As a privately held company, Modern Evil is not required to publicly report on any of its operations or activities. This blog is a faint reflection of our interests and opinions. Thank you.

~ Dr. Archibald T. Staph, Ph.D, President


Death Bonds = Death Bets?

CATEGORY: Death Bonds

DIVISION: Products, Investments

EDITORIAL: In spite of the negative label "Death Bets", we see Death Bonds as a fantastic and profitable opportunity to capitalize on the coming baby boomer decline. Modern Evil Investments will provide an enticing product line for this bond service in the months to come.

Profiting From Mortality - The Death Bond

Business Week

Death bonds may be the most macabre investment scheme ever devised by Wall Street.

In May, as the subprime mortgage market was cracking, many of the biggest players in finance gathered at a conference in New York to talk about the next exotic investment coming down the pike: death bonds. When the event was held two years ago, just 250 people showed up. This time, nearly 600 descended on the Sheraton Hotel & Towers for the three-day confab, including delegations from Bear Stearns (BSC ), Deutsche Bank (DB ), Lehman Brothers (LEH ), Merrill Lynch (MER ), UBS (UBS ), Wachovia (WB ), Wells Fargo (WFC ), and other big firms.

They flocked to seminars with titles such as "Legislative Review," milled about the exhibition hall picking up the usual conference swag, and buzzed at luncheons and a Carnegie Hall gala about the big push into the market being made by Cantor Fitzgerald, a major bond-trading shop. With all the happy banter, you wouldn't have known they were there to learn about new and imaginative ways to profit from people dying.

Death bond is shorthand for a gentler term the industry prefers: life settlement-backed security. Whatever the name, it's as macabre an investing concept as Wall Street has ever cooked up. Some 90 million Americans own life insurance, but many of them find the premiums too expensive; others would simply prefer to cash in early. "Life settlements" are arrangements that offer people the chance to sell their policies to investors, who keep paying the premiums until the sellers die and then collect the payout. For the investors it's a ghoulish actuarial gamble: The quicker the death, the more profit is reaped. Most of the transactions are done by small local firms called life settlement providers, which in the past have typically sold the policies to hedge funds. Now, Wall Street sees huge profits in buying policies, throwing them into a pool, dividing the pool into bonds, and selling the bonds to pension funds, college endowments, and other professional investors. If the market develops as Wall Street expects, ordinary mutual funds will soon be able to get in on the action, too.

BUT THE INVESTMENT BANKS are wading into murky waters. The life settlements industry increasingly finds itself in the grip of dubious characters devising audacious and in some cases illegal schemes to make money. Many are targeting elderly people with deceptive sales pitches—so many that the National Association of Securities Dealers has issued a warning about abusive practices. Others are promising investors unrealistic returns or misleading them about the risks. Some are doing both.

That didn't discourage the high-powered guests at the New York conference, though. As they tossed back cocktails and dined on pan-seared filet mignon, they enthused about the market's possibilities. "Wall Street firms are here because they know this is an asset class that isn't going away," says David C. Dorr, president and CEO of Life-Exchange Inc. (LFXG ), an electronic platform for trading life settlements. "There's big potential."

The truth is, at this early stage, there's no way of knowing how popular death bonds might become. Wall Street's innovation machine has turned out both huge hits and big flops over the years. But the growth of the underlying market for life settlements has been torrid so far. In 2005 about $10 billion worth were transacted, according to Sanford C. Bernstein & Co. (AB ), up from virtually nothing in 2001.

Industry analysts say this number rose to $15 billion in 2006, and could double this year, to $30 billion. Over the next few decades, as the ranks of retirees swell, Bernstein predicts that the face value of life settlement deals will top $160 billion a year in today's dollars. Death bonds will never approach the size of the mortgage market, which saw $1.9 trillion of securities issued last year. But if Wall Street achieves its goal of turning most of the life settlements created each year into death bonds, the market could rival the size of today's junk-bond market, where issuance totaled $128 billion in 2006, up from $56 billion in 1996, according to market watcher Dealogic.

Investment banks have already drawn up their sales pitches to well-heeled institutional customers. Firms say death bonds should return around 8% a year, right between the expected returns of stocks and Treasury bonds. Moreover, they're "uncorrelated assets," meaning their performance isn't tied to what's happening in other markets. After all, death rates don't rise or fall based on what's happening to commodities, say. Uncorrelated assets like these are highly prized in an increasingly connected global financial system.

