DealBook: Former Jefferies Trader Is Charged With Fraud

Federal prosecutors charged a former senior trader at the Jefferies Group on Monday with defrauding his clients — and the government — while selling them mortgage-backed securities after the financial crisis.

Jesse C. Litvak, the former Jefferies trader, is accused of generating more than $2 million in revenue for Jefferies by overcharging his customers through deceitful conduct. Those who are said to have been his victims include some of the world’s largest investment firms, including Soros Fund Management, Magnetar Capital, BlackRock and Wellington Management.

The government was also a victim in this case, prosecutors said, because Mr. Litvak’s clients were managing money that was part of the Treasury Asset Relief Program, or TARP, the $700 billion bailout fund. As part of a public-private investment program, the Treasury picked nine private firms to invest in toxic mortgage-backed securities and help remove them from the clogged balance sheets of the large banks.

While the alleged violations — cheating brokerage clients by misrepresenting the prices of securities — might typically prompt the loss of a job or civil lawsuits, such conduct rarely, if ever, rises to the level of a federal criminal prosecution.

The case demonstrates the aggressive prosecutorial stance of the special inspector general for TARP, or Sigtarp, which led the investigation. The office, now led by Christy Romero, has been responsible for criminal cases filed against 121 individuals.

“Illegally profiting from a federal program designed to assist our nation in recovering from one of our worst economic crises is reprehensible,” said David B. Fein, the United States attorney in Connecticut, whose office brought the charges. The Securities and Exchange Commission filed a parallel civil action in the case.

Federal agents arrested Mr. Litvak, 38, early Monday morning at his apartment on the Upper East Side of Manhattan. He made an appearance in Federal District Court in Bridgeport, Conn., and was released on $1 million bail. Mr. Litvak, who worked at RBS Greenwich Capital earlier in his career, joined Jefferies in 2008 and was fired in December 2011.

“Jesse Litvak did not cheat anyone out of a dime,” said Patrick J. Smith, Mr. Litvak’s lawyer at DLA Piper, in a statement. “In fact, most of these trades turned out to be hugely profitable. Jesse looks forward to the trial in this case so that his name can be cleared and he can get on with his career.”

While the market for mortgage-backed securities is complex and opaque, the charges against Mr. Litvak are rather simple. Prosecutors said that he deceived his customers about the prices of the securities that he sold to them. The indictment said that Mr. Litvak deployed the scheme in part to increase the size of his year-end bonus.

In some cases, they said, Mr. Litvak would lie about the price at which his firm had bought a security so he could resell it to another customer at a higher price and earn more money for the firm. In other instances, the government said, he created a fake seller to give the impression that he was arranging a trade between two customers, when in fact he was selling the security out of his firm’s inventory at a high price.

“The kind of false claims made by Litvak were unfit for a used-car lot, let alone a marketplace for mortgage-backed securities,” said George S. Canellos, the S.E.C.’s deputy director of enforcement.

Mr. Smith, the lawyer for Mr. Litvak, said that the trades were transactions between sophisticated market participants and that the profits that Jefferies earned on each trade were well within industry norms for the mortgage-backed securities market.

Mr. Litvak wants Jefferies to pay his legal fees related to the government’s investigation, and he has filed papers in the Delaware Court of Chancery demanding compensation from the bank. Jefferies has refused to reimburse him, arguing that it fired Mr. Litvak for cause. Richard Khaleel, a spokesman for Jefferies, declined to comment.

The case first showed up on the government’s radar after one of Mr. Litvak’s customers, AllianceBernstein, complained to Jefferies that the bank had overcharged it for mortgage-backed securities, according to people briefed on the case. According to records from the Financial Industry Regulatory Authority, or Finra, Jefferies settled the case with AllianceBernstein for $2.2 million.

Court papers depict Mr. Litvak as an exuberant salesman, frequently communicating with instant messages and peppering his communications with slang. When Mr. Litvak reported to a client, Wellington Management, about a sham purchase, he wrote “winner winner chicken dinner.” Another time, the complaint said, Mr. Litvak gave a customer a false report on the price of a security that he sold to a hedge fund, York Capital Management. “We are doneski gorgeous!” he wrote.

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Hillary Clinton's legacy at State: Splendid but not spectacular

WASHINGTON — Hillary Rodham Clinton leaves her post as secretary of State next month with a split judgment on her diplomatic career: She's won rave reviews from the American public and the president, but maybe not a prominent place in the diplomatic history books.

