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Japan may cancel its multibillion-dollar plans to buy dozens of F-35 stealth fighter jets from the United States if prices continue to rise or delays threaten the delivery date, its defense minister said Wednesday.

Defense Minister Naoki Tanaka said failure by manufacturer Lockheed Martin to deliver on time at current price levels would force Tokyo to consider switching to a different aircraft.

Japan announced late last year that it would purchase 42 F-35 jets in a deal expected to cost more than $5 billion. The next-generation fighter is set to become the centerpiece of the U.S. military and allied air forces around the world, but the program has been plagued by delays and its cost overruns.

Japan hopes to receive its first F-35s in 2016, at a cost of about $120 million per plane.

“I think we will reach a formal agreement before the summer,” Tanaka told a session of Parliament. “If we cannot reach an agreement at that time, this would create a great deal of uncertainty for our national defense and preparedness. We would naturally have to view the possibility of canceling our plan or selecting another aircraft.”

Lockheed Martin, in conjunction with Northrop Grumman and BAE Systems, is building 2,400 F-35s for the U payday advance low fees.S. as well as partner nations. But the cost of the program has jumped from $233 billion to $385 billion. Some estimates suggest that it could top out at $1 trillion over 50 years.

Lockheed is building three versions of the F-35 _ one each for the Navy, Air Force and Marine Corps. The plane would replace Cold War-era aircraft such as the Air Force F-16 fighter and the Navy’s F/A-18 Hornet.

Last January, then-Defense Secretary Robert Gates had put the Marines’ version of the aircraft on a two-year probationary period because of “significant testing problems.”

His successor, Leon Panetta, ended the probation late last month.

But the Pentagon has said it will slow its purchases of the fighter to save money, which has raised concerns abroad. Slowed production could lead to delays in delivery to foreign buyers, and could make the planes more expensive to produce.

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JEFFERSON CITY – A state-sponsored workers’ compensation company has given out huge severance checks to its former executives and hefty bonuses to other employees, according to a state audit released today.

The company, Columbia-based Missouri Employers Mutual Insurance Co., also has bankrolled lavish vacation trips to Hawaii and Mexico as well as paid for sporting events tickets for its board members, executives, employees and guests, the auditor found.

The audit paints a picture of a firm that operates like a private entity, while enjoying federal tax-exempt status and other advantages that its private competitors lack.

Because it is considered an “independent public corporation,” the company has been able to avoid about $50 million in federal taxes since 1993, the audit revealed. That tax exemption has enabled the company to accumulate a surplus of $163 million. The firm has never paid any dividends to its members.

“MEM essentially operates as a private entity, compensates officers and employees at rates that are in excess of public sector entities, incurs expenses that are not considered acceptable in the public sector, and does so without complying with state open records laws,” the audit states.

Missouri Auditor Tom Schweich released the findings today. He undertook the audit after the Post-Dispatch raised questions last year about MEM’s public records policy and the legal status of its board members, along with its executive compensation and other expenditures. The auditor concluded that MEM is a “quasi-public governmental body for purposes of the Sunshine Law” – and thus subject to public records requests.

In a formal response filed with the audit, the company said: “The auditor’s report raises some immaterial, questionable expenditures that MEM already had identified and addressed prior the audit. MEM’s new management has strengthened governmental policies to be sure that expense policies are clearly understood and followed and that the company follows best practices. MEM’s board and management are responsible stewards who operate with integrity.”

The Legislature established Missouri Employers Mutual in 1993 to encourage competition and lower workers’ compensation premiums for employers, particularly small businesses. The state provided a start-up loan of $5 million, which was repaid in 1999 with interest.

Since then, Missouri Employers Mutual has become the leading workers’ compensation insurer in the state, controlling about 16 percent of the market.

The firm’s inner workings drew questions last spring after two former board members were indicted separately for alleged theft and fraud involving other organizations. Questions mounted in June when the company fired its chief executive officer, former Missouri Gov. Roger Wilson, without explanation.

In August, the board agreed to a one-time audit by Schweich. Amid the swirling controversy, both indicted board members – Doug Morgan and Karen Pletz – died late last year. The company is now run by chief executive officer Jim Owen of Chesterfield, a law school classmate and close friend of Gov. Jay Nixon’s.

