World financial news

Luby’s Inc. said Thursday that a regulatory panel has ordered Credit Suisse Securities (USA) LLC to buy back certain auction rate securities from the company.

An arbitration panel of the Financial Industry Regulatory Authority, or FINRA, ruled Credit Suisse was liable to Luby’s and would have to repurchase the securities and accrued interest.

Houston-based Luby’s (NYSE: LUB) had asserted it had been unable to liquidate its auction rate securities as a result of Credit Suisse’s actions.

Auction-rate securities are debt investments issued by municipalities, student-loan agencies, closed-end funds and others, with interest rates that are reset at weekly or monthly auctions run by the investment firms.

As of Feb. 10, the company’s most recent quarterly filing, Luby’s held $7.1 million par value or $5.2 million fair value in auction rate securities. As a result of the award, Luby’s expects to record a pre-tax gain of approximately $1.8 million, net of expenses, on the sale of investments in its fourth quarter fiscal 2010.

Luby’s filed the FINRA claim against Credit Suisse in October 2008. Luby’s asserted that Credit Suisse knew but failed to disclose to Luby’s that auction rate securities were only liquid at the time because broker-dealers and others were artificially supporting and manipulating the auction market to maintain the appearance of liquidity and stability.

Multiple lawsuits were filed in 2008 by various companies and authorities in Texas, New York and Massachusetts, as well as the U.S. Securities and Exchange Commission, related to the sale of auction-rate securities at the peak of the credit crunch and financial system meltdown.

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If you can’t fight the federal government, you may as well pay ‘em. Especially if you’re Goldman Sachs.

In recent days, Wall Street has been abuzz with speculation that Goldman attorneys have entered preliminary talks with the Securities and Exchange Commission with the hopes of settling the outstanding federal fraud charges now facing the company.

Executives at the New York City-based investment bank have offered similar hints.

"There are a myriad of opportunities out there and I won’t rule any of them out," Gary Cohn, the company’s president and chief operating officer, said at the conclusion of the firm’s annual shareholder meeting last week.

A settlement with the SEC would likely bring to an end at least some of the negative publicity Goldman has had to endure since regulators charged the company and one of its employees with defrauding investors in the sale of a complex mortgage investment dubbed "Abacus."

Determining just how much Goldman (GS, Fortune 500) might be on the hook for however, is not simple.

Some legal experts said that a settlement could exceed the $1 billion the SEC claims that investors lost on the deal. That’s due to the high-profile nature of the case and the lack of bargaining power Goldman may have with regulators.

"As a principal regulator, [the SEC] can negatively impact Goldman’s ongoing businesses," said David Desser, managing director of the Chicago-based Juris Capital, a privately-held fund that invests in commercial litigation. "That is a big hammer that no other litigant has against an adversary in court."

A penalty of more than $1 billion would rank as the largest SEC settlement in the post-Sarbanes-Oxley era, eclipsing the $800 million AIG (AIG, Fortune 500) paid to the agency to settle claims related to misstatement of financial results in 2006, according to NERA Economic Consulting.

Others suggest that the SEC may be willing to accept just a fraction of that amount, citing some of its recent settlements as well as the mountain of other enforcement cases the agency has to deal with.

But what Goldman ultimately pays may prove to be of secondary importance.

After all, for a company that is expected to earn $13 billion in pre-tax profits in the next three quarters, according to Thomson Reuters, any fine will likely be quite manageable, especially if a settlement allows Goldman to avoid being in the public spotlight as much it has during the last year.

Instead, legal experts suggest that Goldman may be particularly fearful of any additional demands the SEC may have as part of a settlement.

The agency could, for example, require the company to create greater distance between its mortgage underwriting and trading operations or provide greater transparency to clients about its different investment products.

"Part of it was the difficulty in valuing these derivatives," said Elizabeth Nowicki, a securities law professor at Boston University, who formerly served as a staff attorney for the SEC. "It might be reasonable for the SEC to insist on some best practices disclosures regarding valuation."

Such a move would not be a major departure for the SEC. In the high-profile settlement it reached earlier this year with Bank of America (BAC, Fortune 500) over bonuses paid to Merrill Lynch employees, the banking giant was required to implement a number of corporate governance measures through 2013, including giving its shareholders an advisory vote on the pay of its executives.

Any deal that is struck between Goldman and the SEC might also resolve the fate of Fabrice Tourre, the 31-year-old French trader who helped broker the now infamous investment deal.