Job approval ratings for the former senator and first lady are at stratospheric levels, suggesting that her four years as chief U.S. diplomat could be an important asset if she runs for president in 2016.

But scholars and diplomatic insiders say she has never dominated issues of war and peace in the manner of predecessors Dean Acheson or Henry Kissinger, or laid down an enduring diplomatic doctrine.

President Obama has tightly controlled foreign policy in the last four years — more so even than his recent predecessors. Clinton has had a seat at the table on every key issue, officials say, but she did not "own" any of them.

She devoted long hours to signatures issues, including empowerment of women and girls, gay rights, Third World development, health and Internet freedoms. Clinton lent her support to a wide range of new projects and organizations, and she appointed new officials in the State Department to shepherd them. Some of these may eventually have huge effects, but many are at an early stage.

At the same time, the most important and toughest foreign policy issues of the day — Iran, North Korea, Afghanistan-Pakistan, the Arab-Israeli standoff — weren't resolved during the four years. Some grew more intractable. Though none of that may be Clinton's fault, the lack of diplomatic breakthroughs on her watch limits her legacy.

"She's coming away with a stellar reputation that seems to have put her almost above criticism," said Aaron David Miller, a longtime U.S. peace negotiator who is a vice president at the Woodrow Wilson International Center for Scholars. "But you can't say that she's really led on any of the big issues for this administration or made a major mark on high strategy."

Expectations ran high that Clinton would be a heavyweight — maybe even a "co-president" on foreign policy — from the time Obama picked his bitter rival in the 2008 Democratic presidential primary campaign to take the Cabinet's senior spot. She had star power from 20 years in national life that dazzled foreign audiences and guaranteed worldwide attention to whatever issue she focused on.

"She's the first secretary who's also been a global rock star," said a senior State Department official who was not authorized to be quoted by name. "It's allowed her to raise issues on the global agenda in a way that no one before her has been able to do."

Obama praised her performance Sunday in a joint interview with Clinton that he proposed to CBS' "60 Minutes." Obama described her as "one of our finest" secretaries of State and one of his most important advisors on a range of issues, including Iraq, Afghanistan, Libya and Al Qaeda.

In the interview, Clinton brushed aside questions about her future in politics and pronounced her health as good — although she said she had some "lingering effects" from a concussion she suffered in December when she fainted and hit her head after suffering from a virus that left her dehydrated. The concussion led to a blood clot behind her right ear, for which she was hospitalized.

"The doctors tell me that will all recede," she said, referring to the continued symptoms. "And so, thankfully, I'm looking forward to being at full speed."

As secretary of State, Clinton has shared Obama's democratic take on the proper role of American diplomats, believing that the world is no longer a place where a handful of powers can dictate the terms of the world order. Rather, the job of U.S. diplomats is collaborating with dozens of other countries in the "constant gardening and tending" of institutions and projects that advance common goals, the senior State Department official said.

Foreign audiences warmed to this attitude, which they found appealing after eight years of a George W. Bush administration many associated with a go-it-alone approach. As they did, the American image abroad improved.

At the same time, Clinton quickly removed a potential internal stumbling block, insisting on no infighting between her loyalists at the State Department and Obama's team. Former President Bill Clinton's kibitzing on foreign policy never became the problem some had predicted.

A hard worker and team player, Clinton won praise from many in Obama's circle who had initially doubted her.

But as time passed, it became clear that she wouldn't have the lead role on key issues of war and peace.

Clinton's original plan was to have three powerful "special envoys" in charge of key security issues and reporting to her — a flow chart that would have enabled her to tightly control the biggest security issues.

But Richard C. Holbrooke, in charge of the Afghanistan-Pakistan militant threat, was marginalized after clashing with White House officials. Former Senate Majority Leader George J. Mitchell resigned in May 2011 after the painful collapse of the administration's opening Middle East peace initiative; and diplomat Dennis Ross, the envoy for Iran, moved to the White House in June 2009 to better help manage the range of Mideast problems that were bubbling over.

"She was a fully functioning member of the team," said a former administration official, who asked to remain anonymous speaking about a former colleague. "But not a first among equals."

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The Power of Paying: What Consumer Hotshots Can Learn From Corporate Drudges

Sometimes these days interoperability seems like a lost cause in the technology world. Twitter has been making life hard for startups that make Twitter clients; Facebook has been making life equally hard for Twitter; and Google is preventing anyone else from adding content to its own social network, Google+.

But even as the aforementioned advertising-driven companies have made life hard for developers, enterprise companies have proven that software interfaces for web interoperability can be reliable and robust – powerful enough, even, to build a company on.

