9 Fake Things That Went Wrong With the Facebook IPO

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It's been a week since Facebook went public, and investors have been defriending it ever since. And that may be the least of the company's worries.

As a public service, and for the historical record, we gave our crack financial team the task of ferreting out what, exactly, happened.

Here are eight things they discovered that went wrong with the Facebook IPO...

  1. Mark Zuckerberg updating his status to "well...that didn't go very well" an hour after launch provides impetus for short selling
  2. Facebook COO Sheryl Sanderberg's defriending of Morgan Stanley and Nasdaq immediately after first trade results in a mini-panic
  3. Zuckerberg ringing the Nasdaq bell in his bathing suit gives institutional investors pause
  4. Virtual shares sold on Farmville dilutes the offering
  5. "Strong Buy" rating from Bernie Madoff sends smart money to the sidelines
  6. Facebook referring all questions about improper disclosures to Andy Samberg rubs the media the wrong way
  7. Zuckerberg's drunken "I am the mayor of Crapville" update interpreted negatively by analysts
  8. Sole warning of "potentially increased competition from Friendster" considered not enough of a risk assessment by SEC
  9. Mid-day changing of Facebook's ticker symbol from "FB" to "FU" -- not a good sign for anyone

Happy Memorial Day weekend, everyone!


11 Good Links Related to the Golden Gate Bridge Anniversary

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Photo of Golden Gate Bridge from the 1950s. OFF/AFP/Getty Images

Seems like we've been hearing about the 75th anniversary of the Golden Gate Bridge since the day after the 50th. Well it's finally here...on Sunday, that is. Some final preparatory links before you go all international orange this weekend. And remember, on May 27, the bridge will be closed from 9-10 pm for a fireworks show.


In Oakland Schools, Chronic Absence, Suspension Derail African-American Boys

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By Joanna Lin, The Bay Citizen

High rates of chronic absence, suspension and poor academic performance signal that more than half of African-American male students in the Oakland Unified School District are at risk of dropping out, according to new research.

The Urban Strategies Council, an Oakland-based community advocacy organization, found significant disparities between African-American boys and their peers: Fifty-five percent of black boys in the 2010-11 school year were falling off course from graduation or were at risk of doing so, compared with 37.5 percent of students overall in the district.

From kindergarten through 12th grade, researchers found that black boys struggled with regular attendance and suspensions and scoring proficiently on standardized tests or maintaining grades above a C average – warning signs that they might drop out.

Among African-American males who were not on track to graduate, 73 percent in elementary school were chronically absent, missing 10 percent or more of school days for any reason, according to the findings released this week. In middle school, the same percentage had been suspended at least once. Nearly two-thirds of high schoolers were chronically absent and had less than a C average; 41 percent had been suspended at least once.

"We need to understand what's going on if we're going to effectively intervene and improve outcomes and graduation and success of African-American males," said Junious Williams, chief executive officer of the council. Continue reading »


2 Questions the Geography King of California Missed in the Bee, Plus the Winning Answer

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Yesterday Varun Mahadevan, the 13-year-old geography king of California, came in third in the National Geographic Bee. (The Fremont Argus has a report.) Afterward, he told KQED's Paul Lancour that the toughest question he received, and one he got wrong, was the identification based on a photograph of a lake north of Lake Superior. The answer was Lake Nipigon.

Another one Varun, who is from Hayward and goes to Fremont's Prince of Peace Christian School, got wrong: What landlocked country borders Iran and Tajikistan?

Not necessarily the attributes you think of these days when you call to mind the correct answer: Afghanistan.

"I was under lots of pressure and wasn't thinking properly, I guess," Varun said. "And I was thinking that time was running out, so I entered Turkmenistan."

But overall Varun was satisfied with his showing in the contest, which netted him a $10,000 college scholarship. "Third place is pretty good actually. At first I was very pressured, then I found a breakthrough and I did well."

The winner of the bee was Rahul Nagvekar, a 14-year-old eighth-grader from Sugar Land, Texas. He won a $25,000 college scholarship, a trip to the Galápagos Islands, lifetime membership in the National Geographic Society, and a perpetual exemption from his partner asking him, "why don't you just stop and ask for directions, already?"

Here's the moment when a Bavarian city located on the Danube River -- the legislative seat of the Holy Roman Empire from 1663 to 1806, mind you -- netted Rahul the big prize...


