June 28, 2004
Daschle, Frist Closer to Agreement on Asbestos Trust Fund
Senate Minority Leader Tom Daschle (D-S.D.) and Majority Leader Bill
Frist (R-Tenn.) are still hoping for a deal on asbestos legislation,
with Daschle proposing a $141 billion trust fund, according to sources,
CongressDaily reported. Frist on Friday would not
specifically discuss Daschle's proposal. “We’ve been going
back and forth,” he said, adding that the two had discussed the
matter about three times last week, the newswire reported. Reuters
reported that Frist had suggested a fund of about $131 billion, although
Frist’s staff has not confirmed that number,
CongressDaily reported. The legislation would create a
federally administered trust fund used to compensate individuals with
asbestos-related illnesses. They would have to apply to the fund for
compensation rather than go through the regular court system, which
lawmakers say is clogged with massive class-action suits that cause
delays and do not compensate the sickest victims. Frist said financing
the fund was the “most challenging piece of the asbestos
puzzle,” but if a deal could be reached on the money,
“asbestos reform could be a reality.”
Frist Says Class Action, Gay Marriage Ban Up First In July
Senate Majority Leader Bill Frist (R-Tenn.) committed the chamber on
Friday to taking up class action legislation upon the Senate’s
return from the July Fourth recess, CongressDaily reported.
Speaking to reporters after the Senate broke for the recess, Frist said
while it is unclear whether he has enough votes to pass an amendment
banning gay marriage the week of July 12, he is confident the class
action bill will pass. “This will be successful,” Frist
predicted, despite expected efforts by GOP and
Democratic lawmakers to load the bill down with message
amendments—including minimum wage provisions, the newswire
reported. Frist warned, however, he has not ruled out using a cloture
motion on the class action bill to limit these non-germane amendments.
“I have made it clear that with 38 legislative days left in this
session… that we shouldn’t be debating non-related
amendments,” Frist said.
Consumer Spending Rises in May
Consumers boosted their spending in May by the largest amount in more
than two years, an encouraging sign for the recovery’s strength,
the Associated Press reported. The Commerce Department reported today
that consumer spending rose by a sizable 1 percent, a considerable
pickup from the 0.2 percent increase registered in April. The increase
in May was the largest since October 2001, when spending rebounded with
gusto after being depressed by the Sept. 11 terror attacks, the newswire
reported. Consumer spending accounts for roughly two-thirds of all
economic activity in the United States. The latest snapshot of consumer
behavior was better than economists were expecting. They were
forecasting a 0.8 percent increase in spending and a 0.5 percent rise in
income growth. Americans’ incomes went up by a strong 0.6 percent
in May for the second straight month, AP reported.
Enron
U.S. Withheld Evidence In Enron Criminal Case, Defendants Say
The first Enron Corp. criminal trial, scheduled to begin in August,
has six defendants, more than a dozen lawyers, the shadow of a disgraced
chief financial officer and, increasingly, a guy named Brady. John Brady
was a convicted murderer at the center of a landmark 1963 Supreme Court
decision, which essentially requires that if prosecutors come across
evidence favorable to a defendant, the accused should be informed about
it. The idea was that a defendant deserved to have the benefit of such
“exculpatory” information
in preparing for trial.
In the “Nigerian barge” case against former officials of
Enron Corp. and Merrill Lynch & Co., defense attorneys contend that
the Justice Department hasn’t lived up to its Brady obligations.
In the case, two former officials from Houston-based Enron and four from
Merrill are accused of manipulating
the energy company’s 1999 earnings through the bogus sale of
electricity-producing barges located off the coast of Nigeria.
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Ken Lay Says He’s Not Guilty of Crime in Enron Fall
Former Enron Chairman and Chief Executive Ken Lay took responsibility
for the energy company’s spectacular downfall but insisted he had
committed no crimes in an interview with The New York
Times. Lay, in comments posted on the Times’
Internet site on Sunday, said former Enron Chief Accounting Officer
Andrew Fastow was largely to blame for the Houston-based firm’s
collapse into bankruptcy in December 2001. Enron was the nation’s
top power trader until it was disclosed that the company used
off-the-books deals to hide billions of dollars in debt and inflate
profits. Lay told the Times he and the board were misled by
Fastow, who was accused of siphoning off millions of dollars from the
off-the-books deals into his own bank accounts. Fastow has pleaded
guilty to fraud and is cooperating with prosecutors, who according to
news reports are expected to indict Lay on criminal charges in the next
few days.