Leading the charge has been Amazon, whose web services and software interfaces, or APIs, have emerged as key startup building blocks. Amazon’s S3 storage service and EC2 virtual server service have been like the polar opposite of the Twitter API: Steady where Twitter has been unpredictable, scalable where Twitter has imposed tight limits, and open ended where Twitter has been closed.

But the biggest and most obvious difference between the constrictive Twitter API and the empowering Amazon API is this: The former is free, while the latter costs money. In other words, paying Amazon up front can actually reduce costs long term compared to a free API like Twitter’s, since there’s less volatility and risk in the API itself. (A fair number of startups who bet big on the Twitter API are now cursing the decision, as Wired has documented previously.)

Amazon is hardly the only example of how it pays to bet on software interfaces with a solid revenue stream behind them. Salesforce.com, for example does brisk business with its paid platform cloud Heroku and with its App Exchange, which sells software that runs on its paid core customer relationship management offering. Even Apple’s iOS app store, while essentially free for developers, illustrates how much money can be made writing for a platform that serves paying customers.

“In the consumer world, API’s are usually driven by companies who also have their own direct-to-consumer offering, and thus there is inherent potential conflict in them leveraging their data and user base versus enabling others,” says Matt Murphy, a general partner at Kleiner Perkins Caufield & Byers who has overseen the venture capital firm’s mobile-focused iFund.

Outside of the consumer world, the case for providing a robust API is more clear-cut. Murphy cited as on example of this Twilio, which offers a paid API to connect applications to phone services like text messages, recorded information lines, and conference calls.

Companies like Twilio that make lots of revenue offering software interfaces have an incentive to maintain and improve those interfaces and to keep those interfaces open and running smoothly. That means building on such interfaces is safer, as a rule.

“You need to be mindful of the competitive dynamics,” says Paul Buchheit, a former Google engineer whose startup FriendFeed built on APIs from Facebook, Twitter, Flickr, and others. “The simplest question to ask is if the platform is the product, or if it exists mainly to support another product. The Amazon Web Services platform is the product, and so it’s unlikely that Amazon would do anything to harm the platform. However, in the case of Twitter, the platform is just a feature, and so they will do whatever they believe is best for the core Twitter product, even if that means killing the platform.”

“iOS is kind of in the in-between space of platform as product and platform as feature, and the obviously exercise much more control than Amazon does. I’d be very wary of building an iOS app that somehow competes with Apple, for example.”

Of course, paying customers don’t guarantee a software interface is reliable, just nor does a lack thereof mean a software interface is flaky. Google’s App Engine, for example, offers a paid API that has been criticized as unreliable and constrictive.

GitHub, meanwhile, has built an innovative business around the native API of the free, open-source software revision tracker git.

As a general guideline, however, you can safely assume that if you’re not paying money for an API now, there’s a good chance you’ll be paying, somehow, for your usage later.

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Chris Brown investigated for possible assault

WEST HOLLYWOOD, Calif. (AP) — Grammy-winning singer Chris Brown is under investigation for an alleged assault in a West Hollywood parking lot, the Los Angeles County Sheriff’s Department said early Monday.

Deputies responding to a report of six men fighting Sunday night found the scene clear, but were told by witnesses that there had been a brief fight over a parking space.

“The altercation allegedly led to Chris Brown punching the victim,” the department said in a statement released early Monday morning.

The “victim” wasn’t identified but the celebrity website TMZ — which first reported the fight outside the Westlake Recording Studio — said it also involved Frank Ocean, one of the top nominees at Grammy Awards next month.

In a Twitter posting later, Ocean said he “got jumped by (Brown) and a couple guys” and suffered a finger cut.

It wasn’t Brown’s first problem in the run-up to the Grammys. His attack on singer Rihanna on the eve of the 2009 awards event overshadowed the show.

Last June, he was injured in a brawl with members of hip-hop star Drake’s entourage at a New York nightclub.

No arrests were made. Brown was gone by the time deputies arrived but the department said the investigation is ongoing and Brown would be contacted later.

Email messages to Ocean’s publicist and Brown’s lawyer were not immediately returned. A man answering the phone at the recording studio declined to comment.

Entertainment News Headlines – Yahoo! News

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Well: Keeping Blood Pressure in Check

Since the start of the 21st century, Americans have made great progress in controlling high blood pressure, though it remains a leading cause of heart attacks, strokes, congestive heart failure and kidney disease.

