Advertisement

TOP STORIES -- Jan. 30 -- Feb. 4

Share via
From Times Staff

Court Blocks U.S. From Getting Tobacco Money

Top cigarette makers won a resounding legal victory when a federal appeals court barred the Justice Department from seeking disgorgement of $280 billion in allegedly ill-gotten gains as part of its fraud and racketeering case against the tobacco industry.

The 2-1 ruling by the U.S. Court of Appeals for the District of Columbia does not end the long-running case -- in trial since September in U.S. District Court in Washington -- but it eliminates by far the most threatening sanction the industry had faced.

The decision sparked wide speculation that the Justice Department might seek a settlement rather than continue the trial and appeal the disgorgement ruling. But a Justice Department spokeswoman said only that the decision was under review.

Advertisement

“We are extremely pleased that the appellate court agreed with our long-held belief that disgorgement is not an appropriate remedy,” said Charles A. Blixt, general counsel of R.J. Reynolds Tobacco Co.

*

U.S. Payroll Gain Is Lower Than Expected

U.S. employers hired a net 146,000 new workers in January, the government reported, in a tepid showing that underwhelmed economists.

Economists had been expecting about 190,000 new jobs.

Still, the uptick was large enough for President Bush to avoid becoming the first president since Herbert Hoover to see more people lose jobs than gain them during a term in office.

Advertisement

The number of employed increased by 119,000 from January 2001 to January 2005, less than one-tenth of 1% for a workforce of 133 million.

Payrolls fell by 1.9 million in 2001, 563,000 in 2002 and 61,000 in 2003.

The nation’s unemployment rate fell to 5.2% in January, the lowest level in more than three years. But that was because 200,000 people opted out of the labor force, possibly because they were putting their search for employment on hold.

*

Fed Raises Benchmark Interest Rate to 2.5%

The Federal Reserve raised its key short-term interest rate by a quarter-point for the sixth time since June and signaled that it remained on a steady credit-tightening course.

Advertisement

The Fed’s policymaking Open Market Committee said it had voted to lift its benchmark short-term rate to 2.5% from 2.25%, putting the rate at its highest level since October 2001.

The wording of the central bank’s statement after its meeting was nearly identical to the one it issued after its last gathering, on Dec. 14. Included was the now-familiar reference to tightening credit “at a pace that is likely to be measured,” viewed as code for a quarter-point rate increase at each Fed meeting.

Policymakers also reiterated that they viewed inflation as being “well contained.”

*

Tapes Reveal Enron’s Power Plant Rigging

Enron Corp. traders conspired to shut down a healthy power plant as blackouts rolled across California in early 2001, according to documents.

Enron traders and others discussed in e-mail and phone conversations how to profit from the state’s problems. In one transcript, a trader called it “a good plan” to shut down a small Las Vegas power plant on Jan. 17, 2001, under the guise of “checkin’ a switch on the steam turbine.”

The transcripts were among testimony submitted by the Snohomish County Public Utility District, a Seattle-area utility in a legal battle with Enron.

“We’re continuing to cooperate with ongoing investigations,” an Enron spokeswoman said.

Also, staff of the Federal Energy Regulatory Commission recommended that Enron return almost $1.7 billion in profit gained through improper energy trading dating to 1997.

Advertisement

*

Google Profit Soars on Strong Ad Sales

Google Inc. said profit rose nearly eightfold as it wrung more money out of advertisers in the fourth quarter.

Mountain View, Calif.-based Google reported fourth-quarter profit of $204 million, or 71 cents a share, up from $27 million, or 10 cents, a year earlier. Sales doubled to $1 billion.

The company said it had attracted more people to its stable of websites and was getting better at making sure they saw tempting ads. Google’s text-based ads generate revenue only when users click on them.

Excluding the money Google shared with website operators that ran targeted ads, the company’s sales were $654 million. That was $61 million more than the consensus expectation of 19 analysts polled by Thomson First Call and $28 million more than the top forecast.

*

Boeing May Sell Its Rocketdyne Business

Boeing Co. is close to selling its storied Rocketdyne rocket engine manufacturing business in the west San Fernando Valley to United Technologies Corp. in a deal potentially worth about $500 million, sources said.

