DealBook: Ex-Trader Charged in $276 Million Insider Scheme

Federal prosecutors brought what they called “the most lucrative insider trading scheme ever charged,” filing a criminal case on Tuesday against a former trader at a unit of the hedge fund SAC Capital.

Mathew Martoma, a former trader at CR Intrinsic, a division of SAC Capital, was charged with making about $276 million in combined profits and avoided losses by obtaining confidential information about a drug trial for an Alzheimer’s drug developed by the pharmaceutical companies Elan and Wyeth.

The case is the latest to put the billionaire investor Steven A. Cohen and his hedge fund, SAC Capital, in the spotlight over insider trading crimes committed by former employees.

Mr. Martoma received the information from Sidney Gilman, a neurology professor at the University of Michigan, a leading expert in Alzheimer’s disease. Mr. Gilman is cooperating with the government and has entered into a nonprosecution agreement with the United States attorney’s office in Manhattan.

Mr. Gilman connected with Mr. Martoma through an expert network firm based in New York. Expert networks became popular on Wall Street in the last decade, linking Wall Street money managers to specialists in various industries to help give them an edge on their investments. Expert networks have been a focus of the government’s widespread crackdown on insider trading at hedge funds.

His consulting work at the expert network firm earned Mr. Gilman more than $100,000, according to a parallel civil complaint against Mr. Martoma and Mr. Gilman filed by the Securities and Exchange Commission on Monday.

According to the complaint, between 2006 and 2008, Mr. Martoma consulted with Mr. Gilman on dozens of occasions about the preliminary results of the drug trial and accumulated a roughly $700 million position in the stocks of Wyeth and Elan. Mr. Gilman was chairman of the safety committee overseeing the drug trial.

In June 2008, the complaint says, Mr. Martoma received secret information about negative data relating to the drug trials. After receiving that information, Mr. Martoma caused SAC Capital to sell its entire inventory of roughly 10.5 million shares in Elan and about 7 million shares of Wyeth before the public release of the data.

The day after the study was announced, Elan stock lost about 42 percent of its value and Wyeth dropped about 12 percent. The inside information allowed SAC Capital to make about $276 million in illegal gains.

Mr. Martoma left SAC Capital in 2010, according to a spokesman at the hedge fund. A lawyer for Mr. Martoma could not be reached immediately for comment.

In a statement, Preet Bharara, the United States attorney, said: “The charges unsealed today describe cheating coming and going – specifically, insider trading first on the long side, and then on the short side, on a scale that has no historical precedent. As alleged, by cultivating and corrupting a doctor with access to secret drug data, Mathew Martoma and his hedge fund benefited from what might be the most lucrative inside tip of all time.”

Mr. Martoma is the latest person to have worked at SAC to be ensnared in an insider trading investigation. Jon Horvath, a former technology industry analyst at SAC, pleaded guilty in September to participating in a conspiracy that illegally traded in the shares of Dell computer. His boss, the former portfolio manager Michael Steinberg, has been named as an unindicted co-conspirator but has not been charged in the case. Mr. Steinberg’s lawyer, Barry Berke, declined to comment.

Last year, two former SAC portfolio managers – Donald Longueuil and Noah Freeman – admitted to trading on illegal tips about publicly traded technology companies. Mr. Longueuil is serving a two-and-a-half-year term at a federal prison in Otisville, N.Y.; Mr. Freeman, who is cooperating with prosecutors, has yet to be sentenced.

SAC CAPITAL UNDER A MICROSCOPE The firm has been under a cloud since a former employee, Richard Choo-Beng Lee, pleaded guilty in 2009 to insider trading and began helping the government in its investigation. The crimes he confessed to were committed after he left SAC, but he agreed to provide information about his five years at the firm, which ended in 2004.

