Up Front
Edited by Sheridan Prasso
Talk Show
"I hit my head, and when the stars stopped, I said: `Is someone trying to tell me something?"' -- William Webster, commenting to The Wall Street Journal about being thrown from his horse as he was considering whether to resign from the Public Company Accounting Oversight Board
LAWSUITS
The Skeleton in Frank Zarb's Closet
On the list of candidates to replace Harvey Pitt at the Securities & Exchange Commission is Frank Zarb. He has quite the résumé: former chairman of the National Association of Securities Dealers (NASD), former chairman and CEO of Smith Barney, and head of the Federal Energy Administration under President Ford. But a little-known $6 million fraud judgment in a New Jersey court could throw cold water on his chances in these scandal-sensitive times.
At issue: Zarb's statements in 1996, when, between stints at Smith Barney and NASD, he was CEO of insurance broker Alexander & Alexander Services. Zarb had helped recruit Philip McConkey, a former pro-football player and top insurance salesman, with assurances that the company was not for sale. However, proxy statements revealed that Zarb was in merger talks with Aon Corp. at the time. The court found Zarb to have shown "wanton and willful disregard" for McConkey, who was laid off when A&A was acquired seven months later. It ordered Aon to pay McConkey $6 million. Zarb says he has no comment. Aon is still appealing.
These days, a court finding of deceitful practices won't do much for anyone's job chances in Washington.
By Christopher Palmeri and Mike McNamee
THE FEDS
A Bitter Pill for Biotech
The biotech industry is fuming over a Nov. 1 ruling by the Health & Human Services Dept. on reimbursements from Medicare. A tiny provision of the ruling, stemming from a nasty fight between Johnson & Johnson (JNJ
) and biotech giant Amgen (AMGN
), could have consequences for the entire industry. Biotech execs say the new rules could hurt their ability to recoup costs incurred over many years developing drugs. One angry exec says this could "absolutely kill innovation in America."
Here's the root of the anger: In July, Amgen got the O.K. for broader use of an improved version of its blockbuster anti-anemia drug, Epogen. Called Aranesp, the drug will go head-to-head with an older, J&J-marketed version of it, called Procrit. But J&J persuaded the government to declare both drugs "functionally equivalent," even though Aranesp doesn't need to be given as often. That means Medicare will pay only about half Amgen's price for Aranesp. So, Amgen fears that doctors will use the older, cheaper Procrit instead.
Amgen says it will file suit seeking to overturn the provision.
By John Carey
HIGH TECH
This Year, It's Comdex Lite
Comdex, the U.S. tech industry's biggest trade show, kicks off on Nov. 16 in Las Vegas. But this year's fest won't be the extravaganza of bygone years.
Sure, the tech wreck means there will be less than half as many exhibitors as in 2000. But it appears that the company running the show is in deep trouble, too. Key3Media Group (KMED
), based in Los Angeles, lost $21 million on revenues of $252 million last year, and prospects are looking bleaker this year. Key3 has been delisted from the New York Stock Exchange--shares trade at 2 1/2 cents.
And it gets worse: Six of Key3's 12 board members, including wealthy investor John Pritzker, have resigned in the past few months. The company already had lost several experienced trade show execs after CEO Fredric Rosen moved the headquarters from Massachusetts to California two years ago.
Rosen blames the slowdown in tech and travel. He says he plans to restructure up to $370 million in debt and has not ruled out bankruptcy. "When the industry contracts, we get squeezed," he says. Meantime, Comdex-goers will be wishing they could party like it's 1999.
By Christopher Palmeri
THE LIST
SOFTWARE HARDBALL
Dark Days for Dirty Money
Before the September 11 terrorist attacks, mobsters could take their pick of financial institutions for laundering ill-gotten gains. Those days are over. Now, thanks to the USA Patriot Act, not only banks, but insurance companies, brokerages, and investment banks are required to keep an eye out for cash-cleansing chicanery.
That's good news for the software industry. SAS Institute, for example, decided to jump into an area where only small niche players had previously existed. After releasing its anti-money-laundering software on Sept. 30, SAS immediately logged four sales to large institutions, and it has 25 more in the pipeline. "A huge market has opened up to us," says CEO James Goodnight. Smaller competitor Mantas says it has doubled its client list from 5 to 10 in the past year and expects to double it again.
The software uses complex algorithms to sniff out "smurfing"--when crooks make a series of transactions of under $10,000 to avoid arousing suspicion. That's what fictional mob wife Carmela Soprano was up to on a recent episode of HBO's The Sopranos.
For software makers, this is just the start. The Feds have put casinos on notice that they're next in line for scrutiny.
By Steve Hamm
BALLPARK FIGURES
Cooling on the Boys of Summer
Baseball has been losing ground in the popularity contest with football and basketball. Here are the percentages of people who name each as their favorite sport now, compared with 1985:
CORPORATE CULTURE
Q&A: Facing Our Inner Weasels
Should we be laughing at Corporate America now, when it's making us cry? Yes, says Scott Adams, creator of Dilbert and author of the just-published Dilbert and the Way of the Weasel. He spoke with BusinessWeek Books Editor Hardy Green:
Q: Do you see yourself as a reformer of corporate excess?
A: It's not my mission to make the world a better place--it's to make people laugh. But it's gravy to know that bosses often pause when they're thinking about rolling out a new program. They have to wonder: "Is this the kind of program that could appear in a Dilbert cartoon?"
Q: Are executives at Enron (ENRN
) and WorldCom "weasels"?
A: No. The "weasel zone" is that area between good moral behavior and illegality--the zone where most of us operate as we avoid work and hide our incompetence. Enron executives and others have graduated from this area.
Q: What about your notion of "weasel math"?
A: It's replacing small numbers with big ones that make you look better. I'm hoping the term will catch on so that when some manager proposes a program backed by inflated numbers, others can say: "Oh, that's weasel math." Then, they can just forget about the proposal.
Q: Are accountants, by definition, weaselly?
A: Wherever there is complexity, there are weasels. Since all of our problems lately are related to accounting, you could say that accountants are the uber-weasels--the ones who started it all.
CORPORATE CULTURE
Video: Weasel Patrol
Dilbert creator Scott Adams with some tips on identifying this common form of office wildlife.
THE BIG PICTURE
|
Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
