L.A. County D.A. reassigns rival she beat in November election

Two weeks after taking office, Los Angeles County Dist. Atty. Jackie Lacey has reassigned a political rival she beat in the November election from a prestigious high-profile job to a post where he will no longer try cases — a move he contends is a backward step for his career.

In his new post, Alan Jackson will supervise deputy district attorneys handling what he described as "garden variety felony" and misdemeanor cases rather than the complex, high-profile murder cases he directed and tried for years in the office's elite major crimes division.

The reassignment comes despite Lacey's describing Jackson during and after the election as an "outstanding trial attorney." A nearly 18-year veteran of the office, Jackson was named as "prosecutor of the year" in 2010 by the county's bar association.

He was one of two prosecutors who won the conviction of famed music producer Phil Spector in 2009, marking the office's first victory in a celebrity murder trial in more than 40 years. He also won a conviction in the cold case murders of motor racing legend Mickey Thompson and his wife. Among his current workload was the capital murder case of a former Armenian army soldier accused of killing an 8-year-old girl, her mother and father, and a prostitute.

An office spokeswoman described Jackson's transfer as a "lateral move" that had nothing to do with the campaign. Jean Guccione said more than half of the office's managers were reassigned on Friday as part of a shake-up by the new administration. Jackson's salary, title and office location in downtown Los Angeles will remain the same, she said.

"This is not retaliation," Guccione said. "This new assignment provides an excellent opportunity for him to share his courtroom experience with other prosecutors."

Jackson, however, disputed that the transfer was a lateral move.

"It's a move backward in my career," Jackson said. "This decision is specifically designed to remove me from the courtroom and from access to complex and high-profile litigation."

Jackson stopped short of saying he believed the new assignment, which takes effect Jan. 7, was punishment for his criticism of Lacey during the campaign, but he said he could think of no other reason for the transfer.

"The only thing that has changed from the time I have been trying these cases ... is that I ran for office against her," he said. "Am I disappointed? Absolutely. Not just for me, but I'm disappointed for what it says about the mission of the district attorney's office."

Lacey, a registered Democrat who had the backing of incumbent Steve Cooley, beat Jackson, a registered Republican, in the Nov. 6 runoff by 55% to 45%. The nonpartisan campaign grew testy at times, with Jackson running a television commercial in which he referred to conflicting testimony Lacey gave at employee grievance hearings and accused her of being "dishonest under oath to protect her boss," Cooley.

After the election, Lacey acknowledged that she had felt hurt by the accusation but again called Jackson "a very talented trial lawyer" and promised that she would not retaliate against him.

"I'm not a vindictive person. I'm not a mean person. I don't believe in wasting energy on that kind of thing," she told The Times during an interview two weeks ago. "If he chooses to remain in the office, we will find an appropriate spot."

Lacey, however, did not say that Jackson would remain in the high-profile major crimes division, where he has worked for nearly a decade and most recently served as assistant head deputy.

"The choice won't be up to him. It will be up to us," she said. "I think in this office, you benefit from a variety of assignments."

Jackson on Saturday said he had not decided whether he would remain with the district attorney's office for the long term but added that he would work hard in his new assignment.

jack.leonard@latimes.com

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As Conn. story unfolds, media struggle with facts

NEW YORK (AP) — The scope and senselessness of the Newtown, Conn., school shooting challenged journalists' ability to do much more than lend, or impose, their presence on the scene.

Pressed with the awful urgency of the story, television, along with other media, fell prey to reporting "facts" that were often in conflict or wrong.

How many people were killed? Which Lanza brother was the shooter: Adam or Ryan? Was their mother, who was among the slain, a teacher at the school?

Like the rest of the news media, television outlets were faced with intense competitive pressures and an audience ravenous for details in an age when the best-available information was seldom as reliable as the networks' high-tech delivery systems.

Here was the normal gestation of an unfolding story. But with wall-to-wall cable coverage and second-by-second Twitter postings, the process of updating and correcting it was visible to every onlooker. And as facts were gathered by authorities, then shared with reporters (often on background), a seemingly higher-than-usual number of points failed to pan out:

— The number of dead was initially reported as anywhere from the high teens to nearly 30. The final count was established Friday afternoon: 20 children and six adults, as well as Lanza's mother and the shooter himself.