Audio, Transcript: Jerry Brown on Marketplace

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The guv cited Adams, Jefferson and Lincoln, then went up the ladder by invoking Jesus and Muhammad in his interview with Markeplace's Kai Ryssdal yesterday. Best exchange:

Ryssdal: Why is it that this debate, Governor, happens on the far ends of the economic spectrum? We're talking about cutting services for the most needy in our society and taxing the very richest. How do you reconcile that with an electorate that lives mostly in the middle?

Brown: Well, the electorate in the middle is telling every survey that they don't want any more taxes. They are willing to see the taxes on the most affluent increase at least temporarily -- if it's for schools, for public safety and for the most vulnerable. So faced with a gap of $15.7 billion, I can either fold my tent and then just slash away, or I can give the voters an opportunity to say, 'OK, we'd like to shoulder part of that burden.'


A.M. Splash: Students Face State Aid Cuts in Brown Budget; Good News on Oakland Budget; Study Details Mercury in Calif. Fish

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  • Cal Grant program faces cuts in governor's budget (SF Chronicle)

    Under Brown's revised budget plan, thousands of California college students who start their education in fall of 2013 would either be unable to qualify for a Cal Grant or would receive a much smaller grant than if they had applied this year...The governor is proposing a major change and wants Cal Grants tied to the federal Pell Grants for student aid. That means if a student qualified for only half of the maximum federal award, that student would qualify for just half of the maximum Cal Grant award. Students receiving the full Pell Grant would receive the full Cal Grant. Students who currently receive a Cal Grant would be grandfathered into the program and would not be affected.

  • Oakland finances on upswing (Oakland Tribune)

    City leaders are pointing to better-than-expected revenue growth as a sign that Oakland's economy is rebounding and the era of cutbacks and layoffs is fading. Spurred by robust sales and hotel tax growth, Mayor Jean Quan released a budget update Thursday that includes money for an additional police academy and restores senior center funds. The proposal, which calls for no layoffs or service cuts, will go to the City Council next month for approval.

  • New study details mercury contamination in California sport fish (Bay Area News Group)

    New findings from the first statewide study of contaminants in fish caught off the California coast show that methylmercury, a toxin that damages the nervous system of humans, was found in high concentrations in more than a third of the locations that researchers sampled...Seven species popular with recreational fishermen had high concentrations of methylmercury: leopard sharks, brown smoothhound sharks, spiny dogfish, copper rockfish, rosy rockfish, china rockfish and striped bass, the report stated, so children and pregnant women should not eat them.

  • East Bay VA medical facilities draw health and safety violation citations (Bay Area News Group)

    Federal regulators on Thursday cited four Veterans Affairs facilities in Northern California for unsafe and unhealthful working conditions, including clinics in Martinez, Oakland and Fairfield. Safety hazards were also identified at the VA hospital in Mather. Problems labeled serious by the U.S. Department of Labor's Occupational Safety and Health Administration included blocked emergency exit doors and routes, electrical hazards and exposure to contaminated needles.

  • Facebook could face huge damage claims from IPO (SJ Mercury News)

    Facebook could be on the hook for $1 billion or more in damages if plaintiffs lawyers can prove allegations that the company and its bankers misled investors in its initial public offering. The Menlo Park-based social networking company and its banking partners face a slew of lawsuits in the aftermath of its bungled IPO last week, which raised $16 billion for Facebook and company insiders. The suits accuse the company of misleading investors by failing to share with them information it passed on to select Wall Street analysts -- a warning that its current quarter financial results weren't going to be as rosy as expected.

  • State regulators raise existing cap on solar 'net metering' (SJ Mercury News)

    In a huge victory for solar customers and the states's growing solar industry, state regulators with the California Public Utilities Commission unanimously voted Thursday to effectively raise the current "cap" on net energy metering. Net metering, a popular policy that has been in place in California for 15 years, allows homeowners, school districts and businesses to offset the cost of their electricity with the rooftop solar power they generate and export to the grid. Current state law requires California's major utilities to make net metering available to customers on a first-come, first-served basis, but the program is capped at 5 percent of a utility's "aggregate customer peak demand." That means that as soon as a utility gets 5 percent of its electricity from solar customers, it is no longer required to sign new contracts.

  • Environmental OK for high-rises (SF Chronicle)

    After five years of discussions, the Planning Commission approved an environmental plan Thursday for a new high-rise neighborhood in the heart of the city. The commission also cleared the way for as many as six new towers of up to 850 feet, although each would be smaller than the 61-story, 1,070-foot-tall Transit Tower at First and Mission streets, which would become the tallest building in San Francisco.