Most experts agree that if Tourre is included in a settlement, chances are he could face a fine as well as a suspension from the securities industry for as much as a year.

Goldman Sachs, which has already moved to distance itself from the London-based employee, will most certainly be looking for ways to insulate itself from any future legal action.

Experts said Goldman could also push the SEC to include language in any settlement that Goldman neither "admits nor denies" the SEC charges.

James Cox, a securities law professor at Duke University, said that the company might also attempt to seek a so-called "global settlement," which would absolve the company of any outstanding current or future federal or state lawsuits over the 2007 Abacus transaction or similar mortgage deals.

That would at least alleviate some of the legal headaches the firm is currently facing.

In two separate securities filings this month, Goldman acknowledged it now faces a variety of related lawsuits, as well as investigations from a number of international regulatory agencies, including Britain’s Financial Services Authority, over the sale of mortgage-related investments.

"[Goldman] wants peace and assurance going forward," said Cox.  

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The Hawaii Convention Center has won another Prime Site Award from Facilities & Destinations magazine.

This is the center’s 12th consecutive award from the trade publication. It is one of 27 convention facilities managed by SMG nationwide to receive the award.

The award is determined by members of the meetings and conventions industry — promoters, booking agents and event planners — directly involved in site selection. Voting is based on convenience of location, attractiveness and maintenance of the facility, professionalism of staff, cuisine, and technological capabilities.

SMG markets and manages the Hawaii Convention Center under the direction of the Hawaii Tourism Authority, the state’s tourism agency.

“We are extremely pleased with our continuous success and share our excitement with our 26 sister facilities of the SMG ohana,” said Joe Davis, SMG general manager for the Hawaii Convention Center, in a prepared statement. “This award not only recognizes the facility but highlights Hawaii as a great destination for meetings and the hard work of our staff and destination partners.”

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From avid to involved to casual, two out of three New York residents consider themselves sports fans and the favorite team in the Empire state is the defending World Series champion Yankees.

A poll released Monday by the Siena College Research Institute finds that a total of 68 percent of residents statewide — 16 percent are “avid” fans, 27 percent are “involved” fans, 25 percent are “casual” fans — while 32 percent are “non-fans.”

At the same time, the cost of attending a sporting event is keeping more and more fans away from stadiums and arenas. Over 50 percent of New Yorkers attend at least one professional sports event each year, but despite 63 percent saying they “love to go,” 88 percent say costs have gotten out of control and 77 percent now prefer watching the game on TV to attending in person.

New York City-area teams are among the highest-priced tickets in all sports while the top major professional sports teams in the Upstate region — Buffalo’s Bills and Sabres — rank among the lowest, respectively, in the National Football League and National Hockey League.

Asked about their favorite team, the Yankees came out of top at 28 percent and another 10 percent described the Yanks as their second favorite. The Yankees received three times the support of their closest rival, the Mets for the single top spot and almost double the overall support when looking at each respondent’s first and second favorite team. Overall, the Yankees are named by 38 percent, the Mets by 20 percent and the New York Giants by 20 percent. Further down the list are the Bills and New York Jets at 8 percent, the Sabres at 4 percent. Also, the Boston Red Sox were at 4 percent, followed by Syracuse University and the Pittsburgh Steelers at 2 percent, and the New York Knicks and Rangers at 1 percent.

The SRI Sports Poll showed that New Yorkers are engaged in athletics as 68 percent of regularly watch or listen to sports, talk about the games with friends or read about sports in newspapers or on the Internet.

“When it comes to sports fanship, actions speak louder than words. When asked whether or not they see themselves as a sports fan, 61 percent say 'yes' and 39 percent say 'no,'" said Dr. Don Levy, SRI’s director. "But, we looked at whether or not New Yorkers watch sports or sports news on television or listened on the radio, surfed the net for sports news, read about sports or talked to friends and family about sports. We found that nearly seven out of every 10 residents walks the walk of a sports fan and for 16 percent of all New Yorkers being a sports fan is a major part of what they do each and every day.”

The SRI New York Sports Poll was conducted March 22-26, 29 by random telephone calls to 876 New York adults.

The survey can be found here.

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Pfizer, the world’s largest drug maker, said Wednesday that it paid about $20 million to 4,500 doctors and other medical professionals for consulting and speaking on its behalf in the last six months of 2009, its first public accounting of payments to the people who decide which drugs to recommend. Pfizer also paid $15.3 million to 250 academic medical centers and other research groups for clinical trials in the same period.