NAMES	THE CASES
Jonathan Hollander	The former analyst paid more than $220,000 to settle civil charges brought by the Securities and Exchange Commission accusing him of trading in his personal account on confidential information about the 2006 takeover of the Albertsons grocery store chain.
Jon Horvath and Michael Steinberg	Mr. Horvath, right, a former technology industry analyst, pleaded guilty in September to participating in a conspiracy that illegally traded in the shares of Dell computer. His boss, the former portfolio manager Mr. Steinberg, has been named as an unindicted co-conspirator but has not been charged in the case. Federal prosecutors contend they were part of a seven-person conspiracy — a “circle of friends” — that earned about $62 million in illegal gains trading on secret tips from executives at publicly traded technology companies.
Donald Longueuil and Noah Freeman	The two former portfolio managers admitted in 2011 to trading on illegal tips about publicly traded technology companies. Mr. Longueuil, right, was swept up in a crackdown on so-called expert networks. He is one of roughly a dozen implicated in the case. Mr. Longueuil is serving a two-and-a-half-year jail term at a federal prison in Otisville, N.Y.; Mr. Freeman, who is cooperating with prosecutors, has yet to be sentenced.
Mathew Martoma	The former trader at CR Intrinsic, a unit of the hedge fund, was charged with making about $276 million in combined profits and avoided losses by obtaining confidential information about a drug trial for an Alzheimer’s drug developed by the pharmaceutical companies Elan and Wyeth.

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An ethics debate over embryos on the cheap

Dr. Ernest Zeringue was looking for a niche in the cutthroat industry of fertility treatments.

He seized on price, a huge obstacle for many patients, and in late 2010 began advertising a deal at his Davis, Calif., clinic unheard of anywhere else: Pregnancy for $9,800 or your money back.

That's about half the price for in vitro fertilization at many other clinics, which do not include money-back guarantees. Typically, insurance coverage is limited and patients pay again and again until they give birth — or give up.

Those patients use their own eggs and sperm — or carefully select donors when necessary — and the two are combined in a petri dish to create a batch of embryos. Usually one or two are then transferred to the womb. Any embryos left over are the property of the customers.

Zeringue sharply cuts costs by creating a single batch of embryos from one egg donor and one sperm donor, then divvying it up among several patients. The clinic, not the customer, controls the embryos, typically making babies for three or four patients while paying just once for the donors and the laboratory work.

People buying this option from Zeringue must accept concessions: They have no genetic connection to their children, and those children will probably have full biological siblings born to other parents.

Inside the industry, Zeringue's strategy for making embryos on the cheap has spurred debate about the ethical boundaries of creating life.

"I am horrified by the thought of this," said Andrew Vorzimer, a Los Angeles fertility lawyer alarmed that a company — not would-be parents — controls embryos. "It is nothing short of the commodification of children."

Other experts say they see no problem with the arrangement, although the business model and the issues it raises are to be discussed at a meeting in January of the ethics committee of the American Society for Reproductive Medicine.

Zeringue said the concerns are overblown.

Most of his customers have run out of money and patience by the time they come to his clinic, he said: "They're kind of at the end of the line."

::

Natosha Dukart and her husband, Brad, an oil field worker, spent more than $100,000 without producing a child. They ran up credit cards, flipped houses and moved four times to help finance round after round of IVF.

It was never clear if the problem was her eggs or his sperm.

After eight unsuccessful attempts, Natosha took to the Internet and found Zeringue's clinic, California IVF: Davis Fertility Center Inc., and its embryo program, California Conceptions. With no financial risk, there was nothing to lose.

"It was an easy choice," Natosha said.

She sent their photographs to the clinic and filled out a form saying they wanted a Caucasian baby. Two months later, they received a profile of an embryo the clinic had frozen in storage. Both donors had brown eyes and healthy family histories.

The Dukarts liked the description and this February traveled from their home near Calgary to Davis in an attempt to get Natosha pregnant.

"It was just as emotional as it was with our own embryos," she said.

Last month, at age 39, she gave birth to a healthy 7-pound girl with blue eyes and dark hair. The couple named her Milauna.

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Google should not be accused of “unfair” acts: lawmakers

WASHINGTON (Reuters) – Two lawmakers urged the Federal Trade Commission on Monday to steer clear of expanding its authority as it investigates allegations search engine company Google violated antitrust law.

The two California Democrats in the House of Representatives, who count Google as a major campaign contributor, asked the FTC not to accuse the company of “unfair” acts if it believes it broke antitrust law.

Anna Eshoo, on the Energy and Commerce Committee, and Zoe Lofgren, who is on the Judiciary Committee, said there were reports to suggest the FTC planned to use the unfair standard to avoid proving some elements required in an antitrust claim.

