TOP STORIES -- Dec. 21-26
Disease May Spoil State’s Dairy and Meat Profits
The discovery of a single case of “mad cow” disease in Washington has upended much of California’s beef and dairy industries. Until a fuller picture emerges of how the cow developed the disease, meatpackers in California said, they were wary of buying much in the way of supplies, and middlemen were holding off cutting deals with cattle farmers because they didn’t want to be stuck with a bunch of beef they couldn’t move.
California trade groups would mpt estimate how much financial damage has been caused. But a 1,500-pound dairy cow bound for slaughter was fetching about $450 as of Wednesday, compared with as much as $900 the day before.
Japan and South Korea, the California beef industry’s two largest export customers, banned imports of U.S. beef. California sent about $170 million in beef abroad last year.
As of Wednesday, there was no evidence in California of “mad cow” disease, whose technical name is bovine spongiform encephalopathy, and officials said there was very little chance it would show up here.
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Shoppers Back in Stores the Day After Christmas
Shoppers headed back to stores Friday as retailers hauled out post-Christmas prices in hopes of squeezing more sales from a generally disappointing holiday shopping season.
Retailers cut as much as 80% off price tags to lure consumers. Although some retailers, including Wal-Mart Stores Inc. and Target Corp., recently reported sales at the low end of or below expectations, sales perked up the Friday before Christmas and were strong through Christmas week, said Michael Niemira, chief economist and research director for the International Council of Shopping Centers.
“Now the big question is: What about the post-Christmas season?” he said. Last year, 22% of December sales were generated in the last six days of the year, he said.
Gift cards are the wild card this season because they are expected to account for 8% to 10% of holiday purchases, but accounting regulations forbid retailers to count them as sales until they are redeemed. If shoppers are antsy to use them, gift cards could fuel a post-Christmas shopping surge. But if they languish in wallets, they could skew holiday sales results.
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Vivendi, Former Chief Reach Accord With SEC
Vivendi Universal will pay a $50-million fine and former Chief Executive Jean-Marie Messier will relinquish a $25-million severance package to settle charges that they misled investors about financial problems.
Under a settlement reached with the Securities and Exchange Commission, Messier also will pay a $1-million fine and former Chief Financial Officer Guillaume Hannezo will be required to pay a $120,000 penalty and return $148,000.
Although the SEC is not requiring Vivendi to restate earnings, it said the company, under Messier’s watch, issued news releases that downplayed the media giant’s liquidity crunch and debt. The SEC also cited improper adjustments that inflated cash flow in 2001.
The defendants neither admitted nor denied allegations they violated securities laws. Messier called the settlement “balanced and reasonable.”
Under the settlement, Messier and Hannezo are barred from being an officer or board member of a public company for 10 and five years, respectively.
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Franklin Suspends 3 Employees in Probe
Franklin Resources Inc., the nation’s fourth-largest mutual fund company, said it suspended three employees after an internal review uncovered potentially improper trading of fund shares.
The San Mateo, Calif., firm, whose funds carry the brand name Franklin Templeton, also said it had been subpoenaed by federal prosecutors.
Franklin said some of the questionable trades were made inside the company’s 401(k) retirement plan. The firm said the trades were made by two officers and one trader. It declined to identify the individuals or the specific funds involved but said no portfolio managers or trustees were among them.
Franklin has received subpoenas from U.S. prosecutors in Northern California and Massachusetts, it said in a federal filing and a shareholder update.
A spokeswoman declined to comment further.
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Farmer Bros. Ends Bitter Family Feud in Buyout
A bitter, decades-long battle between two branches of the family that founded Farmer Bros. Co. ended in Los Angeles County Superior Court when the company agreed to buy out the interest of the Crowe clan for $111 million.
The settlement leaves the Farmer branch in control of the Torrance company and gives Crowe family members a fortune they had been unable to tap because of a complex family trust.
The settlement also probably alters the outcome of a separate fight between the company and dissident shareholders, including Franklin Mutual Advisors, a longtime critic of the company’s management. The deal strengthens 87-year-old company Chairman Roy F. Farmer’s hand by giving him, other executives and an employee stock ownership plan 58.3% of the company.