GE-Southern Offer Raises Bar For Enron Pipelines
A joint venture between Southern Union Co. and General Electric Co.
said it agreed to pay $2.35 billion for Enron Corp.’s North
American energy pipelines, leapfrogging a rival offer for a prized asset
of the scandal-tainted company and making it the bid to beat, Reuters
reported. Federal Bankruptcy Judge Arthur Gonzalez said in court earlier
on Thursday that Enron could pursue a deal with the Southern Union-GE
entity ahead of a final auction of the pipeline assets on Sept. 1. The
offer came after NuCoastal LLC had sweetened its offer by $100 million
to around $2.33 billion.
U.K. Judge Paves Way For NatWest Bankers’ U.S.
Extradition
A U.K. judge Friday paved the way for three bankers from National
Westminster Bank to be extradited to the United States to face wire
fraud charges in connection with Enron Corp. The judge, Nicholas Evans,
ruled from London’s Bow Street Magistrates Court that under U.K.
extradition law the charges levied against the bankers meet the criteria
for extradition. The judge must now decide—probably sometime after
August—whether extradition to the United States would violate the
defendants’ human rights or whether too much time has passed since
the original indictment in September 2002 to guarantee a fair trial in
the United States. He will also assess the likelihood of the defendants
being charged with additional offenses in the United States, which would
contravene U.K. extradition law. The three bankers—David
Bermingham, Giles Darby and Gary Mulgrew—are each accused of seven
counts of conspiracy to commit wire fraud and of bilking NatWest, now a
subsidiary of Royal Bank of Scotland, of some $7.2 million, through a
limited partnership set up in conjunction with ex-Enron Chief Financial
Officer Andrew Fastow.
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Talks Between Delta, Pilots to Heat Up in July
Talks between Delta Air Lines and its pilots union are expected to
intensify in the next few weeks as the union prepares to present the
company with a new offer of concessions, Reuters reported. Delta has
said it could be forced to file for bankruptcy if it cannot secure cost
cuts quickly, and a pilot deal is a critical piece of the equation. The
carrier is expected to post another big loss for the second quarter.
Analysts say Delta could face a liquidity crunch this fall or winter as
it continues to burn through cash—especially as soaring fuel
prices amplify its woes, the newswire reported.
US Airways Pilots Offer to Cut Pay by 12.5 Percent
Pilots at Arlington, Va.-based US Airways are offering to take a 12.5
percent pay cut and work more hours through 2008 to help meet fresh
cost-cutting targets at the carrier as it struggles to stay viable, the
pilots union said on Friday, Reuters reported. The proposal submitted to
the company this week by the US Airways negotiating unit of the Air Line
Pilots Association is the first significant offer by any union at the
carrier, which is seeking to save $1.5 billion, including $800 million
from labor. The airline emerged from bankruptcy protection last year and
is again overhauling its business plan to counter low-cost competition,
especially Southwest Airlines.
The pilots would cut their wages across the board and forego any
raises. They would also boost their monthly work schedule from 85 to 90
hours. US Airways is reportedly seeking $295 million in concessions from
the pilots, according to Reuters.
UAL Reports May Results
UAL Corporation, the holding company whose primary subsidiary is
United Airlines, on Friday announced that it filed its May Monthly
Operating Report with the U.S. Bankruptcy Court. The company reported
earnings from operations of $9 million, which represents an improvement
of approximately $164 million over May 2003, according to a company
press release. Mainline passenger unit revenue improved 7 percent
year-over-year. The company reported a net loss of $93 million,
including $58 million in reorganization expenses, which include non-cash
items resulting from the rejection of aircraft as the company aligns its
fleet with the market. UAL met the requirements of its
debtor-in-possession (DIP) financing. UAL ended May with a cash balance
of about $2.2 billion, which included $701 million in restricted cash
(filing entities only). The cash balance decreased $61 million during
the month of May, driven by the May l Bank One DIP repayment of $60
million.
Families, Deep in Debt, Facing Pain of Growing Interest Rates
(New York Times)
A New York Times article discusses the millions of
American families who rode the recent wave of low interest rates to home
ownership and the rapid accumulation of debt, and who must now cope as
rates begin to swing upward. The process is almost certain to begin at a
meeting of the Fed’s policy-makers on Tuesday and Wednesday. They
are widely expected to raise rates a quarter of a percentage point and
follow that with similar increases periodically over the next 18 months.
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Adelphia Trial Jurors Set to Deliberate
A New York jury will begin deliberations this week to decide the fate
of Adelphia Communications founder John Rigas and his sons after a
four-and-a-half month trial on charges they looted the cable company and
cheated investors to fund extravagant lifestyles, Reuters reported. John
Rigas, sons Michael and Timothy, and another executive, Michael
Mulcahey, each face a minimum of 15 to 20 years in prison if convicted.
