NYT > Home Page: DealBook: Fund Titans Battle Over Herbalife

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DealBook: Fund Titans Battle Over Herbalife
Jan 10th 2013, 13:58

10:21 p.m. | Updated

They are two of the richest and most prominent hedge fund managers in Manhattan.

About the same age and athletic build, they favor brash, headline-grabbing investments. They make the rounds in New York charity circles. They live blocks apart in luxury buildings on the Upper West Side. They spend summers not far from each other in mansions in the Hamptons.

Yet, they find themselves locked in a battle over, of all things, a nutritional supplements company that makes protein bars and energy shakes.

One of the hedge fund managers, William Ackman, claims that the company, Herbalife, is a house of cards — "the best-managed pyramid scheme in the history of the world" — and its stock is worth nothing. His rival and friend, Daniel S. Loeb, takes the opposite stance, arguing that Herbalife will not only survive, but thrive.

Their fight played out on a public stage on Wednesday, when Mr. Loeb disclosed that his investment firm Third Point had bought nearly nine million shares of Herbalife, now worth more than $350 million. Just weeks before, Mr. Ackman of Pershing Square Capital excoriated the company at an investment conference, betting $1 billion that the stock would fall in what is known as a short sale.

This is a "battle bigger than any sumo pairing," said Jeffrey A. Sonnenfeld, a senior associate dean at Yale School of Management.

A spokeswoman for Herbalife declined to comment.

Their dispute centers on the company's sales practices. Herbalife relies on an army of independent resellers who have incentive to recruit other members.

Mr. Ackman, 46, has taken aim at this network of resellers, saying that the recruitment efforts are more lucrative than the product sales. He also suggested that the company uses predatory practices to attract undereducated minorities with false promises of becoming millionaires.

Citing the 32-year history of Herbalife, Mr. Loeb, 51, called the short-seller's thesis "preposterous." He defended the company as a "compounder," one that grows steadily year over year with a loyal clientele. Madeleine Albright, the former secretary of state, has extolled the virtues of its product.

Adding to the scrutiny, the Securities and Exchange Commission has opened an investigation into the company, according to a person briefed on the matter who spoke on the condition of anonymity because the inquiry was continuing. The agency has not decided whether to take action and Herbalife has not been accused of any wrongdoing.

Mr. Ackman and Mr. Loeb are similar figures on Wall Street.

Over the last decade, Mr. Ackman and Mr. Loeb have developed a reputation for their aggressive tactics, capitalizing on their rock-star status in finance to gain support for their strategies. Unlike many of their hedge fund compatriots, the activist investors are unafraid to take big positions in companies and demand change in very public ways.

They overhaul management teams, remake boards and dictate strategy, all in the hope of increasing their holdings. Or they just bet against a stock, if they don't have faith.

Last year, Mr. Loeb was instrumental in the ouster of the Yahoo chief executive Scott Thompson. The activist investor, known for his acerbic pen, wrote scathing letters to the board of the Internet company, detailing how Mr. Thompson had padded his résumé.

"Now more than ever Yahoo investors need a trustworthy C.E.O," Mr. Loeb wrote at the time. Since the firm first took a stake in 2011, shares of Yahoo are up more than 50 percent.

Mr. Ackman turned a $60 million investment in General Growth Properties into a $2.3 billion windfall by navigating one of the nation's largest mall operators through bankruptcy. After taking a seat on the board, he successfully fended off a lowball takeover attempt while orchestrating a better deal.

They are not always successful. Mr. Ackman took on Target, battling with the retailer's board in 2009 over how to improve its stock price. After spending millions of dollars on his campaign, he conceded defeat.

He is also bullish on a turnaround at J. C. Penney, bringing in the former Apple retail chief Ron Johnson. But since his first investment in late 2010, Penney's stock has fallen 31 percent.

During the financial crisis, Mr. Loeb's firm suffered along with many of his peers. His main fund lost about 33 percent in 2008.

Only one investor will be right on Herbalife.

In late December, Mr. Ackman announced an "enormous" short position in the company, in a three-hour presentation called "Who Wants to Be a Millionaire?" The investor cast doubt on the company's sales of nearly $4 billion a year.

"I don't think very many retail sales are actually happening at all," said Mr. Ackman, who pledged to donate his personal proceeds from the bet against Herbalife to charity.

