TIME Crime

Prosecutors Charge 33 in Alleged Criminal Enterprise

The conspiracy spread across Ohio, Minnesota, California and Puerto Rico

(San Francisco) — Nearly three dozen people have been charged in California as part of a criminal network that illegally sold millions of dollars in prescription drugs and engaged in bank fraud, money laundering and racketeering, federal prosecutors announced Thursday.

Prosecutors alleged a widespread conspiracy that included numerous companies and activity in California, Minnesota, Ohio and Puerto Rico.

The group — some of them family members with ties to Southern California — got prescription drugs from unlicensed sources and resold them to unwitting customers, prosecutors said.

According to a grand jury indictment, David Miller, 50, ran a drug wholesale business called the Minnesota Independent Cooperative. The business bought about $157 million in drugs from Mihran Stepanyan, 29, and Artur Stepanyan, 38, even though Miller knew they were not licensed to sell drugs and obtained them illegally, the seven-count indictment says.

Ara Karapedyan, 45, another key figure in the enterprise, sold several hundred thousand dollars of drugs, including the antidepressants Cymbalta and Abilify and the cancer drug Gleevec, prosecutors said.

Karapedyan and the Stepanyans were among 32 people arrested Wednesday, according to the U.S. attorney’s office for the Northern District of California. Miller remains at large.

The U.S. attorney’s office said it did not know whether any of the defendants had attorneys who could comment on the allegations. Most of them appeared before federal judges Wednesday but did not enter pleas.

In addition to illegal prescription drug sales, the enterprise is accused of preparing fraudulent tax returns that relied on an unlicensed mailbox business for addresses. Karapedyan and his associates negotiated more than 500 fraudulent checks worth more than $5 million between 2012 and 2014, according to prosecutors.

Karapedyan and another defendant, Gevork Ter-Mkrtchyan, are also accused of paying $1,500 to have someone killed, though prosecutors said the hit was never carried out.

TIME medicine

Puerto Rico Governor Signs Executive Order to Legalize Medical Marijuana

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Getty Images

The order goes into immediate effect

The governor of Puerto Rico signed an executive order Sunday to permit the use of medical marijuana in the U.S. territory.

“We’re taking a significant step in the area of health that is fundamental to our development and quality of life,” Gov. Alejandro Garcia Padilla said in a statement. “I am sure that many patients will receive appropriate treatment that will offer them new hope.”

Padilla noted that research supports the use of marijuana to relieve pain and symptoms from disorders that range from multiple sclerosis to glaucoma.

Puerto Rico’s health secretary has three months to release a report on how the executive order will be implemented in the territory and what its impact will be, the Associated Press reports. Medical marijuana is legal in 23 U.S. states.

[AP]

TIME animals

Young Male Monkeys Prefer Spending Time With Daddy, Study Says

A rhesus macaque monkey grooms another on Cayo Santiago, known as Monkey Island off the eastern coast of Puerto Rico, Tuesday, July 29, 2008.
Brennan Linsley—AP A rhesus macaque monkey grooms another on Cayo Santiago, known as Monkey Island off the eastern coast of Puerto Rico, on July 29, 2008

Turns out quality father-son time is not just a human phenomenon

Male rhesus macaque monkeys prefer the company of their fathers, according to a new study, marking one of the first times gender partiality has been exhibited in primates before they leave the colony.

Rhesus macaques are generally found in Asia, but by studying a colony on the small Puerto Rican island of Cayo Santiago the team was able to identify individual moneys and document socialization patterns, according to the BBC, citing a report in the American Journal of Primatology.

Researchers discovered that infants and juveniles spent more time with their mothers, but as they developed into adulthood the role of the father (and his relatives) becomes increasingly important.

Scientists think this is because male monkeys eventually leave the colony, so young adults spend more time with their fathers to help them prepare for the challenges of a nomadic lifestyle.

While gender preference had been observed in primates before, the new study shows that parental bias begins before the males go off on their own — a departure from the previous idea that favoritism is the result of females forming strong bonds with their relatives by remaining in the group when the males leave.