Although other pharmaceutical companies have disclosed payments to doctors, Pfizer is the first to disclose pay for trials. The disclosure does not include payments outside the U.S.

Pfizer spokeswoman Kristen E. Neese said most of the disclosures were required by an agreement the company signed in August to settle a federal investigation into the illegal promotion of drugs for off-label uses.

Dr. Freda C. Lewis-Hall, Pfizer’s chief medical officer, characterized the disclosure and website as part of "a march to disclosure" that the company started in 2002.

Pfizer is the fourth major drug company to make such disclosures, following Eli Lilly, Merck and GlaxoSmithKline. All four websites are searchable by the names of doctors or organizations, but all are set up in ways that make it difficult to download and analyze the entire database.

"All of them are welcome, but none of them is a replacement for a single national database," said Allan Coukell, director of the Pew Prescription Project, an initiative of the Pew Charitable Trust.

Beginning in 2012, drug and medical device companies will be required to disclose payments to doctors of more than $10, with the first report available in 2013. The Physician Payment Sunshine Act was passed as part of health care reform. Some states also have disclosure laws.

Neese said the disclosures included elements not required by the federal agreement, such as payments to academic centers and to nurse practitioners and physician assistants.

The reporting also goes beyond the Sunshine Law, Pfizer said, by not imposing a delay of up to four years on financial support for clinical trials. Pfizer plans to report the payments without the delay.

Dr. Marcia Angell, former editor of The New England Journal of Medicine and a writer on conflicts of interest, said, "If they’re doing that — it would amaze me if they did, but if they are — that’s great."

Pfizer’s disclosure met with skepticism from one specialist on conflicts of interest in medicine.

"I think it’s a good thing to do, but I put absolutely no trust in what drug companies voluntarily disclose to the public when those things are unaudited," said Eric G. Campbell, lead author of a 2007 study of physician-industry relationships published in The New England Journal of Medicine.

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Coal is used to generate almost half of the world’s electricity and demand is projected to grow by more than 50 percent by 2030, according to the International Energy Agency’s most recent projections.

But burning coal to generate electricity is one of the top two sources of carbon dioxide, the main heat-trapping gas linked to global warming.

Curbing CO2 emissions from coal-fired power plants was a central theme at the Copenhagen talks this month, and the primary driver behind the establishment of the Consortium for Clean Coal Utilization at Washington University a year ago.

Richard Axelbaum, a professor of energy, environmental and chemical engineering, leads the consortium. The goal is to bring together university researchers, industry, foundations and government to research better ways to utilize one of the nation’s most abundant, but dirtiest, fuels.

The effort is partially funded by three St. Louis area companies. Peabody Energy Corp. and Arch Coal Inc., the two largest coal producers in the nation, each committed $5 million over five years and Ameren Corp., one of the nation’s biggest coal-burning utilities, agreed to give $2 million.

Does clean in "clean coal" specifically mean CO2 and other greenhouse gases?

(The term) clean really goes back about 100 years, and it has meant different things at different times. Right now, the pressing issue is reducing greenhouse gases, so present perspective of the term really is focusing on ensuring that we can burn coal in a way that doesn’t emit CO2.

What do you hope the consortium can accomplish? And what’s the time frame?

As you know from Copenhagen, the critical issue that really faces us is that we have to be able to minimize greenhouse gases in a way that the entire world can accept. And, clearly, a critical issue is the economics of that.

So we have to develop technologies that will supply us with electricity in a way that the difference in the cost of electricity is minimal but, at the same time, minimizing greenhouse gases. So the focus of much of what we do, probably 80 percent of the consortium, is determine the best approaches to that sam day payday loan.

When it comes to minimizing CO2 emissions from coal-fueled power plants, the technologies most often referenced are carbon capture and sequestration (separating the carbon from coal and injecting it underground). How close are we to commercializing that technology or making it economically viable?

Right now, there are some demonstration sites that are small scale versions of carbon capture and sequestration. And there’s considerable investment right now both from government and industry to develop this at a larger scale.

I expect — and this is my perspective, and there are different perspectives on the time frame — but certainly in 10 years I expect we will be seeing large scale carbon capture and sequestration sites. And I believe that in 2020 to 2030 it will ramp up considerably.

