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"The company lied. These employees lied. The law was broken. It's just that simple." -- Oklahoma Attorney General Drew Edmondson, filing criminal charges against WorldCom and ex-CEO Bernie Ebbers One of the longest-running acquisition talks in telecom has hit a snag. AT&T (T) and BellSouth, which have been in intermittent discussions for nearly two years, are bogged down over price, BusinessWeek has learned. An executive familiar with the talks says AT&T CEO David Dorman believes the long-distance giant should sell for about $25 a share, a 16% premium over its current price of $21.56. That would put a deal at around $20 billion. BellSouth maintains AT&T is fairly valued and is only willing to pay a small premium over its $17 billion market cap.

Is the dance finally over? BellSouth is showing interest in other targets. There are plenty of cheap telecom assets on the market, and some BellSouth execs think they see better values than AT&T. For example, BellSouth could try to acquire some or all of MCI, which is expected to emerge from bankruptcy this fall. MCI operates Internet powerhouse UUnet. That could improve BellSouth's ability to serve corporate clients. "There have been talks about UUnet," says a person familiar with the discussions. But those talks haven't gone anywhere.

It could be some time before a move is made. The industry is on a more stable footing than last year, and companies are betting they will be worth more tomorrow than they are today. AT&T, BellSouth, and MCI declined comment. Got a problem with asbestos-reform legislation? Tell it to the judge. In a highly unusual (UAL) move, Senator Arlen Specter (R-Pa.) has tapped a federal judge to informally mediate a proposed $145 billion settlement, BusinessWeek has learned.

The bill has been stalled since July 10, when a Senate panel passed a revision that widened the conflicts among labor, plaintiff's lawyers, corporations, and insurers. At Specter's urging, all sides met on Aug. 18 and 19 with Judge Edward Becker of the Third Circuit Court of Appeals. The atmosphere, say several participants, was chilly. Specter's office did not return calls.

The judge's ruling? All he would say: "It was a productive meeting." Becker has asked all parties to file written comments by Aug. 29. Top Senate aides say Becker is free to weigh in all he wants, but lawmakers have no intention of ceding authority to the judicial branch. Buried in a 106-page report by an accountant who spent six months investigating charges of fraud related to the October, 2001, bankruptcy of Polaroid is an unanswered question: Did top execs favor the buyer, One Equity Partners, in exchange for jobs and shares in the company?

On Aug. 22, court-appointed examiner Perry Mandarino issued his report, finding that "it appears around the time of the auction [of Polaroid assets] at the latest," OEP planned to give Polaroid managers shares in the new company. But the investigation was inconclusive. "No one could remember when it was first discussed," says Mandarino. Such a relationship would be fraud if it occurred before the auction, says UCLA law professor Lynn LoPucki.

Shareholders aren't ready to accept the report's findings. On Aug. 26, investors filed a lawsuit claiming the company's auditors, KPMG, and three top execs misled investors. "Clearly, we think a fraud has occurred," says Stephen Morgan, a Polaroid investor. KPMG says it hasn't received the suit and couldn't comment.

Eight former Polaroid execs, including the CFO, own about 4% of the new company. Polaroid isn't named in the shareholder suit but says the auditor's report resolves any questions surrounding its $255 million sale. A spokesman for OEP, a private-equity arm of Bank One, says managers typically get a stake in the new company, and that talks started months after the sale. The first trial of a former Enron employee is being delayed -- and the defense has the Super Bowl to thank.

Lea Fastow, previously Enron assistant treasurer and wife of former CFO Andrew Fastow, has pleaded not guilty to money laundering, filing false tax returns, and conspiracy. Jury selection was to begin on Jan. 27, 2004, but with the Super Bowl in Houston on Feb. 1, the trial could have been a logistical mess, Fastow's lawyers said. Hotels are already booked up. Says defense lawyer Mike DeGeurin: "The government would benefit as much as anybody" by the delay, since the prosecution will no longer have to make its case during distracting festivities. The trial now starts on Feb. 10.

The defense was hoping for a longer reprieve. Lea's lawyers had been trying to get her trial postponed until after her husband's. They argued that his testimony could help his wife, but that he had to wait until after his trial to protect his rights against self-incrimination. So much for chivalry. The tech industry may be starting to rebound, but it will have to revive without the help of Silicon Valley serial entrepreneur Jim Clark. The founder of Silicon Graphics, Netscape, and Healtheon has sworn off the Valley. "It's in such a funk," he says.

Instead, Clark has turned his attention to Miami, where he now resides. With fellow tech veteran Thomas Jermoluk, former chairman of Excite@Home, he has formed a real estate firm, Hyperion Development Group. Their first project under construction is a 330-unit condo on Miami's Biscayne Bay. Apartments in the curvilinear 36-story building, made of steel and blue glass, have views on both sides.

While Clark has left Silicon Valley, he hasn't left risk behind. Miami's Biscayne area is something of an urban renewal project. It's not clear the neighborhood will support $700,000 condos. Still, Clark is happy trying something new. "We're developers now," he laughs. "We've gone back to making money the old-fashioned way." If Clark has anything like the success he had in tech, where he amassed a fortune of nearly $2 billion, you can expect to see Hyperion projects sprouting all over South Florida. The low-carb Atkins Diet has become so popular in Britain that producers of starchy food are worried. Although bread sales are down just 2% over the past three years, the food industry isn't taking any chances.

On Sept. 23, the British Potato Council, the Federation of Bakers, and the Flour Advisory Bureau will hold a "Carbo Summit" to unveil a study -- funded by the industry -- highlighting the health risks of low-carbohydrate diets. The Potato Council is spending $1.6 million on marketing, including a bus tour traveling the country passing out potatoes. In October, a.k.a. British Bread Month, the Federation of Bakers will use retail promotions to try to boost bread's image as low-fat. "People think of bread and potatoes as fattening," says Tamara de Grassi, a nutritionist at the Flour Advisory Bureau. "But carbohydrates provide impor-tant nutrients." Atkins officials say their diet allows "realistic" portions of starches.

While the carb crowd is hurting, the meat producers are living high on the hog. The U.K. Meat & Livestock Commission reports consumption rose to a record 4.3 million tons last year, up from 4.2 million a year ago.


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