— For hours on Friday, the shooter was identified as Ryan Lanza, with his age alternatively reported as 24 or 20. The confusion seemed explainable when a person who had spoken with Ryan Lanza said that 20-year-old Adam Lanza, the shooter who had then killed himself, could have been carrying identification belonging to his 24-year-old sibling.

This case of mistaken identity was painfully reminiscent of the Atlanta Olympics bombing case in 1996, when authorities fingered an innocent man, and the news media ran with it, destroying his life. Such damage was averted in Ryan Lanza's case largely by his public protestations on social media, repeatedly declaring "It wasn't me."

— Initial reports differed as to whether Lanza's mother, Nancy, was shot at the school, where she was said to be a teacher, or at the home she shared with Adam Lanza. By Friday afternoon, it was determined that she had been shot at their home.

Then doubts arose about whether Nancy Lanza had any link to Sandy Hook Elementary. At least one parent said she was a substitute teacher, but by early Saturday, an official said investigators had been unable to establish any connection with the school.

That seemed to make the massacre even more confusing. Early on, the attack was said to have taken place in her own classroom and was interpreted by more than one on-air analyst as possibly a way for Adam Lanza to strike back at children with whom he felt rivalry for his mother's affection.

— At first, authorities said Lanza had used two pistols (a Glock and a Sig Sauer) in the attack and left a .223-caliber Bushmaster rifle in the trunk of a vehicle. But by Saturday afternoon, the latest information was that all the victims had been shot with the rifle at close range.

— There were numerous versions of what Lanza was wearing, including camouflage attire and black paramilitary garb.

With so many unanswered questions, TV correspondents were left to set the scene and to convey the impact in words that continually failed them.

However apt, the phrase "parents' worst nightmare" became an instant cliche.

And the word "unimaginable" was used countless times. But "imagine" was exactly what the horrified audience was helpless not to do.

The screen was mostly occupied by grim or tearful faces, sparing everybody besides law enforcement officials the most chilling sight: the death scene in the school, where — as viewers were reminded over and over — the bodies remained while evidence was gathered. But who could keep from imagining it?

Ironically, perhaps the most powerful video came from 300 miles away, in Washington, where President Barack Obama delivered brief remarks about the tragedy. His somber face, the flat tone of his voice, the tears he daubed from his eyes, and his long, tormented pauses said as much as his heartfelt words. He seemed to speak for everyone who heard them.

The Associated Press was also caught in the swirl of imprecise information. When key elements of the story changed, the AP issued two advisories — one to correct that Adam Lanza, not his brother, was the gunman, and another that called into question the original report that Lanza's mother taught at the school.

But TV had hours to fill.

Children from the school were interviewed. It was a questionable decision for which the networks took heat from media critics and viewers alike. But the decision lay more in the hands of the willing parents (who were present), and there was value in hearing what these tiny witnesses had to say.

"We had to lock our doors so the animal couldn't get in," said one little boy, his words painting a haunting picture.

In the absence of hard facts, speculation was a regular fallback. Correspondents and other "experts" persisted in diagnosing the shooter, a man none of them had ever met or even heard of until hours earlier.

CNN's "Piers Morgan Tonight" scored an interview with a former classmate of Lanza's — with an emphasis on "former."

"I really only knew him closely when we were very, very young, in elementary school together," she said.

Determined to unlock Lanza's personality, Morgan asked the woman if she "could have ever predicted that he would one day flip and do something as monstrous as this?"

"I don't know if I could have predicted it," she replied, struggling to give Morgan what he wanted. "I mean, there was something 'off' about him."

The larger implications of the tragedy were broached throughout the coverage — not least by Obama.

"We're going to have to come together and take meaningful action to prevent more tragedies like this, regardless of the politics," he said, which may have gladdened proponents of stricter gun laws.

But CBS correspondent Nancy Cordes noted, "There's often an assumption that after a horrific event like this, it will spark a fierce debate on the issue. But in recent years, that hasn't been the case."