They said such a move could lead to over-broad authority for the FTC that could create legal uncertainties for firms and stifle economic growth.

“Such a massive expansion of FTC jurisdiction would be unwarranted, unwise, and likely have negative implications for our nation’s economy,” the lawmakers wrote in the letter, which was dated November 19 and sent to the five FTC commissioners.

The FTC is looking into a long list of complaints brought by rivals of Google, which is also accused of using its dominance to squash competitors in vertical search areas such as shopping and travel.

The FTC staff has reportedly given the commission a report urging them to file a complaint against Google for suing competitors based on standard essential patents and asking for injunctions to stop the sales of their products. Standard essential patents are supposed to be broadly licensed at a fair rate.

Google is the seventh largest contributor to Eshoo, donating $ 13,000 during the 2012 election cycle, according to data from the Center for Responsive Politics. It is the third largest contributor to Lofgren, who got $ 14,500 from Google. The donations came from a Google political action committee and employees and lobbyists associated with Google.

Complaints about Google to the FTC over standard essential patents arise from a raft of litigation between Apple Inc, Google and Microsoft Corp, which have sued each other numerous times in various countries, each alleging that their respective patents are being infringed upon by rivals in the highly competitive smartphone market.

In many cases, the companies ask that their rivals’ products be banned from stores. Many antitrust enforcers believe it is inappropriate for companies to ask for sales bans based on the infringement of essential patents.

FTC Chairman Jon Leibowitz, who is expected to leave the agency soon, said in mid-September that he expected a decision in the case by the end of the year. A decision could be in the form of a lawsuit or, more likely, a settlement.

Google has settled with U.S. law enforcement agencies in the past.

For example, it settled with the FTC following privacy gaffes during the botched roll-out of its social network, Buzz. Later, it paid $ 22.5 million to settle charges that it bypassed the privacy settings of customers using Apple’s Safari browser.

Google also paid a $ 500 million settlement in 2011 to the Justice Department for knowingly accepting illegal advertisements from Canadian pharmacies selling in the United States.

FTC spokesman Peter Kaplan confirmed that the commission had received the letter but said the agency declined comment.

(Reporting By Diane Bartz; editing by Andrew Hay)

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Charlie Chaplin’s bowler hat and cane fetch over $60,000 at auction

NEW YORK (Reuters) – One of Charlie Chaplin’s bowler hats and a cane, the staple of Hollywood silent-era comedy, were auctioned for $ 62,500 on Sunday, said auction house Bonhams.

Chaplin’s hat and cane, which fetched more than the initial estimate of $ 40,000-60,000, are synonymous with his “Little Tramp” character in films such as “City Lights” and “Modern Times.”

Bonhams memorabilia specialist Lucy Carr said earlier it is unknown how many of Chaplin’s bowlers and canes still exist. Those auctioned on Sunday are from a private collection but have a direct link to Chaplin, Carr said.

The waddling and bumbling “Little Tramp” character propelled Chaplin to global fame. The character, Hollywood legend says was created by accident on a rainy day at Keystone Studios, first appeared in 1914′s “Kid Auto Races at Venice” and lastly in 1936′s “Modern Times.”

Chaplin’s hat and cane are the highlights of an auction of popular culture artifacts that is still in progress. Other items include a handwritten letter from John Lennon in which the Beatle sketched himself and wife Yoko Ono nude. There is also an archive of Marilyn Monroe photographs, an early Charles Schulz “Peanuts” comic strip, and a wicker chair from Rick’s Cafe in “Casablanca.”

(Additional reporting by Eric Kelsey; editing by Christopher Wilson)

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Really?: The Claim: Eye Problems Can Cause Headaches in Children

Really?

Anahad O’Connor tackles health myths.

THE FACTS When a child complains of frequent headaches, many pediatricians order an eye exam. “In some pediatric ophthalmology practices, it’s a daily occurrence,” said Dr. Zachary Roth, a resident in ophthalmology at Albany Medical Center in New York.

Often, a child may experience headaches while reading or doing schoolwork, leading parents to think the child needs glasses. But are eye problems really a cause of childhood headaches?

In a recent study, Dr. Roth and his colleagues examined 158 children under age 18 who were referred to ophthalmologists for frequent headaches. Then, they evaluated the children’s medical records and looked at the results of earlier vision exams.

