TOP STORIES -- Feb. 29-March 5
Jury Finds Stewart Guilty on All Counts
In a sweeping victory for the government, a federal jury found Martha Stewart guilty on all counts of conspiracy, obstruction of justice and lying to investigators, a verdict that means the media entrepreneur almost certainly will serve prison time.
Stewart, 62, who built a business empire on her sense of style in food, decorating and entertaining, is the most famous person yet convicted in a wave of corporate scandals.
On the third day of deliberations in U.S. District Court in Manhattan, the jury of eight women and four men found that Stewart and her former broker, Peter E. Bacanovic, hatched a plan to cover up her sale of ImClone Systems Inc. stock based on an insider tip, and then lied to investigators about it.
Bacanovic, 41, was convicted of conspiracy, perjury, obstruction and lying to investigators. He was acquitted of making a false document.
Stewart is unlikely to win her appeal, lawyers said after the verdict, reasoning that there did not seem to be any controversies over legal points.
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Eisner Loses Top Post but Will Remain CEO
Walt Disney Co.’s Michael Eisner, hobbled by a powerful shareholder revolt, was removed as chairman of the board but will remain chief executive, an arrangement unlikely to end the controversy swirling around the famed entertainment company.
The board’s unanimous decision to strip Eisner of the title he has held for nearly 20 years came after a raucous annual shareholder meeting that closed with a dramatic announcement: In his reelection bid for the board, Eisner was rebuffed by a surprising 43% of shares cast.
Installed as Disney’s new chairman was former U.S. Sen. George J. Mitchell, the board’s presiding director, who helped craft the strategy to separate the jobs of chairman and CEO. Mitchell’s elevation drew fire from critics because shareholders had delivered a blow to his credibility as well. Nearly a quarter of the votes cast did not support his reelection.
In an interview with The Times, Eisner downplayed the growing demand for his resignation from Disney: “The shareholders I’ve read about cite not present performance but performance from three to five years ago. A lot of things that are being said are separate from reality.”
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U.S. Payrolls Rise by Just 21,000 in February
U.S. employers added 21,000 workers to their payrolls last month, according to a surprisingly weak government report that appeared certain to weigh on President Bush as he seeks reelection.
The Labor Department’s report said private-sector employment was unchanged in February, while the government added a net 21,000 new workers.
The report also showed that job creation in December and January was weaker than previously thought, adding to the gloomy tone of the report. The department revised lower its count of jobs gains in January to 97,000 from 112,000 and for December to 8,000 from 16,000.
February’s jobless rate held steady at 5.6%, as workers dropping out of the labor force offset the effect of plummeting employment as measured by a separate survey of households.
Economists at top Wall Street firms had forecast a February payrolls gain of 125,000 net new jobs, and the market reaction was quick and sharp. Prices for U.S. Treasury bonds shot up Friday, sending interest rates lower, as investors viewed the report as pushing back the day the Federal Reserve will raise borrowing costs.
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PG&E; to Start Pumping Polluted Groundwater
Pacific Gas & Electric Co. is poised to begin pumping polluted groundwater from under the Mojave Desert to stop the toxic chemical hexavalent chromium from seeping into the Colorado River and tainting the water supply for 18 million Southern Californians.
The chemical compound, made infamous by the 2000 movie “Erin Brockovich,” is “on the brink of contaminating the Colorado River,” the Metropolitan Water District of Southern California warned in a strongly worded Feb. 11 letter to state toxics regulators.
The toxic plume is emanating from land near PG&E;’s Topock natural gas compressor station on the California border with Arizona, south of Needles.
The utility used the chemical compound, known as chromium-6, to control such things as corrosion and mold in water cooling towers at the isolated plant, which pushes natural gas along a pipeline from West Texas to the Los Angeles Basin. PG&E; dumped the untreated waste water in percolation beds between 1951 and 1969.
The state Department of Toxic Substances Control and PG&E;, the utility arm of San Francisco-based PG&E; Corp., said they were committed to keeping the chemical from reaching the Colorado River.
