Crain's New York - February 25, 2013 - (Page 4)

IN THE Ellis Island regains its status MARKETS Will serve as Lady Liberty’s security center; the Battery discharging its tent BY LISA FICKENSCHER buck ennix The National Park Service in March is expected to remove an eyesore in lower Manhattan—the large security tent in front of Castle Clinton in Battery Park that’s used to screen a daily crush of visitors to the Statue of Liberty. The tent was erected in December 2001, intended as a temporary measure in the aftermath of the Sept. 11 terrorist attacks. But it has endured, much to the annoyance of tourists and the boat operator that takes them to the island, who have complained for years about long lines that can take an hour or more to get through. The park service, however, is finally ready to move its securityscreening operation to Ellis Island, a plan that was delayed in 2011 because the New York Police Depart- ISLAND CRUISES: The National Park Service will require Statue Cruises to first ferry Liberty Island visitors to Ellis Island, once both reopen. ment did not sign off on it when park officials first floated the idea. “The counterterrorism unit of the NYPD had concerns about how the new system would work,” said David Luchsinger, superintendent of the Statue of Liberty National Monument and Ellis Island.“We’ve addressed those concerns.” The NYPD did not respond to a request for comment. The security tent has remained unused since Sandy floodwaters ruined electrical power sources, walkways, docks and other infrastructure at Liberty and Ellis islands, closing them to visitors. Park officials expect to announce within the next two weeks a reopening date for both islands,possibly either around the Memorial or Independence Day holidays. “We are shooting for a summer opening,” said Mr. Luchsinger, though both islands may open with temporary power. Moving the security operation to federally controlled parkland will reduce the time it takes to move visitors onto sightseeing boats. The Battery Park tent had just seven screening machines, like the ones used at airports, and there were two at Liberty State Park in New Jersey, where visitors can also board ferries to the islands. That was hardly enough to easily accommodate the See LADY LIBERTY on Page 27 istockphoto as a gateway for millions by Aaron Elstein A mythical name and profits, too? J ust a $700 million oops? That’s the amount of profit Chimera Investment Corp. admits was mythical during a four-year stretch when the New York-based company bungled accounting rules. Now time is running out for Chimera. The company has released no financial results since revealing its woes in late 2011. Its shares will be delisted from the New York Stock Exchange unless it produces audited results by March 15. Chimera is not a complete illusion. The mortgageinvestment company that reported $600 million in revenue in 2010 buys securities issued by government-controlled giants like Fannie Mae or by banks and independent originators. Many are backed by Alt-A mortgages, the low-documentation loans that helped stoke the housing bubble, though a person familiar with Chimera’s operations said the company bought most of those securities in 2009, after the housing crash. Although its stock trades 80% below its boom-era peak, it still sports a market value of $3 billion and holders such as Wells Fargo, BlackRock and veteran investor Leon Cooperman’s hedge fund. “One weird puppy” is how Anthony Catanach, a professor at Villanova University’s business school, nevertheless characterizes the company. Chimera didn’t return calls, and its leading shareholders wouldn’t comment. The basic problem is that it overstated the value and earnings generated by its $9 billion investment portfolio between 2008 and 2011 because it treated risky mortgages as if they were high-quality ones, and its former auditors at Deloitte & Touche signed off on the numbers. Poof went $700 million in earnings once it owned up to the error. “It raises questions about the accounting staff, the chief financial officer and the audit quality of Deloitte,” said Mr. Catanach. Deloitte declined to comment. Although the rules in question 4 | Crain’s New York Business | February 25, 2013 are complex and were tweaked in 2009, Baruch College accounting professor Douglas Carmichael described the company’s problems as “very basic internal-control failures.” Launched in 2007, Chimera has close ties to Annaly Capital Management, a leading mortgage-investment firm. A wholly owned subsidiary of Annaly called FIDAC manages Chimera’s investment portfolio and collected $39 million in fees through the nine months ended Sept. 30, 2011. Chimera’s CFO, Alexandra Denahan, is the sister of Annaly CEO Wellington Denahan. (She was awarded $35 million in compensation in 2011, making her the nation’s second-highest-paid female executive, according to Fortune.) Even if Chimera preserves its NYSE listing,it faces a highly uncertain future. Federal Reserve policy has squeezed its profits by narrowing the spread between long- and shortterm interest rates. Annaly could step in and buy its corporate kin, much as it did in January when it bought another of its spawn, commercial mortgage investor CreXus. But Chimera could face years of litigation anyway. No lawsuits appear to have been filed yet, but attorneys may jump once Chimera issues its results or is delisted. “We’re representing a bunch of shareholders,” said class-action lawyer Bill Kyros. 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Table of Contents for the Digital Edition of Crain's New York - February 25, 2013

IN THE BOROUGHS
IN THE MARKETS
THE INSIDER
BUSINESS PEOPLE
OPINION
ALAIR TOWNSEND
GREG DAVID
REPORT: DIGITAL NY
THE LIST
CLASSIFIEDS
FOR THE RECORD
REAL ESTATE DEALS
SMALL BUSINESS
NEW YORK, NEW YORK
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crain's New York - February 25, 2013