Ultimately, the researchers could not find any significant link between headaches and diagnoses of vision problems. In three-quarters of the subjects, the headaches went away over time, both in those who received new glasses and those who did not.

The study, which was presented at a recent American Academy of Ophthalmology conference, was not designed to look for causes of the headaches. But there were “quite a few” children with family histories of migraine, Dr. Roth said. Sinus problems and stress headaches also appeared to be common issues, he added.

“I think the take-away message is that it’s very unlikely for headaches to be caused by an eye problem,” he said. “The experience of all the ophthalmologists we talked to is that it almost never seems to be related to the eyes, so it’s probably more fruitful to investigate other causes.”

THE BOTTOM LINE Vision problems are often blamed for childhood headaches, but in reality, the two are rarely related.

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Solar Power as Solution for Storm-Darkened Homes

When Hurricane Sandy wiped out the power in areas like coastal Long Island and the Jersey Shore, what should have been beacons of hope — hundreds of solar panels glinting from residential rooftops — became symbols of frustration.

Robert Stolarik for The New York Times

R. David Gibbs of the nonprofit group Solar One directed volunteers in an installation at the Rockaway Beach Surf Club.

A blog about energy and the environment.

Despite the popular perception that installing solar panels takes a home “off the grid,” most of those systems are actually part of it, sending excess power to the utility grid during the day and pulling electricity back to run the house at night. So when the storm took down power lines and substations across the Northeast, safety systems cut the power in solar homes just like everywhere else.

“Here’s a $70,000 system sitting idle,” said Ed Antonio, who lives in the Rockaways in Queens and has watched his 42 panels as well as those on several other houses in the area go unused since the power went out Oct. 29. “That’s a lot of power sitting. Just sitting.”

Yet there are ways to tap solar energy when the grid goes down, whether by adding batteries to a home system or using the kinds of independent solar generators that have been cropping up in areas hard-hit by the storm.

In the Rockaways, where nearly 14,000 customers still had no power as of Monday morning, volunteers set up a makeshift solar charging station between a car roof and a shopping cart. A multipanel, battery-tied system is helping fuel a relief center’s operations.

In the storm’s wake, solar companies have been donating equipment across New York and other stricken areas to function as emergency power systems now and backups in the longer term. It is important, executives say, to create smaller, more decentralized ways of generating and storing electricity to help ease strain on the grid in times of high demand or failure.

“The grid won’t evolve into something more distributed and fault-tolerant overnight — it’s still dependent upon a centralized system,” said Ben Tarbell, vice president for products at SolarCity, a leading installer that has donated generators after Hurricanes Katrina and Sandy and is developing a battery backup system for its customers. “But the components are starting to come together.”

Generally, home systems like Mr. Antonio’s are engineered to feed electricity from the roof array through an inverter and into the home’s electrical panel, sending the excess to the broader electric grid. But during a failure, the inverter automatically shuts down the system to guarantee that no electricity is flowing into equipment that workers will be trying to fix. The shutdown also ensures that the system’s current will sync with the grid when power is restored and guards against damaging the lines.

Certain systems allow solar panels to run a household directly during prolonged power failures, generally combined with battery storage to keep the power functioning around the clock. Those require installing a separate electrical panel and a more complicated inverter that would switch the flow of electricity entirely over to the house, perhaps to a few critical circuits to run, say, the refrigerator, some lights, television and minimal heat.

“You size the battery system to go with that, and then the system will work just on those dedicated circuits,” said Tony Clifford, chief executive of Standard Solar, an installer based in Maryland.

The cost of adding battery storage to an existing system can range from $500 to $30,000, depending on how large the solar array is and how much the customer wants to be able to run.

Although demand for battery backup is not yet widespread, interest tends to go up after storms, said David Panico, senior vice president of the industrial power group at SunWize, a solar supplier that provided a low-cost mobile system to the Rockaway Beach Surf Club, a hub of that area’s relief effort.

But a drawback is that residents have to figure out where to put the batteries — a particular quandary for those with homes vulnerable to flooding.

So some are looking at electric vehicles as potential backup energy sources instead. In some cases, a car could fuel a house for days on a single charge.