Appearing on "The O'Reilly Factor" Friday night, Fox News correspondent Geraldo Rivera voiced his own solution.

"I want an armed cop at every school," he said.

___

EDITOR'S NOTE — Frazier Moore is a national television columnist for The Associated Press. He can be reached at fmoore(at)ap.org and at http://www.twitter.com/tvfrazier .

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Sidney Gilman’s Shift Led to Insider Trading Case

Speaking in front of a packed convention hall in Chicago, a top Alzheimer’s researcher, Sidney Gilman, presented the results of a drug trial that had the potential to change the fate of elderly patients everywhere.

Fabrizio Costantini for The New York Times

Dr. Gilman’s lifestyle was a well-kept secret among colleagues at the University of Michigan medical school.

But as he worked through the slides, it became clear to the audience on that day in July 2008 that the drug was not delivering and that its makers, Elan and Wyeth, could lose out on blockbuster profits. Along with other Wall Street analysts in the front rows, David Moskowitz zapped messages to clients to dump shares of the companies. “I can remember gasping” at the results, Mr. Moskowitz said.

Little did anyone in the room know that 12 days earlier, Dr. Gilman had e-mailed a draft of the presentation to a trader at an affiliate of one of the nation’s most prominent hedge funds, according to prosecutors, allowing the fund, SAC Capital, and its affiliate to sell over $700 million of Elan and Wyeth stock before Dr. Gilman’s public talk.

Last month, the trader was arrested on insider trading charges after Dr. Gilman agreed to cooperate with prosecutors to avoid charges.

While he appeared a grandfatherly academic, Dr. Gilman, 80, was living a parallel life, one in which he regularly advised a wide network of Wall Street traders through a professional matchmaking system. Those relationships afforded him payments of $100,000 or more a year — on top of his $258,000 pay from the University of Michigan — and travels with limousines, luxury hotels and private jets.

The riddle for Dr. Gilman’s longtime friends and colleagues is why a nationally respected neurologist was pulled into the high-rolling life of a consultant to financiers and how he, by his own admission, crossed the line into criminal behavior.

“My first reaction was, ‘That can’t possibly be right,’ ” said Dawn Kleindorfer, a former student of Dr. Gilman’s at Michigan.

What is clear is that Dr. Gilman made a sharp shift in his late 60s, from a life dedicated to academic research to one in which he accumulated a growing list of financial firms willing to pay him $1,000 an hour for his medical expertise, while he was overseeing drug trials for various pharmaceutical makers. Among the firms he was advising was another hedge fund that was also buying and selling Wyeth and Elan stock, though the authorities have given no sign they have questioned those trades.

His conversion to Wall Street consultant was not readily apparent in his lifestyle in Michigan and was a well-kept secret from colleagues. Public records show no second home, and no indication of financial distress. Nevertheless, he was willing to share a glimpse of his lifestyle with a 17-year-old student whom he sat next to on a flight from New York to Michigan a few months ago, telling her how his Alzheimer’s research allowed him to enjoy fine hotels in New York and limousine rides to the airport.

“I wouldn’t say he was egotistical because he didn’t come across as obnoxious, but he definitely mentioned the kind of lifestyle that he had,” said the student, Anya Parampil, who had been upgraded to first class.

Dr. Gilman’s role in the case involving SAC Capital has largely been overshadowed by the possibility that investigators may be narrowing in on the firm’s billionaire founder, Steven A. Cohen. Mr. Cohen and his firm have not been accused of wrongdoing in acting on the insider information.

Colleagues now say Dr. Gilman’s story is a reminder of the corrupting influence of money. The University of Michigan, where he was a professor for decades, has erased any trace of him on its Web sites, and is now reviewing its consulting policy for employees, a spokesman said.

The case also turns the spotlight back onto the finance world’s expert networks, which match sources in academia and at publicly traded companies — like Dr. Gilman — with traders at hedge funds and financial firms.

The networks have been a central target of prosecutors in the sprawling insider trading investigations that have resulted in dozens of convictions in recent years.

Some networks have closed, and many are shifting their focus outside the financial world, hoping to make up revenue by consulting for corporate America.

