July 302003

Submitted by webadmin on Wed, 2003-07-30 00:00

July 30, 2003

Consumer Confidence Index Drops in July

The Consumer Confidence Index dropped seven points to 76.6 in July, the
New York-based Conference Board reported yesterday, CongressDaily
reported. 'The rising level of unemployment and sentiment that a
turnaround in labor market conditions is not around the corner have
contributed to deflating consumers' spirits this month,' said Lynn
Franco, director of the Conference Board's Consumer Research Center.
'Expectations are likely to remain weak until the job market becomes
more favorable.' On Wall Street, the Dow Jones Industrial Average
dropped 79 points after the report was issued, while the Nasdaq
composite index dropped 15 points to 1,721.

Experts Discuss Role of Consumer Awareness in Credit-reporting
Process

Many consumers lack basic information about how their credit scores
affect their loan payments, consumer advocates, regulators and financial
services representatives agreed on Tuesday, but they disagreed about
what that means for public policy, CongressDaily reported.
Testifying before the Senate Banking Committee on the role of consumer
awareness in the credit-granting process, Travis Plunkett, legislative
director of the Consumer Federation of America, said consumers'
unfamiliarity with credit reporting means new protections need to be
added to the Fair Credit Reporting Act (FCRA). Banking Committee
Chairman Richard Shelby (R-Ala.) seemed to echo that view in his opening
statement and his questions to witnesses from credit card company
Capital One, the Fannie Mae Foundation and Fair Isaacs.

While the committee has heard testimony about the benefits of 1996
FCRA language that pre-empts all state regulation of credit bureaus
until Jan. 1, Shelby said, 'We have also heard from witnesses who have
highlighted some of the troubling practices which occur in today's
marketplace.' Whether the changes are positive or negative, Shelby said,
consumers' understanding of the credit-scoring process is essential to
ensuring proper functioning of the system, reported the newswire. The
business community has been pushing for renewal of the FCRA
pre-emptions, but privacy and consumer groups argue the law's consumer
protections need to be strengthened to prevent identity theft and the
misuse of customer data by financial institutions.

Hatch Unveils Tools To Combat Identity Theft

As cases of identity theft continue to mount, the most important weapon
against the crime is the cooperation and coordination of federal, state
and local law enforcement agencies, Senate Judiciary Chairman Orrin
Hatch (R-Utah) said at a news conference on Tuesday,
CongressDaily reported. Hatch joined with federal and local law
enforcement officials to unveil the 'Identity Crime Interactive Resource
Guide.' The multimedia information kit, which includes background
material on identity theft, investigative resources and information on
how to assist victims of identity theft, will be sent to thousands of
local police, reported the newswire.

Sarbanes-Oxley Compliance Estimated to Cost More Than $1.5
Billion

U.S. publicly traded companies will pay about $1.5 billion in initial
costs to comply with the demands of the Sarbanes-Oxley
corporate-governance law, according to the Securities and Exchange
Commission (SEC), Bloomberg News reported. The SEC projects companies
will spend $1.24 billion a year on paperwork, legal fees and other
costs, an average of about $91,000 each. Companies such as Intel Corp.
and Pfizer Inc. are lobbying to limit the rule's scope and costs.

'There has been a good deal of concern about the cost of internal
controls,'' said William McDonough, chairman of the Public Company
Accounting Oversight Board, a panel charged with setting rules for
auditors. 'In my view, good internal controls are cost effective and
once put in place more than justify the expense involved,'' reported the
newswire.

WORLDCOM

WorldCom CEO Was Told of Tariff Evasion, Letters Show

WorldCom Inc. Chief Executive Officer Michael Capellas was told by SBC
Communications Inc. three months ago that his company was illegally
avoiding millions of dollars in access charges, letters exchanged
between the companies show, Bloomberg News reported. SBC executive John
Atterbury wrote to Capellas on April 15 and June 12, telling him that
WorldCom was rerouting calls to avoid paying tariffs to use SBC's
local-phone network. James Lewis, a WorldCom attorney, wrote back
disputing the claims, according to copies of the letters obtained by
Bloomberg News.

The letters show Capellas, who has pledged to clean up the company,
may have known of wrongdoing before the Justice Department began a probe
of WorldCom's call-routing. Less than a month before WorldCom seeks
court approval to end the largest U.S. bankruptcy, its rivals have
stepped up efforts to derail the plan and pressure the U.S. government
to drop the company as a supplier. 'WorldCom is trying to rebuild trust,
and from an ethics perspective this is not necessarily the best decision
making,'' said Laura Hartman, a professor of business ethics at DePaul
University in Chicago, reported the newswire.

