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September 3, 2003
MCI
AT&T Files Racketeering Suit Over MCI's Handling of
Charges
AT&T Corp. filed a racketeering suit on Tuesday against MCI, the
Wall Street Journal reported. In its suit, the long-distance
company claims that MCI cheated AT&T through an elaborate
call-routing scheme that stuck AT&T with call-handling charges that
MCI should have paid. The suit, filed in the U.S. District Court for the
Eastern District of Virginia, also names Minneapolis-based Onvoy Inc. in
the alleged misconduct.
MCI, which is in chapter 11 bankruptcy protection, has denied any
wrongdoing since AT&T first aired its charges in a bankruptcy-court
filing about a month ago. Verizon Communications Inc. and SBC
Communications Inc. have also alleged that MCI cheated them out of fees
through a slightly different call-routing scheme that disguised
expensive long-distance calls as cheaper local calls. MCI has denied
those allegations as well, saying its call-handling practices were legal
and above-board. AT&T's suit seeks damages that would cover only the
period after MCI filed for bankruptcy-court protection in July 2002,
reported the online newspaper.
MCI Questions Rivals' Practices In Routing Calls
MCI, under attack by rivals claiming it has been fraudulently
rerouting phone calls, says its own investigation of phone traffic on
its network shows that other phone companies are engaged in these types
of practices, the Wall Street Journal reported. MCI said its
internal investigation, conducted by law firm Gibson, Dunn &
Crutcher LLP, shows AT&T Corp. has been disguising the origin of
certain phone calls initiated in Alaska and routed through Georgia to
avoid paying higher access fees. MCI attorneys have raised the
allegations, but not the details, with the U.S. attorney for the
Southern District of New York, said a spokesman for the company. 'While
our internal review is ongoing, it has revealed that AT&T and some
of our competitors utilize similar practices of which MCI is being
accused,' said Deputy General Counsel Carol Petren. She said the company
intends to share more of the details with the U.S. attorney's office,
reported the newspaper.
Experts: Tax Rule Could Cost MCI $7 Billion
The bankrupt telephone carrier MCI could see $7 billion in future tax
breaks disappear, according to experts, who say new rules adopted by the
U.S. Treasury close a loophole for bankrupt companies, Reuters reported.
MCI declined to comment on the impact the changes would have on its
plans to emerge from bankruptcy protection, for which a hearing is
slated next week. But legal experts said the Treasury ruling could force
reconsideration of its bankruptcy plan.
The Treasury Department on Friday issued a temporary regulation on
tax breaks for companies that have declared bankruptcy. If a parent
company declares bankruptcy and shields canceled debt from taxes, a
subsidiary can lose tax breaks in the amount of debt that was forgiven
in the company's reorganization, Treasury and the Internal Revenue
Service said. A Treasury spokeswoman declined to link the regulation
directly to MCI, but said the regulation could apply to a company in
MCI's situation, reported the newswire.
Sierra Pacific Warns of Bankruptcy Risk
Sierra Pacific Resources Corp. warned on Tuesday that an unfavorable
legal ruling in a dispute with bankrupt Enron Corp. could send the
company into bankruptcy, Reuters reported. Last week a federal
bankruptcy court judge overseeing the case of Enron unit Enron Power
Marketing Inc. (EPMI) granted a motion for summary judgment against
Sierra Pacific's two utility subsidiaries in a case related to power
contracts which were terminated in May 2002. The claims total around
$200 million against Las Vegas-based utility Nevada Power (NPC) and $87
million against the company's other utility unit, Reno, Nevada-based
Sierra Pacific Power (SPPC). 'Any requirement to pay or provide security
for EPMI's claims for termination payments ... could make it difficult
for one or more of Sierra Pacific Resources, NPC to SPPC to continue to
operate outside of bankruptcy,' the company said in a filing with the
Securities and Exchange Commission, reported the newswire.
