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OCTOBER 10, 2005
Edited by Dan Beucke Talk Show "'We have lost control,' that was [Greenspan's] expression." -- French Finance Minister Thierry Breton, quoting the Fed chairman on the U.S. budget deficit after they met. The Fed declined comment. LOOPHOLES Germany Is About To Yell "Cut!" Germany's deadlocked political parties can't agree on who should be the next Chancellor, but whoever it is seems certain to kill a tax loophole that has financed some of Hollywood's hit films. So-called media funds, which let investors write off 100% of their money up front, backed titles such as The Human Stain, 2003 Oscar-winner Monster, and the new Pierce Brosnan vehicle, The Matador. Desperate to rein in Germany's large budget deficit, politicians of every stripe agree that plugging tax loopholes for the rich is a noncontroversial way to do so. They're also eyeing funds that invest in ships, wind farms, and drug development. But the film funds, which raised $1.8 billion last year, attract the most scrutiny. A quirk in German tax regulations treats film investments as "immaterial goods." By taking out loans to cover the initial investment, investors can generate a deduction worth much more than 100% of the cash they put up. If the law changes, funds will have to attract investors by focusing on profits. Good luck finding those in Hollywood. By Jack Ewing   GEARWORLD Does Your iPod Lack Stamina? The clock is ticking for millions of owners of older iPods. The problem: Apple Computer's (AAPL ) iPods run on rechargeable lithium-ion batteries. Newer models are more efficient, but batteries for older models start degrading after 100 to 200 charges and need replacing after a year or two, says Gene Munster, a Piper Jaffray analyst. That means up to 2.2 million iPods sold from fall '03 to fall '04 may soon need new juice. Some owners are covered by a standard one-year warranty, while others have filed claims tied to a class-action suit. But many -- like software developer D'Arcy Norman, who says his iPod fell from six hours of power on a full charge to just one after 16 months of daily use -- have to pay to keep the tunes cranking. For $59, Apple offers an extended warranty or a replacement. Norman says he'll probably buy a third-party battery kit selling online for as little as $30. Meanwhile, Apple had its hands full last week handling complaints about broken or scratched screens on its newest iPod, the nano. Apple said a "vendor quality" problem caused screens to break in fewer than 0.1% of units sold. Customers with a defective screen can contact Apple for a free replacement. By Elizabeth Woyke and Peter Burrows THE BIG PICTURE 
MAD AVE What Would Fred And Ethel Do? Bickering neighbors Fred and Ethel Mertz from the '50s hit sitcom I Love Lucy are returning to television in all their black-and-white glory. But this time they won't be arguing over whether they should join Lucy's latest get-famous scheme. Instead they'll promote new Medicare drug plans in an ad produced by PacifiCare Health Systems (PHS ). PacifiCare is one of many insurance companies gearing up to blitz the airwaves starting Oct. 15 with information about Medicare Part D policies. These health insurers will sell multiple drug plans to supplement traditional Medicare coverage -- a hodgepodge of offerings sure to confuse seniors. Hence, the coming marketing push. "On average, PacifiCare can save folks over $1,000," Ethel says to her famously penny-pinching mate in the ad. Rather than casting lookalikes, Cypress (Calif.)-based PacifiCare bought the rights to use footage of the late Lucy actors, William Frawley and Vivian Vance, from their estates and CBS (VIA ). Ad agency Deutsch LA taped voice actors reading the lines, then tweaked old video from the show to make it look as if Fred and Ethel are discussing Medicare. It's the same technology that allowed Tom Hanks to exchange pleasantries with former President John F. Kennedy in Forrest Gump. PacifiCare is betting that nostalgia and tech wizardry will help cut through the Medicare clutter. Says Jacqueline Kosecoff, executive vice-president of specialty companies at PacifiCare: "For the 65-plus generation, Fred and Ethel really resonate." By Arlene Weintraub TRADE WINDS Sweatshop Swipe After years of relative quiet, the anti-sweatshop debate is about to heat up. On Sept. 28, United Students Against Sweatshops (USAS) mounted demonstrations on 40 campuses demanding that universities force companies that license and make their sports clothes and other apparel to use only suppliers that pay a living wage and respect unions. USAS wants clothing companies to agree to pay higher prices to overseas factories that make college goods, which have annual sales of about $3 billion. Factories would have to boost wages, now about $97 a month in China. Jim Wilkerson, Duke University's director of trademark licensing and stores, calls the