Sidney Gilman’s Shift Led to Insider Trading Case

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

Fabrizio Costantini for The New York Times

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Stephanie Steinberg contributed reporting.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

randy.lewis@latimes.com

elaine.woo@latimes.com

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Meet the World?s Cheapest Venture Capitalist

Maciej Cegłowski’s new startup fund was the toast of Silicon Valley on Friday, lighting up Twitter, winning top billing on the elite Hacker News forum, and drawing dozens of applications from would-be portfolio companies. The fund’s draw: Extreme stinginess.

The Pinboard Investment Co-Prosperity Cloud, as the fund is called, offers chosen startups all of $37 in venture capital. Not $37 million, like you might get from the uber-investors on Silicon Valley’s Sand Hill Road, or $37,000, like what YCombinator and other incubators offer. Thirty-seven crisp George Washingtons.

“The thing that has really changed in the past couple of years that hasn’t been internalized by everyone is that startup costs are really very, very low,” says Cegłowski. “Even compared to 2008 it costs very little money to do stuff. You have these technologies that are pretty good at scaling up … but it’s still free, open source software. So as long as the labor is free, you’re fine.”

‘I want to promote ideas that aren’t game changers.’

— Maciej Cegłowski

The Co-Prosperity Cloud is more than a statement on the rapidly falling cost of scaling software. It’s also about a crucial shift in the role played by startup investors. The importance of the actual capital distributed by venture capitalists continues to fall along with the costs of deploying, distributing, and scaling up apps, websites, other software, and even hardware. Less tangible aspects of an investment, like the endorsement, expertise, and social graph of the investor have become correspondingly more important.

If Cegłowski can prove there is an extreme version of this trend — that there are compelling startups for which investment dollars are borderline meaningless, and for which social capital is paramount – he could help remake the tech investment pipeline from a glorified money hose into a system for primarily distributing social capital like prestige, attention, taste, and advice.

The Co-Prosperity Cloud is an experiment in distributing just that sort of social capital. It offers not just the $37, but also Cegłowski’s vote of confidence – he’s only picking six winners – and “as much publicity as I can provide,” as the fund webpage says. That publicity will presumably come via the devoted online following Cegłowski has built over the years for his articles on bootstrapping his bookmark service Pinboard.in, as well as for his wide-ranging personal essays, including an indispensable meat-lover’s guide to visiting Argentina.

“I want to see if I can give people the social boost to get a chance to explain their idea and attract that initial group of customers,” Cegłowski says. “Because once you have a handful of people who use your product you can kind of claw your way up from that. It’s just that the first part is really tough.”

The former Yahoo engineer is hardly the first to capitalize on the changing nature of startup funding. YCombinator pioneered the pairing of tiny, low-five-figure funding rounds with intensive mentoring and an unconventional selection process. Its success stories include Dropbox, SocialCam, and Airbnb. The venture firm Andreessen Horowitz, meanwhile, bolsters its monetary investments with exceptional expertise in areas like human resources and public relations. Its investments have included Facebook, Twitter, and Skype.

Where the Co-Prosperity Cloud is different is in its lower ambitions. It aims to fund what Cegłowski calls “barely successful … modest” companies like his own Pinboard, a one-man operation that he says couldn’t pay a second employee but that covers his costs, salary, plus a contribution to his savings. Where YCombinator encourages two-founder teams and follow-on venture capital rounds that push startups toward a big-money exit, the Co-Prosperity Cloud actively encourages solo founders and slow-building, sustainable companies.

“I’m interested in this world of niche businesses no one will really fund,” Cegłowski says. “[I] want to promote ideas that aren’t game changers and aren’t going to grow into a giant business but are a perfectly great business.”

The fund is off to a promising start. As of this morning, it was a brand-new idea that had popped into Cegłowski’s head during an a.m. jog around San Francisco. By the end of the evening, he had upward of 40 applications, as well as offers to supplement each of his investments, to the tune of $50 apiece, from venture capitalist Marc Andreessen (of the aforementioned Andreessen Horowitz) and tech entrepreneur Thomas Ptacek.