It all sounds great, except that many of the life settlements that Wall Street firms are buying fall into categories ranging from sketchy to toxic. "They are creating a very risky product," says Janet Tavakoli, a Chicago financial consultant who specializes in advising clients on asset-backed investments. "They may be planning to sell them to sophisticated investors, but they could be roping in people who don't appreciate the risk."

Many life settlement providers, for example, are trying to lure people who don't even hold insurance. In this tail-wagging-the-dog scenario, speculators take out policies on the individuals' behalf, pay them something up front, cover the premiums, and then wait for the people to die so they can collect. At the most outlandish extreme, one outfit devised a plan involving the population of the Federation of St. Kitts and Nevis in the Caribbean.

Investors, meanwhile, have been burned by operators who have misrepresented the profit potential on deals. Two men now awaiting trial in California hatched an allegedly fraudulent scheme aimed at the entire congregation of a black church in South Central Los Angeles. They promised investors 25% annual returns because African Americans die earlier than other racial groups—an ugly pitch that prosecutors say overstated the upside potential.

Even some of the biggest life settlement firms operate under a cloud. Philadelphia's Coventry First, for example, faces civil charges from the New York Attorney General's office and is in danger of being barred from doing business in Florida. It denies any wrongdoing.

The eight-year-old industry certainly has an ignominious history. It grew from the shards of the so-called viaticals business, which imploded in the late 1990s amid allegations of fraudulent dealings with AIDS patients and other terminally ill people. The word viatical comes from viaticum, a religious term for the communion given to a person near death. As AIDS spread during the 1980s, patients turned to the viatical settlements market to unlock insurance money to pay for care. But advances in medicine in the 1990s extended patients' lives, making viaticals less profitable for the buyers. At the same time, the industry was rife with abusive sales practices that drew the attention of prosecutors. By 1999, business had all but dried up.

Surprisingly little has changed in the latest iteration. Only 26 states require professional licensing for life settlement brokers; elsewhere, anyone can hang a shingle. The market is especially popular among former stockbrokers, mortgage brokers, insurance agents, and lawyers. But all sorts of people from small-time movie producers to dentists are setting up shop.

There's nothing inherently wrong with life settlements. In fact, for people who need quick cash or want to supplement their retirement nest eggs, the market can be a boon. Without it, a person looking to unload a policy would have only one choice: to sell it back to the insurer for the so-called cash surrender value, a fraction of the face value. "No one is forcing anyone to sell insurance policies," says Meir Eliav, president of Legacy Benefits Corp., a New York life settlements provider that was involved in one of the first death bond deals in the U.S., a $70 million offering in 2004. "This is a terrific option for the consumer."

Wall Street's intense interest says much about the world of high—and low—finance in 2007. In earlier eras, big firms' success or failure rested mainly on their ability to turn long-term client relationships into full-service operations—advising corporate clients on potential acquisitions, managing investments, and arranging financing. But Wall Street has been overtaken by securities trading and the endless creation of financial products, such as asset-backed bonds, collateralized debt obligations, credit default swaps, and other exotica.

Cast in that light, Wall Street's move into death bonds seems almost inevitable. Goldman Sachs (GS ) and the other firms consider these instruments the next stage in a trend that started with mortgage-backed securities in the 1970s and has since expanded to include everything from credit-card receivables to intellectual property. The term of art is "securitization," and it has become a multitrillion-dollar business. The mechanics are straightforward: Assets are pooled together and then sold off in the form of bonds or pieces of bonds. By collecting many different assets, the risk is dispersed: Even if a few don't pay off, the rest will. At least that's the theory.

ALREADY THERE'S a bustling market in Germany and London for unrated death bonds—that is, ones that aren't graded by big ratings agencies such as Moody's Investors Service (MCO ) or Standard & Poor's (which, like BusinessWeek, is a unit of The McGraw-Hill Companies (MHP )). So far there have been only two small rated deals in the U.S. But given how aggressively the banks are stockpiling life settlements, most market watchers expect big, rated deals to become commonplace soon, at which point mutual funds can dive in. "The product just lends itself to securitizations, like what has been done with mortgage-backed securities," says Philippe Hatstadt, who heads the new "longevity derivatives" group at Bear Stearns & Co (BSC ). Cantor Fitzgerald, one of Wall Street's savviest bond-trading shops, is rolling out an electronic trading platform for life settlements and, ultimately, death bonds. The LexNet platform has been in the works for more than a year and is a major priority inside Cantor, say insiders.

