How “Life of Pi” animators visualized Ang Lee’s blank slate

LOS ANGELES (TheWrap.com) – “Life of Pi” is a movie that has the proverbial cast of thousands… of animals, that is. In one shot set on the ocean, there are 40,000 flying fish. In another one set on a floating island, there are 60,000 meerkats. And not one of them was living and breathing, of course.

“No real meerkats were used,” senior animation supervisor Erik-Jan De Boer told the audience at an effects-themed Q&A following TheWrap’s screening of the movie at the Landmark Theatre on Monday night. “Except of course we went to meerkat sanctuaries and zoos to shoot a lot of reference footage…”

“And the two of us watched every episode of ‘Meerkat Manor,’” interrupted visual effects supervisor Bill Westenhofer. “We were gonna watch one, but it gets addictive.”

That was about all the time these two had to indulge in reality TV during the long gestation and post-production of Pi, which establishes a new benchmark for awe-inspiring digital trickery – particularly in 3D, or “stereo,” as Westenhofer and De Boer refer to the effects-complicating process.

“In total,” De Boer told TheWrap’s editor-in-chief Sharon Waxman, “we animated 580 animals in about 290 shots for the movie, which includes a giraffe, a fox, a fish, and of course the hyena and orangutan.” Not to mention the little matter of the tiger, “Richard Parker,” whose appearances as one of the movie’s co-leads are 15 percent real, 85 percent digital.

That’s not including the aforementioned meerkat and flying fish extras, brought to life via a software program appropriately titled Massive. (If only it had been around in Cecil B. DeMille‘s day.)

“The flying fish sequence is where we start to take some artistic liberties, since Pi’s telling you a tale,” said Westenhofer. “Maybe there were a thousand flying fish in reality, or even a hundred, but you’re seeing his mind’s eye, which saw this multitude, so we have 40,000 in one particular spot. The Massive software is almost artificial intelligence, where you write a little program that’s the brain for each individual fish, and it decides if it’s going to hop out of the water, and how long it’s going to fly; if it sees someone in its path, it does avoidance.”

But before any of that was animated, there was the live-action filming that took place on a 70 meter-by-30 meter wave tank that director Ang Lee had specially built for the film. And there, said Westenhofer, “you had (star) Suraj Sharma on a boat with two guys in rubber rafts just chucking rubber fish at him as hard as they possibly can. It’s a good mixture of the low-tech and the high-tech.”

Of course, it wasn’t fish but previous experience with big cats that got Rhythm & Hues the assignment from Lee to go from lions to tigers and Pi. “He knew we had done the lion in the first Narnia movie. He asked, ‘Does a digital character look more or less real in 3D?’ We looked at each other and thought that was a pretty good question.”

As well as a leading one, since Lee had already made the decision at that point, in 2009, to shoot in 3D. “We took one of the shots and rendered it in stereo and said ‘Yeah, it gives it a little more presence and makes it more real.’” Good answer! “That was the start of our relationship with him.”

Although “Life of Pi” doesn’t exactly go for documentary-style realism, every effort was made to keep the tiger’s actions and reactions to what experts and trainers told them a creature would really do in those situations. Not having him spout any Aslan-style aphorisms was a nice start on that de-anthropomorphizing.

“We always strive for photorealism,” said De Boer – even when they’re working on a Narnia or Cats and Dogs. “Motion-wise we strive for perfect physicality and try to get that animal to behave as characteristically as possible – and then we always have to make them talk or dance or do something really weird, and the realism goes out the window and everybody knows that we were there. For me what was really cool about this movie is not only do we stick with the real animal but we also have to intercut it with a live-action animal, so that made the challenge for us that much bigger.”

Added Westenhofer, “We told the crew we wanted to work ourselves out of any recognition by making it look as real as possible.”

It was at least as big of a challenge, as far as Westenhofer was concerned, to make the digital waves match or amplify the real tank waves – and to create the film’s skies completely from scratch. “There’s not many films where we spend this much time on the water. I think ‘Old Man and the Sea’ harkens back! But even with ‘Titanic,’ you’ll see the water and then go inside.” For much of “Life of Pi,” “inside” amounts to a few furtive peeks under a tarp.

Hence what, on a project like this, becomes a fine line where digital effects providers are also, to some extent, taking over the role of cinematography and art direction. Going to work on filling up these blue-screen shots, the Rhythm & Hues people might well have been humming Bruce Springsteen’s “Empty Sky” to themselves.

“What I’m absolutely most proud of is with these visual effects is that we were given a blank slate for a lot of these shots,” Westenhofer told the audience. “We were given a boat in front of a blue screen, and it was the visual effects team who really were a lot of the creative innovators on the movie. Certainly it was Ang’s vision we were creating. But we’d start a shot, and though Ang absolutely knows what he wants, his communication is sometimes not as specific as you want. Instead of saying ‘I want a three-quarters cloudy sky with yellow over here and some blue,’ he’d say ‘I want a pensive sky.’