The Co-Prosperity Cloud’s application deadline is Jan. 1, and Cegłowski anticipates announcing winners shortly thereafter. He jokes about how poorly things could go, but in the end resolved that this would be OK: “I decided I could spend $200 for this experiment.” That small outlay could result in big savings for future entrepreneurs. Or, at the very least, another blockbuster entry on Cegłowski’s blog.

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Owner of Rivera plane being investigated by DEA

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

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

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

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

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

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

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

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

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

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

He served about five months in prison before being released.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“We don’t comment on matters involving clients,” he said.

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

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

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

___

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

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Life Expectancy Rises Around World, Study Finds

A sharp decline in deaths from malnutrition and infectious diseases like measles and tuberculosis has caused a shift in global mortality patterns over the past 20 years, according to a report published on Thursday, with far more of the world’s population now living into old age and dying from diseases mostly associated with rich countries, like cancer and heart disease.

Tony Karumba/Agence France-Presse — Getty Images

Children in Nairobi, Kenya. Sub-Saharan Africa lagged in mortality gains, compared with Latin America, Asia and North Africa.

The shift reflects improvements in sanitation, medical services and access to food throughout the developing world, as well as the success of broad public health efforts like vaccine programs. The results are striking: infant mortality declined by more than half from 1990 to 2010, and malnutrition, the No. 1 risk factor for death and years of life lost in 1990, has fallen to No. 8.

At the same time, chronic diseases like cancer now account for about two out of every three deaths worldwide, up from just over half in 1990. Eight million people died of cancer in 2010, 38 percent more than in 1990. Diabetes claimed 1.3 million lives in 2010, double the number in 1990.

“The growth of these rich-country diseases, like heart disease, stroke, cancer and diabetes, is in a strange way good news,” said Ezekiel Emanuel, chairman of the department of medical ethics and health policy at the University of Pennsylvania. “It shows that many parts of the globe have largely overcome infectious and communicable diseases as a pervasive threat, and that people on average are living longer.”

In 2010, 43 percent of deaths in the world occurred at age 70 and older, compared with 33 percent of deaths in 1990, the report said. And fewer child deaths have brought up the mean age of death, which in Brazil and Paraguay jumped to 63 in 2010, up from 30 in 1970, the report said. The measure, an average of all deaths in a given year, is different from life expectancy, and is lower when large numbers of children die.

But while developing countries made big strides the United States stagnated. American women registered the smallest gains in life expectancy of all high-income countries’ female populations between 1990 and 2010. American women gained just under two years of life, compared with women in Cyprus, who lived 2.3 years longer and Canadian women who gained 2.4 years. The slow increase caused American women to fall to 36th place in the report’s global ranking of life expectancy, down from 22nd in 1990. Life expectancy for American women was 80.5 in 2010, up from 78.6 in 1990.

“It’s alarming just how little progress there has been for women in the United States,” said Christopher Murray, director of the Institute for Health Metrics and Evaluation, a health research organization financed by the Bill and Melinda Gates Foundation at the University of Washington that coordinated the report. Rising rates of obesity among American women and the legacy of smoking, a habit women formed later than men, are among the factors contributing to the stagnation, he said. American men gained in life expectancy, to 75.9 years from 71.7 in 1990.

Health experts from more than 300 institutions contributed to the report, which provided estimates of disease and mortality for populations in more than 180 countries. It was published in The Lancet, a British medical journal.

The World Health Organization issued a statement on Thursday saying that some of the estimates in the report differed substantially from those done by United Nations agencies, though others were similar. All comprehensive estimates of global mortality rely heavily on statistical modeling because only 34 countries — representing about 15 percent of the world’s population — produce quality cause-of-death data.

Sub-Saharan Africa was an exception to the trend. Infectious diseases, childhood illnesses and maternity-related causes of death still account for about 70 percent of the region’s disease burden, a measure of years of life lost due to premature death and to time lived in less than full health. In contrast, they account for just one-third in South Asia, and less than a fifth in all other regions. Sub-Saharan Africa also lagged in mortality gains, with the average age of death rising by fewer than 10 years from 1970 to 2010, compared with a more than 25-year increase in Latin America, Asia and North Africa.

