconferencecall.com customers who couldn't dial into their conference calls complained to Mr. Erickson, and some of them never returned to the site, he said.
"It was like stepping on somebody's oxygen hose," says Mr. Erickson who thinks the blocking was "criminal."
Mr. Laudner and other Iowa carriers were outraged. In April, he and Mr. Erickson and other Iowa phone executives, traveled to Washington, D.C., to complain about the blocking to officials at the FCC, which has in the past levied fines for similar acts.
The FCC didn't fine the phone companies but staffers phoned AT&T, Qwest, Sprint Nextel, Verizon and Embarq Corp., formerly the local phone division of Sprint Nextel, to warn them that blocking was unacceptable, according to FCC and phone company officials. In June, the agency formally barred the big phone companies from blocking the calls.
For now, despite the FCC's proposed rules, which say some of the carriers are "engaging in an unreasonable practice," the calls continue to flow to Iowa. But AT&T, Verizon and Sprint aren't paying the fees to Mr. Laudner for the disputed calls. Mr. Laudner says he is owed at least $20 million by various carriers.
Mr. Laudner couldn't pay the free-calling-service companies their share. Farmers Telephone and freeconferencecall.com ended their relationship in late June when the companies' two-year contract expired. "Ron had been a good guy," Mr. Erickson said. "He wasn't going to go further with it and I wasn't going to try." He says he's since found other companies in nearby states to handle the calls, noting: "I don't need Iowa to do this."
Write to Dionne Searcey at dionne.searcey@wsj.com1
Sent to Their Area Piled Up Access Fees Until FCC Interceded
WSJ, 4-Oct-2007
By DIONNE SEARCEY
Two-and-a-half years ago Ron Laudner was the anxious owner of a rural phone company serving this tiny town, where Main Street was emptying out as restaurants and other businesses disconnected their phones and moved to busier commercial districts.
More than 1,800 miles away, David Erickson was running a Web-based conference-calling business in Long Beach, Calif., shopping around for phone companies to be his partners.
In mid-summer 2005 this unlikely duo struck a deal. They routed millions of minutes of Mr. Erickson's conference calls through the switches of Mr. Laudner's Farmers Telephone of Riceville. To do it, they used outdated federal regulations to charge telecom companies such as AT&T Inc. and Verizon Communications Inc. steep rates and collected huge profits at their expense. Together, the two made hundreds of thousands of dollars. Soon, Mr. Laudner cut other deals to generate even more traffic. At the peak, his little telephone company was facilitating conversations among everybody from Mary Kay Cosmetics employees to customers of Male Box, an "all male all gay" chat line.
"I'm not going to argue I didn't think it was amazing," Mr. Laudner says.
But the big phone companies had another term for it. "Verizon is not going to stand by while irresponsible companies use this traffic-pumping scheme to overcharge our company," says Tom Tauke, vice president of public affairs, policy and communications for Verizon.
The deal between Messrs. Laudner and Erickson illustrates how tumult in the telecom industry has given rise to opportunities -- and headaches -- as entrepreneurs exploit outdated regulation. Their arrangement, and deals like it, spawned lawsuits, blocked phone calls and triggered an investigation by the U.S. Federal Communications Commission into the high fees some rural carriers charged to the Bells. Late Tuesday, the FCC proposed rules that, if approved, are likely to prevent such deals in the future.
"We got smacked and smacked hard," Mr. Laudner says.
The partnerships benefited from the confluence of hot demand for conference calling and a proliferation of cheap long-distance plans. But the key was federal rules drafted during the 1983 break-up of Ma Bell, which required big telecom companies to pay hefty fees to small carriers to compensate for the high cost of providing service across miles of sparse farmland. Today, because of new technology, hundreds of callers can be linked at very little cost, no matter their location.
The Iowa plan worked like this: Mr. Erickson's freeconferencecall.com assigned a local Iowa telephone number to a group offering a conference call. When customers dialed the number, they went through their own carriers -- say, AT&T -- to be routed to Farmers Telephone in Iowa. Farmers Telephone then linked the callers to each other. Farmers charged the Bells steep rates to transmit their customers' calls and split the proceeds with freeconferencecall.com.
