Monthly Archives: November 2012

How the UN failed Sri Lanka Civilians; the redacted summary from the internal UN report

Between August 2008 and May 2009, as the war between the Government of Sri Lanka and the Liberation Tigers of Tamil Eelam (LTTE) entered its final stages, an estimated 360,000 or more civilians were crowded into an ever smaller part of ‘the Wanni’ area of Northern Sri Lanka where many died as a result of sustained artillery shelling, illness and starvation. Almost 280,000 survivors were forcibly interned in military-run camps outside the area of conflict. The UN responded mainly through its humanitarian assistance and development frameworks; its political and human rights roles were limited. Despite the gravity of events, UN Member States did not formally consider the situation until the war ended. During the final stages, and the aftermath from May 2009 onward, the UN provided assistance to IDPs in internment camps, even as IDP rights and UN principles of intervention were not respected. Most IDPs were eventually allowed to return home. (Annex III provides a detailed account of events and UN actions)

In April 2011, the Secretary-General’s Panel of Experts (POE) on accountability in Sri Lanka issued a report recommending a review of the UN’s own actions. In a letter to the Secretary-General, the POE described UN action as a low point for the organization as a whole, and said that some UN agencies and individuals had failed in their mandates and did not uphold the UN’s founding principles. Pursuant to the POE’s recommendation, the Secretary-General established an “Internal Review Panel on UN action in Sri Lanka” (the Panel), led by Charles Petrie, tasked with providing an assessment of UN action during the final stages of the conflict and its aftermath, identifying institutional and structural strengths and weaknesses, and making recommendations to ensure a more effective UN response in similar situations. The Panel began work in late April 2012 and submitted the present report at the end of September.

For the UN, the last phase of the conflict in Sri Lanka presented a major challenge. The UN struggled to exert influence on the Government which, with the effective acquiescence of a post-9/11 world order, was determined to defeat militarily an organization designated as terrorist. Some have argued that many deaths could have been averted had the Security Council and the Secretariat, backed by the UN country team (UNCT), spoken out loudly early on, notably by publicizing the casualty numbers. Others say that the question is less whether the UN should assume responsibility for the tragedy, but more whether it did everything it could to assist the victims.

The Panel’s conclusion is that events in Sri Lanka mark a grave failure of the UN to adequately respond to early warning and the evolving events during the final stages of the conflict and its aftermath, to the detriment of hundreds of thousands of civilians and in contradiction with the principles and responsibilities adopted by Member States and the Secretariat, agencies and programs.

Decision-making across the UN was dominated by a culture of trade-offs – from the ground to UN headquarters (UNHQ). Options for action were seen less as responsibilities and more in terms of dilemmas. Choosing not to speak up about Government and LTTE broken commitments and violations of international law was seen as the only way to increase UN humanitarian access. Choosing to focus Security Council briefings on the humanitarian situation rather than the causes of the crisis and the obligations of the parties to the conflict was seen as essential to facilitate Secretariat engagement with Member States. There was a sustained and institutionalized reluctance among UNCT actors to stand up for the rights of the people they were mandated to assist. In Colombo, many senior UN staff simply did not perceive the prevention of killing of civilians as their responsibility; and agency and department heads at UNHQ were not instructing their staff in Sri Lanka otherwise.

The UN’s failure to adequately counter the Government’s under-estimation of population numbers in the Wanni, the failure to adequately confront the Government on its obstructions to humanitarian assistance, the unwillingness of the UN in UNHQ and Colombo to address Government responsibility for attacks that were killing civilians, and the tone and content of UN communications with the Government and Member States on these issues, contributed to the unfolding of dramatic events.

UNHQ engagement with Member States regarding Sri Lanka was ineffective and heavily influenced by what UNHQ perceived Member States wanted to hear, rather than by what States needed to know if they were to respond. Reflection on Sri Lanka by UNHQ and States at the UN was conducted on the basis of a mosaic of considerations among which the grave situation of civilians in Sri Lanka competed with extraneous factors such as inconclusive discussions on the concept of the ‘responsibility to protect’ and Security Council ambivalence on its role in such situations. In the absence of clear Security Council support, the UN’s actions lacked adequate purpose and direction amid the many competing factors.

