TOP STORIES -- Aug. 31-Sept. 5

NBC in Tentative Deal for Universal Assets

In a move that could further consolidate a media landscape already dominated by a handful of titans, Vivendi Universal and General Electric Co.’s NBC entered into negotiations to create a multibillion-dollar entertainment powerhouse.

Vivendi’s board met in Paris and agreed to sign a nonbinding letter of intent to merge NBC’s broadcast network and cable channels with Universal’s venerable movie studio, theme parks and TV group. The venture, tentatively dubbed NBC Universal, overnight would become the world’s eighth-largest media company based on revenue.

Vivendi would receive a 20% stake in the joint operation, which would be managed by NBC. Vivendi envisions selling its share of the business and exiting Hollywood by 2008.

As part of the proposed venture, GE would assume $1.6 billion of Vivendi’s debt and help Vivendi secure $3.8 billion in upfront cash backed by GE stock. GE is effectively valuing the Universal entertainment assets at $14.4 billion, exceeding Vivendi’s $14-billion asking price.

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N.Y. Attorney General Targets Fund Firms

New York Atty. Gen. Eliot Spitzer accused four major mutual fund firms of letting a privileged client engage in improper trading that, industrywide, may cost ordinary investors billions of dollars a year.

Spitzer named only four fund groups -- Bank of America’s Nations Funds, Bank One’s One Group funds, Janus Capital Group and Strong Capital Management -- but said his probe would “radiate out in many different ways.”

Spitzer announced a $40-million settlement with hedge fund group Canary Capital Partners, two units and Canary’s managing partner, Edward J. Stern. According to the complaint, Canary was allowed to engage in trading that victimized ordinary mutual fund investors. Stern did not admitting wrongdoing. Canary said it agreed to the settlement to “avoid protracted and complex litigation.”

The mutual fund firms named in the Canary court filing have not been formally charged with anything. Bank of America, Bank One and Strong said they were cooperating with the probe. Janus said it “is reviewing the complaint closely.”

Separately, the Securities and Exchange Commission is seeking information from fund companies and investment banks about involvement in “late trading” and “market timing.”

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Court Blocks FCC’s Bid to Relax Media Rules

In a stinging reversal for the Federal Communications Commission, a federal appeals court issued an emergency order blocking far-reaching media ownership rules from taking effect as scheduled.

The surprise decision by the U.S. 3rd Circuit Court of Appeals throws into question when, and even whether, the agency’s new regulations will be implemented.

The temporary stay delivered an immediate victory to opponents of the relaxed media ownership rules and a defeat to FCC Chairman Michael K. Powell, who had championed the changes. The ruling appears likely to trigger an extended legal battle over how large TV and radio broadcasters may grow and whether a single company may own newspapers and TV stations in the same market.

The Philadelphia court said there was little indication that a stay would harm the FCC or media companies.

Also, a Senate committee voted to keep any broadcaster from owning TV stations reaching more than 35% of the national audience. President Bush has threatened to veto efforts to roll back the FCC reforms.

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Payrolls Slashed Again; Economic Worries Rise

U.S. companies slashed payrolls for a seventh straight month in August, raising new worries that a weak jobs market could shackle the budding economic recovery despite a slight improvement in the overall unemployment rate.

Payrolls fell by 92,000 last month after a net loss of 49,000 jobs in July, the Labor Department reported. Analysts had expected an improving economy to create 12,000 net jobs.

Based on a separate survey of households, the unemployment rate fell in August to 6.1% from 6.2%. Labor Department analysts said they believed that the payroll statistics from the survey of businesses provided a more accurate picture of the economy.

Recent economic data had suggested that the economy was perking up: Many retailers reported robust August sales, construction spending was up, and manufacturers saw demand for their products sharply rise.

Businesses remain extremely cautious about hiring, however, and are holding down costs by doing more with fewer workers. That huge rise in productivity is to blame for some job losses.

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Universal Cuts CD Prices to Fight Net Downloads

Universal Music Group said it would slash the wholesale price of its CDs by 25% in a bid to revive an ailing market and discourage piracy.

