TOP STORIES--FEB. 24-MARCH 1
Greenspan Sees Signs of Slow, Sure Recovery
Federal Reserve Chairman Alan Greenspan told Congress that he sees increasing signs the U.S. economy soon will emerge from recession, but warned that the recovery could proceed at a sluggish pace.
Indeed, the economy grew at a 1.4% rate during the fourth quarter, and manufacturing in February grew for the first time in 19 months.
The longest-serving Fed chief, presenting the central bank’s semiannual assessment of the nation’s economic health, said the nation has largely recuperated from the financial shock of Sept. 11, and there is little evidence that the collapse of Enron Corp. and other recent economic setbacks will cause the recovery to stall.
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Former Global Crossing Employee Files Lawsuit
A former Global Crossing Ltd. employee who questioned the propriety of the company’s accounting methods filed a much-anticipated lawsuit against company founder Gary Winnick and three other executives.
The suit, by former Vice President of Finance Roy L. Olofson, offered new details about the alleged accounting tactics that helped the troubled telecommunications firm mask its deteriorating financial health, which culminated in its Jan. 28 bankruptcy filing.
Olofson said the company improperly used long-term contracts for network capacity to boost revenue, even though many of the deals did not bring in cash. His allegations are being investigated by the Securities and Exchange Commission and the FBI. A spokesman for Winnick said the lawsuit “has no merit.”
Meanwhile, the Labor Department began questioning former Global Crossing workers about the company’s 401(k) retirement plan, apparently to determine whether any pension laws were broken. Employees lost about $250 million between 1999 and 2001, when the value of the company stock in their 401(k) accounts tumbled from a peak of $64 to 30 cents. A Global Crossing spokeswoman said the company was cooperating with the investigation.
Also, the company disclosed that it expects a “significant net loss” for its fiscal fourth quarter and for all of 2001. Its official earnings statement has been delayed while its outside auditor, Andersen, continues to review the books.
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Execs Square Off in Enron Testimony
In a confrontation between accuser and accused, Enron Corp. Vice President Sherron S. Watkins told Congress that former Chief Executive Jeffrey K. Skilling must have known about the company’s financial troubles, while Skilling maintained that he was unaware of accounting improprieties.
Meanwhile, former Enron Treasurer Ben F. Glisan--who reportedly pocketed $1 million by investing $5,800 in the company’s off-the-books partnerships--has begun cooperating with the Justice Department, according to a source familiar with the investigation.
Skilling, whose earlier testimony before a House panel was greeted with skepticism from lawmakers, denied lying to Congress during 5 1/2 hours of grilling before the Senate Commerce Committee. In a classic he-said-she-said duel, Skilling and Watkins--seated at the same table and separated by only Skilling’s attorney--disputed each other’s account of what led to the largest bankruptcy in the U.S.
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State Lawmakers Seek to Bar Gene-Altered Fish
California lawmakers, environmentalists and fishermen are joining to stop the spread of genetically engineered fish into the state.
Two bills and a joint resolution recently introduced in the Legislature would bar live gene-altered fish from entering the state and require special labeling when sold in California stores.
California would be the second state to take action. A less stringent Maryland law adopted last year bans the fish from the state’s network of waterways but allows them in separated ponds and lakes.
Several firms are trying to develop stocks of transgenic salmon and catfish to be sold to fish farmers. These fish, spliced with genes from faster-growing species, would let farmers get bigger fish to market for less money.
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HP Chief Pushes Merger on Wall Street
With a shareholder vote looming, Hewlett-Packard Co. Chief Executive Carly Fiorina made a direct appeal to Wall Street on the proposed $21.7-billion purchase of Compaq Computer Corp., saying it is vital for the company, and asked them to ignore the daily attacks from dissident director Walter Hewlett.
With several major investors on record as being against the deal, and with the shareholder vote scheduled for March 19, Fiorina held a daylong meeting with analysts in New York.
She explained why she thinks Compaq would let HP offer more end-to-end packages to corporate customers, and she detailed the projected financial merits of the deal.
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Investors Pump Cash Into Stock Funds
Despite getting smacked by two straight down years for stocks, investors plowed a net $19.6 billion of new money into equity mutual funds in January.
The cash inflow, reported by the Investment Company Institute, was the highest monthly total in a year and the fifth-highest January inflow.
The tally surprised some analysts, who expected investors to be less willing to buy stock funds after suffering heavy losses in 2001 and as the market weakened again in January.
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Union Decries Chicken Plant Conditions
Seeking to call attention to an “epidemic” of repetitive-stress injuries among blue-collar workers, the United Food and Commercial Workers union filed a federal complaint alleging hazardous working conditions at a Pilgrim’s Pride Corp. chicken plant in Texas.
Union officials said it is only the first salvo in a campaign to force the government to address debilitating wrist, shoulder and back pain in production work, particularly in industries dominated by low-skilled immigrants.
The company said it had worked hard to reduce injuries at the plant, which employs 1,150 workers in Lufkin.
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Tobacco Firms Involved in Smuggling, EU Says
Tobacco companies have violated a U.S. trade embargo for more than a decade by illegally sending billions of cigarettes into Iraq, the European Union has charged.
The allegation is detailed in documents recently filed in federal court in Brooklyn, N.Y., where the EU has accused tobacco firms of evading hundreds of millions of dollars in taxes by taking part in a vast cigarette smuggling scheme.
The Iraq allegation focuses on two companies, R.J. Reynolds and Japan Tobacco Inc., which acquired Reynolds’ international cigarette business in 1999. But an affidavit filed in court claims that in December a witness saw Philip Morris brands being trucked from Turkey into Iraq.
It could not immediately be determined whether U.S. authorities are looking into the EU’s claims.
Tobacco company officials denied the claims.
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Agents, SAG Reach Tentative Agreement
The Screen Actors Guild reached a tentative three-year agreement with the Assn. of Talent Agents that would allow agencies to make and receive investments from companies involved in production.
Underscoring the high stakes of the deal, SAG said it hired two Clinton administration strategists--Mark Fabiani and Chris Lehane.
Under the new proposal--which must be approved by SAG’s governing board and membership--independent production companies and large advertisers would be allowed to invest as much as 20% in a talent agency.
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For a preview of this week’s business and economic news, please see Monday’s business section.
