June 8, 2004

Businesses Urge Senate Not
To Amend Class Action Bill



A large coalition of business groups last week urged Senate Majority
Leader Bill Frist (R-Tenn.) and 61 other senators who have indicated
support for a bipartisan class action bill to pass the measure without
amendments, CongressDaily reported. 'Throughout its
consideration over the past several years, this legislation has been
repeatedly moderated so as to enhance the benefits for consumers and
narrow the scope of cases subject to removal to federal court while
retaining its critically needed reforms,' the Class Action Fairness
Coalition said in a letter. But opponents of the bill, including many
consumer, civil rights and environmental groups, argue it would make it
more difficult for potential class action plaintiffs to seek justice
when corporations violate state laws.

Consumer Credit Rose $3.9 Billion

U.S. consumer debt outstanding
grew by a smaller-than-expected amount in April, according to a Federal
Reserve report on Monday, as credit card borrowing slipped for the
second time in three months, Reuters reported. The central bank said
credit grew by a seasonally adjusted $3.9 billion in April, after an
upwardly revised $9.3 billion jump in March. The March increase had
previously been reported as a smaller $5.7 billion gain. Wall Street had
expected credit to post a larger increase in April of about $6.1
billion. In the April report, the Fed revolving credit —
which tracks borrowing on credit and charge cards — fell by $3.2
billion in April. Revolving credit had also dipped in February.

Non-revolving debt, however, grew at a fast enough pace in April to
more than offset the drop in revolving debt. Non-revolving credit
increased by a healthy $7.1 billion in April, after a $5.5 billion gain
in March. Non-revolving credit measures fixed-term consumer debt,
including loans for cars, boats, tuition expenses and other items. The
April gain in non-revolving credit was the largest since January's $11.7
billion jump, the newswire reported.

Supreme Court to Consider Bankruptcy Case

The Supreme Court said Monday it would consider whether people facing
bankruptcy can prevent certain retirement savings from being used to pay
their debts, the Associated Press reported. Bankruptcy law protects
payments from a person's pensions and annuities, but does not mention
Individual Retirement Accounts, which are at issue in a case involving
an Arkansas couple. The case will be argued at the Supreme Court in the
term which begins next fall. Richard and Betty Jo Rousey have already
lost in a federal appeals court, which said that Congress could easily
change the law if it wanted to protect IRAs. The Rouseys have about
$55,000 in two accounts, money that was rolled over from pensions and
401K plans at their previous employer, Northrop Grumman. The 8th U.S.
Circuit Court of Appeals had held that because the Rouseys could
withdraw money, the IRAs were like 'readily accessible savings
accounts.' The case is Rousey v.
Jacoway, 03-1407.

Federal Reserve Says Banks Can Continue Overdraft
Plans

The Federal Reserve said yesterday that banks
could continue controversial programs that consumer groups say function
as high-cost loans used mainly by poor and middle-income people, the
New York Times reported. The
programs enable customers with low balances to overdraw their checking
accounts, allowing the banks to collect billions of dollars in fees.
They are generally marketed as 'overdraft privilege' or 'bounce
protection' and have grown very rapidly in the last five years, with at
least 1,500 banks now offering them. After studying the programs for
more than a year, the Federal Reserve said in a statement that they
should not be covered under truth-in-lending laws and did not propose
any substantive restrictions on them. The Fed did propose some minor
changes in the way the programs were marketed, the newspaper
reported.

ENRON

Judge Delays Until August Start of Trial In Enron
Case

A federal judge on Monday postponed the start
of the Enron criminal fraud trial because it was going to take longer
than expected, the New York Times
reported. Jury selection was to begin Monday afternoon in the trial of
two former Enron officials and four former Merrill Lynch executives, who
are accused of conspiracy, fraud and lying about the sale of an interest
in Nigerian barges that produced electricity. But Judge Ewing Werlein of
Federal District Court delayed the trial 11 weeks, to Aug. 16, after
meeting with prosecutors and defense lawyers in his chambers. The judge
had asked the lawyers to finish by July 9, but defense lawyers told him
that the case would take longer than expected, the newspaper
reported.

Washington Senator Calls For Release Of All Enron
Tapes

Sen. Maria Cantwell on Monday called on
the Justice Department to release all the audio tapes it has of
conversations involving Enron Corp. energy traders, the Associated Press
reported. At a news conference with Snohomish County Public Utility
District (PUD) officials, the Washington Democrat said the tapes could
help the PUD and others in their legal battles with the Houston company.
Enron filed for bankruptcy protection in 2001 amid devastating
revelations of hidden debt, inflated profits and shady accounting.
Transcripts of a small portion of the existing tapes revealed that Enron
traders laughed about manipulating the electricity market in California
three and four years ago during the West Coast power crunch, the
newswire reported.

AmeriDebt Bankruptcy Threatens
Settlement



The bankruptcy petition that credit counselor
AmeriDebt Inc. filed late last week may jeopardize an $8 million
class-action settlement the company agreed to earlier this year, the
Washington Post reported. The
class-action suit is one of several legal challenges against AmeriDebt,
including ones by the Federal Trade Commission and four states. They
claimed the company deceived consumers seeking debt-consolidation help
by charging high fees and falsely operating as a nonprofit organization
while being run to make money for its founders, Andris and Pamela Pukke,
and their for-profit company, DebtWorks Inc., the
face='Times New Roman'>Post reported.