The sale of Canoga Park-based Rocketdyne, which helped pioneer space exploration in the 1960s, has been rumored as Boeing has struggled to turn a profit in the space launch business. The possible sale to Hartford, Conn.-based United Technologies was first reported by the Wall Street Journal.

Advertisement

Boeing has been “shopping around” Rocketdyne for at least a year, the industry sources said, and United Technologies is believed to be the only suitor to have made a serious proposal.

One person close to Boeing stressed that the two sides still were working to settle on the terms. Spokesmen for Boeing and United Technologies declined to comment.

*

Marsh & McLennan to Pay $850 Million

Apologizing for its “shameful” behavior, Marsh & McLennan Cos. agreed to pay $850 million to settle charges by New York Atty. Gen. Eliot Spitzer that it cheated clients by rigging insurance bids and taking kickbacks.

It is the largest settlement yet with a company caught in the recent spate of corporate scandals. The $850 million will be used to compensate customers who were gouged by the insurance broker’s practices. Marsh also acceded to Spitzer’s demand for a written apology. “Certain Marsh employees unlawfully deceived their customers,” the statement said, adding that “such conduct was shameful.”

Chief Executive Michael G. Cherkasky said the deal would help Marsh regain its footing, “even though it’s a lot of money.”

“We’ve lived under this dark cloud of uncertainty. Everyone has been under suspicion,” Cherkasky said in an interview. “It was very hard for our people and our clients to live through.”

Advertisement

*

Retail Sales Get Boost From Gift Cards

Americans flocked to clearance sales and cashed in gift cards in January, giving retail sales an unexpected boost, according to the International Council of Shopping Centers.

Despite rough weather in parts of the nation, sales at stores open at least one year rose to $45.9 billion, up 3.6% from January 2004. The council had expected sales to rise 2.5%.

Some California companies turned in surprises. Gap Inc.’s same-store sales in January fell 7%. But teen retailer Wet Seal Inc. logged an 8.2% sales gain. And Bebe Stores Inc. posted a 29% jump.

Companies selling luxury goods posted an 8.5% increase. Sales at Nordstrom Inc. and Neiman Marcus rose 8.8% and 11.9%, respectively. Discount stores rose 4.4%, with Target Corp. logging a 9.4% increase and Wal-Mart Stores Inc. rising 2.5% at its U.S. stores.

*

Blockbuster Plans Hostile Bid for Rival

Video rental giant Blockbuster Inc. said it planned to launch a $1.3-billion hostile bid for its chief rival, Hollywood Entertainment Corp., hoping to scuttle a deal that Hollywood Entertainment forged with the No. 3 chain, Movie Gallery Inc.

The offer of $11.50 in cash and $3 in stock for each share of Wilsonville, Ore.-based Hollywood Entertainment is $1.25 a share more than what Movie Gallery agreed to pay. Blockbuster’s first offer was $11.50 a share.

Advertisement

Dallas-based Blockbuster also disclosed in a Securities and Exchange Commission filing that several state attorneys general were investigating its “no more late fees” advertising campaign. California Atty. Gen. Bill Lockyer isn’t among them, a spokesman for Lockyer said.

Critics have called the ads misleading because, in some cases, consumers can be docked the full price of a DVD or pay a “restocking fee.”

*

Disney’s Profit Climbs, Surpassing Estimates

Walt Disney Co. said earnings beat forecasts with a surprisingly strong 5% increase in its fiscal first quarter and remained on track to deliver double-digit growth for the year.

Disney earned $723 million, or 35 cents a share, in the quarter ended Dec. 31, thanks largely to gains in its cable networks and theme parks. That compared with $688 million, or 33 cents, a year earlier. Revenue rose 1.4% to $8.67 billion. Disney easily beat the 29-cents-a-share consensus of analysts surveyed by Thomson First Call.

Operating profit at its media division rose 36% to $467 million. Profit at parks and resorts increased 11% to $258 million.

Disney’s film studio unit saw earnings fall 27% to $333 million.

*

For a preview of this week’s business news, please see Monday’s Business section.

Advertisement