TOP STORIES -- May 18-23
Tax Plan Could Benefit Most Income Groups
The tax cut plan approved by Congress could put a new television in nearly every middle-income family’s den -- and a Mercedes in every wealthy family’s garage -- by providing hundreds or even thousands of dollars in federal income tax savings.
The compromise plan proposes to cut marginal tax rates, give big credits to families with dependent children, slash taxes on dividend income and investment gains and provide some relief from the so-called marriage penalty that plagues many two-income couples.
President Bush has said he would sign the bill when it reaches his desk.
The biggest winners: married couples with children, who would benefit from marriage penalty relief and hefty credits for having children under age 17; wealthy taxpayers, who could save thousands through cuts in marginal tax rates; and investors, who could reap the rewards of lower taxes on dividends and investment gains.
One caveat: Many of the tax breaks have sunset provisions. Unless Congress votes later to extend the tax breaks -- or to make them permanent -- the savings included in the new tax cut bill would disappear.
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Court Throws Out Award Against Big Tobacco
Cigarette makers scored a huge win when a Florida appeals court tossed out a $144.8-billion verdict against them and declared that the case should never have been tried as a class action in the first place.
The long-awaited ruling by Florida’s 3rd District Court of Appeal overturned the record punitive damage award, which was to be split among members of an immense class of Florida smokers. As many as 700,000 smokers were seeking compensation for tobacco-related diseases, which they blamed on an industry conspiracy to conceal the addictiveness of smoking.
The July 2000 damage award by a Miami jury in the so-called Engle case was by far the largest in U.S. history.
The case was brought against Philip Morris USA, R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco and Liggett Group, along with two defunct industry organizations.
Teen Hoops Sensation Scores Nike Contract
Ohio high school basketball phenomenon LeBron James scored big with a seven-year, $90-million endorsement deal with sneaker giant Nike Inc., the most ever paid for an entry-level player.
James, 18, is expected to be the National Basketball Assn.’s No. 1 draft pick next month. And although untested in the pros, the 6-foot-8 player was so impressive in training sessions with various teams that many observers expect him to make an immediate mark in the NBA.
Nike said it was willing to plunk down the money because of James’ “tremendous talent potential,” as well as his “rare combination of showmanship and humility -- in huge doses.” Sports marketing experts say James has a proven ability to make cash registers ring, a dream for companies endlessly looking to re-create the gold standard of marketing magic that Nike forged with basketball great Michael Jordan.
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HMOs Vow to Continue Fighting Doctors’ Suit
Some of the nation’s largest managed-care firms vowed to continue to fight a racketeering lawsuit filed against them by 600,000 doctors, despite Aetna Inc.’s announcement that it would pay $470 million to settle the case.
The proposed settlement by Aetna, the nation’s second-largest health insurer, must be approved by a Florida judge. But the agreement sent shock waves through the managed-care industry. Several major companies said they would continue to defend themselves against the suit.
The landmark class-action case was filed in 2000 by doctors and medical associations in California and several other states against the eight largest managed-care firms, alleging they delayed and denied the doctors’ rightful pay and hurt patient care by denying claims.
Among those vowing to continue to contest the suit are WellPoint Health Networks Inc. of Thousand Oaks; Health Net Inc. of Los Angeles; Louisville, Ky.-based Humana Inc.; and Indianapolis-based Anthem Inc.
Disney Puts Its Retail Stores Up for Sale
Walt Disney Co. is putting its chain of signature stores on the block after a series of missteps and sharp turns in the economy.
Executives of the Burbank-based entertainment giant said the company planned to close more than 100 of its Disney Store outlets during the next six months and sell the remaining stores to one or more buyers that would operate them under a licensing agreement.
Disney Store Inc. President Peter Whitford will be replaced temporarily by Andy Mooney, chief of Disney’s consumer products unit.
The announcements came after several years of attempts to revamp the stores, which have been a drain on Disney since the late 1990s.
Founded in 1987, the Disney Stores have been among the most visible symbols of the company but, according to analysts, have struggled from overexpansion, a failure to respond quickly to changing trends and a falloff in demand for merchandise featuring its animated movie characters.
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Bronfman’s Universal Bid Is Met With Doubt
Edgar Bronfman Jr.’s eleventh-hour decision to try to buy Vivendi Universal’s entertainment assets was greeted with surprise and skepticism by Wall Street and Hollywood insiders.
Given his track record, many wondered how Bronfman, the vice chairman of Vivendi’s board, would be able to pull off an ambitious play for Universal’s movie studio, theme parks, television assets and Universal Music Group, the world’s largest recording company. The assets are valued at about $16 billion, excluding debt.
After all, it was Bronfman who decided to join forces with former Vivendi Chief Executive Jean-Marie Messier when his family sold the Seagram Co. entertainment empire in 2000 to the French company for $34 billion. The deal produced disastrous results for investors, especially the Bronfmans.
“He’s seen by many on Wall Street as something of a dilettante, but you can’t rule out any outcome because of the family’s wealth and interest in the assets,” New York money manager Andrew Wallach said.
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Colon Cancer Drug News
Lifts Genentech Stock
Genentech Inc. said its experimental biotech drug Avastin improved the survival of colon cancer patients who received the medication in a large clinical trial, possibly setting the stage for a new way to treat cancer.
Wall Street drove Genentech’s shares up 45% on Monday, adding $8.7 billion to the total market value of the South San Francisco company. The shares rose 11% in subsequent days, bringing the company’s gain for the week to 61%.
Industry analysts said it looked likely that the injectable drug, which could cost $15,000 to $20,000 a year per patient, would win Food and Drug Administration approval within a year.
The Medical Technology Stock Letter in Berkeley estimated that Avastin’s annual sales could reach $2 billion for colon cancer alone.
A dozen analysts stampeded to upgrade their “buy” recommendations after the announcement. But because of the sharp run-up, analysts Alexander Hittle and Craig West of A.G. Edwards & Sons Inc. downgraded Genentech on Tuesday to “hold” from “buy.” They cautioned against investing in Genentech, calling Monday’s price jump “excessive in the extreme.”
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High Court Orders Review of Ford Case
The U.S. Supreme Court ordered a California appeals court to reconsider a $290-million jury award against Ford Motor Co. in a sport utility vehicle accident that killed three members of a Northern California family.
Ford’s Los Angeles attorney, Theodore Boutrous Jr., said the ruling “sends a strong signal that excessive and arbitrary awards will not be tolerated.”
The high court decision in the Ford case came in the wake of the court’s ruling last month that juries cannot indicate their displeasure with an entire industry or an “unsavory business” by punishing a single company with an enormous damage award.
In addition to the Ford case, a number of high-profile cases involving automotive, tobacco and insurance companies could be affected, analysts said.
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China Is Region’s
Top Trade Partner
China boosted its trade with Southern California 22.5% to $55.5 billion last year, replacing Japan as the region’s top trading partner, according to a report by the Los Angeles County Economic Development Corp.
But China’s explosive export-driven growth could be curtailed by the outbreak of severe acute respiratory syndrome, or SARS, which has wreaked havoc with the region’s airlines, hotels and other service industries, the report warned.
Any significant disruption to China’s economy would be felt throughout California’s trade-dependent economy. In addition to being a key manufacturing base, China is an important market for California-produced oranges, almonds, semiconductors and aerospace parts. Last year, China imported $6.1 billion worth of goods from Southern California. That made it the region’s second-largest customer.
From Times Staff and Wire Reports
For a preview of this week’s business news, please see Monday’s Business section.
