TOP STORIES -- March 12-18
Former WorldCom Chief Found Guilty of Fraud
A federal jury convicted former WorldCom Inc. Chief Executive Bernard J. Ebbers of orchestrating an $11-billion accounting fraud. The verdict could have deep repercussions for other disgraced executives who say they were unaware of financial scams taking root beneath them.
Ebbers, 63, was found guilty of securities fraud, conspiracy and filing false documents with regulators. He was convicted on all nine counts that he faced.
Legal experts said the jury’s decision boded poorly for toppled executives Kenneth L. Lay of Enron Corp. and Richard Scrushy of HealthSouth Corp., who are employing variations of the above-the-fray defense.
Ebbers will be sentenced June 13, and a lengthy sentence could effectively mean life behind bars. He declined to comment after the verdict.
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Disney’s Iger Is Named Successor to CEO Eisner
Walt Disney Co. directors tapped President Robert Iger to succeed Chief Executive Michael Eisner, writing the final chapter for an often stormy 21-year reign.
Eisner, 63, will remain at the post until Sept. 30 and on the board until Disney’s annual meeting early next year, when he will cut ties to the company he was hired to turn around in 1984.
Just a year ago Iger was viewed as a longshot. But his stock has soared as new ABC shows have clicked with viewers and profit has improved.
Former Disney directors Roy E. Disney and Stanley P. Gold said the board failed to find “a single external candidate interested in the job and thus handed Bob Iger the job by default.”
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Oil Hits Record With No Sign of Slowing
The price of oil closed at a record $56.72 a barrel Friday, raising fears that the economy could weaken as energy takes a bigger bite out of business and consumer spending.
The price jump, totaling 4% during the week, bolstered prospects of oil at $60 a barrel -- or higher -- and offered no relief for motorists paying near-record prices at gasoline pumps.
Lofty oil prices are taking a toll on many industries as businesses and consumers dig deeper to pay for fuel.
Bush scored a victory as the Senate narrowly passed a Republican-backed bill to open part of the Arctic National Wildlife Refuge in Alaska to oil and gas exploration, which environmentalists have opposed.
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California Job Picture Better Tracks Nation’s
In a sign that California’s economy is better tracking national growth, employers added a net 27,600 jobs in February, the Employment Development Department reported.
Robust construction activity, fueled by California’s torrid real estate sector, continued to act as an economic engine by creating a net 10,700 jobs last month. Information, EDD’s label for California’s technology industry, expanded by 9,200 positions to 484,700 jobs in February but still remains 6,000 below last year.
The state’s unemployment rate was unchanged from January’s revised 5.8%. That’s down from 6.4% a year earlier. And because the national rate ticked up to 5.4% last month from 5.2%, the state appeared to be more in sync with the broader economy.
In a separate survey of households, EDD found that the number of Californians holding jobs in February was 16.7 million, up 128,000 from January and 372,000 from a year earlier.
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Viacom Considers Splitting Operations
Five years after creating the world’s third-largest media conglomerate by buying CBS Corp. for $40 billion, Viacom Inc. is thinking about splitting in two.
Chief Executive Sumner Redstone said he and Viacom’s board were considering separating the company’s mature operations, including CBS Television and Infinity Broadcasting, from its faster-growing cable networks, which include MTV, Nickelodeon, Comedy Central, BET and Showtime.
Creating two publicly traded firms would give Viacom’s cable group its own currency -- its stock -- to use for acquisitions.
Cleaving Viacom also would resolve the question of who would succeed Redstone, who had set up a horse race between co-Presidents Leslie Moonves and Tom Freston. Redstone would continue to control and be chairman of both companies; Moonves and Freston would each become a CEO.
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GM Cuts Earnings Forecast as Sales Fall
Beset by slumping U.S. sales, General Motors Corp. slashed its earnings forecast for the year.
The announcement by the world’s biggest auto manufacturer prompted Standard & Poor’s to lower its outlook on the company’s bonds to “negative,” moving them one step closer to a junk bond rating.
Detroit-based GM has seen its U.S. market share dip to a historic low of 24.4% as sales in the first two months of 2005 fell 9.9%.
Contributing to GM’s problems are the cost of sales incentives and the waning popularity of sport utility vehicles as the price of oil rises.
GM anticipates that full-year profit will drop to $565 million to $1.1 billion, or $1 to $2 a share, from a previous forecast of $2.3 billion to $2.8 billion, or $4 to $5. Cash flow is expected to dive to a negative $2 billion.
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FCC’s Martin Takes Reins From Powell
Kevin J. Martin was named chairman of the Federal Communications Commission, succeeding Michael K. Powell.
Martin, a commissioner since 2001, takes on one of Washington’s toughest jobs, as new technologies and changing mores threaten to outpace the agency’s ability to regulate telecommunications and the media.
Martin, 38, is widely viewed as a free-market conservative who supports tougher fines against broadcasters and does not oppose media consolidation. He faces the tasks of having to police bawdy behavior on airwaves, rule on several telecom mergers, oversee the transition to digital television and figure out how to regulate Internet and wireless phone service.
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Ohio Congressman Is Tapped as Trade Chief
Facing tough political battles over a trade pact with Central America and rising imports from China, President Bush enlisted a Capitol Hill insider and loyal supporter as his new trade chief.
Rep. Rob Portman (R-Ohio) would replace Robert Zoellick, who is the new deputy secretary of State. The Senate is expected to confirm Portman’s nomination as U.S. trade representative.
Portman, 49, was active in pulling in votes and money for Bush’s reelection campaign in Ohio. Portman, an influential voice in matters involving Social Security, trade and tax policy, is viewed as a respected conservative. But critics of U.S. trade policy said his record demonstrated a willingness to promote the interests of big business over labor rights and the environment.
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FDA Approves Diabetes Drug Long in the Works
Regulators approved Amylin Pharmaceuticals Inc.’s diabetes drug Symlin after an 18-year quest that investors had once written off as hopeless.
It was the first Food and Drug Administration endorsement for the small San Diego company, which was close to closing seven years ago after a clinical trial of Symlin went badly.
One analyst expects that Symlin will have peak sales of $240 million.
Next month, Amylin is expected to receive FDA approval of its second drug, Exenatide, also for diabetes. The company is developing that drug with industry giant Eli Lilly & Co.
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Genentech Cancer Drug Trial Supports New Use
Genentech Inc.’s Avastin prolonged the lives of lung cancer patients in a large clinical trial, the National Institutes of Health said.
Avastin has been approved for treating colon cancer but is being studied for others, including metastatic lung cancer.
The NIH said results of the trial of 878 patients showed that those who received Avastin along with chemotherapy drugs had a median survival of 12.5 months, compared with 10.2 months for those who received only chemotherapy.
Genentech said it would seek Food and Drug Administration approval to market Avastin as a lung cancer treatment.
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Late Mortgage Payments at New Low in California
Rising real estate prices have helped push California’s mortgage delinquency rate down to its lowest level in 25 years, an industry group said.
Many who saw they were in danger of falling into arrears have been able to sell their homes, often for more than the purchase price.
Only 2.04% of the state’s homeowners were 30 or more days late on their home loan payments in the fourth quarter, the Mortgage Bankers Assn. said, down from 2.68% a year earlier. The percentage of households that fell into foreclosure was 0.15%. That rate was up from 0.13% in the third quarter.
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For a preview of this week’s business news, please see Monday’s Business section.