  • Water at California beaches cleanest in years (SF Chronicle)

    ...Nearly every beach in the Bay Area, and throughout the state, had dramatically lower levels of bacteria and pollution than last year, according to an annual survey of 650 West Coast beaches by Heal the Bay, a Santa Monica environmental group.

  • Bay Area yacht racing to resume a month after fatal Farallon Islands accident (SF Examiner)

    After the deaths of five people in a crash near the Farallon Islands last month, yacht racing off the Northern California coast is set to resume this weekend, with the local sailing community vowing to improve safety and training standards to prevent future tragedies.


Another Federal Judge Rules Defense of Marriage Act Unconstitutional

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(Bay City News) A federal judge ruled in Oakland that the state's public-employee pension system must make long-term care insurance equally available to same-sex spouses and partners.

U.S. District Judge Claudia Wilken said a provision of the federal Defense of Marriage Act, or DOMA, is unconstitutional to the extent that it limits same-sex spouses of state workers in obtaining the insurance.

The provision of the 1996 DOMA law defines marriage as "a legal union of a one man and one woman as husband and wife."

It has been used to bar gay and lesbian spouses from obtaining a variety of federal benefits.

Wilken issued her ruling in a lawsuit filed against the California Public Employees' Retirement System, known as CalPERS, by same-sex couples. The system has refused to let gay spouses enroll in its federally approved insurance program on the ground that they were excluded by DOMA.

Wilken said the DOMA ban violated the U.S. Constitution's guarantee of equal treatment. She wrote that there was no proof the DOMA provision was "rationally related to a legitimate government interest."

Today's decision makes Wilken the second trial judge in the U.S. District Court for Northern California to strike down that section of the 1996 law. Continue reading »


The Case of the Berkeley Police Chief and His Son's Stolen iPhone

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Berkeley Police Department

On March 9, after midnight, Berkeley Police Chief Michael Meehan sent his department's public information officer to the home of a reporter, with instructions that she should press him to make changes to a story he'd written that was appearing online.

That incident, for which Meehan apologized, is the subject of an outside investigation ordered by the city manager. And now another matter involving the chief has some Berkeleyites shaking their heads anew.

For an update, we turn to Tracey Taylor of KQED news associate Berkeleyside, which has been following the story.

Edited transcript...

JON BROOKS: Over the last couple of days, whenever I tell anyone about this story, they seem to almost be in a state of disbelief. But the chief and the department are defending themselves and don't seem to think anything is unusual here. Tell us what happened...

BERKELEYSIDE'S TRACEY TAYLOR: It emerged that on Jan 11 Berkeley Police Department Chief Michael Meehan took part in an investigation that involved sending 10 officers to Oakland to find his son's iPhone. He also went out on the call.

The incident started when his son turned up at the Berkeley police station just across the street from Berkeley High School, where he goes, to tell his father that his iPhone had been stolen. Chief Meehan had on his own phone a tracking device which one of the detectives was able to use to track the iPhone to a certain location in Oakland. The decision was made to send 10 officers to this residential block in Oakland to look for the phone. Meehan was present when the officers were knocking on doors -- in one block in Oakland, several officers knocked on doors to try to locate the phone, which was never found.

Some of the officers involved were from the drug task force, and they opted to come in and help on the investigation. And four of the officers involved, property crime detectives, went into overtime, which cost the city about $740 dollars.

There was no report filed on this. It's standard to file a report on any investigation, and the department says that was an oversight that only came to its attention when looking into the story after questions from reporters.

JON BROOKS: How unusual is it for Berkeley police to go into Oakland, to conduct an investigation in an area that is not under their jurisdiction?

TRACEY TAYLOR: Crossing the border is fairly common and they don't necessarily always tell Oakland police they're coming in. They sometimes tell them out of courtesy and also as a matter of safety if they're chasing someone. In this case OPD wasn't alerted.

JON BROOKS: Berkeleyside talked to Chief Meehan yesterday. What did he say?

TRACEY TAYLOR: He explained, in his own words, about the incident. He was very keen to stress that what had happened was not preferential treatment, even though this has been cast in the media as preferential treatment. He said that what happened when they sent out officers to try and live-track his son’s phone would be something the department would have done for anybody in the city, that it was not unusual to respond to a stolen iPhone this way.

