TOP STORIES -- APRIL 13-18
Bechtel Wins Contract for Rebuilding of Iraq
The federal government selected Bechtel Group of San Francisco for a $680-million contract to oversee the rebuilding of Iraq, a massive task that will involve everything from airports and railroads to power grids, water systems and sewers.
The request for bids secretly sent out to a handful of U.S. companies declared the effort essential to keeping the peace there.
Bechtel said it was “honored” to have been selected by the U.S. Agency for International Development. The government said Bechtel initially will receive $34.6 million under the contract, which provides for as much as $680 million over the next 18 months. But USAID officials said the total will be far higher.
The size of the rebuilding contract -- the biggest of eight totaling $1.7 billion being awarded by USAID -- and the fact that it was cloaked under the veil of national security drew criticism from Capitol Hill and government watchdog groups.
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SEC Picks Head of Accounting Watchdog
The Securities and Exchange Commission said it unanimously chose William J. McDonough, the outspoken president of the Federal Reserve Bank of New York, to head the nation’s new accounting watchdog agency.
McDonough, who turns 69 on Monday, is one of Wall Street’s most respected figures. He made waves in September by lashing out at excessive executive pay.
The five SEC commissioners agreed to name McDonough chairman of the Public Company Accounting Oversight Board, which Congress created in July in the aftermath of corporate financial scandals that tainted the U.S. accounting profession.
McDonough said he planned to wrap up his work at the Fed and join the accounting oversight board by the end of next month. His appointment is subject to background checks and a final SEC vote.
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Judge Cuts Bond Levied Against Philip Morris
An Illinois judge reduced Philip Morris USA’s appeal bond in a landmark class-action case, and the cigarette maker said it would meet a deadline to make $2.6 billion in settlement payments to states.
Last month, Madison County Circuit Judge Nicholas G. Byron ordered the tobacco giant to post a bond of $12 billion to guarantee that a damage award of $10.1 billion, plus interest, would be paid if the company fails in its appeal.
Instead, Byron ruled that Philip Morris would be allowed to deposit $6.8 billion in guarantees, though the amount of the verdict remains unchanged.
Philip Morris, a unit of Altria Group Inc., had said it could not put up $12 billion and pay its annual April 15 installment to the states from a 1998 tobacco settlement -- a warning that prompted state attorneys general to threaten suits against Philip Morris and to ask Byron to consider lowering the bond.
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Microsoft Wins Decision Against Class Action
Microsoft Corp. won a major victory against individual consumers suing the software giant on antitrust grounds when a federal judge refused to consolidate their cases into a massive class-action proceeding.
U.S. District Judge Frederick Motz in Baltimore ruled that people who bought Windows operating systems directly from Microsoft should not be allowed to represent big business customers that purchased many more copies of the software and have not sued.
The decision leaves fewer than 30,000 plaintiffs with cases in federal court. They could recover a total of less than $10 million for alleged overcharges.
In California, which allows such indirect claims, a class- action suit tentatively has been settled for $1.1 billion in vouchers from Microsoft toward additional software.
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Tech Bellwethers Forecast Better Year
Intel Corp. and Microsoft Corp., the twin engines of the personal computer industry, issued relatively optimistic earnings projections, further cheering investors on the heels of a solid report from IBM Corp. The three bellwether companies predicted that the coming year would be better than the last.
Microsoft said profit rose to $2.79 billion, or 26 cents a share, from $2.74 billion, or 25 cents. Revenue rose 8% to $7.84 billion.
Intel surprised investors with first-quarter profit of $915 million, down just 2% from a year earlier; per-share earnings held steady at 14 cents. Revenue was flat at $6.75 billion. The results indicate that the semiconductor maker is holding up amid the information technology market’s worst downturn, analysts said.
On Monday, IBM said quarterly earnings were higher for the first time in almost two years. Net income for the world’s biggest computer company in the first quarter was $1.38 billion, up 16% from the 2002 quarter.
