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June 17, 2005
Senate Democrats Pledge to Work With GOP on Pensions Bill
Democratic senators emerged from a meeting yesterday with business
and labor leaders pledging to work with Republican chairmen in
developing pension legislation, CongressDaily reported.
During the meeting, business and labor officials were mostly united in
their opposition to the administration’s plan for fixing the
pension system, according to meeting participants. That proposal called
for companies that sponsor traditional pension plans to increase their
contributions. Labor fears that a sudden mandated increase of payments
to pension plans might prompt companies to drop their retirement plans
altogether. Meeting participants agreed that a bill introduced by House
Education and the Workforce Chairman John Boehner (R–Ohio) is an
improvement over the president’s plan, although it still goes too
far in requiring companies to boost pension contributions. The House is
planning to include its bill as part of a legislative package that
includes an overhaul of Social Security. Senate Finance Chairman Charles
Grassley (R–Iowa) and Health, Education, Labor and Pensions
Chairman Michael Enzi (R–Wyo.) are each working on pension bills.
Sen. Grassley said on Thursday that he wants to move a Social Security
bill without mixing in other retirement issues, setting up a possible
conference featuring broadly different Senate and House legislation, the
newswire reported.
Separately, CongressDaily reported that Delta Airlines
has retained Washington Council Ernst & Young partner Bruce Gates to
represent the airline on miscellaneous “pension issues,”
according to recently filed lobbying disclosure reports.
Factory Slowdown Shows Sector Struggling
Factory activity in the U.S. Mid-Atlantic retreated for the first
time in two years, data on Thursday showed, suggesting the manufacturing
sector has yet to exit a “soft patch” of growth, Reuters
reported. The Philadelphia Federal Reserve said its business activity
index dropped to -2.2 in June—the first negative reading in 25
months—from 7.3 in May, confounding Wall Street forecasts for an
advance to 10.0. A measure below zero points to contraction in the
sector.
Separate data showed, meanwhile, that the American housing sector
extended its four-year-long boom. Construction was started on 2.009
million new homes in May, up 0.2 percent from April but short of analyst
expectations of growth of 0.5 percent. Single-family housing starts rose
4.7 percent to a 1.704 million unit pace in May, the Commerce Department
said. Persistently low mortgage rates have supported the housing
sector’s four-year run. Even though the Federal Reserve has raised
its target for short-term interest rates from two percentage points to
3.0 percent in the past year, long-term rates have not responded.
Frank’s to Emerge from Bankruptcy as Real Estate Development
Company
Lawn and garden retailer Frank’s Nursery & Crafts Inc. has
received court approval of its plan to emerge from chapter 11 bankruptcy
protection as a real estate development company, the Associated Press
reported. The Troy, Mich.–based company will retain about 42
parcels of real estate, which will be developed by the reorganized
company, Frank’s said in announcing the approval Wednesday by the
U.S. Bankruptcy Court for the Southern District of New York.
A WorldCom Promotion Haunts Nasdaq
The name WorldCom is long gone, but as a legal issue, WorldCom
continues to haunt Nasdaq, the exchange where the shares of the onetime
telecommunications giant traded during its heyday, the New York
Times reported. A federal appeals court in Atlanta this week
scheduled oral arguments for September over a novel legal question: Can
a stock exchange, which, as a quasi-governmental regulatory body has
traditionally been considered immune from investor lawsuits, be held
liable for promoting a stock when done as part of its for-profit
business?
Regulators May Warn About New Mortgages
Federal banking regulators are preparing to warn lenders about the
risks posed by the growing popularity of new kinds of adjustable-rate
home mortgages that could leave borrowers facing steeper payments if
interest rates rise or facing foreclosure if home values flatten or
fall, the Washington Post reported. The Office of the
Comptroller of the Currency is considering a warning called a
“guidance,” which is a directive to lenders that would
specify the kinds of loans and borrowers that would draw regulatory
scrutiny because they are riskier.
