Monthly Archives: May 2012

Immediate Vault Immediate Access

Transportation Department Shuts Down 26 Bus Operators for Safety Violations

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Apex Bus station in New York's Chinatown, one of the companies shut down by the feds (photo via Yelp)

In what a Department of Transportation oversight agency has described as the “largest single safety crackdown” in its history, federal officials ordered the immediate shutdown of 26 bus operators that transported passengers along the I-95 corridor. The reason: they are “imminent hazards to public safety,” according to DOT.

The crackdown is the result of a year-long investigation into these small, poorly regulated bus companies following several high-profile crashes along the East Coast in early 2011. “These aggressive enforcement actions against unsafe bus companies send a clear signal:  If you put passengers’ safety at risk, we will shut you down,” said U.S. Transportation Secretary Ray LaHood.  “Safety is and will always be our highest priority.”

The leader of the DOT agency responsible for the shut down, the Federal Motor Carrier Safety Administration (FMCSA) had some strong words of his own. “The egregious acts of these carriers put the unsuspecting public at risk, and they must be removed from our highways immediately,” said FMCSA Administrator Anne S. Ferro. “With the help of multiple state law enforcement partners, we are putting every unsafe bus and truck company on notice to follow the safety laws or be shut down.”

The three main companies whose various operations have been shuttered are: Apex Bus, I-95 Coach, and New Century Travel, which oversaw a network of bus companies, according to DOT. The various companies included — one ticket seller, nine active bus companies, 13 companies already ordered out of service that were continuing to operate and three companies attempting to apply for operating authority — are based out of Georgia, Indiana, Maryland, New York, North Carolina and Pennsylvania.

We covered the outcry for better bus safety in May 2011 in our print publication, Risk Management. Here is an excerpt of that piece, written by Emily Holbrook, in full.

In New York, most people rely on mass transit. And for getting out of town, one of the most popular choices are the motorcoach buses that depart from Manhattan’s Chinatown. These “Chinatown buses” offer riders a cheap ticket out of town to destinations such as Boston, Philadelphia, Washington and various casinos in the area.

But these low-cost tour bus companies have a horrifying track record of safety. On March 12 that fact tragically came to light when a bus returning to Chinatown from the Mohegan Sun Casino in Connecticut overturned on a Bronx highway, killing 15 people and injuring 20. Just two days later, two people were killed in another accident involving a Chinatown bus returning to New York from Philadelphia. That bus line, Super Luxury Tours, has one of the worst driver safety ratings in the nation, according to a report from the U.S. Department of Transportation. Though Super Luxury Tours may be considered the bad seed of the tour bus industry, many motorcoach companies have a spotty safety record. In fact, the Advocates for Highway and Auto Safety reported 34 motorcoach crashes nationwide in 2010 that resulted in 46 deaths and injuries to 363 people.

These crashes have highlighted a long-standing concern over the safety of such discount coaches and, more specifically, the issue of driver fatigue, which is suspected in the Bronx crash. Currently, drivers are required to maintain handwritten logbooks to track the hours spent on the road. These have commonly become referred to as comic books, however, as many drivers allegedly falsify their records routinely.

Other concerns facing tour bus drivers are issues with licenses and medical evaluations. According to the American Bus Association, more than half of the deaths in bus accidents from 1999 to 2009 could have been prevented if the drivers involved had not been allowed behind the wheel.

In response to March’s back-to-back bus accidents, a sting was initiated by the Manhattan Traffic Task Force, which pulled over more than a dozen tour buses at a surprise checkpoint. Each of the buses failed the test when inspectors from the city’s transportation department found that nine drivers should not have been behind the wheel and 10 buses were deemed unfit for the road.

In a more sweeping move, Sen. Charles Schumer (D-NY) asked New York’s Department of Motor Vehicles to re-examine all drivers of low-cost tour buses for previous safety violations and suspended licenses. He believes if an audit had previously taken place, the March 13 crash would not have occurred. “The audit would have shown that the man behind the wheel shouldn’t have been behind the wheel, and he wouldn’t have been driving,” Schumer said.