They are charged with multiple counts of conspiracy, wire fraud,
securities fraud and bank fraud. The company, originally based in
Coudersport, Pa., filed for bankruptcy protection in 2002 and has since
relocated its headquarters to Denver.
Sight Resource Files for Bankruptcy
Sight Resource Corp. (SRC), a Cincinnati-based operator of national
eye care stores, has filed for chapter 11 bankruptcy and disclosed it is
the subject of a Securities and Exchange Commission probe, the
Cincinnati Enquirer reported. The company, which operates
regional stores in Ohio, as well as five other chains in the Midwest and
New England, filed for bankruptcy in the U.S. Bankruptcy Court for the
Southern District of Ohio Thursday and announced it had shut down all
but 32 of its 115 stores. SRC employs 800 people nationwide, including
30 at its Cincinnati headquarters, according to the company’s web
site.
In a statement released on Thursday, the company said the SEC inquiry
centers on failure to file periodic financial reports and problems with
its internal controls. SRC has not filed financial statements since Dec.
28, 2002. At the time of its last filing, Sight Resource reported annual
sales of $58.9 million and losses of $5.5 million. Its assets were
valued at $5.4 million, with a debt of $12.5 million.
Clothing Retailer to Close Seven Connecticut Stores As Part of
Liquidation
New Britain, Conn.-based Weathervane Corp. is closing all 95 of its
clothing stores, including seven in Connecticut, Knight Ridder reported.
About 1,000 employees will lose their jobs, including 175 workers in
Connecticut, the newswire reported. Weathervane filed for chapter 11
bankruptcy protection June 3 in the U.S. District Court in Delaware,
then announced it would liquidate Wednesday. Weathervane, which features
its own brand label, expanded quickly in the 1990s, selling
women’s clothing. The company changed its focus to the teen market
in 1996. The bankruptcy filing lists assets of $28.7 million and debts
of $24.5 million.
MCI Cuts 2,000 Jobs at Call Centers
MCI announced its third major round of job cuts this year,
eliminating 2,000 jobs at four U.S. call centers, according to the
Associated Press. MCI spokesman Peter Lucht said Friday the company will
close call centers in Colorado Springs, Colo., and Wichita, Kan., the
newswire reported. Operations in Greenville, S.C., and Iowa City, Iowa
will be reduced. So far this year, MCI has eliminated 14,000 jobs,
reducing its workforce to about 40,000 employees. MCI, which emerged
from bankruptcy protection this year, lost $388 million in the first
three months of 2004.
KPNQwest Trustees File Complaint Against Qwest
The trustees of bankrupt telecom firm KPNQwest have filed a complaint
with a U.S. court against former shareholder Qwest Communications
International along with former Qwest and KPNQwest officials, the
trustees said on Monday, Reuters reported. The officials named in the
suit are John McMaster, who headed KPNQwest when it tumbled into
bankruptcy in 2002, along with former Qwest Chief Executive Joe Nacchio
and former Chief Financial Officer Robert Woodruff, who served on
KPNQwest’s supervisory board. The trustees, who have sold off
KPNQwest assets largely to its other main shareholder, Dutch phone group
KPN, have also filed the complaint against several unnamed defendants.
The complaint was filed in the U.S. District Court for the District of
New Jersey. Qwest is under investigation by the U.S. Securities and
Exchange Commission and the Department of Justice related to its own
accounting problems.
North Dakota Wants Possible Fraud Debt Out of Bankruptcy Court
The owners of a defunct telemarketing business should not get
bankruptcy protection for potential debts from a state civil fraud
complaint, Attorney General Wayne Stenehjem says, the Associated Press
reported. Stenehjem is seeking more than $64,000 from the WebSmart
company and its four principal owners. The state’s civil
complaint, filed in February, claims the telemarketer misled more than
250 North Dakotans. Stenehjem says WebSmart implied it was selling
credit cards but actually sold “stored value cards” with a
purchase limit equal to the amount of money paid up front.
The attorney general has said he will try to hold personally
responsible the four principal owners: Robert Lamont, John Skowronek,
Marius “Buzz” Stitzer and Patrick Conner. Stenehjem’s
bankruptcy complaint was prompted when a judge signed an order last week
discharging personal debts of Lamont, Skowronek and Stitzer. The state
is asking for a jury to decide whether the owners have a liability for
the state’s fraud claim, said Douglas Anderson, an assistant
attorney general. The owners have until July 6 to file responses to the
state’s bankruptcy complaint. If found to have committed fraud,
they could be subject to fines of up to $5,000 for each instance.