Now 48 percent of the more than 76 million adults with hypertension have it under control, up from 29 percent in 2000.

But that means more than half, including many receiving treatment, have blood pressure that remains too high to be healthy. (A normal blood pressure is lower than 120 over 80.) With a plethora of drugs available to normalize blood pressure, why are so many people still at increased risk of disease, disability and premature death? Hypertension experts offer a few common, and correctable, reasons:

¶ About 20 percent of affected adults don’t know they have high blood pressure, perhaps because they never or rarely see a doctor who checks their pressure.

¶ Of the 80 percent who are aware of their condition, some don’t appreciate how serious it can be and fail to get treated, even when their doctors say they should.

¶ Some who have been treated develop bothersome side effects, causing them to abandon therapy or to use it haphazardly.

¶ Many others do little to change lifestyle factors, like obesity, lack of exercise and a high-salt diet, that can make hypertension harder to control.

Dr. Samuel J. Mann, a hypertension specialist and professor of clinical medicine at Weill-Cornell Medical College, adds another factor that may be the most important. Of the 71 percent of people with hypertension who are currently being treated, too many are taking the wrong drugs or the wrong dosages of the right ones.

Dr. Mann, author of “Hypertension and You: Old Drugs, New Drugs, and the Right Drugs for Your High Blood Pressure,” says that doctors should take into account the underlying causes of each patient’s blood pressure problem and the side effects that may prompt patients to abandon therapy. He has found that when treatment is tailored to the individual, nearly all cases of high blood pressure can be brought and kept under control with available drugs.

Plus, he said in an interview, it can be done with minimal, if any, side effects and at a reasonable cost.

“For most people, no new drugs need to be developed,” Dr. Mann said. “What we need, in terms of medication, is already out there. We just need to use it better.”

But many doctors who are generalists do not understand the “intricacies and nuances” of the dozens of available medications to determine which is appropriate to a certain patient.

“Prescribing the same medication to patient after patient just does not cut it,” Dr. Mann wrote in his book.

The trick to prescribing the best treatment for each patient is to first determine which of three mechanisms, or combination of mechanisms, is responsible for a patient’s hypertension, he said.

¶ Salt-sensitive hypertension, more common in older people and African-Americans, responds well to diuretics and calcium channel blockers.

¶ Hypertension driven by the kidney hormone renin responds best to ACE inhibitors and angiotensin receptor blockers, as well as direct renin inhibitors and beta-blockers.

¶ Neurogenic hypertension is a product of the sympathetic nervous system and is best treated with beta-blockers, alpha-blockers and drugs like clonidine.

According to Dr. Mann, neurogenic hypertension results from repressed emotions. He has found that many patients with it suffered trauma early in life or abuse. They seem calm and content on the surface but continually suppress their distress, he said.

One of Dr. Mann’s patients had had high blood pressure since her late 20s that remained well-controlled by the three drugs her family doctor prescribed. Then in her 40s, periodic checks showed it was often too high. When taking more of the prescribed medication did not result in lasting control, she sought Dr. Mann’s help.

After a thorough work-up, he said she had a textbook case of neurogenic hypertension, was taking too much medication and needed different drugs. Her condition soon became far better managed, with side effects she could easily tolerate, and she no longer feared she would die young of a heart attack or stroke.

But most patients should not have to consult a specialist. They can be well-treated by an internist or family physician who approaches the condition systematically, Dr. Mann said. Patients should be started on low doses of one or more drugs, including a diuretic; the dosage or number of drugs can be slowly increased as needed to achieve a normal pressure.

Specialists, he said, are most useful for treating the 10 percent to 15 percent of patients with so-called resistant hypertension that remains uncontrolled despite treatment with three drugs, including a diuretic, and for those whose treatment is effective but causing distressing side effects.

Hypertension sometimes fails to respond to routine care, he noted, because it results from an underlying medical problem that needs to be addressed.

“Some patients are on a lot of blood pressure drugs — four or five — who probably don’t need so many, and if they do, the question is why,” Dr. Mann said.

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DealBook: Beneath the Calm, SAC Works to Contain Fallout From Inquiry

At last month’s Hurricane Sandy benefit concert, Steven A. Cohen sat near the Madison Square Garden stage, grooving to performances by Bon Jovi and Billy Joel.

Last week, he flew a private jet to the World Economic Forum in Davos, Switzerland, rubbing shoulders with world leaders and Fortune 500 chieftains. And on Monday, he will show up at the Breakers Resort in Palm Beach, Fla., for one of the year’s biggest hedge fund conferences and, if he can squeeze it in, a round of golf.