Globally, AIDS was an exception to the shift of deaths from infectious to noncommunicable diseases. The epidemic is believed to have peaked, but still results in 1.5 million deaths each year.

Over all, the change means people are living longer, but it also raises troubling questions. Behavior affects people’s risks of developing cancer, heart disease and diabetes, and public health experts say it is far harder to get people to change their ways than to administer a vaccine that protects children from an infectious disease like measles.

“Adult mortality is a much harder task for the public health systems in the world,” said Colin Mathers, a senior scientist at the World Health Organization.

Tobacco use is a rising threat, especially in developing countries, and is responsible for almost six million deaths a year globally. Illnesses like diabetes are also spreading fast.

Donald G. McNeil Jr. contributed reporting.

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Court ruling could cut California spending on Medi-Cal

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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America Demands: Obama, Build Us a Death Star

A petition demanding the President Barack Obama administration build a Death Star like the one in Star Wars reached 25,000-plus signatures Thursday, a threshold requiring the government to respond whether it will build the fictional weapon capable of annihilating planets with its super laser.

The petition on the White House website’s “We the People” page demands the Death Star project begin by 2016.

“By focusing our defense resources into a space-superiority platform and weapon system such as a Death Star, the government can spur job creation in the fields of construction, engineering, space exploration, and more, and strengthen our national defense,” the petition says.

The administration promises it will publicly respond to petitions if they get 25,000 signatures in a month’s time.

The Death Star, the Galactic Empire’s “ultimate weapon,” was a space station first appearing in the 1977 Star Wars Episode IV: A New Hope.

David Kravets is a senior staff writer for Wired.com and founder of the fake news site TheYellowDailyNews.com. He's a dad of two boys and has been a reporter since the manual typewriter days.

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Follow @dmkravets and @ThreatLevel on Twitter.

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One Direction named MTV’s 2012 Artist of the Year

NEW YORK (AP) — They’re platinum. They’re fascinating. And now One Direction is MTV‘s 2012 Artist of the Year.

MTV says the fivesome is “the clear choice for the top spot” after a year that included two No. 1 albums, hits such as “What Makes You Beautiful” and a sold-out world tour.

One Direction’s Louis (LOO’-ee) Tomlinson calls Thursday’s honor “the icing on the cake.”

MTV’s team of music staffers chose Carly Rae Jepsen‘s “Call Me Maybe” as song as the year.

One Direction placed third on the U.K. version of “The X Factor” in 2010 and made their U.S. debut in March with the No. 1 album “Up All Night.” Their sophomore album, “Take Me Home,” was the year’s third-highest debut.

The group also made Barbara Walters’ most fascinating people of 2012 list.

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Paper Links Nerve Agents in ’91 Gulf War and Ailments

Reviving a 20-year debate over illnesses of veterans of the 1991 Persian Gulf war, a new scientific paper presents evidence that nerve agents released by the bombing of Iraqi chemical weapons depots just before the ground war began could have carried downwind and fallen on American troops staged in Saudi Arabia.

The paper, published in the journal Neuroepidemiology, tries to rebut the longstanding Pentagon position, supported by many scientists, that neurotoxins, particularly sarin gas, could not have carried far enough to sicken American forces.

The authors are James J. Tuite and Dr. Robert Haley, who has written several papers asserting links between chemical exposures and gulf war illnesses. They assembled data from meteorological and intelligence reports to support their thesis that American bombs were powerful enough to propel sarin from depots in Muthanna and Falluja high into the atmosphere, where winds whisked it hundreds of miles south to the Saudi border.

Once over the American encampments, the toxic plume could have stalled and fallen back to the surface because of weather conditions, the paper says. Though troops would have been exposed to low levels of the agent, the authors assert that the exposures may have continued for several days, increasing their impact.

Though chemical weapons detectors sounded alarms in those encampments in the days after the January 1991 bombing raids, they were viewed as false by many troops, the authors report.