With his usual showmanship, Mr. Ackman also highlighted what he considered the more dubious aspects of the company's culture. He showed an Herbalife video, featuring a tour of a distributor's high-end home.

"Episodes of 'MTV Cribs'?" Mr. Ackman asked. "No. These are Herbalife productions."

In the end, the short-seller had a bold prediction: federal regulators would eventually shut down the company.

The investor's statements sent the stock tumbling. Over the next four days, shares of Herbalife fell 30 percent. Months before, critical questions on a company's earnings call by the activist investor David Einhorn prompted a similar sell-off, although the stock had started to recover before Mr. Ackman's presentation.

Soon after Mr. Ackman's campaign began, Mr. Loeb met with the company executives and bankers about Herbalife's business, according to people with direct knowledge of the matter. He also conducted his own research, digging through the numbers.

The investor eventually decided Mr. Ackman was wrong, buying 8.2 percent of Herbalife. When Mr. Loeb disclosed the stake, he breathed life in the stock. It rose 4 percent on Wednesday to close at nearly $40, higher than when Mr. Ackman delivered his presentation.

Mr. Loeb indicated in a letter to investors that the shares had room to run, given the company's strong revenue, profit and free cash flow. Over all, he estimates Herbalife stock is worth as much as $68.

"While the short-seller's presentation was lengthy, it presented no evidence to show that Herbalife has crossed a line that would compel regulators to shut it down," Mr. Loeb wrote, taking a shot at Mr. Ackman. Mr. Ackman promptly responded, welcoming any investor who "brings additional sunlight to the situation."

On Thursday, Herbalife will tell its side of the story. The company will present to investors its first public rebuttal since Mr. Ackman's attack last month.

Ben Protess and William Alden contributed reporting.

A version of this article appeared in print on 01/10/2013, on page A1 of the NewYork edition with the headline: Just Business: 2 Rivals Clash, Billion in Play.

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NYT > Home Page: DealBook: Deep Cuts Raise Questions About Morgan Stanley

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DealBook: Deep Cuts Raise Questions About Morgan Stanley
Jan 10th 2013, 13:59

When Morgan Stanley's top executives gathered in mid-September at the Gramercy Park Hotel in Manhattan to discuss strategy, some participants complained that the room was too small.

Apparently, that was the point: James P. Gorman, Morgan Stanley's chief executive, chose the cramped quarters to force discussion among the executives, said people briefed on his decision but not authorized to speak on the record.

These days, it is the Wall Street firm that is finding itself a bit boxed in.

Regulatory demands, weak markets and lower credit ratings have weighed on all banks, but perhaps more so on Morgan Stanley, the smallest of the big Wall Street firms. In the three years that Mr. Gorman, 54, has been at the helm, the bank has been progressively shrinking its business of trading bonds, commodities and other investments and expanding into wealth management.

Now the storied company — whose take-no-prisoners trading desks have at times been rivaled only by firms like Goldman Sachs — is cutting even deeper, raising questions among some on Wall Street about whether it should spin off or ditch much of its trading business as its Swiss rival UBS has, a suggestion the firm eschews.

Morgan Stanley is planning another deep round of cuts: 1,600 jobs, accounting for 6 percent of its support work force, and, more telling, 6 percent of institutional securities, which includes its once vaunted trading business.

The planned cuts come just a week ahead of the release of fourth-quarter earnings, which are expected to show the gains the firm has made since the financial crisis in areas like stock trading, banking and wealth management but still will be weighed down by the diminished earnings power of its fixed income business.

Whether the company can avoid shrinking further — and a number of analysts say that additional cuts will be needed — and revive the fixed-income trading business will have significant ripple effects in the financial world.

While the strategy of cutting in some places and building out wealth management may lead to a more stable company, the retreat also means that the fixed-income trading business over all is becoming increasingly dominated by two Wall Street banks — JPMorgan Chase and Goldman — as well as by hedge funds and other investment firms that are more lightly regulated than banks like Morgan Stanley.

Before the financial crisis, the fixed income division at Morgan Stanley, which was created by J. P. Morgan partners when Depression-era laws forced them to split banking from trading, was one of the firm's biggest moneymakers. Now, it is a drain on operations, producing just 20 percent of its revenue but tying up roughly half of its capital.

