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September 22
Fed Raises Rates as Expected to 1.75 Percent
The Federal Reserve today raised interest rates for the third time
this year by a quarter of a percentage point and said the economy was
regaining some momentum after a slow period, Reuters reported. The
widely expected and unanimous decision by the policy-setting Federal
Open Market Committee moves the benchmark federal funds rate to 1.75
percent. The Fed lifted rates by matching amounts in June and at its
last policy session on Aug. 10, spelling an end to a lengthy period of
super-low rates.
Santorum Criticizes Latest Daschle Asbestos
Proposal
A key Senate Republican leader on Tuesday blasted the proposal on
asbestos legislation that Minority Leader Daschlesuggested last week,
CongressDaily reported. Although he did not comment on the
substance of the Democrat’s proposal, Senate Republican Conference
Chairman Rick Santorum (R-Pa.) told reporters that Daschle’s
efforts to find a compromise on the bill were disingenuous. “Sen.
Daschle has thrown monkey wrench after monkey wrench” into the
process, he said. Majority Leader Bill Frist (R-Tenn.) would respond to
the asbestos proposal soon, Santorum added.
House Adopts Sanders’ Pension Amendment
The House yesterday adopted an amendment that effectively would bar
the government from appealing a 2003 court ruling that found conversions
of traditional defined benefit pensions to cash-balance accounts are age
discriminatory, CongressDaily reported. The amendment,
sponsored by Rep. Bernard Sanders (I-Vt.) passed the House 258-160. The
House has adopted similar amendments the last two years, but they were
stripped from the spending bills to which they were attached. The case
involved IBM’s switch from defined benefit pension plans to
cash-balance plans.
“This precedent-setting court ruling against cash balance plans
confirms what American workers have been saying for years: Cash balance
pension conversions discriminate against workers based on age, are
illegal and, without adequate protections for older workers, must be
stopped,” Sanders said, the newswire reported.
3rd Circuit: ‘Healthy’ Company
Can’t File Chapter 11
A financially healthy company that is going out of business cannot
file for bankruptcy for the sole purpose of taking advantage of a
provision of the Bankruptcy Code that sharply limits the amount a
landlord may recover for termination of a long-term lease, the 3rd U.S.
Circuit Court of Appeals has ruled, the Legal Intelligencer
reported.
In its 26-page opinion in In re Integrated Telecom Express
Inc., a unanimous three-judge panel found that the Delaware
Bankruptcy Court had erred by rejecting the landlord’s motion to
dismiss the debtor’s chapter 11 filing on the grounds that it
could not have been filed in good faith since the company had plenty of
cash. Read the article at
href='http://www.law.com/jsp/article.jsp?id=1095434441579'>www.law.com/jsp/article.jsp?id=1095434441579.
Interstate Bakeries Files for Bankruptcy
Interstate Bakeries Corp. today filed for bankruptcy after struggling
with more than $1.3 billion in debt and weak demand for bread products,
brought on by the popularity of low-carbohydrate diets, Reuters
reported. The largest U.S. wholesale bakery and maker of Wonderbread
also accepted the resignation of James Elsesser as chairman and CEO,
according to the chapter 11 filing in the U.S. Bankruptcy Court for the
Western District of Missouri in Kansas City. The company has named Leo
Benatar as non-executive chairman and Antonio Alvarez as chief
executive, according to court papers.
Enron Criminal Trial Begins in Houston Court
The first criminal trial involving an Enron financial transaction
began in federal court here Tuesday, with the prosecution arguing that
the six defendants helped the onetime energy giant illegally increase
its income through a bogus asset sale, the New York Times
reported. But, in their opening statements, defense lawyers argued that
their clients—four former executives with Merrill Lynch &
Company and two former Enron executives—were players who knew of
no illegalities in the transaction, which entailed a sale to Merrill
Lynch of an indirect stake in some electricity barges in Nigeria. Read
the article at www.nytimes.com.
Adelphia Readies Cable Systems for Sale
The Adelphia Communications Corporation, the bankrupt
cable-television operator, said yesterday that it had divided its cable
systems into seven regional groups that will be sold in an auction,
Bloomberg News reported. CEO Bill Schleyer, said selling the cable
systems in seven clusters would probably maximize the number of bidders,
including private equity firms. The clusters average 750,000 subscribers
each, and the largest has 1.3 million customers, he said. Schleyer said
on April 22 that he would consider selling assets of the company to
raise money to help repay creditors owed more than $18 billion.
US Airways
US Airways, Dispatchers Agree to Cuts
US Airways reached a tentative $4.5 million cost-cutting agreement
with leaders of the union that represents the carrier’s 150 flight
dispatchers, the airline said yesterday, the Washington
Post reported. The contract is the first such agreement that US
Airways has reached with an employee union since it began seeking $800
million in labor cuts earlier this year. Though the union is tiny and
the saving is small, US Airways applauded the move, the newspaper
reported.
US Air Seeks More Savings from Its Pilots
US Airways GroupInc., trying to quickly reduce its labor costs so it
can retain access to cash that is keeping it aloft in bankruptcy-court
protection, made a new proposal seeking nearly $1.9 billion in savings
from its pilots through 2009, well above the company’s earlier
request of $1.5 billion from that group, the Wall Street
Journal reported.
The carrier asked the pilots union in its latest proposal for pay
reductions of 19.5 percent. US Airways also sought cuts in contributions
to the pilots retirement plan, increased monthly flight hours and a host
of changes to boost productivity.
MCI Not Liable for Legal Costs From SEC
Investigation
A federal bankruptcy judge ruled yesterday that MCI Inc. cannot be
forced to pay legal costs incurred by a group of former creditors
subpoenaed by the Securities and Exchange Commission in connection with
an insider trading investigation, the Washington Post
reported.
U.S. Bankruptcy Judge Arthur J. Gonzalez, who oversees cases in the
Southern District of New York, ruled that the payment is not authorized
under an agreement put in place between the creditors and the company
shortly after the Ashburn-based telecommunications giant filed for
bankruptcy protection in July 2002.
Mesirow Financial Buying KPMG LLP Unit
Expanding its services to companies that need turnaround help and to
creditors in bankruptcy cases, Mesirow Financial said on Monday it has
acquired a unit of the auditing firm KPMG LLP, the Chicago
Sun-Times reported. The deal for the “corporate
recovery” practice will put about 100 employees under the umbrella
of Mesirow, a diverse firm with practices that include investment
management, insurance, investment banking and real estate.
Lucent Again Cuts Retiree Benefits
Lucent Technologies Inc. said it plans to make additional cuts in its
retiree health-care benefits, in a step that will affect thousands of
former employees, the Wall Street Journal reported. In a
letter to retirees, the telecommunications equipment maker said that the
rising costs and the company’s need to remain competitive made the
step necessary. “Given the impact of health-care costs on our
business, we have no choice but to take this step,” Lucent said in
its letter, the newspaper reported.