But a significant number of medical experts have cast doubts on the sarin gas theory over the years, and several said Thursday that the new paper did little to change their minds.

Dr. John Bailar, an emeritus professor at the University of Chicago who led a group that studied gulf war illnesses in 1996, said there was still no clear evidence that troops might have been exposed to levels of sarin significant enough to have a biological effect.

Dr. Bailar said that the stress of war rather than chemical agents might be a more likely cause of the veterans’ problems. “Gulf war syndrome is real,” he said, using the term for a constellation of symptoms. “And the veterans who have it deserve appropriate medical care. But we should not kid ourselves about its causes or about the most effective means of treatment.”

Nearly half of the 700,000 service members who were deployed in 1990 and 1991 for the gulf war have filed disability claims with the Department of Veterans Affairs, and more than 85 percent of those have been granted benefits, the department has reported.

Many of those veterans have reported long-lasting problems, including chronic pain, memory loss, persistent fatigue and diarrhea, some of which had no clear causes. Many veterans insist that their problems are not the result of stress but have a biological basis.

Paul Sullivan, a gulf war veteran who has advocated for more research into the illnesses, said the new paper provided “overwhelming scientific evidence” that exposure to chemical agents sickened those troops and that the Department of Veterans Affairs should ensure that all receive health care and benefits.

Panels of medical experts have come down on both sides of the issue, with one group in 2000 questioning whether low levels of sarin could cause long-term health problems and another in 2004 concluding that toxic chemicals had caused neurological damage in many troops.

The Pentagon has acknowledged that the postwar demolition of a chemical weapons depot at Kamisiya, in southern Iraq, may have exposed 100,000 troops to nerve gas. But the military has said it was unlikely that nerve gas caused long-term illnesses in troops, a position it reiterated on Thursday.

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DealBook: UBS Expected to Pay At Least $1 Billion to Settle Libor Case

10:00 p.m. | Updated Federal prosecutors are close to securing a guilty plea from a UBS subsidiary at the center of a global investigation into interest rate manipulation, the first big bank to agree to criminal charges in more than a decade.

UBS is in final negotiations with American, British and Swiss authorities to settle accusations that its employees reported false rates, a deal in which the bank’s Japanese unit is expected to plead guilty to a criminal charge, according to people briefed on the matter who spoke of private discussions on the condition of anonymity. Along with the rare admission of criminal wrongdoing at the subsidiary, UBS could face about $1 billion in fines and regulatory sanctions, the people said.

The steep penalty, a surprise given the bank’s cooperation in the case, would represent the largest fine to date in the rate-rigging investigation. In June, the British bank Barclays agreed to pay $450 million to settle accusations that it influenced crucial benchmarks.

The settlement with UBS, which is based in Switzerland, could come as soon as Monday, the people briefed on the matter said. These people cautioned that the bank’s board had not yet approved the deal and it could still fall apart.

By pushing for a guilty plea, the Justice Department may be signaling a new aggressive stance.

Authorities have been reluctant to indict big banks, fearful of the potential for job losses and the ripple effect through the broader economy. If a bank pleads guilty to a crime, the case can be tantamount to a death sentence because the institution may lose its charter to operate.

With UBS, federal prosecutors are trying to strike a balance. By levying a charge against the subsidiary, authorities send a powerful message, but stop far short of putting the company out of business.

Prosecutors decided against indicting HSBC over money laundering, concerned over the repercussions to the financial system. Instead, HSBC, the British bank, agreed on Monday to pay a record $1.9 billion in penalties.

On Thursday, Senator Charles E. Grassley of Iowa, the top Republican on the Senate Judiciary Committee, sent a letter to Eric H. Holder Jr., the attorney general, criticizing the Justice Department for an “inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists,” referring in part to the HSBC case. Mr. Grassley called the fine “hardly even a slap on the wrist,” given HSBC’s profit.

But the UBS case offers authorities a long-awaited moment to criminally punish a big bank. While the public is still simmering over the lack of prosecutions stemming from the financial crisis, the actions against UBS could help damp concerns that the world’s largest and most interconnected banks are too big to indict.