In recent years, the fixed-income department has not been able to make enough money to cover the cost to Morgan Stanley of this capital, according to people briefed on the matter but not authorized to speak on the record.

The fallout can be seen in compensation: a year ago, 110 of the roughly 500 managing directors in sales and trading did not get a bonus, and that number is expected to grow next week when bonuses are handed out.

Still, Mr. Gorman has received high marks from some on Wall Street for playing a difficult hand in the wake of the financial crisis. On Wednesday, he received a big vote of confidence when Daniel S. Loeb's hedge fund told investors that it was taking a stake, saying that Morgan Stanley was "in the early innings of a turnaround."

Still, hobbled by the new realities on Wall Street, that turnaround has so far proved to be a Sisyphean task.

The stock, said the shareholder Christopher Grisanti, has "languished." Mr. Grisanti is the owner and co-founder of Grisanti Capital Management, which owns 690,000 shares of Morgan Stanley, valued at $13.5 million.

While the stock has risen since Mr. Grisanti bought it, it is down almost 40 percent since Mr. Gorman took over in January 2010, and big shareholders like the Bank of Tokyo-Mitsubishi UFJ of Japan, which holds a 22 percent stake valued at $8.5 billion, have had little in the way of returns. Morgan Stanley's return on equity, Wall Street's main benchmark of profitability, is 6 percent, down from 23.8 percent in 2006.

Morgan Stanley's board, said people briefed on the matter, has discussed closing its fixed-income department. Instead, the firm is shrinking the unit, arguing that it is important to offer its customers those trading services. By cutting jobs and costs and exiting lines like structured products and other complex financial investments and focusing on less risky, less capital-intensive businesses like the trading of interest rates, executives contended that the division can generate a healthy return.

"We are not going to pull a UBS," the senior executive Colm Kelleher told a private dinner of Morgan Stanley shareholders at Oceana restaurant in Midtown Manhattan.

A Morgan Stanley spokesman, Wesley McDade, said the firm was optimistic about its prospects.

"In 2013, we expect to benefit from the many strategic decisions we have taken, including an aggressive move into wealth management, a further strengthening of our pre-eminent equities and investment banking franchises, and the repositioning of our fixed income business to meet the realities of the new world," he said.

Morgan Stanley wants to achieve a return on equity of 10 percent in the near term, and it is making progress as it continues to shed both employees and risky assets. Longer term, Morgan Stanley is shooting for a return on equity in the middle teens, according to people briefed on the matter but not authorized to speak on the record.

Critics said Morgan Stanley executives initially moved too slowly to cut business lines, and set unrealistic revenue goals for the division that were never met.

Recently, Mr. Gorman tapped one of his bankers, John Pruzan, to be his eyes and ears in meetings about the revamping of the department. Even that move was not without controversy, though. Some executives in that department, including the fixed income chief Kenneth deRegt, felt it added an unnecessary layer of management.

At the same time, while trying to squeeze risk out, it has taken some surprising ones, hiring for instance a powerful and controversial trader to run its rates desk, a primary center of growth for the fixed-income department. That trader, Glenn Hadden, is under investigation by a key regulator for his trading in Treasury futures. In 2009, he was put on leave at Goldman because of a separate trading incident.

Through Mr. McDade, the Morgan Stanley spokesman, Mr. Hadden declined to comment. A lawyer for Mr. Hadden also declined to comment, but has said that his client did not engage in manipulative activity.

The firm Mr. Gorman runs bears little resemblance to the one that existed before the financial crisis. Mr. Gorman's predecessor, John J. Mack, pushed risk-taking, leading to a $9 billion loss in 2007, one of the largest single trading losses in history, as well as billions of dollars in additional losses because of exposure to bond insurers.

These events nearly crippled the firm, and Morgan Stanley was forced to sell a piece of itself to Mitsubishi, which injected $9 billion into the firm. Not long after, in January 2009, Morgan Stanley made another important strategic investment, combining its wealth management operations with Citigroup in a joint venture that gave Morgan Stanley control.

Still, just weeks after taking over as chief, Mr. Gorman took the stage at a Hilton in Midtown Manhattan on a cold winter day to assure a standing-room-only crowd of investors that maintaining the firm's position as one of Wall Street's most powerful investment banks was a top priority for him.

Even in early 2010, however, it was clear to many inside the firm that he would have his work cut out for him.