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Former WorldCom CEO Faces Fraud Charges
Bernard J. Ebbers, former chief executive of WorldCom Inc., was indicted on charges of masterminding the nation’s biggest corporate accounting fraud.
The federal indictment, handed up in U.S. District Court in Manhattan, came as WorldCom’s former chief financial officer, Scott D. Sullivan, 42, pleaded guilty to the same three fraud counts and agreed to testify against his former boss.
Prosecutors allege that the executives inflated revenue, hid expenses and failed to disclose the worsening financial condition of the No. 2 long-distance company, which filed for bankruptcy protection in July 2002.
WorldCom, poised to emerge from Chapter 11 next month as MCI Inc., has admitted that it overstated profit by $11 billion under Ebbers and Sullivan.
Ebbers’ lawyer said he and his client were “deeply disappointed” and predicted a jury would clear Ebbers.
Ebbers and Sullivan were charged with one count each of securities fraud, conspiracy to commit securities fraud and filing false information to the SEC. In addition to prison, both face millions in fines.
Ebbers, 62, pleaded not guilty through his lawyer and was released on $10-million bond.
Trial was set for Nov. 9, but Assistant U.S. Atty. William Johnson said it could be delayed because additional charges were likely against Ebbers for the conspiracy and for “other conduct.”
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EU Imposes Retaliatory Tariffs on U.S. Goods
The European Union slapped retaliatory tariffs on a wide range of U.S. agricultural and manufactured goods, increasing pressure on Congress to make significant changes in the way U.S. corporations are taxed.
The EU sanctions start small -- $17 million this month -- but will gradually increase to a level of about $670 million a year unless Congress repeals an export tax break declared illegal by the World Trade Organization.
The sanctions are the largest authorized by the WTO since its creation in 1995 and the first the EU has imposed against the United States. They apply to some 1,600 products, from California produce, toys and machinery to Carolina textiles.
The Bush administration and congressional leaders have been promising for months to bring U.S. tax laws into compliance with the WTO ruling. Progress has been stalled by competition among affected industries for new tax breaks and by growing election-year anxiety about issues involving multinational corporations and global trade.
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Local Phone Companies Win Big Court Ruling
A federal appeals court struck down regulations that required local phone companies to lease their networks to competitors at discounted rates, potentially jeopardizing the competition that saved local phone subscribers an estimated $10 billion a year.
A three-judge panel from the U.S. Circuit Court of Appeals for the District of Columbia said the Federal Communications Commission did not provide adequate justification for the regulations it adopted in August.
The ruling was a victory not only for local phone companies such as California providers SBC Communications Inc. and Verizon Communications Inc. but also for FCC Chairman Michael K. Powell.
Last year, he blasted the rules as legally unsustainable after failing to persuade his fellow commissioners to free the Bells from regulated prices.
Although Powell directed his staff to start working on new rules to address the judges’ concerns, three of the FCC’s four commissioners said they wanted to appeal the decision to the Supreme Court.
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Dell Splits Positions of Chairman and CEO
Dell Inc. Chairman Michael Dell plans to cede the chief executive’s job to longtime No. 2 Kevin Rollins after a 20-year run, the PC company said.
Dell, the company’s 39-year-old founder and a billionaire, will focus on technology trends and customer service, while the 51-year-old Rollins will join the company’s board and lead strategy and operations. The handoff, which was approved by Dell Inc.’s directors, will occur at the company’s annual meeting July 16.
“This is about aligning titles with their existing roles, as opposed to Michael easing up in any fashion,” said company spokesman T.R. Reid.
In the wake of corporate scandals at WorldCom Inc., Enron Corp. and elsewhere, shareholder activists have pushed boards to separate the jobs of chairman and chief executive to enhance CEO oversight. Several big technology companies have acceded, including Oracle Corp.
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For a preview of this week’s business news, please see Monday’s Business section.