Mr. Erickson is a 42-year-old high-school graduate from Long Beach who gave up a childhood dream of becoming an architect to instead run construction companies that built machines for designing curbs and gutters. He dabbled in running insurance companies briefly before getting interested in telecom by going to a trade show with a friend and being wowed by a device that allows videoconferencing between PCs.
Mr. Erickson formed freeconferencecall.com in October 2001 working with a Boston phone company. He handled the marketing to attract customers to the service while the phone company provided the phone numbers and transmitted the calls. Mr. Erickson's business plan was to give away free conference calling and sell businesses other things, like a service that would allow users in multiple locations to work on spreadsheets simultaneously.
Other startups were doing the same thing, many of them depending on customers looking for sex chats. These customers have flocked to the free conference-call startups rather than pay costly fees associated with the 900-number sex industry, which has shrunk dramatically with the advent of inexpensive Internet-calling options and Internet-based pornography.
Mr. Erickson says he doesn't market to sex chat groups, but concedes he can't control who uses his free calling service.
Mr. Erickson realized early on there was money to be made from sharing the revenue that his phone-company partners were able to collect from the major carriers. Back in 2001, he started researching the fees and not long after recognized that rural phone companies, which could charge the Bells significantly higher fees than those in urban areas, presented an opportunity.
Mr. Laudner, a robust 49-year-old who has spiky gray hair, a goatee and an earring, was born in an apartment over a phone office his father managed in nearby Rudd, Iowa. One of his first jobs was driving through the cornfield-lined countryside in 1974 for a local phone company replacing customers' rotary-dial phones with more modern touch-tone phones. In 1995 he took over Farmers Telephone and two other rural phone companies all created in the early 1900s when isolated farmers strung wires along fences to get phone service.
In recent years, Mr. Laudner has been eager to find ways to compensate for his shrinking core business, land-line phones. He created a slogan, "Let's talk," and participated in a dozen parades through neighboring towns, decorating his company's float to resemble an iPod to reflect new consumer technologies. He dreamed of rallying his Iowa phone company friends to help build a wireless business in rural Iraq but decided the country became too violent to safely set up shop.
In the spring of 2005, Mr. Laudner bought gear to help him market new Internet-based phone services such as Internet calling, video services, conference calling and other services to businesses outside Riceville's shrinking Main Street. A consultant, Darin Rohead, who helped sell him the equipment, put Mr. Erickson and Mr. Laudner in touch. Over a phone call they soon struck a deal, with Mr. Erickson mailing him gear to install that would enable the calls.
"I'll make you as successful as you want to be," Mr. Laudner remembers Mr. Erickson telling him.
Mr. Laudner offered the firm phone numbers with the local 641 area code to use to market free conference calls and other services. Callers who dialed the 641 number would pay the long-distance charge, which is now close to free in many plans. They would then be linked to one another through telecom gear in Mr. Laudner's phone-switching center. Mr. Laudner agreed to give freeconferencecall.com a "marketing fee" based on phone traffic, which amounted to splitting the per-minute access fees roughly 50-50 for each call.
In the summer of 2005 Mr. Laudner filed standard paperwork with regulators to justify his 5.3-cents-a-minute rate by presenting evidence of his past history of handling very little phone traffic. At the time, it was unclear how dramatically the traffic would jump. The FCC as well as AT&T reviewed his filing and didn't protest.
"We were taking the rules the way the rules were intended," says Mr. Laudner. "I didn't know how much traffic I was going to get."
Several weeks later after a few technical hiccups Mr. Laudner got the system up and running at full speed. Calls to his exchanges were slowly escalating as word spread online about the services.
The big phone companies didn't initially notice the impact of Mr. Laudner and Mr. Erickson's deal.
Mr. Erickson traveled to a barbecue in Iowa to meet Mr. Laudner face to face and to try to pick up more recruits. The two men ate ribs and played a round of golf.
During this period, Mr. Laudner struck partnerships with three other conference-calling firms. Suddenly, Farmers Telephone of Riceville was processing millions of minutes of phone calls a month, earning Mr. Laudner -- and the free-calling-service companies -- hundreds of thousands of dollars in new revenue. In November 2006, Mr. Laudner's company handled 27.4 million minutes of calls, more than double the number he had processed in an entire year before he partnered with the Internet companies. AT&T traffic alone on Farmers' network spiked to 15 million minutes in December 2006 from 121,000 minutes in January of the previous year.
