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Groups Endorse Sarbanes' Plan To Improve Financial
Literacy
Senate Banking ranking member Paul Sarbanes (D-Md.) introduced the
'Financial Literacy and Education Coordinating Act' on Monday with
endorsements from both the Consumer Federation of America and the Public
Interest Research Group, CongressDaily reported. The two groups,
basing their endorsement on a nationwide consumer survey, urged the
government to take the initiative in addressing the lack of financial
literacy among consumers, particularly when dealing with the problem of
identity theft.
The survey found that minority populations, young adults and those of
low or moderate income, are least knowledgeable about their credit
scores. For example, only 8 percent of respondents answered
three-quarters of the questions on a financial literacy quiz correctly.
The bill aims to improve such literacy by allowing the government to
coordinate the education efforts through a central committee chaired by
the Treasury secretary, reported the newswire.
ENRON
Citicorp, J.P Morgan Settle Enron Probe With SEC
Citicorp Inc. and J.P. Morgan Chase & Co. agreed to settle
state and federal investigations into their role in Enron Corp.'s
collapse, Bloomberg News reported. J.P. Morgan will pay $135 million,
and Citigroup will pay $120 million to settle the investigations,
according to a statement issued by the Securities and Exchange
Commission, which said the banks had also settled a criminal
investigation with the Manhattan district attorney in New York.
The SEC said the settlement ended their investigation into claims
that Citigroup and J.P. Morgan helped Enron hide debt by using
bank-sponsored offshore entities to record loans as commodities trades.
Enron filed the second-largest bankruptcy in U.S. history in December
2001, after disclosing the misstatement of the debt, reported the
newswire.
Enron Examiner Says Banks May Lose $5 Billion
Claims
Six investment banks risk losing their claim on more than $5 billion
owed by Enron Corp. because they helped the energy trader cheat
investors, a court examiner said in a report filed on Monday, Reuters
reported. The examiner, Neal Batson, said there is evidence to conclude
that the six banks -- which also include Barclays Bank PLC , Canadian
Imperial Bank of Commerce (CIBC), Deutsche Bank AG and Merrill Lynch
& Co. -- knew of 'wrongful conduct' related to Enron's transactions,
and 'aided and abetted' Enron officers in breaching their fiduciary
duties. This, he said, might lead a court 'to determine that the claims
of such financial institutions, totaling in excess of $5 billion, may be
equitably subordinated to the claims of other creditors.'
In an e-mailed statement, CIBC General Counsel Michael Capatides said
that based on a preliminary review, his bank 'must strongly disagree'
with Batson's findings, which are dated June 30. 'We have every
confidence that CIBC acted properly in all of its dealings with this
company,' he said.
Separately, Reuters reported that Britain's Barclays Capital denied
today that it helped Enron Corp. cheat investors. 'We don't believe
there is any evidence to support any suggestion that we participated in
any effort to mislead anyone,' said John Anderson, a spokesman for
Barclays Capital, reported the newswire.
Justice Rejected IRS Call for Enron Probe
The Justice Department in 1999 declined to pursue a criminal referral
from the Internal Revenue Service of possible bribes paid by Enron Corp.
officials to Guatemalans close to former president Jorge Serrano to win
a lucrative electric-power contract, according to a congressional
investigation to be made public today, the Washington Post
reported. The account of Enron's dealings in Guatemala are in a new
report by the Senate Finance Committee, which spent more than a year
investigating the matter. The findings were sent to the Justice
Department's Enron task force in the spring. The payments identified by
the Senate report were made to a Panamanian corporation and 'were
disguised as add-on fuel charges to conceal them from U.S. and
Guatemalan tax authorities,' the congressional report states, according
to the online newspaper. Enron claimed the charges as tax deductions,
which eventually brought IRS scrutiny. Unrelated Enron accounting
irregularities led to the company's demise in December 2001 in what was
then the largest bankruptcy in U.S. history, reported the
Post.
Prosecutors Suggest Fastows Stand Trial Simultaneously
Former Enron Corp. finance chief Andrew Fastow, who has fought
to get a case against his wife postponed until after his own trial, is
now opposing a suggestion from prosecutors that the two face tax and
fraud charges at the same time. According to an Associated Press
article, Fastow tried earlier this month to persuade U.S. District Judge
Kenneth Hoyt, who is presiding over his case, and U.S. District Judge
David Hittner, who is presiding over his wife's narrower case, to
schedule his trial as early as January and postpone hers to begin after
his concludes.
Lawyers for Andrew Fastow and his wife, Lea, argued that his testimony
is critical to her case, but he cannot testify on her behalf until after
his trial, which has yet to be scheduled, on many more counts of
masterminding accounting schemes at the energy company. Judge Hittner,
who had denied a similar request from Lea Fastow's attorneys, stood firm
that her trial be scheduled for Jan. 27. He had ruled that a glimpse
into sealed testimony proffered by Andrew Fastow was a 'self-serving,
non-incriminating affidavit.'
