TOP STORIES -- March 2-8
Payrolls Fall Sharply
as Jobless Rate Rises
The nation’s payrolls unexpectedly plunged by 308,000 jobs last month, the most since the immediate aftermath of the 2001 terror attacks, the Bureau of Labor Statistics said. The unemployment rate crept up to 5.8%.
The job loss was so much greater than anybody predicted that economists were left scrambling for an explanation. Among the most widely cited: The call-up of reservists for a possible war with Iraq shrank payrolls, and winter storms kept businesses that normally hire at this time of year from doing so.
But neither explanation could mask the underlying message: that the nation’s economy, rattled by war threats and still haunted by the tech and stock market busts, is reeling. Analysts said the most immediate effect of the new figures would be to push the Federal Reserve toward more interest rate cuts.
The central bank’s policy-making Federal Open Market Committee, set to meet March 18, holds a “neutral bias,” which means it is not disposed to raise or lower rates, after slashing its signal-sending federal funds rate 11 times to a four-decade-low 1.25%. But analysts said Fed Chairman Alan Greenspan would come under rising pressure to make more rate cuts if it appears job-worried consumers start to slow their spending.
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Family Decides to Sell
Freedom Media Chain
Directors of Freedom Communications Inc., one of the nation’s last family-owned media companies and owner of the Orange County Register, agreed to put up the company for sale.
An outright sale would end nearly 70 years of Hoiles family ownership of the Register. The decision to sell the Register and the other newspapers and television stations owned by the company ends years of bickering among family members. One group of Hoiles heirs, who wanted to earn more from Freedom’s holdings, in the end prevailed over others content to keep the Irvine-based company under their control.
Potential bidders surfaced immediately after the decision was announced. Gannett Co., owner of USA Today, expressed interest in Freedom, and other suitors were expected to emerge. Analysts said Freedom could fetch as much as $2 billion.
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CSFB’s Quattrone Quits,
Faces NASD Charges
Frank Quattrone, one of the most celebrated investment bankers of the 1990s, resigned from Credit Suisse First Boston and was charged by securities regulators with abuses related to his oversight of stock analysts and the handling of initial public stock offerings during the height of the bull market.
In documents describing their allegations, regulators made public new details about Quattrone’s alleged knowledge of government investigations when he sent an e-mail in late 2000 advising his staff to purge IPO-related documents. Prosecutors are studying that e-mail to determine whether to bring criminal obstruction-of-justice charges against Quattrone.
Among other things, the NASD accused Quattrone of doling out shares of coveted IPOs to corporate executives in exchange for lucrative financing work for CSFB. The NASD also charged him with improper oversight of stock analysts.
In a statement, Quattrone’s attorney, Howard Heiss, denied any wrongdoing by Quattrone. “The NASD charges are completely without merit,” he said.
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DWP May Have Reaped
Profits Unfairly in Crisis
More evidence is emerging that the Los Angeles Department of Water and Power may have violated state regulations by profiting unfairly from trading practices during California’s energy crisis.
DWP officials have denied gaming the market. But a summary of sealed evidence filed with federal regulators by state officials said the DWP and several municipal utilities were willing partners in a ploy allegedly involving nonexistent transmissions to create the appearance of congestion so utilities could collect payments to relieve it.
The report said state investigators had uncovered evidence that the DWP cooperated with power providers to halt detection of “ricochet,” in which energy firms moved electricity back and forth across the border to raise its price. DWP officials say the power never left California and the agency was just selling capacity on its transmission line.
The state attorney general’s office, two other state agencies and the state’s two largest electric utilities filed the allegations against 70 energy companies and municipal utilities with the Federal Energy Regulatory Commission. The coalition seeks $9 billion in refunds for alleged electricity overcharges during the energy crisis.
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Boeing, Hughes Settle With State Department
Boeing Co. and Hughes Electronics Corp. agreed to a $32-million settlement to resolve allegations that Boeing’s El Segundo satellite unit illegally provided China with sensitive technology in the mid-1990s.