Every Wednesday, executives from various corners of the bank who belonged to what was known as the asset liability committee would meet at noon to examine the cost to the firm of everything from looming credit-rating downgrades to regulatory changes.

"It was the most depressing meeting ever," said one attendee who spoke on the condition of anonymity. "It was very clear the Morgan Stanley we knew was never coming back."

A version of this article appeared in print on 01/10/2013, on page B1 of the NewYork edition with the headline: A Slimming Wall Street Giant.

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NYT > Home Page: Flu Widespread, Leading a Range of Winter’s Ills

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Flu Widespread, Leading a Range of Winter's Ills
Jan 10th 2013, 11:32

It is not your imagination — more people you know are sick this winter, even people who have had flu shots.

Boston

The country is in the grip of three emerging flu or flulike epidemics: an early start to the annual flu season with an unusually aggressive virus, a surge in a new type of norovirus, and the worst whooping cough outbreak in 60 years. And these are all developing amid the normal winter highs for the many viruses that cause symptoms on the "colds and flu" spectrum.

Influenza is widespread, and causing local crises. On Wednesday, Boston's mayor declared a public health emergency as cases flooded hospital emergency rooms.

Google's national flu trend maps, which track flu-related searches, are almost solid red (for "intense activity") and the Centers for Disease Control and Prevention's weekly FluView maps, which track confirmed cases, are nearly solid brown (for "widespread activity").

"Yesterday, I saw a construction worker, a big strong guy in his Carhartts who looked like he could fall off a roof without noticing it," said Dr. Beth Zeeman, an emergency room doctor for MetroWest Medical Center in Framingham, Mass., just outside Boston. "He was in a fetal position with fever and chills, like a wet rag. When I see one of those cases, I just tighten up my mask a little."

Massachusetts General Hospital in Boston started asking visitors with even mild cold symptoms to wear masks and to avoid maternity wards. The hospital has treated 532 confirmed influenza patients this season and admitted 167, even more than it did by this date during the 2009-10 swine flu pandemic.

At Brigham and Women's Hospital, 100 patients were crowded into spaces licensed for 53. Beds lined halls and pressed against vending machines. Overflow patients sat on benches in the lobby wearing surgical masks.

"Today was the first time I think I was experiencing my first pandemic," said Heidi Crim, the nursing director, who saw both the swine flu and SARS outbreaks here. Adding to the problem, she said, many staff members were at home sick and supplies like flu test swabs were running out.

Nationally, deaths and hospitalizations are still below epidemic thresholds. But experts do not expect that to remain true. Pneumonia usually shows up in national statistics only a week or two after emergency rooms report surges in cases, and deaths start rising a week or two after that, said Dr. Gregory A. Poland, a vaccine specialist at the Mayo Clinic in Minnesota. The predominant flu strain circulating is an H3N2, which typically kills more people than the H1N1 strains that usually predominate; the relatively lethal 2003-4 "Fujian flu" season was overwhelmingly H3N2.

No cases have been resistant to Tamiflu, which can ease symptoms if taken within 48 hours, and this year's flu shot is well-matched to the H3N2 strain, the C.D.C. said. Flu shots are imperfect, especially in the elderly, whose immune systems may not be strong enough to produce enough antibodies.

Simultaneously, the country is seeing a large and early outbreak of norovirus, the "cruise ship flu" or "stomach flu," said Dr. Aron J. Hall of the C.D.C.'s viral gastroenterology branch. It includes a new strain, which first appeared in Australia and is known as the Sydney 2012 variant.

This week, Maine's health department said that state was seeing a large spike in cases. Cities across Canada reported norovirus outbreaks so serious that hospitals were shutting down whole wards for disinfection because patients were getting infected after moving into the rooms of those who had just recovered. The classic symptoms of norovirus are "explosive" diarrhea and "projectile" vomiting, which can send infectious particles flying yards away.

"I also saw a woman I'm sure had norovirus," Dr. Zeeman said. "She said she'd gone to the bathroom 14 times at home and 4 times since she came into the E.R. You can get dehydrated really quickly that way."

This month, the C.D.C. said the United States was having its biggest outbreak of pertussis in 60 years; there were about 42,000 confirmed cases, the highest total since 1955. The disease is unrelated to flu but causes a hacking, constant cough and breathlessness. While it is unpleasant, adults almost always survive; the greatest danger is to infants, especially premature ones with undeveloped lungs. Of the 18 recorded deaths in 2012, all but three were of infants under age 1.