idea "workable," adding: "It would raise prices, but only by about 25 cents on a $30 garment." By Aaron Bernstein REWIND Immigrants: Rising Numbers, Rising Resistance Many businesses see a huge market in the nation's 11 million illegal immigrants ("Embracing Illegals," July 18, Cover Story). But, as illegals continue to pour in, there's a flip side: pressure on companies to withhold products and services. Outfits such as Friends of Immigration Law Enforcement are threatening mortgage lenders making loans to illegals with federal anti-racketeering suits. And an internal document from Greyhound Lines (LI ) obtained by immigrant advocates last week outlines its prohibition on the sale of bus tickets to illegals. Citing federal law, the Greyhound document warns employees that violations could get them fired -- or arrested. It offers tips on how to spot a potential illegal immigrant smuggler (someone who wants to buy bundles of tickets and uses terms like "my cargo") or illegals themselves (people moving in single file or being led by a "guide"). A spokeswoman says the policy has been around for years and was beefed up after a bus company affiliated with Greyhound was indicted in 2001 by federal officials for trafficking in illegals. Advocates for immigrants worry similar bans could set off a rash of racial profiling. "This is a very intimidating policy," says Arnoldo Garcia, senior program associate at the National Network for Immigrant & Refugee Rights. By Brian Grow FACE TIME Robert Polet: Gucci's CEO Has The Last Laugh  Fashionistas were atwitter last year when Gucci Group named Robert Polet CEO. Could Polet, head of ice-cream sales for Unilever, run a luxury group? You bet: In September, Gucci reported 76% higher operating earnings over first-half 2004, when ex-CEO Domenico De Sole and superstar designer Tom Ford were in charge. Polet, 50, has cut the time needed to get new collections to stores from several months to as little as six weeks. He has tightened financial discipline, threatening to sell smaller brands such as jewelry maker Boucheron if they aren't profitable by 2007. And he introduced focus groups: "Market research can never replace creativity, but insight into our customers helps our designers."Several Gucci veterans were fired or resigned after clashing with the new boss. But Polet has the support of Gucci's owner, Paris-based PPR Group. In the end, he says, ice cream and $1,000 handbags aren't all that different: "You're selling pleasure." By Carol Matlack SOFTWARE This Machine Knows Just How You Feel Your credit-card company may not be just recording your phone call for quality-control and training purposes, as the disclaimer says. It also may be analyzing your voice to detect rising anger -- or lies. Advances in artificial-intelligence techniques mean companies can use audio files to identify everything from combative personalities to fraudsters. Their secret weapon: NICE Perform, a year-old software program from NICE Systems (NICE ), which provides call-recording services to most of the 100 largest corporations. More than 40 companies, including FedEx's Custom Critical subsidiary, use the program to track as many as 26 verbal signals, looking for key words (such as "cancel") and emotions. The emotion algorithm takes a baseline read at the start of the call, measuring deviations in a caller's pitch, volume, and tone. These biometrics "work like a lie detector," says Eyal Danon, vice-president for marketing at the Israeli company. Call-center managers can be alerted to frustrated customers so they can step in with a special deal or follow up with a conciliatory call. NICE says the system also could probably detect nervous vocal changes in people trying to commit ID theft or lying about a "stolen" car. Suspicious calls might go to a fraud-and-security unit, says Danon. A handful of insurance and financial services companies are testing that application. Like lie detectors, NICE's system isn't foolproof. One idea for bolstering its detection powers is to store voice recordings from known fraudsters for comparison. By Elizabeth Woyke JOB-HUNTING Revenge Of The Bean Counters There are some hot new employers on campus: the Big Four accounting firms. In a survey of 30,000 undergrads by Universum Communications for its list of the 15 Most Desirable Employers, PricewaterhouseCoopers came in No. 2 after BMW. Ernst & Young was No. 3, Deloitte No. 6, and KPMG was No. 14. What gives? Accounting firms are top campus recruiters, and they offer attractive benefits, especially now that they need more bodies to keep up with the workload created by Sarbanes-Oxley. But Universum CEO Claudia Tattanelli says that in an odd way, scandals have enhanced the profession's draw: "The fact that an accountant can bring a whole company down or can keep one alive shows how accountants have a lot of power." By Lindsey Gerdes 
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