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September 23, 2004
Fannie Mae Used Improper Accounting
Regulators have discovered serious accounting problems at mortgage
giant Fannie Mae, prompting an SEC inquiry and calling into question its
financial soundness, the company said today, the Associated Press
reported. The board of the government-sponsored company has named a
special committee of outside directors to respond to a newly revealed
accounting crisis. The developments come a little more than a year after
Freddie Mac, Fannie Mae’s competitor in the multitrillion-dollar
home mortgage market, disclosed that it had understated profits by about
$4.5 billion for 2000-02 in an effort to smooth earnings and maintain
its image as a steady performer.
US Airways
Pilots at US Airways Agree to Resume Giveback Talks
Executives of the pilots’ union at US Airways ordered their
negotiating team on Wednesday to resume talks with the company with the
goal of reaching an agreement on concessions, Reuters reported. The
Master Executive Council of the Air Line Pilots Association at US
Airways unanimously approved a resolution giving their negotiators
unrestricted authority to promptly resume talks. US Airways entered
bankruptcy for the second time in two years last week after its unions
failed to give the company $800 million in wage and other concessions to
help it operate like a low-cost carrier.
US Airways Sets Deadline for Concessions
US Airways yesterday gave its unions until tomorrow to agree to
emergency contract concessions, the New York Times
reported. Otherwise, the airline said, it would ask a federal bankruptcy
court to impose temporary pay cuts and other cost-saving steps aimed at
generating much-needed cash. The ultimatum was contained in a bulletin
last night from the chief executive, Bruce R. Lakefield, to the
airline’s 28,000 employees.
Enron
Enron Defendants Try to Deflect Witness’s
Story
Defense lawyers on Wednesday sought to poke holes in a government
witness’s story of an angry confrontation with a former Enron
Corp. accountant charged with fraud after the witness disclosed a secret
deal with Merrill Lynch at the heart of the first criminal trial of
former employees of the fallen energy company, Reuters reported.
Prosecutors have said Enron set up the 1999 sale of three electricity
generating barges in Nigeria to boost its earnings to meet profit
targets, but that the deal was actually a loan because Enron and Merrill
Lynch had an unwritten deal guaranteeing Enron would arrange to
repurchase the barges at a guaranteed profit for the bank, the newswire
reported.
Lehman Nears Deal on Enron Suit
Wall Street brokerage house Lehman Brothers Holdings Inc. is close to
reaching a deal to pay about $220 million to settle a class-action
lawsuit alleging that it and other big brokerage firms participated in a
scheme with Enron Corp. executives to mislead shareholders, according to
a person familiar with the matter, the Wall Street Journal
reported. Lehman would pay the investors who had billions of dollars in
losses as a result of Enron’s collapse amid an accounting scandal
in 2001, the newspaper reported.
IBC Receives $200 Million DIP Financing from JPMorgan Chase
Interstate Bakeries Corp. (IBC), the maker of Wonder bread and
Twinkies, on Wednesday said it has received a $200 million commitment in
debtor-in-possession financing from JPMorgan Chase Bank as part of its
chapter 11 bankruptcy filing, Reuters reported. IBC cited liquidity
issues, resulting from declining sales, a high fixed-cost structure,
excess industry capacity, rising employee health care and pension costs
and higher costs for ingredients and energy, as major factors in its
decision to file. The $200 million financing agreement is subject to
court approval, IBC said in a release.
Dave & Buster’s Says It May Have Won Jillian’s
Bid
Dave & Buster’s Inc., owner of the restaurants that feature
video games for adults, said it’s the “apparent
winner” of an auction for Jillian’s Entertainment Holdings
Inc.’s nine mall-based restaurants and the Jillian’s trade
name, Bloomberg News reported. Dave & Buster’s said in a
statement that it expects confirmation from the U.S. Bankruptcy Court
for the Western District of Kentucky. The sites up for bid are the same
ones the Dallas-based company sought to buy in May for $27 million in
cash.
Feds: No Free Lawyer for ex-Kiss manager
A father who owes more than $174,000 in back child support is not
entitled to a free defense lawyer because he has substantial hidden
assets, federal prosecutors in Manhattan said in papers filed on Monday,
NYNewsday.com reported. Jesse Hilsen, who once worked as a manager for
the band Kiss, has access to “significant assets” in a
variety of bank accounts and businesses in New York, Ohio, South Africa
and Israel. Hilsen, an Upper East Side psychiatrist who made as much as
$500,000 a year while with Kiss, was arrested in the Catskills in June
after 10 years on the run as a deadbeat dad, prosecutors said. Federal
prosecutors charge that Hilsen has refused to pay child support to his
ex-wife for two of their three children for years. Prosecutors contended
that Hilsen evaded the payments by filing for bankruptcy and claiming he
was indigent, NYNewsday reported.
Ex-Chief of Computer Associates Is Indicted on Fraud Charges
A federal grand jury yesterday charged Sanjay Kumar, the former
chairman and CEO of Computer Associates International, with securities
fraud and obstruction of justice, in what may be the last major
white-collar criminal case to come out of the accounting scandals of the
late 1990s, the New York Times reported. Along with Kumar,
the grand jury indicted Stephen Richards, the company’s former
executive vice president for worldwide sales, on similar charges, in a
45-page indictment that depicts a wide-ranging conspiracy at the company
to break accounting rules and mislead government and corporate
investigators, the newspaper reported.
U.S. Government Settles Breast Implant Suit
The U.S. government said on Wednesday it had settled a lawsuit
against several makers of the controversial implants, Reuters reported.
The $11.2 million settlement, taken from a 1995 settlement of more than
$1 billion, will reimburse Medicare for caring for patients with
silicone implant-related illnesses.
Several of the companies lost a final appeal to the U.S. Supreme
Court last June over the issue. In 2002, the federal government settled
for nearly $10 million with Dow Corning Corp. Dow Corning, a joint
venture between Dow Chemical Co. and Corning Inc., filed for chapter 11
bankruptcy protection in 1995 following thousands of lawsuits that
claimed the implants caused autoimmune diseases, the newswire
reported.