The 20-page audit sheds light on MEM’s executive compensation, perks, severance benefits, freebies, and political contributions, as well as legal questions surrounding the company’s taxes and refusal to observe public records laws.

According to the audit, MEM also paid about $1.58 million in severance benefits or settlement payments to four former top executives and employees who either resigned or whose employment was terminated in 2009 and 2010.

Schweich’s audit does not name names, so it is impossible to tell who received the severance money. Former state Sen. Dennis Smith served as the company’s first chief executive from 1994 through June 2009, when he became “CEO emeritus.”

The audit called the severance benefits “excessive” and said that “recent discussions with a MEM official indicate that any future severance benefits paid to executives will be substantially reduced, or eliminated.”

Executive compensation at MEM also “appears significantly higher than would be considered appropriate for a public sector entity,” the audit states.

During 2010, MEM’s top 10 compensated employees made salaries totaling $1.8 million. The top salary was $312,820.

In addition to their salaries, MEM paid its top 10 executives a total of $659,405 in incentives, for an average bonus of $65,940. In other words, when bonuses are counted on top of salaries, the top 10 employees were paid an average almost $250,000 apiece.

Lower-level MEM employees also received substantial bonuses, based on the company’s “performance benchmarks” such as premium growth.

“Compensation and employee incentive bonuses for 2010 totaled over $17 million for approximately 200 employees, an average total payout of approximately $85,000 per employee,” the audit said.

MEM executives also received valuable perks such as the use of company automobiles, paid health insurance coverage for a spouse, five weeks paid time off, paid dues in professional societies and paid memberships in golf and athletic clubs.

Responding to the audit, MEM wrote that its “compensation and expenses are reasonable and necessary for a mutual insurance company. … MEM’s employee compensation averages in the 50th percentile” of other private insurers.

The audit also highlights numerous miscellaneous expenditures that MEM paid:

 A total of $300,000 for an all-inclusive “Presidents Trip” for 64 invitees including MEM board members, top executives, top performing employees, and other guests to Lanai, Hawaii, from Feb. 20 through Feb. 25, 2010. In 2009, MEM’s board chairman, vice chairman and their guests attended the company’s President’s Trip to Cabo San Lucas, Mexico. About $17,000 for St. Louis Cardinals suite tickets. The suite was used to entertain insurance agents as an incentive to doing business with MEM. The tickets were purchased from an unnamed associate of a former board member. About $60,000 for a suite, tickets, and parking passes for University of Missouri football games; an additional $12,000 for basketball tickets and parking passes; and about $5,000 to cater its tailgate party at the university’s homecoming in 2010. $80,000 for company functions in 2010, including $10,000 for a board of directors retreat in Ridgeville, Mo.; $16,000 for MEM’s annual golf tournament; about $8,800 for 15-year anniversary jackets; and about $7,000 for a 15-year anniversary luncheon.

In addition, the audit challenges MEM’s $7.2 million purchase of a for-profit subsidiary. Under state law, the auditor concluded, it is unclear whether the company may legally insure workers who work outside the state.

The audit also noted that MEM conducted an internal inquiry, which revealed that company funds were used for $8,000 in political contributions to the Missouri Democratic Party; $7,400 in cash and in-kind donations to the Insurance Coalition Political Action Committee; $4,000 in donations to gubernatorial inaugural festivities in 2005 and 2009; and $8,000 for a former top executive’s personal legal fees.

The audit is likely to raise additional questions in the Legislature about whether Missouri Employers Mutual should continue to enjoy tax-free status and other advantages over private insurers.

Originally, the company was supposed to become a private firm after the governor appointed the original five board members. But instead, the state has retained control. The governor appoints three of the firms’ five board members, based on nominations from the board and policyholders.

The structure is authorized in company bylaws but not in state law. Schweich said he took no position on whether MEM can prolong its public corporation status beyond that allowed by law by amending its bylaws.

MEM contended that it faces special mandates that partially offset its tax advantages. For example, it must let any of the 4,000 workers compensation insurance agents in the state write a policy for MEM. The company also is required to design and monitor work safety programs for policyholders.

