Week in Review
Stock Market Chief Resigns in Pay Furor
New York Stock Exchange Chairman Richard Grasso resigned Wednesday, unable to withstand the uproar over a $140-million pay package that critics said made him look more like a symbol of Wall Street greed than one of the world’s most important financial regulators.
In an emergency board meeting convened 15 minutes after the stock market closed for the day, NYSE directors requested, received and accepted Grasso’s resignation, climaxing an increasingly bitter three-week flap that market professionals said was tarnishing the Big Board’s reputation and becoming a major distraction from its business.
In his first public appearance as the temporary leader of the NYSE, director H. Carl McCall promised Thursday that the exchange would “operate differently” from the way it did under Grasso.
For one thing, McCall said, the Big Board would pay more attention to its prime customers, including the giant California pension funds that helped precipitate Grasso’s resignation.
McCall took himself out of the running for Grasso’s job, as did several other prominent figures floated as candidates.
The markets largely shrugged off the turmoil. For the week, the Dow rose 1.8%, the Nasdaq gained 2.7%, and the S&P; advanced 1.7%. The Dow has gained in six of the last seven weeks; the Nasdaq and S&P; have posted wins in five of the last six weeks.
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U.S. Vows to Pursue Pacts Outside WTO
Faced with a disappointing setback in global trade talks, U.S. officials vowed to push forward on bilateral and regional border-opening agreements to create a coalition of countries that are enthusiastic supporters of the U.S. trade agenda.
A senior official, who insisted the United States was not looking to “place blame” for the failure of the World Trade Organization talks in Cancun, Mexico, said Washington would find other ways to advance trade liberalization if the global effort bogged down further because of increasing acrimony between rich and poor nations.
The WTO talks in the Mexican resort were halted abruptly last Sunday after about 90 developing countries represented by Botswana refused to consider adding new issues to the agenda, contending that the United States and the European Union had failed to live up to promises to slash their farm subsidy programs.
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Senate Rejects Rules on Media Ownership
The U.S. Senate voted to reject media ownership rules approved by the Federal Communications Commission that would clear the way for greater media consolidation.
The rules, which a Philadelphia appellate court already had blocked, would permit mergers between TV station owners and newspapers in the same market and allow broadcasters to expand their reach locally and nationally.
The 55-40 bipartisan vote in support of a rarely invoked legislative veto is likely to prove symbolic. Leaders in the House have said they had no plans to consider a similar move, and President Bush has threatened to veto any effort to block the FCC from implementing the new rules.
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BofA Broker Charged in Illegal Fund Trading
New York Atty. Gen. Eliot Spitzer’s probe of the mutual fund industry yielded its first criminal prosecution when a former Bank of America Corp. broker was charged with helping a well-heeled investment firm conduct illegal fund trading.
In a complaint filed in state court in Manhattan, Spitzer accused the ex-broker, 36-year-old Theodore Sihpol, of grand larceny and securities fraud, alleging that he helped a private investment group, Canary Capital Partners, engage in the late trading of mutual funds. The Securities and Exchange Commission filed a separate civil action against Sihpol.
The criminal complaint comes two weeks after Spitzer rocked the $6.9-trillion mutual fund industry by revealing his investigation into whether a wide swath of fund companies let privileged customers engage in trading practices that collectively may have cost small investors billions of dollars.
Spitzer told reporters that his investigation was “likely to result in numerous other charges.”
Sihpol’s attorney, Don Buchwald, said his client would plead not guilty.
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‘AOL’ Shed From Media Giant’s Name
When it came time to christen the world’s largest media conglomerate three years ago, there was no question which company’s name would come first: that of highflying Internet service provider America Online.
On Thursday, AOL Time Warner Inc.’s board of directors voted to erase the most visible reminder of that ill-fated marriage of old and new media. The company will be known as Time Warner Inc., reverting to the name of the stalwart entertainment and publishing giant that was gobbled up by the cocky dot-com.
The merger that created AOL Time Warner was supposed to reinvent the media world by meshing prized entertainment assets with the Internet’s ability to deliver. At the time, it was hailed as nothing less than a model of the New Economy.
But the “synergies” that were supposed to usher in this new era never materialized. As the online division’s struggle dragged down the entire company and its once-golden stock price, AOL Time Warner quickly became synonymous with failed corporate ambitions.
“They may be hoping that by dropping the name they can forget the merger ever happened,” said Denise Garcia, an analyst at GartnerG2, a technology research firm, in New York. “But they’re still going to have to figure out how to integrate and become a digital media company.”
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Lockheed Martin to Buy Titan for $1.8 Billion
Lockheed Martin Corp., seeking to beef up its presence in military electronics and government computer systems, said it had agreed to buy San Diego-based Titan Corp. for $1.8 billion in cash and stock.
Titan, with about 11,000 employees, develops and services sophisticated electronics and computer-based information systems used by the Defense Department, the Department of Homeland Security and other government agencies. Revenue last year was $1.4 billion.
The offer by Bethesda, Md.-based Lockheed Martin, the largest U.S. defense contractor, follows acquisitions by Lockheed and other major weapons makers to broaden their product lines, especially in the areas of intelligence and surveillance.
Under the deal, which was approved by both companies’ boards of directors, Lockheed would pay $22 in cash and stock for each of Titan’s shares, nearly a 30% premium over Titan’s closing stock price Monday.
Titan’s stock has climbed 63% this year, as other small and mid-size providers of defense electronics and information technology services have been gobbled up by larger firms.
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ABC to Continue Show After Loss of John Ritter
Executives at ABC decided that the network’s prime-time comedy “8 Simple Rules for Dating My Teenage Daughter” would resume production, despite the unexpected death of its star, John Ritter. The program will stay in its regular Tuesday slot at 8 p.m. and incorporate the loss of his character into the story line.
It’s a risky move for ABC in that it probably will require a shift from broad comedy, which played off Ritter’s knack for physical humor, to a sadder, more heartwarming tone.
“8 Simple Rules” was a modest hit last season for Walt Disney Co.-owned ABC but is one of the most important shows for the network as it struggles to reverse declining ratings and ad revenue. The show will launch its second season as scheduled this week with the first of three episodes Ritter filmed before he died of an undetected heart flaw Sept. 11. That episode, as well as the next two, will feature a special introduction by cast members paying tribute to the actor, who played the harried father of three teenagers.
Reruns from the show’s first season will air in the time period for an undetermined number of weeks. When the series returns with original episodes, Ritter’s character will have died, and the Hennessys, his TV family, will be dealing with his loss while trying to build a new life.
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Park Place in Deal for Casino Near Temecula
Park Place Entertainment Corp., the world’s largest casino company, said it had reached a tentative deal to open its first gambling operation in California, a $250-million Caesars resort on Indian land near Temecula.
Park Place would join other large casino operators that have entered California’s lucrative Indian gambling industry in recent years as tourism has slowed in Las Vegas. Harrah’s Entertainment Inc., Station Casinos Inc. and Trump Hotels & Casino Resorts Inc. already manage casinos in California for Indian tribes in exchange for a share of the profits.
The Pauma-Yuima Band of Mission Indians picked Park Place to build and manage the proposed 500-room hotel and casino complex on a site off Highway 76 where the tribe now operates a small tented gambling operation.
The company has to complete its agreement with the tribe, and the 100,000-square-foot casino would need to be approved by the National Indian Gaming Commission and other regulators. But Park Place said the casino could open as early as 2005.