The Farmer-led management team intends to use its majority of shares to reincorporate the business in Delaware and take a number of other actions opposed by Franklin, which owns 9.6% of Farmer’s stock. A shareholder vote is set for Jan. 21.
The company also plans a 10-for-1 stock split.
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L.A. Investment Firm to Buy Las Vegas Hilton
The owner of the venerable Las Vegas Hilton, where Elvis made his comeback and Liberace tickled his ivories, said it was selling the historic property to Los Angeles investment firm Colony Capital for $280 million.
After buying the property from Las Vegas-based Park Place Entertainment Corp., Colony Capital plans to remodel the 34-year-old site.
Jonathan Grunzweig, a principal at Colony Capital, said the improvements would cost “a substantial amount” but would not give an exact figure.
Hilton Hotels Corp. will continue to operate the 3,000-room hotel and casino, which adjoins the city’s convention center just off the Las Vegas Strip.
The 30-story Vegas Hilton has three casinos, 13 restaurants and more than 200,000 square feet of conference rooms on 60 acres. It will be connected to the Strip next month by a $650-million, four-mile monorail set to stop at the convention center.
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Hanmi Financial to Buy Pacific Union Bank
Solidifying its position as the nation’s largest Korean American community bank, Hanmi Financial Corp. agreed to acquire Pacific Union Bank in a cash and stock deal valued at $295 million.
Los Angeles-based Hanmi Financial is the holding company for Hanmi Bank, which has assets of more than $1.7 billion.
Pacific Union, also based in L.A., has assets of almost $1.1 billion. The combined bank would hold a 43% share of the state’s Korean American banking market, according to Carpenter & Co., an Irvine-based investment bank.
Under terms of the deal, subject to shareholder and regulatory approval, Hanmi would pay $164.6 million in cash for most of the 62% stake in Pacific Union owned by Seoul-based Korea Exchange Bank.
All other Pacific Union shares outstanding, including the remaining shares held by Korea Exchange, would be swapped for 6.1 million Hanmi shares.
Based on Hanmi’s Nasdaq closing price Monday of $21.30, the deal would have a value of $27.63 per Pacific Union share.
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Head of Brokerage Firm Is Accused of Fraud
An attorney who allegedly reaped $175 million conduct- ing illicit mutual fund trades through a little-known Las Vegas brokerage firm he controlled was charged with fraud by securities regulators.
Daniel Calugar, 49, of Las Vegas and Los Angeles engaged in “market timing” and after-the-bell trades in funds managed by MFS Funds and Alliance Capital, the Securities and Exchange Commission said in its civil suit. The SEC seeks fines and the return of any ill-gotten gains.
A federal judge in Nevada froze the assets of Calugar and his shuttered firm, Security Brokerage Inc., after he allegedly tried to transfer $50 million from his account at MFS.
“At no time was any MFS employee aware that Security Brokerage was engaged in late trading of MFS Funds,” a spokesman for Boston-based MFS said.
A lawyer for Calugar did not return calls. Calls to Alliance Capital were not returned.
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Regulators Say Financial Advisor Ran Ponzi Scam
The Securities and Exchange Commission charged Orange County investment manager James P. Lewis Jr. with fraud, alleging that he falsely told clients who were trying to withdraw money that their accounts had been frozen by the Department of Homeland Security.
Securities regulators said the alleged fraud involved two funds managed by Lewis’ Financial Advisory Consultants. The company purportedly manages $813 million in 5,200 investor accounts, the SEC said, but it was unclear how much actually was invested with Lewis. Also, a federal judge issued a temporary order freezing Lewis’ assets.
The SEC described Lewis’ Lake Forest-based operation as a Ponzi scheme. The FBI raided Lewis’ offices but hasn’t filed any related charges.
Lewis’ attorney, Douglas Pettibone, could not be reached for comment, and calls to Lewis’ office went unanswered.
For a preview of this week’s business news, please see Monday’s Business section.