Most crucially, the UN did not use all the political and advocacy tools at its disposal. In particular, it did not keep Member States or the public fully informed. Nor did it warn the Sri Lankan Government or the LTTE of the consequences of their actions, including their responsibility for possible war crimes and crimes against humanity.

Systemic failure in Sri Lanka can be distilled into the following:

(i) a UN system that lacked an adequate and shared sense of responsibility for human rights violations;

(ii)  an incoherent internal UN crisis-management structure which failed to conceive and execute a coherent strategy in response to early warnings and subsequent human rights and international humanitarian law (IHL) violations against civilians, and which did not exercise sufficient oversight for UN action in the field;

(iii)  senior staff on the ground who lacked the necessary armed conflict, political and IHL experience to deal with the challenge presented by Sri Lanka, and who were given insufficient support;

(iv) the ineffective dispersal of coordination of UN action and monitoring of human rights and IHL violations across several different UNHQ entities in Geneva and New York with overlapping mandates;

(v) inadequate political support from Member States and inadequate efforts by the Secretariat to build such support;

and (vi) a framework for Member State engagement with human rights and IHL protection crises that is outdated and often unworkable.

Overview of Recommendations

The Panel’s Terms of Reference imply that it should gather lessons from an historical event that has passed. However, the magnitude of the violence in the Wanni, following decades of strife and injustice, continue to be felt by Sri Lanka’s communities. Sri Lanka’s peaceful and stable progress will require a process of accountability and reconciliation and a political solution to the long-standing grievances of all communities, as well as a response to ongoing and new concerns, and prevention and protection in the future. Working closely with the Government of Sri Lanka, the UN needs to take on this further challenge.

This report’s recommendations for the UN system are designed to be politically feasible and resource neutral, while encouraging profound changes in the institution’s approach to similar situations in the future. The broad lines of the recommendations include the need to:

Restate the vision of the UN: The Secretary-General should restate a vision of the UN’s most fundamental responsibilities to include the defence of human rights. The vision should help frame strategy and policy responses by senior levels of the organization to situations of massive human rights violations.

Embed a UN human rights perspective into UN strategies: The UNHQ needs stronger capacity to include human rights, IHL and international criminal law perspectives in overall analysis and strategy for any situation. It should also have stronger capacity to build political support from Member States for addressing grave concerns.

Strengthen the management of the UN’s crisis response: To ensure coherent UNHQ oversight for UN strategy and action, the Secretary-General should strengthen management of the whole-of-UN response to situations of massive human rights violations.

Promote accountability and responsibility: All staff should be fully informed of, and have easy access to, procedures under which allegations of serious misconduct by staff can be reported and promptly investigated.

Improve UN engagement with Member States and building of political support: For every such crisis, the Secretary-General must have an array of options that will permit him to fully inform Member States and suggest appropriate actions.

Better address violations of privileges and immunities: When a Member State engages in sustained actions against UN personnel and institutions, including violations of UN privileges and immunities, the Secretary-General should review options for response by the Secretariat and invite Member States to consider what action they could also take.

Coming at the beginning of his second term, the Secretary-General’s decision to commission an internal review is an extremely courageous step. The Panel believes that the report’s findings and recommendations provide an urgent and compelling platform for action. The UN’s failure to adequately respond to the events in Sri Lanka should not happen again. When confronted by similar situations, the UN should be able to meet a much higher standard in fulfilling its protection and humanitarian responsibilities. In support of this effort, the Panel strongly urges that its report be made public.

This executive summary was obtained fromhttp://www.innercitypress.com/

Final redacted version of UN report

BBC initial report (unfortunately does not contain the leaked version as a pdf)

See also Sri Lanka civilians

 

Oil Sands of Canada; sticky metal pipes

Canada’s oil sands contain some 170 billion barrels of oil that can be recovered economically with today’s technology (and perhaps ten times that in total). Canada thus has the world’s third-largest proven oil reserves, after Saudi Arabia and Venezuela. And since most oil-rich nations’ reserves are under state control, Canada has the largest reserves that private companies are free to invest in—more than half of the global total, reckons Ken Hughes, Alberta’s energy minister.

