TOP STORIES -- June 13-18
California Adds Jobs for 3rd Month in Row
California employers added jobs in May, marking a third straight month of gains, a milestone not achieved in more than three years and a sign that the state’s fragile recovery is sustainable.
The net gain of 23,600 jobs, although modest, was broad-based, lifting employment in every field except natural resources and government, the state Employment Development Department said. The leisure and hospitality category showed the largest monthly gain. Manufacturing added a small number of jobs for a second month, a sign that the sector has finally bottomed out, economists said.
California’s rate of job growth nearly matched that of the nation, after lagging behind for several months. But the state’s unemployment rate remained unchanged at 6.2% as the newly employed were replaced by new or returning job seekers.
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MGM-Mandalay Casino Deal Back on Track
The deal that would create the world’s largest casino company appeared back on track when Kirk Kerkorian’s MGM Mirage and Mandalay Resort Group signaled they had agreed on terms of a $4.8-billion buyout.
If approved by antitrust regulators, MGM Mirage’s proposed acquisition of Mandalay Resort would give Kerkorian, the 87-year-old Los Angeles financier who is MGM Mirage’s majority shareholder, control of about half the business on the Strip.
The buyout, approved by the board of Mandalay, faces potentially tough scrutiny from federal antitrust regulators and Nevada gaming officials.
After considering MGM Mirage’s $68-a-share offer for a week, Mandalay negotiators were surprised by a last-minute demand that would have given Kerkorian’s company a 15-month window in which to walk away if regulators forced it to sell casinos. Mandalay rejected the offer and broke off talks.
But MGM Mirage came back, offering to do the deal without the escape clause. An agreement was struck at $71 a share. The deal also would include assumption of $3.1 billion in debt.
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Lockyer Sues Enron; FERC to Review Tapes
The uproar over tapes in which Enron Corp. energy traders bragged of exploiting “Grandma Millie” and other Californians intensified as state Atty. Gen. Bill Lockyer sued the energy firm and U.S. regulators said they would review the new evidence.
The suit seeks to recover “potentially hundreds of millions of dollars” for market manipulation in the 2000-01 energy crisis.
The Federal Energy Regulatory Commission said it would review the tapes as potential evidence in regulatory proceedings, including California’s refund case from the energy meltdown.
In the tape recordings, energy traders laid out strategies for “gaming” the state’s electricity marketplace. In colorful and vulgar language, Enron traders spoke openly of stealing from Californians -- the fictitious Grandma Millie among them -- and expressed the wish that a large earthquake would push the state into the ocean.
Lockyer’s suit accused Enron of violating the state’s Unfair Competition Law and the commodities fraud statute, and seeks a return of unjust profits.
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Audit Finds Flaws in New Nielsen Meters
A confidential audit of a new electronic system being employed by Nielsen Media Research to measure TV-watching habits has found that 1 in 6 viewers was improperly classified as black and 1 in nearly 14 was improperly labeled Hispanic.
An executive summary of the Ernst & Young audit, obtained by The Times, contained other criticisms, including that those using the electronic devices were poorly trained. It also cited high “fault rates” in which the device couldn’t tell what TV programs a viewer was watching or was unable to communicate the information to Nielsen.
Although the Ernst & Young audit examined a relatively small pool of minority viewers -- fewer than 40 families in all -- the details are likely to give a boost to critics who argue that Nielsen’s “people meter” system is flawed and doesn’t accurately capture what African Americans and Latinos are watching.
Paul Donato, Nielsen’s chief research officer, said the company, a unit of Dutch publishing firm VNU, either had dealt or was dealing with the issues raised in the audit.
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Fed Rate Hikes Still Expected to Be Gradual
Federal Reserve Chairman Alan Greenspan said he did not expect inflation to pose a serious threat to the economy anytime soon, easing concerns that a big increase in consumer prices last month might prompt the Fed to speed its timetable for raising interest rates.
Greenspan appeared to take in stride a Labor Department report, issued before he made his comments, that the consumer price index had surged 0.6% in May. It was the biggest monthly increase in three years and added to evidence that inflation pressures have been building as the economy has accelerated.
But so-called core inflation, which excludes volatile energy and food prices, increased only 0.2%, a modest rise that cheered stock and bond investors.
Greenspan said Fed officials still believed they could begin boosting short-term interest rates at a “measured” pace. The first increase is widely expected when the Fed’s policymaking Open Market Committee meets June 29 and 30.