[BBC]

TIME LGBT

Puerto Rico Drops Opposition to Gay Marriage

"Today is a great day for my island," wrote Puerto Rican superstar Ricky Martin.

The Puerto Rican government announced on Friday that it would drop its opposition to same-sex marriage.

Justice Secretary Cesar Miranda said at a news conference that the Puerto Rican justice department would no longer oppose a suit challenging the constitutionality of the socially conservative island’s ban.

“Our constitutional system does not allow discriminatory distinctions such as that contained in the Civil Code concerning the rights of same-sex couples,” Gov. Alejandro Garcia Padilla said in a statement posted to his office’s website. “Everyone knows my religious beliefs, but it is not for political leaders to impose our beliefs. We must push for progress in civil and human rights for all citizens equally. As Governor of Puerto Rico, that’s my duty.”

Puerto Rico native Ricky Martin, who has advocated for gay rights since he announced he was gay in 2010, said on Twitter that he was grateful for the move.

In a lengthier statement, the singer called Padilla a “leader who is not afraid of the present challenges.”

“Today is a great day for my island,” he wrote. “How proud I am to live a country of equality. I love you Puerto Rico.”

TIME Television

Watch John Oliver Cast His Ballot for Voting Rights for U.S. Territories

Rock the vote

To help commemorate the 50th anniversary of the march on Selma, Alabama, John Oliver focused his Last Week Tonight ire on a topic that does not tend to generate headlines: voting rights for the U.S. island territories — that is, the U.S. Virgin Islands, Puerto Rico, Guam, American Samoa, and the Marianas Islands.

According to Oliver, there are 4.1 million people living in Puerto Rico and the island territories. Of that population, 98.4% are racial or ethnic minorities, none of whom have the right to vote in U.S. elections. According to Oliver, the more you look into the reasons that the U.S. territories don’t have voting rights, the harder it is to understand why these dated laws have not been changed. Way back in 1901, it was said that the island territories were inhabited by “alien races” that couldn’t “understand Anglo-Saxon principles” and thus were denied the vote. That hasn’t changed, despite the fact that even at the time, American legal thinkers thought that the territories’ lack of voting power should only last for a limited time. Fast forward 114 years and the U.S. citizens living on these territories still can’t vote, which Oliver compares to failing to update your computer operating system for over a millennium.

To bolster his argument that many U.S. citizens don’t understand the relationship between the 50 states and the U.S territories, Oliver showed clip after clip of news sources reporting that U.S. Supreme Court Justice Sonia Sotomayor was the child of Puerto Ricans who “immigrated” to the United States. As Oliver says, “If Puerto Ricans are immigrants, so is anyone who moves anywhere.” Despite the fact that Puerto Ricans are U.S. citizens—and has more U.S. citizens than 21 states— they can’t vote for president, have no representation in the U.S. Senate and send only one non-voting delegate to the U.S. House. Oliver compares this status to letting a six-year old “vote” on where to spend the family vacation.

But Puerto Rico is lucky compared to some of the other U.S. territories. American Samoans aren’t even automatically granted U.S. citizenship, which, according to Oliver, renders the “American” part as moot as the phrases “social media expert” or “People’s Choice Award nominee.” Instead, they’re considered U.S. nationals, but not citizens. Over on Guam, 27% of the island is occupied by U.S. Navy and Air Force bases, and a staggering high number of Guam citizens are veterans of the U.S. military, but they still have no voting rights. Despite that, Guam holds a straw poll every presidential election and has higher voter turn-out than any other U.S. state — you know, the ones whose votes actually count.

It’s a valuable civics lesson and an important reminder to ask — if you don’t mind cribbing a line from Oliver — how is this still a thing?

 

TIME Diet/Nutrition

Parents of Obese Children in Puerto Rico Could Face Fines of Up to $800

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Peter Dazeley—Getty Images

Obesity is a significant problem in the territory

Parents in Puerto Rico will be fined up to $800 if their children are obese, if a bill currently being debated in the legislature is implemented.