Other countries welcome the idea of plentiful energy from a stable democracy. It could reduce the rich world’s dependence on the Middle East. There are “no bribes or body bags”, grins an oil-industry booster. And the potential is immense. A new study by the Alberta Geological Survey estimates that the province has huge resources in its shale beds as well as its oil sands: 3,400 trillion cubic feet of natural gas and 420 billion barrels of oil—numbers comparable to America’s.  However, Canada’s output of 3.5m barrels of oil a day is less than half that of America. (America’s output is set to exceed Saudi Arabia’s; see article.) Several problems hobble Canadian energy: geology, capital, people and pipes.

First, geology. Canadian oil is hard to extract. It mostly comes in the form of bitumen, which is “hard as a hockey puck” at 10°C, as the Canadian Association of Petroleum Producers (CAPP), an industry body, puts it. If it is far below ground, it must be blasted with steam to make it flow, and then pumped out. This process (known as “steam-assisted gravity drainage”) was developed in Alberta. In the past decade, with high oil prices, it has made the oil sands economical to exploit. But precariously so: the best projects break even when oil is $30 a barrel, but many new ones need it to be $80 or more. (West Texas Intermediate is currently $85.)

See also Oi Sands Rush

Canada gets less than it should for its oil because it lacks enough pipelines. Environmentalists oppose them, arguing that pipes leak (which is always possible) and that Canada’s heavy oil causes more greenhouse-gas emissions than other oil (which is true, but not by much). President Barack Obama has delayed the approval of a pipeline called Keystone XL, which would move Canadian oil to America’s Gulf coast. A decision is expected soon.

Alex Pourbaix of TransCanada, the firm behind the Keystone pipeline, insists that the project will be good for both countries. Canada forgoes a fortune—perhaps $20 a barrel—because it cannot get its oil to the sea. Canadian gas sells at a discount, too: North American prices are far lower than those in Asia.  Another proposed pipeline, Northern Gateway, would carry oil to Canada’s west coast, whence it could be shipped to Asia. Canada would benefit from having a choice of customers. But the government of British Columbia, and various aboriginal groups, have yet to say yes.

To exploit its hydrocarbons, Canada needs capital: some $50 billion-60 billion a year, on recent trends. Such sums are “far more than Canadian capital markets can raise,” says Dave Collyer of the CAPP. Canada gets plenty of foreign investment: Syncrude, one of the biggest oil-sands developers, is a joint venture that includes American, Chinese and Japanese partners. But lately the country has grown frostier towards foreign capital.

In October Canada’s federal government temporarily blocked a $5.2 billion bid by Petronas, Malaysia’s state energy giant, for Progress Energy Resources, a Canadian natural-gas company. It has yet to approve a $15 billion offer by CNOOC, a Chinese state-owned firm, for Nexen, a Canadian oil-and-gas firm. A deadline passed last week; a decision may come next month. Mr Hughes says he is keen on foreign investment so long as foreign firms abide by the same rules as Canadians; but it is not up to the provincial government.

The other big bottleneck is human capital. Hardly anyone lives near the oil sands, so labour must be imported, from other parts of Canada and from abroad. People from 127 countries live in Fort McMurray, says Ken Chapman of the Oil Sands Developers’ Group. They speak 69 languages. The Walmart in town looks like the United Nations, except that all the shivering Africans are buying woolly hats. Mr Hughes expects to see a skills shortfall of 100,000 people in Alberta by 2017. Canada’s immigration rules are more liberal than America’s, but firms still gripe about delays. An Irish worker in Fort McMurray complains of having to fly to Calgary to sit a test of English proficiency. It’s her native language, and the test is online.

Companies poach staff from each other, bidding up labour costs. It would be easier to attract workers to Fort McMurray if the town were more liveable; a one-bedroom flat can cost $2,000 a month. To build more homes, however, the town must wrestle with provincial red tape—and also attract legions of builders, plumbers and electricians, all at inflated wages.

Working conditions in the oil sands are tough. Touch a metal pipe with your bare hand at minus 40 and it sticks. “It’s not for everybody,” shrugs an oil-firm boss. At remote work camps, companies provide hot food, warm cabins, broadband and squash courts. All this is costly. Many firms make equipment elsewhere and truck it in, so that fewer people have to toil in the cold. Some are hoping dramatically to raise the proportion of man-hours worked off-site.

With so many bottlenecks and a volatile oil price, firms are growing cautious. Suncor Energy and Canadian Natural Resources, among others, are putting new investments on hold. “It’s the uncertainty,” says Marcel Coutu, the boss of Canadian Oil Sands, a firm that owns 37% of Syncrude. “No one knows when or whether those pipelines will be built.”