But the push into increasingly complicated securitizations carries with it ever greater risk. That's what Wall Street is dealing with now as bonds backed by pools of subprime mortgages blow up left and right. A surge in defaults on these riskiest of loans is battering the hedge funds that invested—and the banks that arranged, packaged, and sold them. In June, two Bear Stearns hedge funds that bet on bonds backed by subprime loans collapsed, sparking panic on Wall Street about the health of other risky investments. Tavakoli says the same kinds of missteps are bound to happen with death bonds. But Wall Street is good at justifying its moves into new lines of business, however iffy they might seem, notes Kenneth C. Froewiss, a professor of finance at New York University's Stern School of Business and a former JPMorgan Chase & Co. (JPM ) investment banker: "At the end of the day, what Wall Street does best is figuring out what investors might want and structuring products to meet those needs." And its own needs.

That's not to say it isn't aware of appearances. Wall Street is doing its best both to polish the life settlement industry's image and to downplay its own direct involvement. The New York conference was put on by the Life Insurance Settlement Assn. (LISA), an organization of market players that began as the Viatical Association of America in 1994, changed its name to the Viatical & Life Settlement Assn. in 2000, and then dropped the "viatical" altogether three years ago. In an attempt to put even more distance between Wall Street and the old viatical crowd, six investment houses, including Bear Stearns, Credit Suisse (CS ), Goldman Sachs (GS ), and UBS, in March formed a trade group called the Institutional Life Markets Assn. to lobby for "best practices" and "appropriate regulation."

Until some degree of legitimacy is in place, firms will keep as low a profile as possible. Goldman Sachs, for example, came close last year to acquiring San Diego's Life Settlement Solutions Inc., a large provider, but backed out at the last minute, according to people familiar with the potential deal. Instead, Goldman, which declined to comment for this story, is quietly building up its own subsidiary under the nondescript name Eastport Capital. That unit sent four representatives to the LISA conference.

It's no wonder that Wall Street is simultaneously attracted and cautious. The alchemy going on in the finance labs is real, but the market for life settlements is deeply troubled. There's a persistent problem with brokers offering lowball prices and failing to disclose transaction costs. The marketing to investors has often been suspect, too. In late 2005, for instance, the big accounting firm KPMG sent a cease-and-desist notice to Keydata Investment Services Ltd., a London firm that was using KPMG's name in its marketing material for unrated death bonds without permission. A Keydata official didn't return phone calls seeking comment. A KPMG spokesman says: "We do not endorse or recommend these products."

IMPROPER MARKETING is just one of the things that got two California men into trouble. Next March, Curtis D. Somoza and Robert A. Coberly are scheduled to go on trial in federal court in Los Angeles on charges that they bilked dozens of investors out of tens of millions of dollars in a scheme involving an African American church group in Los Angeles called the Personal Involvement Center. The men, whose lawyers declined to comment, raised $69 million for an investment trust called Persistence Capital, which arranged to buy policies from Transamerica Corp. on the lives of some 2,000 members of the inner-city church. The deal was structured so that Persistence would pay for the premiums, while the $275,000 death benefit on each policy would be split three ways: $15,000 to the deceased person's family to cover burial costs, $20,000 to the church group, and the remaining $240,000 to the trust. The trust's haul would go toward paying the premiums on the remaining policies and providing payouts to investors.

Somoza and Coberly pitched the deal to the Reverend J. Benjamin Hardwick as an opportunity for the 75-year-old pastor to get a modest death benefit for his mostly poor members and raise funds for the group's charitable works. Somoza and Co-berly sold it to investors as a way to score a high annual return of 25% because the church group's members "were predominantly African Americans and had a higher mortality rate than the average population," according to the indictment. Prosecutors say the pitch reflected inflated return assumptions. Hardwick didn't return several phone calls seeking comment.

Soon after the deal was set up, say prosecutors, Coberly and Somoza began looting the trust to buy mansions and sports cars. In September, 2005, a year after Persistence bought the policies from Transamerica, it was forced into bankruptcy by investors demanding their money back. Trying to salvage the scheme, Coberly and Somoza shopped the policies to other investors but could find no buyers. They were arrested in May, 2006, and charged with 27 counts of securities and wire fraud.

