Wednesday November 2nd, 2005
by: Ed Mayberry, November 2, 2005 5:11:00 am
A federal appeals court in Houston has tossed out the 24-year sentence of a former Dynegy tax official on securities fraud and other charges. In an opinion released Tuesday, a three-judge panel of the 5th U.S. Court of Appeals said a lower court improperly calculated the sentence. It ordered the district court to resentence Jamie Olis. But the panel upheld the conviction of Dynegy's one-time senior director of tax planning. Olis was sentenced to 292 months in prison in March 2004. He was convicted of securities fraud, mail and wire fraud and conspiracy in connection with his work as a tax lawyer and accountant at Dynegy. The charges stem from a transaction called "Project Alpha,'' which was designed to artificially boost Dynegy's cash flow by disguising a $300 million loan as cash.
The world's second-largest reinsurer says the global insurance industry could face more than $20 billion in claims from Hurricanes Rita and Wilma. Previous forecasts had put the insurance cost from Rita in the range of $5 billion to $10 billion. Now, Swiss Reinsurance Company says claims will be at or above the high end of estimates--mostly because of damage to offshore oil installations. The two storms followed in the wake of Hurricane Katrina--the costliest single-day event in history. Analysts and reinsurance companies say Katrina cost the global insurance industry between $40 billion and $60 billion. Re-insurers sell backup insurance to other insurance companies, spreading risk so that enormous losses from natural catastrophes can be covered. Katrina struck the U.S. Gulf Coast in late August; Rita hit Texas and Louisiana in late September. Wilma struck crossed South Florida last week.
Governor Rick Perry and Mayor Bill White of Houston, where as many as 150,000 evacuees still live, criticized the Federal Emergency Management Agency in separate acts with similar accusations of inefficiency. Perry wrote in a letter yesterday to Homeland Security Secretary Michael Chertoff criticizing FEMA's conflicting instructions and its delay in identifying sex offenders and other violent criminals among Katrina evacuees, and warning that tens of thousands of Katrina evacuees will soon be evicted with no place to go. Meanwhile, White met with two lawmakers from Texas and Michael Jackson, Deputy Secretary of the Department of Homeland Security, in Washington. He complained that federal reimbursement of Houston's costs of caring for evacuees has significantly slowed. White said in the Houston Chronicle that he believed this should be treated as an emergency matter.
The Department of the Interior's Minerals Management Service is back at its Gulf of Mexico Regional Office in New Orleans, after operating for two months of operating with a reduced staff in Houston following Hurricane Katrina. About 150 of 600 MMS employees will remain in Houston until further repairs are made on the agency's building. About 350 have employees have gone back to New Orleans. About 100 district employees continue working in district offices along the Gulf Coast.
About $5.6 million will be available to universities that contribute to the post-hurricane rebuilding of Gulf Coast communities. The federal funding is via the U.S. Department of Housing and Urban Development. Hurricane Katrina slammed the Gulf Coast in late August and swamped much of New Orleans. Rita made landfall September 24th near Sabine Pass. The money is available to schools across the country. About $2 million worth of grants will go to architecture schools. The rest is earmarked for historically black schools to work with storm-damaged cities and supply services such as nursing, counseling or legal work.
The head of the Federal Deposit Insurance Corporation will oversee U.S. government hurricane disaster recovery efforts in the Gulf Coast. The Bush administration announced the duties go to Donald Powell. Powell is a former president of First National Bank in Amarillo and is an ex-chairman of the Texas A&M System Board of Regents. Powell will be in charge of the long-term plans to rebuild states hit by Hurricanes Katrina and Rita. Katrina made landfall in late August, swamping New Orleans and battering other parts of the Gulf Region. Rita came ashore September 24th near Sabine Pass. Powell will be the administration's point person for dealing with Congress, state and local governments, and private businesses on the hurricane relief efforts. He'll eventually replace day-to-day coordinator Coast Guard Vice Admiral Thad Allen.
Leaders of some oil companies could be asked why more of the industry's record profits aren't used to help more struggling people pay their energy bills. A U.S. Senate hearing is planned next week. The Associated Press reports among those expected to be questioned are: Jim Mulva, who's chief executive of ConocoPhillips in Houston; Lee Raymond, who's chairman of Irving-based Exxon Mobil; and John Hofmeister, who's president of the U.S. unit of Royal Dutch Shell. AP reports a final list of witnesses has yet to be completed. Senators Byron Dorgan of North Dakota and Chris Dodd of Connecticut have renewed their call for passage of a windfall profits tax on oil companies.
The South Texas Project Unit 2 nuclear reactor is once again producing power, after shutting down October 2nd for refueling. Houston-based Texas Genco Holdings owns 44 percent of the two-unit plant; San Antonio's municipal utility holds 40 percent and the city of Austin has a 16 percent share. Texas Genco is being acquired by New Jersey-based NRG Energy.
A contract to build a $2 billion liquified natural gas plant in Yemen has been awarded to an international joint venture that includes Halliburton subsidiary KBR, according to the Houston Business Journal. Partners include JGC Corporation of Japan and Technip of France. The partnership will build two LNG production lines, with the first unit starting up by the end of 2008.