That outbreak is worst in cold-weather states, including Colorado, Washington, Wisconsin, Minnesota and Vermont.

Although most children are vaccinated several times against pertussis, those shots wear off with age. It is possible, the authorities said, that a new, safer vaccine introduced in the 1990s gives protection that does not last as long, so more teenagers and adults are vulnerable.

And, Dr. Poland said, if many New Yorkers are catching laryngitis, as has been reported, it is probably a rhinovirus. "It's typically a sore, really scratchy throat, and you sometimes lose your voice," he said.

Though flu cases in New York City are rising rapidly, the city health department has no plans to declare an emergency, largely because of concern that doing so would drive mildly sick people to emergency rooms, said Dr. Jay K. Varma, deputy director for disease control. The city would prefer people went to private doctors or, if still healthy, to pharmacies for flu shots. Nursing homes have had worrisome outbreaks, he said, and nine elderly patients have died. Homes need to be more alert, vaccinate patients, separate those who fall ill and treat them faster with antivirals, he said.

Dr. Susan I. Gerber of the C.D.C.'s respiratory diseases branch, said her agency has not seen any unusual spike of rhinovirus, parainfluenza, adenovirus, coronavirus or the dozens of other causes of the "common cold," but the country is having its typical winter surge of some, like respiratory syncytial virus "that can mimic flulike symptoms, especially in young children."

The C.D.C. and the local health authorities continue to advocate getting flu shots. Although it takes up to two weeks to build immunity, "we don't know if the season has peaked yet," said Dr. Joseph Bresee, chief of prevention in the agency's flu division.

Flu shots and nasal mists contain vaccines against three strains, the H3N2, the H1N1 and a B. Thus far this season, Dr. Bresee said, H1N1 cases have been rare, and the H3N2 component has been a good match against almost all the confirmed H3N2 samples the agency has tested.

About a fifth of all flus this year thus far are from B strains. That part of the vaccine is a good match only 70 percent of the time, because two B's are circulating.

For that reason, he said, flu shots are being reformulated. Within two years, they said, most will contain vaccines against both B strains.

Joanna Constantine, 28, a stylist at the Guy Thomas Hair Salon on West 56th Street in Manhattan, said she recently was so sick that she was off work and in bed for five days — and silenced by laryngitis for four of them.

She did not have the classic flu symptoms — a high fever, aches and chills — so she knew it was probably something else.

Still, she said, it scared her enough that she will get a flu shot next year. She had not bothered to get one since her last pregnancy, she said. But she has a 7-year-old son and a 5-year-old daughter, "and my little guys get theirs every year."

Jess Bidgood contributed reporting.

A version of this article appeared in print on January 10, 2013, on page A1 of the New York edition with the headline: Flu Widespread, Leading a Range of Winter's Ills.

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NYT > Home Page: Israeli Police Say Car Explodes in Tel Aviv

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Israeli Police Say Car Explodes in Tel Aviv
Jan 10th 2013, 11:34

TEL AVIV, Israel (AP) — An explosion went off in a car near a bus in Tel Aviv on Thursday in what police said was a criminally motivated assassination attempt. Four people were slightly injured.

In a country with a long history of bus bombings by Palestinian militants, such explosions immediately cause jitters about terrorism. And the explosion went off close to the site of a bus bombing in November.

Israeli media offered various reports of how the blast occurred. Some cited witnesses as saying a motorcyclist tossed an explosive device at the car, and other witnesses as saying the motorcyclist attached a bomb to the vehicle.

Police spokesman Micky Rosenfeld said he couldn't confirm Israeli media reports that the target was a well-known underworld figure.

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NYT > Home Page: Google Chief Urges North Korea to Embrace Web

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Google Chief Urges North Korea to Embrace Web
Jan 10th 2013, 11:48

BEIJING--Eric E. Schmidt, the executive chairman of Google, returned from a four-day visit to North Korea on Thursday with a message for the reclusive nation's young new leader: embrace the Web or else.

Eric E. Schmidt, Google's executive chairman, standing center, with Bill Richardson, standing right, and North Korean soldiers Wednesday at the Grand People's Study House in Pyongyang.