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Feinstein has 'concern' about Rice's Benghazi talking points

Sen. Dianne Feinstein said Sunday that she has initiated a review of talking points used by U.N. Ambassador Susan Rice on the attack on the American diplomatic facility in Libya, with the goal of determining why the public comments appeared to conflict with the initial assessment of U.S. intelligence sources.

Feinstein, chair of the Senate Intelligence Committee, defended Rice against what she called the “politicization” of her comments on the battery of Sunday news shows in the wake of the Sept. 11 attack that led to the death of four Americans, including Ambassador Chris Stevens.

But the California senator also said she had “some concern” with the process that produced the unclassified “speaking points” that Rice worked off of, in which she said it was the administration’s preliminary view that the attacks were a spontaneous reaction to an anti-Islamic video, rather than a planned terrorist attack.

Feinstein, appearing on NBC’s “Meet the Press,” said that the now-former director of the Central Intelligence Agency, David H. Petraeus, had “very clearly said that it was a terrorist attack” in a meeting with lawmakers the day after the attack in Benghazi.

PHOTOS: U.S. ambassador killed in Libya

Asked then why Rice would not call the attack "terrorism" days later, Feinstein said it was because Petraeus’ view was based on information that was not yet cleared for public review.

“She could speak publicly only on unclassified speaking points. I have some concern with those speaking points,” Feinstein said. “We gave the direction yesterday that this whole process is going to be checked out. We are going to find out who made changes in the original statement. Until we do, I really think it's unwarranted to make accusations.”

Rep. Mike Rogers (R-Mich.), chair of the House Intelligence Committee, stopped short of saying information was withheld from initial talking points for political reasons.

Still, he said, “I know the narrative was wrong, and the intelligence was right.”

“The narrative, as it went from at least the CIA and other intelligence agencies, was accurate,” he said. “There were some policy decisions made based on the narrative that was not consistent with the intelligence that we had. That's my concern, and we need to say hey, we need to figure out how that happened.”

The episode involving Rice’s testimony on the Sept. 14 news shows is at the heart of Republicans’ questioning the administration’s handling of the Benghazi attack. More recently, it has become the basis for some lawmakers vowing to block the potential nomination of Rice to replace Hillary Rodham Clinton as secretary of State in President Obama’s second term.

Feinstein said it was not right for Rice to be “pilloried” for comments that were consistent with the approved statement she was given to speak off of. Sen. Lindsay Graham (R-S.C.) said that in considering a possible Rice nomination he was “not going to give her a plus for passing on a narrative that was misleading to the American people.”

PHOTOS: 2016 presidential possibilities

“I am very disappointed in Susan Rice … telling a story that was disconnected from reality that did make the president look good at a time when, quite frankly, the narrative should have been challenged not reinforced that Al Qaeda was dismantled,” he said.

Rep. Peter King (R-N.Y.) said that before appearing on the television shows, Rice should have had a fuller understanding of events.

“She certainly could have gotten the classified briefings. She would have sat down with the National Security Council, and she would have known that those talking points had been watered down, and she could have caveated that in her statement, which she didn't,” King said on ABC’s “This Week.” “President Obama said, don't blame Susan Rice because she had nothing to do with Benghazi. Then why did they send her out as the representative to the American people?”

Sen. John McCain (R-Ariz.) said on CBS’ “Face the Nation” that Rice has “a lot of explaining to do,” and should explain her comments if she is nominated.

“They said they wanted to not give classified assessment of what happened because they didn’t want to betray sources. Well if the classified assessment changed the unclassified assessment, then why in the world would you keep that information from the American people,” McCain said.

Sen. Dick Durbin (D-Ill.), a member of the Foreign Relations Committee, said it would be “totally unfair” to hold Rice responsible for simply relaying information she was given. He also accused McCain and Graham of hypocrisy for using the incident to potentially block a Rice nomination.

“Eight years ago when President Bush suggested Condoleezza Rice for secretary of State, some people said, ‘Well wait a minute, wasn’t she part of misleading the American people about intelligence information that led to our invasion of Iraq?’ And it was Sen. McCain and Sen. Graham who stood up and said, ‘Don’t hold her accountable for the intelligence that was given to her,’” Durbin said.

