TOP STORIES -- Nov. 9-14
Charles Schwab Faces Regulatory Investigation
San Francisco-based investment giant Charles Schwab Corp. said regulators were investigating possible improper or illegal trading in some of the 3,000 mutual funds it sells, ensnaring the firm in the spreading fund industry scandal.
Schwab, which has long portrayed itself as a champion of individual investors, disclosed in a regulatory filing that it found evidence of a “limited number” of fund orders apparently entered after the 4 p.m. Eastern time market close but priced at the same day’s value. In addition, a “small number of parties” were allowed to rapidly trade in and out of the Excelsior Funds run by Schwab’s New York-based U.S. Trust unit.
The Securities and Exchange Commission and New York Atty. Gen. Eliot Spitzer are investigating Schwab and U.S. Trust. The SEC would not comment; calls to Spitzer’s office were not returned.
“A very small number of trades may have been entered incorrectly against our policies,” a Schwab spokesman said. “We are still trying to figure out the nature of the operational glitches. There is no evidence of staff trying to profit from the trades.”
*
In a Boost for California, Jobs and Exports Grow
California’s job market added a net 34,800 positions in October in the biggest one-month hiring binge seen in nearly three years.
Employers added jobs across industries, the state Employment Development Department reported. The big gains surprised economists and fueled hopes that the state’s long-awaited employment recovery has finally begun.
California’s unemployment rate rose in October to 6.6% from a revised 6.5% the month before. But that may be because more than 100,000 Californians flooded back into the job market.
Also, exporters in California posted their first increase in merchandise shipments in nearly three years. The trade data provided further evidence that the state’s economy, its high-tech industry in particular, is emerging from the doldrums.
In the third quarter, high-tech exports were down from year-earlier levels but up 4.2% from second quarter. Exports from farms and factories totaled more than $23 billion. That was up just $54 million, or 0.2%, from a year earlier but marked the first year-over-year increase since the export sector began to falter in early 2001.
*
U.S. Steel Tariffs Are Ruled Illegal by WTO
The World Trade Organization ruled that President Bush’s steel tariffs violated global trading rules, increasing pressure on the White House to rescind the levies or face retaliation by Europe, Japan and other countries.
The European Union said it would impose sanctions no later than Dec. 15 on a $2.2-billion list of U.S. goods unless Bush removed the tariffs. The sanctions would inflict symbolic and political pain for the president and GOP lawmakers.
The WTO decision, though expected, adds a sense of urgency to the president’s midpoint review of the three-year tariff program he put in place last year to help U.S. producers fend off foreign competition by propping up the price of steel.
Steel users have been pressuring the White House to stop the tariffs ahead of schedule.
“We disagree with the overall WTO report,” said White House spokesman Scott McClellan. White House officials have indicated that Bush would decide soon what to do about the tariffs.
*
Mediator Defers Talks Between Union, Grocers
Federal mediator Peter J. Hurtgen suspended negotiations between the grocery workers union and Southern California’s three major food chains. Talks had resumed Monday after a monthlong stalemate.
Hurtgen said the sessions had been useful but did not say when they would resume.
“The parties have issues and matters to reflect upon, and I will be in touch with them in the days ahead,” Hurtgen, director of the Federal Mediation and Conciliation Service, said in a statement.
Going into the talks, neither the United Food and Commercial Workers union nor the grocery chains had signaled any change in positions on key issues such as health-care coverage and a lower pay-and-benefits package for new hires.
The union and chains -- Safeway Inc.’s Vons and Pavilions, Kroger Co.’s Ralphs and Albertsons Inc. -- are honoring Hurtgen’s request for a news blackout on the progress of talks.
*
MPAA’s Valenti Likely to Leave Post in January
Jack Valenti, Hollywood’s voice in Washington for nearly 38 years, probably will step down in early January as chief of the Motion Picture Assn. of America while retaining the chairman’s title and continuing to oversee the movie ratings system he fathered, sources said.
People familiar with the matter said Rep. W.J. “Billy” Tauzin (R-La.) remained the clear front-runner to replace the 82-year-old Valenti, who last summer disclosed he was planning for succession but left the timing vague.
Tauzin has been linked to the job as far back as January. The chairman of the House Energy and Commerce Committee, 60, has been the subject of reports that a secret deal already has been set. But sources said there was no formal agreement between Tauzin and the MPAA.
Tauzin spokesman Ken Johnson said, “No one from the MPAA and none of the studio heads have contacted him about the position.” But, he said, “is he on their wish list? Absolutely.”
*
Microsoft Makes Its Case Against EU Sanctions
A team of Microsoft Corp. lawyers and economists sought to refute charges that the software giant used its market power to unfairly crush competition in Europe.
Observers at a closed-door hearing before the European Commission in Brussels described Microsoft’s presentation as a polished argument against sanctions that could include billions of dollars in fines and an order to modify Windows. The hearings focus on whether Microsoft improperly leveraged the dominance of Windows in the European market for servers and audiovisual software.
It was not clear what effect Microsoft’s presentation had on regulators, who are expected to rule on the case in the spring.
The Redmond, Wash.-based company has argued that its settlement with the Justice Department provided enough details of Windows’ workings to ensure competitive software.
*
Former Gateway Execs Face Civil Fraud Charges
Three former Gateway Inc. executives were charged with manipulating the computer maker’s financial results.
The Securities and Exchange Commission filed a civil fraud complaint against former Chief Executive Jeff Weitzen, former Chief Financial Officer John Todd and former Controller Robert Manza, alleging that they took improper steps to mask declining sales and boost revenue in 2000.
The SEC claims that in May 2000 the three executives realized Gateway would fall short of Wall Street’s expectations and altered numbers to “close the gap.” Gateway restated its 2000 results in February 2001. In April of this year, it restated portions of 1999, 2000 and 2001.
Attorneys for the three denied the allegations.
Also, the SEC concluded a wider probe into Gateway’s accounting without levying fines against the Poway, Calif.-based company or accusing any current executives of wrongdoing.
*
SEC and Putnam Reach Accord in Funds Scandal
Federal regulators and Putnam Investments reached a reform deal in the mutual fund trading scandal, potentially providing a blueprint for the rest of the industry as it struggles to restore public confidence.
But the agreement with the Securities and Exchange Commission was lambasted by Massachusetts regulators, who said that the SEC was letting Boston-based Putnam off easy -- and that the settlement sent the wrong message to other fund organizations under investigation.
Putnam said it agreed to a number of changes in the makeup of its fund boards to improve oversight. The fund firm also would hire an independent compliance consultant and restrict trading of fund shares by its employees. As with most SEC settlements, Putnam would not have to admit wrongdoing.
The SEC had charged Putnam with securities fraud for allowing two portfolio managers in recent years to engage in allegedly improper short-term trading of fund shares for their own enrichment, and to the potential detriment of other investors.
*
Supreme Court Will Hear Intel-AMD Case
The U.S. Supreme Court said it would intervene in a dispute between chip giants Intel Corp. and Advanced Micro Devices Inc. about when a company can be forced to share secret documents with foreign regulators.
Santa Clara, Calif.-based Intel is trying to beat back an attempt by rival AMD to get its hands on confidential Intel documents and pass them along to antitrust enforcers at the European Commission.
AMD says the documents will bolster its claim that Intel uses anti-competitive tactics -- such as illegal rebates, withholding technical information and threatening computer makers that use AMD products -- to protect market share in Europe.
In its filing to the Supreme Court, Intel argued that a company should not be able to demand documents that the foreign tribunal itself is not seeking.
For a preview of this week’s business news, please see Monday’s Business section.