Days after the charges were filed, Dr. Gilman retired and has gone into seclusion at his home on a wooded lot overlooking the Huron River on the outskirts of Ann Arbor, which is listed in public records as worth $400,000. He declined to open the door to a reporter last week, directing questions to his lawyer. “I can’t discuss it,” he said. “I’m sorry.”

Stephanie Steinberg contributed reporting.

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United Airlines pilots ratify new labor contract

CHICAGO — After years of divisive negotiations between United Airlines and its pilots, union members on Saturday ratified a new labor agreement, shedding a bankruptcy-era contract for pilots and marking an important step toward fully integrating United and Continental airlines, which officially merged in 2010.

The Air Line Pilots Assn., which over the last couple of years has staged pickets about its lack of a contract and had taken a preliminary strike vote, said 67% of its 10,000 members voted over the last several weeks to ratify the deal, with nearly 98% casting votes. Voting closed Saturday morning.

The four-year contract will go into effect immediately. It provides gains in pay, job protections, retirement and benefits compensation and work rules.

"The era of bankruptcy and concessionary contracts is now over," union leaders said in a statement. "For too long, the pilots of United and Continental have had to shoulder more than their share of the burden as our respective airlines struggled through the difficult economic times of the past decade. We now stand ready to embark on a fresh start for the pilots and the airline."

With help from federal mediators, the two sides agreed in principle to a deal in August, then took until mid-November to work out language for a contract and send the proposal to the union membership for a vote.

"The ratification of this agreement is an important step forward for our pilots and the company," said Fred Abbott, United senior vice president of flight operations, in a statement.

The finished contract is a bit of good news in what has otherwise been a rocky merger for Chicago-based United Continental Holdings.

Most notable to passengers were rampant flight delays and cancellations after a conversion to a combined passenger reservation system in March. Those operational woes were severe over the summer, and customers started to flee to other airlines. But the problems have subsided in recent months, with United hitting its goal of an 80% on-time rate.

United is still in joint negotiations with other major unions, including those for flight attendants, passenger service agents, dispatchers and ramp and fleet workers. Pilot contracts are traditionally done first and tend to be the most contentious.

gkarp@tribune.com

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Gil Friesen dies at 75; longtime president of A&M recording label

A&M Records spent much of the 1960s, '70s and '80s as one of the leading independent labels in the music business, buoyed by a remarkably consistent string of hits from superstar acts, beginning with label co-founder Herb Alpert & the Tijuana Brass and continuing through the Carpenters, Carole King, Cat Stevens, Joe Cocker, Peter Frampton, the Police, Sting, the Go-Go's, Janet Jackson, Bryan Adams and many others.

The one thing they had in common: Most weren't superstars when they came to A&M.

"We don't sign big names," Gil Friesen, the longtime president of the label founded in 1962 by Alpert and business partner Jerry Moss, told Forbes in 1988. "We would rather have an artist whose career you slowly build with great credibility over time than an artist with whom you have instant chart success and that's the end of it."

Friesen, who was sometimes referred to as "the ampersand in A&M," died Thursday of leukemia at his home in Brentwood, said his friend and Rolling Stone magazine publisher Jann Wenner. He was 75.

Friesen spent a quarter century at the label until his resignation in 1990 shortly after Alpert and Moss sold the company to international conglomerate PolyGram for $500 million.

"Gil was a visionary," Alpert said Friday. "His door was always open to people looking for [new] thoughts and ideas.... He was always there to say things that maybe you didn't think of before."

He also contributed significantly to A&M's reputation for fair play among the musicians the label signed.

"The night the Byrds were inducted into the Rock and Roll Hall of Fame [in 1991], we were giving a press conference and I looked out into the small crowd and saw Gil Friesen, who in turn gave me a 'thumbs up,' as if to say 'well done.' I'll never forget that," Chris Hillman, the Byrds founding member who recorded for A&M after starting the Flying Burrito Brothers, said Friday. "He was one of the good guys."

