Slots license bid clouded by SEC suit

The Gaming Commission yesterday grilled Penn National Gaming executives over what it called poor hiring decisions as it weighed the firm's suitability to apply for the sole slots parlor license.

Among the hires questioned was Daniel Mudd, the former CEO of Fannie Mae, who the Securities and Exchange Commission has accused of lying to Congress. Mudd was hired by Fortress Investment Group, a major investor in Penn National.

"That nobody had a concern about it is astonishing to me," commission chairman Stephen Crosby said.

"We dealt with the facts and circumstances expeditiously," said Wesley Edens, a Penn National board member, once they became aware of the SEC lawsuit.

Penn National has an agreement to buy the Plainridge Racecourse in Plainville for $42 million.

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$300M ruling due from judge in Demoulas case

The latest legal tug-of-war in the Demoulas family feud over their Market Basket grocery chain hits a Boston courtroom today, where a judge could decide whether to temporarily block a $300 million shareholder payout.

Shareholder and director Arthur S. Demoulas yesterday fired back against his rival cousin, CEO Arthur T. Demoulas, calling the latter's lawsuit seeking to unseat the board's interim chairman — and set aside some board votes taken under his leadership — as "malnourished by a severe lack of factual allegations."

The CEO's legal move is a "perverse request to obstruct the proper, lawful management of the business and affairs of Demoulas Super Markets Inc. by its board," according to court documents filed by Arthur S. Demoulas, who's been trying to oust his cousin for alleged fiscal recklessness.

The CEO alleges Keith O. Cowan should be disqualified as an independent director because he's "controlled" by Arthur S. Demoulas — in violation of a 1998 court order that three of seven directors be independent. In addition to the $300 million payout — taken from a $500 million cash balance, court documents state — votes taken since Cowan's July election that the CEO wants set aside include formation of a committee to evaluate his performance and report back on whether he should be removed.

Cowan — an attorney and former Sprint executive who previously was an "A" director elected in 2012 by Arthur S. Demoulas and his backers — also filed court documents asserting his independence and painting him as the "latest casualty" of a litigious family feud dating to 1990.

Allegations against him are "replete with the innuendo, invective and ad hominem allegations — not to mention a healthy dose of conspiracy theory — that have come to typify disputes between the Demoulas factions," but devoid of facts, the documents state.

Arthur S. Demoulas and Cowan could not be reached. Spokespeople for the board and CEO declined comment.

Board members are scheduled to meet tomorrow morning in Boston, prior to the court hearing.

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Hugging Elmo, bracelet loom on Toys R Us hot list

Will your kids be clamoring for an Elmo that gives hugs, a loom that lets you make rubber bracelets or a kid-size go-cart this holiday?

Those and others have made Toys R Us' annual list of "hot" toys that the company is betting kids will want around holiday time.

It's a crucial calculation because retailers can make up to 40 percent of annual holiday sales during the holiday season, so Wayne, N.J.-based Toys R Us needs to make sure it has the right mix of toys at the right prices.

Overall holiday spending is expected to be cautious. Retail revenue in November and December is expected to rise 2.4 percent during the biggest shopping period of the year, Chicago-based research firm ShopperTrak said Tuesday. That compares with a 3 percent increase in 2012 from 2011.

Meanwhile, Toys R Us, the largest specialty toy retailer in the U.S., has its own challenges. It's facing tough competition from discount stores and online retailers, and is in the midst of a CEO search since Jerry Storch left in February.

But executives at the privately held company say they expect a bustling season.

"Christmas always comes and parents want to give their kids items on their wish list," said Chief Merchandising Officer Richard Berry. "We're pretty bullish on what holiday looks like."

Toys R Us' list of the top 15 toys for the season is split nearly evenly between toys that are available everywhere and toys that are exclusive to Toys R Us. Exclusives help retailers compete since shoppers can't buy the toys elsewhere for cheaper.

Among non-exclusive offerings: Hasbro's Playskool Big Hugs Elmo, a $59.99 22-inch Muppet doll with flexible arms that plays songs, knows phrases and gives out hugs; LeapFrog's LeapPad Ultra, the educational toy company's latest $149.99 tablet for kids; and a $119.99 Lego set Legends of Chima The Lion CHI Temple construction set.

Exclusives on the list include a $14.99 Shimmer 'N Sparkle Cra-Z-Loom by Cra-Z-Art, which creates rubber band bracelets; a $399.99 Razor Crazy Cart go-cart for kids a Toys R Us' own $149.99 tablet for kids called the tabeo e2.