Or, ‘I want it to be operatic.’ So it would be our job to go translate that, and the team did a great job of supplying that.

“And Claudio Miranda did an awesome, awesome job on the cinematography, but a lot of the cinematography on the ocean is digital effects.”

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Mandela’s Infection May Be Pneumonia

Nelson Mandela is being treated for a lung infection, a term often used synonymously with pneumonia.

Elderly people are at an increased risk for infections in general – more so if the person has many chronic medical problems, but as people age their immune systems are less capable of fighting off infections.

South African officials say Mandela’s lung infection is “recurring.” The former president is 94 years old.

As elderly people become more and more infirm, they have a decreased cough response and may aspirate oral secretions into their lungs, raising the risk of infections. And if someone is bedridden, their breaths become more shallow, raising the risk even more.

It may seem surprising that it took so long for Mandela’s diagnosis to be made public. However, it’s possible that it took this long to make a diagnosis.

Elderly people respond differently to pneumonia, meaning they might lack common symptoms like fever and cough, and instead show signs of confusion. The evaluation of change in physical or mental condition in someone of Mandela’s age is broad with much testing needed to make a diagnosis.

There are different types of pneumonia including viral (caused by influenza), bacterial (caused by pneumococcus or tuberculosis), fungal and parasitic. I suspect Mr. Mandela most likely has a viral or bacterial pneumonia. If he does, they are likely treating him with antibiotics and providing respiratory support.

Pneumonia is a leading infectious cause of death in the elderly. But with proper treatment, many do recover.

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Fed ties rate pledge to a threshold as new stimulus set

WASHINGTON (Reuters) – The Federal Reserve, announcing a new round of monetary stimulus, took the unprecedented step on Wednesday of indicating interest rates would remain near zero until unemployment falls to at least 6.5 percent.

It was the latest in a series of unorthodox measures taken by central banks around the world as major economies face erratic, sub-par recoveries from the global financial crisis and recession of 2007-2009.

The Fed said it expects to hold rates steady until its new threshold on unemployment was reached as long as inflation does not threaten to break above 2.5 percent and inflation expectations are contained.

Fed officials, who cut their forecasts for both economic growth and inflation next year, also replaced an expiring stimulus program with a fresh round of Treasury debt purchases.

“The committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions,” the Fed’s policy-setting panel said in a statement at the close of a two-day meeting.

Fed officials committed to purchase $ 45 billion in longer-term Treasuries each month on top of the $ 40 billion per month in mortgage-backed bonds the U.S. central bank started buying in September. They also repeated a pledge to keep pumping money into the economy until the outlook for the labor market improves “substantially.”

The Fed will fund the new Treasury purchases with an expansion of its $ 2.8 trillion balance sheet. Under the “Operation Twist” program, the Fed bought an identical amount but paid for them with proceeds from sales and redemptions of short-term debt.

Some policymakers view actions that expand the Fed’s balance sheet as economically more potent than those that do not. However, Fed Chairman Ben Bernanke told a news conference that the stimulus would remain about the same, given that the central bank is still purchasing a combined $ 85 billion per month in longer-term securities.

“They see an anemic economy, and they’re doing all they can to get any economic progress,” said Alan Lancz, president of Alan B. Lancz & Associates in Toledo, Ohio.

The Fed’s actions initially gave a small lift to U.S. stocks prices, but the major stock indexes closed mostly unchanged, while government bond prices fell. Oil prices rose and the dollar weakened against the euro.

Fed policymakers voted 11-1 to back the new plan. Jeffrey Lacker, president of the Richmond Federal Reserve Bank, dissented, as he has at every meeting this year, expressing opposition both to the bond buying and the new economic thresholds.

SWEATING A WEAK RECOVERY

The newly unveiled numerical policy guidelines offered the most specific suggestion yet that the Fed is willing to tolerate slightly higher inflation as it tries to juice up a moribund economy and spur stronger job growth.

A drop in the unemployment rate to 7.7 percent in November from 7.9 percent in October was driven by workers exiting the labor force, and therefore did not come close to satisfying the condition the Fed has set for trimming its stimulus.

“Decisions taken today further strengthen the Fed’s commitment to generate a stronger recovery and substantially improve conditions in the labor market,” said Michael Gapen, an economist at Barclays in New York.

In response to the financial crisis and recession, the Fed slashed overnight rates to zero almost exactly four years ago and bought some $ 2.4 trillion in mortgage and Treasury securities to keep long-term rates down.

Despite its unconventional and aggressive efforts, U.S. economic growth remains tepid. Gross domestic product grew at a 2.7 percent annual rate in the third quarter, but a Reuters poll published on Wednesday showed economists expect the economy to expand at just a 1.2 percent pace in the current quarter.

Businesses have hunkered down, fearful of a tightening of fiscal policy as politicians in Washington wrangle over ways to avoid a $ 600 billion mix of spending reductions and expiring tax cuts set to take hold at the start of 2013.