Friesen's tenure at A&M began "in the heyday of the record business when the record business was a thriving, exciting place to be with the rise of a new generation of popular music, and A&M was at the forefront of it," Wenner said. A&M was "the leading independent label. It had a real reputation for style, class and integrity. It was a happening place to be, and Gil led that."

Gil Friesen was born March 19, 1937, in Pasadena and grew up in a musical family, which he credited with his own passion for music. His first job in the music business was at the lowest rung of the career ladder, processing mail for Capitol Records.

Later, he remembered visiting Santa Monica-based radio station KDAY to pitch a record to Alan Freed, the fabled East Coast deejay who moved to California after getting caught up in the radio payola scandal of the late 1950s.

"I was promoting a Peggy Lee record," Friesen recalled. Freed "was shocked to have a representative from Capitol show up. He introduced me to an independent promotion guy who was there for same reasons I was. His name was Jerry Moss. Jerry Moss and I became friends. Good friends."

In 1981, Friesen spearheaded the launch of A&M Films, the company's independent film division, and became executive producer of the 1985 hit "The Breakfast Club." He also produced two early John Cusack comedies, "Better Off Dead" (1985) and "One Crazy Summer" (1986), and the 1989 biopic "Blaze," about Louisiana Gov. Earl Long, starring Paul Newman.

Most recently he'd been working on a documentary titled "Twenty Feet From Stardom," about the backup singers who support rock and pop stars. It has been selected to be shown on opening night of the 2013 Sundance Film Festival.

Former A&M Senior Vice President and General Manager Jim Guerinot recalled Friday that Friesen would regularly invite groups of friends and co-workers to his home for dinner and engage them in conversations on topics far beyond that of day-to-day business affairs.

"He was friends with [historian] Bob Dallek, and after dinner, he'd say, 'Let's all go to the living room. What are we going to talk about tonight, Bob?' And Dallek would say, 'Tonight, let's talk about FDR' or 'Let's talk about Vietnam.' He made all those intellectual pursuits seem cool. And they were cool, because Gil did them."

An art aficionado, Friesen had been a board member and chairman of the Museum of Contemporary Art in Los Angeles. He also was a founding partner of the Classic Sports cable channel, which was sold to ESPN in 1997 for $175 million, and a founding investor in Akamai, a prominent Internet content delivery platform.

In addition to Janet Friesen, his third wife, Friesen is survived by their two children, Theo and Uma, and a son, Tyler, from a previous marriage. No services have been announced.

randy.lewis@latimes.com

elaine.woo@latimes.com

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Owner of Rivera plane being investigated by DEA

PHOENIX (AP) — The company that owns a luxury jet that crashed and killed Latin music star Jenni Rivera is under investigation by the U.S. Drug Enforcement Administration, and the agency seized two of its planes earlier this year as part of the ongoing probe.

DEA spokeswoman Lisa Webb Johnson confirmed Thursday the planes owned by Las Vegas-based Starwood Management were seized in Texas and Arizona, but she declined to discuss details of the case. The agency also has subpoenaed all the company's records, including any correspondence it has had with a former Tijuana mayor who U.S. law enforcement officials have long suspected has ties to organized crime.

The man widely believed to be behind the aviation company is an ex-convict named Christian Esquino, 50, who has a long and checkered legal past. Corporate records list his sister-in-law as the company's only officer, but insurance companies that cover some of the firm's planes say in court documents that the woman is merely a front and that Esquino is the one in charge.

Esquino's legal woes date back decades. He pleaded guilty to a fraud charge that stemmed from a major drug investigation in Florida in the early 1990s and most recently was sentenced to two years in federal prison in a California aviation fraud case. Esquino, a Mexican citizen, was deported upon his release. Esquino and various other companies he has either been involved with or owns have also been sued for failing to pay millions of dollars in loans, according to court records.

The 43-year-old California-born Rivera died at the peak of her career when the plane she was traveling in nose-dived into the ground while flying from the northern Mexican city of Monterrey to the central city of Toluca early Sunday morning. She was perhaps the most successful female singer in grupero, a male-dominated Mexico regional style, and had branched out into acting and reality television.

It remained unclear Thursday exactly what caused the crash and why Rivera was on Esquino's plane. The 78-year-old pilot and five other people were also killed. Esquino was not on the plane.

