Business Digest

BUSINESS DIGEST

January 27, 2004

In The Region

SEC's Allegheny probe reportedly targets finances

An "informal" federal investigation of Allegheny Energy Inc. appears to involve the utility's acknowledged financial and accounting problems rather than any suspicion of fraud, Chief Executive Officer Paul J. Evanson said yesterday.

The Hagerstown company disclosed the Securities and Exchange Commission inquiry Friday in an SEC filing on its third-quarter financial results. The filing showed that Allegheny lost $51 million in the third quarter of 2003, compared with $263 million a year earlier.

In a conference call with securities analysts, Evanson said the SEC informed Allegheny of the informal investigation last week and requested certain documents in connection with it.

Evanson said he wasn't surprised, since Allegheny discussed a number of problems in its 2002 annual earnings statement in September. They included the company's discovery of accounting errors in previous filings, which led it to restate some past results and delay filing other reports.

City PR firm hires Ciena's ex-communications chief

Glenn Jasper has joined Trahan, Burden & Charles public relations as a management supervisor in the Baltimore firm's newly formed corporate services division. He will be responsible for spearheading communications programs.

Jasper most recently served as director of public relations for Ciena Corp., where he was responsible for global media relations. Before that, he worked in New York representing clients as diverse as Frito-Lay, Dunkin' Donuts, Bell Atlantic Mobile (now Verizon Wireless), Mazda and New York Life.

Elsewhere

WorldCom probe finds grounds to sue KPMG on tax shelter

A new report by WorldCom's bankruptcy court examiner raised the possibility of the firm suing KPMG over a complex tax shelter it designed to minimize state taxes owed by the telecommunications company.

The report, filed yesterday in U.S. Bankruptcy Court in New York, was written by Richard L. Thornburgh, a former U.S. attorney general appointed by the bankruptcy court to investigate the scandal.

Thornburgh, in a speech yesterday in Harrisburg, Pa., described the KPMG strategy as "accounting on the way fringe of propriety," and warned that states could seek substantial taxes and penalties from MCI.

Thornburgh's report said WorlCom, which now calls itself MCI, would be entitled to sue KPMG for malpractice and negligence "to recover any interest and/or penalties paid by the company to any state taxing authorities based upon the flawed advice KPMG provided to WorldCom. ... The company may also have claims to require KPMG to return the millions of dollars in fees paid to KPMG for its flawed advice."

KPMG rejected yesterday Thornburgh's conclusions and defended the tax strategy, which is still in use by MCI, though it may be phased out as part of the company's financial reorganization.

8 female, 4 male jurors to try Martha Stewart

Women outnumber men eight to four on the jury that will decide Martha Stewart's fate - a panel that includes a minister, a man who lost money because of Enron Corp.'s collapse and a woman who says the government should move faster to prosecute corporate scandals.

The jury, culled by lawyers from a pool of hundreds to decide whether Stewart lied to investigators about a well-timed stock sale in 2001, was seated yesterday. Opening statements were set for this morning.

Many of the jurors told the judge in private interviews they had been exposed to some of the enormous pretrial publicity that has surrounded Stewart's prosecution but assured the court they could be impartial anyway.

NYSE's enforcement chief is retiring March 31

New York Stock Exchange enforcement chief David P. Doherty, who is leading the Big Board's probe of trading violations by market makers known as specialists, will retire March 31.

The departure of Doherty, 63, the executive vice president for enforcement, isn't related to the Securities and Exchange Commission's notification to the specialists last week that they may face civil charges, a spokesman said.

The NYSE and the SEC are investigating allegations that traders at the firms, which referee trading and buy and sell for themselves, failed to properly match buy and sell orders, in some cases profiting at the expense of investors. The SEC sent so-called Wells Notices to LaBranche & Co. and at least four other specialists last week to notify them of the agency's potential action.

WTO refers to arbitration anti-U.S. sanction requests

Requests by the European Union and seven other countries to start trade sanctions against the United States over a trade law the World Trade Organization has ruled illegal were referred to arbitration yesterday, officials said.

The countries had asked the WTO for permission for the sanctions in retaliation for Washington's failure to repeal the Byrd Amendment - a law that gives American firms hundreds of millions of dollars raised in fines levied on foreign rivals.

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