TOP STORIES -- June 15-20

Senate Panel Votes to

Undo New FCC Rules

A Senate committee called for a substantial tightening of media ownership rules that were eased only weeks ago by the Federal Communications Commission. But the wide sweep of the proposed legislation sparked protest from industry representatives and may diminish chances for passage by Congress.

A bipartisan coalition on the Senate Commerce Committee voted to keep television broadcasters from owning stations that reach more than 35% of the nation’s viewers, reinstate a ban on owning a TV station and a newspaper in the same city and force a few radio giants to sell some stations.

Several lawmakers on the Senate Commerce Committee expressed deep disapproval of what they described as a move by the FCC to unduly empower giant media corporations.

An FCC spokesman said the commission doesn’t comment on pending legislation but would abide by any laws passed by Congress.

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Lehman Bros. Found Liable in Fraud Case

A federal jury held Lehman Bros. Holdings Inc. accountable for fraud at an Irvine mortgage firm it helped finance, saying the investment bank aided and abetted a First Alliance Corp. scheme to cheat borrowers.

The verdict marked the first time a financial backer of an abusive lender has been held liable. The jury in federal court in Santa Ana said Lehman not only knew that First Alliance engaged in fraud but also “substantially assisted” the deception.

Jurors awarded $51 million in damages to about 4,500 borrowers, assessing 10%, or $5.1 million, to Lehman.

According to testimony, First Alliance concealed the fact that it was adding as much as 24% in fees to the balances of mortgages it refinanced for hard-pressed borrowers.

Lehman attorney Helen L. Duncan said the company would appeal. Lehman said its employees were “never aware of any wrongdoing that may have been committed by individual loan officers at First Alliance.”

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CalPERS Members Balk at Rising Health Costs

The California Public Employees’ Retirement System faces a growing member revolt as the giant pension fund approved a nearly 17% rate increase in health insurance payments for next year.

The rate hike means CalPERS’ medical bills will grow by an additional $600 million in 2004 to almost $4 billion. And a big chunk of that increase will be borne by its 1.2 million members statewide. Those in CalPERS’ system include public workers at hundreds of agencies, schools, police departments and other government offices in the state.

Members are balking at escalating costs. And some public agencies are threatening privately to pull out of CalPERS health plans.

Sid Abrams, chairman of CalPERS’ health benefits committee, said CalPERS got a good deal in obtaining a 16.6% rate increase for next year.

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Oracle’s Sweetened Bid Rejected by PeopleSoft

Oracle Corp. boosted its hostile bid for PeopleSoft Inc. and sued to prevent it from merging with J.D. Edwards & Co.

But Pleasanton, Calif.-based PeopleSoft spurned rival Oracle’s $6.3-billion bid, which at $19.50 a share is 22% higher than the $16 a share offered earlier this month. Its board said the higher offer was inadequate and that antitrust regulators would block the deal. The board rejected an earlier $5.1-billion offer.

Oracle’s suit, filed in Delaware Chancery Court against PeopleSoft, its board and J.D. Edwards, seeks an injunction to stop the companies “from interfering with the sale of control of a publicly held company.”

Also, Connecticut Atty. Gen. Richard Blumenthal filed a federal antitrust lawsuit to block Redwood City, Calif.-based Oracle’s acquisition of PeopleSoft.

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Gemstar Ex-Executives Face SEC Fraud Suit

The Securities and Exchange Commission filed civil fraud charges against two former top executives of Gemstar-TV Guide International Inc. in connection with an alleged “widespread and complex scheme” to inflate revenue.

The lawsuit filed in federal court in Los Angeles accuses Gemstar’s founder and former chief executive, Henry Yuen, and former chief financial officer, Elsie Leung, of overstating revenue by $223 million in a two-year period when they were in charge of the Hollywood-based publisher of TV Guide.

Attorney Stanley Arkin, who represents Yuen, 55, and Leung, 57, called the SEC’s charges “as unfair as they are fragile and arbitrary.” Arkin has stressed that KPMG, Gemstar’s auditor at the time in question, supported the accounting methods used by Yuen and Leung.

A Gemstar spokesman said the company continues to cooperate with the SEC.

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Genentech Asthma Drug Receives FDA Approval

Genentech Inc.’s drug Xolair, a genetically engineered treatment for asthma triggered by allergies, was approved by the government. The Food and Drug Administration’s approval comes just weeks after its advisory committee gave Xolair its support May 15.

Xolair controls asthma by interrupting a biological chain reaction that can result in serious breathing difficulties. It differs from conventional medications such as steroids and antihistamines, which manage weepy eyes or other symptoms.

The company would market Xolair jointly in the U.S. with Swiss drug maker Novartis, and the two would share profit.

Genentech and Novartis see potential for Xolair beyond asthma. The companies are testing the drug in hay fever patients with asthma and expect to begin a study in patients with peanut allergies by the end of the year.

Worldwide Xolair sales could reach $80 million in 2004 and rise to $750 million in 2008, analyst Patrick Flanigan of Adams, Harkness & Hill has said.

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Cablevision Problems May Ruffle Bronfman

Cablevision Systems Corp. said it fired 14 employees after discovering allegedly fabricated invoices and inappropriate accounting of millions of dollars in expenses.

Analysts said the disclosure could cast a cloud over Seagram heir Edgar Bronfman Jr.’s bid for Vivendi Universal’s U.S. entertainment assets. Cablevision is backing Bronfman’s move to try to reclaim the assets his family once owned. Cablevision would contribute its three national cable networks -- American Movie Classics, International Film Channel and WE: Women’s Entertainment -- to the venture.

Cablevision executives said the accounting problem wasn’t material and wouldn’t require restatement of its financial results. Sources close to Bronfman said the development would have no effect on his bid for Vivendi’s assets. The Vivendi bids are due Monday.

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Disney Decides to Quit Broadcasters Group

Walt Disney Co., parent of ABC television network, abruptly quit the National Assn. of Broadcasters in protest over what it called the trade group’s “network bashing” and its aggressive lobbying in the media ownership battle.

Disney joins other networks, including Viacom Inc.’s CBS, General Electric Co.’s NBC and News Corp.’s Fox, that bolted several years ago. The networks are considering forming a lobbying alliance to counteract the association, which has been dominated by TV station groups.

The fracture follows the Federal Communications Commission’s June 2 vote to relax many media ownership rules.

The industry was split over a rule that limits how many viewers one company may reach nationwide. The association wants to keep the 35% cap because it fears the expansion of major networks.

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‘Sopranos’ Won’t Get Whacked Next Season

David Chase, the creator of HBO’s “The Sopranos,” has agreed to go beyond the planned fifth season and do an additional round, HBO executives said.

Chase had said he would step away from the popular drama series about an organized crime family after its coming fifth season. Star James Gandolfini and other key players had said that if Chase left, so would they.

The entire cast -- including Gandolfini, who a few months ago was embroiled in a bitter contract dispute with the cable network -- is expected to return for the sixth season, which is scheduled to be 10 episodes, three installments fewer than the usual “Sopranos” season.

Chase could not be reached for comment.

HBO would not discuss the specifics of the deal. The network reportedly is paying about $4 million per episode for the fifth season, well above the average for most hourlong dramas.