Bernanke has warned that running over this “fiscal cliff” would lead to a new recession. He told reporters the Fed could ramp up its bond buying “a bit,” but emphasized that monetary policy has limits and could not fully offset the impact.

NEW TACK ON RATES

By setting thresholds to help guide its decision on when to eventually hike rates, the Fed was able to jettison a previous prediction that borrowing costs would remain at rock bottom levels until at least mid-2015.

Officials were uncomfortable with guidance that relied on a calendar date, and they are hopeful the new framework will help financial markets assess incoming economic data in a way that helps them correctly guess were monetary policy is heading.

Bernanke emphasized that the central bank would look at a range of indicators, not just the rates of unemployment and inflation, in determining when to finally raise rates.

“Reaching the thresholds will not immediately trigger a reduction in policy accommodation,” said Bernanke, adding that the central bank would not be on “auto pilot.”

“No single indicator provides a complete assessment of the state of the labor market,” he said.

The prior practice of fixing an end point was criticized by some economists as sending a message that the Fed expected the economy to be weak until then. Bernanke said the new framework was consistent with the earlier calendar guidance, because officials do not expect the unemployment rate to reach the 6.5 percent threshold level until sometime in 2015.

Indeed, a fresh set of economic projections from the Fed put the jobless rate in a 6 percent to 6.6 percent range in the fourth quarter of 2015. At the same time, the projections showed that at no point over that forecast horizon does the central bank see inflation topping its 2 percent target.

Officials held to their assessment that they could eventually push the jobless rate down to a 5.2 percent to 6 percent range without sparking inflation, although Bernanke cautioned that policy would have to start tightening before it fell so low. In its statement, the Fed said its long-term asset purchase program would end well before any rate hike.

Fed policymakers see GDP expanding between 2.3 percent and 3.0 percent next year. That’s down from the 2.5 percent to 3.0 percent they forecast in September, but is still a bit more optimistic than most private forecasters. The Reuters poll of economists found a median U.S. growth estimate of 2.1 percent for next year.

(Writing by Pedro Nicolaci da Costa; Editing by Andrea Ricci, Tim Ahmann and Leslie Adler)

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The Hobbit: Richard Armitage Talks Preparations For Playing Thorin Oakenshield

British actor Richard Armitage admitted it wasn’t a walk in the park to play a J.R.R. Tolkien character in Peter Jackson’s reimagining of “The Hobbit,” the first installment of which is on its way into theaters.

Upon touching down in New Zealand, where the trilogy was shot, the cast had a lot of character preparation to do.

PLAY IT NOW: Martin Freeman Discusses The Hobbit’s ‘Good Chemistry’ & Playing Bilbo Baggins

“We arrived in February 2011 and we went straight into a training program, which was called ‘Dwarf Bootcamp,’ which was literally boots — these huge boots. We learned how to walk, we wrestled with each other, we did archery together, we did sword fighting, hammer fighting, horse riding — everything you could possibly think of,” Richard, who plays Thorin Oakenshield in the film told Access Hollywood at the film’s junket.

In addition, the cast, which includes his former “Cold Feet” co-star James Nesbitt as Bofur, found ways to get to know each other better off set.

VIEW THE PHOTOS: The Hobbit: An Unexpected Journey — New York City Premiere

“We went round to each other’s houses and we cooked food together, we went to the pub and got drunk together, so there was an incredibly great bonding time between the dwarves,” he said.

Richard had plenty of experience sword fighting and horse riding in the BBC America series “Robin Hood,” but it was something else that came in handy during the long days on set.

“I’d done a number of shows where I’d had to use sword fighting and I’d also done horse riding. I’d also pulled guns out of my pocket. That was less useful,” he laughed, likely referring to his recent role in the PBS-import series “MI-5,” where he played a British spy. “But, yeah, you draw on everything. I’d worked at the Royal Shakespeare Company, so the vocal work was really useful to kind of pull that from there. I’d worked in a circus, there were… all sorts of things that were really useful, but the one thing that I do have — for lack of talent — is stamina and that’s the one thing I think everybody needed on this job.”

VIEW THE PHOTOS: Meet ‘The Hobbit’ Cast!

An imagination was useful also, but Richard said what turned out on the big screen was still wilder – and more beautiful – than he dreamed of.

“So many moments… Actually, apart from the eagles — which every single time I’ve seen this film absolutely blows my mind and I can barely keep the tears back and [it has] nothing to do with the pathos of the scene, just that feeling of flight moves me — is the throne of Aragorn, in the beginning of the prologue,” he told Access of the moment that moved him most. “When it got to [filming] that scene, I walked on and… it was just a green cross on the floor with a tiny green chair… [But in the film], they just made this incredible, almost space aged, sort of suspended seat in the middle of this stalagmite. It just blows my mind when I see that.”

VIEW THE PHOTOS: The Brit Pack: Hot Shots Of Stars From The UK!

