October 72004

/>

October 7, 2004

Daschle Seeks Compromise to Salvage Asbestos
Plan

Senate Minority Leader Tom Daschle (D-S.D.) on Wednesday urged his
Republican counterpart to help resolve their remaining differences on
establishing a fund to compensate asbestos victims, Reuters reported.
With Congress due to recess this week ahead of the Nov. 2 elections,
Daschle wrote Senate Majority Leader Bill Frist (R-Tenn.), asking him to

outline a possible compromise. Neither Frist nor Daschle has been
willing to declare their effort dead for the year, even as time dwindles

for creating a fund financed by companies and insurers to compensate
victims while ending their right to sue in court. Daschle earlier this
month accepted Frist’s proposal to cap the fund at $140 billion,
but Frist complained Daschle’s ideas did too little toward taking
asbestos claims out of court.

“Given the lateness of the legislative year, the only way to
secure a solution is for both sides to demonstrate a willingness to give

and take,” wrote Daschle. Although Congress will return after the
election, Frist has said the focus will be on spending bills and
resolving bills that have passed both the Senate and House of
Representatives, the newswire reported.

Senate to Hold Hearing on Effect of Bankruptcy and
Pension Policy on the Airlines

The Senate Committee on Commerce, Science and Transportation will
hold a hearing this morning on “The Effect of Federal Bankruptcy
and Pension Policy on the Financial Situation of the Airlines.”
Members will hear testimony examining the impact of Federal pension and
bankruptcy policy on the financial health of the airlines. Witnesses
include David M. Walker, comptroller general of the United States, U.S.
Government Accountability Office, Bradley D. Belt, executive director,
Pension Benefit Guaranty Corporation, Robert L. Crandall, senior fellow,

The Brookings Institute and Duane Woerth, president, Airline Pilots
Association.

US Airways

Attorneys for US Airways Group Inc. hope to convince a bankruptcy
court judge in Alexandria, Va., today that without substantial pay
cuts, the airline will go out of business, the Washington
Post reported. The argument will place the airline in a tricky
position, analysts said, because issuing such a dire warning could
prompt travelers and travel agents to avoid booking US Airways tickets
for the holiday season. But without this forecast, the airline may be
unable to persuade U.S. Bankruptcy Court Judge Stephen S. Mitchell to
approve its request for a temporary 23 percent pay cut, the analysts
said, the newspaper reported.

US Airways Group Inc. said on Wednesday that its flight simulator
engineers had ratified a cost-savings agreement with the company,
helping the bankrupt airline save about $4.2 million over the term of
the agreement, Reuters reported. The deal with the Transport Workers
Union Local 546, covering 24 flight simulator engineers, is effective
retroactive to Oct. 1, 2004, and is subject to bankruptcy court
approval.

Enron

A federal judge ordered California to drop fraud claims seeking $2
billion in refunds from Enron Corp., saying the company is protected
from such suits under bankruptcy law, Bloomberg News reported. U.S.
Bankruptcy Judge Arthur J. Gonzalez ruled that no new claims could be
filed against Enron after an Oct. 15, 2002 deadline he imposed following

Enron’s 2001 bankruptcy. He denied California’s request to
put the ruling on hold until the state could file an appeal, saying
“the state has failed to establish that it would suffer
irreparable harm by dismissing” the suit. The lawsuit, filed in
June in Alameda County, California, accused Enron of manipulating power
prices during California’s energy crisis in 2000 and 2001 using a
series of unlawful trading schemes. The state plans to appeal
Gonzalez’s decision, the newswire reported.

Ben Glisan Jr., a former treasurer of Enron, testified publicly for
the first time on Wednesday, describing what he portrayed as an array of

crimes he participated in to help bolster the company's financial
performance, the New York Times reported. Glisan, who
pleaded guilty last year to one count of conspiracy to commit fraud, at
first invoked his Fifth Amendment right against self-incrimination when
called to testify in a criminal case against four former executives with

Merrill Lynch & Company and two former Enron executives. Under a
motion by the government, Federal District Judge Ewing Werlein Jr., who
is hearing the current case, granted Glisan immunity, compelling him to
testify. The defendants are charged with conspiring to allow Enron to
prop up its profits in late 1999 through a bogus sale of some Nigerian
electricity barges from Enron to Merrill.