What other technologies are being studied beside carbon capture and sequestration?

Other studies are what we consider carbon capture and utilization, where you would take the CO2 and, for example, one study is to grow algae from the CO2 and use that to process into useful products. It could be nutraceuticals. Also bioproducts, biodiesel products. Also you can convert CO2 into useful fuels not from algael approaches, but from catalytic processes. We’re studying that as well.

What role do the consortium’s international partners play?

The consortium was really founded on the principal that the challenges of clean utilization of coal and minimizing CO2 emissions were global challenges and really would require us working together, both so that we can transfer knowledge, but also so we can understand the challenges that the rest of the world faces in addressing emissions. So we have a major effort to ensure that the research that we support is actually going to support collaborative efforts between Washington University and other institutions in China, India, in Japan, Israel and other nations.

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Iran has always adhered to its implied output target under OPEC’s existing output curbs and has not violated its commitments, its OPEC governor Mohammad Ali Khatibi told the semi-official Mehr news agency on Saturday.

The most recent Reuters survey of oil firms, OPEC officials and analysts showed Iran, the group’s second-largest producer, pumped 430,000 barrels above its OPEC target in September, the most in absolute terms of any member.

“Iran has always been committed to crude production quotas set by OPEC and there has never been any violation by Iran in this respect,” Khatibi said.

Khatibi said reports by the International Energy Agency (IEA) and other secondary sources are based on “guesswork and not reliable.”

“The point to be noticed is that the figures reported by these sources are completely incompatible with one another.”

OPEC agreed late last year to lower supply by 4.2 million barrels per day (bpd) as recession curbed fuel use and led to a slide in prices.

But the Reuters survey showed the group met 63 percent of promised cutbacks in September, down from 68 percent in August, continuing a trend of rising output that shows some members have relaxed adherence amid higher oil prices.

Iran has long been one of the group’s members most interested in higher prices.

The world’s fifth-largest crude exporter has struggled for years to develop its oil and gas reserves and now has to contend with an international lack of credit, as well as the U.N. nuclear sanctions over its disputed nuclear program.

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A report by a parliamentary research center, published on Saturday by Iran’s Aftab-e Yazd daily, said Iran’s crude oil exports will “drop to zero” in eight years in the absence of an annual $4.5 billion in investment in the oil sector.

The authorities blame sanctions for the lack of foreign investment in the country’s energy sector.

Iran also lacks sufficient refining capacity to meet its domestic demand and imports up to 40 percent of its gasoline requirements.

It subsidizes gasoline, which is therefore among the world’s cheapest, encouraging fast growth in demand and making it very reliant on imports from international markets.

However, Iran’s deputy oil minister Noureddin Shahnazizadeh said gasoline production had increased in the country. 

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California will lag the United States as the country recovers from a deep recession, with normal growth in the most populous U.S. state not seen resuming until 2011, the UCLA Anderson Forecast group said Wednesday.

Although there are signs now of a recovery beginning to take hold in California, the state’s unemployment rate is expected to stay above 10% until late in 2011, the forecast group said in a report.

The report comes a day after Federal Reserve Chairman Ben Bernanke said that the worst U.S. recession since the Great Depression was probably over, though he warned that recovery and job creation would be slow.

California’s economy, the world’s eighth largest, is suffering record unemployment as it staggers under the combined weight of the recession, a sharp drop in consumer spending, reduced trade flows, financial market turmoil, the mortgage crisis and a prolonged housing slump.

"Overall, the outlook for the balance of the year is for little to no growth," UCLA Anderson Forecast said in its report. "The economy will begin to pick up some tail winds towards the end of 2010 and by the beginning of 2011 we will get off the tarmac and begin to grow at more normal levels.

"The keys to California’s recovery remain a recovery in U.S. consumption, which increases the demand for Asian imports, and for products from California’s factories, increased public works construction, and increased investment in business equipment and software," the report said.

Over the near term, California will be hurt by reduced public spending. The state in July closed a budget gap of more than $24 billion opened by a plunge in personal income tax revenues. Retail sales tax revenues have been hurt by weak consumer spending, denting the coffers of both the state and local governments.

The combined blow of lower income tax and sales tax revenues "implies declining government employment through the end of the 2010 fiscal year," the report said unsecured personal loans.

High unemployment to persist

California’s unemployment rate will peak at 12.2% in the fourth quarter and average 11.6% this year, the report said.