For a full list of the 15 top toys and the overall list of 36 products, go to toysrus.com/hottoys.

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Alaska asks ConocoPhillips to reopen LNG plant

ANCHORAGE, Alaska — The state of Alaska wants ConocoPhillips to reopen its mothballed Kenai Peninsula liquefied natural gas plant to provide an incentive for petroleum companies to explore and invest in Cook Inlet.

In a Sept. 5 letter to ConocoPhillips President Trond-Erik Johansen, acting Natural Resources Commissioner Joe Balash requested that the company apply for a three-year federal LNG export license for the plant at Nikiski, about 70 miles southwest of Anchorage.

ConocoPhillips in March announced it would not extend its natural gas export license beyond March 31 but said it would consider a new license if the needs of local gas markets were met and sufficient natural gas was on hand to export.

Balash said contracts are in place to support local utility needs through 2018. Concerns exist, he said, for future exploration.

"Without market opportunities for gas discoveries, companies lack the incentive to invest in continued exploration activities," he wrote. "In addition to the economic challenges this would present for those employed in the Cook Inlet energy industry, a lack of healthy exploration now may lead to supply contractions in the future as existing wells' production levels decline."

ConocoPhillips spokeswoman Natalie Lowman said Tuesday the company appreciates the state's comments and shares its interest in promoting local energy security and the local economy.

"We're going to begin evaluating this and working with stakeholders to evaluate the feasibility of resuming LNG export," she said.

The U.S. Geological Survey has estimated the Cook Inlet basin may hold trillions of cubic feet of gas, Balash said.

"More market opportunities would create a more attractive business environment for gas sales that would in turn encourage aggressive exploration," he said.

Balash also requested that ConocoPhillips install equipment that could be used to truck LNG throughout Alaska. The plant could back up plans for providing North Slope natural gas to Fairbanks and other interior Alaska communities.

Lowman said truck-rack facilities would be part of the evaluation.

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Builders: City Hall redo is hard to nail

Builders were receptive to mayoral candidate Marty Walsh's plan to level City Hall, but warned that redeveloping Government Center would be no easy feat.

"Without a doubt it's a tremendous development site because of its location and access to public transit," said developer John Rosenthal. "But I know there's a lot of constraints due to the fact the JFK federal building shares the site and there's a lot of restrictions that the federal government can put on what goes on next to it."

The Herald first reported Sunday night that Walsh is pushing a dramatic plan within the first 90 days of his administration to sell City Hall Plaza to a private developer to transform into possible office, retail, hotel and residential space. He'd also relocate and privatize City Hall and use proceeds from the entire project for education, recreation, the arts and the rainy day fund.

Suffolk Construction CEO John Fish said there would be plenty of construction challenges, including the underground T lines, utilities and soil constraints, not to mention navigating city, state and federal agencies for various approvals.

"I wouldn't dismiss any creative thinking regarding City Hall Plaza," said Fish. "It's a very attractive site that has a lot of pros to it. But it also has a lot of cons."

With a week to go, the 12 mayoral candidates are all scrambling to break away from the rest of the pack — and many wasted no time teeing off on Walsh's plan yesterday.

"It seems like a make work project for Marty's unions," Suffolk District Attorney Daniel F. Conley said Boston Herald Radio's "Morning Meeting" show yesterday. "It's not an original idea. It's not innovative."

Mayoral contender Michael P. Ross even called a press conference in Uphams Corner, hammering Walsh for focusing on the downtown while neglecting neighborhoods.

"I do not think this is a game-changer," Ross told the Herald. "It's the same old issue that's been tossed around for decades."

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State bill eyes easing of fed flood insurance rates

State lawmakers will hold a hearing today to see if they can bring relief to thousands of Massachusetts homeowners and businesses facing a dramatic rise in flood insurance rates under new federal law and a redrawing of flood lines by the Federal Emergency Management Agency.

House Bill 865 would have the state insurance commissioner investigate how rates are set by the National Flood Insurance program and make suggestions to ensure that rates are not excessive.

State Rep. Jim Cantwell introduced the bill because of FEMA's decision to redraw flood lines and because the Biggert-Waters Flood Insurance Reform Act of 2012 will do away with the grandfathering of properties that used old flood-risk data.

"This is the most significant fiscal threat to coastal communities and inland communities that have water running through them because rates in some instances are quadrupling," said Cantwell (D-Marshfield).