The late singer's brother, Pedro Rivera Jr., said that he didn't know anything about the owner or why or how she ended up in his plane.

Esquino told the Los Angeles Times in a telephone interview from Mexico City earlier this week that the singer was considering buying the aircraft from Starwood for $250,000 and the flight was offered as a test ride. He disputed reports that he owns Starwood, maintaining that he is merely the company's operations manager "with the expertise."

In response to an email from The Associated Press, Esquino said he did not want to comment. Calls to various phone numbers associated with him rang unanswered.

Esquino is no stranger to tangles with the law. He was indicted in the early 1990s along with 12 other defendants in a major federal drug investigation that claimed the suspects planned to sell more than 480 kilograms of cocaine, according to court records. He eventually pleaded guilty to conspiring to conceal money from the IRS and was sentenced to five years in prison, but much of the term was suspended for reasons that weren't immediately clear.

He served about five months in prison before being released.

Cynthia Hawkins, a former assistant U.S. attorney who handled the case and is now in private practice in Orlando, remembered the investigation well.

"It was huge," Hawkins said Thursday. "This was an international smuggling group."

She said the case began with the arrest of Robert Castoro, who was at the time considered one of the most prolific smugglers of marijuana and cocaine into Florida from direct ties to Colombian drug cartels in the 1980s. Castoro was convicted in 1988 and sentenced to life in prison, but he then began cooperating with authorities, leading to his sentence being reduced to just 10 years, Hawkins said.

"Castoro cooperated for years," she said. "We put hundreds of people in jail."

He eventually gave up another smuggler, Damian Tedone, who was indicted in the early 1990s along with Esquino and 11 others in a conspiracy involving drug smuggling in Florida in the 1980s at a time when the state was the epicenter of the nation's cocaine trade.

Tedone also cooperated with authorities and has since been released from prison. Telephone messages left Thursday for both Tedone and Castoro were not returned.

Esquino eventually pleaded guilty to the lesser offense of concealing money from the IRS.

Joseph Milchen, Esquino's attorney at the time, said Thursday the case eventually revolved around his client "bringing money into the United States without declaring it."

However, Milchen acknowledged that a plane purchased by Esquino was "used to smuggle drugs."

He denied his former client has ever had anything to do with illegal narcotics.

"The only thing he has ever done is with airplanes," Milchen said.

Court filings also indicate Esquino was sentenced to two years in federal prison after pleading guilty in 2004 to committing fraud involving aircraft he purchased in Mexico, then falsified the planes' log books and re-sold them in the United States.

Also in 2004, a federal judge ordered him and one of his companies to pay a creditor $6.2 million after being accused of failing to pay debts to a bank.

As the years passed, Esquino's troubles only grew.

In February this year, a Gulfstream G-1159A plane the government valued at $500,000 was seized by the U.S. Marshals Service on behalf of the DEA after landing in Tucson on a flight that originated in Mexico

Four months later, the DEA subpoenaed all of Starwood's records dating to Dec. 13, 2007, including federal and state income tax documents, bank deposit information, records on all company assets and sales, and the entity's relationship with Esquino and more than a dozen companies and individuals, including former Tijuana Mayor Jorge Hank-Rhon, a gambling mogul and a member of one of Mexico's most powerful families. U.S. law enforcement officials have long suspected Hank-Rhon is tied to organized crime but no allegations have been proven. He has consistently denied any criminal involvement.

He was arrested in Mexico last year on weapons charges and on suspicion of ordering the murder of his son's former girlfriend. He was later freed for lack of evidence.

The subpoena was obtained by the U-T San Diego newspaper.

A Starwood attorney listed on the subpoena, Jeremy Schuster, declined Thursday to provide details.

"We don't comment on matters involving clients," he said.

In September, the DEA seized another Starwood plane — a 1977 Hawker 700 with an insured value of $1 million — after it landed in McAllen, Texas, from a flight from Mexico.

Insurers of both aircraft have since filed complaints in federal court in Nevada seeking to have the Starwood policies nullified, in part, because they say Esquino lied in the application process when he noted he had never been indicted on drug-related criminal charges. Both companies said they would not have issued the policies had he been truthful.

