June 9, 2004
Fed to Act as Needed to
Thwart Inflation
Federal Reserve Chairman Alan
Greenspan suggested yesterday that Fed policy-makers can boost interest
rates gradually, but he did not rule out more aggressive action to help
contain inflation, the Associated Press reported. Although
Greenspan repeated the Federal Open Market Committee's (FOMC) view that
any upcoming rate increases would likely be at a very methodical pace,
he said that assessment was made on Fed policy-makers' best judgment of
how economic and financial forces will evolve in the months ahead.
'Should that judgment prove misplaced, however, the FOMC is prepared to
do what is required to fulfill our obligations to achieve the
maintenance of price stability so as to ensure maximum sustainable
economic growth,' Greenspan said.
Study By Pro-Biz Group Cites
Burden of Litigation Costs
Senate Finance Chairman Charles Grassley (R-Iowa) urged small business
owners yesterday to support Senate candidates who favor his class action
legislation and other pending bills that would overhaul the tort
litigation system, CongressDaily reported. Grassley said his
class action bill, which the Senate is scheduled to take up after
completing its action on the FY05 defense authorization bill, would
'ensure that class action lawsuits benefit those who presumably are
harmed rather than the lawyers.' The bill would transfer many class
action lawsuits from state court to federal court, where more stringent
rules would govern the cases. 'I think that class action fairness is a
very small step in the right direction of helping curb widespread abuse
of the legal system,' Grassley said.
Pointing to
href='http://www.legalreformnow.com/pdfs/Small%20Business%20Study.pdf'>a
study released yesterday by the Institute for Legal Reform, an
arm of the U.S. Chamber of Commerce, Grassley said Congress should
overhaul the legal system to help small businesses that are 'bogged
down' by litigation costs and related insurance premiums. The study,
conducted by NERA Economic Consulting, found that tort litigation costs
businesses $129 billion annually. About 68 percent of those costs --
roughly $88 billion a year -- fall on small businesses with annual
revenue under $10 million, according to the study.
Separately,
CongressDaily reported that Sen. Christopher Dodd
(D-Conn.) said that he probably would be 'resistant' to any amendments
that could alter the substance of a compromise he and two other
Democrats forged last November with sponsors of the bipartisan Senate
class action bill. 'On those issues pertinent to the agreement that we
reached, I would be resistant to amendments,' Dodd told reporters. Sen.
Thomas Carper (D-Del.), an original co-sponsor of the bill, also would
likely oppose any amendments that threaten to disrupt the compromise
that has the support of more than 60 senators, according to a Carper
spokesman, the newswire reported.
NextWave To Auction
Airwaves In Six Markets
Bankrupt wireless company
NextWave Telecom Inc. said on Tuesday it plans to auction airwaves in
six markets as a step toward reorganizing by the end of the year,
Reuters reported. NextWave said the auction, which is subject to
bankruptcy court approval, includes wireless spectrum in New York;
Denver; Portland, Ore.; Sarasota, Fla.; Tampa, Fla.; and Tulsa, Okla. It
has scheduled an auction for July 8.
HealthSouth To Pay Debtholders, Averting
Threat
HealthSouth Corp. said on Tuesday it would pay
investors $80 million to stop them from demanding repayment on $1.9
billion of bonds, which could have thrown the company into bankruptcy,
Reuters reported. HealthSouth, which has been accused of a $3 billion
accounting fraud, said a committee unofficially representing bondholders
agreed to refrain from declaring the company in default in exchange for
the payments. Although HealthSouth was not behind on interest payments
to the bondholders, investors were entitled to declare the company in
technical default for failing to file audited financial statements.
Investors could have then forced HealthSouth to pay off its debt
immediately or enter bankruptcy, the newswire reported.
Adelphia Witness Defends Big Cash Advances
Michael Mulcahey, the former assistant treasurer at
the Adelphia Communications
Corporation, testified yesterday that he never doubted that the
company's founder, John Rigas, could repay cash advances of $1 million a
month for expenses, Bloomberg News reported. Mulcahey, who is on trial
on fraud charges with Rigas and two of his sons, tried to explain
earlier testimony about cash advances that he authorized. Prosecutors
contend that Mulcahey helped the Rigases steal $100 million, hide $2.3
billion in debt and lie about revenue and operations. All of the
defendants have pleaded not guilty.
Delta Presses for Cutbacks By Citing Stark
Outlook
Increasing the pressure to obtain labor concessions,
Delta Air Lines has told its
employees that competition and high costs mean its bid to avoid
bankruptcy protection may not be under its control, the
face='Times New Roman'>New York Times reported. That message,
delivered in a memorandum on Monday from CEO Gerald A. Grinstein,
was Delta's latest effort to stress the urgency of winning cuts from its
pilots, who Delta maintains are paid far more than their counterparts
elsewhere. Last month, Delta warned that it could seek bankruptcy
protection unless it was able to lower its costs and win wage and
benefit cuts from its pilots' union. With a strategic review due to its
board in late summer, Delta has hired consultants that specialize in
debt restructuring and turnaround plans. In recent days, however,
industry analysts have said that the airline, saddled with $20.6 billion
in debt, may have to file for bankruptcy protection by the end of the
year, the newspaper reported.
Former Officer of Symbol Pleads Not Guilty
A former vice president and general counsel for
face='Times New Roman'>Symbol Technologies pleaded not guilty in
federal court here on Tuesday to charges that he participated in a
scheme to defraud the company, the Associated Press reported. The
charges against the executive, Leonard Goldner, are part of a
wide-ranging prosecution of officials of the company, a maker of
bar-code scanners and wireless networks. An indictment unsealed in
federal court in Brooklyn last week accused Symbol's former president,
Tomo Razmilovic, CFO Kenneth Jaeggi and five others of devising various
accounting schemes to meet Wall Street projections for earnings and to
fatten their own incomes, the newswire reported.
Lea Fastow Ordered to
Report to Prison
Lea Fastow, the wife of former Enron CFO Andrew
Fastow, has been ordered to serve her one-year sentence for a
misdemeanor tax charge in a downtown Houston federal lock-up, just
blocks from the failed company's headquarters, Reuters reported. U.S.
District Judge David Hittner ordered Fastow to surrender by July 12, an
order made public on Tuesday.
Sealed Air Contests W.R. Grace
Chapter 11 Court Ruling
Sealed Air Corp. said on Tuesday it was contesting a bankruptcy court
ruling relating to asbestos claims in its acquisition of a W.R. Grace
& Co. business, Reuters reported. The Saddle Brook, N.J.-based
company said it filed a motion in the District Court of Delaware to
vacate a July 29, 2002 opinion on the legal standard to be applied in
fraudulent transfer claims against the company. Sealed Air said it is
not challenging the settlement agreement signed and presented to the
court for approval in November 2003. It said it still expects the
settlement agreement will become effective with court approval and W.R.
Grace's emergence from bankruptcy.