Kmart Appoints 3 New Executives
Discount retailer Kmart Holding Corp. named three new executives on
Tuesday, as its post-bankruptcy management team takes shape, Reuters
reported. The Troy, Mich.-based company put Bruce Johnson in charge of
supply chain and operations, named Janet Kelly chief administrative
officer, and appointed Lisa Schultz as chief creative officer. All three
report to President and CEO Julian Day. Johnson was previously in charge
of information technology, logistics and store organization for
Carrefour, the world's second-largest retailer. His responsibilities at
Kmart include inventory management and logistics. Kelly had been general
counsel for Kellogg Co. Her new job includes overseeing human resources
and corporate development. Schultz was most recently a consultant, after
spending more than a decade at Gap Inc., where she was involved with
product development and design. Kmart said her job, a newly created
position, 'will be responsible for the creative vision of Kmart as it
pertains to product and merchandising'.
The moves are the latest in CEO Day's efforts to build a new management
team. Nearly all of the top executives who ran Kmart before its January
2002 bankruptcy have left the company and two have since been charged
with accounting fraud, reported the newswire.
Mirant Bid To Shed Contract Stirs Jurisdictional Debate
Mirant Corp.'s chapter 11 bankruptcy proceeding is stoking an ongoing
debate about the jurisdictional boundaries between federal courts and
federal agencies, according to several legal experts. Mirant, which
filed for chapter 11 protection on July 14, asked the U.S. Bankruptcy
Court in Ft. Worth, Texas, on Thursday to allow it to reject an
agreement through which it purchases power from a unit of Pepco Holdings
Inc. Mirant said the contract is causing it to lose millions of dollars
and hurting its efforts to restructure. And, in what some legal experts
described as a bold move, the Atlanta-based power marketer obtained a
temporary restraining order from the bankruptcy court in Ft. Worth that
prevents Pepco and the Federal Energy Regulatory Commission from taking
action to require Mirant to uphold the power purchase agreement.
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Halliburton Sees More Delays in Asbestos Deal
Halliburton Co. on Tuesday said it has encountered more delays in
finalizing its asbestos settlement, as it continues to review mounting
claims in the proposed deal, Reuters reported. 'We are continuing our
due diligence review,' company spokeswoman Wendy Hall said. The
Houston-based company late last year agreed to a $4 billion
cash-and-stock deal to settle 200,000 asbestos lawsuits. It has since
asked for and received extensions and last month said it needed more
time to document claims. The latest postponement came as the U.S.
Congress debated a plan that would limit the impact of asbestos
litigation on companies and would reduce Halliburton's asbestos costs by
an estimated $3.5 billion.
Halliburton, the world's second-largest oilfield services firm, on
Tuesday also it is nearing agreement on its chapter 11 bankruptcy plan
for its DII Industries and Kellogg Brown & Root units. It expects to
file the prepackaged bankruptcy plan in October, reported the
newswire.
EOTT Says Judge Orders Shell Unit to Pay $30 Million
EOTT Energy LLC, a former Enron affiliate, said on Tuesday a Texas
district court judge ordered a unit of Royal Dutch/Shell Group to pay
EOTT $30 million in damages for a 1992 oil pipeline leak, Reuters
reported. EOTT, which emerged from bankruptcy earlier this year, said in
a statement that a jury in July found the Shell unit, Texas-New Mexico
Pipe Line Company, was 'grossly negligent and committed willful
misconduct related to the spill.' The spill contaminated groundwater in
the Kniffen Estates subdivision of Midland, Texas, EOTT said. A
spokeswoman for Texas-New Mexico Pipe Line Co. said the company plans to
appeal the judge's decision, reported the newswire.
Air Canada, Stelco, May Face Index Removal
Some big name stocks could be cut from the benchmark S&P/TSX
composite index as part of its latest quarterly review, CIBC World
Markets said on Tuesday, Reuters reported. Stelco Inc. and Air Canada
will likely be cut from Canada's main stock index for failing to meet
revamped standards for market capitalization, according to analyst Yin
Luo. Standard and Poor's, which operates the index, last year tightened
criteria for inclusion in the index, cutting companies with low market
capitalization or small trading volume, reported the newswire.
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