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August 8, 2005
July Job Growth Unexpectedly Strong
href='http://www.washingtonpost.com/wp-dyn/content/article/2005/08/05/AR20050…'>The
nation’s economy generated 207,000 jobs in July, the Labor
Department reported today, exceeding expectations and scoring the best
job growth in three months, the Washington Post reported
Friday. In addition, average hourly earnings rose by 6 cents, or 0.4
percent, to $16.13, the largest gain in a year. The unemployment rate
held steady at about 5 percent. A year ago, the jobless rate was 5.5
percent. The figures, especially the earnings numbers, are expected to
bolster arguments for the Federal Reserve to continue boosting benchmark
interest rates in order to contain inflationary pressure.
href='http://www.washingtonpost.com/wp-dyn/content/article/2005/08/05/AR20050…'>Read
the full story.
U.S. Consumer Credit up $14.5 Billion
href='http://www.federalreserve.gov/releases/g19/current/default.htm'>U.S.
consumer credit rose in June at an annual rate of 8.2 percent, or
$14.5 billion, the Federal Reserve said Friday. It was the largest
increase since October, MarketWatch reported. Revolving credit, such as
credit card debt, increased by 11.5 percent annualized, or $7.6 billion,
the Fed said. Non-revolving credit, such as automobile loans, increased
by 6.2 percent, or $6.9 billion. Economists surveyed by MarketWatch were
expecting consumer credit to rise by $5.9 billion. The decrease in
consumer credit in May, meanwhile, was revised to show a drop of $1.2
billion from a drop of $3 billion, or 1.7 percent. Revised figures show
revolving credit increasing in May by 1.4 percent, or $950 million, and
non-revolving credit falling by 2 percent, or $2.8 billion.
href='http://www.federalreserve.gov/releases/g19/current/default.htm'>Read
the report.
Diocese, Victims Settle for Millions
The
href='http://insidebayarea.com/argus/localnews/ci_2919406'>Roman
Catholic Diocese of Oakland has agreed to a $56.4 million settlement
with 56 childhood sexual abuse survivors, capping three years of
litigation and four months of intense negotiation, the
Argus reported Saturday. The settlement includes suits that
named several former northern Californian priests, including Robert
Freitas, Stephen Kiesle and Donald Eugene Broderson, and the late Revs.
Vincent Breen and James Clark. The settlement ranks among the largest
reached by U.S. dioceses in the abuse scandals that have rocked the
Catholic Church in recent years.
href='http://insidebayarea.com/argus/localnews/ci_2919406'>Read the full
story.
Bledsoe Brace Files for Chapter 11 Protection
Facing a $6.7 million bill after losing a patent infringement case,
Medical Technology Inc.,
which does business as Bledsoe Brace Systems, filed for chapter 11
bankruptcy protection, the Dallas Journal reported
Sunday. The Grand Prairie, Texas–based company designs and
manufactures orthopedic braces, which are sold to hospitals, doctors,
prosthetic shops and physical therapists in the United States and
abroad. The filing was designed to prevent the plaintiff, Richmond,
British Columbia–based Generation II Orthotics Inc., from bringing
the verdict to Texas and selling off Bledsoe Brace’s assets to
recoup the judgment. The chapter 11 filing will enable the business,
which has been growing and is profitable, to appeal the judgment,
according to Bledsoe Brace’s reorganization plan. If the appeal
ultimately is unsuccessful, the reorganization plan calls for the
judgment to be paid over time.
href='http://msnbc.msn.com/id/8866545/'>Read the full story.