Coventry First has also been accused of wrongdoing. Last October Eliot Spitzer, in one of his final acts as New York's attorney general, charged the firm with cheating elderly insurance holders. In a civil suit in New York State Court, the now-governor accused Coventry, which buys life settlements and resells them, of making "dozens" of secret payments to brokers as a reward for not seeking competing bids. (The investigation is now overseen by Attorney General Andrew Cuomo.) Coventry CEO Alan Buerger says the lawsuit was based on "a handful of out-of-context e-mails."

True or not, the allegations against Coventry sent a shock wave through the life settlement business. Most damagingly, they torpedoed a planned $300 million death bond offering from a partnership formed by Coventry and Ritchie Capital, a hedge fund. The deal, which was to be underwritten by Lehman Brothers Inc (LEH )., would have been backed by a pool of life insurance policies with a face value of $1.16 billion, by far the largest U.S. death bond offering to date.

What's alarming is how far the deal had progressed before blowing up. Investors were cued up and ready to buy. On Oct. 10, 2006, Moody's (MCO ) even tagged the senior notes, which had a face value of $166 million, with a rating of A3, an investment-grade status that would have allowed ordinary mutual funds to pile in. Then the Coventry suit was filed, and Moody's quickly withdrew its rating, citing the "uncertainty surrounding the transaction." Michael N. Adler, a Moody's spokesman, says the firm wasn't aware Coventry was under investigation when it issued the rating. The 10-page report that accompanied the rating is no longer available to the public. In the report, obtained by BusinessWeek, Moody's said it believed that Coventry's "due diligence was adequate for the rating being requested." Jay Eisbruck, a Moody's managing director, stresses that "this is an asset class that we are very careful about."

What especially worries regulators are so-called stranger- initiated deals, in which an investor persuades people to take an expensive policy and lends them money for the premium. In the boldest example yet, an investor group pitched a bank on a deal involving all 45,000 residents of St. Kitts and Nevis. The promoters claimed the islands' government was on board. But the deal got a cool reception from Wall Street bankers, who all stress that they perform ample due diligence before buying policies. A government finance official said he had never heard of such a deal.

Yet hedge funds and other finance firms have been diving into other stranger-initiated deals in the past two years, wooing seniors into taking out policies by offering cruises and other gifts. Industry sources estimate that $10 billion to $20 billion in such policies have been created since 2004. Some state insurance commissioners have joined with insurers in calling for a crackdown.

Amazingly, such problems have merely delayed the emergence of death bonds, not derailed it. G. Andrew Karolyi, a finance professor at Ohio State University's Fischer College of Business who specializes in international markets, says Wall Street's interest is predictable given the "demographic bubble" of aging baby boomers, many of whom will be looking to cash in insurance policies. "For investment banks," he says, "all of this sounds like an opportunity to make money." Tavakoli, the securitization consultant, is more blunt. The idea of death bonds, she says, "creeps me out."

How Death Bonds Work

CATEGORY: Death Bonds, How-To

DIVISION: Products, Investments

NOTE: This instructional brief is meant as a quick overview on how Death Bonds work. For more details, consult a professional broker [coming soon to Modern Evil].

Profiting from Mortality

Death bonds may be the most macabre scheme ever. Investors buy up life insurance policies, securitize them, and collect when the insured persons die.

The Seller

A person, typically 70 or older, who wants to cash out of a life insurance policy hires a "life settlement" broker to find prospective buyers. The buyers keep paying the premiums until the seller dies, and then they collect. The up-front payout to the seller varies widely, from 20% of the death benefit to 40%.

The Broker

A person paid to link buyers and sellers, this player typically seeks three bids from specialty finance firms called life settlement providers, which are often financed by hedge funds and investment banks. Commissions, paid by the seller, usually range from 5% to 6%.

The Provider

The life settlement provider resells the insurance policy to a hedge fund or investment bank, which warehouses it in order to build a big pool of policies.

The Investment Bank/Hedge Fund

After a bank or hedge fund collects a sufficient number of policies, typically 200, it turns them into asset-backed securities called death bonds to sell to investors. The pitch: Death bonds will produce steady returns (around 8%) and aren't correlated with stocks, bonds, commodities, or other investments.

The Investor

Hedge funds and other big investors are already buying up death bonds in Europe and expect a big bond issue in the U.S. soon. Institutional investors are especially attracted to uncorrelated assets, which make their portfolios less volatile.

