TOP 10 STORIES: July 10-14
1. Record Damages Sought Against Cigarette Makers: A Miami jury ordered America’s big tobacco companies to pay $145 billion in punitive damages for injuring hundreds of thousands of Florida smokers, in the largest product-liability verdict in U.S. history. A long appeals process lies ahead, however, so the penalties should have little immediate effect. The jury in the class-action lawsuit brushed aside tobacco company arguments that a multibillion-dollar verdict would be a “death warrant” for the industry. The jury deliberated just 4 1/2 hours Friday before reaching its verdict, which came close to the $154 billion the plaintiffs sought. Earlier in the week, the tobacco industry won its second case brought on behalf of an individual smoker. A Mississippi jury ruled that R.J. Reynolds Tobacco Co. is not liable in a wrongful-death suit brought by the widow of a man who had smoked since he was a boy.
2. Search Engine Controversy: Scour Inc., whose popular Internet service locates digital music and video files, also has technology that allows users to peer at any kind of multimedia file stored on many personal computers, sometimes without the owners’ knowledge. The Beverly Hills new-media company, backed in part by Hollywood super-agent Michael Ovitz, has attracted millions of users to its Web site and its controversial search technique. Scour’s attorney says that the technique is legal, though not particularly effective. The company said Friday it has stopped the search technique and plans to replace it. (P.J. Huffstutter)
3. Economic Picture Mixed: California gained 51,500 private-sector jobs in June, the biggest such monthly increase in nearly two years, but the jobless rate edged up to 5.2% from 5.1% in May, the second increase in a row. A major reason for the mixed picture was the loss of 37,400 government positions in June, mainly involving Census 2000 workers who went off the federal payroll after completing their temporary jobs. Meanwhile, U.S. reports suggested the economy may not be slowing as much as the Federal Reserve would like to see. Retail sales rose more than expected in June, led by gains by auto dealers and gas stations. Prices at the wholesale level rose 0.6%. However, excluding energy products, wholesale prices fell 0.1%.
4. Oscar Home Will Get Kodak Name: Eastman Kodak Co. will pay $75 million over 20 years to put its name on a new Hollywood Boulevard theater that will permanently house the Academy Awards, in one of the largest sales of naming rights outside of sports. The project’s developer, TrizecHahn Development Corp., said Kodak won out over five other companies for the naming rights, but wouldn’t name them. Robert Rehme, president of the Academy of Motion Picture Arts and Sciences, said the academy is pleased that the photography and technology company won because of its close links to Hollywood, unlike Staples Inc. and sports. “I doubt there are many basketball players who use office supplies in their professional work,” Rehme said.
5. Gemstar and TV Guide Merged: Gemstar International Group of Pasadena closed its $14.3-billion deal to buy longtime rival TV Guide Inc. after the Justice Department cleared the way for the merger. The combined company, Gemstar-TV Guide International, is set to control the evolution of interactive on-screen television program guides, which analysts expect to become a multibillion-dollar vehicle for advertising and electronic commerce. Interactive program guides help channel surfers sift through scores of program listings according to topic, channel or air time by pointing and clicking their remote controls. But they will become more powerful--and more critical to cable and satellite television providers--when they add features to let TV viewers order movies on demand, pizza and other merchandise. (Karen Kaplan)
6. Generic Price-Fixing Case Settled: Generic drug maker Mylan Laboratories agreed to pay $135 million to settle federal, state and private lawsuits charging it with fixing the prices of two medications commonly used to treat anxiety and hypertension among the elderly. The company, which makes lorazepam, the generic version of Ativan, and clorazepate, the generic for Tranxene, maintained it had done nothing wrong. The suits marked the first time the federal government had sought such massive fines against a pharmaceutical company for price fixing. California was among 32 states that joined in actions against the company.
7. UnitedHealthcare Members Switched: UnitedHealth Group said it’s cutting most of its California managed-care operations, shifting care for nearly a million of its UnitedHealthcare members to nonprofit Blue Shield of California. UnitedHealth, the nation’s second-largest health plan, said it hasn’t been able to make money from the operations and isn’t willing to hassle with the state’s troubled and contentious network of doctors and hospitals. The company said it will continue to sell insurance to some large employers in the state.
8. Ex-Banker Pleads Guilty: A former top Small Business Administration official who went on to head up SBA lending at a Paramount bank agreed to plead guilty to taking kickbacks from loan brokers whose deals he helped approve. Gerold Y. Morita of Hacienda Heights agreed to serve 15 to 21 months in prison and pay $934,656 in restitution as part of the plea agreement, which caps a decade-long investigation that has led to nearly two dozen convictions. The allegations date to 1990 and 1992, when Morita headed the SBA lending division of Mechanics National Bank. Morita accepted no responsibility for the scheme, which cost the SBA and the bank about $8 million in losses and contributed to the demise of Mechanics in 1994.
9. Frederick’s Seeks Bankruptcy Protection: After 54 years of selling sexy lingerie, Frederick’s of Hollywood was forced to reveal its financial assets as it filed for Chapter 11 bankruptcy. And the financial picture was less than sexy. Frederick’s sought protection from creditors after it was unable to repay $55 million in loans taken on for a 1997 buyout by its former owners. Executives said the filing would not affect the company’s 1,200 employees or operations at its nearly 200 stores nationwide. Among the obstacles they face in reorganizing the company include robust competition from Victoria’s Secret and discount stores, Frederick’s own reputation for tawdriness and the aftereffects of several missteps in recent years. (Indraneel Sur)
10. Mergers Brewing: Major acquisitions reportedly in the works, with no confirmation from the companies by late Friday, included a $10.5-billion offer by General Mills for the Pillsbury unit of Britain’s Diageo. VoiceStream Wireless became the latest company eyed by Germany’s Deutsche Telekom, and Japanese cell-phone giant NTT DoCoMo emerged as another possible bidder for VoiceStream. Deutsche Telekom was still considered a possible buyer for Sprint Corp., but such a deal could face regulatory scrutiny as tough as the proposed Sprint-WorldCom Inc. combination that officially dissolved Thursday.
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* See Monday’s Business section for a preview of the week’s events.
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Tech Earnings
Internet pioneer Yahoo Inc.’s report Tuesday of better-than-expected second-quarter earnings was followed by several other profit reports in the tech sector that pleased analysts and investors. Technology stocks pushed the Nasdaq up for three days in a row, to close the week at 4,246.18, the highest close since April 7, when it finished at 4,446.45.
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Note: Earnings and losses exclude one-time gains or charges.
