Enron pushing for inexpensive mediation decision

When Enron enters mediation today with the bankers, shareholders and former employees that are suing the company, it will have a Houston legal heavyweight in its corner.

Enron has received permission from a bankruptcy judge to retain the law firm Susman Godfrey to represent it in the mediation and to sue the banks should mediation fail.

"We need our most able counsel to be there," said Brian Rosen, a bankruptcy lawyer for Enron.

Susman will receive $250,000 a month during the mediation and up to 1.25 percent of any money Enron recovers. If lawsuits become necessary, Susman will receive $1 million a month and up to 3 percent of cash recovered. The maximum the firm can receive is $200 million.

Although a lot of money, a 3 percent contingency is low in legal circles.

Generally, lawyers taking an individual's case on contingency will charge 20 to 45 percent. But lawyers handling class-action cases, institutional clients or gigantic sums often contract for lesser percentages.

"I'll probably have to hide my head around Joe Jamail for doing a contingency case for 3 percent," said Lee Godfrey, referring to the notable Houston trial lawyer.

"Nobody knows how many lawsuits might need to be filed," said Godfrey, a named partner. "If we can't negotiate this out, it will be a long project with multiple litigation and multiple defendants. We will be confronting a war."

Federal judges overseeing Enron's bankruptcy and civil lawsuits appointed a mediator to negotiate with key parties to jump-start a wide-ranging settlement. By opening the door to other parties, the mediator may have defeated his own purpose.

Several lawyers involved in the giant would-be class-action lawsuits said this week that by inviting more than just the few attorneys designated by U.S. District Judge Melinda Harmon of Houston and U.S. Bankruptcy Judge Arthur Gonzalez of Manhattan, the newly appointed mediator will bog down the process and render it useless.

The first scheduling meeting is to be held this morning by the mediator, 83-year-old senior U.S. District Judge William Conner, of White Plains, N.Y.

Harmon and Gonzalez ordered that only Enron and its creditors, a group of financial institutions, and the shareholder and employee plaintiffs in the would-be class-action suits would come to the table with Conner.

A mediator could help broker deals to resolve the civil and bankruptcy cases that have already run up hundreds of millions of dollars in legal bills. The financial institutions have the deep pockets, and if they could negotiate a settlement in the civil suits and the bankruptcy, where they are creditors and will likely be accused of aiding in the company's downfall, the rest of the defendants would likely fall in line.

But opening this nonbinding mediation to the dozens of parties and hundreds of lawyers could make even taking attendance a daunting task, much less finding a quick solution.

Conner is a Wichita Falls native who received his undergraduate and law degrees from the University of Texas in 1941 and 1942. He served as a lieutenant in the Navy Reserve during World War II and was appointed to the federal bench in 1974.

Conner has presided over cases from antitrust to securities fraud and presided over litigation arising from New York City's 1970s fiscal crisis. He has also handled a number of media- and entertainment-related cases.

Another judge named to mediate lawsuits

The federal judges overseeing Enron Corp.'s bankruptcy and huge civil lawsuits Monday appointed a new mediator, an 83-year-old federal judge, to see if the company and some key parties can negotiate a settlement.

Senior U.S. District Judge William C. Conner, of White Plains, N.Y., was appointed mediator late Monday by U.S. District Judge Melinda Harmon of Houston and U.S. Bankruptcy Judge Arthur Gonzalez of Manhattan. Conner, an appointee of Richard Nixon, will mediate with Enron and its creditors, a group of financial institutions and the shareholder and employee plaintiffs in the would-be class-action suits.

Harmon and Gonzalez first ordered these groups to another mediator, New York-based U.S. District Judge Kevin T. Duffy, in the case in late May. They withdrew Duffy's name a week later at his request. In the meantime, the financial institutions and the lead plaintiffs have suggested mediators but the judges picked someone else.

Conner is a Wichita Falls native who received his undergraduate and law degrees from the University of Texas in 1941 and 1942. He served as a lieutenant in the Navy Reserve during World War II and was appointed to the federal bench in 1974.

Conner has presided over a variety of cases, from anti-trust to securities fraud, and presided over litigation arising from New York City's 1970s fiscal crisis. He has also handled a number of media- and entertainment-related cases.

In 1991, he became one of the first federal judges to allow TV cameras in the courtroom when he let a crew tape a copyright dispute over photos of the late actor James Dean.

Ideally, a mediator could help broker deals to resolve the civil and bankruptcy cases that have already eaten up hundreds of millions of dollars in legal bills.

These negotiations could also postpone the inevitable clashes as the two giant civil cases move into discovery. The parties in the civil cases, the bankruptcy and even the Enron Task Force prosecutors are likely to vie for control of the questioning of the witnesses, suspects and defendants.

