RJ Reynolds Chargedin Smuggling CaseR.J. Reynolds Tobacco...

RJ Reynolds Charged

in Smuggling Case

R.J. Reynolds Tobacco Holdings Inc. and a Japan Tobacco Inc. unit were charged with fraud by Canadian police after a 4 1/2-year investigation of the smuggling of tobacco products from the United States.

Authorities filed six counts of fraud and one of conspiracy to commit fraud against three subsidiaries of R.J. Reynolds, the second-largest U.S. tobacco company, the Royal Canadian Mounted Police said.

Canadian authorities allege that from 1991 to 1996, the accused companies defrauded Canada and the provinces of Quebec and Ontario of more than $804 million in taxes and duties. The firms also are accused of supplying black-market tobacco products from Canadian factories by shipping the goods to the United States, where the companies knew they would be turned around and smuggled back into Canada to dodge taxes.

The companies charged are Japan Tobacco’s JTI-Macdonald Corp., formerly known as RJR-Macdonald Inc.; and R.J. Reynolds units R.J. Reynolds Tobacco Co., R.J. Reynolds Tobacco International Inc. and Northern Brands International Inc. Several executives were also charged.

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Revised Data Show

Deeper State Recession

California’s latest recession has proved to be far deeper and longer than previously estimated, the government said, with job losses at the depths of the downturn reaching 290,000 -- nearly triple what state officials had reported before.

The revisions by the state Employment Development Department show that the labor market was much weaker between spring of 2001 and early 2002, particularly in Northern California, in large part because of huge losses in the state’s technology sector.

The new figures suggest California’s road to recovery could be more difficult than that of the nation. The loss of high-paying high-tech jobs has wreaked havoc on the state’s tax revenue.

Revised jobless figures also show that California officials understated unemployment rates in late 2002, with December’s rate hitting a six-year high of 6.9%, up substantially from the 6.6% previously reported.

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VaxGen’s AIDS Vaccine

Fails in Tests; Shares Fall

Shares in biotechnology company VaxGen Inc. plunged 71% last week after the company revealed that its five-year, $100-million trial of an experimental AIDS vaccine failed to protect people from the human immunodeficiency virus.

The failure of the largest human trial yet for an HIV vaccine throws VaxGen’s future into question. The Brisbane, Calif.-based company has no licensed products and has only about seven months of cash remaining.

VaxGen’s management said its ability to tap investors for additional financing would depend largely on the results of a second, smaller vaccine trial that is winding up in Thailand. But investors expressed impatience with VaxGen as the company’s shares hit a 52-week low. They closed Friday at $3.76 on Nasdaq.

“The disappointment comes from working in AIDS. This is no doubt a challenging little bug,” VaxGen President Donald P. Francis said.

VaxGen also is at work on vaccines for smallpox and anthrax.

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PUC Orders Probe of

Sempra-Owned Utilities

A divided state Public Utilities Commission ordered an investigation of whether two Southern California utilities put the interests of their parent company ahead of their customers.

The commission voted 3 to 2 to examine whether Southern California Gas Co. and San Diego Gas & Electric Co. sought to maximize the profit of parent company Sempra Energy at the expense of ratepayers. If commissioners find that ratepayers were harmed, the result could be a toughening of PUC rules.

Critics have said that Sempra’s operations create situations in which actions that benefit shareholders could cost consumers more money.

Sempra officials said their utilities and other business units have worked to avoid conflicts of interest and improper sharing of information.

“There was no new evidence a proceeding like this was merited,” spokesman Doug Kline said.

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Peregrine Chairman

and 3 Directors Resign

Peregrine Systems Inc. Chairman John J. Moores and three other members of the software maker’s five-member board resigned in a deal aimed at clearing the air with creditors and moving the company’s bankruptcy reorganization case along.

Moores, owner of the San Diego Padres baseball team, and the outside directors stepped down Friday, when the firm submitted audited financial statements to U.S. Bankruptcy Court.

The company reduced by $509 million its reported revenue for the period from April 1, 1999, through Dec. 31, 2001, because of accounting irregularities.

Revenue of $1.34 billion was originally reported for that period, Peregrine said. The company said it lost $11.36 a share in the fiscal year ended March 31, 2002, $13.32 a share for fiscal 2001 and $2.12 the previous year.