Mr. Schmidt, part of private delegation led by former Gov. Bill Richardson of New Mexico that also sought to press Pyongyang on humanitarian and diplomatic issues, said North Korea risked falling further behind if it did not provide more access to cell phone service and the Internet.

"As the world becomes increasingly connected, their decision to be virtually isolated is very much going to affect their physical world, their economic growth and so forth and it will make it harder for them to catch up economically," he told reporters after arriving at Beijing International Airport. "We made that alternative very, very clear."

Their visit, the highest-profile delegation of Americans since Kim Jong-un took power upon the death of his father in December 2011, comes at precarious time for U.S.-North Korean relations following Pyongyang's rocket launch last month that drew international condemnation. North Korea insists its Unha-3 rocket is part of a peaceful space program; South Korean and American intelligence officials say the North was testing a long-range ballistic missile that could one day reach the United States.

The State Department was not exactly thrilled with Mr. Richardson's freelance diplomacy, at least not publicly. A spokeswoman described Mr. Richardson's visit as not "particularly helpful" given that the U.S. is seeking to rally support for tougher international sanctions on Pyongyang. Some North Korea experts have described the self-described humanitarian mission as naïve, saying it will ultimately serve Pyongyang's propaganda needs.

Although Mr. Richardson did not address the criticism on Thursday, he said his hosts were receptive during discussions about ways to reduce tensions on the Korean peninsula as well as his effort to seek the release of a Korean-American who was detained in November in the north of the country.

"We had a very positive reaction," Mr. Richardson said.

The delegation did not meet with the detained American, Kenneth Bae, 44, a tour operator from Washington who has been accused of "hostile acts," but Mr. Richardson said he was assured Mr. Bae was being treated well and that judicial proceedings would begin soon.

There was one tangible success of their visit: the authorities, Mr. Richardson said, had agreed to deliver to Mr. Bae a letter from his son.

But Mr. Richardson's efforts to promote peace, love and understanding were overshadowed by the billion-dollar wattage of Mr. Schmidt, a vocal proponent of Internet freedom. The delegation, which included Mr. Schmidt's daughter and Jared Cohen, a former State Department official who heads Google's think tank, made highly choreographed visits to several sites meant to display the nation's information technology prowess.

At the elite Kim Il Sung University, computer science students showed off their ability to surf the Internet, stopping on a Web site run by Cornell University. At one point, a student opened up Google's site and typed in New York City, according to the Associated Press, the only American news organization with a bureau in North Korea. "That's where I work," Mr. Schmidt exclaimed, pointing to a photograph on Wikipedia. "That's where I live."

For most North Koreans, using a computer, let alone accessing Google, is all but impossible. Although the country has global broadband Internet, few people are allowed to access it, and if they do, their surfing is strictly monitored. Experts say fewer than a thousand people have such access, most of them software developers, government officials and well-connected party loyalists.

At the main library in Pyongyang, the Grand People's Study House, the Americans watched as users in thick winter coats crowded around computer screens that provide access to North Korea's Intranet, known as Kwangmyong, which serves up government-approved documents, books and archival newspapers.

They later toured the Korea Computer Center, an incubator for domestic software and hardware, where they played with a homegrown tablet and other gadgetry, most of it developed with help from Russia, China and India. A quote from Kim Jong Il, the current leader's father, graced the room: "Now is the era for science and technology. It is the era of computers."

Since he came to power last year, the 20-something Mr. Kim, who was educated in a Swiss boarding school, has emphasized the importance of science and technology for economic development. But he has made no mention of addressing North Korea's status as one of the world's least wired nations.

Mr. Schmidt appears to have learned a great deal from his visit. Speaking to reporters in Beijing, he spoke in some detail about the nation's 3G cellular phone service, developed by the Egyptian telecom company Orascom. But he noted with disappointment that little more than one million of the country's 24 million citizens had cell phones.

That system, he added hopefully, had the potential to provide Internet access but that so far the feature was unavailable. "It would be very easy for them to turn it on," he said.

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NYT > Home Page: Bomb in Southwest Pakistan Kills 11 People

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Bomb in Southwest Pakistan Kills 11 People
Jan 10th 2013, 11:48

QUETTA, Pakistan (AP) — Police say a bomb that appeared to be targeting paramilitary soldiers has exploded in a commercial area in southwest Pakistan, killing 11 people.

