Week in Review

Consumer Prices Rise Sharply in February

Prices rose in February at the fastest pace in four months, the Labor Department reported, in the latest evidence that climbing costs of oil, metals and other commodities are increasingly being passed to consumers.

The consumer price index jumped 0.4% in February from the previous month, sharply higher than the 0.1% increase in January.

Core prices, which exclude volatile food and energy costs, grew 0.3%, compared with 0.2% in each of the last four months. Overall prices were up 3% from February 2004, and core prices gained 2.4%.

Energy led the increase, leaping 2% for the month and 10.4% for the year.

Analysts said the price gains were worrisome but not fatal to the economic recovery, partly because wages had not been going up much.

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Supreme Court Rejects Philip Morris’ Appeal

The U.S. Supreme Court rejected an appeal by Philip Morris, setting the stage for the tobacco giant to pay more than $16 million to a Glendale woman who contracted lung cancer. It would be the largest payment and the first punitive damages paid to an individual smoker.

Altria Group Inc.’s Philip Morris had been fighting to overturn the damages award to Patricia Henley, 58. In February 1999, a jury in San Francisco County Superior Court awarded Henley $51.5 million. The award was reduced to $10.5 million, but Philip Morris will have to account for interest accrued during the years of appeals.

William S. Ohlemeyer, vice president and associate general counsel for Philip Morris, said the “decision isn’t going to make it any harder for us to defend cases in California.”

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Paramount Pictures Hires Fox Executive

Paramount Pictures Chief Executive Brad Grey has tapped Fox Entertainment President Gail Berman to be his second in command.

The duo responsible for revamping the studio joins another longtime TV executive, Tom Freston, former head of MTV Networks and now co-president of Paramount parent Viacom Inc.

Berman’s appointment as the studio’s top creative executive sends a clear signal that Grey has no qualms about looking outside Paramount’s Melrose Avenue gates in assembling his new team.

Berman, 47, has overseen a schedule at News Corp.’s Fox that includes such signature shows as “American Idol,” “24,” “The Simpsons” and “The O.C.” At Paramount, she assumes the title of president.

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American Funds Wages Battle Against Lockyer

State Atty. Gen. Bill Lockyer sued the Los Angeles-based mutual fund company that has been the nation’s most popular for the last three years, alleging that giant American Funds failed to properly tell its 20 million shareholders how it paid brokerages to pitch its products.

The firm beat Lockyer to court, filing its own lawsuit against him and contending that its financial disclosures have been accurate and that Lockyer was encroaching on the authority of federal regulators.

American Funds, which has $650 billion in assets, insists that it broke no laws.

Lockyer’s suit, filed in Los Angeles County Superior Court, said American Funds investors did not know that their brokers had incentives to sell one fund over another. Lockyer is asking for disgorgement of ill-gotten profit, along with penalties and restitution.

American Funds is a unit of Los Angeles-based Capital Group Cos.

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Schering-Novartis Drug Falls Short in Testing

A potential rival to Genentech Inc.’s cancer drug Avastin stumbled in a clinical trial.

Swiss drug maker Novartis and its German partner Schering have been testing PTK-787 as a treatment for colon cancer. The companies said the drug did not extend the time it took cancer to worsen -- so-called progression-free survival -- when compared with standard chemotherapy drugs.

Like Avastin, PTK-787 was designed to inhibit the growth of blood vessels that feed tumors, a process known as angiogenesis. PTK-787 was thought to have an advantage over Avastin because it was a pill, and therefore relatively easy for patients to take. Avastin is an intravenous drug.

Novartis and Schering said that they were continuing the clinical trial to see whether PTK-787 would extend the overall survival of patients but that results won’t be known until next year. Action by U.S. and European drug regulators would come after that.

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Blockbuster Drops Its Bid for Hollywood Video

Blockbuster Inc. withdrew its bid to acquire its smaller rival, No. 2 Hollywood Entertainment Corp., citing moves by federal antitrust regulators to thwart the purchase.

The decision clears the way for the nation’s No. 3 video rental company, Movie Gallery Inc., to acquire the Wilsonville, Ore.-based operator of Hollywood Video for $850 million.

Lawyers from the Federal Trade Commission had recommended that the agency sue to halt Blockbuster’s hostile takeover bid. Concerns that the FTC would not budge from its position resulted in Blockbuster’s withdrawal, the company said.

Movie Gallery executives embraced Blockbuster’s decision and said Hollywood’s shareholders would meet on April 22 to approve an acquisition. The FTC has already approved Movie Gallery’s bid, which was recommended by Hollywood’s board.

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Real Estate Investors Believe in More Magic

A fund co-founded by former Laker guard Earvin “Magic” Johnson has banked $490 million in a second round of financing for commercial developments in inner-city neighborhoods.

Canyon-Johnson Urban Fund has commitments for an additional $110 million that would bring the total to $600 million by the end of April. The fund expects that the new pot of money, when combined with $300 million it raised in 2001, will allow it to expand its portfolio to more than $3 billion of property in cities across the country.

The retired NBA star has been a key partner in the fund’s money-raising and community outreach efforts. He also brings to the table his network of corporate partnerships.

Investors in Canyon-Johnson -- including the California State Teachers’ Retirement System, the University of Michigan and Verizon Communications Inc. -- profit when projects the fund undertakes are sold.

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Agency Recommends Workers’ Comp Rate Cut

Employers could get a big break on workers’ compensation premiums later this year if insurers follow a rate recommendation by a key agency.

The Workers’ Compensation Insurance Rating Bureau in San Francisco, an industry-backed private organization that provides statistical analysis, recommended that insurance companies drop their premiums by about 10% beginning in July.

The rate recommendation, based on the rating bureau’s analysis of the latest actuarial data, confirms that the cost and frequency of injury claims have dropped.

The recommended reduction, which must be endorsed by California Insurance Commissioner John Garamendi, provides insurers with a voluntary benchmark for policies that start or renew in the second half of 2005. Insurers generally follow the bureau’s recommendation.

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Apparel Giant VF to Buy Sandal Maker

Catching the latest wave of consolidation in Southern California’s surf wear industry, apparel giant VF Corp. said it planned to buy San Diego sandal maker Reef Holdings Corp.

VF, of Greensboro, N.C., said it would acquire all of Reef’s outstanding stock from an investor group led by majority shareholder Swander Pace Capital. Terms were not disclosed.

Reef would become part of VF’s outdoor division. Under new ownership, Reef would expand its apparel line, a VF spokeswoman said.

Reef would continue to operate in San Diego under current management, she said. The deal is expected to be completed by the end of next month.

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Unocal Settles Lawsuit Over Myanmar Project

Unocal Corp. settled a landmark human rights lawsuit that accused the El Segundo-based energy company of being responsible for forced labor, rapes and a murder allegedly carried out by soldiers along a natural gas pipeline route in Myanmar.

The suit was filed on behalf of 15 Myanmar villagers in Los Angeles County Superior Court in 1996. The case, brought under the U.S. Alien Tort Claims Act of 1789, alleged that the company knew or should have known that the Myanmar army committed human rights abuses while providing security for the $1.2-billion pipeline project.

Terms of the settlement were not disclosed.

A statement said the agreement would provide compensation for the villagers and provide money “to develop programs to improve living conditions, healthcare and education and protect the rights of people from the pipeline region.”

A Unocal spokesman declined to comment on the case.