Local senator Gilberto Rodríguez stated that the bill was aimed at improving children’s health and enabling parents to make better health choices, the Guardian reported.

Under the proposed bill, schoolteachers would refer potential obesity cases to a counselor, who would then work with the parents of the child to create a diet and exercise program monitored by monthly visits. Failure to show improvement within six months to a year could result in fines of between $500 and $800 for the parents.

Obesity is a significant problem in the small island territory, with over 28% of youngsters reportedly defined as obese. However, several doctors, including the Puerto Rico chapter president of the American Academy of Pediatrics, have called the initiative unfair.

[Guardian]

TIME Infectious Disease

1 Million People Have a Disease You’ve Never Heard Of

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Photo Researchers—Getty Images/Photo Researchers RM

Chikungunya virus has infected over one million people this year, but Big Pharma still isn't stepping up

It’s a tale scientists are tired of telling: a disease that’s been carefully watched and studied for years is suddenly infecting an unprecedented number of people while promising drugs and vaccines sit on shelved, unfunded.

This time it’s not Ebola but a mosquito-borne disease called chikungunya, which causes debilitating joint pain and has infected more than 1 million people just this year. Originating in Africa, the virus has rapidly spread into the Caribbean and Central and South Americas, with a smattering of cases in the United States. Chikungunya is nothing like Ebola, but scientists who study it find themselves in a predicament similar to Ebola researchers: Despite decades of study, there’s still no way to treat or prevent it, due in part to a lack of interest from drug companies.

“[Chikungunya] is another example of an emerging infectious disease that we clearly have a light at the end of the tunnel for in a vaccine, and it’s pharmaceutical interest that really seems to be the road block,” says Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, who is trying to get support for a chikungunya vaccine his team developed. “It’s the big dilemma. The frustration. Back when Ebola was not on the front pages, we didn’t have very many enthusiastic pharmaceutical companies.”

MORE: TIME Person of the Year: The Ebola Fighters

In late 2013, chikungunya hit the west for the first time, in St. Martin. Now, in Puerto Rico alone, there were 10,201 reported cases from May to August 2014. In prior years, the Centers for Disease Control and Prevention (CDC) would only see an average of about 28 cases of chikungunya in the United States brought by travelers who had visited affected countries, primarily in Asia. But so far in 2014, there’s been over 1,900 recorded cases stateside.

Often, chikungunya is compared to dengue fever, but while chikungunya is not often fatal, up to 80% of people infected will show symptoms, which can be excruciating, says Dr. Pilar Ramon-Pardo, a PAHO/World Health Organization adviser in clinical management. “People cannot move because it’s so painful. There are tears in their eyes,” she says. “Sometimes there’s not an appreciation for chikungunya because it has a low fatality rate, but it’s a real public health problem. The economic impact from disability is high.”

Chikungunya was first identified in 1952 in Tanzania, and the more recent outbreaks started emerging in 2003 in East Africa, then spread into Southeast Asia, the Pacific Islands, and eventually to India, where millions of people were infected in 2006. In 2007, it touched down in Italy, at which point the CDC with the Pan American Health Organization (PAHO) doubled down to ensure countries were equipped to keep an eye on—and diagnose—the disease.

“We are very concerned about chikungunya moving into the Western Hemisphere,” says Dr. Roger Nasci of the CDC. “We have the two different species of mosquitoes in the U.S. capable of spreading the virus.” Massive outbreaks in the United States are unlikely; the temperate U.S. climate isn’t especially mosquito friendly, and widespread use of window screens and bug spray limit most Americans’ risk. Still, the disease takes a toll, and other countries are at risk of even more massive outbreaks.

Researchers at the National Institutes of Health (NIH) recently published results from a successful vaccine trial for chikungunya showing it’s safe but in order to take that vaccine to the masses, it needs to undergo an efficacy trial—and then it needs a distributor. Without a pharmaceutical partner, Fauci says a timeline for a chikungunya vaccine is “impossible to predict,” though the NIH is currently meeting with two undisclosed companies for possible partnerships.