“The Hobbit: An Unexpected Journey” hits theaters on December 14, 2012, followed by “The Hobbit: The Desolation of Smaug,” on December 13, 2013 and “The Hobbit: There and Back Again,” on July 18, 2014.

– Jolie Lash

Copyright 2012 by NBC Universal, Inc. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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‘The Hobbit’: Like One Bad Video Game

Perhaps the most exciting thing about Peter Jackson‘s landmark, blockbuster Lord of the Rings films was that they made fans, through a combination of stunning landscapes and intricate special effects and soaring music and dramatic spectacle, feel as though we were seeing an almost impossible elevation of the potential size and scope of movies. Here was a rich, dense, sprawling series of films that thundered like myths, that were breathtaking in their realization of some pretty huge ambitions. Sure, they were massive corporate projects that earned lots of people millions of dollars, but to the regular moviegoer they were feats that proved the majesty of the movies, the potential to tell enthralling stories that also played like art. And so it’s hugely disappointing, if not all that surprising, that Jackson’s first foray back into the land of Middle Earth, The Hobbit: An Unexpected Journey, is such a sullenly, basely commercial and junky affair, a movie that feels not crafted with Jackson’s seemingly divine inspiration but by the hands of studio executives. Perhaps the reason that Warner Bros. is forgoing the usual console video-game tie-ins for simple mobile games is because the damn movie already looks like a video game, and not a very fun one at that.

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The Lord of the Rings series succeeded aesthetically because it was such an elegant, painting-like wonder to behold. The textures and palettes all had the look of a particularly vibrant illustrated story book, the kind of immersive vision that exists somewhere between imagination and the real world. For The Hobbit, though, Jackson chose to film at a high frame rate and with Real 3D technology in mind — because 3D movies are doing well these days and, hell, doesn’t hurt that the tickets cost more — but the results are frequently hideous. Those among us who have bought shiny new flatscreen TVs over the past few years are likely familiar with the dreaded “Soap Opera Effect,” which turns what should be stunning, glossy images into cheap-looking messes, all strange movement and lighting, like any network soap or cheap British show. (Think Children of Men looking like Torchwood.) It’s the problem of technology over-thinking or over-performing, and it is on startling, gruesome display in The Hobbit. When you’re wearing the 3D glasses (and admittedly sitting a little off to the side), this hugely expensive movie looks like it was shot on a nice handheld digital camera on the cheap. Actors stand in strange contrast to the digital backgrounds behind them, motion looks too slick or unnatural. Gone are the somber vistas and rugged terrain, replaced by eye-aching shine and plastic-y smoothness. The most special effects-heavy sequences look very much like the non-playable parts of modern video games — the exposition bits that can amp up the graphics a bit because they don’t have to worry about the randomness of play, the stuff you see in the commercials, right before the “rated T for teen” part. I don’t know if I just had a bad projector or what, but I spent the bulk of this long movie distracted by how dreadful everything looked. With a few small exceptions — The Shire glows with lovely green, a mountain cave fight/chase sequence is bracingly rich — this is a dismally unattractive movie, featuring too many shots that I’m sure were lovely at some point but are too often ruined and chintzified by the terrible technology monster.

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So on its aesthetic merits, The Hobbit comes up more than short. The trouble is, it’s not rescued by many narrative successes. Jackson has taken largely from the first third of J.R.R. Tolkien‘s novel — about an expedition to reclaim a lost dwarf kingdom from a dragon — but he’s also added in some elements found in appendices detailing an expanded universe that Tolkien included in an edition of The Lord of the Rings. This is partly to flesh out the story as Jackson believes Tolkien meant it to be, but it’s also meant to satisfy the needs of a supersize film trilogy based on one mere book. And so we get several pointless and uninteresting diversions, mostly about dwarves and their bitter enemies the orcs, that read exactly like the filler they are. Jackson is trying to flesh out dwarf mythology, because we spend so much of our time with these little guys, but it feels tediously synthetic, as if there are two movies competing for attention with neither one getting its due. We go to the goblin caves of The Hobbit and then, upon deliverance from that dark place, are thrust right into some kind of honor-and-revenge-based conflict with a snarling, giant, one-armed orc. It’s all very crowded and strangely hurried for a movie that, all told, takes its sweet time.

RELATED: No One Likes Peter Jackson’s New ‘Hobbit’ Footage

I suspect that another of Jackson’s reasons for including all this extra dramatic battling is that, on its own, The Hobbit is something of a children’s book. We’ve got wacky, food-crazed dwarves, a mean old dragon, and a funny little guy to take us along on the journey. Jackson doesn’t deny his movie the kiddie flourishes — there’s snot humor and butt jokes and lots of other goofy stuff involving some trolls, plus two little musical numbers involving all the dwarves — but he then tries to complement them with the big, booming faith and honor stuff and it never properly congeals. One moment we’re on a sprightly children’s adventure, the next we’re talking in big fashion about all that warlike serious business. It’s a discordant mix, and I’d imagine it will leave both kids and adults out in the cold.