The mediation is not binding, and what is discussed there cannot be used back in the courtroom. To streamline matters, most of the defendants are not required parties to these talks.

The financial groups ordered to mediation are J.P. Morgan Chase & Co., Citigroup, Credit Suisse First Boston, Canadian Imperial Bank of Commerce, Bank of America, Merrill Lynch & Co., Barclays PLC, Lehman Brothers Holding, UBS Paine Webber and UBS Warburg, LLC, Deutsche Bank AG and Goldman Sachs.

There is currently no working scheduling order or trial date in the shareholder and employee class-action lawsuits.

Court sides with Wall Street banks

The Supreme Court on Monday dealt a setback to investors suing over their losses in the crash of technology stocks seven years ago. In a 7-1 decision, the court sided with Wall Street banks that allegedly conspired to drive up prices on 900 newly issued stocks.

The justices reversed a federal appeals court decision that would have enabled investors to pursue their case for anticompetitive practices.

The case deals with alleged industry misconduct during the dot-com bubble of the late 1990s.

The outcome of the antitrust case was vital to Wall Street because damages in antitrust cases are tripled, in contrast to penalties under the securities laws.

The question was whether conduct that is the focus of extensive federal regulation under securities laws is immune from liability under federal antitrust laws.

An antitrust action raises "a substantial risk of injury to the securities market," Justice Stephen Breyer wrote. He said there is "a serious conflict" between applying antitrust law to the case and proper enforcement of the securities law.

In dissent, Justice Clarence Thomas said the securities laws contain language that preserves the right to bring the kind of lawsuit investors filed against the Wall Street investment banks.

In 2005, the 2nd U.S. Circuit Court of Appeals said the conduct alleged in the case is a means of "dangerous manipulation" and that there is no indication Congress contemplated repealing the antitrust laws to protect it.

Investors allege that the investment banks, including Credit Suisse Securities (USA) LLC, agreed to impose illegal tie-ins, or "laddering" arrangements. Favored customers were able to obtain highly sought-after new stock issues in exchange for promises to make subsequent purchases at escalating prices. The investment banks allegedly conspired to levy additional charges for the stock.

As a result of the conspiracy, the investors say, the average price increase on the first day of trading was more than 70 percent in 1999-2000, 8 1/2 times the level from 1981 to 1996.

Private class-action lawsuits, say plaintiffs' attorneys, provide a significant supplement to the limited resources available to the Justice Department to enforce the antitrust laws.

Lawyers for Wall Street investment banks say it is a highly technical matter where the line is drawn between legal and illegal activity in the sale of newly issued stock. It must be left to highly trained securities regulators to decide, rather than to courtroom juries in antitrust lawsuits brought by investors, the industry says.

The Supreme Court concluded that "antitrust courts are likely to make unusually serious mistakes" that hurt defendants. As a result, investment banks must avoid "a wide range of joint conduct that the securities law permits or encourages."

In other action, the court also added one case to its calendar for next term. It will consider whether an investor in a large 401k retirement plan can sue to recover losses to his individual account that are the fault of the plan's manager.

Other Wall Street institutions in the case before the Supreme Court were Bear, Stearns & Co. Inc.; Citigroup Global Markets Inc.; Comerica Inc.; Deutsche Bank Securities Inc.; Fidelity Distributors Corp.; Fidelity Brokerage Services LLC; Fidelity Investments Institutional Services Co. Inc.; Goldman, Sachs & Co.; The Goldman Sachs Group Inc.; Janus Capital Management LLC; Lehman Brothers Inc.; Merrill Lynch, Pierce, Fenner & Smith Inc.; Morgan Stanley & Co. Inc.; Robertson Stephens Inc.; Van Wagoner Capital Management Inc.; and Van Wagoner Funds Inc.

Airbus order revives Boeing rivalry

Having just signed a deal that could signal the recovery of troubled aircraft maker Airbus, the chief executive of Qatar Airways knows full well he has thrown the cat among the pigeons.

"I think you should be delighted that we are paying $16bn (£8bn) to a European company," Akbar Al Baker says.

"Today we are really putting ink on paper for the purchase agreement."

Ahead of the Paris air show, Airbus had failed to secure more than 13 orders for its mid-size, long-range A350 WXB, a rival to American aerospace giant Boeing's 787 Dreamliner, which had already clocked up 584 orders.

New confidence

We are at the beginning of a new story Louis Gallois, Airbus chief executive

In placing an order for 80 of the expensively redesigned A350s, Qatar has revived the rivalry between the two companies, despite much talk of the Airbus plane's faulty design and delayed arrival in the market place.

"This project is taking off in the best way," declares a beaming Louis Gallois, chief executive of Airbus.

"Now we are at the beginning of a new story."