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michael.memoli@latimes.com

Twitter: @mikememoli

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Cablevision subscribers sue over Hurricane Sandy outages

LOS ANGELES (TheWrap.com) – Even as workers scramble to clean up the mess that Hurricane Sandy left in the Northeast two weeks ago, a legal mess is beginning to spill into the court system.

Cablevision subscribers Jeffery and Irwin Bard filed a class-action lawsuit against the cable provider in New York Supreme Court this week, seeking restitution for television, telephone and internet outages caused by Sandy, according to court papers obtained by TheWrap.

The suit, which alleges breach of contract and unjust enrichment, claims that Cablevision “continued to advertise falsely that it was providing services to its customers” even after the storm caused outages for its customers, and “could not restore services to many of its customers for days, or even weeks.”

Moreover, according to the complaint, Cablevision continued to issue bills for services it was unable to provide in the aftermath of the storm, and “instituted a secretive policy to offer ‘customer credits’ only to customers who affirmatively and actively demanded rebates on a discretionary basis,” rather than offer across-the-board rebates to its customers, even though it had access to which customers had lost power and for how long.

A spokesman for Cablevision told TheWrap that the lawsuit “misstates the facts and is without merit,” and that Cablevision has “an extremely broad and customer friendly credit policy following Sandy.”

“Blanket or arbitrary credits for cable outages could shortchange customers because each case is different and our policy covers the entire period of time when Cablevision service was out, including when the service interruption was caused by the loss of electrical power,” the spokesman said in a statement.

Cablevision does allow for customers to call and process their credit, or go to optimum.net/credit, where they can detail the period of their outage to receive credit.

The suit, filed Tuesday, seeks unspecified damages for each member of the class, plus attorneys’ fees and court costs, along with a permanent restraint barring Bethpage, N.Y.-based Cablevision from billing or invoicing customers when there’s a service outage of more than 24 hours.

(Pamela Chelin contributed to this report)

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News Analysis: Steroids and Back Pain: An Uneasy Match

RANDALL KINNAIRD’S legal clients had steroids injected into their backs last summer for a wide range of reasons. Of the 25, one got three shots in a two-month period when pain never totally disappeared. Another got one as a preventive measure because she was going on a trip to Europe and was worried that cobblestones would aggravate an old injury.

Now the 25 — or their survivors — have engaged Mr. Kinnaird, one of Nashville’s leading lawyers, to sue the New England Compounding Center. Three have died, one is paralyzed, several more are still hospitalized and all suffer blinding headaches — victims of the meningitis that resulted from vials of steroid medicine contaminated by fungus.

The New England Compounding Center certainly seems deserving of its current status as the prime culprit in a tragic outbreak that has killed 32 and sickened 438. The bottles of supposedly sterile steroid medication it shipped were reportedly so tainted that white fuzz could be seen floating in some vials.

But, experts say, the now notorious Compounding Center has a nationwide network of unwitting enablers and accomplices: There are the doctors who overprescribe an invasive back-pain therapy that, in studies, has not proved useful for many of the patients who get it. And there are the patients, living in an increasingly medicalized society, who want a quick fix for life’s aches and pains.

The use of steroid injections to treat back pain has skyrocketed in the past 15 years — out of proportion to growth in the number of patients with back pain, or the aging of the population. The frequency of steroid injections dispensed to Medicare patients rose 121 percent from 1997 to 2006. Washington State found that the use of back injections grew 12.6 percent between 2006 and 2009, at a cost to the state of $56 million. Some people received more than 10 shots a year.

The increase in treatment has not led to less pain over all, researchers say, and is a huge expense at a time of runaway health costs. “There are lots of places doing lots of injections for conditions that haven’t been shown to benefit,” says Dr. Janna Friedly, a researcher at the University of Washington, who added, “Sadly, some of the patients who got meningitis were probably in that category — they did not have conditions where steroid injections were indicated.”

Studies are at best inconclusive about exactly which groups of back-pain patients are likely to benefit from steroid shots. Though some patients clearly get much-needed relief, health researchers are nearly unanimous that the treatment is vastly overused in the United States.

But Dr. Laxmaiah Manchikanti, head of the American Society of Interventional Pain Physicians, said the increasing number of spine injections was just part of “an exponential increase in all interventional techniques” and is a good thing, reflecting a better understanding of chronic pain and patients’ demands for improved pain relief.