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The film is not without its bright spots, rare as they may be. Ian McKellen is a feisty, spirited, mysterious Gandalf as ever before, and Martin Freeman nicely and genially projects everyday hobbit-ness, even if he’s a tad underused in the film. (Yeah, in the movie called The Hobbit, there’s barely any time to focus on the darn Hobbit.) Cate Blanchett turns up once more as the ethereal elf Galadriel, lending the movie a cool classiness and a welcome dose of feminine energy. And, of course, we’re back, for one mesmerizing scene, with our beloved Gollum, so winningly and creepily played by Andy Serkis, and here yet another marvel of computer innovation. In some ways Gollum’s innate cartoonishness works better now than it did in the original trilogy, which is probably the only time that can be said of this movie. There are one or two moments in Gollum’s pivotal scene where he’s given a bit too much modern humor to play, but all told he’s the most welcome sight in the film. Maybe that’s just the newfound purist in me, yearning for the old days, but I suspect it has more to do with Gollum being the only genuinely realized character we’ve so far encountered in this new trio of films. Everyone else is a snoozy lesser version of someone else, especially the ridiculous bloodthirsty orc leader, who snarls and growls like something out of the Underworld movies. Sometimes, in the jumble of the The Hobbit‘s many cluttered and dull action scenes, the frantic blur looks like any sequence from one of those schlocky ’00s B-movies; all roughly hewn CGI clashing around nonsensically, with this orc fellow leading the charge.

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Despite all the technical advancements, if we can call them that, most moments in The Hobbit feel like Peter Jackson is sadly trying to make all those familiar LOTR elements work for him once more, without ever really being able to reignite the old flame. The supposedly awe-inducing visit to the elf city of Rivendell is a ho-hum experience in this new frame-rate-ruined world. A silly battle sequence involving a wizard, a silly Radagast the Brown, riding around pell-mell on a rabbit-drawn sled looks like an interstitial from late-era Super Mario. Even Elijah Wood, appearing briefly as Frodo, looks strange — a pale ghost of himself, as if stitched in from another movie by some forlorn and desperate hand. The film is inevitably resonant with memories of the original trilogy, and little about it can hold up to the comparison. There’s too much effort in the wrong places — action instead of story, technical tricks instead of actual design — and the constant rhythm of arbitrary event after arbitrary event becomes tiresome well before the film’s two hours and forty minutes have lurched to a halt. I’m sure there are kids who will like this wan, distracted effort — they might not yet have anything else to compare it to, depending on their age — but as a human who remembers what came before, I’m afraid The Hobbit left me nothing but frustrated, sad, and tired. Frustrated that these big-budget visionaries seem to consistently feel they have to taint their earlier masterpieces with techno-junk followups, sad that once magical lands now flicker cheap and garish in my head, and tired at the prospect of two more of these things. I exited the theater trying to remind myself that Attack of the Clones was way better than Phantom Menace and that Revenge of the Sith was better still. I then realized how depressing it was that I was making that comparison. Oh, Middle Earth. What has become of you?

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Lawsuit claims A&E’s ‘Storage Wars’ show is rigged

LOS ANGELES (AP) — Some of the valuables found hidden in abandoned lockers on A&E’s “Storage Wars” have been added by producers to deceive viewers, a former cast member of the show claims in a lawsuit filed Tuesday.

David Hester‘s suit claims producers have added a BMW Mini and newspapers chronicling Elvis Presley‘s death to lockers in order to build drama for the show and that his complaints about the practices led to his firing.

Hester is seeking more than $ 750,000 in his wrongful termination, breach of contract and unfair business practices lawsuit. A&E Television Network declined comment, citing the pending lawsuit.

“Storage Wars” follows buyers who bid for abandoned storage lockers hoping to find valuables tucked inside.

“A&E regularly plants valuable items or memorabilia,” the lawsuit states. Hester’s suit claims he was fired from participating in the series’ fourth season after expressing concerns that manipulating the storage lockers for the sake of the show was illegal.

He claims that producers stopped adding items to his units after his initial complaints but continued the practice for other series participants. The lawsuit alleges entire units have been staged and the practice may violate a federal law intended to prevent viewers from being deceived when watching a show involving intellectual skills.

“Storage Wars” depicts buyers having only a few moments to look into an abandoned unit before deciding on whether to bid on it at auction. The lawsuit claims some of the auction footage on the show is staged.

Hester, known as “The Mogul” on the show, has been buying abandoned storage units and re-selling their contents for 26 years, according to the suit.

Nielsen Co. has ranked “Storage Wars” among cable television’s top-ranked shows several times since its 2010 debut.

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HSBC guilty of ‘stunning failure’

11 December 2012 Last updated at 13:05 ET

Loretta Lynch, US Attorney: “Their US compliance department was woefully inadequate”

The US said “dangerous practices” at HSBC allowed the bank to pass money to “drug kingpins and rogue nations”, as it fined it $ 1.9bn (£1.2bn).