For a man who has emerged as the Justice Department’s great white whale in its insider trading investigation — a Wall Street version of Captain Ahab pursuing Moby-Dick — Mr. Cohen, the billionaire owner of the hedge fund SAC Capital Advisors, does not appear concerned.

But inside the offices of SAC’s Stamford, Conn., headquarters, and at Midtown Manhattan law firms, Mr. Cohen’s employees and lawyers are working hard to contain the fallout from the investigation.

His executives have offered financial incentives to Mr. Cohen’s staff members to stay with SAC. Marketing officers are trying to persuade investors to keep their money at the fund. And defense lawyers are working furiously to persuade federal securities regulators not to file a civil fraud lawsuit against the firm.

“This has always been a stressful place to work,” said an SAC employee who requested anonymity because he was unauthorized to speak publicly about the fund. “Now it’s just more stressful.”

Neither SAC nor Mr. Cohen has been accused of any wrongdoing.

The main question now looming over the firm is whether its clients will stand by the fund, or its legal and regulatory problems will cause investors to head for the exits. Under the firm’s rules, SAC clients have until Feb. 15 to ask for their money back, and then cannot make another so-called redemption request for another three months.

Mr. Cohen’s fund was dealt a blow last week when a Citigroup unit that manages money for wealthy families disclosed that it was withdrawing its $187 million investment. The move by the bank was the most prominent client departure since November, when the multiyear investigation into SAC’s trading practices entered a more serious phase.

Citigroup’s withdrawal represents a tiny percentage of SAC’s $14 billion in assets under management. The fund has said it expects total investor redemptions for the first quarter of up to $1 billion, a number that an SAC spokesman has said will not adversely affect its business.

SAC is largely insulated from the potentially devastating effects that client defections can have on a hedge fund in part because of Mr. Cohen’s extraordinary wealth. Unlike other hedge fund managers who rely almost entirely on outside investors, Mr. Cohen has the comfort of knowing that about $8 billion of SAC’s fund belongs to him and his employees.

Still, the Citigroup decision stung, say people close to SAC’s business, because of the longstanding and lucrative relationship between the bank and the fund. Another concern, said these people, is that the move could influence other large SAC investors currently weighing whether to keep their money at the fund.

For Citigroup, its withdrawal of money from SAC carries substantial business risk. The bank has a vast relationship with SAC, earning revenue by providing the fund with financing and trading services.

SAC could exact retribution on Citigroup by terminating, or at least scaling back, its broader relationship with the bank. An SAC spokesman declined to comment.

Citigroup’s move came two months after federal authorities arrested Mathew Martoma, a former SAC portfolio manager, in what they described as the most lucrative insider trading case ever uncovered. The Martoma indictment represented the first time that the government had brought charges stemming from a trade in which Mr. Cohen had been involved. The Securities and Exchange Commission has warned Mr. Cohen that it might file a civil fraud action against SAC related to the case.

In addition to Mr. Martoma, at least seven former SAC employees have been tied to insider trading while at the fund. Three have pleaded guilty to criminal charges.

Citigroup issued a statement that its decision “should not be construed as a statement on the merits of any outstanding legal proceedings or potential regulatory action.” But the bank specifically cited the Martoma case, explaining that “in the event these legal and regulatory matters are resolved favorably for Mr. Martoma and SAC, Citi Private Bank expects to reconsider admission of SAC’s funds to its hedge fund platform.”

Mr. Martoma has pleaded not guilty and rejected requests by federal agents to cooperate against his former boss. Mr. Cohen has told his employees and clients that he is confident that he has acted appropriately at all times.

Yet the heightened government scrutiny has caused skittishness among SAC’s top ranks, forcing the fund to lavish even richer financial incentives on a group of employees that is already among the most highly compensated in the hedge fund industry.

This month, SAC told its stable of portfolio managers that it would increase year-end bonuses by three percentage points. SAC portfolio managers — the fund’s most senior traders, given the authority to make their own investment decisions and also feed Mr. Cohen their best ideas — are paid, on average, 20 percent of the profits they generate for the fund.

“The program is intended to retain our most valuable resource, our investment professionals,” said Jonathan Gasthalter, the SAC spokesman.