Having announced more than $30bn in orders during the first day of the show - equivalent to what analysts had expected from all the aircraft-makers here combined - it seems Airbus' deal-makers have defied gravity in a manner only matched by the A380 super-jumbo's spectacular air display.

The giant 555-seat aircraft still turns heads, two years after its first fly-over in Paris, though there are many who bemoan the fact that the big bird has yet to be delivered to customers.

Qatar Airways has given Airbus a huge boost

The A380 delays, which have been caused by wiring problems, have cost Airbus dear and sparked concerns about the company's ability to deliver the A350 on schedule.

Mr Gallois is eager to ensure airlines that this time all is under control.

"We have learnt a lot [from the problems with the A380], and you can be sure we will take care of that," he says.

"I don't like the campaign right now that the [A350] aeroplane is not defined. It is defined, performance is defined, we are committed to achieve the performance, and we are offering guarantees to our customers."

No delays

Boeing's technologically advanced Dreamliner is set for a debut on 8 July and "we expect to deliver the first 787 in May next year", Scott Carson, head of Boeing's commercial airplanes division, tells BBC News in an interview.

Airbus lags far behind, with an estimated arrival date of 2013.

AIRCRAFT DELIVERED IN 2006 Airbus: 434 Boeing: 398

But at this stage the choice between the two aircraft has become easier for buyers since Boeing's swelling order book means it is operating a waiting list for new orders.

In other words, regardless of which plane a carrier was to choose at this stage, they would probably not take delivery till 2013 in any case.

Consequently, the two aircraft makers are back on a level-playing field as they vie for the attention of Emirates, which is planning to place an order for 100 aircraft.

Boeing executives are confident about the Dreamliner

The airline says it will place the entire order with just one of the companies, choosing either the A350 XWB or the 787 Dreamliner.

"We've got some talking to do to both Boeing and Airbus with regard to the commercial terms of the deal," says Emirates president Tim Clark.

"But I think we're in a good position to make an aircraft decision in the next few months.

Some observers say Qatar could also be in the market for more aircraft, though when asked whether he would be placing orders with Boeing anytime soon, Mr Al Baker remains mum.

"You get Mr Gallois worried when you talk about Boeing," he quips. "You shouldn't be talking about Boeing here."

Wendy's to consider sale

Hamburger chain Wendy's International Inc. on Monday slashed its 2007 earnings forecast and said it would explore a possible sale of the company instead of other restructuring options.

Wendy's had said in April it would weigh options to boost strategic value, including a possible sale. The latest announcement shows that the fast-food chain sees a sale as a more likely option.

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A selection of Wendy's menu items in an undated image courtesy of the company. The hamburger chain said on Monday it would explore the possible sale of the company instead of other restructuring options. REUTERS/Handout

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"We believe recent sales and profit trends may have diminished board faith in the current strategy, and seem to have heightened resolve to sell the company," said David Palmer, an analyst with UBS Equity Research.

Shares of Wendy's, which has a market capitalization of about $3.5 billion, fell 3.2 percent. Wendy's stock had surged in April after the fast-food chain first said it was exploring a sale. Since then, the stock has risen about 20 percent.

The operator of the No. 3 U.S. hamburger chain cut its 2007 earnings forecast to a range of $1.09 to $1.23 a share, down from previous guidance of $1.26 to $1.32 a share. It cited lower-than-expected same-store sales and higher commodity costs for the reduced outlook.

For the first quarter, same-store sales rose 3.8 percent in the United States at company-operated restaurants, and rose 0.7 percent in the second quarter through June 15, Wendy's said.

Wendy's said the past two months had been challenging and it adjusted its pricing to bring its products in line with rivals such as McDonald's Corp. .

The new pricing strategy has hurt Wendy's short-term performance, but should generate more positive operating margins over the long-term, the company said.

LONG-TERM OUTLOOK SUSPENDED

Due to the potential sale of the company, Wendy's suspended its earnings outlook for 2008 and 2009.

Despite the weak fundamental performance at Wendy's, a private equity buyer could still squeeze value out of the chain by recapitalizing the debt, refranchising more company-owned restaurants and reinvigorate the brand through improved marketing, UBS's Palmer said.

Currently about 22 percent of Wendy's 9,900 restaurants are operated by the company, while 78 percent are run by franchisees, Palmer said.

Last month, Wendy's hired JPMorgan Chase & Co. and Lehman Brothers Holdings Inc. as its financial advisers for a possible deal.

"Our goal is to move forward expeditiously," said Wendy's Chairman James Pickett.

The special committee of the board is also weighing a possible securitization financing, which could be used by the potential buyer or in a recapitalization of the company.

Highfields Capital Management, which owns 8.5 percent of Wendy's, last month urged the fast-food chain to sell itself to the highest bidder, according to media reports. Last year, Wendy's succumbed to pressure from billionaire investor Nelson Peltz to shed its secondary brands.