HSBC agreed the fine, the largest of its kind, earlier on Tuesday.

A US Senate investigation said the UK-based bank had been a conduit for drug barons and nations such as Iran against which it had sanctions, making it illegal to do business there.

HSBC admitted having poor money laundering controls and apologised.

Money laundering is the process of disguising the proceeds of crime so that the money cannot be linked to the wrongdoing.

US Assistant Attorney General Lanny Breuer said in a statement: “HSBC is being held accountable for stunning failures of oversight – and worse – that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries.

Another official said it was implicated in “wilful and dangerous” practices.

‘Sorry’

“We accept responsibility for our past mistakes,” said HSBC group chief executive Stuart Gulliver in a statement.

“We have said we are profoundly sorry for them, and we do so again.”

The bank said it had spent $ 290m on improving its systems to prevent money laundering and clawed back some bonuses paid to senior executives in the past.

Continue reading the main story

If HSBC had been indicted for these offences, that would have meant that the US government and others could no longer have conducted business with it, which would have been humiliating and highly damaging.”

End Quote

It also said it expected to reach an agreement with the UK’s Financial Services Authority shortly.

Last month it announced it had set aside $ 1.5bn to cover the costs of any settlement or fines.

The news followed the announcement of a similar but much smaller settlement with UK-based Standard Chartered bank, which will pay $ 300m in fines for violating US sanctions.

The cases are seen as part of a crackdown on money laundering and sanctions violations being led by federal government agencies and New York state authorities.

Senate criticism

The settlement had been widely expected following a report by the US Senate, published earlier this year, that was heavily critical of HSBC’s money laundering controls.

The report alleged that:

• HSBC in the US had not treated its Mexican affiliate as high risk, despite the country’s money laundering and drug trafficking challenges


• The Mexican bank had transported $ 7bn in US bank notes to HSBC in the US, more than any other Mexican bank, but had not considered that to be suspicious


• It had circumvented US safeguards designed to block transactions involving terrorists drug lords and rogue states, including allowing 25,000 transactions over seven years without disclosing their links to Iran


• Providing US dollars and banking services to some banks in Saudi Arabia despite their links to terrorist financing


• In less than four years it had cleared $ 290m in “obviously suspicious” US travellers’ cheques for a Japanese bank, benefiting Russians who claimed to be in the used car business

The report suggested HSBC accounts in Mexico and the US were being used by drug barons to launder money.

BBC business editor Robert Peston said that as big as the $ 1.9bn penalty looks, it could have been much worse.

“HSBC has signed a Deferred Prosecution Agreement for breaches of the US Bank Secrecy Act, the Trading with the Enemy Act and assorted money laundering offences. This is in effect putting the bank on probation,” he said.

“But if HSBC had been indicted for these offences, that would have meant that the US government and others could no longer have conducted business with it, which would have been humiliating and highly damaging.”

‘Failures’

The bank stressed that it had taken on new senior management since the time the problems happened.

Lord Green was chairman of HSBC from 2006 until late 2010 and is now Minister of State for Trade and Investment.

In a statement, his department said: “The report by the US Senate Sub-Committee sets out in detail the evidence submitted to it, and the action taken by HSBC to ensure compliance with US regulations at the time that Lord Green was group chairman. It is for HSBC to respond to this report.”

HSBC has announced it has appointed a former US official to work as its head of financial crime compliance, which is a new position.

Bob Werner was previously the head of the US Treasury’s Office of Foreign Assets Control (OFAC) – the agency responsible for enforcing the US sanctions on countries including Iran.

He will be responsible for beefing up HSBC’s anti-money laundering and sanctions compliance systems.

It is unclear what impact the case will have on HSBC’s business. The bank is the biggest in Europe by market capitalisation, and made pre-tax profits of $ 12.7bn for the first six months of 2012.

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Microsoft ups Surface production, to sell in more stores

SEATTLE (Reuters) – Microsoft Corp has stepped up manufacturing of the Surface tablet, its new device designed to counter Apple Inc‘s iPad, and will introduce it to third-party retailers this week.

The moves suggest Microsoft is seeing some demand for its first own-brand computer in the crucial holiday shopping season, although it has yet to divulge any sales figures.

“The public reaction to Surface has been exciting to see,” said Panos Panay, general manager of Microsoft’s Surface project, which forms part of the company’s Windows unit.

“We’ve increased production and are expanding the ways in which customers can interact with, experience and purchase Surface,” said Panay, but gave no details of how many extra units were being produced.

Panay did not mention names of retailers that will sell the Surface, but separately office equipment retailer Staples Inc said it would stock the tablet from Wednesday.

He said the Surface would also be on sale at retailers in Australia from mid-December, with more countries to follow in the next few months.

Since launch in late October, the Surface has only been sold by Microsoft itself, in its own brick and mortar stores in the United States and Canada and online in Australia, China, France, the UK and Germany.

