TOP STORIES -- April 27 -- May 2
Wall Street Firms to Pay
$1.4-Billion Settlement
One of the biggest scandals in Wall Street history reached an important watershed when securities regulators announced a sweeping legal settlement that will change the way brokerage firms do business.
The accord, reached with 10 major firms after months of negotiations, calls for the industry to pay $1.4 billion and implement reforms to restore investors’ shaken trust in Wall Street.
The deal ends several investigations into whether analysts intentionally skewed advice given to ordinary investors. The probes peeled back the curtain on a host of practices that became commonplace on Wall Street in the late 1990s. They revealed that some analysts, despite personal misgivings, touted stocks to entice companies to hire their firms for fee-rich services such as underwriting securities or giving merger advice.
As is common in such settlements, the firms neither admitted nor denied guilt. However, regulators said their primary goal was to bolster investors’ legal cases against the firms.
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Steep Cost of Free Music
Hits Four Collegians
Four college students learned that free music downloads can carry a hidden price tag -- in this case, thousands of dollars.
The major record companies had accused the students -- two at Rensselaer Polytechnic Institute in New York, one at Princeton University in New Jersey and one at Michigan Technological University -- of fueling music piracy by running file-sharing networks on campus and offering songs for copying.
The four settled the companies’ claims and promised not to violate their copyrights. The students did not admit to committing or aiding piracy, but each agreed to pay $12,000 to $17,500 to the Recording Industry Assn. of America, the labels’ trade group.
The settlements mark the first time the record companies have recovered money from individuals in the United States accused of piracy on file-sharing networks.
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Nation’s Jobless Rate Rises to 6% in April
The U.S. unemployment rate rose to 6% in April as companies slashed jobs for the third straight month -- particularly in manufacturing, airlines and department stores.
Last month’s jobless rate was up two-tenths of a percentage point from March, with payrolls falling by 48,000, the Labor Department reported.
In a separate report, the Commerce Department said factory orders rose 2.2% in March, an improvement over the 1% decline registered in February and the largest gain in eight months.
A big fear among economists is that consumers, whose spending accounts for two-thirds of U.S. economic activity, will continue to keep their wallets closed as layoffs continue and hiring remains stagnant.
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Apple Chief Launches Online Music Service
Steve Jobs, chief executive of Apple Computer Inc., unveiled the company’s online music service, promising to lure customers from unauthorized file-sharing networks with what he called “a major milestone in the evolution of the real digital music age.”
Packed with 200,000 downloadable songs available for 99 cents apiece, Apple’s iTunes Music Store is the first industry-endorsed service to forgo subscription fees. The service allows users to transfer songs to as many as three computers and an unlimited number of iPod music players. All five major record labels are supplying content to the service, which offers free 30- second samples and purchases with a click of the mouse.
The Music Store is available only to users whose machines run on Mac OS X, Apple’s latest operating system, although Jobs promised a Microsoft version by the end of the year.
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Fed Chairman Issues a Cautious Outlook
Federal Reserve Chairman Alan Greenspan offered a surprisingly cautious assessment of the U.S. economy, saying that the country is poised to resume strong growth with the end of the Iraq war but warning that there are few signs of a much-needed pickup in business investment and hiring.
A week after President Bush signaled that he would nominate the central banker to a fifth term as Fed chairman, Greenspan sought to offer a kind word about the White House’s multibillion-dollar tax cut proposal. But he said he could support the cuts only if they were accompanied by spending cuts of similar size.
Greenspan reiterated his confidence in the nation’s economic prospects in his address to the House Financial Services Committee. But he coupled that with caveats. Consumer confidence is recovering with war’s end, he noted, but “reports from businesses have not exhibited a similar improvement in tone.”
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Affidavit Alleges Rap Label’s Drug Dealer Ties
Record label Murder Inc. has exploited the notoriety of a convicted drug dealer with a reputation for violence to intimidate industry rivals through threats and extortion, according to a newly unsealed federal affidavit.
The document alleges that a secret relationship has existed for several years between convicted felon Kenneth McGriff and Murder Inc., founded by record producer Irv Gotti, a childhood friend. The government contends that McGriff has used the company to launder proceeds of alleged narcotics dealing.
Among other things, the affidavit states that McGriff was being paid by Murder Inc. under various aliases to conceal payments from the label, which is part of Vivendi Universal’s Universal Music Group.
McGriff and Gotti could not be reached for comment. They previously have denied wrongdoing. Island Def Jam, which has provided funding to Murder Inc., would not discuss the case, nor would Universal Music Group.
The affidavit arises out of a probe by a federal task force into the finances of Murder Inc. and its relationship with McGriff.
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Blackstone May Buy Vivendi’s Theme Parks
Vivendi Universal is in advanced talks to sell its flagship theme parks to a New York investment firm in what could be the first step toward dismantling its entertainment empire in a bid to raise cash, a source familiar with the discussions said.
Blackstone Group is negotiating with the Paris-based company to buy all or part of its theme park division, the source said. Blackstone already holds a 50% stake in the two parks that make up Universal Orlando.
The theme park operation is likely to fetch about $1.5 billion, according to analysts.
The talks come as Vivendi made clear last week that it planned to sell not only the theme parks but also its Universal movie studio and television properties by year’s end. The fate of Universal’s music division remained less certain.
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Northrop 1st-Quarter Income Rises Sharply
Northrop Grumman Corp., bolstered by its TRW Inc. acquisition and Pentagon spending that helped its defense businesses, posted sharply higher first-quarter profit and raised its earnings forecast for the year.
Century City-based Northrop, the nation’s second-largest defense contractor, had net income of $253 million, or $1.34 a share, contrasted with a loss of $283 million, or $2.56, a year earlier, when it took a $432- million charge to write down goodwill assets on various acquisitions. The latest results beat Wall Street’s expectations. Sales rose nearly 50% to $5.9 billion.
Northrop raised its estimate of year-end operating earnings to $3.80 to $4.20 a share from its forecast of $3.65 to $4.15, in part because of a lower tax rate.
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Wells Loses California Mortgage Licenses
California officials revoked Wells Fargo & Co.’s state mortgage lending licenses, marking the latest development in a long, bitter feud over which government agencies have authority over the San Francisco bank.
Regulators and bank officials said Wells’ California customers were unlikely to be affected because Wells would be able to continue making and servicing home loans under authority granted by federal regulators.
The dispute turns on Wells’ refusal to obey a state law barring lenders from charging interest until the day before a mortgage is officially recorded. Wells maintains that the law is impossible to comply with and does not apply to nationally chartered banks such as itself.
Wells Fargo mortgage chief Pete Wissinger said, “Our customers ... can feel confident that Wells Fargo will continue to originate, process and service mortgage loans.”
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Chevron Profit Jumps to Nearly $2 Billion
ChevronTexaco Corp. said first-quarter profit more than doubled, boosted largely by the same higher oil prices that sent gasoline prices to record levels in California and elsewhere.
The San Ramon, Calif., company is the latest in a string of oil firms to report higher profits as crude prices jumped on concerns over war in Iraq and an oil worker strike in Venezuela.
ChevronTexaco posted net income of $1.9 billion, or $1.81 a share, up from $725 million, or 68 cents, a year earlier. Sales rose 47% to $30.6 billion.
Consumer advocates were quick to point to the first-quarter results as proof that ChevronTexaco and others benefited at the expense of motorists. A Chevron spokesman rejected the notion that its refineries were collecting unseemly profits.