Kerry Bogdan, senior engineer at FEMA, said the agency updated its maps for every coastal community in Massachusetts because "key updates to engineering and modelling approaches were not accounted for in the 1980s maps."

Her explanation comes as little solace to Mitch Haddad of Haddad's Ocean Cafe in Marshfield, who said he and his brother rebuilt their restaurant last year 2 feet above the then-required elevation at a cost of $3.3 million, only to learn six weeks ago that the new required elevation is another 3 feet higher.

"It's just insane," Haddad said. "We tried to be proactive. ... We certainly could have built it another 3 feet higher."

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Tech talk on tap at cop confab

Tech companies are targeting the law-enforcement market as 3-D printing, Google Glass and other advances open new crime-fighting frontiers — innovations to be showcased at a conference in Cambridge this week that is drawing cops from around the country.

"Technology can help in every aspect of policing," said Dan Riviello, spokesman for the Cambridge Police Department and co-director of the two-day Police Innovation Conference at Microsoft New England, where representatives from police departments including Boston, Cambridge, New Mexico and Michigan will work to improve their use of technology and learn how to use new technology.

"As police forces have had to downsize because of the recession, their workload hasn't decreased," said Joe Rozek, executive director of homeland security and counterterrorism for Microsoft, who helps to put together "fusion centers" — police hubs where cameras, sensors and other real-time information can be collected and disbursed to responders.

"(The center) takes the information and raw data and turns it into actionable intelligence," Rozek said.

The conference will touch on social media, but also new and emerging technologies, like drones and 3-D printing.

"There's a lot to learn about and to harness and to understand. It's all moving very fast," said Peter Olson, founder of WiredBlue, makers of an app police departments can sign up for to better connect with the public.

Riviello will be speaking about the CPD's unique use of Twitter, where dispatch calls are automatically tweeted with the reason for the call and rough location.

"We think an informed community is a safer community," he said.

Mutualink, a Westford company that creates a secure method of interagency communication that is private for both parties, will show off its method for giving hands-free context and tactical awareness to first responders using Google Glass.

That would allow police responding to an incident to see vital information — like a map or surveillance camera feed — without using their hands. For example, in a school shooting, the school could provide law enforcement with a map and live feeds of video cameras that show up on Glass so first responders could make better and quicker decisions.

Still, all the information in the world is only as useful as the back-end system to put it together, experts said.

The key, Rozek said, is not looking at one technology as the "end-all solution."

The answer, and the way to use technology, "is one based on logic and reason."

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Harvard profs target cure for Lou Gehrig’s

Two Harvard stem-cell scientists are teaming up with a German biotech company to expand the search for a cure for Lou Gehrig's Disease.

Harvard University professors Kevin Eggan and Lee Rubin will conduct amyotrophic lateral sclerosis trials in partnership with Evotec, the university and the company announced.

"We're not a pharmacy company and they're set up for this," said Harvard science spokesman B.D. Colen. "We are doing some of that already, but they're able to do it on a much larger scale."

ALS destroys nerve cells in the brain and the spinal cord, eventually leading to paralysis and death. There is currently no known cure or treatment that halts or reverses ALS, although several drugs in clinical trials hold promise.

The new amyotrophic lateral sclerosis trials will expand on Eggan and Rubin's brain motor neuron research and is the university's fourth collaboration with Evotec. The company is led by the former student of another Harvard researcher whose hormone treatment of diabetes sparked an earlier Evotec deal, said Colen.

Eggan, the first researcher to link the deterioration of motor neurons with the onset of ALS, is known for his development of a revolutionary use of stem cells in research that spares patients the danger of taking experimental drugs across the spectrum of human disease, Colen said.

"It literally moves the disease out of the patient and into a lab dish so then you can use it to screen for possible drug treatments," Colen said,

The finances for the ALS deal are confidential, Colen said. "But if ... down the road this does prove successful and it becomes a drug, there will be revenue coming back to the discoverers and to the university."

Efforts by former Gov. Paul Cellucci to fight the debilitating disease that claimed his life did not contribute directly to Rubin and Eggan's research, Colen said, "But in terms of making Massachusetts a hospitable environment to do this kind of research, absolutely."

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Ponzi schemes proliferate

The Securities and Exchange Commission and law enforcement continue to see a steady stream of Ponzi schemes nearly five years after the Bernard Madoff scandal rocked the securities world.

Since fiscal year 2010 alone, the SEC has brought more than 100 enforcement actions across the nation against nearly 200 people for carrying out Ponzi schemes, prompting the commission to launch a Web page in 2011 for whistle-blowers to report violations of federal securities laws and apply for a financial award.