Schweich said the firm was unable to quantify the impact of those requirements.

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In March, Sherry Hunt and a co-worker were called into a meeting at CitiMortgage’s big operations base in O’Fallon, Mo.

A high company executive awaited her there.

“It’s your asses if these defects don’t improve,” Hunt recalled being told by her “boss’s boss’s boss.”

Hunt didn’t create the “defects” in mortgage applications. It was her job to find them — red flags for bad loans. She felt the executive wanted her to stop doing her job and let the bank make bad loans that would be guaranteed by the federal government.

“The message was clear to me,” Hunt recalled. “I was threatened.”

Her experience provides a telling window into the inner-workings of mortgage misconduct that continued to occur even after the global financial system nearly collapsed due to the industry’s shady dealings with subprime loans and mortgage-backed securities.

Hunt, rather than cave to pressure, filed a “whistleblower” lawsuit against CitiMortgage and its Citigroup parent, claiming the mortgage lender deliberately ignored fraud and errors in government-insured mortgage programs. The U.S. Department of Justice then joined the suit.

Earlier this month, Citigroup admitted that it approved Federal Housing Administration mortgages that failed to meet government guidelines. It agreed to settle the suit for $158 million, the amount government expects to lose on FHA mortgages it claims Citi should never have made.

Hunt filed suit under the federal False Claims Act, which lets whistleblowers share in the payout if their suits succeed. Her take, minus legal fees, will be $31 million.

“I didn’t do it for the money,” said Hunt in an interview last week with her and her lawyer, Finley Gibbs.

As she tells it, Hunt tried hard to persuade Citi management to root out fraud. She complained weekly in memos, and finally took her case to human resources. When all that failed, and the pressure to bend kept building, she went to a lawyer.

In an emailed statement, Citi said it settled “so we could put these issues behind us and focus on serving our clients. We take our quality assurance processes seriously and have pro-actively undertaken process improvements.”

The bank declined to respond to specific allegations. A spokesman also would not say if Citi had removed or reassigned executives because of the case, or describe other changes it made to satisfy the government.

Now that it’s over, Hunt thinks CitiMortgage will finally reform. But it’s not clear if she’ll be there to see it; she’s now negotiating whether she remains an employee with the company.

INSPECTING LOANS

Hunt lives on a “hobby farm” in Silex with her retired husband, Jonathan. They grow alfalfa and vegetables. She is reticent about her private life. She declined to say how many children she has, for instance, or describe her upbringing. She wouldn’t say what she might do with so much money.

Her entire working life — 37 years — has been spent in the behind-the-scenes paper-shuffle of mortgage processing.

Citigroup, the nation’s third largest bank, is a giant in the mortgage business. It made 30,000 FHA loans since 2004, totaling more than $4.8 billion. About 30 percent have defaulted, according to the government.

Like many big lenders, Citi can make government-backed loans — putting taxpayers on the hook for defaults — without sending applications to the FHA for review. But it has to abide by strict guidelines and set up separate quality control departments, independent of the bank’s other operations, to flag suspicious applications.

That was Hunt’s job at CitiMortgage. She had started in the mortgage business in 1975 at age 18 as a lowly processor, then climbed the ladder into management. By 2008, she supervised nine workers in the quality control department. They scrutinized one out of every 10 mortgage applications.

They caught “over a thousand” applications with problems, according to Gibbs, her lawyer. Some were obvious fraud – such as numbers whited-out on a W-2 wage form faxless payday loans. Others may have been goofs, such as missing documents or wrong calculations.

The cases were passed on to a fraud unit, which verified that about half really were attempts to cheat, says Hunt. Such cases were supposed to be reported quickly to the Department of Housing and Urban Development, which overseas the FHA. But the government wasn’t hearing of the problems.

At first, Hunt didn’t blame the Citi system. “The sheer volume of referrals was overwhelming,” she thought.

More than 1,000 cases referred by Hunt’s unit were backed up in the fraud unit in 2009, according to the government. More than 80 percent were loans that had defaulted shortly after they were made, which the government calls an indicator of fraud. Eventually, Citi simply erased those records from its files, the government charged.

