TOP STORIES -- Feb. 1-6
January Payroll Growth Lower Than Expected
American employers expanded their payrolls by 112,000 in January, the largest addition of jobs in three years but still far below what most economists predicted.
The weaker-than-expected showing put off for at least another month a clear sign that employment growth has finally begun to follow economic growth. The economy has grown at a powerful 6% clip since the middle of last year while jobs have barely managed 1%.
The latest figures from the Labor Department ratchet up election-year pressure on President Bush, who has staked his reputation as an economic manager on a series of tax cuts that he says are reviving both jobs and growth. And they embolden Democratic challengers to renew claims that Bush has the worst jobs record of any president since Herbert Hoover.
This latest report showed that the unemployment rate fell to a two-year low of 5.6% last month from 5.7% in December. But analysts said that was largely the result of statistical adjustments that tend to be applied more heavily than usual to smooth out the effects of Christmas holiday hiring.
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Orange County Man Indicted in Fraud Case
Money manager James P. Lewis Jr. was indicted on 14 counts of mail fraud and money laundering, accused of bilking more than $200 million from about 3,000 people, many of whom lost their life savings. But it was the federal government -- not the state of California -- that brought the case against him.
That has left some aggrieved investors wondering why the state failed to go after Lewis and his company, Financial Advisory Consultants Inc., when it had the chance. State officials say they receive far more complaints than they can actively investigate.
The director of the Department of Corporations, William P. Wood, declined to comment on his agency’s handling of the Lewis matter since 2001. The department had received a letter in spring 2001 from regulators in Atlanta who had become increasingly suspicious of Lewis.
Lewis began refusing last summer to allow clients to withdraw money. In October, with investors eager to cooperate, the department called the FBI. The agency already was looking into Lewis on a tip from Barry Minkow, mastermind of the ZZZZ Best carpet-cleaning fraud, now a fraud consultant.
Lewis’ lawyer said he was reviewing the government’s material but could not comment further.
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Movie Academy Plans L.A.-Area Museum
The Academy of Motion Picture Arts and Sciences, sitting on a $134-million nest egg, plans to use some of that wealth to develop a “world-class” motion picture museum in the L.A. area.
The price tag and site are not yet known. But sources say academy governors are aiming for a project that would cost about $200 million and take about seven years to develop.
Although previous efforts have been made to start film museums in Los Angeles, the academy plan would be by far the most ambitious in scope and carry with it the stamp of the world’s most prestigious film organization. Academy executives said they wanted the museum to be a “major statement” comparable to such landmarks as the Walt Disney Concert Hall and J. Paul Getty Museum.
Academy President Frank Pierson said the governors envisioned creating not only a major Southern California tourist attraction but a film education center as well.
Funds from the nonprofit organization would be used as seed money to design an enterprise that is expected, in turn, to attract donations and possibly assistance from local government.
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Oracle Steps Up Bid for Rival PeopleSoft
Oracle Corp. raised its hostile tender offer for rival software maker PeopleSoft Inc. by a third to $26 a share, or $9.4 billion, in a bid to increase its chances of winning control of the firm if antitrust regulators decide not to oppose the combination.
The sweetened offer cleared suspicions that the database software giant was merely trying to disrupt PeopleSoft’s business with an unsolicited offer.
For Oracle to prevail, the Redwood City, Calif., company would have to persuade the holders of a majority of PeopleSoft shares to back the deal. Oracle also has to convince regulators in Washington and European Union that a combined company would not hold too much sway over the market for business productivity software.
Oracle said its offer would expire March 12, by which time it said it expected to have heard from federal regulators.
Pleasanton, Calif.-based PeopleSoft said its board would meet to decide whether to endorse the new bid. The company reiterated its reasons for rejecting Oracle’s previous offers, including its belief that Oracle plans to stop selling some of PeopleSoft’s software.