Peregrine, based in San Diego, filed for Chapter 11 bankruptcy protection in September. Creditors have been fighting in recent months to replace Moores and the other board members with an independent trustee.

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More Investors Throw In

the Towel on Stocks

More investors are giving up on stocks, even when it comes to long-term retirement accounts. In January, redemptions outpaced cash inflows to stock mutual funds, data show.

Also, an index that tracks how 1.5 million workers divvy contributions to employer-sponsored 401(k) retirement plans found that 61.3% of the money went to stocks in January, down from 68.4% for all of 2002 and the lowest since Hewitt Associates launched the index in 1997.

For stock funds overall, redemptions outpaced new money invested by $466 million in January, according to a report issued by the Investment Company Institute. That was the first January net cash outflow since 1990. Redemptions and net exchanges out of the funds totaled $72.5 billion. Gross purchases were down 21% to $72 billion from a year earlier.

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Liberty May Seek Deal

for DirecTV Alone

Satellite TV leader DirecTV may become a battleground for two of the media industry’s greatest powers: News Corp.’s Rupert Murdoch and Liberty Media Corp.’s John Malone.

The two companies, which have been working as partners to buy DirecTV for more than two years, may now make separate bids for El Segundo-based Hughes Electronics Corp., parent of the satellite TV company, according to sources close to the situation. Each sent in independent teams last month to look at Hughes’ financial books.

News Corp. and Liberty would not comment on bidding strategies after a report in the Wall Street Journal said the companies were no longer working together on a deal.

But Liberty spokesman Mike Erickson said the firm would look at the satellite TV provider with or without News Corp. He said a joint venture may still be possible, noting that bids have not been submitted.

Until recently, Liberty and News Corp. were discussing a 50-50 venture to buy the 30% of Hughes owned by General Motors Corp., a stake with a market value of about $4.5 billion.

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Gap Posts Profit Even

as Challenges Continue

San Francisco-based Gap Inc. logged a fourth-quarter profit as the nation’s largest apparel chain continues to try to turn around its business.

The owner of the Gap, Old Navy and Banana Republic chains posted earnings of $249 million, or 27 cents a share, reversing a loss of $34 million, or 4 cents, a year earlier. Sales for the quarter ended Feb. 1 rose 14% to $4.7 billion. Sales at stores open at least a year rose 8%.

Old Navy has been helping to fuel a turnaround, as the lower-priced chain strikes a chord with bargain shoppers. But Gap still has considerable challenges ahead, analysts say, including developing a cohesive strategy for its namesake stores.

Better understanding Gap’s customer is a major focus for Paul Pressler, who was hired as Gap’s chief executive in September. Pressler said Gap was conducting research to determine what kind of shoppers its stores attract.

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Nielsen People Meters to

Alter Local TV Ratings

Nielsen Media Research said it would begin providing overnight ratings in the nation’s top 10 TV markets, a move that could give new clout, and more ad dollars, to local cable firms.

Beginning next year, Nielsen will install electronic boxes called “people meters” in thousands of additional homes in Los Angeles, New York and Chicago to glean detailed demographic information about viewers and their TV habits. At present, the detailed data that advertisers care most about -- the age and gender of viewers -- are available in local markets only after “sweeps” periods. With the people meter system, such information will be produced every night.

The change represents a victory for cable providers over resistant broadcast networks. Cable firms have complained that viewer data for local markets are inaccurate, compiled from an infrequent and antiquated 1950s-era measurement system using written diaries.

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Feds Crack Down on

Drug Paraphernalia

Dozens of dot-com entrepreneurs saw their businesses go up in smoke after they were charged with selling water pipes and other drug paraphernalia on the Internet. The Justice Department charged 55 online merchants, several in California.

Among those investigated was actor Tommy Chong, whose Gardena-based business manufactures water pipes that turned up for sale on some of the sites. Chong, the star of the 1978 hit “Up in Smoke,” was not indicted.

One of those indicted was Ara Melkizian of North Hollywood, who allegedly operated Omnilounge.com. That site offers several Chong Glass pipes, including “El Fuego” for $114 and “Luscious” for $200.

The charges included conspiring and offering to sell drug paraphernalia. Under federal statutes, each charge can bring three years in prison and a $250,000 fine.