Then Hunt suspected something more sinister, a “pattern of behavior,” she said. “As I found things against the HUD rules and reported them to management, nothing happened, even after more follow-ups.”

According to the government, Citi’s misbehavior started in 2004, when it took the quality control function away from an outside contractor and moved it in house. It continued until mid-2011. That was more than two years after CitiGroup nearly failed over problems that included massive investments in bad mortgages. The government bailed out the bank to the tune of $45 billion.

BULLYING

Hunt wasn’t alone in her worries. According to the government’s suit, Michael Watts, the director of quality control, complained repeatedly to company officials charged with controlling risk. He warned that employees had “marching orders” to fight quality control decisions.

At one large staff meeting, managers praised loan processors for “beating back” the quality control team and getting them to withdraw complaints, she said. The quality control team was standing there listening. “Someone was allowing them to bully us,” Hunt said.

In June of last year, Hunt wrote a memo complaining about pressure from Jeffrey Polkinghorne, Citi’s director of “front-end” risk. “We also have Polkinghorne telling us it is our asses . . . if the quality does not improve,” she wrote, according to the federal complaint.

At that point, Hunt could have shut up and started overlooking problems. Instead, she complained to CitiMortgage human resources department. There were meetings. Five months later, nothing had changed.

That’s when she decided to blow the whistle outside Citi.

Part of the decision was self interest — she wanted to separate herself from an illegal activity. Hunt also felt an obligation to keep the mortgage industry honest. The FHA had certified her to handle its mortgages. “I uphold their standard,” she said.

She talked with her husband about the costs of standing up, about everything they could lose. Her career. Their home.

She talked to Gibbs, a lawyer from Columbia, Mo., who she knew. Gibbs knew about the federal false claims act, although he had never handled such a case. He filed suit in August.

Then Hunt went back to work. “I kept a low profile. It wouldn’t serve a purpose for me to go blasting this all over the place,” she said.

False Claims Act suits are filed under seal, and they remain sealed until the government decides whether to participate. For the first few weeks, Citigroup didn’t know it was being sued.

The Justice Department got interested and took up the case. It began negotiating with Citgroup. The law forbids employers from retaliating against whistleblowers, and Hunt said she felt no blowback at work.

“I don’t believe much of this filtered down to the O’Fallon office,” she said. “I was comforted in my mind that nobody I was passing in the hallways knew.”

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Consumer sentiment improved a tad in February to rack up a year high as Americans became more confident about the economy’s resilience, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment came in at 75.3, edging up from 75.0 the month before. It was the highest level since February 2011.

It surpassed economists’ expectations of 73.0 and recovered from a decline to 72.5 in February’s preliminary reading.

“It is not that surging oil prices, instability in the Mideast, the European crisis or uncertainties about future tax and spending policies could not ultimately derail the recovery, but that consumers expect the pace of overall economic growth to continue to slowly restore lost jobs despite these potential problems,” survey director Richard Curtin said in a statement.

The survey’s barometer of current economic conditions eased to 83.0 from 84.2, but the survey’s gauge of consumer expectations also rose to its highest level in a year at 70.3 from 69.1.

A third of consumers spontaneously reported hearing about more job opportunities, the highest proportion ever recorded by the survey.

But consumers’ outlook for the economy and job growth was more positive than their views on their own finances. Improving finances were reported by 27 percent of respondents, down from 29 percent in January.

The survey’s one-year inflation expectation held steady at 3.3 percent, while the survey’s five-to-10-year inflation outlook rose to 2.9 percent after sitting at 2.7 percent for four months.

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German business confidence probably rose to the highest in seven months in February as progress in taming Europe

Technology analyst John Kinnucan was arrested Friday on allegations of trading on information about many of the nation’s leading tech companies, resulting in illicit gains of nearly $110 million.

Kinnucan faces both criminal and civil charges. He was arrested at his Oregon home and is awaiting transfer to New York, according to the U.S. Attorney’s office for the Southern District of New York, which is conducting an ongoing probe into insider trading. The Southern District includes the nation’s major stock exchanges and is taking the lead on insider trading probes nationwide.

