Lawmakers Focus on Enron ExecsThe week started...
Lawmakers Focus on Enron Execs
The week started with former Enron Corp. Chairman Kenneth L. Lay backing out of testifying before Congress and ended with him agreeing to appear this week.
In between, Lay’s former No. 2, Jeffrey K. Skilling, made a compelling witness before the House Energy and Commerce subcommittee on oversight and investigations in an atmosphere rife with outrage. But Skilling told lawmakers that he knew nothing about the hidden debt or inflated profits that led to the company’s collapse.
Meanwhile, The Times reported that Skilling was among a handful of senior Enron executives who sold $44 million in company stock as concerns were growing inside the company that losses racked up by a group of obscure partnerships could spill into public view.
New Disclosure Rules Proposed for Analysts
The National Assn. of Securities Dealers proposed new disclosure rules for Wall Street analysts, but many said the plan falls short of solving the industry’s conflict-of-interest problem.
The plan, devised at the urging of Congress and securities regulators, includes a requirement that past ratings be plotted on a stock’s price chart. A common complaint is that Wall Street analysts are so biased that they often reiterate “buy” ratings on crumbling stocks, such as Enron Corp. last year, with which their firms also have investment banking business.
Many of the rules sought by the association, the industry’s self-regulatory agency, match those the Securities Industry Assn. trade group unveiled last summer--guidelines major brokerages say they already follow.
Accounting Allegations Dog Global Crossing
Troubled Global Crossing Ltd., which filed for bankruptcy protection two weeks ago, is being dogged by a former employee’s allegations that the company used misleading accounting methods to boost its financials. The Bermuda company, which has executive offices in Beverly Hills, now faces investigations by the Securities and Exchange Commission and the FBI. While the company awaits other bailout bids, Global Crossing this week unveiled more details about a proposed $750-million investment from two Asian investors, but that plan is likely to face stiff opposition because it wipes out shareholders and leaves little for Global Crossing’s many creditors, bankers, and bondholders.
Trader Suspected of Piling Up Bank Losses
Ireland’s biggest bank disclosed that a rogue employee involved in currency trading secretly lost $750million at its U.S. subsidiary, jolting European markets and triggering a federal criminal investigation into another financial debacle.
The suspected fraud at Allied Irish Banks’ Baltimore-based subsidiary, Allfirst Bank, would be one of the biggest trading scandals since Singapore dealer Nick Leeson brought down Britain’s Barings Bank in 1995 after piling up $1.4billion in concealed losses.
Allied Irish said John Rusnak, 37, who was well-regarded in his seven years at the bank, ran up the huge losses last year at Allfirst Bank, where he was part of a small but aggressive currency-trading operation.
The bank subsequently said it would centralize currency-trading operations and open an internal investigation.
WorldCom Profit Falls Amid Default Fears
Telecommunications giant WorldCom Inc. said fourth-quarter profit plunged 64% and 2002 results will be lower than expected, partly because of an upcoming charge of as much as $20 billion.
But investors, fearing that the Mississippi-based company might succumb to the financial devastation sweeping the telecom industry, gave the company a reprieve after Chairman Bernard Ebbers said WorldCom has access to $10billion in cash and that its operations, though struggling, are sound.
Forum Sees More Sluggish Times
The anti-globalization forces were a sideshow. Business and government leaders attending this year’s World Economic Forum in New York were far more preoccupied with an unanticipated triple threat: Enron Corp., Argentina and Al Qaeda.
In the heavily guarded Waldorf-Astoria hotel, these very different sources of political and financial uncertainty combined to cast a pall over the forum’s 32nd annual meeting, making participants unusually reluctant to make firm predictions about the economic future.
There was a consensus about global and regional trends: The world’s leading economies will remain sluggish this year, most of the industrialists and finance ministers at the five-day talk fest concurred.
NASA to Launch Rocket Propulsion System
Quietly inserted in NASA’s proposed budget for 2003 released last week was a $125-million initiative for developing a nuclear-powered propulsion system, which would aid exploration of the solar system.
The proposed project is being resurrected after a 30-year hiatus. NASA abandoned the project in 1972 after it was deemed infeasible.
NASA scientists hope advances in nuclear reactors and rocket propulsion systems will give the quest for a nuclear rocket new life.
Such spaceships would have small nuclear reactors, which would give the engines virtually unlimited fuel supply to travel to the farthest reaches of the solar system.
Mexico Wins Upgrade of Foreign Debt Rating
Mexico received a long-awaited seal of approval from the financial community when Standard & Poor’s Corp. raised its foreign debt rating to investment grade. The rating is a boost to President Vicente Fox’s economic policies.
The upgrade to BBB- from BB+ will reduce Mexico’s cost of borrowing on international markets and generate a significant increase in foreign investment. The move follows similar upgrades by Moody’s and Fitch.
Mexico’s sound fiscal and monetary policy, low inflation and improved tax collections have improved economic stability and enhanced Mexico’s status of “safe haven” for foreign investment, S&P; said.
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From Times Staff
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For a preview of this week’s business and economic events, please see Monday’s Business section.
