Week in Review
Fraud Ring Taps Into Consumer Credit Data
A fraud ring infiltrated one of the nation’s largest collectors of consumer information and obtained credit reports, Social Security numbers and other information about tens of thousands of people in a massive case of identity theft.
ChoicePoint Inc. said it had begun sending letters to about 35,000 Californians to tell them that their personal information might have been compromised. The Alpharetta, Ga.-based company urged them to check their credit reports for new accounts or suspicious activity.
ChoicePoint also said it would warn 110,000 people outside California.
A North Hollywood man was arrested and pleaded no contest to felony identity theft. Olatunji Oluwatosin, 41, was sentenced to 16 months in state prison
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L.A. Mutual Fund Firm Accused of Wrongdoing
Los Angeles-based American Funds, one of the nation’s biggest seller of mutual funds, violated securities rules by steering stock trading business to brokerages that pushed its funds to their clients, regulators said.
The NASD alleged that American Funds paid $100 million in commissions to about 50 brokerages in 2001 to 2003 for executing stock trades, both “to reward past sales and to encourage future sales.”
American Funds broke rules aimed at eliminating incentives for brokers to pitch funds in exchange for fees from the mutual fund company, the NASD said. The NASD seeks to force American Funds to return “any and all ill-gotten gains.”
Parent company Capital Group Cos. denied any wrongdoing and said it would seek to block action by the NASD.
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Verizon to Buy MCI in $6.7-Billion Deal
Directors of MCI Inc. agreed to sell the long-distance carrier to Verizon Communications Inc. for about $6.7 billion in cash and stock.
The decision to hitch up with the nation’s largest telephone company further transforms the U.S. telecommunications industry into one dominated by a few national behemoths that serve international corporations as well as households.
In voting for Verizon, MCI spurned a richer bid by Qwest Communications International Inc., which had sweetened its original offer over the weekend by about $1 billion to $7.3 billion.
The action may draw complaints from MCI shareholders, most of whom bought into the company after it emerged from bankruptcy. It was called WorldCom Inc. when an $11-billion accounting fraud crippled the company in 2002.
Although Qwest’s offer was higher, the company is weaker financially than Verizon.
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CalPERS Board Elects Feckner as President
The board of the California Public Employees’ Retirement System unanimously elected Rob Feckner as president.
Within minutes of the vote, 47-year-old Feckner presided over the selection of his vice president, read a statement of his beliefs and launched a discussion of the No. 1 item on the day’s agenda: voting to oppose Gov. Arnold Schwarzenegger’s campaign to overhaul the state’s pension system for state and local workers.
Feckner in his first remarks as president said he would employ “a quieter, less flashy style” than his predecessor, Sean Harrigan, whose ouster in December sparked a debate over the future of the nation’s largest public pension fund.
Feckner vowed to continue initiatives to limit excessive executive pay, control soaring healthcare costs and, above all, oppose efforts by Schwarzenegger and his Republican allies in the Legislature and business to dramatically change how public pensions are paid.
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Wachovia Probes Brokers’ Stock Trading
Brokerage giant Wachovia Securities said it was investigating stock trading, including possible use of fictitious accounts to reap short-term gains, at one of its Westlake Village offices.
The NASD, the brokerage industry’s self-regulatory agency, also has opened a probe into the office, according to people familiar with the matter. The NASD declined to comment.
These people said an anonymous letter sent to Wachovia alleged that brokers used fabricated accounts to take advantage of company stock-purchase plans in which shares are sold to investors at discounts of as much as 5% off the market price.
The brokers allegedly sought to play the so-called arbitrage opportunity in such transactions: By buying the shares at a discount, then quickly selling the stock in the open market, they could profit from the “spread” between the two prices.
“There is an internal investigation into these issues,” said a Wachovia spokesman.
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WorldCom’s Finance Chief Says He Lied
The government’s star witness against former WorldCom Inc. chief Bernard J. Ebbers acknowledged under cross-examination that he repeatedly lied to the board about the company’s financial plight and its fraudulent accounting maneuvers.
Scott D. Sullivan, former chief financial officer, said he misled directors shortly after Ebbers was forced out of the company in April 2002. That concession could potentially undercut Sullivan’s claim that he wanted to disclose WorldCom’s troubles to investors but was held back by Ebbers.