Another valuable resource is SAC’s outside investors, which account for about $6 billion, or 40 percent, of the fund’s assets. That money accounts for hundreds of millions of dollars in fees, which SAC uses to finance one of the world’s largest and most sophisticated hedge fund operations, with more than 1,000 employees and 125 teams of traders and analysts. Its operation is also one of the most successful, posting average annualized returns of about 30 percent since 1992.

Those results have in the past kept SAC’s customers satisfied, but the government scrutiny has made many of them uneasy. The firm’s marketing team has reached out to the fund’s investors to address their concerns and reassure them that the insider trading inquiry will not affect its performance.

Despite those efforts, several investors in addition to Citigroup, including Titan Advisors and a unit of Société Générale, have notified SAC that they are withdrawing money. Other clients, like Chapwood Investments and SkyBridge Capital, have said they will continue to invest with the fund.

SAC executives continued the charm offensive with major clients on Sunday, holding an annual golf outing in Palm Beach on the eve of a hedge fund conference at the Breakers sponsored by Morgan Stanley. The conference — a matchmaking event that connects top managers with the world’s richest investors — is considered an important stop on the hedge fund money-raising circuit.

Since Morgan Stanley does not invite the news media to its conference, there is not expected to be the same paparazzi-like reports on Mr. Cohen that emerged last week from Davos. Bloomberg News filed a dispatch that Mr. Cohen sat in on a panel discussion on data security called “The Digital Infrastructure Context.” And Henry Blodget, the editor of the financial Web site Business Insider, wrote a Twitter post on a sighting of Mr. Cohen.

“Steve Cohen was hanging in Davos lounge yesterday,” he wrote. “Didn’t look worried.”

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California still hasn't bought land for bullet train route

Construction of California's high-speed rail network is supposed to start in just six months, but the state hasn't acquired a single acre along the route and faces what officials are calling a challenging schedule to assemble hundreds of parcels needed in the Central Valley.

The complexity of getting federal, state and local regulatory approvals for the massive $68-billion project has already pushed back the start of construction to July from late last year. Even with that additional time, however, the state is facing a risk of not having the property to start major construction work near Fresno as now planned.

It hopes to begin making purchase offers for land in the next several weeks. But that's only the first step in a convoluted legal process that will give farmers, businesses and homeowners leverage to delay the project by weeks, if not months, and drive up sales prices, legal experts say.

One major stumbling block could be valuing agricultural land in a region where prices have been soaring, raising property owners' expectations far above what the state expects to pay.

"The reality is that they are not going to start in July," said Anthony Leones, a Bay Area attorney who has represented government agencies as well as property owners in eminent domain cases.

State high-speed rail officials say it won't be easy, but they can acquire needed property and begin the project on time.

"It is a challenge," said Jeff Morales, the rail agency's chief executive. "It is not unlike virtually any project. The difference is the scale of it."

Quickly acquiring a new rail corridor is crucial to the project, which Gov. Jerry Brown touted last week as the latest symbol of California's tradition of dreaming big and making major investments in its future.

Delays in starting construction could set in motion a chain reaction of problems that would jeopardize the politically and financially sensitive timetable for building the $6-billion first leg of the system. Under its deal with the Obama administration, which is pushing the project as an integral part of its economic and transportation agenda, the state must complete the first 130 miles of rail in the Central Valley by 2018, an aggressive schedule that would require spending about $3.6 million every day.

California voters in 2008 approved plans for a 220-mph bullet train system that would initially link the Bay Area and Southern California at a cost of $32 billion, less than half the estimated cost of the project.

If the construction schedule slips, costs could grow and leave the state without enough money to complete the entire first segment. Rail agency documents acknowledge initial construction may not get as close to Bakersfield in the southern Central Valley as planned.

In addition to property, the rail authority still needs permits from the Army Corps of Engineers and approval by the San Joaquin Valley Air Pollution Control District, two more potential choke points that Morales says can be navigated.

The land purchases are waiting on the hiring of a team of specialized contractors, but they cannot start their work until the rail agency gets approval from another branch of the state bureaucracy. About 400 parcels are needed for the first construction segment, a 29-mile stretch from Madera to Fresno.

The formal offers will start an eminent domain action, the legal process for seizing land from private owners. The owners have 30 days to consider the offer, and then the state must go through a series of steps that can add 100 more days of appeals and hearings, assuming the state can get on the court calendar, according to Robert Wilkinson, an eminent domain litigator in Fresno. If the state fails to convince a judge that a quick takeover of property is justified, formal trials could stretch on for 18 months, he added.

"I would think a lot of these are going to end up in litigation," he said. "It is a tight schedule, no question about it."

