TOP STORIES -- June 8-13
Judge Sentences Waksal to More Than 7 Years
Samuel D. Waksal, founder of drug maker ImClone Systems Inc., was sentenced to more than seven years in prison and fined $4.3 million by a federal judge who called Waksal’s insider trading abuses “truly incalculable.”
Waksal, 55, is the first prominent U.S. chief executive to be sentenced to prison in the corporate scandals that erupted after Enron Corp. collapsed in 2001.
Waksal pleaded guilty in October to six counts, including securities fraud and perjury, stemming from his attempt to dump ImClone stock ahead of bad news concerning the company’s most prominent cancer drug, Erbitux. He also pleaded guilty to a bank fraud charge.
At sentencing, U.S. District Judge William Pauley in New York rejected pleas by Waksal for a lighter sentence and ordered him to serve 87 months in prison and pay $4.3 million in fines and back taxes.
“The harm that you wrought is truly incalculable,” Pauley told Waksal. “You abused your position of trust as chief executive.”
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Northrop to Pay U.S. to Settle TRW Suit
Northrop Grumman Corp. agreed to pay the federal government $111.2 million to resolve claims that TRW Inc., which it recently acquired, padded bills for defense work done in the early 1990s.
The agreement ends a nine-year legal fight initiated by Richard Bagley, a former chief financial officer for TRW’s Redondo Beach unit. Bagley alleged that TRW overcharged the Pentagon for work on several space electronics programs.
Bagley, who filed a lawsuit in 1994 under the U.S. False Claims Act, will be awarded 24.5% of the settlement. The U.S. attorney’s office in Los Angeles said he would receive $27.2 million, one of the largest payments to an individual whistle-blower, because of his “extraordinary resolve and tenacity.” Bagley, 64, who now lives in Henderson, Nev., declined to comment.
Century City-based Northrop denied any wrongdoing. The lawsuit had been scheduled to go to trial in November.
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Employers in California Cut 21,500 Jobs in May
California’s labor market deteriorated sharply in May as the state’s employers shed 21,500 jobs -- more than the rest of the nation combined, according to data from the Employment Development Department.
The job losses were felt across a wide spectrum of the economy, bad news for a state struggling to create jobs under the weight of a massive budget shortfall and ballooning business costs. The losses are the highest since last December and mark the fourth consecutive month of payroll declines in California.
Since February, the state has shed more than 50,000 jobs, or nearly 0.4% of its nonfarm payroll positions, compared with 0.2% for the U.S. as a whole.
Despite the hefty job losses, California’s unemployment rate declined to 6.6% in May from a revised 6.8% in April, largely because so many people have stopped actively looking for work and no longer are counted in the jobless statistics. In Los Angeles County, the seasonally adjusted unemployment rate declined to 6.6% in May from 6.7% the month before.
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Lockheed Sues Rival Boeing Over Rocket Bid
Lockheed Martin Corp., the world’s largest defense contractor, sued Boeing Co. and three former Boeing employees, alleging that its archrival stole proprietary documents and used them to win a multibillion-dollar rocket contract.
The lawsuit, filed in federal court in Orlando, Fla., accuses Boeing and the former workers of illicitly using documents obtained from Lockheed during the high-stakes competition for a new generation of rockets used to launch military satellites.
Last month, Chicago-based Boeing revealed that it was under investigation by the Justice Department and Air Force over allegations that it illegally used documents from Lockheed to win the satellite rocket deal.
Boeing spokesman Dan Beck said that its lawyers hadn’t read the lawsuit and that they couldn’t comment on it.
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Medical Device Maker Guidant Pleads Guilty
Guidant Corp. pleaded guilty to 10 felonies for covering up malfunctions of a device to treat aneurysms that led to 57 emergency procedures and 12 deaths.
The company also agreed to pay $92.4 million in fines. The penalty will be the largest paid by a medical device marketer for failing to report malfunctions to the Food and Drug Administration, the government said.