Senior police officer Zubair Mehmood says the blast Thursday also wounded 27 people, including three security officials. The attack took place in Quetta, the capital of Baluchistan province.

Another police officer, Mohammed Rafique, says the bomb exploded near a vehicle carrying paramilitary soldiers.

Baluchistan has experienced a decades-long insurgency by nationalists who demand greater autonomy and a larger share of the province's natural resources. It is also home to many Islamist militants, including the Taliban.

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NYT > Home Page: Joshua P. Rechnitz Abandons Plan for Velodrome in Brooklyn Bridge Park

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Joshua P. Rechnitz Abandons Plan for Velodrome in Brooklyn Bridge Park
Jan 10th 2013, 10:48

Eight months after it was first announced to the surprise and bewilderment of many New Yorkers, an improbable but well-financed plan to bring a bicycle racing track to Brooklyn Bridge Park has collapsed.

Joshua P. Rechnitz, the reclusive philanthropist behind the project, said on Wednesday that he and his team had withdrawn their proposal for the park and would seek another location in or around the city for the indoor sports complex.

For cyclists, it is a velodrome dream deferred. For some Brooklyn residents, who balked at the use of an outsize park parcel for a niche sport, it is good riddance.

But in the end, supporters said, the neighborhood was just too expensive.

The decision to abandon the Brooklyn park, reached at a meeting on Monday, came after planners were unable to produce a design that could fit within the bounds of Mr. Rechnitz's $50 million pledge for its construction and maintenance, despite months of efforts.

"You can't build a facility of this nature, at this site, at this budget," said Greg J. Brooks, the executive director of N.Y.C. Fieldhouse, the nonprofit group behind the project. "We're very excited and eager to find a new home for this recreation center and velodrome. The funding remains intact."

The money came from Mr. Rechnitz, 47, in what is among the largest individual gifts in the history of New York City's parks. A central requirement of the gift had been the inclusion of the bicycle racing track in the complex.

"The New York metropolitan area deserves a world-class cycling and recreation center," Mr. Rechnitz said in a statement on Wednesday. "I greatly regret that this cannot happen in Brooklyn Bridge Park, but I am confident that we will find a new home for the field house in the very near future."

Some Brooklyn Heights residents who live near the proposed site, at Furman Street near Pier 5, had objected to the size of the building and its potential effect on traffic and parking. Others chafed at the notion that a millionaire could, with a large donation, impose an obscure sport on a city park.

But Mr. Brooks, a former deputy comptroller for the city, said it was the costs arising from the site, rather than any local opposition, that had killed the deal.

For instance, the location meant that the roof of the building — visible to those walking above on the Brooklyn promenade nearby — had to be "aesthetic," he said, driving up the price.

Hurricane Sandy also raised concerns about the low-lying site, which did not flood during the storm but sits only about a foot above where the waters came. "A foot doesn't give a lot of room for comfort," Mr. Brooks said, adding that the plan called for raising the structure a few feet off the ground.

The nonprofit organization, he said, had also agreed to provide a boathouse and maintenance for the complex.

The design had been scaled back, reducing the size of the building to 95,000 square feet from 120,000 square feet, and the number of fixed spectator seats to 500 from 2,499, Mr. Brooks said. But even with those changes — and an added $10 million from Mr. Rechnitz for the reserve fund on top of his original $40 million pledge — the project remained stubbornly in the red.

There was no talk of the park making up the difference in the overruns, said Regina Myer, the president of the Brooklyn Bridge Park Corporation.

"We are grateful that we were considered for this facility, and frankly we are saddened that it won't come to fruition in the park," Ms. Myer said.

Ms. Myer said that before Mr. Rechnitz's gift, the site, now occupied by a one-story concrete warehouse, had been planned as a garage for park-maintenance equipment, as a storage area for recreational boats and as restrooms. Officials were looking to return to that plan, she said.

Mr. Rechnitz, a media-shy philanthropist, art collector and cyclist, had considered locations in New York and New Jersey before settling on the Brooklyn park. Many of those locations would be considered again, Mr. Brooks said.

A version of this article appeared in print on January 10, 2013, on page A17 of the New York edition with the headline: Philanthropist Abandons Plan For Velodrome in Brooklyn Park.

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