Indeed, the rail authority's formal right-of-way plan indicates it does not expect to acquire the first properties until Sept. 15, despite other documents that indicate construction would start in July. Rail officials said they padded the schedule to avoid claims for additional payments by construction contractors should land not be available by July.

Last month, the federal Government Accountability Office reported that about 100 parcels were at risk of not being available in time for construction.

That assessment was based on information the office collected last August. Susan Fleming, a GAO investigator, testified at a House hearing last month: "Not having the needed right of way could cause delays as well as add to project costs."

Morales said in a recent interview that he would not argue with the warning in the GAO report but still sees nothing that would delay the start of construction. Technically, the rail authority could meet the July target date by beginning demolition or other construction on a single piece of property, he said.

Anja Raudabaugh, executive director of the Madera County Farm Bureau, which is suing to halt the project under the California Environmental Quality Act, said the rail authority will face strong opposition to condemnation proceedings in the Central Valley. The bureau has hired a condemnation expert to help battle the land seizures.

"It is a harried mess," she said.

She noted that agricultural land prices rose rapidly last year across the nation. In the Central Valley, the average price of farmland is $28,000 per acre, while the rail authority's budget anticipates an average price of $8,000 per acre, she said.

Kole Upton, an almond farmer who leads the rail watchdog group Preserve Our Heritage, questioned the rail agency's expertise in conducting complex appraisals of agricultural land that has orchards, irrigation systems and processing facilities.

"I am not sure this thing has been well thought out by people who have a deep understanding of agriculture," Upton said. "I live on my farm, and my son lives on my farm. My dad started it after World War II. This is our heritage and our future."

Morales said he believes the agency's budget for property acquisitions is adequate and he did not want to negotiate prices publicly.

"We don't think we are wildly off," he said.

ralph.vartabedian@latimes.com

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Lace 'Em Up: 4 Running Shoes Reviewed

Hitting the streets to get fit by spring? We review four new specialty sneakers for runners.

Adidas' Adizero Feather 2.0 runners are so light (barely 7 ounces) and so responsive, running in them feels more like bouncing on fluffy clouds than pounding on pavement. OK, I'm exaggerating, but I was really blown away by the light weight when I took them out on long-distance runs. So effective was the feather-weight design on a 5-mile outing, I could actually notice the reduced effort in my legs.

The shoe is topped with a barely-there breathable mesh that runs from the toes all the way back to the heel. Ventilation is therefore excellent, with a constant flow of cool air delivered directly to your piggies. And, unlike most shoes that make use of fancy, lightweight materials, they're actually quite sturdy.

These sneaks are compatible with Adidas' miCoach data reporting system and its companion apps. So if you already have a miCoach Speed_Cell sensor, just lift up the shoe's insert and pop it in (You can also attach the sensor to your laces). The sensor can be synced with your iPhone to track your speed, acceleration, distance, and pace during runs.

The only problem is that the miCoach system needs some work, including the inconsistent syncing and the iPhone app's interface. If you're used to the Nike+ app, you'll be struggling to work your way through using Adidas' lesser creation. That said, it's an add-on to the shoe and not a primary feature, so miCoach's shortcomings don't detract from the sneaker's quality.

WIRED Obscenely light at only 7 ounces. Flexible mesh upper keeps your tootsies cool and dry. Durable, despite the lightweight design. miCoach-compatible for tracking your runs. Great styling. Affordable at $115. Men's and women's versions.

TIRED If you're not into light shoes, these aren't for you. The miCoach system needs a lot of work -- it's adequate, but could be so much better.

Photos by Ariel Zambelich/Wired

Rating: 8 out of 10

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Well: Ask Well: Squats for Aging Knees

You are already doing many things right, in terms of taking care of your aging knees. In particular, it sounds as if you are keeping your weight under control. Carrying extra pounds undoubtedly strains knees and contributes to pain and eventually arthritis.

You mention weight training, too, which is also valuable. Sturdy leg muscles, particularly those at the front and back of the thighs, stabilize the knee, says Joseph Hart, an assistant professor of kinesiology and certified athletic trainer at the University of Virginia, who often works with patients with knee pain.

An easy exercise to target those muscles is the squat. Although many of us have heard that squats harm knees, the exercise is actually “quite good for the knees, if you do the squats correctly,” Dr. Hart says. Simply stand with your legs shoulder-width apart and bend your legs until your thighs are almost, but not completely, parallel to the ground. Keep your upper body straight. Don’t bend forward, he says, since that movement can strain the knees. Try to complete 20 squats, using no weight at first. When that becomes easy, Dr. Hart suggests, hold a barbell with weights attached. Or simply clutch a full milk carton, which is my cheapskate’s squats routine.

