Week in Review
1. Fraud Probe Links Mob to Street: Suspected mob members were indicted along with Wall Street brokers and accountants in one of the largest-ever crackdowns on securities fraud--and one with an element of violence that white-collar crime typically lacks. Federal prosecutors hit a record 120 people with felony charges based on a yearlong FBI probe that uncovered an elaborate series of financial swindles that involved Mafia members using threats, extortion and beating of stock brokers. The scams, by pushing stocks of tiny companies, netted more than $50 million from investors nationwide since 1995.
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2. Seagram Poised for Sale to Vivendi: French water, media and industrial conglomerate Vivendi is in advanced talks to acquire entertainment and spirits giant Seagram, both sides confirmed. The prospective $40-billion deal, which as of now would pay Seagram stockholders $77 a share in stock, would be a three-way deal between Vivendi, Seagram and Canal Plus, which Vivendi controls through a 49% stake. Seagram Chief Executive Edgar Bronfman Jr. would become vice chairman, overseeing music and new technologies. Seagram’s spirits and wine operation, which includes such brands as Chivas Regal, is expected to be spun off. Bronfman and Vivendi chief Jean-Marie Messier, who would be chief executive of the new company, first met last October, and have held talks off and on for the last few months. Final details are expected to be concluded within three weeks. (James Bates)
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3. Heat Brings Power Problems: Searing temperatures forced rolling electricity blackouts in the San Francisco Bay Area on Wednesday, and electricity costs for utilities neared a record, underscoring California’s precarious electricity situation this summer. The heat wave covered much of the West, boosting prices of natural gas to a 3 1/2-year high Friday as utilities burn more of the fuel to make electricity for air conditioning. Natural gas prices have risen almost 50% in the last six weeks on concern that increased demand from utilities this summer will limit the amount of gas that can be stored for winter heating needs.
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4. Economic Easing Indicated: Economic reports added to evidence of a modest slowing in the record expansion, leading more analysts to predict that the Fed won’t raise interest rates later this month. The closely watched consumer price index showed only slight inflation in May, while housing starts dropped sharply and consumers reined in their spending at retail stores and auto dealerships. Industrial output rose unexpectedly, but production of consumer products declined. Federal Reserve Chairman Alan Greenspan, during a speech before business economists Tuesday, gave no hint of what action the Fed might take on interest rates later this month.
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5. Dow Crumbles After Quiet Week: Blue-chip stocks plunged Friday, sending the Dow Jones industrial average to its biggest sell-off in two months, after several banking companies and long-troubled Xerox Corp. warned of lower profit. But technology stocks carried the Nasdaq to a modest gain Friday. Stocks seesawed throughout the week as investors weighed a more positive interest rate outlook against the possibility that corporate profits will be hurt by the slowing economy. The Dow slumped 265.52 points, or 2.5%, Friday to close at 10,449.30, leaving the index with a net loss of 1.6% for the week. The Nasdaq composite index eased just 0.4% for the week.
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6. Congress Approves Online Signatures: Signing on the dots online may soon hold the same force as signing on paper after Congress overwhelmingly approved the “digital signature” bill. “E-signatures” are expected to jump-start consumer transactions and streamline business deals, but certain transactions--such as adoptions and mortgage foreclosures--would still require signatures on paper to ease consumer fraud concerns. The Senate approved the bill Friday, just two days after the House, and President Clinton plans to sign it--probably on paper.
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7. Microsoft Scores a Win: In a victory for Microsoft, the U.S. Court of Appeals in Washington, D.C., agreed to hear the company’s arguments for a stay of the tough restrictions on its business practices ordered by U.S. District Judge Thomas Penfield Jackson. The restrictions are part of Jackson’s antitrust ruling that found the software giant guilty of being an abusive monopolist. Meanwhile, the government maneuvered to get any appeal of the decision fast-tracked to the Supreme Court. Microsoft also won a small victory in Oregon as a judge dismissed a civil suit against the company claiming it overcharged for Windows 98. A case combining several such suits will be heard starting next week.
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8. Largest Phone Company Deal OKd: Bell Atlantic Corp.’s plan to acquire GTE Corp. won conditional approval from the Federal Communications Commission, clearing the way for the companies to form the nation’s largest phone company, to be named Verizon Communications. The companies agreed to sell 90.5% of GTE’s nationwide Internet unit to the public while it seeks long-distance authority in 12 states so Bell Atlantic can sell Internet services within the region. Earlier in the week, SBC Communications Inc. won a long-sought endorsement from the Justice Department to sell long-distance service in Texas.
