TOP STORIES -- Oct. 10-15
Flu Vaccine Shortage Prompts Inquiries
Chiron Corp. said that it received a subpoena from a federal grand jury in New York and that the Securities and Exchange Commission had begun an informal investigation into its role in the flu vaccine shortage.
In addition, two congressional committees have asked the Food and Drug Administration to provide information on how much the agency knew in advance about problems at Chiron’s plant in England.
The Emeryville, Calif.-based company said it would cooperate with the investigations but offered no other details. Federal officials declined to comment.
U.S. health officials on Friday said none of the flu vaccine at Chiron’s factory in Britain was safe to use after finding evidence of contamination there. The plant was supposed to supply half of this country’s vaccine.
Meanwhile, more than half of U.S. hospitals that took part in a trade group survey said they had been offered scarce flu vaccine at highly inflated prices, stirring allegations of gouging.
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Senate Passes Big Corporate Tax Breaks
A bill that was conceived as a way to resolve a trade dispute with Europe but became a sanctuary for special-interest tax provisions won final congressional approval from the Senate.
The $136-billion bill would repeal an export tax subsidy that the World Trade Organization had ruled illegal. But Congress, heavily lobbied by business, added a host of complexities and preferences for politically connected industries, from a $10-billion buyout of tobacco growers to a $4-million tax write-off for Alaskan whaling boat captains.
The Senate passed the bill on a 69-17 vote. It now goes to President Bush, who is expected to sign it.
The bill would replace the export subsidy with an across-the-board $77-billion corporate tax cut for manufacturers and a $43-billion reduction for companies operating overseas. The bill will lower the corporate tax rate for manufacturers to 32% from 35%. Lawmakers added scores of special tax breaks.
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New York’s Spitzer SuesTop Insurance Broker
Launching a new assault on the financial services industry, New York Atty. Gen. Eliot Spitzer filed a lawsuit claiming that the world’s largest insurance broker, Marsh & McLennan Cos., conspired to cheat business clients out of hundreds of millions of dollars.
The suit said Marsh, which was hired to find the best deals for its mostly corporate customers, instead steered clients to major insurance companies that made backdoor payments to the broker. Spitzer alleged that Marsh had insurers fabricate bids to deceive clients into believing that they were getting the lowest-priced policies.
Marsh and other firms named in the probe said they were reviewing the allegations. Marsh said it was “committed to serving its clients to the highest professional and ethical standards.”
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Oil, Gas Prices Soar, With No Letup in Sight
Worries over lagging supplies sent crude oil and heating oil futures to new peaks, sparking predictions of higher gasoline prices in the coming weeks.
The average in California reached a record $2.378 for a gallon of self-serve regular Thursday, according to the Auto Club of Southern California.
A petroleum supply report from the U.S. Department of Energy on Thursday showed that commercial stocks of heating oil, used heavily in the Northeast, fell by 1.2 million barrels for the week ended Oct. 8. The decline exacerbated fears that recent hurricane-related production troubles would leave inventories at dangerously low levels.
In late trading on Friday, light crude for November delivery marched to a record high of $55 a barrel before settling at $54.93, up 17 cents for the day. Traders primarily cited worry over winter heating-oil supplies.
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Intel Growth Slows as PC Demand Wanes
Chip maker Intel Corp. said slackening demand for personal computers ended a streak of robust profit growth.
The Santa Clara, Calif., company said profit rose 15% to $1.91 billion, or 30 cents a share, for the third quarter ended Sept. 25, from $1.66 billion, or 25 cents, a year earlier. Revenue was up 8% to $8.47 billion. In the five previous quarters, net income had nearly doubled or more than doubled.
In other technology earnings:
* Yahoo Inc. reported third-quarter net income of $253 million, or 17 cents a share, up sharply from $65 million, or 5 cents, a year earlier. Sales jumped to $907 million from $357 million. Yahoo raised its revenue forecast for the year.
* Strong sales of Apple Computer Inc.’s iPod music players propelled fiscal fourth-quarter profit to $106 million, or 26 cents a share, up from $44 million, or 12 cents, a year earlier. Revenue rose 37% to $2.35 billion.
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Amgen Wins Ruling for Anemia Drug Patents
A federal judge ruled for biotech firm Amgen Inc. in a dispute with Transkaryotic Therapies Inc. over patents protecting Amgen’s anemia drug Epogen.
Judge William G. Young in federal court in Boston ruled that Amgen’s patents in the 7-year-old dispute are valid. The fight centers on a method of producing the human protein erythropoietin for therapeutic use. Amgen’s Epogen is used to boost red blood cells in anemic kidney disease patients.
Transkaryotic has been blocked from selling its drug Dynepo because of the patent dispute. The company hired Switzerland’s Lonza in August to make Dynepo in Europe, where Amgen’s patent expires later this year.
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Writers Don’t Get Bigger Slice of DVD Revenue
After months of stalled negotiations, Hollywood TV and film writers agreed to a $58-million contract with studios and TV networks that boosts health benefits but fails to secure a larger chunk of DVD revenue.
The 12,000 members of the Writers Guild of America will see an additional $37 million in contributions to shore up the guild’s healthcare fund, along with increased pension contributions, better minimum payments and increased money to writers of made-for-pay-TV programs.
But studios were unyielding in giving up a bigger share of the DVD bonanza, which the union had staked out as a crucial issue in contract talks.
The contract, which must be ratified by writers, runs from Nov. 1 through Oct. 31, 2007.
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BofA to Pay Customers at Least $372 Million
Bank of America Corp. must pay at least $372 million in damages and interest to hundreds of thousands of Californians, a judge ruled, saying Social Security funds in their accounts were seized illegally to cover overdraft and bounced-check fees.
Superior Court Judge Anne Bouliane in San Francisco said she agreed with a jury’s finding that the bank also should pay $1,000 to each affected customer. Plaintiffs lawyers said the bank’s liability could top $1 billion.
In a Securities and Exchange Commission filing, BofA said the rulings would not be final until after a Nov. 30 hearing addressing its many objections. Charlotte, N.C.-based BofA said it would appeal any judgment against it.
A jury decided the case in February, but determination of damages was left to the judge.
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Accounting Rule on Options Is Delayed
Bowing to corporate pressure spearheaded by Silicon Valley, accounting regulators voted to delay implementing a rule that would force companies to deduct from earnings the cost of stock options given to employees.
The Financial Accounting Standards Board also rejected efforts to change the formula that companies would have to use for valuing options. Technology companies had campaigned for an alternative method to lessen the damage to their bottom lines.
In a 5-2 vote, the FASB agreed to require companies to deduct the value of options from earnings starting June 15, instead of at the end of this year.
FASB member Edward W. Trott said the accounting panel determined that companies needed more time to change their options accounting.
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Medtronic Must Pay $400 Million to Inventor
A federal jury ordered Medtronic Inc. to pay a Los Angeles surgeon $400 million in punitive damages in a dispute over implants that he invented to treat spinal injuries.
Those damages came on top of $110 million in compensatory damages the jury awarded two weeks ago to Dr. Gary K. Michelson and his licensing firm, Karlin Technology Inc., after finding that Medtronic, which sold the implants, breached several licensing contracts.
The jury also ruled that the medical equipment maker infringed patents held by Michelson and must pay him 10% of its sales on those products -- royalties that could boost the total damages to more than $1 billion in the next 20 years, said Michelson’s lawyer Robert Krupka.
Medtronic called the award “unjustified and excessive” and said it would appeal the ruling against its unit Medtronic Sofamor Danek Inc.
For a preview of this week’s business news, please see Monday’s Business section.