WorldCom Settlement With Verizon Approved by Bankruptcy
Court

WorldCom Inc. won approval from a U.S. Bankruptcy Judge for a $60
million settlement with Verizon Communications Inc., Bloomberg News
reported. WorldCom will make the payment when it emerges from the
largest U.S. bankruptcy. New York Bankruptcy Judge Arthur Gonzalez
approved the settlement in court yesterday. Under the terms of the
agreement reached last week, Verizon will support WorldCom's
reorganization plan, which will be presented for court approval on Aug.
25. The settlement will allow Verizon to keep $376.5 million it
collected from customers on behalf of WorldCom, according to a
bankruptcy court filing. It would also eliminate a $436.5 million debt
WorldCom owes Verizon for services including network use.

WorldCom Hires Firm for Internal Probe

WorldCom Inc. announced yesterday that it hired an outside law firm to
investigate allegations that it improperly rerouted millions of
long-distance telephone calls in an effort to avoid paying billions of
dollars in fees owed to other companies, the Washington Post
reported. Los Angeles-based Gibson, Dunn & Crutcher LLP was brought
in by WorldCom to handle the internal inquiry, the company said.
Partners Douglas R. Cox, a former Justice Department lawyer, and F.
Joseph Warin, a former federal prosecutor, will head the inquiry,
WorldCom said.

The U.S. attorney's office in Manhattan has been looking into the issue
for the past two months. 'MCI is committed to providing all necessary
company resources and its full cooperation to the review,' the company
said in a prepared statement. WorldCom has already been the subject of
two similar internal reviews related to its massive accounting scandal
and subsequent bankruptcy last year, reported the Post.

Accusations Against MCI Could Drive Clients Away

Accusations that MCI used fraudulent methods to reduce the access
charges it pays to other phone companies could make it harder for the
company to keep some of its current customers and to sign up new ones,
according to industry consultants, the New York Times reported.
The accusations are raising new questions about the reliability of the
financial data and projections that MCI is giving to creditors and to
the federal bankruptcy court in Manhattan overseeing its reorganization.
'This is a new closet opening up and new skeletons coming out,' said
Jeffrey Kagan, an independent analyst based in Atlanta. 'This is the
biggest test yet for Capellas,' he said, referring to Michael D.
Capellas, the computer executive brought in last November to be MCI's
chairman and chief executive, reported the Times.

Federal-Mogul Posts 2nd-Quarter Loss of $5.1 Million

Federal-Mogul Corp. posted a second-quarter loss of $5.1 million as
automakers and vehicle owners bought fewer parts, Bloomberg News
reported. The net loss was 6 cents a share, compared with net income of
$16 million, or 17 cents, in the same period last year, the Southfield,
Mich.-based company said in a statement. Sales rose less than 1 percent
to $1.445 billion from $1.442 billion, helped by the strength of the
euro against the dollar, reported the newswire.

The company, which expects to emerge from chapter 11 bankruptcy by the
end of 2004's first quarter, said lower North American production of
cars and trucks hurt its results. U.S.-based automakers made 12 percent
fewer vehicles in the region. Demand for replacement parts declined in
North America, Venezuela, Mexico and the Middle East, Federal-Mogul
said, Bloomberg reported.

ENRON

Enron Used World Bank to Avoid Taxes, Get Guatemalan
Contract

Enron Corp. used World Bank and U.S. government agency funds to make at
least $17 million in 'questionable'' payments to a group of Guatemalan
businessmen

who helped win approval for the first power plant in Central America, a
U.S. Senate investigation found, Bloomberg News reported. Enron
disguised the payments, made from 1992 to 1995, as fuel costs to reduce
the company's U.S. and Guatemalan tax

liability, the Senate Finance Committee says in a 506-page report
obtained by Bloomberg News.

The report shows how Enron avoided scrutiny of its overseas
investments by U.S. officials and government-backed financing agencies
in Washington, D.C. The Guatemala project came years before Enron went
bankrupt in 2001 after admitting it hid $1.2 billion in losses through
hundreds of off-the-books partnerships. Senators who commissioned the
report said it illustrated that more corporate oversight is needed.
'Enron benefited from taxpayer support and multilateral organization
support to extend its international reach, including the Guatemalan
power project with its questionable payments,'' the report said,
reported the newswire.

Separately, the Washington Post reported that Justice
Department officials said yesterday that the statute of limitations
prohibits them from pursuing allegations of bribery by Enron Corp.
officials in the Guatemala power-generating project. But they declined
to comment on why the case was not pursued when the department received
a criminal referral from the Internal Revenue Service in 1999.

Banking Giants Further Tangle the Enron Cases

After agreeing to pay nearly $300 million to settle accusations that
they helped Enron defraud investors, J.P. Morgan Chase and Citigroup
face new hurdles to recover money they lent to the company and to reach
a favorable settlement with its shareholders, the New York Times
reported. The two banks are among Enron's largest creditors. Legal
experts said that put them against other creditors, which will probably
try to recover money from the banks directly and try to block J.P.
Morgan and Citigroup from recovering money that Enron owes them.

'This is the case where clearly the court is going to look at it,' said
Kim Martin Lewis, a bankruptcy lawyer at Dinsmore & Shohl in
Cincinnati who is not involved in the case. The settlement is also
likely to push up the cost of settling private shareholder lawsuits
filed in Houston against Enron's various advisers - even though the two
banks did not admit to any wrongdoing, lawyers said, reported the
Times.