The same thing was happening at nearly a dozen other small Iowa phone companies that were partnering with freeconferencecall.com and other companies, processing calls for everything from an Amish conference-calling service to "Free Phone Chat," a place where callers could "meet new friends and lovers."
About the same time in Denver, at the corporate headquarters of Qwest Communications International Inc., the company's analysts began to notice a spike in the bills owed to Iowa companies. Qwest's Lisa Hensley Eckert, who reviews traffic between phone carriers, received call records from the Iowa phone companies so she could examine the jump in volume. She started plugging popular Iowa phone numbers into a search engine tracking several to Web sites such as hotlivesexchat.com, allfreecalls.net, freecalls2theworld.com.
"They all used the same three Iowa area codes," says Ms. Hensley Eckert. "To see millions of dollars going out the door -- it was much larger than anything we'd seen before."
AT&T, Verizon, Sprint Nextel Corp. and other phone companies were also taking note. In late 2006, Qwest and AT&T disputed their unusually high monthly bills and stopped paying Mr. Laudner. On Jan. 29, AT&T sued Farmers and three other Iowa companies in U.S. District Court there; Qwest and Sprint soon followed with similar lawsuits and filings to the FCC. In one filing, AT&T complained that the Iowa companies "make a mockery" of the system designed to compensate carriers for providing phone service in rural areas.
The charges to Iowa companies, including Farmers Telephone, affected Qwest's 2006 fourth-quarter earnings, and cost the company roughly $10 million to $15 million out of total profits for that quarter of $194 million.
According to phone-company records, Riceville handled nearly 2.1 million minutes in January alone of calls to Male Box as well as five million from the Chicago Blade and Chicago Alibi, which offer adult chat and a "live personals" service where callers record and select personal ads.
Mr. Laudner says sex calls made up a sliver of his business. Most of the traffic Farmers Telephone handled came from sports chat clubs, businesses and charities including a domestic-violence prevention group, he says.
Still, word got around about the sex-related traffic. It didn't go over well in Riceville, population 900, which touts its "safe environment for children" on its Web site. A resident stopped one of Mr. Laudner's workers early this year to ask whether his company was involved in the sex-call business.
In March, Mr. Laudner received a call from freeconferencecall.com saying customers' calls weren't going through.
Freeconferencecall.com initially blamed Mr. Laudner for the problems, and he checked his equipment, which he found to be working properly. Quickly Mr. Erickson learned the problem was more widespread than Farmers Telephone. Qwest had suddenly stopped routing some Iowa traffic through its network. And AT&T started blocking calls to numbers it tied to "unscrupulous carriers," the company says. The tactics in some cases affected regular phone traffic to Iowa, the Iowa carriers say.
Angry freeconferencecall.com customers who couldn't dial into their conference calls complained to Mr. Erickson, and some of them never returned to the site, he said.
"It was like stepping on somebody's oxygen hose," says Mr. Erickson who thinks the blocking was "criminal."
Mr. Laudner and other Iowa carriers were outraged. In April, he and Mr. Erickson and other Iowa phone executives, traveled to Washington, D.C., to complain about the blocking to officials at the FCC, which has in the past levied fines for similar acts.
The FCC didn't fine the phone companies but staffers phoned AT&T, Qwest, Sprint Nextel, Verizon and Embarq Corp., formerly the local phone division of Sprint Nextel, to warn them that blocking was unacceptable, according to FCC and phone company officials. In June, the agency formally barred the big phone companies from blocking the calls.
For now, despite the FCC's proposed rules, which say some of the carriers are "engaging in an unreasonable practice," the calls continue to flow to Iowa. But AT&T, Verizon and Sprint aren't paying the fees to Mr. Laudner for the disputed calls. Mr. Laudner says he is owed at least $20 million by various carriers.
Mr. Laudner couldn't pay the free-calling-service companies their share. Farmers Telephone and freeconferencecall.com ended their relationship in late June when the companies' two-year contract expired. "Ron had been a good guy," Mr. Erickson said. "He wasn't going to go further with it and I wasn't going to try." He says he's since found other companies in nearby states to handle the calls, noting: "I don't need Iowa to do this."
Write to Dionne Searcey at dionne.searcey@wsj.com1
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