Another attorney for Starwood has not responded to phone and email messages seeking comment, and no one was at the address listed at its Las Vegas headquarters. The address is a post office box in a shipping and mailing store located between a tuxedo rental shop and a supermarket in a shopping center several miles west of the Las Vegas Strip.

___

Associated Press writers Elliot Spagat in San Diego and Ken Ritter in Las Vegas contributed to this report.

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Former IndyMac CEO Michael Perry to pay $1 million in settlement

Former IndyMac Bancorp Chairman and Chief Executive Michael W. Perry has agreed to pay $1 million and be banished from the banking industry to settle government claims that he overloaded the Pasadena thrift with risky home loans before it collapsed in July 2008.

The Federal Deposit Insurance Corp. is dropping its $600-million negligence lawsuit against Perry in return for the personal payment and the right to seek $11 million from IndyMac's insurance carriers, Perry's lawyers and the FDIC said in statements released Friday.

The collapse of IndyMac is considered one of the early events that helped usher in the 2008 financial meltdown. A run on the bank's deposits wound up costing the FDIC insurance fund $13 billion — by far the most costly bank failure of the crisis.

Perry has continued to maintain that he did nothing wrong. A statement from the lawyers said he was settling "in large part" because the corporate insurance funds for his defense had been exhausted battling lawsuits brought against him and other former bank insiders.

"Mike Perry was a smart, honest and highly capable CEO who did all he could to save IndyMac Bank," said defense attorney D. Jean Veta of Washington, D.C.

Of the executives the government has accused of civil wrongdoing in the aftermath of the financial crisis, Perry was the most outspoken self-defender.

He even set up a website, http://www.nottoobigtofail.org, to dispute lawsuits brought by the FDIC, the Securities and Exchange Commission and private investors. Among other things, Perry noted that he had never sold his stock in IndyMac as the mortgage meltdown approached and then ripped through the industry.

Perry's lenders became the nation's largest issuer of so-called alt-A mortgages — home loans mostly based on borrowers' simple statements of their income rather than on tax returns. As such, they were commonly called "liar loans."

IndyMac's collapse was hastened when Sen. Charles E. Schumer (D-N.Y.) released a letter in June 2008 to the FDIC and other regulators, saying that "IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers."

Veta said the FDIC's filings acknowledge that the agency did not blame Perry for causing the bank to fail. Instead, she said, "the FDIC insisted on pursuing an equally baseless simple negligence claim, alleging that Mr. Perry should have had a crystal ball, seen the financial crisis coming and stopped making loans sooner than IndyMac did."

FDIC spokesman Andrew Gray did not dispute Veta's characterization of the case. He issued a statement saying: "The FDIC as Receiver of IndyMac has settled with Michael Perry in an agreement that will bar him from banking and that recovers $1 million in personal assets and up to $11 million of insurance policy money."

The FDIC sued Perry in July 2011.

His No. 2 at the bank, former IndyMac President Richard Wohl, previously settled FDIC negligence claims for $1.4 million — most of it covered by the bank's directors and officers insurance policies, the FDIC said last week. The agency had not previously disclosed that settlement.

In a separate suit, the FDIC accused three former executives of negligence at an IndyMac division that made loans to home builders. A federal court jury in Los Angeles last week ordered the three to pay $169 million to the agency.

That case included evidence that Perry had questioned the aggressive loans made by the home builder division of his bank — a demonstration, Veta said, that he had taken "sound fiscal actions" to try to save IndyMac.

A sweeping SEC fraud case against Perry was largely tossed out this year by a federal judge. He recently settled the sole remaining claim in that lawsuit for $80,000.

scott.reckard@latimes.com

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Court ruling could cut California spending on Medi-Cal

SAN FRANCISCO — In a potential windfall for the state, a federal appeals court decided unanimously Thursday that California may cut reimbursements to doctors, pharmacies and others who serve the poor under Medi-Cal.

A three-judge panel of the 9th Circuit U.S. Court of Appeals overturned injunctions blocking the state from implementing a 2011 law that slashed Medi-Cal reimbursements by 10%. Medi-Cal, a version of Medicaid, serves low-income Californians.