Hughes owned the satellite business at the time of the violations; Boeing now owns it.
Ending a bitter and drawn-out dispute, Boeing and Hughes will pay the State Department $20 million in cash over seven years. They also will spend $8 million internally to bolster their export compliance programs. Boeing was credited with $4 million it has spent on strengthening its internal controls.
Hughes and Boeing acknowledge the “seriousness of the offenses charged by the Department of State,” including the harm such offenses could cause to the security and foreign policy interests” of the U.S., said a statement by Hughes President Jack Shaw and Dave Ryan, Boeing’s general manager for the satellite unit.
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State Gas Prices Soaring Faster Than Cost of Oil
Oil companies blame the recent spike in gasoline prices on the rising cost of crude oil. But in California, pump prices have jumped more than three times as much as oil prices in the last two months, state figures show.
Since the first week in January, the cost of crude oil delivered to California refineries has climbed an average 12 cents a gallon, while the statewide average retail price of regular gas has soared 43 cents a gallon, the California Energy Commission has determined.
Sen. Barbara Boxer (D-Calif.) called for an investigation into “possible manipulation” of the state’s gasoline supply. Boxer asked the General Accounting Office to look into California’s spiraling prices.
John Felmy, chief economist at the American Petroleum Institute, an industry trade group, said there was no basis for Boxer’s suspicions about California refineries.
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Vivendi Will Entertain All Offers for Assets
Oil magnate Marvin Davis learned that he isn’t holding the cards in his high-stakes bid to win control of Vivendi Universal’s entertainment properties.
Vivendi Chief Executive Jean-Rene Fourtou refused to give the Los Angeles billionaire exclusive negotiating rights for the entertainment and theme park assets. In a recent letter, Davis threatened to withdraw his $13-billion offer for a controlling interest in those properties unless his demand was met this week.
After a Vivendi board meeting in Paris, Fourtou said he was weighing a variety of options for the company’s operations and would not be pressured into a quick decision.
Davis declined to comment, but probably would keep his offer on the table, sources familiar with the negotiations said.
Fourtou’s remarks came as Vivendi reported a $25.5-billion net loss for last year -- the largest in French corporate history.
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FCC Media Chief Inclined to Lift Curbs
The federal official charged with rewriting media ownership rules said he was leaning toward lifting bans that prevent TV broadcasters from owning newspapers or more than a handful of radio stations in a single market.
In comments about the agency’s review, Federal Communications Commission Media Bureau Chief W. Kenneth Ferree said he would like to replace the regulations with a “diversity rule.” That approach might rely on a mathematical formula to measure diversity of media voices in a local market rather than blanket prohibitions.
The regulatory staff member said his views still may evolve as he consults with FCC Chairman Michael K. Powell and the four other commissioners, who will make the final decision. The commissioners are expected to vote on recommendations by Ferree’s staff by June.
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WellPoint’s Bid for CareFirst Dealt Setback
WellPoint Health Networks Inc.’s expansion was set back as Maryland’s insurance commissioner rejected the medical insurer’s bid to buy CareFirst Inc.
Commissioner Steven Larsen cited WellPoint’s proposed $1.37-billion bid as too low, along with other factors that failed to meet state requirements.
To extend its reach, Thousand Oaks-based WellPoint offered to buy CareFirst, a nonprofit Blue Cross organization with members in Maryland, Delaware, Virginia and the District of Columbia. CareFirst, of Owings Mills, Md., planned to convert to for-profit status to complete the sale to WellPoint. But the conversion needs approval from regulators in those states, and Larsen’s decision suggests the deal is on thin ice in the other locations as well.
WellPoint, the parent of Blue Cross of California, said it would “decide which additional actions, if any, are appropriate.”
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For a preview of this week’s business news, please see Monday’s Business section.