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
US Airways Posts Profit Due to Government Aid
US Airways Group Inc. swung to a profit in the second quarter, but only
because of the government assistance given to commercial carriers, the
Wall Street Journal reported. US Airways, which emerged from
bankruptcy-court protection in March, reported on Monday net income of
$13 million, compared with a net loss of $248 million for the previous
second quarter. During the latest quarter, US Airways received $214
million from the government as reimbursement for certain security fees.
It also recorded a charge of $35 million in connection with its deferral
of aircraft purchases. Excluding those one-time items, the company had a
pretax loss of $154 million, which compares with a year-earlier loss,
excluding items, of $250 million. The carrier attributed the improvement
to cost reductions put in place during its chapter 11 reorganization,
partially offset by lower passenger revenues and higher fuel costs,
reported the Journal.
WORLDCOM/MCI
AT&T Objects to WorldCom Bankruptcy Plan
AT&T Corp. on Monday objected to rival WorldCom Inc.'s plan to
emerge from bankruptcy protection, accusing the long-distance telephone
carrier of diverting phone calls to Canada in order to dodge hefty fees,
Reuters reported. AT&T said in a filing with the U.S. Bankruptcy
Court for the Southern District of New York that it plans to bring
racketeering and fraud action against WorldCom and seek damages.
AT&T contended that WorldCom routed U.S. domestic calls that
incurred higher access fees through Canada and on to AT&T's network,
thereby shifting the costs onto AT&T and violating long-standing
agreements. WorldCom filed for bankruptcy protection last year after
being rocked by an accounting scandal that has reached $11 billion,
amassing huge debts and experiencing faltering customer demand. The
company plans to emerge from bankruptcy this fall.
FCC Is Reviewing Allegations Against WorldCom
The Federal Communications Commission (FCC) said on Monday it was
reviewing allegations that bankrupt WorldCom Inc. diverted telephone
calls to avoid paying hefty connection fees, an agency spokesman said on
Monday, Reuters reported. 'The commission is reviewing the allegations,
appropriate action, if any, will be taken,' said Michael Balmoris, the
spokesman for the agency that regulates the telecommunications industry.
He declined to elaborate. If the FCC decides to launch a probe and finds
WorldCom violated federal regulations, the agency could levy a fine.
Allou Distributors, Creditors Against Converting Case To Chapter
7
Lenders and unsecured creditors of Allou Distributors Inc. said a
plan from the company's interim chapter 11 trustee to convert the case
to a chapter 7 liquidation is premature and should wait until after a
dispute about the election of a permanent trustee is resolved.
As reported, Kenneth Silverman, who was appointed interim chapter 11
trustee for Allou Distributors in May, filed a motion earlier this month
saying all of the company's operations had ceased and there wasn't a
business left to reorganize, so the case should be converted to chapter
7. That would allow Allou's bankruptcy estate to save money while it
pursues various lawsuits, said papers filed with the U.S. Bankruptcy
Court in Central Islip, N.Y. However, the official committee of
unsecured creditors said in an objection to Silverman's conversion plan
filed on Friday that it is at best premature and at worst, a 'thinly
disguised attempt by the interim trustee to further entrench himself in
this case despite unanimous creditor opposition to his continuance in
office.'
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
W.L. Ross to Buy Burlington Industries for $620 Million
Textile maker Burlington Industries said distressed asset firm W.L. Ross
agreed to buy the company for just over $620 million, clearing a major
hurdle to emerge from bankruptcy, Reuters reported. Ross increased an
earlier bid of $608 million in cash in an auction held on Monday in New
York. The names of the other bidders weren't disclosed. The deal ends a
months-long auction process that began in February when Ross won a court
order requiring an open auction for the Greensboro, N.C.-based textile
maker. That decision dissolved an earlier agreement for Burlington to be
sold to investor Warren Buffett's Berkshire Hathaway for about $579
million, reported the newswire.
Allegheny Energy to Sell Contract for $405 Million
Allegheny Energy Inc. on Monday said it agreed to sell an energy supply
contract to a division of Goldman Sachs Group Inc. for $405 million, a
move enabling the U.S. power company to cut its debt and sending its
shares up more than 5 percent, Reuters reported. Allegheny has been
struggling to avert a bankruptcy filing despite securing $2.4 billion in
financing earlier this year. Last week it received regulatory approval
to complete a $300 million financing and borrow as much as $2.2 billion
under its existing credit facilities.
The Hagerstown, Md.-based company said its Allegheny Trading Finance
unit will sell the contract to J. Aron & Co., a Goldman Sachs
division, in a deal that is expected to close at the end of the year.
The final sale price will be determined by changes in the contract's
mark-to-market value as well as the number of trades to be assumed by J.
Aron, the company said in a statement. Proceeds from the sale will be
used to cut the company's debt and reduce its financial exposure to
energy trading, reported the newswire.
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