“They intentionally misled the public, doctors and FDA,” said Assistant U.S. Atty. Matthew J. Jacobs in San Francisco.
Indianapolis-based Guidant was charged with nine counts of selling a misbranded product and one count of making false statements to the FDA. Guidant said it has set aside more than $90 million to pay the fines. A spokesman couldn’t be reached. Patients with the device, still on the market, aren’t at risk, the government and company said.
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Oracle Spurned, Sued Over PeopleSoft Bid
Software company Oracle Corp. got a triple dose of rejection last week. First, PeopleSoft Inc.’s board scorned Oracle’s $5.1-billion hostile takeover offer. Hours later, J.D. Edwards & Co. sued Oracle, alleging it is trying to foil Edwards’ $1.7-billion acquisition by PeopleSoft. Also, PeopleSoft sued Oracle, accusing it of improper interference in its relationships with customers and of unfair trade practices.
PeopleSoft’s board cited probable antitrust issues and Oracle’s stated intention to stop selling PeopleSoft’s products.
J.D. Edwards filed suit against Oracle in Colorado and California courts. PeopleSoft filed suit in Alameda County Superior Court. Oracle said the suits were without merit.
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L.A. Home Prices Jump, but Sales Decline 7.6%
Home prices in Los Angeles County shot up to another record in May, but sales fell significantly from a year earlier.
The median sales price of new and existing homes in L.A. County jumped 21% on a year-over-year basis, to $313,000 last month, according to a report released by the estate research firm DataQuick Information Systems. The number of sales in the county, however, dropped 7.6%, to 10,863 properties.
Real estate experts and brokers said the sales slowdown isn’t a sign of weakening demand; rather, they blamed it on a persistent shortage of homes for sale and a storm of refinancings that is clogging the system and delaying closings.
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Bronfman’s Bid for Universal Wins Backers
Defying naysayers on Wall Street, Edgar Bronfman Jr. has lined up financial backing to make a bid for the Universal entertainment assets his family once owned, sources familiar with the proposal said.
Bronfman has secured key commitments from two prominent private equity firms -- Thomas H. Lee Partners and Blackstone Group -- to help finance a bid for Vivendi Universal’s Hollywood movie studio, theme parks, television channels and music company, the sources said. They said Edgar Bronfman Sr. also would contribute an undisclosed amount toward his son’s financing package.
The Universal assets are valued at about $16 billion, after subtracting debt. Sources said Bronfman may be ready to make an offer this month.
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Lawyer Withdraws From Pooh Suit
Bertram Fields is withdrawing from the multimillion-dollar battle over Winnie the Pooh royalties. For nearly three years, the Los Angeles entertainment attorney has been a thorn in the side of Walt Disney Co. as he fought on behalf of a mother and daughter who hold the merchandising rights to the honey-loving bear and his friends. They contend that Disney has cheated them out of hundreds of millions of dollars in royalty payments.
Fields declined to say why his firm was quitting. “It would not be proper for me to discuss the reasons,” he said. “I still have great confidence in the merits of the case.... It’s just not a case that I can try,” he said.
Fields’ clients, Patricia Slesinger and her mother, Shirley Slesinger Lasswell, recently grew frustrated over delays and complications that had driven up the cost of litigation. In court papers filed recently, Disney counsel Daniel Petrocelli accused Slesinger of changing testimony related to Pooh documents.
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NBC Reshuffles Its Television Team
NBC shook up its Burbank television team as NBC Entertainment President Jeff Zucker announced that Kevin Reilly would become president of prime-time development, while NBC Studios President Ted Harbert and Karey Burke, an executive vice president for development, would soon step down.
Reilly, 40, will join the General Electric Co.-owned network in the new post this summer when his contract ends with Fox’s FX, where he has been chief of entertainment. The shake-up signals NBC’s recognition that it has yet to plant the seeds for new hits to replace “Friends” or “Frasier,” which are expected to end next season.
Harbert, former president of ABC entertainment, said it was a good time to leave his home of nearly four years. Burke said she would remain as a producer. “This was my choice,” she said.