"Though the California economy will be growing in 2011, it will not be generating enough jobs to drive the unemployment rate below double digits until the end of the year," the report added. It forecast an average jobless rate next year of 10%.

The report forecast California’s total employment will shrink by 3.7% this year and grow only at a 0.2% rate next year, then expand by 1.9% in 2011.

The report did offer glimmers of optimism: the housing market is beginning to pick up, existing homes are more affordable, "conditions are becoming ripe for new residential construction," and demand for the state’s export goods is starting to increase.

"Though the consumer goods and services sectors remain very weak, consumer confidence surveys and the response to the ‘cash for clunkers’ program provide indicators that consumer demand may be on the verge of recovery and the implosion of hospitality, retail, wholesale and transportation employment may be coming to an end," the report said.

"Everything that happens at the end of a recession is happening now," said Jerry Nickelsburg, a senior economist with the UCLA Anderson Forecast unit. "But what doesn’t happen at the end of a recession is an end to job loss, so in that sense there will still be some more bleeding." 

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Just a month after taking office, President Obama asked Congress to move fast to reform the "outdated" system of financial oversight and install "tough, new common-sense rules of the road" for Wall Street.

Now, as Obama gave a major address on Monday marking the one-year anniversary of the Lehman Brothers collapse, things haven’t advanced very far.

Obama urged Congress to pass his proposed reforms.

"We have to live up to our responsibilities on financial reform," he said. "There will be those who argue we should do less or nothing at all. But to them I’d say only this: Do you believe that the absence of sound regulation one year ago was good for the financial system? Do you believe the resulting decline in markets and wealth and employment was good for the economy? Or the American people?"

Congress has moved only sluggishly on a set of changes that are more modest than the overhaul originally envisioned. It is likely that the patchwork system of regulatory agencies will remain mostly intact.

Meanwhile, traders continue to buy and sell unregulated and complex financial products, like those sold by bailed out insurance giant AIG (AIG, Fortune 500).

None of the administration proposals under consideration would eliminate the conflicts that can occur when bond issuers pay credit rating agencies to evaluate their financial products.

Big Wall Street pay checks might get more thorough scrutiny, but they won’t be subject to strict limits.

One of the most far-reaching proposals — the creation of an agency to regulate consumer financial products like mortgages and credit cards — has faced a tough beating by industry lobbyists. The U.S. Chamber of Commerce has pledged another $2 million, and probably more, to a campaign to kill it.

And every day that the economy improves and the health care fight sucks up more congressional energy, momentum to overhaul the financial system is lost.

"The clock is ticking and we’re at a cross roads," said Travis Plunkett,chief lobbyist for the Consumer Federation of America. "If we don’t see a substantial move this fall, financial reform may wither on the vine."

What’s been done so far?

The biggest push happened this spring, when Congress passed changes to credit card laws aimed at helping consumers buried in debt.

However, the Federal Reserve was already moving to implement many of the same changes later next year, and many card issuers have raced to hike rates ahead of the new laws that make such hikes tougher.

The House has logged the most progress. On July 31, it voted 237-185 for a bill that gives shareholders the chance to use nonbinding votes to speak their minds on executive pay.

The executive compensation bill also empowers regulators to create new rules to limit bonuses tied to risk-taking at firms with more than $1 billion in assets. But it doesn’t impose any hard caps like those being called for in Europe.

The House is expected to begin voting on other reforms in late September or October, starting with a bill to create the new consumer watchdog agency.

The Senate is a different story. It hasn’t passed anything other than the credit card bill.

Staffers for the leaders of the Senate Banking Committee worked throughout the summer on an all-encompassing financial reform bill. Congressional watchers say it could be released later this month.

But the health care debate could push negotiations over the most complex financial proposals to next year.

"When you’re dealing with the future of the charters and the bank regulatory system … it’s all very complicated and it’s going to take a very long time," said Washington policy analyst Brian Gardner of investment firm Keefe Bruyette & Woods.

Status of key proposals

Regulating consumer products: The first and biggest fight will be over the creation of the Consumer Financial Protection Agency.

The agency would be empowered to examine and subpoena information from banks. It would also create templates for basic financial products, such as fixed-rate, 30-year mortgages. More complicated mortgages would have to spell out how they differ from "plain-vanilla" financial products.

The industry opposes that level of oversight. While some agree on the need for more consumer protections, "the debate is how best to achieve it," said Scott Talbott of the Financial Services Roundtable, a lobbying group.