A frequent source of funding for neglected infectious diseases, the Bill & Melinda Gates Foundation, does not have any active grants or investment in chikungunya. Meanwhile, for Fauci, getting backing for chikunhunya is a “here we go again” task of trying to churn up interest in a disease that doesn’t make headlines. “It’s a theme that continues to recur among my colleagues and I,” says Fauci.

Read next: The Unexpected Animal Group Dying from Climate Change

MONEY Travel

4 Shockingly Affordable Last-Minute Holiday Trips

Who says you have to celebrate at the homestead? This year, start a new tradition in one of these affordable getaways.

Are the usual holiday festivities feeling a little stale? This could be the perfect time to shake up your routine and celebrate the season with a much-deserved getaway. Yes, we know: Traveling at the tail end of the year is pricey. However, if you’re strategic about where and when you go, you might be surprised by just how low you can get that tab. Here you’ll find four festive trips, each with its own unique appeal. Though the destinations range from beach towns to ski meccas, they do have one thing in common: a reasonable price tag. Now that’s a gift.

 

 

  • San Juan, Puerto Rico

    This palm-lined beach in San Juan, Puerto Rico, could be your holiday vista.
    Arco K. Kreder—First Light This palm-lined beach in San Juan, Puerto Rico, could be your holiday vista.

    When to Go: Dec. 31-Jan. 7. San Juan remains relatively affordable throughout the year thanks to its airport, which has the cheapest average fares (per mile) of the 75 busiest hubs in the U.S., according to the Department of Transportation. In a recent search, flying from Chicago early on New Year’s Eve costs a manageable $550. Hotels are also affordable compared with many Caribbean hotspots. On Hotels.com, four-star properties in San Juan start at $206 a night during the first week of 2015, vs. $304 in Montego Bay, Jamaica, and $341 in Punta Cana in the Dominican Republic.

    What to Do: You can’t go wrong wandering the blue cobblestone streets of Old San Juan. Stop by the massive Castillo San Cristóbal fort ($5) and the Museo de Arte de Puerto Rico ($6), one of the Caribbean’s largest museums. On Calle del Cristo browse shops such as El Galpon, which sells authentic Panama hats (prices from $60).

    Next, head to Santurce, an up-and-coming area full of hip bars and eateries. “It’s always packed with locals,” says Ryan Ver Berkmoes, author of guidebook Lonely Planet Puerto Rico.

    Hit the beach at nearby Ocean Park and Condado. For less than $20, you can rent a chair, buy a couple of cold beers, and feast on empanadas sold by street vendors. For a wilder dose of nature, explore the hiking trails and waterfalls at El Yunque National Forest, an hour outside the city. A guided tour is $60, including transportation from San Juan.

    Interested in another good day trip? Try Playa Luquillo, the mile-long crescent of surf and sand about an hour east of San Juan. The beach here has a fun, social atmosphere and is known for its food vendors, says Ver Berkmoes. So grab a tasty fried snack and check out the scene.

    How to Celebrate: The city’s biggest New Year’s party, complete with fireworks, happens at the Puerto Rico Convention Center (discounted tickets are $65 on Gustazos.com). For something more low-key, head back to Santurce and its central square, ringed with open-air bars and cafés, to toast 2015 with a $3 piña colada.

    Jan. 6 is Día de Los Reyes, or Three Kings Day. Expect parades and festivals with food and live music (but keep in mind that some stores and restaurants will be closed).

    Where to Stay: In San Juan, Le Consulat is a great bargain in the Condado luxury district, where it’s surrounded by hotels charging upwards of $300 a night. At $127 for a double, you get free Wi-Fi, a simple, modern room, and an outdoor pool. For a bit of a splurge, Ver Berkmoes recommends spending a couple of nights at the Gallery Inn, where each room is decorated with art and antiques. Doubles start at $220 a night.

  • San Francisco

    Embarcadero, Ferry Building, San Francisco, CA.
    Walter Bibikow—Getty Images Skaters take a spin on the Embarcadero rink.