Ebbers, WorldCom’s former chief executive, is charged with fraud and other crimes stemming from the telecom company’s bankruptcy, the biggest in U.S. history. He faces at least 30 years in prison if convicted.
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Judge Declares Mistrial in Tenet Healthcare Case
The trial of Tenet Healthcare Corp. on charges that doctors were bribed to refer patients to its Alvarado Hospital Medical Center in San Diego ended in a hung jury. U.S. District Judge James Lorenz declared a mistrial after jurors reported they were deadlocked following five days of deliberations.
U.S. Atty. Carol C. Lam said that she remained confident in the government’s case and that a retrial was likely in light of a poll that showed the jury was leaning toward conviction. She declined to comment further.
Tenet’s general counsel, E. Peter Urbanowicz, said that he was sorry the jury failed to reach a verdict and that he hoped prosecutors would drop the charges.
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FDA Panel Urges Painkiller Warnings
A Food and Drug Administration advisory panel voted to let doctors prescribe COX-2 painkillers but recommended stronger warnings about the risk of heart attacks and strokes.
Doctors, scientists and other experts on the 32-member panel proposed that Celebrex, Vioxx and Bextra carry “black box” warnings -- the strongest admonishment the FDA can give to doctors.
Such warnings are likely to discourage use of the drugs.
In the case of Vioxx, which was taken off the market voluntarily last fall by Merck & Co., panel members voted to approve its use by a margin of two votes.
Celebrex and Bextra, which have remained on the market during the safety controversy, are produced by Pfizer Inc.
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French Government Settles Exec Life Suits
Credit Lyonnais and the French government agreed to pay $600 million to settle their part of a long-running legal battle over the 1991 collapse of Executive Life Insurance Co.
The settlement of two consolidated lawsuits brought by California Insurance Commissioner John Garamendi and a Bay Area company, Sierra National Insurance Holdings Inc., wasexpected to be endorsed by a U.S. District Court judge in Los Angeles.
Credit Lyonnais, a major French bank, and two French government-controlled companies have agreed to pay $525 million to the state and $75 million to Sierra, according to attorneys familiar with the agreement.
The payments would settle fraud claims arising from the purchase of failed Executive Life and its portfolio of devaluing junk bonds by the bank and MAAF, a Paris-based insurance company. Sierra was a losing bidder to buy the insurance business and the bonds.
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Hewlett-Packard Results Top Expectations
A week after ousting Chief Executive Carly Fiorina, Hewlett-Packard Co. said that its fiscal first-quarter revenue rose 10% but that profit was little changed from a year earlier.
Despite an improvement from last year, the company’s PC business managed an operating margin of 2%, compared with 15% for its printing and imaging business.
Strong holiday-season sales of personal computers and computer services for the quarter ended Jan. 31 led HP to a profit of $943 million, or 32 cents a share, up 0.7% from $936 million, or 30 cents, a year earlier. Revenue was $21.5 billion, up from $19.5 billion.
Palo Alto-based HP’s operating earnings of 37 cents a share beat the consensus estimate of 34 cents by Wall Street analysts.
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Microsoft Outlines Software Security Plan
Microsoft Corp. Chairman Bill Gates outlined for the first time how the software giant plans to use recent purchases to beef up security of its Windows operating system.
Speaking at a security trade conference in San Francisco, Gates said Microsoft would give away a program to combat computer spyware, release a safer Internet browser this summer and sell anti-virus tools by year-end.
Gates said Microsoft was making significant progress in helping consumers and companies reduce the risk of electronic attacks.
Security industry rivals and some customers expressed doubts about Microsoft’s efforts, noting that shortcomings in the company’s other products were a major reason that attacks by spyware and electronic viruses continued to increase.
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Pace of Home Sales Slows in Southland
The pace of Southern California home sales slowed last month as the rate of price appreciation eased slightly in much of the region, according to DataQuick Information Systems.
A total of 21,680 new and resale homes were sold in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties in January. That was a 28.5% decline from December’s 30,317 and a 4.9% drop from 22,652 in January 2004.
The median price -- the point at which half of all properties sold for more, half for less -- for a home in the six-county region rose 21% last month to $415,000.
January’s median price was down 2.1% from December’s median of $424,000.