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Apple Profit Plunges; CEO Breaks Silence
Apple Computer Corp. reported sharply lower fiscal second-quarter earnings, but the news took a back seat to continued speculation about the company’s interest in buying Vivendi Universal’s music division.
Chief Executive Steve Jobs broke his conspicuous silence with a cryptic statement about speculation that Apple is considering a bid for Universal Music Group. “Apple has never made any offer to invest in or acquire a major music company,” he said.
But Jobs did not dispute the reports that Apple and Vivendi have been discussing a deal since December. Sources said Apple was considering offering $5 billion to $6 billion.
Apple’s earnings plunged 65% to $14 million, or 4 cents a share, from $40 million, or 11 cents, a year earlier. Revenue was down slightly to $1.48 billion. Though meager, profit was twice the consensus of analysts polled by Thomson First Call.
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American Airlines Squeaks by Chapter 11
American Airlines avoided filing for bankruptcy by the thinnest of margins when its flight attendants reversed an earlier vote and joined other workers in accepting hefty pay cuts.
The airline and its parent, AMR Corp., vowed to reorganize under Chapter 11 creditor protection unless the carrier secured $1.8 billion in total concessions from its labor groups.
The pilots and mechanics approved their givebacks. American’s 26,000 flight attendants, represented by the Assn. of Professional Flight Attendants, first narrowly voted against their new contract. But after union leaders complained of balloting problems, American let them vote again Wednesday.
This time flight attendants approved a $340-million concessions package, which includes a 15.6% pay cut and changes to work rules and other benefits.
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Ex-Gemstar CEO May Face Contempt Citation
The Securities and Exchange Commission asked a federal court to hold the former chief executive of Gemstar-TV Guide International Inc. in contempt, saying he violated a court order to testify in the investigation of the firm’s accounting practices.
The SEC said Henry C. Yuen refused to testify Wednesday and failed to show up Thursday, though he had promised to do so. The agency asked the court to jail Yuen and fine him $50,000 a day -- and to double the fine every day until he testifies.
Stanley Arkin, an attorney for Yuen, said the SEC’s action came as a shock because he had informed the agency that he needed to reschedule. Arkin accused the SEC of seeking revenge for a lawsuit his client filed last month. Yuen and a colleague accuse the SEC of illegally freezing $37.6 million in severance pay.
A judge will set a hearing at which Yuen will have the chance to explain why he should not be held in contempt.
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Anschutz Said to Be in Talks to Settle IPO Case
Billionaire financier and Los Angeles sports mogul Philip F. Anschutz is in preliminary talks with the New York attorney general to settle claims that he made more than $1 billion at the expense of Qwest Communications International Inc. shareholders, sources said.
Anschutz, founder and former chairman of the Baby Bell, is one of five current and former telecom executives accused in a lawsuit of profiting from initial public offerings without disclosing potential conflicts of interest.
The negotiations, the first among the defendants sued in the fall by Atty. Gen. Eliot Spitzer, are in an “advanced state,” a source said. Another said no settlement was imminent.
“We don’t have a comment, but, hopefully, soon we will,” an Anschutz spokesman said.
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Global Director Cook Sued for Loan Default
Lodwrick M. Cook, who made tens of millions of dollars as the chairman of Atlantic Richfield Co. and co-chairman of Global Crossing Ltd., is being sued by J.P. Morgan Chase & Co. for failing to repay a $7.5-million personal loan.
Cook, 74, defaulted on a letter of credit and is trying to use Global Crossing’s bankruptcy filing “to avoid his obligation to repay the millions of dollars loaned to him that he rightfully owes to others,” according to the suit filed last week in New York federal court by the bank, which backed the loan.
Cook, a longtime Los Angeles civic booster, could not be reached for comment. A Global Crossing spokeswoman declined to comment.
J.P. Morgan is seeking repayment of the loan plus unspecified interest.