The only Surface model available now – officially called Surface with Windows RT – runs a version of Windows created to work on the low-power chips designed by ARM Holdings, which dominate smartphones and tablets but are incompatible with old Windows applications.

It starts at $ 499 for the 32 gigabyte version plus $ 120 for a thin cover that doubles as a keyboard.

A larger, heavier tablet – called Surface with Windows 8 Pro – will be introduced in January, running on an Intel Corp chip that works with all Microsoft’s Windows and Office applications. Microsoft plans to price the new Surface from $ 899 for a 64 gigabyte version.

The world’s largest software company also said it would keep its chain of ‘pop-up’ holiday stores open into the new year and will convert them into permanent retail outlets or what it called “specialty store locations”.

Microsoft’s recent push into physical retail – following Apple’s great success – has resulted in 31 permanent stores plus 34 holiday ‘pop-up’ stores in the U.S. and Canada.

If Microsoft converted each of the temporary stores into permanent outlets it would have 65 stores, still well below Apple with almost 400 worldwide.

(Reporting by Bill Rigby in Seattle, Sruthi Ramakrishnan in Bangalore)

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‘Skyfall’ launches back to top spot with $10.8M

LOS ANGELES (AP) — The James Bond blockbuster “Skyfall” has risen back to the No. 1 spot at the weekend box office, taking in $ 10.8 million.

That brought its domestic total to $ 261.4 million and its worldwide haul to a franchise record of $ 918 million.

The top 20 movies at U.S. and Canadian theaters Friday through Sunday, followed by distribution studio, gross, number of theater locations, average receipts per location, total gross and number of weeks in release, as compiled Monday by Hollywood.com are:

1. “Skyfall,” Sony, $ 10,780,201, 3,401 locations, $ 3,170 average, $ 261,400,281, five weeks.

2. “Rise of the Guardians,” Paramount, $ 10,400,618, 3,639 locations, $ 2,858 average, $ 61,774,192, three weeks.

3. “The Twilight Saga: Breaking Dawn — Part 2,” Summit, $ 9,156,265, 3,646 locations, $ 2,511 average, $ 268,691,029, four weeks.

4. “Lincoln,” $ 8,916,813, 2,014 locations, $ 4,427 average, $ 97,137,447, five weeks.

5. “Life of Pi,” Fox, $ 8,330,764, 2,946 locations, $ 2,828 average, $ 60,948,293, three weeks.

6. “Playing For Keeps,” FilmDistrict, $ 5,750,288, 2,837 locations, $ 2,027 average, $ 5,750,288, one week.

7. “Wreck-It Ralph,” Disney, $ 4,859,368, 2,746 locations, $ 1,770 average, $ 164,402,934, six weeks.

8. “Red Dawn,” FilmDistrict, $ 4,236,105, 2,754 locations, $ 1,538 average, $ 37,240,920, three weeks.

9. “Flight,” Paramount, $ 3,130,305, 2,431 locations, $ 1,288 average, $ 86,202,541, six weeks.

10. “Killing Them Softly,” Weinstein Co., $ 2,806,901, 2,424 locations, $ 1,158 average, $ 11,830,638, two weeks.

11. “Silver Linings Playbook,” Weinstein Co., $ 2,171,665, 371 locations, $ 5,854 average, $ 13,964,405, four weeks.

12. “Anna Karenina,” Focus, $ 1,544,859, 422 locations, $ 3,661 average, $ 6,603,042, four weeks.

13. “The Collection,” LD Entertainment, $ 1,487,655, 1,403 locations, $ 1,060 average, $ 5,455,328, two weeks.

14. “Argo,” Warner Bros., $ 1,482,346, 944 locations, $ 1,570 average, $ 103,160,015, nine weeks.

15. “End of Watch,” Open Road Films, $ 751,623, 1,259 locations, $ 597 average, $ 39,989,766, 12 weeks.

16. “Hitchcock,” Fox Searchlight, $ 712,544, 181 locations, $ 3,937 average, $ 1,661,670, three weeks.

17. “Talaash,” Reliance Big Pictures, $ 449,195, 161 locations, $ 2,790 average, $ 2,397,909, two weeks.

18. “Taken 2,” Fox, $ 387,227, 430 locations, $ 901 average, $ 137,700,304, 10 weeks.

19. “Pitch Perfect,” Universal, $ 305,765, 387 locations, $ 790 average, $ 63,517,408, 11 weeks.

20. “The Sessions,” Fox, $ 218,973, 197 locations, $ 1,112 average, $ 4,948,342, eight weeks.

___

Online:

http://www.hollywood.com

___

Universal and Focus are owned by NBC Universal, a unit of Comcast Corp.; Sony, Columbia, Sony Screen Gems and Sony Pictures Classics are units of Sony Corp.; Paramount is owned by Viacom Inc.; Disney, Pixar and Marvel are owned by The Walt Disney Co.; Miramax is owned by Filmyard Holdings LLC; 20th Century Fox and Fox Searchlight are owned by News Corp.; Warner Bros. and New Line are units of Time Warner Inc.; MGM is owned by a group of former creditors including Highland Capital, Anchorage Advisors and Carl Icahn; Lionsgate is owned by Lions Gate Entertainment Corp.; IFC is owned by AMC Networks Inc.; Rogue is owned by Relativity Media LLC.