In January, seven hedge fund managers and investment professionals were indicted in New York, charged with sharing insider information when making trades. Last year, Raj Rajaratnam, founder of the Galleon Group hedge fund, was found guilty and sentenced to 11 years in prison and fined a record $92.8 million. The SEC alleges the Galleon case resulted in $91 million in illicit gains, less than in Kinnucan’s case.

The Securities and Exchange Commission alleges that Kinnucan befriended and rewarded insiders at various technology companies, including Apple (, Fortune 500), Dell (, Fortune 500), Fairchild Semiconductor (), Marvell Technology (), and Western Digital (, Fortune 500), in order to gain information, which the SEC claims he then sold to clients, primarily portfolio managers and analysts at prominent hedge funds and investment advisers.

"The information he obtained and passed along to clients was not the result of research. It was inside information Kinnucan bought from company insiders," said Janice Fedarcyk, FBI assistant director-in-charge. "That kind of information beats research every time. The only problem is it isn’t legal."

In late 2010, Kinnucan took the unusual step of announcing on TV and in an e-mail to clients that he had been contacted by FBI agents, whom he mocked as "fresh-faced eager beavers."

He said he was approached at the end of October 2010 and asked to wear a wire in an insider-trading investigation targeting certain hedge funds. He shut down his Portland, Ore.-based firm, Broadband Research Corp., soon after that disclosure. Kinnucan and members of his former firm could not be reached for comment Friday.

The U.S. Attorney’s office and the SEC would not comment on Kinnucan’s actions in 2010. 

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A senior U.N. nuclear expert says his team is leaving for Tehran with hopes that Iranian officials will agree to talk about suspicions that the Islamic Republic has worked _ or is working _ on a clandestine atomic arms program.

Herman Nackaerts of the International Atomic Energy Agency is heading a group of experts focusing on the allegations, which Iran continues to deny.

Nackaerts told reporters Sunday before boarding a flight to Tehran “the highest priority remains of course the possible military dimensions of Iran’s nuclear program.”

The trip is the second one in less than a month as the IAEA attempts to dent nearly four years of Iranian refusal to cooperate with its probe. IAEA experts came back from their last visit in late January with no concrete results.

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The number has been repeated so often by presidential prognosticators that it’s an article of faith: No president has been re-elected since World War II with an unemployment rate higher than 7.2 percent.

But the stock market turns out to be a pretty good predictor, too.

The Dow Jones industrial average has soared 62 percent since President Barack Obama took the oath of office during some of the darkest days of the Great Recession. The Dow was just below 8,000 then and stands near 13,000 today.

If a recent study of stock markets and presidential elections is any guide, Obama can start preparing his second inaugural address.

“There’s something to this,” says Phil Orlando, chief equity market strategist at Federated Investors, the $370 billion investment firm.

There are plenty of other signs often consulted for their political forecasting power, like whether a team from the National Football Conference or the American Football Conference wins the Super Bowl.

This one makes a little more sense: When the economy picks up and unemployment falls, confident investors put money into riskier investments and stocks rise. Voters are likely to reward the sitting president with another four years.

“The stock market reflects trends in the economy,” Orlando says. And as any political operative can attest, in a presidential campaign, it’s the economy _ you know the rest.

The study was backed by the Socionomics Institute, a think tank studying how a shared mood among a group sways its members’ actions. Their researchers dug up data on economic output, prices, unemployment and stock-market performance and matched them to presidential elections.

They went all the way back to the first re-election in 1792, when George Washington beat John Adams and won a second term as the president.

The researchers found a solid connection between the stock market’s direction in the three years leading up to Election Day and the election results. Gains of 20 percent or more for the Dow nearly assured victories for sitting presidents. Drops of 10 percent or worse got them tossed out.

Voters returned Calvin Coolidge to the White House in 1924, just as the Roaring ’20s started roaring. They booted Herbert Hoover in 1932 while the stock market suffered through a three-year plunge.

The authors of the Socionomics Institute study say everything can be traced back to the prevailing optimism or pessimism. Their organization studies “the social mood.” But how do you read the mood of a whole country?

The authors say that the stock market is the best available gauge of how the country is feeling, “because investors can act swiftly to express their optimism or pessimism.” Bad day? Time to sell. Things looking up? Time to buy.