Canadian energy: The sands of grime, Economist, Nov. 17, 2012, at 62

Killing off Piracy

The International Maritime Bureau, a body that fights shipping crime, counted 219 cases of pirates trying to board a vessel in 2010 and 236 in 2011. This year’s total is just 71, against 199 for the same period last year. Successful seizures are down from 49 in 2010 to 28 in 2011 and only 13 this year….

Tom Patterson, a maritime-security expert at Control Risks, a consultancy, points to three factors that have made piracy a lot riskier and less profitable. The first is that soaring insurance premiums and the threat to crews have forced shipowners to change their ways. Ships have been made harder to attack by a range of measures known as BMP, or best management practice. They cruise faster and practise evasive manoeuvres. Physical barriers such as razor wire are now fitted. Many have secure “citadels” on board for the crews to retreat to if all else fails. They also follow the reporting protocols established by the European Union’s naval task-force (EU NAVFOR) when crossing dangerous waters.

The second factor he cites is better co-ordination by the international naval task-forces. These include the EU flotilla, a similar one provided by NATO, an American-led coalition and warships under national commands from China, Japan, India, Iran, Russia and Saudi Arabia. These all meet four times a year to discuss tactics and make better use of the intelligence coming from surveillance aircraft and Somalis who want to be rid of the pirates.

The legal issues around fighting pirates are still tricky. But the foreign naval forces have become more assertive. On October 11th an EU vessel arrested seven pirates because their dhow was carrying ladders and a large quantity of fuel and water drums. Pirate mother ships now face pre-emptive boarding and skiffs are destroyed rather than ordered home as happened in the past. Mr Patterson highlights the psychological importance of a strike in May by helicopters from EU NAVFOR on targets near Haradheere, a pirate haven. It destroyed fuel, outboards and speedboats. The force’s spokesperson, Lieutenant Commander Jacqueline Sherrif, says that disrupting logistics on land “sends a strong message” to the pirates and their investors who now know “they will no longer have impunity on the beaches”.

However, both Mr Patterson and Rear Admiral Anthony Rix, now of Salamanca Risk Management, say that the biggest game changer of all is probably a third factor. Mr Patterson reckons that more than a quarter of vessels now carry armed security guards. The shipping industry used to oppose this, fearing that armed guards would escalate violence. But not a single vessel with guards has been boarded. Usually a warning shot is enough to deter the pirates. Lieut-Commander Sherrif says: “The pirates go to sea to make money, not die in a firefight.” BIMCO, the biggest international shipping organisation, has recently produced a standard contract for the industry, known as GUARDCON. Most of the security firms supplying guards are British. Admiral Rix says that his company hires mostly former Royal Marines…

 

Piracy: Hung, drawn and quartered, Economist, Nov. 10, 2012, at 62

The Manipulation of Energy Markets by Wall Street

The U.S. Federal Energy Regulatory Commission (FERC) is taking on big banks for their questionable energy trade.  The Federal Energy Regulatory Commission has slammed Barclays (pdf) with a demand to pay $470 million in fines for allegedly manipulating electricity markets in the western US to benefit the bank’s financial swap positions from 2006 to 2008.  Messages and email exchanges between Barclays energy traders released earlier this month reflect their efforts to manipulate and cheat their way to profits. What’s more disturbing is the glee the Barclay’s traders took in manipulating the energy markets with a total disregard for the costs to consumers.

The Barclays traders’ own words are damning:

“I totally f**kked with the Palo mrkt today. . . . Was fun. Need to do that more often.”

The attitude expressed doesn’t get much clearer than that.

In another instant message, the same Barclays trader wrote, “I’m gonna try to crap on the NP light and it should drive the SP light lower.”

The response from his colleague: “That is fine.”

Enron’s energy traders could have written the Barclays’ traders’ scripts. Remember Enron traders gloating, “He just f—s California,” and “He steals money from California to the tune of about a million” a day?  Only the traders’ attitudes are more obscene than their language. So saturated in arrogance, the traders had no concern they might get caught — which makes it even better that they did.