In further action, Sen. Frank Lautenberg (D-NJ) penned a letter to U.S. Transportation Secretary Ray LaHood, saying he is “concerned that DOT is lagging behind in its progress on the Motorcoach Safety Action Plan.”

The plan, introduced back in 2007 after a motorcoach crash in Atlanta killed five members of the Bluffton University baseball team, stalled shortly after its origination. It eventually resurfaced again this January after a motorcoach accident in Ohio. Now, politicians are pushing for permanent legislation to improve tour bus safety standards.

The Motorcoach Enhanced Safety Act, co-sponsored by Schumer and Sen. Kirsten Gillibrand (D-NY), would, among other things, require buses to be less flammable and have safety belts, anti-ejection windows, tougher roofs that can withstand rollovers and increased fire resistance. The bill would also address the logbook issue by having electric, on-board recorders installed in each motorcoach.

It is not only the bus drivers or parent companies that are to blame for increased risk among buses. A recent report issued by the federal government regarding city transit buses states that it may have to rewrite safety rules due to passengers being heavier today that they were in the past. The Federal Transit Authority (FTA) proposes raising the assumed average weight per bus passenger from 150 pounds to 175 pounds, which means fewer people will be allowed to ride city buses. The changes are needed to “acknowledge the expanding girth of the average passenger,” said the FTA.

With steadily rising fuel prices, more and more people are turning to public transportation. Hopefully, for bus riders, that will not prove to be a risky decision.

Facebook IPO: The Good, the Bad and the Ugly

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By this time, you’re probably aware of the debacle over Facebook’s initial public offering on the NASDAQ exchange last week. Let’s break it down.

The Good
There isn’t much that falls under this category, execpt for the fact that the NYSE is enjoying the controversy — it’s attempting to lure Facebook to the exchange.

The Bad
It was announced Tuesday that two U.S. financial regulators suggested reviews be launched into the social media site’s IPO, citing concerns over disclosure relating to underwriter Morgan Stanley. It was reported that Morgan Stanley analysts received information that caused them to cut revenue forecasts for Facebook. This information, however, was only shared with analysts from the 33 underwriting banks and was never made public. Simply put, “the disclosure of lower forecasts to certain big institutional investors left both Facebook and Morgan Stanley open to accusations of selective disclosure. Many smaller investors who bought Facebook shares in the IPO were left in the dark.”

This morning it was announced that Morgan Stanley and other underwriters associated with the IPO have profitted close to $100 million from stabilizing the share price, along with millions in profit more in IPO fees. Before the public offering, Morgan Stanley was given the opportunity to purchase a large chunk of shares at a discount in order to keep the share price stable through buying and selling once the shares were offered to the public. The bank not only sold every last one of the 421,233,615 shares it bought at discount, but it also shorted an additional 484,418,657, which only signals one thing — Morgan Stanley knew the share price would drop and it, in turn, would buy back the shorted shares at a profit.

The Ugly
Thus begins the wave of lawsuits. Tuesday, a Los Angeles-based law firm, Glancy Binkow & Goldberg LLP, filed a class action lawsuit on behalf of investors who suffered losses from Facebook’s IPO. And it was announced today that the law firm of Girard Gibbs LLP has filed a similar class action suit, stating that “the company, its officers and directors, and underwriters with violations of federal securities laws for false and misleading statements made in the Registration Statement and Prospectus issued in connection with the IPO.” In addition to these, several lawsuits have been brought against Mark Zuckerberg, Morgan Stanley and even Nasdaq.

In the end, the fact is that not all Facebook IPO investors received the same data. To most (i.e., small, individual investors), that’s unfair. But to many (institutional investors and underwriters), that’s just the name of the game. What’s your take?

The Greatest Risks of the Greek Debt Crisis

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The ongoing debt crisis in Greece continues to spur unrest, move markets and threaten the very fabric that connects the eurozone. Exactly how much effect a Greek default — and the domino effect in lending costs it would have throughout Europe — would have on the U.S. business world remains unclear.

But a good rundown from CNN Money offers a list of the three biggest risks Greek default presents for the United States: (1) U.S. bank exposure to sovereign debt, (2) a pullback in U.S. exports, and (3) U.S. business slow down.

