Wednesday PM December 13th, 2006
by: Ed Mayberry, December 13, 2006 5:12:00 am
Former Enron CEO Jeff Skilling has begun serving his 24-year sentence for fraud and other crimes. Skilling reported to a low-security federal prison just after noon today in Waseca, Minnesota to serve the sentence for his role in the collapse of the former energy giant. He was driven there by his brother Mark, a television weather forecaster from Chicago, and his wife Rebecca and an aide. Skilling is serving a sentence that's far longer than anyone else implicated in the collapse of the former Houston-based energy giant. He could earn a few years off for good behavior and for participation in an alcohol treatment program. Even if he does, the 53-year-old former executive will be in his 70's at the end of his 24-year, four-month prison term at the 1,123-bed facility. That's more than twice as long as the sentence of any other Enron executive. Skilling and Enron founder Ken Lay were convicted last May on numerous counts of fraud, conspiracy, insider trading and other charges in the Enron collapse. That fall led to the loss of thousands of jobs, more than $60 billion in company stock and more than $2 billion in employee pension plans. A federal judge late Tuesday denied Skilling's request to remain free on bond pending his appeal. In his order, Judge Patrick Higginbotham noted "serious frailties'' in Skilling's convictions. But he says those problems fail to raise a "substantial question'' likely to result in the overturning of all of Skilling's convictions, as would be required to grant bail during appeal. The Fifth U.S. Circuit Court of Appeals had ruled this week that Skilling could remain free until it decided on his request. Lay died in July of a heart attack before he could be sentenced, prompting a judge to vacate his conviction.
Ex-Enron energy trader Timothy Belden will pay $2.1 million to former employees financially harmed by Enron's collapse, according to Bloomberg News. The law firm Cooley Godward Kronish, representing the employees, said Belden agreed to forfeit the money under an agreement with federal prosecutors. The funds come from Belden's deferred pay and bonuses. The money will go to a committee representing former employees in the company's bankruptcy case in New York.
The lead investor in the Enron shareholder class action has asked a federal judge to drop former Enron executive Lou Pai as a defendant in the case. Lawyers for the University of California regents asked U.S. District Judge Melinda Harmon to remove Pai, Enron's former Retail Energy division president, after earlier in the week asking Judge Harmon to dismiss Vinson & Elkins from the same case.
A flurry of confirmed and reported talks among airlines may signal merger mania within the struggling industry, but analysts aren't convinced consolidation is a good thing. Published reports indicate in Elk Grove Village, Illinois-based United Airlines and Houston's Continental Airlines are exploring a possible combination. The preliminary talks between United and Continental were reported last night by the Wall Street Journal and the New York Times. That pairing could face significant obstacles, since Northwest Airlines may be able to stop it under a 2000 agreement with Continental. And airline consultant Michael Boyd says a United-Continental combination, or any other combination for that matter, wouldn't be good for consumers, as it would reduce competition.
Airtran says rival Midwest Air Group has rejected its $290 million buyout offer, but that it'll continue its effort to acquire the regional carrier. Airtran Chairman and Chief Executive Joe Leonard did not say when the company will make another offer but promises it will, adding that he thinks Midwest's shareholders would want to see such a deal.
A Northwest Airlines executive says the airline might be willing to share a new route to China with Continental or Chicago-based United Airlines. Eagan, Minnesota-based Northwest is still fighting with those airlines and American Airlines to win federal approval for nonstop flights to China. A decision is expected this month. But senior vice president for government affairs Andrea Fischer Newman tells the Star Tribune of Minneapolis that Northwest could strike a deal with Continental or United to operate three flights a week to Shanghai instead of seven. Northwest wants to fly nonstop from Detroit to Shanghai. One of the other airlines could provide service to China from a different U.S. city on the other days. United has proposed a Washington-Beijing route, while Continental wants Newark-Shanghai.
Few routes are as important to American Airlines as the one that shuttles high-paying business travelers between New York and Los Angeles. Those are the kind of passengers who value service over price. American doesn't want them to think that the nation's largest airline has slipped behind the competition on that. American is fighting back with upgraded first-class cabins that include flat-screen televisions and personal entertainment devices offering movies, TV, music and video games. As a bonus, replacing bulky analog tape systems and cathode-ray-tube monitors will free up enough room to add a first-class seat in some planes. American says it is spending nearly $20 million to spruce up its fleet of Boeing 767-200 aircraft. American is already in the process of installing lie-flat seats in first class on Boeing 777s and 767-300s. Those are used on New York-London and other international flights.
Federal officials say more than 1,200 people were arrested during raids of Swift meatpacking plants in six states, including in Cactus, Texas. Homeland Security Secretary Michael Chertoff says the raids uncovered a "disturbing front'' in the war against illegal immigration. He says an investigation found that illegal immigrants were using the identities of U.S. citizens to obtain jobs. Authorities say hundreds of U.S. citizens and legal residents may have had their identities stolen in a scheme designed to help illegal immigrants get jobs at Swift. Immigration and customs enforcement officials say along with immigration violations, some of the workers also have criminal warrants. Swift says it has never knowingly hired illegal workers and doesn't condone the practice. It uses a government pilot program to confirm whether social security numbers are valid but it doesn't detect identity theft. The raids at the swift company plants resulted in nearly 1,300 arrests, most on immigration charges. Chertoff says raids like the one Tuesday "protect the privacy rights of innocent Americans while striking a blow against illegal immigration.'' He says the investigation is continuing into several groups that might have sold identity documents to illegal immigrants.