Week in Review
California Subpoenas Flu Vaccine Distributors
The state attorney general’s office subpoenaed three Southern California vaccine distributors as part of a broader investigation into possible price gouging by companies selling scarce flu vaccine.
The subpoena seeks information about vaccine pricing and sales from Dublin Medical Inc. of San Diego; Van Nuys-based Nationwide Medical Surgical Inc.; and Laguna Hills-based Advanced Medical Sales. None were charged with wrongdoing.
“We believe the information these distributors will provide ... will help us understand how this market is working and how prices were being set,” said Tom Dresslar, a spokesman for Atty. Gen. Bill Lockyer.
Chiron Corp. announced Oct. 5 that its flu shot production for this year would be eliminated because of contamination at a plant in England. That cut the U.S. supply almost in half.
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SoCal Edison Says Data on Safety Were Rigged
Southern California Edison Co. used faulty workplace safety data -- and in some cases may have suppressed reports of on-the-job injuries -- over the last seven years to win performance-related bonuses from the state, the utility acknowledged.
Edison, a unit of Rosemead-based Edison International, told California Public Utilities Commission staff that it would forgo or return to the agency $35 million in payments based on flawed safety ratings. Many ratings were distorted by inadvertent omissions, others by what Edison called “inappropriate” efforts by managers to hide reportable incidents.
The injury statistics are part of a 1997 PUC program that rewards -- or fines -- utilities based on customer satisfaction, employee safety, service reliability and financial results.
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In Small World, Eisner and Ovitz Unite in Court
Walt Disney Co. Chief Executive Michael Eisner and former Disney President Michael Ovitz find themselves joined again, this time in a Delaware court.
Shareholders suing Disney’s board contend that Ovitz’s hiring and dismissal cost the company as much as $200 million in severance and interest. So Ovitz and Eisner will be compelled to explain in detail why their relationship imploded.
In the first day of the trial, Duke University professor Deborah DeMott said the board failed to scrutinize Ovitz’s hiring in 1995 and his dismissal 15 months later. She was the first of three expert witnesses scheduled to be called by shareholders’ lawyers.
Lawyers for Disney directors said that board members were involved in Ovitz’s hiring in one-on-one deliberations and that the company was obligated legally to pay him his severance.
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California Job Growth Remains Lackluster
California employers added a net 4,900 jobs in September, the Employment Development Department reported, in a modest showing suggesting that the state was having trouble revving up its economic recovery.
The increase followed a revised gain of 4,300 net nonfarm jobs in August.
September’s unemployment rate of 5.9% was unchanged from August and down from 6.7% a year earlier. The national jobless rate stood at 5.4% last month.
Budget woes have stifled government employment, which fell by 7,100 jobs in September. The tech sector is adding jobs slowly.
The EDD’s household survey posted a gain of 37,000 jobs last month, versus the 4,900 of the more extensive payroll survey.
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In First Earnings Report, Google Results Double
In the first earnings report to follow its initial public offering in August, Google Inc. said sales and profit more than doubled in the third quarter. The strong results put to rest any concerns about a slowdown in its core business, selling online ads targeted to Internet search results.
Net income for the Mountain View, Calif., company climbed to $52 million, or 19 cents a share, from $20 million, or 8 cents, a year earlier. Revenue rose to $806 million from $394 million. Results blew past even the most bullish of analysts’ forecasts.
The company took one-time charges and also expenses the cost of stock options and grants to employees. Excluding those items, earnings were 70 cents a share, far outpacing the Wall Street consensus of 56 cents.
Google shares jumped more than 15% to $172.43 in Nasdaq trading Friday.
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Marsh & McLennan Brokers Speak Out
Insurance brokers in the Los Angeles office of Marsh & McLennan Cos. say they were ordered late last year to temporarily stop selling personal coverage lines from one insurer because doing so could reduce commission payments to Marsh.
The brokers, whose job is to find the best policies for clients among competing insurance firms, say they were outraged by the directive because of potential harm to customers who would be forced into inferior, or more expensive, coverage.
Marsh is at the center of the scandal that has engulfed the U.S. insurance industry. New York Atty. Gen. Eliot Spitzer sued the company Oct. 14, charging that its brokerage unit cheated corporate customers by rigging bids and receiving kickbacks from insurance firms.
The New York-based company has said it is cooperating with Spitzer’s investigation.
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States’ Questions About WellPoint May Stall Deal
Regulators in three states that have approved Anthem Inc.’s proposed purchase of Thousand Oaks-based WellPoint Health Networks Inc. are raising new questions about the deal, increasing the likelihood that it may unravel.
California’s Department of Managed Health Care had cleared Anthem’s plan to buy WellPoint’s large Blue Cross of California operation, partly because Blue Cross pledged to invest $100 million in healthcare over 20 years for the state’s rural and underserved communities.
Missouri insurance regulators wonder whether the pledge was behind a request by a WellPoint Missouri unit to make a $10-million dividend payment to its California parent. Georgia’s insurance commissioner has rescinded his approval.
A Texas deputy insurance commissioner said approval of the deal was in “limbo” while awaiting resolution of a court fight between Anthem and California Insurance Commissioner John Garamendi over his decision to block part of the deal.
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Finger-Pointing Over Clogged Southland Ports
Efforts to unclog Southern California’s ports are foundering as labor officials said a highly publicized plan to hire and train 3,000 nonunion dockworkers was a disappointment.
As many as 1 in 4 recruits has dropped out, according to the dockworkers’ union, which cited the arduous work and a shortage of equipment to train the hires.
So shiploads of cargo, some destined for store shelves for the holidays, are stranded at sea.
The International Longshore and Warehouse Union and the Pacific Maritime Assn., which represents shipping lines, each said the other side was at fault. ILWU President James Spinosa called on the shipping lines to promote 1,000 nonunion workers to full union status.
For its part, the PMA accused the union of trying to take advantage of the situation to pad its membership.
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SEC Seeks Pension Data From Boeing, Others
Boeing Co. said it was among six large manufacturing companies that have been asked by the Securities and Exchange Commission for information about accounting practices for a multibillion-dollar pension fund.
The SEC inquiry isn’t focused on payments to retirees but on how the companies account for their complex pension and retiree health plans and whether changes in assumed rates of returns can inflate earnings.
The SEC has asked General Motors Corp. and Ford Motor Co. for documents about the way they estimate their pension liabilities. It also has sought information from truck builder Navistar International Corp., auto parts maker Delphi Corp. and Northwest Airlines Corp.
The requests, which aren’t connected to an investigation into any wrongdoing, are part of a new strategy to “preempt” problems, an SEC official said.
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Gloomy Holiday Season Seen for Toy Makers
Downbeat forecasts from major toy makers, including industry leader Mattel Inc., underscored concerns that a wobbly economy and rising gasoline prices might prompt people to pare back holiday spending.
El Segundo-based Mattel and Hasbro Inc. posted slower third-quarter sales and warned that fourth-quarter sales might be hurt if what Mattel called a “challenging” environment continued. Mattel’s third-quarter profit fell 5% to $255.9 million, or 61 cents a share, from $270 million, or 61 cents, a year earlier. Sales fell 2% to $1.67 billion.
Hasbro of Pawtucket, R.I., said sales fell 2% to $947.3 million and said it was unlikely to meet sales targets for the year.
Educational toy maker LeapFrog Enterprises Inc. said third-quarter profit would be 32 cents to 34 cents a share, about half what Wall Street expected.
For a preview of this week’s business news, please see Monday’s Business section.