Diocese Deposition Postponed
A federal bankruptcy judge has agreed to
href='http://www.washingtonpost.com/wp-dyn/content/article/2005/08/05/AR20050…'>postpone
the deposition of Roman Catholic Archbishop William J. Levada in the
Portland (Ore.) Archdiocese bankruptcy case, the Associated Press
reported on Saturday. U.S. Bankruptcy Judge Elizabeth Perris
signed an order on July 29 agreeing to allow Levada to give the
deposition in Portland on Jan. 12 instead of this month. The judge said
Levada must agree to acknowledge the jurisdiction of the court and waive
any diplomatic immunity he might have because of his position at the
Vatican, a sovereign state. The court filings state that Levada will let
the scope of his testimony and the validity of any privilege he might
claim be decided by the court.
href='http://www.washingtonpost.com/wp-dyn/content/article/2005/08/05/AR20050…'>Read
the full story.
United Racks Up Bills on Bankruptcy Route
United Airlines is racking up an average of $10 million in expenses
each month for the small army of attorneys, consultants and accountants
helping the carrier navigate through bankruptcy protection, already
spending nearly $260 million, the Rocky Mountain News
reported Saturday. The nation’s second-largest carrier already has
spent more than $259.5 million in professional fees from the time it
filed for chapter 11 in December 2002 through June of this year,
according to a review of bankruptcy court documents. The total will
continue to climb until United exits bankruptcy, a goal that became a
bit more distant this week when the carrier again delayed filing key
documents that would trigger the start of its emergence.
Delphi
Delphi in Restructuring Talks to Avoid Bankruptcy
Delphi Corp., the nation’s largest maker of auto parts, on
Friday confirmed it is in talks with its main unions and its former
parent and biggest customer General Motors Corp. about restructuring its
U.S. operations to avoid bankruptcy, the Associated Press reported
Friday. The company also disclosed that it had begun drawing on its $1.8
billion credit line to its finance its operations, and that it initiated
a draw down of $1.5 billion on Wednesday. Delphi shares fell 52 cents,
or 9 percent, to $5.26 on the New York Stock Exchange. The stock has
traded in a range of $3.20 to $9.63 in the past year.
Delphi Posts Loss, Warns on Costs
Delphi Corp. posted a quarterly loss today due to production cuts by
major customer General Motors Corp., and the company said it may have to
file for bankruptcy if it cannot cut high wage and benefits costs,
Reuters reported. Delphi, the largest U.S. automotive parts supplier,
also said that it expects North American vehicle production to continue
to decline in the third quarter from a year earlier, hurting revenue and
margins. Delphi reported a second-quarter net loss of $338 million, or
60 cents per share, compared with net income of $143 million, or 25
cents per share, a year earlier. The results included $49 million in
restructuring charges. Revenue fell to $7 billion from $7.5 billion.
Delphi has struggled to become profitable since GM spun it off in
1999.
Fitch Cuts Delphi Corp. Debt Ratings to CCC from B
Delphi Corp.’s senior unsecured debt rating was cut to CCC from
B on Friday by Fitch Ratings MarketWatch reported Friday. Delphi debt
could be downgraded further as it is on Fitch’s Rating Watch
negative. “The downgrade reflects the drawdown of Delphi’s
revolving credit facility and the implied heightened bankruptcy risk as
the company enters a critical stage in its discussions with the [United
Auto Workers],” Fitch wrote.
Parmalat Sues JPMorgan Chase, Unicredito
Insolvent dairy company Parmalat Finanzaria SpA sued JPMorgan Chase
& Co. and Unicredito Italiano SpA for €4.4 billion ($5.4
billion) in damages for their roles in the sale of Parmalat bonds issued
from 1997 through 2001, the Associated Press reported today. The suits
are part of a campaign by Parmalat’s bankruptcy administrator
Enrico Bondi to recover billions of dollars for the company’s
creditors by suing financial institutions he alleges helped the former
Parmalat management deceive investors. Unicredito called the claim
“groundless” and said the bank will act legally to defend
its reputation and recover damages, if any.
