TOP STORIES -- June 1-6

FCC Relaxes Limits on Media Ownership

In a bitter split along party lines, the Federal Communications Commission -- led by Chairman Michael K. Powell -- voted 3 to 2 to relax rules that prevented TV stations from merging with local newspapers and restricted how many stations one company could own, both nationally and locally.

The broad revision of ownership rules clears the way for further consolidation by the biggest media conglomerates, enhancing the economic prospects of companies such as News Corp., Viacom Inc. and Tribune Co., parent of the Los Angeles Times.

But the vote drew threats of congressional countermeasures and protests from critics.

The new rules will take effect early this summer.

Under the new rules, broadcasters are permitted to own stations reaching 45% of the nation’s viewers, up from 35%, allowing TV networks to raise the number of wholly owned stations that carry their shows. But the FCC retained a rule that prevents mergers among the four biggest TV networks -- ABC, CBS, Fox and NBC.

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Martha Stewart Faces Criminal Charges

A federal grand jury indicted lifestyle mogul Martha Stewart and her former stockbroker on charges of conspiracy, obstruction of justice and making false statements to investigators.

Arraigned in a packed courtroom in lower Manhattan, Stewart and former Merrill Lynch broker Peter Bacanovic pleaded not guilty to all charges in the nine-count indictment.

Stewart stepped down as chairwoman and chief executive of the company she founded and controlled, New York-based Martha Stewart Living Omnimedia Inc. The company said she would stay on in the role of “founder and chief creative officer” and remain on the board.

The indictment doesn’t charge Stewart and Bacanovic with insider trading. That charge is contained in a civil suit filed by the Securities and Exchange Commission, which accuses the pair of using inside information to dodge losses in her stock holdings of biotech company ImClone Systems Inc., formerly headed by Stewart’s friend Samuel D. Waksal.

If convicted on all charges, Stewart could face a maximum penalty of 30 years in prison and $2 million in fines.

Stewart’s lawyers, Robert G. Morvillo and John J. Tigue, questioned why she was targeted.

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Wireless Users Can Keep Phone Numbers

Mobile phone users soon will be able to take their numbers with them when they change carriers, after a federal court decision that was applauded as a victory for millions of wireless customers.

Rejecting arguments of the cell phone industry, the Circuit Court of Appeals in Washington, D.C., ruled that a Federal Communications Commission order to require so-called number portability by Nov. 24 is “permissible and reasonable.”

Consumers and advocate groups hailed the decision as one that gives customers the ability to move more easily from carriers with poor service or high prices to better providers.

But it’s likely to cost the cellular phone industry about $500 million to make the technical changes required for number portability and an estimated $2billion to $3 billion annually in commissions, handset subsidies and service activation expenses.

Jobless Rate Rises, but Trend Data Improve

U.S. employers cut payrolls by 17,000 jobs in May, the Labor Department reported -- enough to help push the unemployment rate to a near nine-year high of 6.1% but also spur hopes that the economy is emerging from its long slump.

The May jobs report showed the economy has lost fewer jobs than previously reported so far this year.

Analysts said that Friday’s report was most important for what it showed about job trends earlier this year. Only a month ago, the Labor Department estimated that the economy had shed 48,000 jobs in April and more than half a million since February. But in its new report, the department said that there had been no job losses in April and 272,000 since February.

Many now estimate that Federal Reserve policymakers will cut the federal funds rate a quarter point when it next meets.

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Grand Jury Indicts Former Enron Trader

A federal grand jury indicted former Enron Corp. trader John M. Forney as his lawyers complained that the government improperly hyped Forney’s alleged role in the California energy crisis to “garner media fanfare.”

A San Francisco grand jury indicted Forney on a single count of conspiracy to commit wire fraud related to an alleged criminal manipulation of California electricity markets from 1999 to 2001, according to federal prosecutors.

Forney, on leave from his job at American Electric Power Co. in Columbus, Ohio, was arrested Tuesday on charges of wire fraud and conspiracy.

Brian Murphy, a lawyer representing Forney, said the energy trader did nothing illegal and would fight the government’s charges.

The government contends that Forney devised some of the trading schemes, including one dubbed Forney’s Perpetual Loop, that worsened California’s energy crisis of 2000 and 2001.

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U.S. Plans to Review Airwave Allocation

In a move that could pave the way for a big expansion in wireless communications, the Bush administration ordered a comprehensive review of how the federal government manages the nation’s scarce radio airwaves.

“We must unlock the economic value and entrepreneurial potential of U.S. spectrum assets while ensuring that sufficient spectrum is available to support critical government functions,” President Bush said in a memo to government agencies.

The directive came in response to mounting pressure to allocate more airwaves to public safety officials, utility companies, railroads and the burgeoning cell phone industry. They all want to shift to a more modern communications system that relies on digital, rather than analog, devices.

The fast-growing wireless phone industry, for instance, has attracted more than 140 million subscribers. But the increasing subscriber demand for the ability to download computer data, send digital pictures and make ordinary voice calls is taxing commercial networks. Similarly, police and fire departments and utility companies serving sprawling communities also need more capacity.

The yearlong review will be directed by the Commerce Department.

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McKesson Ex-Chairman Faces Fraud Charges

The former chairman of drug wholesaler McKesson Corp. was charged in connection with what prosecutors say was a “long-running fraudulent scheme” to inflate revenue and profit at a software firm he headed.

A federal grand jury indictment charges that Charles W. McCall, 59, allegedly conspired with other executives to “cook the books” at the software firm, HBOC, resulting in $9 billion in shareholder losses. The firm was acquired in early 1999 by San Francisco-based McKesson. McCall was fired as chairman of the combined company in June 1999.

McCall was charged with seven counts of securities fraud. Each count carries a penalty of up to 10 years in prison and a $1-million fine. He also faces civil charges.

“We’re all very disappointed. ... He didn’t do it,” said his lawyer, Michael Shepard.

Analysts said the case wasn’t likely to hurt McKesson.

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Fed Chief Offers Hope for Interest Rate Cut

Federal Reserve Chairman Alan Greenspan made clear that he’s betting on investors to show the way to an economic recovery. And to keep stock and bond buyers on the bullish path, Greenspan offered the potential for another Fed interest rate cut.

The central bank chief’s latest comments on the economy, in a speech at a bankers’ conference in Berlin, appeared to have the desired effect: Yields on some Treasury securities fell to generational lows, and major stock indexes jumped.

Greenspan said the Fed believes the economy stabilized in May but that a revival “has not yet begun.” However, he said a surge in stock prices and decline in yields on higher-risk bonds indicate investors believe a rebound is on the horizon.

The Fed considers deflation unlikely. Even so, Greenspan said, the central bank believes it can’t take the chance that its policies could be too restrictive.

The central bank’s benchmark short-term interest rate is at a 41-year low of 1.25%. Policymakers meet June 24 and 25.

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Murder Inc. Audit Finished, Sources Say

Forensic auditors hired by a lawyer for Vivendi Universal record label Murder Inc. have completed a report that accounts for its business dealings with a convicted drug dealer, people familiar with the situation said.

The report could raise questions about government claims that the label was used to launder illicit funds.

The auditors were retained by Kaye Scholer, a law firm that represents Murder Inc. founder Irv “Gotti” Lorenzo. The law firm declined to comment. People familiar with the audit wouldn’t disclose who conducted it.

Federal agents raided Murder Inc.’s Manhattan offices five months ago, accusing Lorenzo of laundering drug money for convicted crack kingpin Kenneth “Supreme” McGriff.

Federal authorities declined to discuss the investigation.