September 1, 2004
U.S. August Consumer Confidence Falls Sharply
U.S. consumer confidence fell sharply in August, the Conference Board
said yesterday, CBS MarketWatch reported. The consumer
confidence index declined to 98.2 in August from a revised 105.7 in
July. This is the largest drop in the index since February. The level of
confidence is the lowest since May. The reading was below expectations.
Economists expected the index to fall slightly to 103.6. The July
confidence index was revised down from an initial estimate of 106.1. The
present-situation index fell to 100.7 from 106.4, while the expectations
index dropped to 96.6 from 105.3. Lynn Franco, the director of the
Conference Board’s Consumer Research Center, said the lowdown in
job growth in the past two months has curbed confidence.
US Airways, Pilots Set to Discuss Further Cuts to Pension Plan
US Airways and its pilots’ union were set to meet last night,
amid resistance within the pilots’ ranks to the airline’s
bid to cut their already diminished pension plan, the New York
Times reported. The airline sought to assure its frequent fliers
yesterday that its internal turmoil would not affect customer service or
its mileage program. In an e-mail message, the airline’s senior
vice president for sales and marketing, B. Ben Baldanza, said the
troubles at US Airways were similar to restructurings under way at a
number of other airlines. Negotiations were to resume during the evening
between negotiators for US Airways and the union, the Air Line Pilots
Association. The union was waiting for the company’s response to
its latest offer, made on Monday.
Separately, the Washington Post reported that
cost-cutting talks between US Airways and its machinists union broke off
yesterday after the airline said the union’s proposed money-saving
ideas were not enough to help the carrier avoid bankruptcy. Union
leaders met with airline officials at the carrier’s Arlington
headquarters to outline operational changes that union officials said
could save the carrier about $100 million, the newspaper reported.
Enron
Former Enron Broadband Exec Pleads Guilty
Former Enron Corp. broadband Internet executive Kevin Hannon pleaded
guilty on Tuesday in federal court to one count of conspiracy to commit
wire and securities fraud and agreed to cooperate with prosecutors
against his former colleagues at the bankrupt company, Reuters reported.
In a hearing before U.S. District Judge Vanessa Gilmore, Hannon, who was
chief operating officer of Enron Broadband Services (EBS), agreed to
forfeit $2.2 million and pay $1 million to settle Securities and
Exchange Commission civil charges. He had been indicted on charges of
conspiracy, money laundering and insider trading and was scheduled for
trial on Oct. 4. Now he is set for sentencing on Jan. 31 and could face
up to five years in prison.
Conn. Agency to Recoup $111 Million from Enron Loss
Connecticut trash agency will recoup $111 million from a failed deal
with Enron Corp. after selling its bankruptcy claim at a premium to
Deutsche Bank Securities, the president of the agency said on Tuesday,
Reuters reported. Before it went bankrupt in 2001, Enron agreed to pay
the Connecticut Resources Recovery Authority (CRRA) $28.5 million
annually over 12 years for power generated from “The
Mid-Connecticut Project,“ a trash-to-energy plant serving 70
cities and towns. As part of the agreement, Enron received $220 million
upfront from the CRRA, but the energy company declared bankruptcy after
making only eight monthly payments. The authority sued Enron to recover
the money and was awarded about 37 cents on the dollar, or $82 million,
by the bankruptcy court. About two-thirds of the award is expected to be
in cash and one-third in stock in a new company that would be formed
post-Enron, said Tom Kirk, CRRA’s president, the newswire
reported.
Enron to Begin U.S. Pipeline Auction Today
Enron Corp. starts an auction today to sell its U.S. gas pipelines,
the company said, Reuters reported. A bankruptcy court in New York will
host the auction starting Wednesday. The process is expected to take one
to two days, and a winner could be announced either day, Enron said. The
auction process began in June, when Enron agreed to sell its crown jewel
U.S. pipelines, bundled into CrossCountry Energy Corp, to Southern Union
and General Electric Co. for $2.35 billion in cash and assumed debt.