The Bond Rater

Big debt-rating agencies such as Moody's Investors Service and Fitch Ratings are soon expected to start issuing ratings on death bonds in the U.S., opening the market to other big investors including mutual funds. Moody's has already rated at least one death bond issue, although it subsequently pulled the rating when the provider was charged with fraud.


Wanted: Dead Or Alive

CATEGORY: Death, Technical Definitions

DIVISION: Modern Evil, Products

EDITORIAL: Technical definitions of death fail at the times when they are needed the most, usually in life-and-death situations.

So to put to rest the debate for yourself and your loved ones, the Modern Evil Online Will and Testament Kit [to be introduced later this year] will also include a customizable AND legal definition of your own death. Your end should be of your own choosing.

Because when you're incapable of living, you may also be incapable of dying.

Should You Define Your Own Death?

By Tom Heneghan

17 Jul 2007 23:04:59 GMT

WASHINGTON, July 18 (Reuters) - Robert Veatch weighs his words carefully when he talks about how people pass away. Most simply die. Some "become dead". Others are "made dead".

Some end-of-life cases are so unclear, he thinks, that people should be able to choose in advance the definition of death they want to be used to declare them deceased.

"Most ordinary people, including most physicians, assume whether you're dead or alive is a science question," Veatch, a Georgetown University medical ethics professor who has lectured about death and dying for over three decades, told Reuters.

"In my view, it's a philosophical and religious issue and different people have different views on the matter," he said at a bioethics seminar at Georgetown's Kennedy School of Ethics.

Thanks to medical progress, terminally ill patients or victims of severe accidents can be kept on life support far beyond the point where they would have died naturally.

Veatch asked if being permanently unconscious and dependent on feeding and hydration tubes is still really life. If not, then people taken off that support are not killed, he argued, but are "made dead" or they "become dead".

The traditional view is that death occurs when the heart and lungs stop. Since the 1970s, Western countries have defined it as the irreversible loss of the entire brain's functions.

But the brain stem can keep basic functions going -- such as breathing -- even in a permanent vegetative or comatose state.

So since 1973 Veatch has been advocating a third definition saying that death sets in when the higher brain functions -- the thinking and feeling that make us human -- are lost.

This means death comes when consciousness is permanently lost, he said: "If you've got the substratum in your brain for consciousness, you're alive. If that's gone, you're dead."

Veatch suggests the law set a default definition, most likely whole brain death, and let individuals opt out and sign a statement saying they want to be declared deceased either by cardio-respiratory death or higher brain death.

Only two places on Earth allow anything near this. The U.S. state of New Jersey lets orthodox Jews opt out of the whole brain-death idea and use cardio-respiratory death because they traditionally see breath as the key to life.

Japan uses the heart and lung criteria as a default, but lets people opt for whole brain death so they can donate organs.

"It's not an accident that we did the first heart transplant in 1968 and in 1970, we began adopting laws that change the definition of death," Veatch said. "As soon as we figured out a way to do heart transplants, we had to figure out a way to get somebody dead without their heart stopping."


Stock in Niche Defense Firms Soars in Wartime

CATEGORY: War Profiteering

DIVISION: Investments

COMMENTARY: If there's anyone who should come out ahead in the current wars, it's the people that started them. They're the ones that took the initiative, had a vision, and sold everyone on the new venture - so of course, they should reap the rewards.

We encourage you to contact your broker and get in on the action while there's still some war left.

Armaments And Investments

By Renae Merle

Washington Post Staff Writer

Sunday, July 15, 2007; F01

Bullets, trucks and armor -- the meat and potatoes of the defense industry -- are back in fashion.

After years of holding second rank to expensive, futuristic programs -- from $300 million fighter jets to robots -- the essentials have been pushed to the forefront by the wars in Iraq and Afghanistan. And that has proved good news for the stocks of companies that replenish the weapons, trucks and helicopters that see frontline action. They are among the best performers this year, analysts say.

The Iraq war may be politically unpopular, but it has been a boon for the defense industry. Last year, the sector soared 27.7 percent, while the Standard & Poor's 500-stock index rose 13.6 percent. So far this year, the industry has gained 26.7 percent, compared with the S&P's 9.5 percent increase. Since 2001, defense stocks that make up the S&P Aerospace & Defense Select Industry Index have climbed 181.7 percent; the broader market is up 17.6 percent.

But it's the niche companies, such as the makers of armored vehicles, that are the top individual gainers this year, according to the Spade Defense Index, which tracks the sector.

"Clearly anything that is still related to the war in Iraq and Afghanistan is the hottest market right now," said Byron Callan, an independent industry analyst.