Though doctors are still arguing, most academic researchers say there is no evidence that steroid injections are useful in easing straightforward chronic low back pain. Professional guidelines say such shots should generally not be used for back pain that is less than four to six weeks old, which studies show almost always gets better with noninvasive treatments. Although many Medicare patients get spinal injections to treat a condition called spinal stenosis, a narrowing of spaces between bones of the spine, Dr. Friedly said, shots are not used for that condition in many European countries.

Spinal injections, which can cost between $600 and $2,500, including the fees for treatment rooms, have been fostered and promoted by the rising number of pain clinics and pain specialists — mostly anesthesiologists and rehab doctors — who invest in extra training to learn procedures like spinal injections.

“There used to be only a small number of people who did this, but that’s gone way up, and reimbursement has gone up, too,” says Scott Forseen, a doctor who studies the treatment of back pain at the Georgia Health Sciences University. The number of spinal injections given in any geographical area correlates better with the number of local specialists trained in the procedure rather than the amount of back pain, Dr. Friedly says. There is an old saying in medicine: “When you go to Midas, you get a muffler.”

The shots — which may include a steroid and an anesthetic — are often dispensed at for-profit pain clinics owned by the physicians holding the needle. “There’s a lot of concern about perverse financial incentive,” Dr. Friedly added.

Mr. Kinnaird’s clients got their injections at the St. Thomas Outpatient Neurosurgery Clinic, a limited-liability corporation half owned by doctors, which occupied a floor of one of Nashville’s major hospitals. It gave 5,000 injections a year, or about 20 each business day, and epidural steroid injections are listed on its Web site as its “top procedure.”

Since guidelines for injections are being disputed among doctors’ groups, it is hard in most cases to say if a particular patient should or should not have been offered an injection, says Marc Lipton, a Michigan attorney who is representing more that 20 patients with fungal meningitis. Though he believes that steroid shots are overused, he says many of the patients he represents were treated appropriately, for example, receiving an injection for pain from a herniated disc in an attempt to stave off back surgery. He and other lawyers are, for now, targeting the Compounding Center in product liability lawsuits.

But, says Dr. Forseen: “You have to use injections selectively, and selectivity has gone way down. In some places, people get injections because they’ve walked in the door.”

Patients have proved eager consumers of the new medical offering, desirous of a quick cure rather than waiting the weeks or months for the normal healing process to occur.

Mr. Kinnaird, the lawyer, says: “If I hurt my back in the ’70s, my doctor would say, go to the beach, get a few beers, relax, you’ll be fine. Now if you hurt your back, you go to the doctor and right away there’s an M.R.I., and they need to fix something. Maybe you should take an injection.”

And steroid shots are not a cure-all, even for the conditions for which doctors agree an attempt is worthwhile: low back pain accompanied by signs of nerve injury like tingling or weakness in a leg. One-third of such patients will get better, one-third will show some improvement and some will show no improvement at all, Dr. Forseen said.

When Oregon’s Health Evidence Review Commission earlier this year explored narrowing reimbursement for injections to certain conditions, it got an earful of public comment from groups like the International Spine Intervention Society.

“Obviously they are not utilizing the literature correctly,” said Dr. Manchikanti, adding that attempts to limit the shots were motivated in part by an effort to control costs and by competition from other medical specialties.

Private insurers vary considerably in coverage for the procedure, though some will pay after two weeks of back pain.

Back pain is, of course, a debilitating condition. And modern medicine has produced some miraculous cures. But from now on when doctors and patients are tempted to say “what’s the harm in trying an injection” to dispense with a nagging back — they will be more aware of just how big the risk can be.

A physician and a reporter for The New York Times.

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Machinima Using Game-Themed Videos to Lure Young Men

LOS ANGELES — Big Media’s hunt for young male viewers is not going so well.

News Corporation is holding a fire sale for IGN, its online network aimed at guys. Disney XD, a cable channel for boys, is growing in popularity — among girls. Comcast’s game-focused G4 channel is retooling its entire programming strategy.

Where are all the “lost boys,” as analysts sometimes call them? Increasingly, the answer involves Machinima.