Accountants Sentenced in WorldCom Scandal
An accountant who made some fraudulent entries in the books at
WorldCom has been sentenced to five months in prison and five months of
house arrest, WLNS News reported today. Betty Vinson said she was
pressured by superiors to make the false entries. She had hoped to avoid
prison time after cooperating with the government’s prosecution of
former CEO Bernard Ebbers. Also, a second former accounting official who
testified against Ebbers, Troy Normand, was sentenced to three years
probation. The judge did not impose a fine. Ebbers was sentenced last
month to 25 years in prison for his role in the $11 billion fraud. The
fraud plunged WorldCom into bankruptcy in 2002.
Friedman’s to Emerge from Chapter 11 in November
Jewelry retailer Friedman’s Inc. on Sunday said it had filed a
reorganization plan allowing it to emerge from chapter 11 bankruptcy by
November, Reuters reported. Under the terms of the plan, filed with the
U.S. Bankruptcy Court for the Southern District of Georgia, all existing
equity interests will be canceled upon its emergence from chapter 11,
the company said.
Enron Investors Ask Judge to Rule on Merrill Lynch’s
Participation in Fraud
Investors who lost money in the collapse of Enron Corp. filed a
petition Friday asking the judge overseeing bankruptcy proceedings to
rule on whether Merrill Lynch & Co. was a knowing participant in
helping the energy trader hide massive losses, the Associated Press
reported today. The petition marks an escalation of the attempts by the
lawyer for the University of California, the lead plaintiff in the class
action case, to recover money from brokerages and banks that had
relationships with Enron. Settlements with JPMorgan Chase & Co.,
Citigroup Inc., Canadian Imperial Bank of Commerce, and others have
already totaled $7.12 billion that will some day be divided up among
investors. But Merrill Lynch has so far resisted settling. If the judge
were to grant the motion, Merrill Lynch could be found liable for Enron
losses before the case even goes before a jury later this year. A
spokesman for Merrill Lynch did not return telephone calls on
Friday.
Pricewaterhouse Ordered to Pay $120 Million in Suit
href='http://online.wsj.com/article/0,,SB112320345868905696,00-search.html?KE…'>A
federal jury ordered PricewaterhouseCoopers LLP to pay $120 million in
connection with its audits for the long-defunct Ambassador Insurance
Co., one of the largest jury verdicts against an accounting firm,
the Wall Street Journal reported on Friday. The decision,
reached last week after a 10-week trial, comes two decades after the
insurer filed for bankruptcy. A PricewaterhouseCoopers spokesman said
the firm is “very disappointed with the verdict in this matter,
which we believe is inconsistent with the facts and the law. We intend
to challenge this verdict before the trial court and, if necessary, on
appeal.” Since the suit’s filing, Ambassador’s chief
executive has died, and Coopers & Lybrand merged with Price
Waterhouse LLP. The damages awarded last week are large compared with
other recent Big Four accounting-firm settlements.
href='http://online.wsj.com/article/0,,SB112320345868905696,00-search.html?KE…'>Read
the full story.
Airlines Try to Lift Web Ticket Sales
Delta Air Lines Inc. will sell 10 million tickets online this year,
about 24 percent of its total bookings. That will let the financially
struggling company
href='http://www.bizjournals.com/industries/travel/tourism/2005/08/08/atlanta…'>pocket
tens of millions of dollars that would otherwise be pocketed by
third-party ticket agents, the Wichita Business Journal
reported today. Delta’s goal is to get online bookings up by about
another 10 million by the end of 2007—or to 45 percent of all
tickets issued. On Aug. 1 it launched an enhanced web site.
Delta’s chief Atlanta competitor, AirTran Airways, also unveiled a
new web site Aug. 1. Both airlines now feature online check in,
frequent-flier accounts and reservations more prominently on their home
pages. Delta’s biggest change with its new site is the
“risk-free cancellation policy.” Customers who book tickets
on delta.com now can cancel a ticket within 24 hours after a purchase
and receive a full refund with no cancellation fee.
href='http://www.bizjournals.com/industries/travel/tourism/2005/08/08/atlanta…'>Read
the full story.