TOP STORIES -- March 9-14
Rally Loses Steam as Investors Tread Lightly
A big rally Thursday helped Wall Street break a two-week losing streak, but there was little follow-through Friday as investors continued to fret about a possible United States-led war against Iraq.
With the Middle East situation unresolved and war still a distinct possibility, analysts questioned whether the rally was meaningful. The week’s economic news was mixed, with upbeat profit outlooks from some companies counter-balanced by reports showing declines in consumer confidence and surging energy costs.
For the week, the Dow Jones industrial average gained 1.6%, while the Standard & Poor’s 500 index inched up 0.5%. The technology-laden Nasdaq composite index advanced 2.7%, putting it in positive territory for the year to date.
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Judge Blocks State’s Bid to Rein In Wells Fargo
A federal judge dealt a setback to the state’s efforts to regulate Wells Fargo & Co.’s mortgage unit and prevent the institution from operating in California because of allegedly unlawful lending practices.
U.S. District Judge Garland Burrell Jr. issued a preliminary injunction in Sacramento, saying the California Department of Corporations apparently lacks regulatory jurisdiction over the San Francisco-based bank’s mortgage lending activities. Burrell said Wells was likely to prevail in its suit against the state, in which the bank contends that it is subject only to federal rules.
Separately, Wells Fargo reversed itself and said it would contribute $267,000 to a war-reparations fund being created under a settlement last year between Belgium’s Jewish community and the banking industry.
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High Court Says Cancer Fear Can Merit Damages
Corporate America’s asbestos liability problem expanded as the Supreme Court ruled that workers’ fear of developing cancer can be the basis for winning extra damages from employers.
The 5-4 ruling came in a lawsuit against a railroad company, but the decision will extend broadly, beyond even asbestos cases, business experts said.
Paying for damage caused by asbestos has spawned a new industry in law and driven at least 57 companies to file for bankruptcy protection, including 26 since Jan. 1, 2000.
The justices said Congress should pass laws to cope with the “elephantine mass of asbestos cases.” In the meantime, the court said, it will not change the ordinary rules of liability to shield employers from paying injured workers.
The ruling upheld jury verdicts won by six retired railroad workers in West Virginia who were exposed to asbestos on the job and suffered scarring of their lungs. They said they feared they would die of cancer.
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Verizon Is Ordered to Slash Rates for Rivals
California regulators slashed prices that competitors must pay Verizon Communications Inc. for key parts of its telephone network, a move designed to jump-start competition in territories covered by the state’s second-largest local carrier.
Interim rates set by the state Public Utilities Commission took effect immediately and reduced by 31% to 60% the wholesale prices Verizon charges for access to local phone equipment.
Consumer advocates and other phone companies hailed the decision, saying it would open Verizon’s 6.3 million lines to much-needed competition. But the 4-1 PUC vote was a blow to Verizon, which long has been permitted to charge significantly higher wholesale and retail rates than SBC Communications Inc.
“We’re very disappointed with the decision,” said Phil Cleverly, the company’s state director for regulatory affairs.
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California Regulators to Sanction Allstate
California insurance regulators plan to sanction Allstate Insurance Co. for allegedly using customers’ credit records to set rates and pushing agents to alter policyholders’ driving mileage to collect higher auto premiums.
A spokeswoman for Insurance Commissioner John Garamendi said the agency already has decided to take action against Allstate for the two alleged violations and is waiting for recommendations from its attorneys before proceeding.
Allstate collected $1.56 billion in premium income last year from about 2.2 million policyholders in the state.
Use of credit ratings for auto insurance rate-setting purposes is prohibited by Proposition 103, approved by California voters in 1988. But Allstate has been doing it for at least a year, said Insurance Commission spokeswoman Nancy Kramer. Executives at Northbrook, Ill.-based Allstate could not be reached for comment.
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Northrop Gouging Navy, Pentagon Official Says
A top Pentagon official accused Northrop Grumman Corp. and General Dynamics Corp. of gouging the Navy on a massive program to build a new generation of nuclear attack submarines.
The accusation came as the Pentagon and the two companies negotiated the cost of a second batch of the submarines being built jointly by General Dynamics and Century City-based Northrop. The Navy’s apparent concern: The program’s price tag could grow by more than 17% to $83 billion, according to a Navy study.
A General Dynamics spokesman said it would be inappropriate for either firm to discuss comments from Pentagon acquisition chief Edward “Pete” Aldridge, as negotiations are continuing. Industry and Navy sources tried to downplay Aldridge’s remarks, saying they appeared to be his way of posturing for a better deal.
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Lockyer Sues Hollywood Charity Event Producer
California Atty. Gen. Bill Lockyer moved to shut down a prominent charity event organizer, accusing the firm of misusing funds from affairs backed by a stable of entertainment and political luminaries.
In a 53-page complaint, state prosecutors accused fundraiser Aaron Tonken, socialite Cynthia Gershman and two associates of orchestrating schemes that misdirected or failed to account for at least $1.5 million in charitable contributions.
The suit, filed in Los Angeles County Superior Court, said some funds were improperly diverted to accounts controlled by Tonken. Philip Levy, an attorney hired by Tonken to evaluate the complaint, said Tonken “never benefited personally from any of the events he produced.”
Richard Sherman, an attorney for Gershman, said he hadn’t seen the complaint and couldn’t address its specifics.
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Gallo Workers Vote on Petition to Cut UFW Ties
Farmhands at Gallo of Sonoma cast votes on whether to oust the United Farm Workers of America from the vintner’s fields, less than three years after the union won a hard-fought and much-publicized contract there.
A petition to break ties with the UFW had been filed with the state Agricultural Labor Relations Board by workers.
But the uncounted ballots were placed in a safe-deposit box at a Santa Rosa, Calif., bank, pending the outcome of a labor board investigation. UFW officials alleged that Gallo representatives pressured workers to sign the decertification petition and that family scion Matthew Gallo promised workers raises if they ousted the union.
Gallo of Sonoma, a unit of E. & J. Gallo Winery, countered with its own charges, alleging that UFW representatives threatened workers and labor contractors. Each party denies the other’s allegations.
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SEC Presses Gemstar Founder, Ex-CFO to Talk
The founder and the former chief financial officer of Gemstar-TV Guide International Inc. have reneged on commitments to honor subpoenas issued by the Securities and Exchange Commission, prompting the agency to seek a court order to compel them to testify.
The SEC, which is investigating Pasadena-based Gemstar’s financial reporting practices, said in court filings that former finance chief Elsie Leung “failed to obey” a subpoena to appear March 10 in U.S. District Court for the Central District of California. The filing said founder and former Chief Executive Henry Yuen informed the SEC he would not testify March 24.
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News Corp., a major shareholder, said it “continues to cooperate fully with the SEC’s investigation and has directed its employees to do the same.”
Stanley Arkin, the attorney representing Yuen and Leung, said his clients needed more time to review documents.
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Revised State Job Data Show Gain, Not Loss
The state Employment Development Department said California didn’t lose 10,500 nonfarm jobs in January as previously reported. Instead, state payrolls grew by 28,500 jobs.
The unusual revision in the job numbers, officials said, was because of a technical error in the way the federal Bureau of Labor Statistics calculated the movement of seasonal workers in the winter.
A gain rather than a loss of jobs in one month doesn’t significantly alter the general pattern of the state’s economic recovery, which has been tepid and uneven since summer.
Most other states were unaffected as they don’t release seasonally adjusted economic data.