To me, the last one seems the most threatening. Only now is the U.S. economy beginning to make any headway on replacing the jobs lost after the 2008 meltdown — and even this “recovery” remains mild, at best.

Here is how CNN breaks down that risk.

Many products sold by U.S. companies in Europe are made in Europe.

And losses there are already taking a bite out of U.S. multinational firms, from automakers General Motors and Ford Motor, to cereal maker Kellogg and smaller niche companies like watch and accessories maker Fossil, whose stock tumbled 40% in a single day after reporting weak European sales earlier this month.

If the value of the euro versus the dollar continues to drop, U.S. goods are going to become more expensive by comparison to those made by European rivals. And that could cut into U.S. business sales and exports around the globe if countries can get cheaper imports from Europe.

Furthermore, if export-driven economies like China see demand from Europe slow, it increases a risk of a so-called “hard landing” for the Chinese economy.

Given the importance of emerging market growth worldwide, a hard landing in China and other export markets poses a significant threat of creating a global recession, according to a report earlier this year from the World Bank.

And the with U.S. GDP of 2.2% in the most recent quarter, it is doubtful the United States can avoid a recession of its own if there is a true global slowdown.

There’s the “R” word resurfacing. For the United States—not just economies across the pond. In 2012, there is no greater risk facing American companies.

Travelers CEO Jay Fishman Speaks on the “American Opportunity”

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A while back, I wrote a story on racial diversity — or, more accurately, the lack thereof — in the risk and insurance industry. There were several people I talked to whose words have stayed with me even almost four years later. Specifically, I remember a few days spent in Philadelphia at the annual conference of the National African-American Insurance Association (NAAIA).

It was an interesting place to be while I, a white guy, was writing about what it is like for nonwhites to work in an industry that even today remains racially homogeneous to a staggering degree. Of the few hundred attendees there, I was one of about five white people. The awkwardness that I felt by this (at times … everyone was overwhelmingly welcoming), especially while walking around with a reporter hat on essentially asking everyone “So … what’s it like to be black?,”  provided an excellent means to frame my understanding of how black people working in insurance must feel all the time. It is just strange to be unlike virtually everyone else around you from such a fundamental, identity-establishing perspective.

It was somewhat ironic, then, that the most enduring memory I have from those few days was provided by another person just like me: a white dude who stood out like a tourist. Jay Fishman, CEO and chairman of Travelers, gave a speech to discuss what his company was doing to try to promote better diversity at his company.

Here is how I wrote about it at the time.

[The September 2008] NAAIA conference in Philadelphia was particularly memorable as it marked both the association’s tenth anniversary as well as the first time the CEO of a major insurer gave a keynote address. Travelers chairman and CEO Jay Fishman spoke to around 200 people over lunch and was visibly emotional as he articulated his feelings on the industry’s legacy of exclusion and his company’s struggles to overcome the past.

“I’m outside my zone of comfort and to not acknowledge that, I’d be lying,” said Fishman. “I’m in awe of this group. My awkwardness is born out of sensitivity — not out of an unwillingness to tackle the subject.”

While Fishman admitted that Travelers may not have been focused on diversity for as long as some of the other carriers and brokers in the industry, he also expressed a personal commitment and discussed his company’s recent diversity program advancements. “There has been an awakening to the inequities of the past,” said Fishman. “We’re not where we want to be, but at best, we’re headed in the right direction. At best.”

When I wrote that he was visibly emotional, I mean that he might have actually been crying on stage. He was clearly choked up throughout his presentation and really seemed to be going through something while addressing an audience of black people and telling them that, essentially, his industry was still failing to include them just as much as it had been doing for the past century.

I’m not sure exactly what all this has to do with the video below. But the clip was made by Travelers and it shows Fishman talking about how he has “been a remarkable beneficiary of the American opportunity” while discussing how his grandmother immigrated to the United States from Russia when she was 13 years old to work a sewing machine.

So that just struck a chord and reminded me of a time when he seemed to also realize how unique his American story was — and how genuinely I once saw him expressing how much he wishes that others could benefit from that same opportunity just as much as he has.