The step could shake up the economics of the record industry, leaving consumers among the biggest beneficiaries of Universal’s action and retailers among the biggest losers.

The Vivendi Universal Inc.-owned giant said the lower prices, expected to kick in Oct. 1, would be maintained at least through the year-end holidays.

By cutting prices, Universal is offering consumers a carrot, at a time the Recording Industry Assn. of America has threatened litigation against those who download songs without paying.

Universal also jolted retailers by disclosing a plan to halt discounts and “positioning” fees for shelf placement. Many store owners have been earning more from fees than from selling CDs.

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Utilities Told to Refund $1 Billion to Customers

State regulators voted to refund $1 billion to customers of Southern California Edison and two other major utilities, a move made possible by lower wholesale electricity costs.

The one-time rebate will be about $40 for a typical Edison residential customer and $100 to $300, on average, for a small business. Large industrial and commercial users will see significantly bigger refunds.

Customers of PG&E; Corp.’s Pacific Gas & Electric Co. and Sempra Energy’s San Diego Gas & Electric Co. will get similar refunds. Refunds will appear as a credit on customer bills starting in about two weeks.

The rebate had to be approved by the state Public Utilities Commission.

Of the $1 billion being returned to ratepayers, $422 million will go to customers of Edison International’s Southern California Edison utility. Pacific Gas & Electric, which serves Central and Northern California, will get $444 million, and San Diego Gas & Electric, which also serves much of southern Orange County, $135 million.

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Reed Slatkin Sentenced to 14 Years in Prison

Reed E. Slatkin, who took $593 million from investors in one of the biggest Ponzi schemes in history, was sentenced to 14 years in prison by a Los Angeles judge. Some investors had criticized prosecutors’ recommendation for an 11-year sentence.

Citing “the tremendous harm he has done,” U.S. District Judge Margaret Morrow rejected the former Santa Barbara money manager’s claim that he had acted under “duress and diminished capacity” because of threats from fellow Scientologists who allegedly urged him to continue his scam.

Morrow credited Slatkin, 54, with helping authorities unravel the financial fiasco but raised questions about the timeliness and degree of his assistance.

Slatkin’s fraudulent financial empire lasted 15 years, dissolving into bankruptcy proceedings in May 2001 and leaving investors with a loss prosecutors set at $240 million. Slatkin, who was taken into custody in April 2002, pleaded guilty to 15 counts of fraud, conspiracy and money laundering.

Morrow also entered an order requiring Slatkin to repay the $240 million in losses suffered by his victims.

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U.S. to Investigate Gasoline Price Rise

Federal authorities will investigate recent gasoline price increases that have angered motorists across the country, Energy Secretary Spencer Abraham told Congress. Last month’s run-up in pump prices “struck me as being unusually large ... and in need of greater explanation,” Abraham said.

Abraham had been invited to testify on last month’s Northeast power blackout. Instead, he was peppered with questions about gasoline prices, reflecting the widespread public frustration over the increases. “What we’ll look into ... is whether or not anybody took advantage of the situation,” said Deputy Energy Secretary Kyle McSlarrow.

The national average for self-serve regular grade hit an all-time high of $1.75 a gallon for the week ended Aug. 25. California prices soared 36 cents a gallon in the two weeks before Aug. 18.

The Energy Department’s Energy Information Administration will conduct the inquiry.

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France’s Credit Lyonnais Agrees to Plea Deal

Paris-based Credit Lyonnais and the French government have agreed to plead guilty to criminal charges and pay $575 million in connection with the bank’s allegedly fraudulent purchase of California’s Executive Life Insurance Co. in 1993.

Consortium de Realisation, a French government-owned corporation formed in 1995 to bail out Credit Lyonnais, said it had “reached an agreement in principle with the U.S. attorney’s office in Los Angeles.”

A spokesman for that office confirmed that there was “a settlement in principle” and said it would “likely be several weeks before it is finalized.”

Consortium de Realisation said it and the bank were “pleased to have resolved the criminal investigation” and that they would “continue in related civil litigation to defend vigorously allegations that their actions harmed Executive Life policyholders.”

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For a preview of this week’s business news, please see Monday’s Business section.