MCI

MCI Judge Seals Records on KPMG

The judge presiding over MCI Inc.'s
bankruptcy-court proceedings has taken the unusual step of sealing
public records in response to a request by MCI to prevent the public
disclosure of a Securities and Exchange Commission (SEC) inquiry into
MCI's retention of KPMG LLP as its independent auditor, the
face='Times New Roman'>Wall Street Journal reported. The SEC
inquiry stems from an aggressive tax-shelter strategy that KPMG sold MCI
during the late 1990s, when MCI was known as WorldCom Inc. At the time,
Arthur Andersen LLP was the telecommunications company's outside
auditor. KPMG replaced Andersen in 2002. A reference to the inquiry was
contained in a June 1 court filing submitted by one of MCI's outside law
firms, Piper Rudnick LLP of Baltimore, the online newspaper
reported.

Former WorldCom CFO Pleads to
Conspiracy

Scott Sullivan, former CFO of WorldCom, pleaded guilty on Monday to
one count of conspiracy to commit securities fraud, Mississippi Attorney
General Jim Hood said, the Associated Press reported. Sullivan entered
his plea before Hinds County Circuit Judge Bobby DeLaughter and
sentencing was delayed. Sullivan faces up to five years in prison and a
fine of $5,000, the attorney general's office said. Hood said the charge
stems from Sullivan's involvement in WorldCom's misrepresentation of
billions of dollars in operating expenses, which let the company falsely
report earnings, the newswire reported.

Bankrupt San Diego-based Discount Retailer to
Close 23 More Locations

Bankrupt Factory 2-U Stores said it will close 23 money-losing
locations, the Knight Ridder
reported. After the closures, the San Diego discount retailer will have
172 stores remaining in seven Western states. The company said store
closure sales will start around July 1. In February, Factory 2-U closed
44 stores. At the time, the company said in court documents that the
outlets were losing a total of $30,000 a day -- or more than $10 million
a year. Analysts have questioned the long-term viability of the
company's strategy of focusing on low-income shoppers. After a
disappointing holiday season, Factory 2-U filed for chapter 11
bankruptcy reorganization in mid-January. In its chapter 11 petition,
the company listed $136.4 million in assets and $73.5 million in debts,
the newswire reported. The company also announced that a U.S. Bankruptcy
Court judge in Delaware granted the company's request for extra time to
submit its reorganization plan.

Supreme Court Rules in Favor of Early Retirees Denied
Pensions

Employers cannot cut back on pensions for
workers who retire early from one job and then take another, the Supreme
Court ruled Monday in a decision with potential implications for
millions of retirees, the Associated Press reported. The court was
unanimous in saying that an employer-financed pension plan cannot change
the rules to deny benefits to two Illinois construction workers who
retired with full pension benefits after 20 years on the job.  The
ruling applies primarily to private-sector workers covered by group
pension plans. Group, or multi-employer, benefit plans are common in
industries like construction, trucking, mining, retail and
manufacturing. About 9.5 million people were covered by such plans in
2002, according to federal data, the newswire reported.

Adelphia Witness Denies Secret-books Accusation

A former executive of Adelphia
Communications yesterday denied claims by a
prosecution witness that the company kept secret books that hid true
financial results from bank lenders, Bloomberg News reported. Michael
Mulcahey, a former assistant treasurer at Adelphia, sought to rebut
testimony by James R. Brown, a former vice president for finance who has
pleaded guilty to fraud and conspiracy. Brown said that Adelphia lied to
banks to avoid loan defaults and to cut borrowing costs, keeping actual
results in a second set of books, the newswire reported.

SEC May
Dilute Plan to Increase Holders' Power

Under pressure from business groups,
Securities and Exchange Commission Chairman William Donaldson is
considering toning down a controversial proposal aimed at giving
disgruntled shareholders more power to nominate corporate directors, the
Wall Street Journal reported.
Donaldson is exploring an alternate plan that would give
board-nominating committees the power to replace a director targeted by
investors for removal.

Court Reverses Bankruptcy Ruling Against
Prudential Unit in Indonesia

The Indonesian Supreme Court reversed a
bankruptcy verdict against a local unit of United Kingdom insurer
face='Times New Roman'>Prudential PLC, an official with the court
said on Tuesday, the Wall Street
Journal reported. 'The Supreme Court accepted Prudential Life's
appeal and rejected the bankruptcy petition filed by a former consultant
against it,' the Supreme Court's spokesman, Joko Upoyo Pribadi,
said.

Majority of Owens Corning
Creditors Back Reorganization Plan

Owens Corning has struck a deal
with a majority of its creditors who will now support the company's
reorganization plan, removing a hurdle to its emergence from bankruptcy,
the company said on Monday, Reuters reported. As a result, Owens Corning
said it now has the support for its reorganization plan from all major
creditor groups except its pre-petition bank debt holders, who still
oppose the plan. Under the deal, holders of the company's bonds, bank
debt and senior trade debt will be able to recover 38.5 percent of their
claims when Owens Corning emerges from bankruptcy.

Federal Appeals Court Sides With One Pasta Company In Dispute
Over 'America's Favorite'

A federal appeals court ruled on Monday that a pasta company can bill
itself as 'America's Favorite Pasta,' rejecting a rival's claim of false
advertising, the Associated Press reported. The ruling in favor of
American Italian Pasta Co., which upheld a lower court decision, found
that the disputed phrase was harmlessly vague 'puffery.' New World Pasta
Co. had claimed that the marketing amounted to false or misleading
advertising under federal law. New World last month filed for bankruptcy
protection.