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Madonna to Sell Stake in Maverick Label
Madonna has agreed to sell her interest in Maverick Recording Co., which she co-founded in 1992 in a joint venture with Warner Music Group, the companies said.
The deal is part of the settlement of a lawsuit she filed accusing Warner Music of cheating her and her partners out of millions of dollars.
One of Madonna’s partners in Maverick, Ronnie Dashev, also will sell, and she and Madonna together will receive about $10 million, according to people familiar with the agreement. The singer’s other partner, Guy Oseary, agreed to sell part of his stake and extend his employment contract with the label, these people said.
Warner Music will own more than 75% of Maverick, up from 40%.
When the transaction is completed, possibly within weeks, Warner Music is expected to shut down Maverick’s Beverly Hills office, lay off some of the label’s staff and shift the remainder to its flagship Warner Bros. Records label in Burbank, sources said.
Maverick, whose roster includes such acts as Michelle Branch and Alanis Morissette, will continue as a separate label, the company said.
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European OK Seen for Sony-BMG Deal
European regulators are poised to green-light a proposed merger of the Sony Corp. and Bertelsmann music divisions, brightening prospects for the creation of a juggernaut with a roster of artists as diverse as Bob Dylan, OutKast and Yo-Yo Ma, sources said.
The expected decision by European Commission antitrust regulators would shrink the number of major competitors to four from five. It also would signal a shift in policy for the European Commission’s antitrust chief, Mario Monti.
With annual revenue of about $5 billion, Sony BMG would become the nation’s biggest record operation, selling about 1 of every 3 new albums in the United States, according to Nielsen Soundscan data.
The proposed merger is still subject to U.S. approval, but Europe had been seen as the tougher hurdle. Representatives of the companies and the European Commission declined to comment.
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Miramax Films May Cut About 20% of Workforce
Walt Disney Co.-owned Miramax Films could lay off as much as 20% of its workforce in a series of cost-cutting measures aimed at heading off a financial squeeze, according to sources familiar with the plans.
The expected layoffs come as Miramax co-founders Harvey and Bob Weinstein are under increasing pressure to save money at their New York-based movie company. The Weinsteins have run through most of the company’s $700 million annual production and marketing budget nearly four months before the end of its fiscal year on Sept. 30.
Sources said the total number of job cuts could reach 100 out of 450 Miramax employees worldwide. It is unclear how the layoffs would be divided between the company’s corporate headquarters in New York, where the bulk of the staff is located, and at its Los Angeles offices.
“This is just speculation at this point. No decisions have been made,” said Miramax spokesman Matthew Hiltzik. A Disney spokeswoman declined to comment.
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FTC Rejects Plans for ‘Do-Not-E-Mail’ List
The Federal Trade Commission rejected a plan to create a “do-not-e-mail” list modeled after the popular “do-not-call” registry that keeps telemarketers at bay. In a 5-0 vote, the FTC decided that the proposed list would entice spammers to send more junk e-mail, not less.
Many e-mail marketers flout the federal and state anti-spam laws already on the books.
If a list of e-mail addresses were compiled and published, unscrupulous e-mailers would use the list as fodder for their campaigns, the commission decided.
“Consumers will be spammed if we do a registry and spammed if we do not,” said FTC Chairman Timothy J. Muris.
The federal Can Spam Act, which took effect Jan. 1, compelled the FTC to investigate the wisdom of creating a list. The commission concluded that it would be better for Internet service providers to find a technological solution to the problem of unwanted messages.
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Owner of Omni Hotels to Acquire Gold’s Gym
The owner of Omni Hotels is hoping to add some new muscle to fitness chain Gold’s Gym International Inc.
Texas-based TRT Holdings Inc., which owns about 40 Omni Hotels in North America, has agreed to purchase the 2.5-million-member Gold’s chain from Brockway Moran & Partners Inc., an investment firm based in Boca Raton, Fla.
The purchase, valued at $160 million by one person familiar with the deal, is expected to close in late July.
Gold’s, which began as a single gym in Venice and was featured in the 1977 documentary “Pumping Iron,” has about 650 company-owned and franchised Gold’s Gyms worldwide, an apparel brand, a line of exercise equipment and food and drink supplements.
Gold’s is expected to keep both its name and management team.
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For a preview of this week’s business news, please see Monday’s Business section.