He stressed what the Berkeley Police Department had already said -- that he did not give the order for the search –- that a group of detectives were in a room with him, and one of the detective sergeants said, “let’s go find this phone.” Meehan said he went along for two reasons: first, because he had never personally taken part in tracking an iPhone using these apps that allow you to monitor the location, so he was interested to see it happening. And also because it was his personal iPhone that was being used to track his son’s iPhone. So he wanted to stay close to his phone.

He also said that he did not request a report because he was not the officer in charge of this particular investigation. And he did not know, until recently, that a report had not been filed – that this only came to light when the media started asking questions. BPD says it was an oversight.

JON BROOKS: And what would you say the chief's attitude was toward this whole story?

TRACEY TAYLOR: I would say he was fairly defiant, that he thought a storm had been created around this situation, when in fact it was a fairly straightforward, not atypical investigation, and that preferential treatment was not an issue here.

JON BROOKS: How are people reacting in Berkeley to this episode?

TRACEY TAYLOR: Well a lot of Berkeleyside readers think he should step down, that this is not acceptable behavior and it shows a poor sense of priorities sending officers on something like this, which is resources and time and money people don’t think should have been spent. Or people think he should at least apologize.

But it's exacerbated by concern over the earlier incident in which Chief Meehan sent an officer to a reporter's house to ask him to change some things in an article. There are two independent agencies that have been hired by the city to look into that. One is from an agency brought in to analyze the Berkeley Police Department's media relations; the other is an investigation by a San Francisco law firm, hired by the city manager. That investigation is focusing on whether the chief broke any rules. That investigation is ongoing, and the city is not intending to make the report public, because it's considered a personnel matter. Both those investigations together will cost the city $50,000. I think that's informing a lot of the surprise and feeling about Chief Meehan right now.

JON BROOKS What was the view of Chief Meehan before these two incidents?

TRACEY TAYLOR: These incidents aside, he's proved to be a popular chief. He's done a lot of community outreach, and if you did a survey, I think you'd find a lot of people are happy with him, for reasons not the least of which is that crime rates are down since he came on board. He's also talked at meetings about wanting to have a transparent department, and about improving crime data.

But within the department there's a lot of dissatisfaction and grumbling about his leadership and his decision making, on a level more wide-ranging than just the two incidents. We've heard from people within the department who say they're not happy with his leadership style, what they call his self-involvement.

Having said that we should also point out that the police unions are currently renegotiating their contract right now, so one should take some of these things with a grain of salt.

Addendum: From Berkeleyside yesterday:

"On Tuesday, the BPD supplied Berkeleyside with examples of seven cases where anywhere between four and 11 police officers were assigned to track and locate iPhones or iPads. The cases were from the past three years. One took the police to San Francisco, and two resulted in arrests." Continue reading »


Texas Firm Sues Calif. Homeowners With Foreclosed 2nd Mortgages

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by Rick Jurgens, California Watch

Adding new uncertainty in the state’s ongoing mortgage crisis, a Texas company is aggressively pursuing hundreds of Californians to collect second-mortgage debt – on homes they’ve already lost through foreclosure.

mortgage note against the house Trejo lost through foreclosure in 2008. Trejo won but HPF has appealed. (Michael Short/California Watch)

Many of these former homeowners believed their mortgage debt had been erased after their houses were taken by banks and lending companies. But the Texas company, Heritage Pacific Financial, has aggressively pursued collections and filed lawsuits claiming those debts still linger.

For Ahmed Abdelfattah of San Jose, debt collectors started calling in 2009, saying he owed Heritage Pacific $135,000. He said he’d never heard of the company before.

“It’s been a nightmare,” Abdelfattah said. “It’s cost me money and time, and they ruined my credit until now.”

Oscar Trejo said his first encounter came a few days before he expected to exit bankruptcy and get a fresh financial start. That was in November 2010, he said. Heritage Pacific sent Trejo, who also lives in San Jose, a letter saying it had asked a bankruptcy judge not to discharge, or erase, its $88,800 claim against him.

Trejo invested in properties in Merced and later lost them all in foreclosures. But he hadn’t done business with Heritage Pacific. “I had never seen the company’s name,” he said.

Heritage Pacific was started by identical twin brothers, Chris and Ben Ganter, who once starred in a reality TV show, “PayDirt,” about investing in the Dallas-Fort Worth real estate market.