Among the hottest products is the Marine Corps' newest mine-resistant vehicle. The program for the vehicles -- which cost about $1 million each -- has ballooned over the past few months to a potential $20 billion from $8 billion, lifting prospects for the vehicles' manufacturers. The military is seeking the vehicles because it thinks they can better protect troops from roadside bombs, the biggest threat to service members in Iraq.

The makers of these vehicles, including Force Protection and Oshkosh Truck, recently emerged as winners in the House version of the 2008 defense authorization bill. The administration had requested $400 million to help fund production. The House approved $4 billion. Force Protection stock is up 31percent this year, and Oshkosh has gained 34 percent.

A highly critical report from the Pentagon inspector general didn't hurt Force Protection's stock. Last week, the inspector general's office said Force Protection was slow to deliver on contracts, but the company's stock finished up Thursday after release of the report.

The larger defense industry isn't exactly suffering from the attention given to the niche players. The big weapons makers have continued to soak up huge Pentagon spending and have expanded their international business. Military spending is on target to reach $624.6 billion in fiscal 2008, including more than $100 billion in war supplemental outlays, according to a report by the Center for Strategic and Budgetary

Assessments on June 7. At those levels, the flow of military funds would be the highest in real terms since fiscal 1946, the report said.

Among big defense contractors, Lockheed Martin stock has gained 6.7 percent this year, General Dynamics has climbed 9 percent and Raytheon is up 4 percent.

Analysts caution that the huge outlays that have propped up the big defense companies may not continue. "It just seems there is a ceiling we're going to hit here. It is not like DOD is behaving like it's blue skies forever," said Callan, the independent industry analyst.

In fact, the House authorization bill shaved more than $800 million from Boeing's Future Combat Systems. That huge Army modernization project includes new tanks and equipment that will not be ready for several years.

Investing in defense companies is different from buying into most other industries. For starters, a company's income depends largely on the Pentagon and Congress. In choosing stocks, the political and military winds often matter as much as a company's operations. A weapon in favor one year could be canceled the next, requiring investors to stay sharply attuned to the companies' lobbying efforts and political clout. A company's bottom line can also be affected by government oversight. Congress has recently stepped up its criticism of firms for late and over-budget programs.

"The defense industry has done very, very well without much oversight from Congress," said David Strauss, U.S. aerospace and defense analyst for UBS Investment Research.

He noted that in the past, companies were not forced to absorb some of the expenses when a program exceeded its cost targets. "Now you've got Congress trying to put a closer thumb on that," Strauss said.

In a May industry survey, Standard & Poor's said: "The military weapons-buying business operates in a highly regulated environment." Put another way, the report added, the budget process by which contractors get money is "arduous and unpredictable."

Investors also find themselves somewhat in the dark about what exactly they're getting for their money. Often a good chunk of larger defense companies' operations are classified, meaning investors can't get a full picture of what's generating a firm's revenue.

"Even for people on Wall Street, it's very, very hard for us to know how much individual companies are benefiting from classified areas," said Strauss.

Intelligence spending is on the rise, analysts say. One hot area is information technology for gathering intelligence and identifying enemies, said Eric Hugel, an industry analyst for Stephens Inc. "I mean, there is a lot money going into these things, we just don't know how much, but theoretically it's a lot," Hugel said.

The excitement about this sector was evident last year when Northrop Grumman bought Columbia-based Essex. Northrop sought Essex because it specializes in classified technology used by the National Security Agency and other agencies. Northrop paid about $580 million for Essex, whose technology processes signals, images and information the agencies collect. Essex's projected earnings of $250 million to $300 million this year made Northrop's purchase among the priciest for a federal information technology firm in recent memory, according to Jefferies Quarterdeck, a mergers-and-acquisition investment-banking firm that served as Essex's adviser.

Information technology companies operating in the more prosaic arena of Pentagon computer upgrading and database integration have been attracting less funding in recent years. These firms, which flourished after the Sept. 11, 2001, terrorist attacks, are now losing out to sexier IT companies involved in intelligence. Organic revenue growth in the sector has declined to about 5 percent from an average of 20 percent in 2004, said Bill Loomis, a government-technology analyst for Stifel Nicolaus. The information technology company CACI International, for example, has lowered its earnings expectations and seen its stock slump in recent months. CACI of Arlington is down 12 percent this year.