El Paso Corporation continues shedding assets to support its debt-reduction program. The Houston-based natural gas provider closed the sale of its Javelina midstream interests to Englewood, Colorado-based MarkWest Energy Partners for about $156 million, and closed the sale of some other midstream facilities to Dallas-based Crosstex Energy for $486 million. El Paso has sold $1.4 billion in assets since March 17th.
Diversified Human Resources plans to open a regional office in Houston next month on Richmond. The professional employer organization is interviewing candidates to handle sales, risk management, customer service, benefits and administrative support. Diversified Human Resources enables clients to outsource human resources management, employee benefits, payroll and workers' compensation.
Texas voters will decide Tuesday whether to lift a state constitutional ban on line-of-credit advances on reverse mortgages. Reverse mortgages allow homeowners age 62 or older to borrow against the equity in their homes--and they're available everywhere. The amount of the loan can increase with the value of the house and the age of the borrower. It's repaid with interest after the borrower dies, moves or sells the house. But the line of credit--which is the most popular form of the loan--is banned under the Texas constitution. Proposition 7 on Tuesday's ballot would change that. Lenders have pushed for the change for several years, and there's no organized opposition. In fact, AARP Texas spokeswoman Carole Barasch says a line-of-credit option would let seniors borrow against their homes only when they need money.
Dell has long been a computer-making leader with a low-cost model that drove rivals crazy. Now Round Rock-based Dell has lowered its earnings guidance for its just-ended fiscal third quarter. Dell this week cited costly failed computer parts and sluggish growth. The company's goal of hitting $80 billion in annual sales within three to four years may be drifting out of reach. Cindy Shaw is an analyst for Moors & Cabot. The firm has downgraded Dell's stock from "buy'' to "hold.'' Shaw says Dell isn't a company that's on the ropes, but she thinks it's struggling to maintain the growth targets it has set for itself. Dell still tops the industry with 18 percent of the personal computer market. But Dell is taking charges of $450 million, related to restructuring and a defective computer component. Third quarter results will be released November 10th.
TXU Corporation today says its third-quarter earnings fell as comparisons with a year ago were hampered by the effect of discontinued operations. The Dallas-based utility also disclosed it doesn't plan to spin off its energy delivery business, as some investors anticipated. TXU Chief Executive John Wilder had hinted since August that it was considering spinning off all or part of its energy delivery business, which includes electricity transmission and distribution. But in a third-quarter earnings call, Wilder said none of the possible transactions had panned out. TXU says its third-quarter earnings fell 15 percent from last year to $565 million. But its third-quarter income from continuing operations rose 49 percent to $571 million. TXU's third-quarter operating revenue rose 16 percent to $3.19 billion.
Electronic Data Systems today posted a narrow third-quarter profit. Plano-based EDS also reports that new contract signings--which is an indicator of future revenue--nearly doubled from one year ago. The company has agreed to a memo of understanding to settle shareholder lawsuits filed in late 2002 after EDS announced it would fail to hit earnings targets. EDS in the third quarter earned $8 million dollars. That compares to a year-ago loss of $153 million. Revenue rose to $4.87 billion. Chairman Michael Jordan says the results showed continued progress at EDS, which runs computer and other information systems for client companies.
EDS has agreed to sell its management consulting unit--A.T. Kearney--to a group of Kearney executives. No price was disclosed. Kearney has about 200 partners. A spokesman says 150 to 185 are expected to take part in the management buyout from Plano-based EDS. The unit accounted for about four percent of EDS revenue last year. EDS wouldn't retain any interest in Kearney, but the agreement calls for EDS to enter a multi-year services and marketing deal with the Chicago-based consulting firm. Kearney will continue to provide management consulting services to EDS and EDS clients.
Raycom Media plans to sell 12 network-affiliated stations to more effectively focus on and strengthen its core group in the Southeast and Midwest. Raycom President Paul McTear says the stations, with more than 800 employees, will likely be valued at more than $600 million. The company's August agreement to purchase 15 stations from South Carolina-based Liberty Corporation presented a chance to reassess Raycom's station group. Two Liberty stations, including KGBT-TV in Harlingen, will be sold as soon as the transaction goes through. The other ten television stations to be sold are in New Mexico, Colorado, South Carolina, Iowa, Missouri, Michigan, New York and Ohio. Raycom operates 37 network-affiliated television stations in 20 states, and has other holdings.
The mining company which owns an Amarillo refinery says it has completed a $75 million debtor-in-possession financing arrangement to aid its reorganization. Asarco filed for Chapter 11 bankruptcy protection in August. The copper mining firm's 1,500 union workers in Arizona and Amarillo have been on strike since July. If approved by the court, the financing arrangement would make CIT Group/Business Credit a priority creditor claim. That would give it a first lien on the company's assets in the event it does not emerge from bankruptcy. Borrowings will be limited to $20 million until a U.S. bankruptcy court in Texas gives approval for the entire loan at a November hearing.