TOP STORIES -- Aug. 10-15
Fed Leaves Rate
at 45-Year Low
The Federal Reserve sent a stronger message that it wouldn’t be raising short-term interest rates anytime soon, hoping to give the economy a chance to build up a substantial head of steam.
That was more bad news for Americans who rely on income from bank accounts and money market funds, though it could help owners of stocks and bonds.
At their midsummer meeting, Fed policymakers left their key short-term rate at a 45-year low of 1%, as expected, and repeated much of what they said in late June: They see the odds as evenly balanced between business activity picking up and slowing down, but remain worried about inflation getting too low for the economy’s good.
Given that environment, the Fed indicated in its post-meeting statement that it would maintain its policy of rock-bottom short-term rates “for a considerable period.”
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Stock Market Pulls Out of Its Losing Streak
The stock market broke a two-week losing streak as Wall Street survived further turmoil in the bond market and a massive power outage in the Northeast.
For the week, the Dow Jones industrial average rose 1.4%, the Standard & Poor’s 500 index gained 1.3% and the Nasdaq composite index advanced 3.5%. Investors were bolstered throughout the week by a series of encouraging economic news, including upbeat reports on employment and manufacturing.
Also, the Federal Reserve’s policymaking group Tuesday signaled that it intended to keep short-term interest rates low for the foreseeable future, although that didn’t prevent long-term bond yields from surging for the eighth week out of the last 10.
The markets appeared to weather Thursday’s blackout, which shut down power to Wall Street just minutes after the close of trading. Most markets opened as usual Friday, but trading was the lightest of the year, in part because many traders couldn’t make it to work in Manhattan.
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ABA Code Targets Corporate Crimes
The near-sacred duty of attorneys to guard their clients’ secrets became less absolute when the American Bar Assn. changed its ethics code to allow lawyers to report wrongdoing to corporate boards, fraud victims and even government authorities.
The move was a response to the Enron Corp. debacle and other corporate scandals in which lawyers came under attack for their actions or their silence. The ABA also was motivated by its desire to head off a more sweeping measure being considered by the Securities and Exchange Commission.
The changes reflect a philosophical shift in the definition of a lawyer’s duties, but observers said it was uncertain how much direct effect they would have on the practice of law.
For one thing, though the amendments give lawyers broader latitude to report wrongdoing, they don’t require them to do so. And in California -- where strict attorney-client confidentiality is in the state’s Business and Professions Code -- the effect could be minimal.
Still, some observers said the ABA vote was momentous. Stephen Gillers, a professor of legal ethics at New York University, called it a “tectonic shift” from an almost completely client-centered view of the law to a “recognition that the interests of others who might be the victims of client wrongdoing must also be weighed in the balance.”
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Microsoft Loses UC Patent Case
A federal jury found that Microsoft Corp.’s Web browser infringed a University of California patent and directed the company to pay $520.6 million in damages, the biggest award ever against the Redmond, Wash.-based software giant.
The jury decided that Microsoft should pay the University of California and Eolas Technologies Inc., a small Chicago company that licenses the technology from the university.
The 12-member jury determined the damage award by concluding that Microsoft owed $1.47 for each copy of the Windows operating system that included Internet Explorer during a nearly three-year period.
Should the verdict stand, the university system could gain 10% of the award, or about $52 million, under the terms of its licensing contract, a person familiar with the case said.
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Microsoft Sidesteps Latest Worm Attack
A quirk in the widespread Internet worm known as Blaster allowed Microsoft Corp. to sidestep a coordinated attack on one of its Web sites, but the worm and its variants made life unpleasant for tens of thousands of computer users and could clog business networks over the next few days.
Blaster has infected 300,000 to 1.2 million machines, according to various estimates. Two of the major strains were programmed to instruct their host computers to contact Microsoft’s Windowsupdate.com Web site the first time they are turned on after their internal clocks strike midnight Saturday morning. The flood of Internet traffic would have caused a so-called denial-of-service attack.
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Comcast Won’t Bid for Vivendi Assets
Vivendi Universal may have lost its last, best hope for getting the cash-rich deal it covets when Comcast Corp. said it wouldn’t make an offer for the French company’s U.S. entertainment assets.
Comcast, the nation’s leading cable operator, is the latest to drop out of the auction for Vivendi’s movie studio, theme parks and television operations.
Its departure positions General Electric Co.’s NBC Inc. -- which is proposing a merger of assets involving little cash -- as a front-runner heading into Monday’s deadline for final offers.
Like others, Comcast balked at the $14-billion minimum asking price. Most bidders place the value at $10 billion to $12 billion, several sources said.
Vivendi’s lofty price tag prompted Metro-Goldwyn-Mayer Inc. to drop out late last month, and a consortium led by billionaire oil tycoon Marvin Davis also has walked away. The two remaining suitors willing to put up cash for all the assets -- Liberty Media Corp. and a consortium led by Vivendi Universal Vice Chairman Edgar Bronfman Jr. -- are unlikely to meet the $14-billion minimum. Another bidder, Viacom Inc., is interested only in Vivendi’s cable unit.
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Buffett to Advise Schwarzenegger
Arnold Schwarzenegger named billionaire investor Warren E. Buffett to be his senior economics advisor, in an apparent bid to add substance to a gubernatorial campaign that has been criticized for being all flash.
The surprise move will give the Republican Schwarzenegger the counsel of the world’s second-richest man, a Democrat from Omaha who has liberal views on taxes and many social issues.
But the breadth of the role Buffett is to play in the actor’s campaign wasn’t clear. Some Schwarzenegger staffers said Buffett would not have a high public profile. He is expected to advise Schwarzenegger as he assembles a larger group of business and economic leaders to help form policy.
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Former Heart Patients Sue Tenet, 8 Doctors
Attorneys representing 366 former patients -- including country-western singer Merle Haggard -- filed a lawsuit against Tenet Healthcare Corp., its Redding Medical Center and eight doctors and their medical practices, alleging that they conspired to conduct unnecessary heart surgeries to boost profit.
Also named as a defendant was Tenet Health System Hospitals Inc., a Tenet subsidiary that operates and maintains some of the company’s 114 hospitals. The same subsidiary is under federal indictment in connection with Alvarado Medical Center in San Diego on charges of paying illegal kickbacks to doctors.
The 247-page civil complaint, filed in Shasta County Superior Court, takes allegations that had largely been confined to two doctors -- Chae Hyun Moon and Fidel Realyvasquez -- and implicates six more cardiologists and vascular surgeons who also conducted procedures at Redding Medical Center since at least the 1990s.
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Homestore to Settle Suit by Shareholders
Homestore Inc. said it would pay $13 million in cash and hand over 20 million shares to settle a stockholder lawsuit over a scam that puffed up the Internet real estate firm’s revenue in 2000 and 2001 as the dot-com balloon began to deflate.
The settlement, valued at $71 million, was negotiated with the California State Teachers’ Retirement System, the lead plaintiff.
CalSTRS said it would continue to press its case against other defendants, including former Homestore auditor PricewaterhouseCoopers and several former Homestore executives. The suit claims they engineered phony business deals with advertisers and others to inflate revenue.
From Times Staff
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For a preview of this week’s news, please see Monday’s Business section.