Though FERC hasn’t historically had much to do with regulating Wall Street, that is changing. FERC now also is going after JPMorgan Chase (pdf) and Deutsche Bank  (pdf) on similar charges.  The Los Angeles Times reports that JP Morgan’s questionable trades in the power market in 2010 and 2011 may have cost California residents and businesses more than $200 million. The no-holds-barred pursuit of profiteering no matter what laws and regulations are violated or what the cost is to the public has become a hallmark of Wall Street from Enron to Barclays.

While Wall Street may not have gotten the message that Enron-esque conduct is wrong, it’s gratifying to see FERC step up to hold banks accountable using the power from a post-Enron law. The 2005 Energy Policy Act gave FERC the authority to prevent market manipulation in the energy markets.  Not only does FERC have the power to fine companies as much as $1 million a day per violation, but it also has the ultimate weapon: the ability to suspend authorization to sell. JP Morgan knows that FERC is not afraid to flex this muscle.

Just last week, FERC suspended the authorization for a JPMorgan unit, J.P. Morgan Ventures Energy Corp., to sell electricity at market-based rates for six months beginning next April. FERC took this step because it found that JPMorgan had filed “factual misrepresentations” and omitted material information in filing with FERC and in communications with the California Independent System Operator. JPMorgan will be able to offer electricity for sale only at prices based on specified factors, so that utilities can continue to be able to meet demand.  FERC is relatively new to dealing with Wall Street, but it is quickly learning that a strong jolt is necessary to get banks to comply.

The Commodity Futures Trading Commission, which often works side-by-side with FERC, is expected to see similar cases of energy market manipulation as a result of whistleblower information provided to the CFTC’s new whistleblower reward program created under Dodd-Frank. The outcome of the FERC cases against Wall Street could provide a useful roadmap for future whistleblowers.

Excerpt from, Erika Kelton, Barclays’ Traders Show How Much Fun Wall Street Has Manipulating Markets, Forbes, Nov. 20, 2012

Rating Agencies on Fire

The ruling in the Federal Court of Australia on November 5th held Standard & Poor’s (S&P) jointly liable with ABN AMRO, a bank, for the losses suffered by local councils that had invested in credit derivatives that were designed to pay a high rate of interest yet were also meant to be very safe. The derivatives in question were “constant proportion debt obligations” (CPDOs). These instruments make even the most ardent fans of complex financial engineering blush: they are designed to add leverage when they take losses in order to make up the shortfall. S&P’s models, which the court said blindly adopted inputs provided by ABN AMRO, gave the notes a AAA rating, judging they had about as much chance of going bust as the American government.

S&P denies that its ratings were inappropriate, and plans to appeal. But evidence before the court suggests a world of harried analysts being outsmarted by spivvy bankers. It also indicated a disturbing lack of curiosity by S&P analysts and a desire to cover up for the firm’s failings even when they fretted about a “crisis in CPDO land” and worried that some buyers of these products were “in no hurry to stay in front of the truck”. Instead of warning investors that it had made mistakes, the court found that the firm continued to provide glowing opinions on new CPDOs coming out of the ABN AMRO factory.  There is nothing in the ruling to suggest the shoddy behaviour that took place in this instance was widespread across the firm. It would be a mistake to attribute all ratings that subsequently turn out to be wrong to negligence. Making predictions is hard, as Yogi Berra, a famously quotable baseball player, noted, especially when they are about the future.

But the Australian case does challenge a central part of the defence proffered by S&P and other ratings agencies (Moody’s and Fitch are the other two big ones) in some 40 ongoing cases worldwide alleging negligence. They argue that ratings are merely opinions and protected by constitutional safeguards on free speech, and that only imprudent investors would take decisions solely based on them.  This defence has already worked in a number of high-profile cases in America. Investment analysts and lawyers reckon that there is no sign that courts elsewhere are likely to follow the Australian ruling; it may not even survive the appeal. But the reasoning in the Australian case is persuasive. The judge argued that agencies could not wash their hands of all responsibility if investors took their ratings at face value and then lost money. “The issuer of the product is willing to pay for the rating not because it may be used by participants and others interested in financial markets for a whole range of purposes but because the rating will be highly material to the decision of potential investors to invest or not,” the judge wrote.

