TOP STORIES--FEB. 10-15

Lay Keeps Quiet, but Watkins Talks

Former Enron Corp. Chairman Kenneth L. Lay showed up on Capitol Hill but remained mum about details of the company’s collapse. Instead he expressed “profound sadness” about what had happened at the company and invoked his 5th Amendment right against self-incrimination.

Separately, Enron executive Sherron S. Watkins told lawmakers that Lay was “duped” by top executives and didn’t understand the company’s perilous financial state before it filed for bankruptcy.

Watkins testified that former Chief Financial Officer Andrew S. Fastow tried last fall to fire her after she complained about the company’s accounting practices to Lay. Fastow declined to give testimony during his appearance before Congress two weeks ago.

Meanwhile, six of Enron’s 14 board members resigned as the company attempts to restructure.

The company also said it would provide Congress with copies of its tax returns dating to 1985 to aid an inquiry into whether the company used “aggressive tax planning” to avoid paying federal income taxes. The Senate Finance Committee and the Joint Committee on Taxation are planning a “thorough and comprehensive probe.

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Airline Mechanics Gear Up for Strike

United Airlines, U.S. officials and travelers are bracing for a possible strike against the carrier this week by its 10,600 mechanics, who rejected the latest contract offer.

The International Assn. of Machinists, is set to strike Wednesday if the two sides can’t reach an agreement. United and the IAM resumed bargaining Friday after the mechanics--who haven’t had a raise since 1994--voted down an immediate 37% pay hike recommended by an emergency board appointed by President Bush.

The board delayed a mechanics’ strike in late December while it worked out the latest contract proposal. Now, it appears that only Congress could block a strike. But Congress is in recess and won’t return until Feb. 26, so a mechanics’ strike could last for days before lawmakers could end it.

The threat is causing many passengers to shift to other airlines, further eroding the financial health of United, which lost $2.1 billion last year.

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When Bad News Is Good News

A day after missing out on the gold medal in a controversial judging decision that has overshadowed everything else at the Winter Olympics, Canadian figure skaters Jamie Sale and David Pelletier were getting urgent calls from reporters, talk-show hosts and assorted deal makers.

Even though the duo was awarded the gold by week’s end, their long-term commercial success still is not assured; their names could be added to the lengthy list of talented skating couples who were overshadowed by the more glamorous women’s singles competition.

The sports marketing pie for the Winter Games, traditionally smaller than that for the Summer Games, also has been reduced by the recession and post-attack advertising cutbacks.

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Did ‘Miss Cleo’ See It Coming?

The brief TV career of “Miss Cleo” is coming to an end amid allegations that the psychic hotline advertised by the Caribbean clairvoyant scammed consumers out of millions of dollars with false promises of free readings.

In a lawsuit filed in U.S. District Court in Fort Lauderdale, Fla., the Federal Trade Commission accused two telemarketing firms of using deceptive tactics to lure callers to the hotline, which provides psychic readings at a cost of $4.99 a minute.

Psychic Readers Network Inc. and Access Resources Services Inc. used the pseudonymous Miss Cleo in their nationwide TV ads, infomercials and mailings.

The FTC said the hotline in recent years has been the subject of about 2,000 consumer complaints.

Lawyers for the firms complained that the FTC had refused to discuss the allegations before filing its complaint, choosing to try the firms in the media. The commission “apparently was unwilling to allow the truth to compromise a good headline,” they said.

“To say we’re being deceptive is just plain wrong and unfair,” said Peter Stolz, president of the two telemarketing firms, adding that “99.999% [of customers] are happy with the service.”

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Homestore Is Where the Restatement Is

Homestore.com Inc. said it would restate its 2000 financial results and file new numbers by mid-March, fueling analysts’ doubts about the viability of the Westlake Village company.

The news prompted the Nasdaq Stock Market to halt trading of the Internet home-listing service’s shares until it satisfies the exchange’s request for additional information. The share price was 72 cents when trading was halted.

Homestore already had said it would restate financial results for the first, second and third quarters of 2001.

The newest restatements involve historical accounting issues and do not relate to Homestore’s ongoing operations, Chief Executive Michael Long said. But that explanation was not enough to convince analysts that Homestore will be viable in the long term.

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You’ve Got E-Mail Scam Crackdown

In the first of a series of planned government crackdowns on junk e-mail schemes, the Federal Trade Commission announced actions against one of the most widely distributed get-rich-quick scams.

The e-mail, which promised recipients they could “Be a millionaire like others within a year!” on a $25 investment, is an illegal chain letter ruse. Seven people caught last year in an agency sting agreed to a federal court judgment that required them to return future funds gained from the scheme.

The FTC also said it had sent warning letters to 2,000 other people allegedly involved in distributing the e-mail.

FTC officials said they are serious about pursuing e-mail scams, but they acknowledge it’s an uphill battle. The agency has only 271 investigators to examine all types of commercial claims nationwide, online or otherwise. Some computer users get at least that many unsolicited e-mail offers each week.

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Putting New Spin on an Old Toy

Several toy makers and major retailers are betting that the Japanese craze for toy tops will be the next kids’ sensation in the U.S.

The new toys, unveiled last week at the annual International Toy Fair in New York, are to traditional spinners what Razor scooters were to the wheeled wooden platforms that came before them.

The goal of most of the new top games is the same: to be the last one standing. What’s different are the added features and accessories to help get the tops going, keep them spinning and aid their ability to knock down other players’ tops.

Also during Toy Fair, Lego Co., the Danish toy maker best known for its brightly colored interlocking bricks, said it was moving into a new dimension with the introduction of several action figures. Based on the Fox Kids show “Galidor: Defenders of the Outer Dimension,” which debuted this month, Lego’s line of 20 moving figures is part of the company’s efforts to broaden its product line.

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$140 Million Is Music to Dick Clark’s Ears

Pop icon Dick Clark reached an agreement to sell his independent television production company, which produces such shows as “Dick Clark’s New Year’s Rockin Eve” and the “Golden Globe Awards,” to a group of private investors for $140 million.

Clark, 72, will remain chairman and chief executive of the company that he formed in 1957--the year his “American Bandstand” made the leap from a local Philadelphia production to a national audience on ABC.

The investors acquiring Dick Clark Productions Inc. include Mosaic Media Group, Capital Communications CDPQ Inc. and entertainment industry veteran Jules Haimovitz.

The partners agreed to pay $14.50 a share in cash to shareholders, with the intent of taking the company private. Clark will receive $12.50 a share, making his holdings worth nearly $95 million.

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Global Crossing Still Making Waves

Global Crossing Ltd. stayed in the headlines all week, as the company made plans to move out of its Beverly Hills headquarters, and news emerged that Chief Executive John Legere was paid as much as $3 million in severance for making the move to Global Crossing from his position as CEO of subsidiary Asia Global Crossing.

Legere and Global Crossing founders Gary Winnick and Lodwrick Cook, all silent since the company filed for bankruptcy protection last month, sent missives to employees acknowleding that the bankruptcy has been hard for employees but that the move to Bankruptcy Court is the “best way to preserve our wonderful company.”

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From Times Staff

For a preview of this week’s business and economic news, please see Monday’s Business section.