"In the 1990s, the federal IT budget was growing faster than the overall defense budget. Now that has switched," Loomis said. "You don't have to put the next generation of financial software in place in a time of war, so we tend to see a number of those engagements slow down."

In the long term, the defense companies' fate could depend on the ballot box and the war. "I am positive on defense stocks still, but there is cautionary note in background. There could be potential cuts to the budget, particularly if we get a Democratic president and Democratic Congress," said Richard Tortoriello, equity analyst for aerospace and defense at Standard and Poor's.

Republicans have held down funding for non-defense projects, which has helped the Pentagon budget grow, Strauss said. "If Democrats focus on [increasing] non-defense discretionary spending, it will be difficult for the defense budget to continue to go up," he said.

And what happens if the war ends? Some analysts think the big players such as Lockheed Martin and Boeing could benefit as the focus returns to the long-range transformation of the military. "After we get out of Iraq, there has been a lot of investment activity that has been delayed that will be put back on track," said Scott Sacknoff, manager of the Spade Defense Index.

*Batteries Not Included

CATEGORY: Pseudo-Religion, Bunko

DIVISION: Products

NOTE: Modern Evil will be offering a Special Discount and Rush Delivery on this product this fall, just in time for the festive Halloween season.

Impress Your Friends. Zap Loved Ones. And order soon - Don't Be Left Out.

Police Seize Magic Trick From Preacher

Tue Jul 10, 8:49 AM ET

Ugandan police are holding a Ghanaian preacher over a stage magic device they fear may dupe people into believing they have experienced miracles.

Customs officials seized the Electric Touch device -- which magicians use to give small electric shocks to volunteers -- from "Prophet" Obiri Yeboah at the airport last week, the state owned New Vision daily reported Tuesday.

The pastor heads one of many Pentecostal churches in Uganda, receiving large sums of money from congregations seeking miracle cures for diseases or help with financial problems.

The Electric Touch device is usually sold in magic shops alongside card tricks, magic coins and disappearing balls.

"With a simple touch, make a fluorescent bulb glow on and off at your command, make confetti move, charge a spoon and watch as it shocks a volunteer!" says one online magic shop selling the device.

"People could be duped to think it is a miracle," the New Vision quoted Civil Aviation Authority security chief Herman Owomugisha as saying.

Officials are worried about the proliferation of "miracle" churches in Uganda, many of which claim to cure HIV/AIDS.


Killer Ghost Terrorizes Village

CATEGORY: Killer Ghost, Evil Spell

DIVISION: Products

NOTE: By Fall '07, Modern Evil will announce a line of services designed to help people in these types of situations - specifically regarding evil spells and their consequences.

Village School Under Evil Spell

Statesman News Service

DHENKANAL, July 6: Superstition has caused panic among the school children at the Jagannathpur gram panchayat as the presence of a ghost, at the Kageilo Janata School spread like wild fire, with the villagers speculating that the ghost is that of a child.

A team of doctors and the district inspector has visited the school. But the efforts to convince people have failed, and most of the villagers are convinced about the presence of the killer ghost.

According to them one student has died and four others have been hospitalized due to the evil spell cast by the ghost. Priyabrata Samal, a student of class VII went out to urinate and complained of reeling and eventually fell down. He was rushed to the hospital, but died on the way on Monday, the villagers narrated.

The very next day Saroj Das who used to sit beside Samal showed similar symptoms, but recovered, while a third boy Satyabrata Samal has also fallen unconscious.

The doctors who visited the school failed to find any outbreak of disease in the area. The district inspector of schools Mr Mayadhar Pany said that he too had visited the school.

He admitted that the villagers are firmly believing in the presence of the apparition.

The local administration has been trying to dispel such baseless apprehensions.

It has also undertaken tests of the tubewell water to find out whether the water has been contaminated or not. Study at the school has been hampered because of the rumor that has gained wide credence.


Insurable Interests are Everywhere

CATEGORY: Death Insurance, Secret, Law Suit

DIVISION: Products

NOTE: Breaking the waves as usual is WalMart, by taking out life insurance policies on their employees without their employees knowledge or consent. Fantastic! We at Modern Evil believe this is a wonderful new revenue stream and can be applied to every business.

By the fall, we will provide an easy Do-It-Yourself life insurance kit called "Insurable Interests", complete with a registered insurance company, so that everyone can take out life insurance policies on their employees, strangers, or anyone.

