Week in Review
Ex-CEO of Tyco Charged
With Evading Taxes
L. Dennis Kozlowski, the mega-rich deal maker who built Tyco International Ltd. into a huge conglomerate, was charged with evading more than $1 million in sales taxes owed on purchases of artwork.
In a 12-count indictment in New York State Supreme Court, prosecutors alleged that Kozlowski engaged in an elaborate scheme with several art dealers to avoid paying New York state and city sales taxes on at least six paintings worth $13.2 million.
Kozlowski, 55, resigned as chief executive of Tyco the day before the charges were announced. As CEO, he was awarded a pay package last year worth about $125 million.
He pleaded not guilty to charges of sales tax violations, falsifying business records, tampering with physical evidence and conspiracy.
Perot Says His Firm
Acted Within the Law
California Atty. Gen. Bill Lockyer subpoenaed Perot Systems Corp. for more information about the company’s role in marketing techniques to exploit weaknesses in the state’s electricity markets.
Company Chairman H. Ross Perot, in an interview with The Times, said his firm’s activities were legal and sanctioned by state power grid officials.
Perot Systems helped develop the computer systems for the California Power Exchange and the California Independent System Operator.
State Sen. Joe Dunn (D-Santa Ana) released a 44-page computerized sales presentation produced by Perot Systems’ energy services unit that touted ways to boost profit in California’s electricity markets by taking advantage of holes in market rules or protocols.
The document unleashed a political uproar, and Gov. Gray Davis called on federal regulators to investigate the allegations.
Perot said current and former executives would cooperate in the investigation. The two-time presidential candidate said his company developed the energy marketing techniques based on publicly available information about California’s deregulated energy market.
Jobless Rate Down;
Gradual Recovery Seen
The nation’s unemployment rate dipped to 5.8% in May and employers added 41,000 jobs, the Labor Department said, but almost no one was taking the new numbers as evidence that the economy is recovering quickly.
Government analysts accompanied the monthly figures with a sweeping revision of past reports that indicates that the department missed about one in every five jobs lost since the start of the recession in March 2001.
More than half the new hiring in May was by temporary employment agencies--hardly a vote of confidence that the country is coming back on all cylinders.
“The bottom line is that we’re in the early stages of a tepid recovery,” said Los Angeles economic consultant Donald H. Straszheim.
Andersen’s Fate Rests
With Jury in Houston
Jurors began their deliberations in the federal obstruction-of-justice trial of accounting firm Arthur Andersen in Houston after prosecutors and defense attorneys battled about the firm’s intent when it shredded documents last year related to Enron Corp.
To convict the company, the jury must find that an Andersen employee “corruptly persuaded” another to destroy evidence with the intent to conceal it from regulators. If convicted, the 89-year-old accounting giant would lose its right to audit public companies.
Two Courts Deal Fresh
Setbacks to Big Tobacco
A West Coast appeals court upheld a verdict against Philip Morris Cos. and restored an $80.3-million damage award that the trial judge had trimmed.
In a separate decision, a San Diego judge fined R.J. Reynolds Tobacco Co. $20 million after finding that the country’s No. 2 cigarette maker was targeting teenagers by advertising Camel and other brands in magazines such as InStyle, Spin and Hot Rod.
The fine is believed to be the first financial penalty imposed for a violation of the 1998 settlement that freed the nation’s tobacco companies from lawsuits filed by the attorneys general of 46 states.
RJR’s top lawyer said the company would appeal.
Philip Morris also said it would appeal the Oregon Court of Appeals finding that the trial judge had erred in paring the verdict to $32 million in a suit filed by survivors of Jesse D. Williams, a Portland school custodian and longtime Marlboro smoker who died of lung cancer in 1997 at age 67.
New York Arrests Have
Links to Hollywood
The former producing partner of actor Steven Seagal was accused of taking part in a Gambino crime family plot to extort money from a Hollywood film figure, later identified as the action star.
The charges against Julius “Jules” R. Nasso came in a sweeping indictment whose broader purpose is to crush organized crime’s hold on local waterfronts, authorities said.
Named with Nasso in the 68-count federal indictment charging racketeering, fraud and extortion was the crime family’s acting boss, Peter Gotti, brother of imprisoned “Dapper Don” John Gotti, now serving a life prison term in Joliet, Ill.
Nasso, 49, of Staten Island, N.Y., was arrested and charged with two counts of conspiracy to commit extortion and attempted extortion of a figure in the motion picture industry.
Jackson Joins Coalition
for Music Artists’ Rights
Michael Jackson became the latest pop star to jump on the artist rights band wagon, accusing his record company, Sony Music, of questionable accounting practices.
Jackson recruited the Rev. Al Sharpton, the New York-based activist, and lawyer Johnnie L. Cochran Jr. to launch an initiative to “emancipate” him and other recording artists from unfair contracts.
The pair’s sudden involvement in a growing artist rights movement that began in California 18 months ago could bring additional trouble for the music industry.
Executives of the Sony Corp. unit declined to comment.
USC to Close High-Tech
Business Incubator
USC officials have decided to shut the school’s technology business incubator, known as EC2, on June 30. The project helped more than two dozen technology firms get their starts.
Officials cited several reasons cited for closing the incubator, including falling investment yields that reduced available funding and the dot-com collapse.
Opened in the fall of 1995, it was one of the first high-tech business incubators in Los Angeles. It was funded by the USC Annenberg Center for Communication.
Trader Agrees to Face
Charges in New York
Amr I. “Anthony” Elgindy, the Encinitas, Calif., speculator accused of using FBI secrets to manipulate stock prices, agreed to be taken to New York, where he and four others face charges of racketeering, fraud, extortion and obstruction of justice.
Elgindy, 34, waived his right to an extradition hearing. He was being held without bail in San Diego, and it was unclear when marshals would take him to New York. Three alleged accomplices have surrendered in New York or promised to appear there.
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For a preview of this week’s business and economic news, please see Monday’s Business section.