    When to Go: Dec. 19-26. Why not spend Christmas in the City by the Bay? The weather is temperate, most attractions are open, and hotel prices actually drop, says Chris McGinnis, a travel blogger for the San Francisco Chronicle. For instance, last year, rates at the city’s big convention hotels hit an annual low of $170 or less from Dec. 19 to 25, vs. a full-year average of $241, according to the visitors bureau. Plus, with the usual tourist hordes thinned, museums are less mobbed, and reservations at top restaurants are easy (or at least easier!) to snag. Flights, too, are reasonable this time of year. We found nonstop flights from Chicago starting at $305.

    What to Do: Skip touristy Fisherman’s Wharf and check out the futuristic de Young Museum ($10; closed on Dec. 25), which displays 27,000 works from the 17th to 20th centuries. Don’t miss the observation tower. It has stunning views of Golden Gate Park. Nearby, the California Academy of Sciences houses an aquarium, a planetarium, and a living rainforest dome ($35).

    The city is “brimming with sublime food,” says Michele Bigley, author of the Fodor’s San Francisco guide. In the buzzing Mission District, Bigley recommends La Taqueria for a behemoth burrito ($7) before catching a movie at the Roxie, one of the oldest theaters in the nation. Cap the night with a cocktail at Trick Dog, where drinks are named for local landmarks ($12).

    Visit the Ferry Plaza Farmers Market to see the NoCal bounty. “Occasionally you’ll spot famous chef Alice ­Waters shopping there,” says Anna Roth, food and drink editor of SFWeekly. In the same building, she recommends Hog Island Oyster Co. for seafood stew and, of course, oysters ($18 to $20).

    How to Celebrate: Through March, an art project using 25,000 LED lights will illuminate the cables of the Bay Bridge. Check it out from the amazing Top of the Mark bar on the 19th floor of the Intercontinental Mark Hopkins. For a more athletic option, glide over the city’s largest outdoor ice-skating rink, set along the waterfront on the Embarcadero ($14 with skates).

    On Christmas Eve, indulge in an old-school meal at the House of Prime Rib, a city institution. “During the holidays it’s all decked out,” says Roth. “You’ll spend $40 or so for an entrée, but at least the martinis are cheap!”

    Where to Stay: For a unique property in the heart of things, try the Herbert Hotel. Located just off Union Square, the Herbert has bright, sleek rooms (ask for one with a private bathroom) and hardwood floors. Doubles are $259 a night through Dec. 20 but drop to $155 Dec. 21–25. Prefer something with more of a neighborhood feel? The quaint San Remo Hotel offers rooms with windows from $99, though you will need to share one of several bathrooms.

  • Bacalar, Mexico

    Bacalar, Mexico
    Hugo Ortuño Suárez—Demotix/Corbis The shallow waters of the Lagoon of Seven Colors

    When to Go: Dec. 15-22. Mexico’s Yucatán Peninsula can get pretty busy at the end of the year. According to American Express Travel, Cancún is 2014’s most popular international destination for both Christmas and New Year’s. That appeal has some upsides—every major U.S. airline offers direct flights to Cancún. However, it also means crowds and, according to hotel researchers STR, a December average daily rate of $227.

    For holiday travelers, Bacalar is an escape from that tourist frenzy. This small town overlooking Laguna Bacalar, or the “Lagoon of the Seven Colors,” is 3½ hours from Cancún, and 35 minutes from Chetumal. During the holidays, ­Bacalar hotels ­average a manageable $123 on ­Hotels.com. To visit, fly into Cancún and rent a car (about $40 a day) or take the $55 bus. Flights tend to be cheaper earlier in December, says Zachary Rabinor, CEO of tour operator Journey Mexico; we found one for $414.

    What to Do: Tour Bacalar’s beautiful old Spanish fortress, Fuerte de San Felipe de Bacalar ($4, free on Sundays), originally built to protect the town against pirates. Later, hang with the locals at the town’s popular balneario (swimming facility); entry $2. The area is lined by small eateries and has plenty of thatched umbrellas where you can take a break from the Caribbean sun. Or, for just $1.50 an hour, rent a bike from Cocomoco rental shop and pedal along the bay. Obviously, you should be eating as many tacos as possible; the fish and shrimp options at La Playita are not to be missed (from $4).