Intensely focused on 18- to 34-year-old men, Machinima (pronounced ma-SHIN-i-ma) is a Web and mobile distribution network that delivers free game-oriented shows, trailers and news reports. The company, founded in 2000, generates more than 2.2 billion video views a month, according to comScore data. Machinima Prime, a YouTube channel that arrived in August and is dedicated to highly polished episodic series, ranked as the video hub’s No. 1 destination this month.

Despite their escalating reluctance to watch television or go to the movies, young men continue to flock to traditional outlets like Disney’s ESPN or Viacom’s Comedy Central.

And Machinima is certainly not the only online network where young men congregate; Break Media operates testosterone-heavy sites like ManMade.com and HolyTaco.com.

But Machinima has rapidly evolved into a must-visit site for young men by improving the quality of its programming. The company’s mission is not dissimilar to that of cable channels: gain a foothold with inexpensive content (in Machinima’s case it was user-generated videos) and then use that perch to attract higher-quality programs, as AMC did with “Mad Men.”

Ultimately, Machinima intends to produce its own long-form episodic series.

First, Machinima must prove that YouTube can indeed become the new television — that consumers will watch long videos and come back the next week for another episode. In many ways, Machinima just pulled that off with “Halo 4: Forward Unto Dawn,” a five-part live-action series.

“Forward Unto Dawn,” which cost Microsoft $10 million to make and was meant to promote the release of the game Halo 4 on Xbox, has been viewed about 27 million times; four related videos delivered 9.2 million additional views. Machinima also said it experienced very little viewer “fall off,” an industry term for people leaving after watching only a couple of minutes.

Fans understand that this kind of programming is really marketing masquerading as entertainment, said Allen DeBevoise, Machinima’s chief executive. But he contended that “high-quality content is better marketing than traditional advertising; if it’s the equivalent of what people would watch on their own anyway, fans really appreciate that.”

Halo 4 had $220 million in global sales in its first 24 hours in stores.

“If you’re a marketer and not paying serious attention to Machinima, you’re really behind the curve,” said Matt Britton, a founder of MRY, a youth-focused New York marketing firm. “College kids may not be bringing TVs to their dorm rooms anymore, but Machinima, because it has smartly built itself around YouTube, is right there on their laptops.”

NBCUniversal recently decided Machinima was the best way to bring one of its TV movies to consumers. “Battlestar Galactica: Blood and Chrome,” a prequel to the Syfy channel’s 2004 “Battlestar Galactica” series, was cut into 10 episodes and is rolling out on Machinima Prime. “Blood and Chrome” will then run on Syfy next year as a two-hour movie.

Warner Brothers is completing a programming deal with Machinima for a new series tied to its Mortal Kombat game franchise. “Mortal Kombat: Legacy,” a nine-part series, ran on Machinima last year, and at least one installment captured over 10 million views — on par with viewership for some fantasy programs on television.

Machinima, which is based in Los Angeles and makes money by selling advertising, got its start in 2000 as a Web site dedicated to a genre of digital filmmaking that uses video game graphics to create original animated movies.

In 2005, Mr. DeBevoise and his brother, Philip, bought the Web site and set about turning it into a global entertainment network. It has about 200 employees and secured a $35 million round of financing in May; the company declined to discuss revenue or profitability.

Mr. DeBevoise said about 50 percent of Machinima’s total traffic now came from overseas. The company — with backing from MK Capital, Redpoint Ventures and Google, which owns YouTube — also has a significant presence on mobile devices.

Machinima Prime is part of YouTube’s strategy, started a year ago, to lure television viewers and advertisers with higher-quality videos, even if aimed at niche interests.

YouTube invested about $100 million in the overall effort — Machinima received an undisclosed portion — and in recent weeks YouTube began evaluating which channels had done well enough to receive a second round of financing.

In addition to Machinima Prime, YouTube successes include AwesomenessTV, aimed at 12- to 17-year-olds, and Vice, which also courts young men. In an e-mail, Malik Ducard, YouTube’s director of content strategy, called Machinima “a great example of how a Web brand with a laserlike focus on serving a single audience can drive massive eyeballs.”

Mr. Ducard added that YouTube partners like Machinima, sometimes dismissed as niche players, were adding subscribers at a rate “four times faster” than they did just a couple of years ago.

“Niche may not be the right word because that may sound small,” he said. “Billions of views is not small.”

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