"Investors should continue to be wary of Ponzi schemes, which we steadily uncover and prosecute in regions throughout the country," said Kevin Callahan, an SEC spokesman. Red flags, such as promises of extraordinarily high returns with little or no risk, can signal that something may be amiss."

Among the recent local cases is that of Steven and Lori Palladino of West Roxbury, who were indicted earlier this year for allegedly running a multimillion-dollar Ponzi scheme. Prosecutors allege the couple used their company, Viking Financial Group, to borrow investors' money, which often went into the Palladinos' personal bank accounts to fund their lavish lifestyle. Money from new investors then allegedly was used to repay earlier ones and make monthly payments to all of them. But prosecutors allege it didn't stop there. Earlier this month, Palladino also was charged with one count of usury, or loan-sharking, for allegedly demanding a 40 percent interest rate on a loan his company made to a businesswoman.

"He's continuing to buy time, but inevitably, he needs to answer where our money is," one of their alleged victims, who declined to give his name, said of Steven Palladino. "History tells us we don't always get back what we've lost. But we do want to see justice served."

Prosecutors in the Economic Crimes Unit of the U.S. Attorney's Office in Boston make a point of bringing victims to perpetrators' sentencings so that judges can see firsthand that the impact of the crimes goes beyond dollars.

"People literally find overnight that they're destitute," said Assistant U.S. Attorney Paul Levenson, whose unit has prosecuted 13 Ponzi schemes in the last five years.

Beginning in November, Levenson's office will hold a series of forums to warn the elderly in particular of the dangers of investing with people who promise inordinately high returns.

"It's clear that it is prevalent. It's a form of violence, a form of sociopathology.
 And I think it's becoming increasingly defined that way," said Gaytri Kachroo, a lawyer who has represented hundreds of Madoff victims.

People frustrated with low bank and bond rates "make a very appetizing opportunity" for perpetrators, said Secretary of State William Galvin, whose office has taken action against seven schemes in the past five years.

"The problem with Ponzi schemes is finding them," Galvin said. "They strive for secrecy. When we hear about them, all you have to do is follow the money. The problem is you don't hear about them until they default. It's like a game of musical chairs. Ultimately, the music has to stop, and you're going to be one chair short."

Antonio Planas contributed to this report.

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Prep test for MBA goes mobile

It took Elad Shoushan five tries to master the Graduate Management Admission Test. But Shoushan turned his circuitous route to Massachsuetts Institue of Technology's Sloan School of Management to his advantage by developing an app that he claims is cheaper, more convenient and ultimately more effective than any test-prep course on the market.

The 31-year-old Israeli native used his experience as a serial GMAT underachiever and former professional basketball player to figure out what he'd been missing.

"As a basketball player, it was very simple to identify what I needed to improve," he said. "But with the GMAT, it's really hard to focus on one weakness at a time."

So in 2012, he founded LTG Exam Preparation Platform, a mobile learning platform for standardized tests. The company's first product, Prep4GMAT, is available for the iPhone and iPad, and categorizes questions based on what concepts they're testing.

When a user gets a question wrong, the app breaks it down based on keywords. Over time, Shoushan said, the app helps the user focus more quickly on keywords inside questions, associating them with the concepts learned.

"You start to see where your deficiencies are so you can really hone in on those areas," said Tarlin Ray, Shoushan's mentor in the 
$1 million startup competition and accelerator MassChallenge, where he is now a finalist.

This approach of dissecting a test through pattern recognition, coupled with the fact that LTG was built "from the ground up" to be a mobile company, distinguishes it from other test-prep companies, said Ray, including Kaplan, where he worked for 3 1⁄2 years.

"It's almost like you have a coach in your pocket," he said.

Alba Medina, 28, needed a 650 on the GMAT to get into a top-10 graduate school. So for help, she turned to three programs — Manhattan Prep, Veritas Prep and Knewton.com — spending between $300 and $800 on each.

"After failing four times, I was desperate," Medina said.

So she tried LTG for $20, she said, and improved her score by 120 points, just enough to get into MIT.

"I didn't have to carry around books with me," Medina said. "The software discovered my weaknesses, so it was easy to concentrate on them."

LTG's other advantages are that it doesn't require users to log into a website that might not be available if they don't have an Internet connection, and, for the next few weeks, it's also free until Shoushan and his team finalize LTG's premium version, which will cost between $30 and $50.

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