    The town also makes a great base for exploring the Mayan ruins of Chacchoben ($4), a 45-minute drive away. The site, closed to the public until 2002, is home to stone structures dating to the year 800—some still showing signs of their original red paint. Mexico’s biggest cenote (a natural sinkhole), the 300-foot-deep Cenote Azul, is about a mile outside of town—the water is so clear you can see down to the sparkling-white sand floor. Entrance $1, life vests $3.

    How to Celebrate: Get in on the holiday spirit by checking out the town’s tree lighting. Then shop for locally made gifts at handicraft shops in the town center or near the entrance to the cenote. Also be sure to sample traditional Mexican Christmas goodies such as ponche (warm tropical-fruit punch stirred with cinnamon sticks), romeritos (sprigs of the romerito plant served with potatoes and mole), and bacalao (salted cod).

    Where to Stay: The recently opened Bacalar Lagoon Resort ($115) consists of seven spacious cabanas set on a freshwater lagoon; snorkeling gear is available gratis. Nearby Rancho Encantado is a great value at $125. The rooms have thatched roofs, air-conditioning, and cool tile floors. Guests can get an outdoor massage, kayak on the lagoon, or just kick back in one of the property’s many hammocks.

  • Keystone, Colo.

    Keystone, Colorado.
    Jack Affleck—Courtesy of Vail Resorts Skiers take in the view of North Peak.

    When to Go: Dec. 25-30. For a ski trip that doesn’t break the bank, Dan Sherman of Ski.com recommends Keystone, the most affordable of Colorado’s Vail Resorts properties. In late December, a single-day advance-purchase lift ticket at Keystone costs $99, compared with $129 at Vail or Beaver Creek. Plus, Keystone is just 90 minutes from Denver, allowing visitors to fly into a large airport with well-priced flights. Trim the cost of your airfare even further by flying on Christmas Day, when flights from Chicago start at $245, vs. $315 on the 24th.

    What to Do: Hit the mountain! Keystone offers an impressive mix of terrain, from “long-groomed cruisers” to the “trees and bumps of North Peak,” says Harold C. Jenkins, a travel agent at Corporate Vacations American Express Travel. The resort is also home to Colorado’s biggest night-skiing program, with the slopes open until 8 p.m. during the last week of the year. “Watching the sunset from the top of Dercum Mountain is spectacular,” says Sherman.

    Buy your lift tickets at least a week in advance; you’ll save up to 25% off same-day rates. Feeling a little rusty? Ski School lesson prices drop around 20% when you book two days ahead (about $130, though 2014 holiday prices are still being finalized). Kids 12 and under ski free, with none of the holiday blackouts you see at other resorts.

    For a break from the slopes, spend an afternoon in Breckenridge, a half-hour away. Grab ­coffee at local favorite Cuppa Joe and check out the stores and galleries in this former mining town.

    How to Celebrate: You’ve been burning calories, so go ahead and splurge on a nice meal. In the village, Ski Tip Lodge offers a four-course prix fixe ($75), with dessert served by the toasty fireplace. Or hop a gondola to Der Fondue Chessel, located at the top of North Peak. You’ll get a full Bavarian meal—including fondue, of course—for $59 a person.

    What time and place could be more appropriate for a sleigh ride? The resort offers hourlong rides that wind through Soda Creek Valley and include hot apple cider (adults, $30; kids, $20). Afterward, swing by Keystone Lodge to check out the model village carved out of chocolate.

    Where to Stay: Unlike most resorts, Keystone is just a ski area, with no standalone town. While that results in fewer off-mountain activities, it also means most lodging is just minutes from the slopes. A two-bedroom condo at the Gateway Mountain Lodge, a five-minute walk or free shuttle ride from the lifts, starts at $419 per night. (Compare that with a two-bedroom in Vail, which starts at about $900.)

