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"The mutual fund industry operates on a double standard. Certain companies and individuals have been given the opportunity to manipulate the system." -- New York Attorney General Eliot Spitzer, announcing a settlement with a hedge fund that he accused of making illegal trades with several mutual fund companies With the great blackout of 2003 still fresh in everyone's mind, three energy companies are planning to ask the Nuclear Regulatory Commission for permission to build new reactors. If issued, the permits would be the first ones to be granted since the early 1970s.

Dominion Resources (D) a utility based in Richmond, Va., will most likely be first, with a filing planned for this month. Later this fall, Entergy (ETR) is expected to request a permit for a new reactor at its Grand Gulf Nuclear Station in Port Gibson, Miss. Also expected this fall is a filing from AmerGen Energy, an Exelon unit that wants to expand its Clinton Power Station in Clinton, Ill.

All this activity will do little to ease concerns about future outages, however. The companies face a year-and-a-half wait for approval. A new reactor would take six to seven years to construct and cost about $6.5 billion, figures Dominion CEO Thomas Capps.

Asking for a permit now could shave years off that timetable, although Dominion doesn't have immediate plans to build. "We're keeping our options open," Capps says. It's still a long way to new nukes. Why should California fantasies be restricted to screenwriters? The economic plans proposed by candidates in the state's recall election outdo even Hollywood.

Lieutenant Governor Cruz Bustamante wants to hike income taxes on the wealthy and businesses, along with cigarette taxes. But he also proposes $2 billion in tax cuts that he can't identify. Or consider Peter Ueberroth's proposal to raise $6 billion through a one-time tax amnesty. Problem is, it would raise just $11.5 million, says Jean Ross, a director at the nonpartisan California Budget Project. As for Arnold Schwarzenegger's plan to hire auditors to find ways to cut waste, Ross says there's not much fat left after slashing the $38 billion deficit.

Truth is, California doesn't have much wiggle room to close next year's $8 billion deficit. About 75% of spending is locked in place through ballot initiatives and constitutional requirements. That makes it nearly impossible for Ueberroth to cut $2 billion by slashing spending 5% across the board.

The gubernatorial candidates would also cut $4 billion in automobile fee hikes, but it's not clear how they would close the gap. "The public doesn't care about figures," said Schwarzenegger. "What the people want to hear is: Are you willing make changes, be tough enough to go in there and provide leadership?" Spoken like a true action star. The State Dept. is asking high-tech companies to help make American passports smarter by adding a chip that will store biometric data, most likely facial measurements. IBM (IBM) and Infineon Technologies, Europe's No. 2 chipmaker, confirmed that they have responded to the request. State Dept. officials declined to identify other bidders.

There are 51 million U.S. passports in circulation, and 7 million are issued annually. At a recent tech conference, the deputy assistant secretary of state for passport services, Frank Moss, said the technology will cost the government an estimated $100 million a year.

The State Dept. is up against a deadline. By October, 2004, all new U.S. passports must have a biometric chip. The change is called for by a 2002 anti-terrorism law that also requires entry visas to use this technology.

How will it work? The chips will store the document holder's unique facial measurements, such as the distance between their eyes. That info can then be checked against a central database or a local scanner at the airport. "We could even do away with the paper entirely," says Charles Palmer, head of security research at IBM. The chips will also make passports and visas harder to counterfeit. More troubles for tarnished Rust Belt baron Ira Rennert: A court-appointed trustee has asked the bankruptcy court to liquidate two of Rennert's companies. And if the trustee wins a little-noticed lawsuit, Rennert's companies may have to pay $100 million in claims.

On Aug. 28, the trustee of Renco Metals Inc. and Magnesium Corp. told the court that the debtors were broke and unlikely to emerge from bankruptcy. A suit filed by the trustee a month earlier alleged that the two were unable to pay their debt, because much of the $150 million from junk bonds was used to pay dividends to Rennert's holding company, Renco Group. Both companies filed for bankruptcy in 2001. A Renco spokesman calls the charges "categorically false."

The suit is one of the first to name Rennert's associates. It alleges that accountant KPMG, banker Donaldson, Lufkin & Jenrette (now Credit Suisse First Boston (CSR)), and law firm Cadwalader, Wickersham & Taft helped provide "false and misleading information." KPMG says the claims are without merit. CSFB declined to comment. And no one at Cadwalader was available for comment.

Rennert can't be too worried. He recently rejected a $750 million offer for Humvee maker AM General from Cypress Group. Renco says it's considering all options. Microsoft's rivals know an opportunity when they spot it. When a spate of computer viruses attacked Microsoft (MSFT) programs this summer, a trade group representing AOL Time Warner (AOL) Sun Microsystems (SUNW), and Oracle (ORCL) pounced. On Aug. 27, Ed Black, CEO of the Computer & Communications Industry Assn., fired off a letter to Homeland Security Secretary Tom Ridge urging him to dump Microsoft. While conceding that the virus creator bears most of the blame, the letter also says: "Microsoft is also largely responsible for continuing to create software riddled with obvious and easily exploited vulnerabilities."

A month earlier, Homeland Security had agreed to buy $90 million worth of Microsoft programs over five years. Black says the agency defending the nation ought to set an example. The agency says it has no plans to ditch the programs. Microsoft declined to comment.

But people in glass houses ought to be careful where they fling their Windows CDs. Since January, the Energy Dept., which tracks viruses, reported seven high-risk vulnerabilities with Microsoft's software. But Sun, with two high-risk vulnerabilities, isn't blemish-free. When it comes to viruses, no software is immune. Oh, how mutual funds miss those bubble years. With the market's recent pop, some funds are running a type of ad popular in the boom. Trumpeting performance, they omit other info to help investors pick funds.

Take a recent Smith Barney (C) newspaper ad. It highlights the Capital & Income Fund's 15.3% five-month return, then later shows the -9.8% one-year return and 7.8% 10-year return. A Fidelity Leveraged Company Stock Fund ad promotes a 45% five-month return, and it later shows a 4.6% one-year return and 2.9% for the life of the fund.

The ads are disturbing, says Morningstar analyst Gregg Wolpert, because they don't help investors understand risks. They may also set unrealistic expectations. A spokesman at Fidelity says its ad gives "a good picture of the fund's performance." A Smith Barney spokesman says complete performance data are useful, "especially when combined with the guidance of the financial professionals who offer our funds."

The ads contrast with a recent Longleaf Funds letter to shareholders: "Returns of this magnitude are not normal.... We caution you not to increase your expectations based on these numbers." Score one for plain talk.


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