On the other side, consumer advocates don’t like one possible compromise — strengthening consumer protection departments at existing agencies.

Policing risk: Experts agree that Congress will likely give more power to existing regulators to prevent the biggest financial firms from over-borrowing or making other overly risky business moves.

On the table is a plan to grant more authority to the Federal Reserve, with some backstop help from other agencies.

But some key players, including Senate Banking Committee Chairman Sen. Chris Dodd, D-Conn., and Federal Deposit Insurance Corp. head Sheila Bair, have argued against making the Fed a super-regulator. They instead back a strong regulatory council with multiple agencies.

Many banks and financial institutions support the idea of a more unified system of oversight. But some analysts believe that such a change might not be the cure people hope for.

"I don’t know how much it’ll help," said Douglas Elliott, a former investment banker and now a fellow at the Brookings Institution. "It’s very hard to be the one that steps out in front and says I know what you’ve been saying, but we think you’re wrong and we’re not going to let you do it."

Winding down firms in trouble: There’s more agreement around the idea of giving the FDIC, which now has the job of taking over troubled banks, more power to do the same to big investment firms and insurers.

Still, the proposal is complicated. For one thing, most big firms have smaller subsidiaries, some of which are regulated by state regulators.

Former Fed Chair Paul Volcker and SEC Chairman Mary Schapiro have warned that instituting a powerful new "resolution authority" could have the unintended consequence of creating a safety net for big institutions that make bad decisions.

Derivatives: The Obama administration is proposing new rules for derivatives, which are financial products whose value is derived from something else, such as a stock or commodity.

The administration wants big firms that sell derivatives to meet new capital requirements. They also want derivatives to be traded on clearinghouses — markets that could add more transparency to the value of derivatives.

But the clearinghouses would only apply to the most common derivatives and leave more specialized derivatives mostly unregulated.

-CNN’s Ed Henry contributed to this report. 

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A Florida man already jailed on charges of hacking into major retail computer networks has been indicted a third time for allegedly stealing data on a record number of credit and debit cards.

The record broken with this latest alleged attack was previously set by the same suspect, law enforcement officials said.

The U.S. Justice Department said Albert Gonzalez, 28, of Miami, Fla., was indicted by a federal grand jury in New Jersey for allegedly stealing data involving more than 130 million credit cards used by customers of five retailers including the 7-11 chain.

Justice Department officials familiar with the case said they have no estimate of possible financial losses that could be linked to the credit-card data theft, and declined to characterize or speculate on potential losses.

Federal prosecutors in New Jersey apparently will have to wait in line to try him, though.

Gonzalez is currently in jail in Brooklyn, New York, awaiting trial there next month for his alleged role in hacking into computers for the Dave and Buster’s restaurant chain.

He also has been indicted in Boston, Mass., along with several co-conspirators, on charges stemming from hacking into the data bases of at least eight major retailers, and stealing data related to 40 million credit cards. Then-Attorney General Michael Mukasey said in that indictment announced a year ago that the computer crime involved what was then a record number of credit cards. Gonzalez is scheduled to go on trial on those hacking charges next year.

Corporate victims in the Massachusetts case included T low cost car insurance.J. Maxx, Marshalls, BJ’s Wholesale Club (BJ, Fortune 500), OfficeMax (OMX, Fortune 500), Barnes & Noble (BKS, Fortune 500) and Sports Authority.

In the New Jersey case, the indictment charges that Gonzalez, operating under a series of computer aliases including "soupnazi," managed to exploit computer networks beginning in 2006 by circumventing firewalls to steal the credit card information.

Prosecutors said Gonzalez is charged along with two co-conspirators identified only as "Hacker 1 and Hacker 2 both of Russia." They allegedly moved the data to computer servers operating in California and Illinois, and overseas in Latvia, the Netherlands and Ukraine.

Acting U.S. Attorney Ralph Marra in Newark said in a statement, "The servers were used to store information critical to the hacking schemes and to subsequently launch the hacking attacks."

"The charges announced today relate to a different pattern of hacking activity that targeted different corporate victims and involved different co-conspirators," the Justice Department said in a statement issued Monday in Washington.

If convicted on the New Jersey indictment Gonzalez could face up to 20 years on wire fraud conspiracy and five years for a separate conspiracy count. He could also be fined up to $500,000. 

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