    Prefer a standard hotel room? The Inn at Keystone ($235 a night for a double) is also walking distance from the slopes and has a rooftop hot tub with views of Keystone Valley.

  • What to Know Before You Go

    No matter where you’re going this season, these four air-travel strategies will save you time, money, and hassle.

    Check in the day before. Not only is online check-in your best chance at switching to a better seat (airlines release some prime spots 24 hours in advance), but if the flight is oversold, it reduces your chances of being bumped, says Wendy Perrin, travel advocate for TripAdvisor.com.

    Get in the fast lane. Planning to travel a lot in 2015 and beyond? Apply for TSA PreCheck, the program that allows you to go through expedited security lines without removing your shoes, coat, belt, or laptop. Membership costs $85 and lasts for five years.

    Load up on apps. Use your airline’s app to get the latest on your flight. MyTSA will update you on security wait times, and GateGuru is great for sussing out airport amenities.

    Bookmark flightstats.com. Canceled flight? Use this site to vet your options, says Perrin. Flightstats will show you which airports and planes are delayed so you can look for a route that works for you, rather than blindly accepting whatever the airline rep suggests.

     

MONEY municipal bonds

Muni Bonds are Beating Stocks This Year. What to Know Before You Jump In.

Municipal bonds are on a tear. On Monday The Wall Street Journal noted that the normally staid $3.7 trillion sector has returned 8.3% so far this year, outperforming the Dow Jones Industrial Average and highly rated corporate bonds. Readers of MONEY’s print edition shouldn’t be surprised. Our April issue argued these bonds could “make a bid for comeback investment of the year.” If munis are just getting your attention now, here are four things you need to know:

Munis benefit some investors more than others

Munis’ interest payments are exempt from federal and sometimes state and local income tax. That means, all other things being equal, those who pay higher tax rates enjoy a bigger benefit. Just how good a deal is it? Because municipal bond buyers are well aware of the tax perks, muni bonds typically yield less than Treasuriess. So to find out if munis make sense for you, you need to look at the difference between these two yields and compare with your tax rate.

The question can also be complicated factors like where you live and whether you are subject to the alternative minimum tax or the new Medicare tax on investment income.

But there is a basic rule of thumb. Start by subtracting your tax bracket from 1. So if you are in the 33% bracket you are left with 0.67. Then divide the municipal bond’s tax-free yield by the resulting number. Finally compare the result to the yield on a taxable investment. Right now the 10-year Treasury yields about 2.3%. Top-rated muni bonds with similar 10-year durations are yielding 2.1%. The upshot: A muni investor in the 33% tax bracket could grab an after-tax yield of 3.1%. For an investor in the 25% bracket, the after tax yield falls to 2.8%.

Munis aren’t risk free

Although munis may offer an after-tax yield advantage, it comes at a cost. While Treasuries issued by the Federal government are considered iron-clad, municipal bonds’ credit risk can range from triple-A to junk, not unlike bonds issued by companies. While you can certainly buy bonds backed by, say, the State of New York or California, many municipal bonds are issued by less august entities — a particular city or school district. Still others may be backed by a particular stream of revenues — like the tolls collected on a particular road. In all there are more than 15,000 issuers, according to Moody’s. Even counting small issuers, municipal defaults are rare. But political impasses — like the 2008 California budget deadlock — can give the markets jitters, driving down prices. Sometimes, as the news out of Detroit or Puerto Rico show, the problems really are serious.

Where you live has a lot to do with the fund you should buy.

Municipal bonds may carry state and local tax perks. For instance, income from municipal bonds issued by a particular state is typically exempt from state income taxes for residents of that state. In other words, New Yorkers who own New York bonds get a state tax break on top of their federal income tax benefits. That’s why there’s a proliferation of municipal bond mutual funds targeting individual states, especially populous and high-tax ones like New York, California, and New Jersey.