The Justice Department’s criminal division, which arranged the guilty plea with the Japanese subsidiary, could also strike a nonprosecution agreement with the parent company, the people briefed on the matter said. The deal will force UBS to continue cooperating with the wider rate manipulation case.

In a statement, a UBS spokeswoman said the bank continued “to work closely with various regulatory authorities to resolve issues relating to the setting of certain global benchmark interest rates. As we are in active discussions with these authorities, we cannot comment further.” The authorities leading the case — the Justice Department, the Commodity Futures Trading Commission, the Financial Services Authority of Britain and the Swiss Financial Market Supervisory Authority — declined to comment.

As the UBS investigation comes to a close, global authorities are fast-tracking several civil and criminal cases in connection to the manipulation of important benchmarks, including the London interbank offered rate, or Libor. Regulators and prosecutors have uncovered evidence that points to a systemic problem with the rate-setting process, which underpins trillions of dollars of financial products like mortgages, student loans and credit cards.

Authorities contend that some bank employees reported false rates to squeeze out extra trading profits and deflect concerns about their health during the financial crisis.

The fallout from the Libor case could be significant. The Royal Bank of Scotland has indicated that it could announce penalties before its next earnings release in a couple of months. Deutsche Bank also has set aside money to cover potential fines. In all, the investigation has ensnared more than a dozen big banks.

The push for criminal charges at UBS caught the bank off guard.

After settling a tax evasion case in 2009, the bank was eager to cooperate with authorities and gain leniency in the Libor case. UBS, for example, reached a conditional immunity deal with the antitrust arm of the Justice Department, which was supposed to protect the bank from criminal prosecution under certain conditions. But the deal did not extend to the Justice Department’s criminal division, giving authorities some leeway to take action.

With its reputation and profits on the line, the bank moved to dissuade the criminal division from pursuing charges. Bank officials have been meeting with authorities in Washington in a last-ditch effort to influence the outcome, according to the people briefed on the matter.

Eventually, the bank agreed to the broad contours of a settlement that included a guilty plea by the Japanese subsidiary. The bank is still negotiating the final elements of the deal.

Prosecutors are also expected to charge a former UBS trader who featured prominently in the investigation. On Tuesday, Britain’s Serious Fraud Office arrested three men in connection with the Libor case, including Thomas Hayes, a 33-year-old former trader at UBS and Citigroup, according to people with knowledge of the matter. The three men, which also included two people who worked at the British brokerage firm R P Martin, were released on bail the same day.

A lawyer for Mr. Hayes could not be located.

Mr. Hayes is expected to be a central figure in the case against UBS. The UBS settlement is likely to include accusations that Mr. Hayes and other employees colluded with traders at other banks to influence the direction of interest rates, as part of a broader scheme to increase their profits. Some UBS traders have been suspended or fired over the matter.

Mr. Hayes built his reputation as an interest rates trader at UBS. He worked at the Tokyo office of UBS from about 2006 to 2009 before departing for Citigroup. Citigroup fired Mr. Hayes the next year, for approaching a trading desk about influencing the yen-denominated Libor rates, and the bank reported his actions to regulators.

The role of Japanese operations came to the forefront last December when the country’s regulator sanctioned both UBS and Citigroup. Local regulators discovered that traders at the banks had tried to manipulate the Tokyo interbank offered rate, or Tibor, a main benchmark for borrowing in Japan.

The efforts to rig the rate were “unjust and malicious, and could undermine the fairness of the markets,” the Securities and Exchange Surveillance Commission of Japan said in a statement when recommending the nonfinancial penalties against UBS.

UBS has a big presence in Japan. The bank has more than 1,100 employees in the country, spread across its major business lines.

The guilty plea could have collateral consequences for the unit. For one, the guilty plea delivers a painful blow to its reputation, securities experts say. Depending on the details of the case, the group could also be subjected to an independent monitor and face some limitations on its business.

Charlie Savage and Hiroko Tabuchi contributed reporting.

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