Husband Files 'Dead Peasant' Suit Against Wal-Mart for Collecting Insurance in Spouse's Death

By Emanuella Grinberg

Court TV

When Karen Armatrout died of cancer in 1997, her husband, Richard, collected a modest amount in life insurance benefits from her employer, Wal-Mart.

But Armatrout claims that, unbeknownst to him, Wal-Mart also collected on a life insurance policy, one the company took out on Karen Armatrout years before without her knowledge.

This week, Armatrout filed a class-action complaint seeking what his lawyers estimate might be $80,000 in benefits that Wal-Mart supposedly collected "in bad faith" on a corporate-owned life insurance policy.

Armatrout's "dead peasant" suit, filed Wednesday in Tampa, Fla.'s U.S. District Court, accuses Wal-Mart ofmaking money off her death without having a valid claim to her estate.

Typically, such a stake, known as an "insurable interest," is reserved for individuals so closely connected to the person insured that he or she would suffer significant financial damage if the person died.

The complaint also charges that the Arkansas-based corporation misappropriated Karen Armatrout's name and personal information for the purposes of taking out the policy.

"Wal-Mart and the insurers used employees' private information to buy and sell policies," Armatrout's Texas attorney, Mike D. Myers, told "As matter of public policy, Wal-Mart should not be permitted to keep the policy's benefits because it did not have the necessary insurable interest in the lives of its rank-and-file employees to warrant being a beneficiary."

From 1993 to 1998, Wal-Mart was not alone in reaping the tax benefits associated with corporate-owned life insurance, which came to be known by critics as "dead peasant" insurance, based on a character in Nikolai Gogol's "Dead Souls" who buys up the contracts of recently deceased serfs.

Lawyers for Armatrout, who say that Wal-Mart took out such policies on 350,000 "rank and file" employees like Karen Armatrout during that time, have also participated in lawsuits against Golden Corral, Winn Dixie and Camelot Music.

The attorneys, who have brought three identical lawsuits against Wal-Mart in Texas, Oklahoma and Louisiana, say the company made use of favorable tax regulations in Georgia, which allowed the company to take out corporate-owned life insurance policies without the employees' knowledge.

Wal-Mart settled the suits in Texas and Oklahoma, where the company paid back 100 percent of the benefits, amounting to just over $5 million.

Along with Armatrout's case in Florida, another suit is pending in Louisiana.

In the previous cases, Wal-Mart attempted to argue that Georgia law applied because that was where the policies were purchased and paid out. But the courts found that the proper venue for deciding whether Wal-Mart had an insurable interest was thedeceased's state of residence.

Only six states, Delaware, Georgia, New Jersey, North Carolina, Pennsylvania, Vermont, allow companies to take out life insurance policies on their employees without notifying them. Most states have laws requiring that companies advise their employees and seek their consent before purchasing the policies.

Myers says he is hopeful that the precedents set in the other cases bode well for the Florida case, where he is seeking class-action certification for an estimated 80 plaintiffs in addition to Armatrout.

"I'd rather be where we are now rather than after losing three in a row," Myers said.

Representatives for Wal-Mart did not return calls for comment.


"Priest" Brand Perfumes

CATEGORY: Religious Sales, Iconography

DIVISION: Products

COMMENTARY: Why didn't we think of this?! A "Priest" brand! Clothing, gear, consumables - the works! Taking something so common, so omnipresent in world culture, and trademarking it so that you can make a killing on the free market. This is such a good idea Father Jankowski that we'll race you to it.

Priest Plans His Own Perfumes

Tue Jul 3, 2007 9:41AM EDT

WARSAW (Reuters) - A prominent Polish cleric known for preaching against communism and for his anti-Semitic remarks said on Tuesday he planned to launch perfumes, clothing and cafes branded with his image.

Father Henryk Jankowski took part in strikes which led to the end of communism in 1989 as part of Solidarity movement. He was later suspended from preaching for a year after insulting remarks about Jews.

Setting out his plans, Jankowski told the daily Dziennik newspaper that his initiative would "do everyone good."

"I am for it as long as it serves a good purpose. If necessary I will also sing and dance," he said.

The money from the initiative would go to the "Father Henryk Jankowski Institute," which says it supports charities and social projects.

Jankowski, who already has a wine branded with his image under the name "Monsignore," said he would be on the panel for "castings" of waitresses for the 16 cafes he plans to open in major Polish cities.

Jankowski is admired by many Catholics for his role in supporting Solidarity.