The tendency of investors to rely on ratings is reinforced by the privileged access that agencies have to information about issuers. The agencies’ defence that theirs is just an opinion wears thin when, having looked under the hood and kicked the tyres, they then tell investors to make up their own mind from a distance. It would help if regulators forced issuers of bonds and other rated securities to provide more public information. That would allow investors to do more of their own due diligence and enable more competition between agencies to provide the best analysis to investors rather than the best service to issuers.

Ratings agencies: Crisis in ratings land?, Economist, Nov. 10, at 74

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Italian prosecutors filed suit against five former employees of Standard and Poor’s (S&P) and two former employees of Fitch [corporate websites] for allegedly manipulating the market and abusing privileged information that led to the rating agencies’ downgrades of Italy. Though magistrates in Rome and Milan have refused to support the claim, prosecutors from the southern town of Trani contend that the agencies failed to respect European rules of transparency.-

Divide and Conquer the Mekong River; the new giant dam

Laos has given the go-ahead to build a massive dam on the lower Mekong river, despite opposition from neighbouring countries and environmentalists.  Landlocked Laos is one of South-east Asia’s poorest countries and its strategy for development is based on generating electricity from its rivers and selling the power to its neighbours, says the BBC’s Jonah Fisher in Bangkok.  Xayaburi is being built by a Thai company with Thai money – and almost all of the electricity has been pre-sold to Thailand, BBC says.

Countries such as Cambodia and Vietnam point to a report last year that said the project should be delayed while more research was done on the dam’s environmental impact. Up to now, Laos had promised not to press ahead while those concerns remained…

Laos has followed the letter, if not the spirit, of the 1995 Mekong Agreement. Under its terms, the countries that share the Mekong agree to prior consultations on the possible cross-border impact of any development on the river before deciding to proceed. Laos believes it has just done that.  Cambodia and Vietnam expressed concerns about the dam’s impact on fish migration and the flow of sediment downstream. So the Laos authorities brought in their own contractors and now say the problems have been solved.  Critics of the dam say many of the modifications to it are untested and the decision to proceed amounts to a huge experiment on one of the world’s great rivers.

Four dams already exist in the narrow gorges of the Upper Mekong in China but until now there have been none on the slower-moving lower reaches of the river..Laos deputy energy minister Viraphonh Virawong said work on the Xayaburi dam itself would begin this week, and hoped it would be the first of many….

Excerpt, Laos approves Xayaburi ‘mega’ dam on Mekong, BBC, Nov. 5, 2012

Barclays and Qatar: an Unholy Alliance?

U.S. authorities are investigating Barclays  for potentially violating anti-corruption laws during its scramble to raise money from Middle Eastern investors in the early days of the financial crisis.  The probe, being conducted by the Justice Department and the Securities and Exchange Commission, is at an early stage…The U.S. investigation follows a similar probe that British regulators opened earlier this year.

According to people familiar with the probe, it is examining Barclays’ use of middlemen serving as brokers to connect the bank with powerful Middle Eastern interests at a time when the bank was seeking a cash injection from investors in the region.  Barclays disclosed the investigation at the same time it reported a GBP106 million third-quarter loss…The new investigations represent the latest blows to a once-proud British institution. This summer, Barclays paid about $450 million to settle U.S. and British charges that it sought to manipulate benchmark interest rates, sometimes at the behest of top executives. The ensuing political furor led to the abrupt resignations of Barclays’s chairman, chief executive and chief operating officer.

The Justice Department and SEC investigation involves possible violations of the Foreign Corrupt Practices Act, which among other things bars companies with U.S. operations from bribing overseas politicians or corporate executives in order to win business.  In June 2008, as the financial crisis was gaining steam, senior bankers at Barclays persuaded the Qatar Investment Authority and other investors to inject about GBP4.5 billion into the British bank, seeking to erase fears about Barclays’s health. As part of that deal, Barclays hired the Qatar fund to provide “advisory services’ in the Middle East. The bank later disclosed that it was paying about GBP238 million in fees and commissions to Qatar Investment Authority and related entities.

This summer, the U.K.’s Financial Services Authority launched a formal investigation into Barclays’s public disclosures of those arrangements. The probe focused on past and present Barclays executives, including finance chief Chris Lucas, as well as on the manner in which Barclays wooed the Qataris to invest, according to people familiar with the matter.

Excerpts, Barclays Faces U.S. Anti-Corruption Probe, MarketWatch, Oct. 31, 2012