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9. Internet TV Recorder Sued: Entertainment giants took a swat at tiny RecordTV.com, a 3-month-old Web site that enables users to record television shows and watch them online. Walt Disney Co., Time Warner Inc. and other Hollywood powerhouses filed a lawsuit against the site, run by David Simon from his home in Agoura Hills, to shut it down. The suit also seeks more than $10 million in damages from the company, which says it gets just enough ad revenue to keep it going. What does Simon say? “The networks’ argument has been the technology is not there yet for them [to provide online programming]. But the demand we have is astronomical, even with lousy quality. I think these networks are missing a major opportunity.”
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10. Boeing Co.’s troubled Delta III rocket program got a major boost Friday by winning a 10-year contract valued at up to $5 billion from NASA. The contract also preserves thousands of jobs at Boeing’s plant in Huntington Beach. News of the contract came just two days after Boeing said it would launch a mock payload aboard a Delta III in August, in order to restore confidence among potential customers following two consecutive failures of Delta III rockets. Boeing also netted an $8.9-billion contract to build 222 new F/A-18E/F “Super Hornet” fighter jets, despite concerns by federal auditors about noise and vibration.
The rest:
* Lockheed Martin Corp. agreed to pay a record $13-million fine for illegally helping the Chinese government correct critical defects in the rocket motor for its Long March 2E satellite launch vehicle, the State Department said. Although Lockheed was not required to admit guilt to settle the case, it agreed to pay a fine that was only slightly short of the $15-million maximum that could have been imposed if the government had prevailed on all charges in a proceeding before an administrative law judge.
* Northrop Grumman Corp. found a buyer for its struggling commercial aerostructures unit in privately held Carlyle Group, for $843 million, and said no “significant” job cuts are expected at the unit’s plant in Hawthorne. Carlyle’s United Defense unit also snapped up Sweden’s Bofors Weapon Systems from Saab, its first move into European arms markets and one that it indicated won’t be the last.
* A utility partnership announced plans to build a 212-mile pipeline linking Baja California to the North American natural gas grid in a bid to meet the border area’s fast-growing energy needs as well as a Mexican mandate to reduce pollution. The pipeline, planned by Sempra Energy, PG&E; Corp. and others, will start in Arizona and won’t pass through energy-hungry Southern California.
SAGing Strike Negotiations
The strike by actors against the advertising industry, now entering its seventh week, remains at a standstill, with no sign it will improve. A federal mediator summoned both sides in an effort to push them back to the bargaining table but was unsuccessful. Los Angeles film officials estimate that the area is losing $1 million a day as commercial producers shoot in outlying areas, other states and in places such as Vancouver, Canada, where they can avoid the disruptions of picket lines. Stars such as Amy Brenneman and Noah Wyle turned out for a boisterous rally in Los Angeles, while Lauren Bacall, Susan Sarandon and others appeared at a similar one in New York. The dispute is over how actors are paid when they appear in commercials. The ad industry wants them to be paid a flat fee for commercials that run on network TV instead of being paid each time a commercial airs. Actors want to be paid each time a commercial runs both on network and cable TV, instead of the flat fee they receive now when an ad appears on cable.
THE QUIZ
1. What well-known attorney is representing a group of former Coca-Cola Co. employees in a new racial discrimination lawsuit?
2. What unusual partner did the recording industry gain in its effort to shut down online music provider Napster?
3. What high-profile attorney did Napster recruit for its legal team?
Answers on C15.
Answers to Week in Review Quiz on C2
1. Johnnie Cochran, who helped defend O.J. Simpson in his murder trial, is representing four black women in a new $1.5-billion suit against Coca-Cola, filed the same day the company settled a bias suit it had fought for a year.
2. MP3.com Chief Executive Michael Robertson submitted a declaration Monday backing the Recording Industry Assn. of America’s motion to shut down Napster, saying its file-sharing services hurt young and emerging artists. Days before, MP3 had settled copyright suits filed by two record labels.
3. The U.S. government’s lead attorney in the antitrust case against Microsoft, David Boies, on Friday signed on with Napster in its battle with the RIAA. In April, Boies emerged victorious in the case against Microsoft when U.S. District Judge Thomas Penfield Jackson ruled that the company had abused its dominant position in the computer industry to control the market for browser software.