Straight leg lifts are also useful for knee health. Sit on the floor with your back straight and one leg extended and the other bent toward your chest. In this position, lift the straight leg slightly off the ground and hold for 10 seconds. Repeat 10 to 20 times and then switch legs.

You can also find other exercises that target the knees in this video, “Increasing Knee Stability.”

Of course, before starting any exercise program, consult a physician, especially, Dr. Hart says, if your knees often ache, feel stiff or emit a strange, clicking noise, which could be symptoms of arthritis.

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J. Richard Hackman, an Expert in Team Dynamics, Dies at 72

J. Richard Hackman, a Harvard psychology professor whose fieldwork sometimes took him to the cockpit of an airliner to observe the crew in a nearly five-decade quest to determine the dynamics of teamwork and effective leadership, died on Jan. 8 in Boston. He was 72.

The cause was lung cancer, his wife, Judith Dozier Hackman, said.

Dr. Hackman, the author or co-author of 10 books on group dynamics, was the Edgar Pierce professor of social and organizational psychology at Harvard.

In one of his best-known books, “Leading Teams: Setting the Stage for Great Performances” (2002), he replaced the popular image of the powerful “I can do it all” team leader with that of someone who, as he wrote, had the subtle skills “to get a team established on a good trajectory, and then to make small adjustments along the way to help members succeed.”

The conditions for a successful team effort — among them “a compelling direction, an enabling team structure, a supportive organizational context and expert team coaching” — “are easy to remember,” Dr. Hackman wrote.

“The challenge,” he continued, “comes in developing an understanding of those conditions that is deep and nuanced enough to be useful in guiding action, and in devising strategies for creating them even in demanding or team-unfriendly organizational circumstances.”

Besides tracking the interplay of pilots, co-pilots and navigators aboard civilian and military planes, Dr. Hackman observed corporate boards, sports teams, orchestra players, telephone-line repair crews, hospital workers and restaurant kitchen staff members.

And in recent years, for his 2011 book, “Collaborative Intelligence,” he was allowed to observe interactions within the American intelligence, defense, law-enforcement and crisis-management communities.

“Although my main aspiration has been to provide guidance that will be useful to team leaders and members,” he wrote, “there are no ‘one-minute’ prescriptions here — creating, leading and serving on teams is not that simple.”

Anita Woolley, a professor of organizational behavior and theory at the Tepper School of Business at Carnegie Mellon University in Pittsburgh, said, “The key thing about Dr. Hackman’s work is that it stands in contrast to some of the more popular models of leadership that focused very much on style or how leaders behave, versus what they do.”

Rather than viewing pay as a prime motivator for good performance, she continued, “he focused on features of people’s jobs that made them more intrinsically satisfied: the freedom to determine how they conduct their work, having a variety of tasks, having knowledge of the ultimate outcomes of their work, knowing how their work affects or is received by other people.”

He also liked to overturn some of the received wisdom about teamwork. In a 2011 article for The Harvard Business Review, Dr. Hackman listed “Six Common Misperceptions About Teamwork.” Among them was this:

“Misperception No. 2: It’s good to mix it up. New members bring energy and fresh ideas to a team. Without them, members risk becoming complacent, inattentive to changes in the environment, and too forgiving of fellow members’ misbehavior.

“Actually: The longer members stay together as an intact group, the better they do. As unreasonable as this may seem, the research evidence is unambiguous. Whether it is a basketball team or a string quartet, teams that stay together longer play together better.”

John Richard Hackman was born in Joliet, Ill., on June 14, 1940, the only child of J. Edward and Helen Hackman. His father was an oil pipeline engineer, his mother a schoolteacher.

Dr. Hackman received a bachelor’s degree in mathematics from MacMurray College in Jacksonville, Ill., in 1962, and a doctorate in psychology from the University of Illinois in 1966. He soon joined the psychology and administrative sciences department faculties at Yale, where he taught until 1986, when he moved to the psychology and business departments at Harvard.

Besides his wife, who is an associate dean at Yale, he is survived by two daughters, Julia Beth Proffitt and Laura Dianne Codeanne, and four grandchildren.

After Dr. Hackman died, The Harvard Crimson wrote that for years he had “devoted countless hours to improving one team in particular — the Harvard women’s basketball squad, for which he volunteered as an honorary coach.”

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