There are some wrinkles that may surprise you, though: Bonds issued by territories like Puerto Rico are exempt from state taxes everywhere. That’s helped make them far more popular than they might otherwise be. (They may even turn up in funds labelled “New York.”) So Puerto Rico’s fiscal problems have had a real impact on individual investors on the U.S. mainland.

If you’re just buying now, the deals are less attractive

Of course, while the tax benefits of municipal bonds can seem attractive, taxes should never be your only consideration for an investment. You also have to judge whether the price you’re getting will turn out to be a bargain, and the yields the bonds are offering now are looking a bit thin. (Remember, as bond prices rise, yields fall.) Muni bonds had a rough 2013, declining about 2.6% at a time when Detroit’s fiscal problems were continually making headlines. But munis haven’t just snapped back. They’ve put together their longest string of monthly gains in two decades, according to the Journal. Such a sharp rally can only mean that investors’ return prospects have gotten a lot less rosy.

“It’s difficult to find real value in the muni market these days, but if you already own munis, you should stick with what you own because it’s hard to replace that income,” Jim Kochan, a senior investment strategist at Wells Fargo Advantage Funds recently told investment bible Barron’s. “Whenever we’ve been at these yields in the past, it’s never been a good time to buy, because the market usually corrects.”

MONEY bonds

Risky Puerto Rico Funds Are Still on UBS’s Menu

UBS
Matthew Lloyd—Bloomberg via Getty Images

Brokers, according to an October memo, can recommend clients buy bond funds at the center of a recent $5.2 million settlement and hundreds of arbitration claims.

UBS is sticking with its recommendations that some clients buy risky Puerto Rico closed-end bond funds, despite hundreds of arbitration claims by investors who blame the securities for huge losses, according to an internal document.

UBS told brokers that they may continue to recommend the funds to clients following a $5.2 million settlement last week with Puerto Rico’s financial institutions regulator about sales practices involving the funds, according to an Oct. 9 internal memo reviewed by Reuters.

However, brokers “should continue to evaluate investment recommendations in a manner consistent with UBS policies and FINRA rules,” the firm said in the four-page memo, written in a question and answer format. FINRA, the Financial Industry Regulatory Authority, is Wall Street’s industry-funded watchdog.

Brokers who have questions about whether a “particular investment recommendation” is suitable should contact their branch manager or the firm’s compliance department, UBS wrote.

It is unclear who wrote the memo, which is unsigned.

A UBS spokeswoman did not say whether the firm planned to give more specific guidance to brokers. She said brokers consider “each client’s entire range of wealth management needs and goals when devising their financial plans.”

She noted that Puerto Rico municipal bonds and closed end funds provided excellent returns for more than a decade, as well as tax benefits.

FINRA requires that investment recommendations be “suitable” for investors, based on factors such as risk tolerance and age.

Lawsuits have been mounting, and there are more than 500 arbitration claims against UBS following a sharp decline in the value of Puerto Rico municipal bonds last year. Investors in closed-end funds with heavy exposure to those bonds suffered deep losses.

Puerto Rico regulators interviewed a sampling of UBS clients while looking into the firm’s bond fund sales practices. Those interviewed were elderly with low net worth and conservative investment goals, according to the settlement with UBS, also on Oct. 9. UBS did not admit to any wrongdoing as part of the deal.

According to the settlement, six UBS brokers in Puerto Rico “may have” directed their clients to improperly borrow money in order to buy the funds. Lawyers handling the arbitration cases said the investors’ losses were magnified because they invested through the illegal loans, sold through UBS Bank USA of Utah.

Even without the added leverage, analysts say funds that invest heavily in Puerto Rico debt still carry significant risk. Ratings agencies have cut Puerto Rico’s debt to junk status because of significant default risks.

Puerto Rico has an onerous debt burden that faces headwinds of a weak economy and significant unfunded pension obligations, said Morningstar analyst Beth Foos. She declined to comment specifically on the UBS funds.

Analysts said investors continue to buy Puerto Rico bonds, drawn to tax advantages and attractive yields as high as 7.75 percent, even though there is a significant risk that the U.S. territory will not be able to repay its bond obligations.

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