Week in Review
Adelphia Being Probed in Two States
Adelphia Communications Corp., the target of a U.S. accounting probe, said it’s under investigation by prosecutors in two states and missed $45 million in interest and dividend payments due Wednesday as the company seeks to avoid being delisted from the Nasdaq Stock Market.
Grand juries in the Southern District of New York and the Middle District of Pennsylvania are investigating certain matters related to the cable-television firm.
Adelphia is under Securities and Exchange Commission scrutiny for guaranteeing $2.3 billion in loans to partnerships run by the family of founder John J. Rigas, who resigned last week as chairman and chief executive.
Indexes Up as Buyers Return to Wall Street
Stocks broke a three-week losing streak as better-than-expected retail sales and some promising profit reports from the technology sector brought buyers back to Wall Street.
The tech-laden Nasdaq composite index gained 8.8%--its best weekly performance in 13 months--as Dell Computer Corp. and Applied Materials Inc. reported better-than-expected earnings.
Blue-chip stocks also gained, with the Standard & Poor’s 500 index rising 4.9% for its best week since September.
The Dow Jones industrial average gained 4.2% as Wal-Mart Stores Inc. rose almost 9% for the week.
Enron Documents Spur Calls for Refunds
More internal documents from Enron Corp. were released, giving glimpses of conversations between traders and lawyers that California Atty. Gen. Bill Lockyer and others said show that Enron and others manipulated power prices and supplies in California.
The documents sparked renewed calls for refunds of alleged overcharges in California and the Pacific Northwest.
Meanwhile, Enron lawyers, former and current, testified before a Senate panel that they warned Enron its trading ploys might be breaking the law.
Federal Energy Regulatory Commission Chairman Pat Wood testified that price caps might be extended in Western markets when they expire in September.
Dynegy Inc. and Reliant Resources Inc. said they did nothing illegal in the California market. But both companies conceded they had engaged in sham trading with CMS Energy, exchanging like amounts of energy with CMS at the same price.
AOL Time Warner’s Levin Steps Down
AOL Time Warner Inc. Chief Executive Gerald Levin ended his 10-year reign at the world’s largest media conglomerate as many shareholders blamed him for selling prized Time Warner assets to an overvalued Internet giant at a fire-sale price.
Looking gaunt and distraught at the company’s annual shareholder meeting, Levin turned over his job as chief executive to protege Richard Parsons with a plea to investors for “faith, hope and, above all, patience.”
Capping a decade of deal-making, Levin was heralded as the media industry’s most visionary leader in January 2000, when he oversaw the merger of new and old media by agreeing to sell Time Warner to America Online for stock then valued at $156 billion.
Since then, the value of the combined company’s stock has plunged to about $84 billion as the dot-com bubble burst and AOL’s Internet growth slowed.
Trading Scam Bilked Banks of $1 Billion
A global metals trading scam allegedly swindled as much as $1 billion from banking giants FleetBoston Financial Corp. and J.P. Morgan Chase & Co. and other financial institutions in one of the biggest bank frauds on record.
According to charges unsealed in a New York federal court, the scheme allegedly cooked up by four men in New Jersey hoodwinked at least eight banks into financing bogus metals shipments in India, Hong Kong and elsewhere.
The scheme also involved a group of banks, including General Bank, operated by Los Angeles-based GBC Bancorp, and Torrance-based Chinatrust (USA), a subsidiary of Taiwan’s China Trust Commercial Bank Corp.
Bertelsmann to Buy Napster Assets
Bertelsmann agreed to buy the assets of Napster Inc., the pioneering Internet music-swapping service that was teetering on the brink of bankruptcy.
Bertelsmann will pay $8 million to Napster’s creditors. Napster founder Shawn Fanning, who had resigned, and former Chief Executive Konrad Hilbers will rejoin the company. The company was expected to file for bankruptcy protection if the Bertelsmann deal hadn’t come through.
Sears Says It Will Buy Clothier Lands’ End
Sears, Roebuck & Co. said it’s buying classic clothier Lands’ End Inc. for $1.9 billion in cash as part of efforts to boost Sears’ long-suffering apparel division.
Lands’ End will continue to offer its line of conservative and dependable fashion, luggage and home furnishings via the Lands’ End catalogs and Web site.
In addition, Sears will begin selling select Lands’ End items in some of its 870 department stores by the holidays, with a full roll-out by fall 2003.
Wal-Mart to Open
40 Supercenters
Wal-Mart Stores Inc. plans to open 40 supercenters in California over the next four to six years, its first foray with the giant discount-plus-grocery stores in the state. The move is a direct challenge to grocery chains in California.
Meanwhile, Bentonville, Ark.-based Wal-Mart’s quarterly earnings jumped 20%, the most in about two years, after reining in costs, selling more groceries and reducing inventory at its main division in the U.S.
FBI Investigating Former Kmart Execs
The FBI is investigating Kmart Corp., joining securities regulators examining the actions of former top executives and the discount retailer’s accounting before it sought bankruptcy protection.
The reviews were spurred by a series of anonymous letters “expressing concern with respect to various matters,” Kmart said.
The board of Kmart, which filed the U.S. retail industry’s largest bankruptcy, also is conducting an investigation.
Court Ruling Boosts Telecom Competition
The U.S. Supreme Court upheld federal rules that allow outsiders to lease local phone lines at relatively low cost, seemingly supporting the effort to bring competition to the local phone market.
The 7-1 ruling is a victory for the Federal Communications Commission, which is seeking to spur competition, and for long-distance providers such as AT&T; Corp. and WorldCom Inc., which are eager to move into the local phone market.
The state Public Utilities Commission reached a similar conclusion, opening the door for long-distance companies to compete with local phone company SBC Pacific Bell Co. by slashing the prices SBC can charge them for access to residential customers.
For a preview of this week’s business and economic news, please see Monday’s Business section.