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Fallout Continues From Show at Super Bowl
The fallout from the Super Bowl halftime show continued as major broadcast networks scrambled to shield themselves from potential fines in the growing clamor over nudity and profanity on television.
A Pro Bowl halftime performance was scrapped. A five-minute delay was imposed on the Grammy Awards telecast. A shot of an elderly woman’s breast was deleted from an episode of “ER” on NBC. And producers of the Academy Awards show decided to use a short delay in its live broadcast.
As for Janet Jackson, whose breast-baring stunt set off the uproar, she will not participate as planned in tonight’s Grammy Awards ceremony on CBS, a person close to the singer said. Jackson’s Super Bowl dance mate, Justin Timberlake, was still scheduled to perform.
Federal Communications Commission Chairman Michael K. Powell said last week that he planned to oversee the commission’s investigation into the Super Bowl halftime show, which elicited complaints about singer Nelly’s crotch grabbing and the content of advertisements.
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Broker’s Aide Says Stewart Sold After Tip
Martha Stewart sold her stock in ImClone Systems Inc. after her broker’s assistant told her the company founder was trying to dump shares, the assistant said in testimony directly implicating the lifestyles mogul.
Douglas Faneuil, 28, then an aide to Stewart’s Merrill Lynch & Co. stockbroker, Peter E. Bacanovic, recounted the two- minute phone call on Dec. 27, 2001, that is at the heart of the federal fraud and obstruction-of-justice case against Stewart and Bacanovic.
Under examination by lead prosecutor Karen Patton Seymour, Faneuil said that when Stewart reached him Dec. 27, she said, “Hi. This is Martha. What’s going on with Sam?”
Sam was Stewart’s friend Samuel D. Waksal, then head of ImClone. Faneuil told Stewart there was no news out on ImClone, “but Peter thought you might like to act on the information that Sam Waksal was trying to sell all of his shares.”
Stewart asked for the price of ImClone shares, he said.
“So I gave her a quote,” Faneuil testified. “She said, ‘I want to sell all my shares.’ ”
A day later came an adverse regulatory ruling that caused ImClone stock to plunge.
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U.S. Investigates Hiring Practices at Ralphs
The U.S. attorney’s office in Los Angeles is looking into allegations that Ralphs supermarket managers have illegally hired locked-out union workers under false names and Social Security numbers, according to federal law enforcement sources.
Ralphs spokesman Terry O’Neil said that “it is against our policy for our managers to hire anyone who they know is using a falsified Social Security number or pseudonym.”
The federal probe follows a pair of lawsuits filed last month by the United Food and Commercial Workers union. It is not illegal for a striker to cross a picket line, but under a lockout, an employer can’t selectively hire back workers.
The National Labor Relations Board also is investigating the charges.
The UFCW struck Safeway Inc.’s Vons and Pavilions stores Oct. 11. Albertsons Inc. and Kroger Co.-owned Ralphs then locked out union workers.
Formal negotiations aimed at ending the long strike and lockout were expected to resume this week with a federal mediator, the union and the grocers said.
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Telecom Spending Helps Boost Sales at Cisco
Spending by telecommunications firms drove fiscal second-quarter sales at Cisco Systems Inc. to their highest level in more than three years, but net income fell because of costs from a pending acquisition.
The largest maker of computer networking equipment said profit fell to $724 million, or 10 cents a share, from $991 million, or 14 cents, a year earlier. Without $567 million in acquisition costs, Cisco would have had profit of $1.3 billion, or 18 cents. Sales rose 15% to $5.4 billion.
Sales to telecom, Internet and other service providers accounted for a quarter of Cisco’s revenue in the three months ended Jan. 24.
Cisco’s report gave some of the most compelling evidence to date of a resurgence in the long-suffering telecom industry. Chief Executive John Chambers also credited the improving economy. The company predicted that sales would be 18% to 20% higher in the current quarter than in the same period of 2003.
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For a preview of this week’s business news, please see Monday’s Business section.
