June 17, 2004
Kelly Says Single Office
Should Enforce Bank Secrecy Act
Arguing that the nation's 'fragmented' anti-money laundering system is
structurally incapable of keeping pace with the war on terrorism, House
Financial Services Oversight and Investigations Subcommittee Chairwoman
Sue Kelly (R-N.Y.) said on Wednesday during a hearing on the Treasury
Department's operations that lawmakers should establish a single federal
office to ensure compliance with the Bank Secrecy Act (BSA),
CongressDaily reported. Dennis Schindel, the Treasury
Department's acting inspector general, said audits have revealed gaps in
various regulators' monitoring of financial institutions' BSA compliance
efforts. Schindel said other audits have shown that the Treasury
Department's Financial Crimes Enforcement Network's database of
suspicious activity reports has lacked critical information and
contained inaccurate data. Schindel also said FinCEN must take 'a more
aggressive leadership role' in coordinating financial regulators'
anti-money laundering efforts, the newswire reported.
Leggett & Platt to Buy
Georgetown Steel for $21 Million
Leggett & Platt Inc., which makes products such as
bed springs and shelves, on Wednesday said it plans to buy bankrupt
Georgetown Steel Co. for $20.9 million, beating out International Steel
Group Inc. (ISG). ISG lost out after bidding $16 million in cash plus
assumed liabilities. Leggett & Platt said it will not take on
Georgetown's liabilities. The acquisition still needs bankruptcy court
approval, Leggett said. The deal will go before the bankruptcy judge
today, the newswire reported.
Delta CEO Again Warns Survival Depends on
Concessions by Pilots
The CEO of Delta
Air Lines reiterated his warning that the carrier's survival will
require a full slate of concessions from its pilots union, the
face='Times New Roman'>Wall Street Journal reported. 'There's no
reason to belabor the need for the concessions,' Gerald Grinstein,
Delta's CEO, said at an investor conference in New York. 'What we will
not accept is an agreement that provides only a partial or temporary
solution.' Grinstein's comments represented the latest warning from the
Atlanta carrier in recent months that it may be forced to seek
bankruptcy-court protection unless it can drastically cut expenses,
including its pilot costs, which are the highest in the industry. Wall
Street analysts have suggested that Delta's labor costs, high fuel
expenses and weak pricing power could push the carrier to the brink of
bankruptcy by year's end, the Journal reported.
Lawsuits Challenge Charity Hospitals on Care
for Uninsured
Richard Scruggs, the Mississippi lawyer
whose legal attack on the tobacco industry helped bring about changes --
and multibillion-dollar settlements -- alleges hospitals are
overcharging uninsured patients and subjecting some to harsh
bill-collection tactics, the Wall Street Journal reported. Late
yesterday, Scruggs and other lawyers filed class-action suits in federal
courts in eight states against about a dozen not-for-profit hospital
systems, challenging whether those institutions deserve the tax
exemptions they have enjoyed for so long.
Harvard Law School Professor Elizabeth
Warren hailed the Scruggs challenge, saying that he had a 'strong
argument.' She added, 'Someone has to expose these hospitals. Who is in
a position to do it? It is not some poor family that has no health
insurance, makes $32,000 a year and is slapped with a $7,000 hospital
bill.' Read the
href='http://online.wsj.com/article/0,,SB108741641781739037-search,00.html?co…%'>article (subscription
required).
Proesecutor Charges That
Adelphia Bankrupted By Founder's Greed
Adelphia Communication corp.'s founding family used
the cable company as their 'personal piggy bank,' driving it to
financial collapse with greed, betrayal and lies, a federal prosecutor
charged in closing arguments at the fraud trial on Wednesday, Reuters
reported. 'They were so greedy, took so much from Adelphia, that when
the full extent of the lies and looting were revealed it bankrupted the
company,' Assistant U.S. Attorney Chris Clark told jurors. The federal
prosecutor's statements came on the first day of closing arguments that
are expected to last about a week, setting the stage for jury
deliberations later this month. During the three-and-a-half-month trial,
prosecutors have charged John Rigas and his two sons with stealing
millions in Adelphia funds to buy stock and pay for personal expenses,
the newswire reported.
Healthsouth Ex-CEO Lawyers
Argue To Reduce Charges
Attorneys for ousted Healthsouth Corp. CEO Richard
Scrushy on Wednesday challenged the use of the Sarbanes-Oxley corporate
reform law against their client and argued for a reduction in the number
of criminal counts Scrushy is facing. Scrushy pleaded not guilty in
November to 85 criminal counts in the multibillion-dollar accounting
fraud that brought the health care company he founded to the verge of
bankruptcy. He is free on bail and awaiting trial. Scrushy's attorneys
called the 85-count indictment overkill and accused prosecutors of
piling on charges to influence potential jurors, the newswire
reported.
Megabanks Pose System
Risks-San Francisco Fed
The creation of $1 trillion megabanks in the United
States heightens concerns about risks to the entire financial system, a
senior official at the San Francisco Federal Reserve Bank said, Reuters
reported. 'The ever-growing scale of bank mergers raises challenging
policy questions, including banking concentration at the national level
and systemic risk concerns,' said Simon Kwan, the head of financial
research at the San Francisco Fed. Policy-makers must address these
concerns while safeguarding the nation's financial system, Kwan wrote in
an 'economic letter' posted on the bank's web site, the newswire
reported.
The last time the Fed was involved in managing a
crisis that threatened the global financial system was in 1998, when the
New York Fed brokered a controversial private-sector deal to bail out
the hedge fund long-term capital management, which was on the verge of
bankruptcy, the newswire reported.
Professor Dissects Finance
Fraud
In an article appearing in the most recent issue of the
face='Times








New





Roman'>Journal
of Forensic Accounting, accounting professor W. Steve Albrecht
pinpoints abuses he believes converged to create a storm that struck
corporate America. 'All of (these factors) are what created the
pressures, the opportunities and the rationalization for this to
happen,' said Albrecht, who has been asked to discuss his fraud-related
studies with the U.S. Securities and Exchange Commission. 'If you
analyze each fraud case, almost in every case, there are issues that
relate to almost all of these, if not all of them.' Read the
href='http://deseretnews.com/dn/view/1%2C1249%2C595070604%2C00.html'>article.
Wing, a Prayer and a Lot of Luck
United Airlines may need loan guarantees, labor
concessions and assorted other financial boosters to get back to robust
health, the New York Times reported.
Airline experts say it will take every ounce of personal energy and
dedication for the CEO Glen Tilton to make the skies friendly for
United again. Tilton is facing tasks that are every bit as formidable as
those he faced as CEO of Texaco, where he presided over both a
bankruptcy and a merger. The Air Transportation Stabilization Board
could rule as soon as this week on whether to provide United, which is
operating under bankruptcy protection, with $1.6 billion in loan
guarantees, according to people in the airline industry. Read
the
href='http://www.nytimes.com/2004/06/17/business/17tilton.html'>article.
Ex-Director Says Tyco Pay Panel Knew of Big Loans to
Executive
The compensation committee of Tyco
International knew that Mark A. Belnick, a former general
counsel, had $15 million in no-interest company loans when it approved
his 2002 employment agreement, a former director testified yesterday at
Belnick's trial in New York State Supreme Court, Bloomberg News
reported. Belnick's lawyers have argued that committee members' approval
of the contract shows that they believed that the loans, in addition to
a $17 million bonus, were authorized. Prosecutors say former CEO L.
Dennis Kozlowski gave Belnick the money to buy his silence about frauds
at Tyco, the newswire reported.