“An increasingly positive social mood produces a rising stock market as well as votes for the incumbent, and an increasingly negative social mood produces a falling stock market as well as votes against the incumbent,” they write.

To the authors, it’s the mood that determines the election, not the stock market. The stock market is just a reliable gauge of the national temper, an incredibly accurate mood ring.

In recent successful re-election campaigns, the connection appears clear. Ronald Reagan won re-election in 1984 following the Dow’s 41 percent surge and despite an unemployment rate of 7.2 percent. Bill Clinton was awarded a second term after the Dow gained 63 percent in the three years leading up to Election Day.

But there are misfires. James Madison, for instance, won re-election in 1812 despite a 34 percent drop in the market over three years. George H.W. Bush lost to Bill Clinton even though the Dow rose 51 percent over his term in office.

Doug Wead, a presidential historian who served in the elder Bush’s administration, says the stock market theory sounds suspect.

“The stock market isn’t even a good indicator of the economy,” he says. “You can have the stock market going up while the rich get richer and the poor get poorer.”

There’s also the danger of oversimplifying _ relying on one number, in this case the Dow’s performance, while ignoring everything from scandals and wars to third-party candidates.

In William Howard Taft’s last three years in office, the Dow lost 12 percent, and Taft lost the 1912 election to Woodrow Wilson. But if Theodore Roosevelt hadn’t split from the Republicans and run under the Progressive Party banner against Taft that year, Taft might have returned to office.

It was a similar story with the first President Bush in 1992. The independent candidate Ross Perot siphoned off votes from both candidates, but historians generally believe more came from Bush’s Republican camp. Clinton won with just 43 percent of the popular vote.

The economy also slipped into a recession during Bush’s second year in office, and as he campaigned for re-election, the unemployment rate hovered well above the dreaded 7.2 percent mark.

Orlando, of Federated Investors, says a change in any single statistic won’t guarantee a president gets re-elected. Analysts should consult a range of figures. One that looks less reassuring for Obama is his approval rating, he says.

No president has been re-elected with a Gallup approval rating below 48 percent approaching Election Day. Obama’s numbers are improving, and the election is more than eight months away, but for now he’s teetering on the edge _ 48 percent.

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Builders broke ground on more homes than forecast in January, helped by warmer weather and adding to signs the U.S. residential real estate market is stabilizing.

Starts rose 1.5 percent to a 699,000 annual rate from December

Companies restocked at a faster pace in December, a positive sign that they expect consumers to step up spending.

Business stockpiles grew 0.4 percent in December, the Commerce Department said Tuesday. That followed a similar gain in November. Sales rose 0.7 percent, almost double the November gain.

Companies are building up their stockpiles again after cutting them over the summer amid recession fears. Higher inventories require more production, which boosts economic growth. It also suggests companies expect more sales.

Rising inventories were a key reason growth accelerated in the final three months of last year. Still, some economists expect the restocking to slow this year.

Wholesalers reported a 1 percent increase in inventories. Retailers reported a 0.2 percent gain and manufacturers 0.1 percent.

Inventories rose to a seasonally adjusted $1.56 trillion in December. That is 18 percent above the low point reached in 2009, just after the recession ended.

Rising sales are keeping stockpiles from getting too high. If companies feel their inventories are excessive, they could cut back on orders, slowing the economy payday loans direct lenders.

Overall sales rose in December. Wholesalers reported a 1.3 percent jump in sales, followed by a 0.7 increase for manufacturers and flat sales for retailers. That pushed down the ratio of inventories to sales to the lowest level since March. A lower ratio suggests inventories aren’t out of line with sales.

A separate report Tuesday showed that retail sales rose 0.4 percent in January. Consumers rebounded from a slow holiday shopping season and spent more on electronics, sporting goods, building materials and gas.

The economy expanded at a 2.8 percent annual rate in the fourth quarter. But economists expect companies won’t add as much to their stockpiles in the current quarter. That could push growth down to 2 percent or even below.

Stockpiles held by manufacturers account for nearly 40 percent of total business inventories, while wholesalers and retailers each hold about one third.

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