The ruling could make it harder to find doctors for as many as 2 million new patients who could become eligible for Medi-Cal under President Obama's healthcare law — a possible 25% expansion of the program. California already provides one of the lowest rates of reimbursement in the nation for medical services to the poor, and there is a shortage of doctors to serve those patients.

Lynn S. Carman, an attorney for a group of pharmacies, said the decision would be costly for providers, worsen the doctor shortage and would be appealed.

"If this decision stands it will not only destroy the Medicaid program in California, but it will destroy the Obamacare program for millions of Americans who are now being shoved into the Medicaid program under the Affordable Care Act," Carman said.

"They will not be able to obtain quality healthcare or access to services because providers cannot provide services at less than what it costs to furnish them," Carman said.

The ruling could make it considerably easier for the state to close its budget gap.

The state is facing a $1.9-billion deficit next year, although Proposition 30's temporary tax hike and an improving economy are projected to shift the state back into surpluses in the near future.

Medical providers said Thursday that the cutback should be lifted now that the state's fiscal outlook has improved. The ruling can be applied retroactively to June 1, 2011.

"Now that the state has money, it would be like Scrooge for Gov. Brown not to pass a bill to eliminate at least the retroactivity part of it," Carman said.

For the governor, Medi-Cal cuts could serve one policy aim at the expense of another.

Balancing the budget has been Brown's first priority since taking office, and cutting healthcare — the state's second-biggest cost after education — has been key to his fiscal goal.

But at the same time, he has wanted California to be out front in healthcare reform, and lead the country in efforts to put the federal law into place.

A spokesman for Gov. Brown released a statement Thursday that implied that Brown was inclined to put his budget priorities first, and was not likely to rescind the cuts.

"Today's decision allows California to continue providing quality care for people on Medi-Cal while saving the state millions of dollars in unnecessary costs," the spokesman wrote.

In a ruling written by Judge Stephen S. Trott, appointed by President Reagan, the panel said the lower court injunctions were unwarranted because the federal government had approved the cuts.

"Neither the State nor the federal government 'promised, explicitly or implicitly,' that provider reimbursement rates would never change," Trott wrote.

California has estimated that the 10% cut to medical providers and pharmacies would save the state $50 million a month.

Medi-Cal typically covers families and disabled Californians. The federal law will extend its coverage to single, childless adults beginning in 2014.

The California Medical Assn., which joined dentists, pharmacists, medical suppliers and medical response companies in trying to block the cutbacks, urged Brown to repeal them.

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Facebook, Google tell the government to stop granting patents for abstract ideas

Facebook (FB), Google (GOOG) and six other tech companies have petitioned the courts to begin rejecting lawsuits that are based on patents for vague concepts rather than specific applications, TechCrunch reported. The agreement, which was cosigned by Zynga (ZNGA), Dell (DELL), Intuit (INTU), Homeaway (AWAY), Rackspace (RAX), and Red Hat (RHT), notes the only thing these abstract patents do is increase legal fees and slow innovation in the industry. The companies claim that “abstract patents are a plague in the high tech sector” and force innovators into litigation that results in huge settlements or steep licensing fees for technology they have already developed on their own, which then leads to higher prices for consumers.

“Many computer-related patent claims just describe an abstract idea at a high level of generality and say to perform it on a computer or over the Internet,” the briefing reads. “Such barebones claims grant exclusive rights over the abstract idea itself, with no limit on how the idea is implemented. Granting patent protection for such claims would impair, not promote, innovation by conferring exclusive rights on those who have not meaningfully innovated, and thereby penalizing those that do later innovate by blocking or taxing their applications of the abstract idea.”

The companies conclude, “It is easy to think of abstract ideas about what a computer or website should do, but the difficult, valuable, and often groundbreaking part of online innovation comes next: designing, analyzing, building, and deploying the interface, software, and hardware to implement that idea in a way that is useful in daily life. Simply put, ideas are much easier to come by than working implementations.”

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Linux/Open Source News Headlines – Yahoo! News

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