US Offers Support to New Palestinian Government

The Bush Administration has lifted its economic and political embargo against the newly-formed western-backed government of Palestinian President Mahmoud Abbas. VOA's Stephanie Ho reports from Washington.

Condoleezza Rice, 18 Jun 2007

Secretary of State Condoleezza Rice said she conveyed Washington's strong support in a phone call to new Palestinian Prime Minister Salam Fayyad.

"I congratulated him on his new post and I told him the United States would resume full assistance to the Palestinian government, and normal government to government contacts," said Condoleezza Rice.

President Abbas named the prime minister and a new Palestinian cabinet Monday. This follows his dismissal of Hamas member Ismail Haniyeh from his post as prime minister after Hamas seized control of Gaza last week in fighting between Hamas and Mr. Abbas's Fatah faction, which controls the West Bank.

Speaking to reports in Washington, Rice added that in a further show of support, the U.S. government is also lifting restrictions concerning private economic ties with the Palestinian government.

"We intend to lift our financial restrictions on the Palestinian government, which has accepted previous agreements with Israel and rejects the path of violence," she said. "This will enable the American people and American financial institutions to resume normal economic and commercial ties with the Palestinian government."

She said the Bush administration would work with Congress to restructure $86 million in assistance already promised to President Abbas's Palestinian Authority.

The U.S. government will also contribute an additional $40 million to the United Nations to help Palestinians, particularly those living in the Gaza Strip. The U.S. State Department considers Hamas, the militant group that controls Gaza, a terrorist group.

"Through its actions, Hamas sought to divide the Palestinian nation," said Rice. "We reject that. It is the position of the United States that there is one Palestinian people and there should be one Palestinian state."

Meanwhile, the White House says President Bush assured Mr. Abbas of U.S. support for his new government in a phone call.

The U.S. moves come as the European Union also announced plans to restart direct aid to the new Palestinian government in the West Bank.

Israeli Prime Minister Ehud Olmert indicated his country is ready to work toward peace with the new Palestinian government. Israeli officials say Mr. Olmert also promised to consider releasing hundreds of millions of dollars of Palestinian tax revenues frozen when a Hamas-led government took power last year.

Mr. Olmert met Sunday with U.N. Secretary-General Ban Ki-moon in New York. He is scheduled to meet Tuesday with President Bush at the White House.

Boy Killed By Black Bear In Utah

Wildlife officers shot and wounded a bear Monday, just hours after an 11-year-old boy on a family camping trip was snatched from his tent and killed, a rare fatal attack in Utah's Wasatch Mountains. But the bear is still on the loose.

With 26 dogs assisting them in the search, authorities were confident that the bear that was shot was the same one that ripped through the tent shortly before midnight Sunday.

"The dogs are on the scent. ... We're hopeful this bear will be taken shortly," Jim Karpowitz, director of the Utah Division of Wildlife Resources, said at a morning news conference.

The boy, his mother, stepfather and a 6-year-old brother were sleeping in a large tent in a primitive camping area, about 30 miles southeast of Salt Lake City.

The boy, sleeping alone in a separate section of a large tent, screamed before he was dragged away in his sleeping bag, said Lt. Dennis Harris of the Utah County Sheriff's Office.

The boy's stepfather heard the scream, and immediately got up and ran out of the tent to try to find out what was going on. But there was no sign of the boy, Harris told CBS station KUTV.

A host from a nearby campground contacted police, who feared the boy had been kidnapped. Deputies blocked off the canyon, checking vehicles.

But they soon found evidence of a bear attack, including the ripped tent and what they believed were bear tracks.

Following the tracks, they found the boy about 400 yards from his tent, in the direction of another campsite where a bear sighting had been reported earlier in the weekend, Harris said.

It was not known what provoked the bear, though a bear can smell food for miles.

"They stick their nose in the air. It's like radar," said Hal Black, a biologist at Brigham Young University in Provo.

Karpowitz said it was the first fatal attack by a black bear in Utah.

"When it's hot and dry like this, bears are short of food," Karpowitz said.

In July 2006, a black bear bit the arm of a 14-year-old Boy Scout while he slept in a tent, also in Utah County. The female bear returned to the campground and was killed. The boy was not seriously injured.

The Utah wildlife agency and the U.S. Forest Service were pursuing the wounded bear with the help of a helicopter. It was described as a male, possibly 300 pounds and "jet black."

American Fork Canyon is a popular camping destination and home to Timpanogos Cave National Monument. Harris said the family was camping about two miles up a dirt road.

"All he wanted to do was come up and have a good time with his family. And then something like this happens," Harris said. "It's probably the most devastating thing that can happen to a family."

"It's shaken everybody up. We're all distraught," said Scott Root, conservation outreach manager at the Utah wildlife agency. "It could put a lot of fear in the public."