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"If you're going to stab people, first you've got to give them a ham sandwich." -- Congressman Jim McDermott (D-Wash.), charging that the White House is extending unemployment benefits to make it politically easier to cut taxes for the wealthy The heated scene in a New York State Supreme Court room on Jan. 7 was fitting for the Academy Award-winning film producer Kenneth Lipper. But the man, who has become even more famous for running a hedge fund that allegedly lost more than $315 million belonging to some of the country's rich and famous, wasn't there. He let his lawyers duke it out with his irate investors and their attorneys over how to get their money back.
Possibly because the amount of money in dispute is so great, and the names of the affected so prominent, Judge Karla Moskowitz ruled that Lipper has to start refunding his investors by early February. She ordered that 75% of the already liquidated assets of two Lipper Convertibles funds be returned. That's about $250 million, based on the lower of two valuation methods. Lipper's high-profile clients include actress Julia Roberts, Walt Disney (DIS
) Chairman and CEO Michael Eisner, Senator Ernest "Fritz" Hollings (D-S.C.), New York Reserve Bank Chairman William McDonough, and members of the Tisch family, which controls Loews Corp.
Some new names were revealed on Jan. 7. They include Today Show host Matt Lauer; actor Liam Neeson; former Federal Reserve Board Chairman Paul Volcker; co-founder of the Hard Rock Cafe (RANKY
) chain Peter Morton; Hollywood film producer Jerry Bruckheimer; and artist Frank Stella, on behalf of the Barnett & Annalee Newman Foundation.
As BusinessWeek first reported in the cover story "The Fallen Financier" on Dec. 9, the plan to refund investors is hotly contested, since investors who entered the fund more recently would get more of their money back than earlier investors.
Doling out the remaining 25% will be more contentious. Investors are dickering over the methodology used to value the assets and determine how much they should get back.
Other remaining issues are whether Lipper should be removed as liquidating trustee and whether he should return performance fees. "Lipper is rewriting the portion of history that allows him to hurt investors yet keep his ill-gotten gains," says Mark Ressler, an attorney for several investors. The judge is expected to release a plan in the next few weeks.
It's unclear if Lipper will be charged with any crimes. The Securities & Exchange Commission and other regulators are continuing to investigate his firm. The next big thing in advertising? It could be Yao Ming, the 7-foot, 5-inch center for the Houston Rockets. He has become quite a sensation since being recruited from China to the NBA, drawing thousands of Chinese to games in Houston, Los Angeles, San Francisco, New York, and other locales with large Chinese-American communities.
Advertisers sure are taking notice. In Houston and New York, Chinese beermaker Yanjing has been advertising in stadiums and on a local TV station--in Chinese. Yanjing is now the only imported beer sold at the Rockets' home arena Compaq Center. "The phenomenon of Yao Ming now affords advertisers who are targeting Chinese-Americans a potentially riveting celebrity," says Saul Gitlin, a strategist at Kang & Lee Advertising in New York.
Next up: After making his commercial debut promoting the NBA on ESPN, Yao will star in an ad for Apple Computer's (AAPL
) new PowerBooks. It features Yao with the diminutive Verne Troyer, of Mini-Me fame. Ad execs are enthused about Yao's on-screen persona. "He's really very, very charming," says Lee Clow, chairman of advertising giant TBWA/ Chiat/Day, which produced the spot. Look for Madison Avenue to keep the Yao-fest going. Just when a technology upturn seemed at hand, some buyers say they're zipping up their wallets again. On Jan. 2, a Goldman Sachs (GS
) survey of information technology managers reported a surprising turn for the worse. An October survey by Goldman had predicted a 2% to 3% spending increase in 2003. But suddenly, tech buyers now expect a 1% decline.
The New Year's gloom is especially odd because Commerce Dept. data show modest tech spending gains over the past three quarters. And other surveys and forecasts indicate that replacing old equipment and purchasing new products such as wireless networks could mean better days for the struggling tech industry.
Why the disconnect? Goldman Sachs analyst Laura Conigliaro blames a soft November and year-end budget cutting. Perhaps the uncertain economy and war fears are to blame, too. Says Conigliaro: "It feels unrealistic to close the book on the slowdown." Not long ago, the notion of six degrees of separation was all the rage. So the University of Michigan Business School applied the principle to the boards of directors of the top 1,000 U.S. companies. How many degrees separate the business elite? About 4.6, on average.
Try tracing the chairman of a board that BusinessWeek ranked among the worst (Conseco) (CNC
) to the chairman of one of the best (Colgate-Palmolive) (CL
). Gary Wendt chaired Conseco's board, which included David Harkins, who serves on the board of Fisher Scientific (FSH
) with Michael Dingman, who's on the board of Ford Motor (F
) with Robert Rubin, who serves at Citigroup (C
) with Ruben Mark, CEO and chairman of perennially profitable Colgate--which apparently didn't help Wendt much. Wendt resigned in October, shortly before Conseco filed for Chapter 11.
Such links among directors, says study co-author Gerald Davis, continue to proliferate even as boards reform to include fewer insiders. "A small number of random connections makes the whole world small," says Davis. Or rather, run by the connected few. You know those America Online (AOL
) CD-ROM offers that clutter up your mailbox? Jim McKenna and John Lieberman collect them. The two El Cerrito (Calif.) residents got so tired of getting the CDs that they started a campaign to accumulate a million of them. Why? To return them to AOL headquarters in Dulles, Va.
So far, they've rounded up almost 130,000, mailed to them by like-minded folk who saw the duo's Web site (www.nomoreaolcds.com) and share their aversion to what they call AOL's "wasteful practice." "We just want them to market their products another way," says McKenna. The pair have received CDs from every continent except Antarctica. The CDs, which McKenna renders inoperable by scratching, are kept in Lieberman's garage.
AOL has no plans to stop mailing CDs, says spokesman Nicholas Graham. "For every handful of people who call requesting not to receive the CDs, hundreds request them," he says. If the two reach their mark, they envision sending 18 tons across the country via an "armada of trucks." AOL'S response? "We'll meet them at the front door," says Graham, who notes that AOL recycles a million CDs a week. "We'll even give them a map to get here." President Bush's education-reform effort, the No Child Left Behind Act, did more than establish nationwide standards for public education. It also gave frustrated school administrators a new technique to try to win more funding: the ability to sue their states in federal court. "If schools can't meet standards because they don't have the resources, theoretically they have a claim against the state for damages," says Kansas State Senator John Vratil, a Republican.
School boards have sued in state courts with mixed results. But now, federal standards, plus being able to sue at the federal level, may make it easier to show that kids are being shortchanged --and thus entitle their schools to damages to fund better education. In Ohio, where the state's Supreme Court recently ruled school funding inadequate, estimates of how much more money is needed are as high as $3 billion for 2003. Similar cases are pending in 20 states.
Lawmakers are bracing for more claims, even as deficits force budgets cuts. Losing in court would mean ponying up for schools--and likely hiking state taxes.