PG&E Settles Tax Dispute with Subsidiary
PG&E Corp. on Tuesday said it had settled a dispute with bankrupt
subsidiary National Energy & Gas Transmission Inc. (NEGT) related to
federal income tax savings, freeing up about $350 million for stock
repurchases, Reuters reported. The San Francisco-based company said it
was raising its earnings guidance for 2005 to $2.15 to $2.25 per share
to reflect the impact of expected additional share repurchases, up from
a previous range of $2.10 to $2.20 per share. NEGT, which owns power
plants and gas transmission assets, filed for chapter 11 bankruptcy
protection in July 2003. Losses at the unit resulted in tax savings for
the parent and as part of the pact PG&E agreed to pay $30 million to
NEGT. The parent also expects to pay $100 million of consolidated tax
obligations in 2004 attributable to the unit’s taxable income. The
settlement is backed by PG&E, NEGT and the official committee of
unsecured creditors in the unit’s bankruptcy proceeding, the
newswire reported.
Embezzlement by Bankruptcy Lawyer Can Toll Statutes
When a bankruptcy lawyer embezzles funds from an estate, the 3rd U.S.
Circuit Court of Appeals has ruled that statutes of limitations should
not be strictly enforced since the trust placed in the lawyer may have
prevented the debtor and trustee from discovering the theft, the
Legal Intelligencer reported. The court wrote that the
trust inherent in a fiduciary relationship is such that “it may
take a ‘smoking gun’ to excite searching inquiry on the
principal’s part into its fiduciary’s behavior.” Read
the full article at
href='http://www.law.com/jsp/article.jsp?id=1090180457910'>http://www.law.com/jsp/article.jsp?id=1090180457910.
Hollinger Files Stinging Report on Ex-Officials
In a 513-page report, a special committee of the publishing company,
Hollinger International Inc., concluded that former officials Conrad M.
Black and F. David Radler ran a “corporate kleptocracy,”
diverting to themselves virtually all the company’s $400 million
in earnings over seven years, the New York Times reported.
The report, which was filed as part of Hollinger’s effort to
recover $1.25 billion from Lord Black and others, also criticized
certain directors as being “ineffective and careless” in
stopping the “systematic looting” of the company. Read the
full article at
href='http://www.nytimes.com/2004/09/01/business/media/01conrad.html'>http://www.nytimes.com/2004/09/01/business/media/01conrad.html
United Airlines
United Air Flight Attendants Union Seeks to Oust Company
Managemet
The union representing United Airlines’ flight attendants on
Tuesday called for new management at the airline and said it would seek
the ouster of executives, the Associated Press reported. Leaders of the
Association of Flight Attendants (AFA) passed a resolution of no
confidence in United’s senior management, saying they have failed
to return United to its former status as a “pre-eminent”
airline, a statement by the AFA said. United spokeswoman Jean Medina
said all interested parties need to work together to get the company in
the best shape to compete in the long term.
United Airlines Looks to Cut Another 6,000 Jobs
United Airlines is considering plans to cut an additional 6,000 jobs;
10 percent of its workforce and take another $655 million out of annual
operating costs, as part of a more radical overhaul of its business
plan, the Financial Timesreported. United is now dependent
on the capital markets for financing to enable it to emerge from
bankruptcy protection, where it has been since November 2002. According
to people familiar with the discussions, the airline is preparing a new
plan that CEO Glenn Tilton will take to United’s board at the end
of September FT said.
SEC Urges More Time to Bring Fraud Lawsuits
The U.S. Securities and Exchange Commission is urging a U.S. federal
appeals court to give some investors more time to sue companies for
fraud, the Wall Street Journal said today. In a
friend-of-the-court brief filed on Tuesday, the agency urged making
retroactive a provision of the Sarbanes–Oxley Act
that would let investors revive some older claims, the newspaper said.
Sarbanes–Oxley, adopted in July 2002, allows
investors to file lawsuits within two years of discovering fraudulent
behavior and five years after the violation occurred. The old limits
were one year and three years, respectively, the newspaper reported.