TOP STORIES -- Jan. 5-10
Bush Plan Would
Speed Up Tax Cuts
President Bush unveiled a plan designed to spur the sluggish economy through bigger, faster tax cuts -- an approach he said would increase consumer spending and reinvigorate the stock market.
The plan would cost the federal government $674 billion over 10 years, more than half of it by eliminating the tax on cash dividends that companies pay to shareholders, according to White House estimates.
The proposal also would accelerate all income-tax rate cuts in Bush’s 2001 tax plan -- including changes in tax brackets, the so-called marriage penalty and child credits -- to become effective this year.
Under existing law, the cuts would have come into force gradually until 2010.
The president also proposed a new tax incentive for small business and the creation of “reemployment accounts” to help the unemployed get training and other services needed to find jobs.
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FCC May Alter Rules on Phone Networks
The Federal Communications Commission is considering rolling back or eliminating rules that require the regional Bell phone companies to rent their networks to rivals at deeply discounted rates.
The proposed rule changes, the biggest for the heavily regulated industry since Congress passed a sweeping reform measure in 1996, could result in higher phone rates, critics of the plan contend.
The changes would require long-distance companies such as AT&T; Corp. and WorldCom Inc. to own more of the equipment necessary to sell local phone service.
Specifically, the FCC’s staff is considering proposals that would curtail or eliminate heavily discounted access to the building blocks of the local telephone network -- switches that route phone calls. Instead, the agency would require companies to spend $1 million to $3 million in each local market to buy and maintain a refrigerator-size switch needed to connect to customers.
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Pharmaceutical Firms Are Sued by State
State officials accused two major pharmaceutical companies of bilking the Medi-Cal program out of millions of dollars through “grossly excessive, unreasonable and unlawful” inflation of drug prices.
In announcing a lawsuit against Abbott Laboratories Inc. and Wyeth Pharmaceuticals Inc., Atty. Gen. Bill Lockyer said he also planned to take legal action against other drug companies for allegedly cheating California’s $27-billion health program for the poor.
Lockyer said fraud by pharmaceutical companies appeared to be one reason that Medi-Cal’s tab for drugs doubled to $3 billion a year while the patient load shrank 15% from 1997 to 2001.
The civil suit is the latest action authorities have taken to try to stem Medi-Cal fraud, which some estimate at more than $1 billion a year.
In the last few years, the state and federal governments have filed criminal charges against about 700 people and companies.
Diller Apologizes for Remarks About Davis
Media mogul Barry Diller publicly apologized after making disparaging remarks about billionaire Marvin Davis.
Diller made reference to the oil tycoon’s girth at an investor conference in La Quinta, calling him “that fat Marvin Davis,” and dismissed Davis’ prospects for acquiring Vivendi Universal’s U.S. entertainment businesses.
Davis has made it clear that he would oust Diller, the current co-chief executive of Vivendi’s U.S. entertainment operations, if he succeeded in his bid for the Universal movie studio, theme parks and music group.
“For my stupid and cheesy attempt at humor at the end of a luncheon interview, I apologize,” Diller said in a statement. “It was ungracious, uncalled for and inaccurate.”
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Housing Starts Are Expected to Jump
Data on housing starts revealed one bright light in California’s lackluster economic outlook: More homes and apartments are expected to be built in 2003 than in any year since 1989, with a large portion slated for Southern California.
Fueled by rising demand, 170,000 housing units are projected to be constructed this year, according to the California Building Industry Assn., a trade group. That would be a 3.7% increase from last year -- slightly outpacing the national growth rate -- and represent the strongest activity since 237,000 homes went up in the final year of the last construction boom.
The forecast, which outside economists described as conservative, is good news for the state. An increase in home building would help ease a housing shortage and give a boost to businesses that rely on housing, from stone and glass manufacturers to furniture dealers. The amount spent on residential building, including remodeling, is expected to total $34 billion this year.
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U.S. Sues Tenet Over Alleged False Claims
The Justice Department sued Tenet Healthcare Corp. for as much as $323 million in damages, claiming the nation’s No. 2 hospital chain falsified patient diagnoses on Medicare claims from 1992 through 1998 to inflate its revenue.
The Justice Department accused Tenet employees of substituting their judgment for that of physicians and assigning false diagnostic codes in order to boost Medicare payments. Tenet is alleged to have manipulated codes for pneumonia, septicemia and other illnesses.
The lawsuit, filed in federal court in Los Angeles, came a day after settlement negotiations between the two sides broke down. The dispute dates back to alleged violations at various hospitals when Tenet was known as National Medical Enterprises.
Tenet expressed regret that it was unable to reach an amicable resolution.
The case is separate from a recent federal investigation into billing practices at Santa Barbara-based Tenet involving special Medicare reimbursements known as “outlier” payments, or supplemental revenue to hospitals for complicated cases.
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Mottola Steps Down as Sony Music Chief
Thomas D. Mottola, one of the most recognizable executives in the music business, abruptly resigned as head of Sony Music Entertainment, instantly becoming a symbol of the recording industry’s inability to reverse plunging profits and surging piracy. He was replaced by NBC television executive Andrew Lack.
Mottola’s success at building the careers of such pop divas as Celine Dion, Jennifer Lopez and Mariah Carey -- whom Mottola later married and since has divorced -- has failed to translate in recent years to Sony Music’s bottom line: It posted operating losses of $142 million for much of last year and ranked third among the five major music corporations.
The industry’s longest-reigning “creative” record chief, and one of its highest paid, characterized the move as one of his own making.
Mottola said he decided over the course of a year to launch his own recording label and will have considerable financial help from Sony.
Loan Overcharges by Wells Fargo Alleged
State regulators accused Wells Fargo & Co. of knowingly overcharging about 15,000 Californians on “instant loans” in a suit against the banking company’s consumer finance unit that seeks to invalidate the loans and impose as much as $38.8 million in fines.
The unsecured personal loans, made by mailing unsolicited offers, were for $1,000 to $3,000, according to the California Department of Corporations, which filed the suit in Superior Court in Sacramento.
If the state succeeds in voiding the loan contracts, the borrowers -- who took out the loans by signing check-like drafts -- wouldn’t have to repay any of the money, which regulators said totaled about $24 million.
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Jobless Rate Hovers at an 8-Year High
Unexpectedly large job cutbacks by struggling retailers and manufacturers kept the U.S. unemployment rate at an eight-year high of 6% in December, reflecting an economy still suffering from an uneven recovery.
Though the overall U.S. economy has shown recent signs of improvement, the Department of Labor figures showed a loss of 101,000 jobs in December, coupled with a revised decline of 88,000 jobs the previous month.
That resulted in a second straight year of job losses and marks the worst two-year record of employment creation this country has seen in five decades.
Analysts blamed December’s surprisingly weak job picture on dismal holiday sales and lagging consumer confidence, a weak global economy and uncertainty over the effect of tensions with Iraq and North Korea.
They predicted that the employment picture would remain weak until late 2003 or 2004. The poor numbers are expected to give a boost to President Bush’s proposed economic stimulus plan, which he said would help create 2.1 million jobs by the end of next year.
From Times Staff
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For a preview of this week’s business news, please see Monday’s business section.