Parmalat Wins First Bank Settlement after
Scandal

Parmalat’s managers on Wednesday won a first out of court
settlement from a bank which did business with the now-bankrupt Italian
food group, clinching a €160 million offer from a unit of Banca
Intesa, Reuters reported. In a move that could put pressure on other
banks, Intesa’s Nextra Investment Management said the deal meant
Parmalat would not challenge its acquisition and quick resale of
€300 million of Parmalat bonds. Those transactions took place
during the six months before the group collapsed in a €14 billion
($17.2 billion) accounting scandal last December, attracting the
attention of investigators.

United Airlines to Cut U.S. Flights

United Airlines said on Wednesday it would cut 12 percent of
available seats on U.S. flights and increase capacity on more lucrative
international routes by 14 percent as part of its aggressive
cost-cutting campaign to emerge from bankruptcy, Reuters reported. The
carrier, a unit of UAL Corp., also said it plans to reduce its mainline
fleet to 455 aircraft by next March, 68 fewer than it flew in August
2004 and a reduction of 112 planes, or nearly 20 percent, since 2002,
the newswire reported.

Moody’s Sees Gaps in U.S., Canadian Corporate
Reform

Large U.S. and Canadian companies have made strides on corporate
governance reforms but many shortcomings remain, Moody’s Investors

Service said on Wednesday, Reuters reported. Excessive executive pay,
lack of plans for replacing chief executives and lack of independent
boards at some companies are still concerns, the bond rating agency
said. The conclusions came after reviews of 169 of the largest
corporations in the United States and Canada over the past two years.
“As a group, these companies have made strides in increasing the
expertise, independence and diversity of their boards of directors, and
in particular, their audit committees,” Moody’s said in a
report. Still, one in four companies base executive compensation on
formulas that promote a short-term focus or unhealthy appetite for risk,

Moody’s said, the newswire reported.

Kaiser Aluminum Signs Intercompany Settlement

Kaiser Aluminum, taking another step towards its goal of emerging
from bankruptcy next year, said on Wednesday it signed an Intercompany
Settlement Agreement (ISA) with the Unsecured Creditors Committee (UCC),

Reuters reported. The ISA will be the subject of a motion to be filed
shortly with the U.S. Bankruptcy Court for the District of Delaware
seeking its approval, the Houston-based company said. Kaiser has been in

discussion with the UCC for the last nine months concerning such an
agreement.

GE Unit Requests Bankruptcy for Brazil’s
Vasp

A unit of General Electric Co. has filed a request with a Brazilian
court that Vasp, Brazil’s fourth-largest airline, be declared
bankrupt because of unpaid debts, the U.S. company said on Wednesday,
Reuters reported. “We have an overhaul facility in Brazil, a
company called Celma. And they (Vasp) had ceased to make payments on the

contracts with Celma for over two years, and we’ve been trying to
resolve the situation over the last several months,” said Rick
Kennedy, a spokesman for GE’s aircraft engine business, the
newswire reported.

Stelco Considers Sale of Entire Company

Former CEO Is Among 11 Indicted in Peregrine
Case

In the federal investigation of Peregrine Systems, Inc. a federal
grand jury indicted 11 individuals, including the company’s former

chief executive, for their alleged roles in a conspiracy to inflate the
financial results of the San Diego software provider, the Wall
Street Journal reported.

The indictment, filed in a federal court in San Diego, named eight
former Peregrine officials, one of its outside auditors and two company
business partners. The government charged that over a three-year-period
beginning in early 1999 the defendants used various means to improperly
improve the company’s reported results in order to
“fraudulently inflate and sustain” Peregrine’s share
price. In 2002, the company filed for bankruptcy-law protection, from
which it emerged last year, the newspaper reported.