Fantastic Sams Sold in Bankruptcy for $17 Million

A California bankruptcy court has cleared the way for a group of
investors to acquire Fantastic Sams for just over $17 million from its
debt-laden parent Opal Concepts Inc., bankers involved in the deal said
on Tuesday, Reuters reported. Cheveux Acquisition, a group formed by
four entrepreneurs who own the New England franchise rights for
Fantastic Sams, won the bankruptcy auction in Santa Ana, Calif. Cheveux,
which was backed by an equity investment by New York-based Pouschine
Cook Capital Management and debt financing through G.E. Capital, expects
to close the purchase on Aug. 4.

The decision marked a setback for Japanese cosmetic giant Shiseido
Co. Ltd. and its U.S. subsidiary Zotos International Inc., which had
owned a minority stake in the Anaheim, Calif.-based parent company of
Fantastic Sams, Opal Concepts Inc.

Shiseido had attempted to assign $8 million it was owed by Opal to a
competing group bidding for the Fantastic Sams chain, but that move was
disallowed by U.S. District Judge John Ryan. The result was that the
winning cash bid in bankruptcy court was high enough to pay back bank
creditors but not enough for subordinated creditors, including Shiseido,
to recoup their financing to the failed hair-cut chain operator,
reported the newswire.

AES Closes $950 Million Financing

Independent power producer AES Corp. on Tuesday said it closed $950
million in senior secured credit facilities, lowering the independent
power producer's interest costs and extending its debt maturities,
Reuters reported. The Arlington, Va.-based company said the credit
facilities are comprised of a $250 million revolving loan and letter of
credit facility and a $700 million term loan facility. AES also said it
has called for redemption all $198 million aggregate principal amount of
its outstanding 10 1/4 percent senior subordinated notes due 2006. AES,
like many U.S. power companies, is in the process of selling assets in
order to focus its business on the domestic market and pay down debt,
reported the newswire.

Non-bankrupt Asbestos Companies to Pay $120 Million, Court Rules

Pfizer Inc., Union Carbide Corp. and other non-bankrupt members of the
Center for Claims Resolution must fully honor a $120 million asbestos
settlement even if some of the other members can't or won't pay, an
appeals court in Cleveland decided, Bloomberg News reported. The Ohio
8th District Court of Appeals ruled on Thursday that members of the
center, which was set up by manufacturers to pay asbestos injury claims,
are jointly and severally liable for a 1999 settlement with 15,000
people who claim they were harmed by exposure to the material, reported
the newswire.

Cingular to Pay $1.4 Billion for NextWave Licenses

Cingular Wireless LLC agreed to buy wireless-spectrum licenses from
bankrupt NextWave Telecom Inc. for about $1.4 billion, said people
familiar with the matter, Bloomberg News reported. The companies plan to
file the agreement as early as today with the U.S. Bankruptcy Court in
White Plains, N.Y. The bid would need approval from the court. The
acquisition would help bolster the presence of Cingular, an
Atlanta-based venture of SBC Communications Inc. and BellSouth Corp., in
cities such as Boston, Los Angeles and Washington, D.C. NextWave has
been offering to sell some of its 90 wireless licenses, valued at about
$6.5 billion, since the U.S. Supreme Court handed it ownership of the
airwaves in January, reported the newswire.

California Plan to Protect PG&E Hydro Land Draws Praise

Environmental groups are endorsing a new plan to protect a vast sprawl
of mountain land and rivers in California owned by bankrupt Pacific Gas
& Electric Co., Reuters reported. The 140,000-acre property in the
Sierra Nevada embraces the utility's hydroelectric power system, a
500-mile network of power plants, dams, lakes and generating 4,000
megawatts. The land deal is a key element in a proposed settlement
between the PG&E Corp.-owned utility and the staff of the California
Public Utilities Commission to break a deadlock and allow PG&E to
pay $12 billion to creditors and emerge from its two-year bankruptcy
early next year. The agreement, while still light on details, would
remove the threat of PG&E selling off its land for logging and other
commercial development by donating it to public agencies and nonprofit
conservation groups, setting up permanent conservation easements, and
forming a nonprofit company to oversee the accord, reported the
newswire.

Petroleum Geo-Services Files For Chapter 11 In Manhattan

Petroleum Geo-Services ASA, or PGS, Tuesday voluntarily filed a petition
for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in
Manhattan. The Norwegian oil services company commenced the U.S. chapter
11 case with the support of major creditors and certain significant
shareholders. This filing is an important development in the
restructuring process that is intended to maximize recovery to
stakeholders of the company and provide a solid capital structure,
aligned with projected future cash flows, that can support the company's
future business development. This filing follows a previously announced
agreement with a majority of both the company's banks and bondholders
and its largest shareholders whereby they have agreed to support the
company's reorganization plan.

Thanks for visiting
Today's Bankruptcy Headlines. New articles are posted here each business
day.