In Business This Week: HEADLINER: STEPHEN TRAFTON
EXPECTING A BIG CHECK FROM UNCLE SAM
On July 1, the Supreme Court handed Stephen Trafton the win of his career. Since taking over as CEO of troubled Glendale Federal Bank in 1992, Trafton poured as much as $5 million of the Ssuperscript&L's money and untold hours into a high-profile breach-of-contract case against Uncle Sam. Now, the Supreme Court has ruled in his favor.
At issue was the government's decision to rewrite accounting rules for buyouts of troubled thrifts. Trafton argued that the move cost Glendale $1.5 billion because it forced it to write off $700 million--from an acquisition of a failed thrift that the government encouraged--in just six years instead of the 40 the government originally promised.
Cheering from the sidelines are some 120 other Ssuperscript&Ls, some now closed, that have similar suits pending. The government could end up repaying them as much as $10 billion. The ruling came while Trafton was with his son climbing Colorado's peaks. So he should be in fighting trim for the upcoming damages trial. Says Trafton: "Our ability to be flexible in any settlement is very limited."EDITED BY KELLEY HOLLANDReturn to top
BORLAND'S CHIEF STEPS ASIDE
BORLAND INTERNATIONAL just can't win. The former software highflier has seen revenues diminish every year since 1992 and hasn't turned an annual profit since 1991. On July 2, Borland's president and CEO, Gary Wetsel, abruptly resigned. Wetsel and the company refuse to comment. But UBS Securities analyst Michael Wallace says Borland needs "somebody with a stronger technical background" who can boost corporate sales. Meanwhile, financial woes continue: Also on July 2, Borland warned investors to expect a loss close to $14 million for the quarter ended June 30. The company expects results to pick up when it delivers a new product based on the Internet's Java language. Investors pushed the stock down from 9 1/4 to 7 7/8 on the news.EDITED BY KELLEY HOLLANDReturn to top
LAZARD AUDITIONS MGM SUITORS
IT WILL BE A BUSY JULY superscript4 holiday for Lazard Freres investment bankers working for Credit Lyonnais, owner of Hollywood studio MGM. By July 12, Lazard is expected to begin negotiating with a likely buyer. In pole position is PolyGram, a unit of Philips Electronics, with an estimated $1.3 billion offer. Other bidders include News Corp. and Ace Ventura producer Morgan Creek. MGM is in the midst of a turnaround. But bidders really want its 1,500-film library, including 17 James Bond flicks and classics such as Some Like It Hot.EDITED BY KELLEY HOLLANDReturn to top
SHAKEUP AT A SWISS BANKING GIANT
HOW TO GET AHEAD IN global banking: build a tightly focused, centrally managed organization. That's why CS Holding, the Zurich-based owner of CS First Boston and Credit Suisse, announced a restructuring on July 2 aimed at consolidating control under Chairman Rainer Gut. The company has been renamed Credit Suisse Group, and deputy Josef Ackermann, who industry sources say moved too slowly with restructuring, is out. Gut has named a new CEO, Lukas Muhlemann, now CEO of insurer Swiss Reinsurance. Gut also is planning cuts in his Swiss retail-banking network.EDITED BY KELLEY HOLLANDReturn to top