Week in Review

Ex-Enron Trader Pleads

Guilty to Manipulation

A former high school math teacher who became one of Enron Corp.’s most valued energy traders pleaded guilty in U.S. District Court in San Francisco to manipulating the California power market.

Jeffrey Shawn Richter admitted to conspiring to commit wire fraud and lying to the FBI and prosecutors during an interview in September. He agreed to cooperate with investigators of the state’s energy crisis, which saddled utilities with billions of dollars of debt and left California with some of the highest electricity rates in the country.

Richter, 33, is the second high-ranking Enron trader to be convicted in connection with the gaming of the California power market. Sentencing was postponed to give prosecutors more time with Richter, who agreed to testify against others if needed.

Enron declined to comment on Richter’s plea.

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CSFB Suspends Tech

Financier Quattrone

Credit Suisse First Boston said it placed investment banker Frank Quattrone on administrative leave after discovering evidence that “raised questions” about whether the onetime star of Silicon Valley’s dot-com boom knew of pending government investigations when he advised employees to “clean up” files.

An e-mail dated Dec. 3, 2000, was sent to Quattrone by David Brodsky, CSFB’s former general counsel, according to a person close to the matter. In that message, Brodsky told Quattrone that securities regulators were investigating CSFB’s allocations of public stock offerings and the firm had received a grand jury subpoena, the person said.

Two days later, Quattrone, head of CSFB’s technology investment banking unit, sent staff an e-mail advising them to purge unneeded documents that he said could be sought by plaintiffs’ lawyers, the source said.

Quattrone will remain on administrative leave “pending completion of an [in-house] investigation,” the firm said.

“I did nothing wrong,” Quattrone said in a statement. “I am confident that the investigation will show that.”

Bush’s Budget Plan

Outlines Deep Deficits

President Bush asked Americans to embrace a Ronald Reagan-style $2.2-trillion budget that sends the nation’s finances deep into deficit by slashing taxes and boosting outlays for national security.

Bush’s proposed 2004 budget predicts a $1.1-trillion shortfall over the five years ending in 2008, not counting the cost of a possible war in Iraq.

Bush acknowledged that his proposal would contribute to several years of deficits but said the need to stimulate the economy, expand the war on terrorism and enhance homeland security has temporarily trumped the virtues of fiscal restraint.

The budget proposal seeks a 53% funding increase for the Securities and Exchange Commission next fiscal year so the agency can hire more staff and crack down on corporate fraud.

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Wells Fargo Mortgage

Unit May Lose License

California regulators threatened to revoke Wells Fargo Home Mortgage’s lending license, saying the home-loan unit of Wells Fargo & Co. refused to make refunds to borrowers after routine examinations revealed what the state alleges are excessive interest charges and inadequate disclosures.

Department of Corporations Commissioner Demetrios A. Boutris said Wells broke a state law that says consumers can’t be charged interest on mortgages until the day before their home loans are officially recorded. He also accused the bank of violating federal Truth in Lending Act provisions requiring full disclosures of finance charges.

The bank will have an opportunity to respond to the state’s charges before additional action is taken. Wells Fargo Senior Vice President Lawrence P. Haeg said the San Francisco-based bank regards its dealings with mortgage borrowers as fully legal under federal law.

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Wet Seal Fires CEO,

Warns of Dismal Results

Wet Seal Inc. fired longtime Chief Executive Kathy Bronstein as it announced dismal sales and earnings projections.

The Foothill Ranch-based retailer said Chairman Irv Teitelbaum would act as interim CEO until it hires a replacement for Bronstein, 51, who had been with Wet Seal since 1985 and was one of the few women leading a publicly held company. She became CEO in 1992.

Teitelbaum declined to say precisely why Bronstein was let go, but he acknowledged that her departure was linked at least in part to Wet Seal’s recent poor performance. Bronstein could not be reached for comment.

