"To be a great philanthropist with other people's money really is not very persuasive." --U.S. District Judge Leonard Sand sentencing John and Timothy Rigas for looting hundreds of millions from Adelphia Communications
At their 11th wedding anniversary dinner in 2002, marketing guru Roger Blackwell says his then-wife told him "she was going to look for someone better." In fact, Tina Stephan may well help land Blackwell in jail. Her testimony was key to a federal trial that ended on June 20 with Blackwell's conviction on insider trading charges in Columbus, Ohio. Blackwell, 64, was a director at Worthington Foods when it was sold to Kellogg (K) in 1999. He was found guilty of tipping off friends, an employee, and family members about the pending sale. Stephan, 39, who agreed with Blackwell to end their marriage last October, was named an unindicted co-conspirator. In exchange for immunity, she testified that she and Blackwell gave $20,000 to her mother to buy Worthington shares and that they destroyed evidence related to the case.
Stephan eventually became engaged to Terry Lundgren, CEO of Federated Department Stores (FD). Blackwell plans an appeal. He already has resigned as a marketing professor at Ohio State University. Blackwell is scheduled for sentencing later this year. He faces possible fines and a lengthy jail term. Maybe all is not fair in love and war, after all.
Can former IBM (IBM) CEO Louis Gerstner Jr. fix Morgan Stanley? The firm's board of directors may be considering it. Gerstner's name is among those making the rounds in one corner of Morgan Stanley as a possible successor to Philip Purcell. Through spokespeople, Gerstner and Morgan declined to comment. A spokesman for Charles Knight, head of the search committee, did not return a call seeking comment.
Gerstner would be a controversial choice. A key task for any candidate will be to stop Morgan Stanley's top investment bankers from leaving. Most names mentioned so far, such as former Citigroup (C) Co-CEO John Reed, have Wall Street experience. By contrast, Gerstner has chaired the private equity firm Carlyle Group since 2003 and was president of American Express. Still, it's easy to see why some might think Gerstner, 63, could work. At IBM, he remade one of Big Business' most ingrained and dysfunctional cultures. Some think if Morgan Stanley's board keeps ruling out former President John Mack, Gerstner could be the next best option. "If they're not going to bring Mack back, they need something dramatic. Gerstner is dramatic," says money manager Michael Holland of Holland & Co.
The buzz among Northwest Airlines (NWA) employees is that management says it may file Chapter 11 if unions won't give up $1.1 billion in cuts and the airline can't put off paying $3.8 billion to fund pensions. From the way managers have been unloading Northwest stock, it looks as if they don't expect to prevail. After virtually no activity in early 2005, Chairman Gary Wilson has sold 2.9 million shares since mid-May, for more than $15.5 million. The sales came almost daily in June, reducing his holdings by 68%, according to Securities & Exchange Commission filings. Wilson is the top seller, but he's not alone. CEO Douglas Steenland cashed in 117,000 shares in the second quarter, while two executive vice-presidents reported smaller sales. The execs declined to comment, through a spokesman, but Wilson says in filings the sales fall under a trading schedule he began on Apr. 26.
The insider sales and bankruptcy talk have helped cut Northwest's share price by half in 2005, to around $5. Typically a stock loses most of its value right after a bankruptcy filing and is voided when it emerges. So Ted Ludwig, president of the Aircraft Mechanics Fraternal Assn. at Northwest, asks: "Do they know something we don't?" Workers could find out soon.
U.S. computer and health-care companies have long looked to fill talent shortages by recruiting overseas. Now accounting firms are following suit. The sixth-largest audit firm, BDO Seidman, says it will fill 80 of its 600 new domestic spots with global hires in 2005 -- up from 20 last year. Of those, 37 are Filipinos. Others hail from South Africa, India, and Europe. Newcomers will stay a minimum of three months, but most are on three-to-six-year visas. Hiring overseas costs about 20% more, once you figure in visas, lawyers, and temporary housing. But BDO says it couldn't find enough qualified U.S. candidates to handle the 40% to 60% more audit hours required by Sarbanes-Oxley.
When a board takes a broom to its CEO, the explanation often is dressed up with niceties about "philosophical differences." But what do board members really think? Training company Leadership IQ quizzed 1,087 directors about what caused them to lose faith. Among CEOs who got fired, 31% were seen as having mismanaged change. Close behind, 28% ignored customers, and 27% tolerated low performers. Then there were the 23% who were canned for "denying reality." Nothing makes it real like a pink slip.
Dr. Roger Perlmutter is feeling more optimistic about Amgen (AMGN) than when he joined as research chief in 2001. Then the biotech giant was facing heat over its thin drug pipeline. So Perlmutter axed dozens of the least promising lab efforts. That discipline is starting to pay off. Amgen has released encouraging early data on osteoporosis and cancer drugs; 10 more are ready for human testing. Perlmutter, executive vice-president for research and development, predicts Amgen will apply for Food & Drug Administration approval for four products in the next five years.
Tell that to Wall Street. Despite 23% first-quarter earnings growth, Amgen stock has dropped $3, to $61, since Jan. 1. That may be because Perlmutter can't predict the potential of the osteoporosis and cancer drugs until late-stage trial data is released starting later this year. "I pretty much know [the drugs] are going to work. But what's the commercial trajectory? I don't know." Investors are watching carefully.
Sears (S) is extremely proud of the American heritage of its Craftsman line of tools. The point was driven home in a recent episode of the Travel Channel TV series John Ratzenberger's Made in America that extolled the tools' merits.
But now a small number of consumers are challenging Craftsman's pedigree. In a lawsuit filed last December in New York Supreme Court, three plaintiffs claim that many Craftsman tools are falsely labeled "Made in USA," since major parts are often from other countries. It is one of nine such suits filed in five states. In each case, Sears has filed a motion to dismiss. Spokesperson Chris Brathwaite says: "We will continue to vigorously defend them."
In 1997 the Federal Trade Commission set a standard for Made in USA labels: American origin may be claimed only if "all, or virtually all" of the product is made here. Fine print in Sears promotional materials reveals only about 1,600 of Craftsman's 5,000 tools are U.S.-made. The suits claim this isn't obvious from the retailer's ads. A quick check of several Sears stores by BusinessWeek found, for example, a screwdriver with a label indicating Canadian origin hanging under an image of the product labeled Made in USA. FTC lawyer Laura Koss won't say if the agency is investigating. "The bottom line is making sure consumers get accurate information," she says. Sometimes it takes a court fight to hammer that home.
Its logo, featuring an Islamic crescent "C," a Star of David "X," and a Christian cross "T," is meant to represent the peaceful coexistence of faiths. But Coexist, a Fishers (Ind.) apparel company, isn't turning the other cheek. Its May 12 lawsuit against online marketplace CafePress.com and three small Web outlets claims they violated a two-year-old trademark.
The four pulled T-shirts from their sites pending judicial review but insist the designs are their own. Aaron Ring, owner of Atheists Online and a defendant, says his design is "unique and distinct," using a yin and yang symbol instead of the "O" and a Celtic pattern for the "S." Coexist says the designs are "confusingly similar."
In 2001, Polish artist Piotr Mlodozeniec designed a logo using religious symbols for Jerusalem's Museum on the Seam. Coexist trademarked it, with slight differences, two years later. Can't these logos all just get along?