The company’s lawsuits often accuse defendants of misstating their incomes on loan applications. While many borrowers did overstate their incomes on applications, consumer attorneys say Heritage Pacific is targeting people who filled out their forms honestly or whose mortgage brokers pumped up their applications without their knowledge. Continue reading »


Paul Krugman on California Fiscal Crisis, Pensions, and 'Not a Shred of Evidence' That Higher Taxes Kill Jobs

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On Monday on KQED Public Radio's Forum program, New York Times op-ed columnist and Nobel Prize winner in economics Paul Krugman sat down with host Michael Krasny to discuss the perpetually lousy economy and possible solutions, as described in Krugman's new book, End This Depression Now! (You can read a little of that on Amazon.com.)

In the course of the conversation, Krugman addressed California's fiscal crisis as well as another issue that's been much on local minds of late: public pensions. Liberals, read on with fawning admiration; conservatives... prepare for the gnashing of your teeth...

Edited transcript:

QUESTION FROM LISTENER: Can California solve its problems separate from U.S. stimulus?

In a lot of ways California led the nation into its current state of disaster.
--Paul Krugman
PAUL KRUGMAN: No. You can do some things. [But] I think there's a lot of reason to believe states are better advised to meet their fiscal crisis at least partly by raising taxes, not just by cutting spending. Which of course is very hard given the constitutional mess California is in... In a lot of ways California led the nation into its current state of disaster.

[But] there's a limited amount you can do. It's pretty much the same thing for the prime minister of a small European country. How much can he do? There at least they have the nuclear option of leaving the Euro. But that's a huge step to take. And of course California doesn't have anything like that. So I'm willing to cut governors a lot of slack, because there's only so much they can do.

HOST MICHAEL KRASNY: Jerry Brown's become kind of an austerion in some ways…

PAUL KRUGMAN: He sort of has to. I have to say, I'm feeling really old, that Jerry Brown's governor of California again and he's an austerity advocate. What happened to my generation?

QUESTION FROM LISTENER Will the government borrowing to stimulate demand cause a long-term improvement in the economy when the economy's underlying institutions seem to be dysfunctional? That seems to be trying to prime a pump with terribly leaky seals.

For instance, outside my window, the city of Mountain view is replacing a water main with labor artificially priced far above its global value, perhaps a hundred dollars per hour. If we could re-price domestic labor more flexibly, Mountain View could hire many more people, each at lower pay, and fix many more water mains or hire more teachers.

PAUL KRUGMAN: First of all, I want to ban pump priming as a metaphor, because nobody in modern America knows what it means. Call it jumpstarting instead.

But bear in mind, mostly what we're talking about now is rehiring school teachers. The representative public employee is a school teacher. And are school teachers, or public employees in general, vastly overpaid? The answer is no they're not. We've actually had a number of studies -- depending on exactly how you cut the numbers you can move it a few percent either way -- but basically public employees are paid about what you'd expect given their education levels. So it's not the case we have vastly overpaid public employees.

MICHAEL KRASNY: What about the pensions problem?

PAUL KRUGMAN: That's a real issue, but it's one of those exaggerated issues. You look at it, yeah there's a problem. Public pensions are underfunded, but so are private pensions. So is a lot of stuff in this economy. That's one of those issues that needs to be dealt with, but it's not relevant to the immediate mess we're in.

And here's Krugman on the overall issue of whether stimulus or spending cuts is the correct course to right the economy:

PAUL KRUGMAN: There's absolutely no reason to believe that spending more would not create a lot more employment right now. What we've seen is the experience with spending cuts. We've basically carried out a massive unethical human experiment in Europe and to some extent in the United States on the effects of spending cuts. And guess what: they destroy jobs, which says that reversing those spending cuts would bring those jobs back.

MICHAEL KRASNY: Then we have the GOP saying if you impose any kind of tax you hurt job creation….

PAUL KRUGMAN: That's why the economy tanked after Clinton raised taxes, and why we had such a wonderful decade after George W. Bush cut taxes. And for that matter why America was such a disaster area back in the days of that socialist Dwight Eisenhower, when the top marginal tax rate was actually 91 percent.

Nothing in history supports that, there's not a shred of evidence for that position… It comes back to that great Californian from long ago, Upton Sinclair, who said it's very difficult to get a man to understand something when his salary depends on him not understanding it. So there's a lot of money behind promoting that belief.

You can listen to the whole show here....