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More “fiscal cliff” talks but neither side giving ground

WASHINGTON (Reuters) – The White House and House of Representatives Speaker John Boehner’s office held more negotiations on Monday on ways to break the “fiscal cliff” stalemate, although neither side showed any public signs that they were ready to give ground.

The talks gained urgency after Republican Boehner met at the White House with President Barack Obama on Sunday, raising hopes of progress in averting the onset of tax increases and spending cuts that kicks in on January 1 unless Congress intervenes.

But while striking a more conciliatory tone, both sides kept to a familiar script in the weeks-long standoff. Obama renewed his call for higher tax rates for the richest Americans, which most Republicans oppose, while Republican leaders urged Obama to submit a new offer with specific spending cuts he would back.

Economists say going over the fiscal cliff could throw the U.S. economy back into a recession.

On a road trip to Michigan to drum up support for his stance, Obama said he was willing to compromise on some things but not on his demand that Republicans support an increase in tax rates for the wealthiest 2 percent of Americans.

“What you need is a package that keeps taxes where they are for middle-class families, we make some tough spending cuts on things that we don’t need, and then we ask the wealthiest Americans to pay a slightly higher tax rate, and that’s a principle I won’t compromise on,” Obama said during a visit to an auto plant in Redford, Michigan.

Boehner spokesman Michael Steel said Republicans were still waiting for the president to make a new offer that identifies the spending cuts he will make in the deficit-reduction negotiations.

“The Republican offer made last week remains the Republican offer,” Steel said, adding the two sides were holding staff-level talks on Monday.

Boehner and the House Republican leadership submitted their terms for a deal to the White House last week, after Obama presented his opening proposal. Both sides seek to cut budget deficits by more than $ 4 trillion over the next 10 years but differ drastically on how to get there.

Boehner and Republicans oppose letting any tax rates increase and prefer to find new revenues by closing loopholes and limiting deductions. Republicans also want deeper spending cuts than Obama has offered in entitlements like the Medicare and Medicaid healthcare programs.

Democrats have insisted that tax rates for the richest must be nailed down before negotiating further on how to proceed with tax reform efforts or new spending cuts in entitlement programs.

‘A DEAL IS POSSIBLE’

“I can only say that the president believes that a deal is possible,” White House spokesman Jay Carney told reporters on the flight to Michigan. “But it requires acceptance and acknowledgement in a concrete way by Republicans that the top 2 percent will see an increase in their rates.”

Financial markets have calmed recently after a series of wild swings, when nearly every utterance from a politician about the looming budget crisis caused volatility in stock prices.

Polling shows most Americans would blame Republicans if the country goes over the cliff, and pressure has been building from some Republicans for Boehner to get an agreement quickly, even if it means tax hikes on the wealthiest.

Republican Senator Bob Corker of Tennessee called for a quick deal with the White House to allow an extension of the lower tax rates that have been in place for about a decade, except for the top two rates that Obama wants to raise.

“Right now there is no question in my mind the president has the slight upper hand in the negotiations,” Corker said on CNBC on Monday.

He said there was support among Senate Republicans for taking that step so the fiscal cliff negotiations could then shift to focusing on how to restrain the growing costs of Medicare and other entitlement programs.

“If you did it this week (agree to raising tax rates on the richest) you’d have the rest of this month to have the focus totally on entitlements,” said Corker, who has a record of reaching out to Democrats on major bills.

More conservative Senate Republicans, most notably Senator Tom Coburn of Oklahoma, also have signaled a willingness to let tax rates rise on higher-income groups.

Erskine Bowles, co-chairman of the so-called Bowles-Simpson deficit reduction commission, said he thought chances were improving for a deal.

“I think the atmospherics are getting so much better. We have kind of gotten out of Kabuki theater and gone to dancing the tango,” Bowles told CNBC on Monday. “Any time you start to tango you’ve got a chance.”

Bowles said he did not expect the president to give in on his demand that taxes rise for the top 2 percent of earners.

“I would almost guarantee that rates are going to go up for people in the top 2 percent,” he said.

U.S. stocks edged higher on Monday but moves remained muted as investors looked for any signs of movement on the fiscal cliff front.

The S&P 500 index has nearly retraced the 5.3 percent slide it suffered in the first seven sessions after the November 6 presidential election.

“The sentiment has definitely changed,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York. “The market has become somewhat desensitized to headlines out of Washington because the fear of the economy hitting a wall in 2013 if we don’t get a deal done has diminished.”

(Additional reporting by Steve Holland, Jeff Mason, Thomas Ferraro, Susan Heavey and Franklin Paul; Writing by John Whitesides; Editing by Alistair Bell and Eric Beech)

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