Regretful KPMG Asks for a Break
Accounting firm KPMG LLP is engaged in negotiations with the Justice
Department over whether it will face criminal charges related to its
marketing of abusive tax shelters during the 1990s, the Washington
Post reported. Federal prosecutors in Manhattan have developed a
criminal case against the firm. But KPMG has appealed to Justice
officials in Washington, arguing that it has cleaned up its act and that
the case can be resolved short of charges that could destroy the firm,
according to sources familiar with the probe who spoke on the condition
of anonymity because the case is at a delicate stage.
US Airways Can Pay to Keep Nonexecutive Managers
US Airways Group Inc. won bankruptcy court approval yesterday to
spend up to $15 million to keep nonexecutive managers the company says
are critical to completing its proposed merger with America West
Holdings Corp., the Washington Post reported. The
Arlington, va.–based airline, which has filed for chapter 11
bankruptcy protection twice in the past three years, asked the court for
more than $50 million for a severance and retention plan for its more
than 1,800 management-level employees and for its senior executives. The
plan included severance payments for managers who lose their jobs as a
result of the merger. U.S. Bankruptcy Judge Stephen S. Mitchell
denied the request for senior officers, citing the “magnitude of
the proposed severance payments.”
Air Canada Hires New Chief Financial Officer, Two Other
Executives
Air Canada, which emerged from bankruptcy protection last fall, named
a new chief financial officer and announced two other major executive
appointments Thursday, the Associated Press reported. Joshua Koshy, the
former senior vice president for information technology at Emirates
Group, was named Air Canada’s new executive vice president and
chief financial officer. He replaces Rob Peterson, who will continue as
executive vice president and CFO of ACE Aviation, which is Air
Canada’s parent company.
Jeffrey Gural, TrackPower Submit Bankruptcy Plan to Acquire Vernon
Downs
TrackPower Inc. announced yesterday in a press release that it has
joined with Jeffrey Gural to form Vernon Downs Acquisition LLC as a
vehicle to purchase Vernon Downs Racetrack out of bankruptcy. TrackPower
and Gural have jointly filed a chapter 11 plan of reorganization
together with Mid-State Raceway Inc., the owner of Vernon Downs. The
plan provides that Vernon Downs Acquisition LLC will become the sole
shareholder of Vernon Downs, but that prior shareholders will be offered
the opportunity to purchase 10 percent of the membership interests in
Vernon Downs Acquisition LLC. Vernon Downs Raceway is the oldest harness
track in New York state.
Mirant Suit Says Former Parent ‘Siphoned’ Funds
Independent power generator Mirant Corp. filed a federal lawsuit
against former parent Southern Co., accusing the big utility company of
improperly “siphoning” $2 billion in funds from Mirant prior
to spinning it off as a separate company in October 2000, the Wall
Street Journal reported. As a result, Mirant claims, it was
weakened financially and had to initiate bankruptcy proceedings in July
2003, following a downturn in wholesale energy markets. The suit alleges
that Southern made investments in Mirant that were characterized
initially as equity infusions, but later were redesignated as
“advances” for which Southern demanded repayment with
interest. Mirant says that it was forced to borrow money to repay these
sums and make dividend payments to Southern.
Debtors Rush to Beat New Bankruptcy Law
Tens of thousands of consumers have rushed to file bankruptcy in the
wake of the passage of a new law that will soon make it tougher to shed
debt, the Sentinel reported. Personal bankruptcies,
nationally and in Central Florida, surged in the first quarter,
according to the latest court figures. Nationally, more than 393,000
cases were reported during the first quarter, up 8 percent over the
previous quarter, according to the American Bankruptcy Institute, a
Washington-based nonprofit research group. Experts had predicted the
increase, ahead of what they have called the most sweeping reform of the
U.S. Bankruptcy Code in decades. Although the law doesn’t kick in
fully until October, some measures took effect in mid-April when
President Bush signed the bill. For example, the law limits homestead
exemptions that bar creditors from going after a debtor’s home.
Florida is among a handful of states with such statutes.
Creditors Seek Bankruptcy for Former Las Cruces Hospital
Operator
Two creditors are asking the U.S. Bankruptcy Court in Albuquerque to
declare the former operator of Memorial Medical Center bankrupt, the
Associated Press reported. This would allow the creditors to seek more
than $1.6 million they allege they are owed. A hearing on the request is
set for June 28.