Wet Seal expects to report a per-share loss of 15 to 20 cents for its fiscal fourth quarter ended Feb. 2. Analysts surveyed by Thomson First Call were expecting earnings of a penny. Sales at stores open at least a year sank 18% during the quarter.

Rising Southland Rents

Buck National Trend

The weak economy and a home-buying boom have slowed demand for apartments nationwide, but the average rent across Southern California has continued to climb, according to a major survey of larger complexes.

Southern California has seen relatively scant new construction of apartments given the needs of the region’s growing population and influx of immigrants. As such, even in a sluggish economy, many landlords don’t seem to be having much trouble finding takers, especially for lower-priced units.

Although there are no precise rental figures for all apartments, the average rent for larger complexes in the Southland was $1,130 last year, up 2% from the previous year but 30% more than it was in 1998, according to a survey by RealFacts, a research firm that tracks data for apartments with 100 or more units.

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Sony’s New Music Chief

Faces Contract Dispute

Rock band Incubus, which has sold an estimated 7 million albums worldwide and emerged as a darling of Sony Corp.’s music roster, filed a lawsuit seeking free agency. The case ultimately could threaten the basic contract structure underpinning the music business.

Michael Einziger, Brandon Boyd, Jose Pasillas and Alex Katunich have been under contract to Sony’s Immortal Records since 1996. In an action filed in Los Angeles County Superior Court, the band is asking a judge to rule that California labor law allows it to stop recording for Sony and cut a new deal.

The move comes amid a dispute in which the band has been trying to renegotiate an arrangement it believes has paid them too little.

Industry executives say they are watching to see how new music chief Andrew Lack will deal with the artist dispute.

The company said in a statement: “We have the highest regard for Incubus and their music and take great pride in the work we have done together to build a worldwide audience for them.”

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U.S. Unemployment Rate Declines in January

The nation’s jobless rate fell to 5.7% in January as restaurants, bars, department stores and other retailers laid off fewer temporary workers than they usually do after the holidays, the Labor Department said.

The monthly tally showed payroll employment increased by 143,000 last month, nearly erasing the previous month’s job loss of 156,000. It was the biggest gain in 26 months.

Economists cautioned against reading too much into the seasonally adjusted figures. Retailers hired fewer temporary workers than normal in December because they did not expect a big increase in holiday sales. But the increase in payroll employment was bigger than expected by many analysts.

Study Finds Pay Gap

at Wal-Mart Stores

Female workers at Wal-Mart Stores Inc. earned 4.5% to 5.6% less than men doing similar jobs and with similar experience from 1996 to 2001, according to a study conducted as part of a federal discrimination lawsuit.

The study, based on an analysis of payroll data obtained under the litigation, found that among nonsalaried workers, men earned an average of 37 cents an hour more than women for similar work. And the pay gap widens higher up the management ladder, the report said. The report will be used to bolster an attempt to win class-action status for the case, filed in federal court in San Francisco in 2001.

Wal-Mart executives had not seen the study and did not comment. The company, which employs 1 million people, maintains it does not discriminate on the basis of gender.

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Sales of Million-Dollar

Homes Soar to Record

California’s luxury home market was hotter than ever last year. Sales of million-dollar homes skyrocketed 45.5% statewide to a record 13,828, far surpassing the previous high of 11,365 in 2000, according to figures released last week.

The surge was driven by appreciation that pushed more homes into the high-end market and a growing number of equity-rich homeowners who traded up. The pace of million-dollar sales was strongest in Southern California. Last year’s most expensive confirmed sale: a Bel-Air estate that went for $15 million in August, according to DataQuick Information Systems. Unconfirmed sales as high as $30 million have been reported in Beverly Hills and San Francisco.

The typical seven-figure home sold last year had four bedrooms and three baths and measured 2,885 square feet. Last year, 617 condos went for $1 million or more. In some areas, such as Santa Monica’s north end, $1 million might get you a 7,500-square-foot lot -- with nothing on it, one broker said.

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For a preview of this week’s business news, please see Monday’s Business section.