Financial life in a big town

OTTAWA–The federal government recorded a $1.2-billion budgetary deficit in March, likely trimming its surplus for the just-completed fiscal year to $10.2 billion.

The Finance Department says the deficit last March was half what the government experienced in March 2007, when it spent $2.4 billion more than it earned.

The department also says preliminary accounting points to a $10.2-billion surplus for the 2007-08 financial year that ended March 31, the exact amount forecast in Finance Minister Jim Flaherty's budget in February.

The federal government's revenues were up $1 billion, or 5.2 per cent, in March, largely as a result of higher receipts in taxes from individuals cheap payday loans. Program expenses were flat.

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Stocks will face major obstacles to extending their gains next week if the price of oil continues to break records, as fears about inflation and the discretionary spending power of the embattled American consumer are forced into the spotlight.

The gyrating price of oil has been a significant factor in the price of stocks in the past week. Oil rose to a record $127.82 a barrel on Friday, after Goldman Sachs, the most active investment bank in energy markets, forecast a continued spike in prices through the end of the year, due to thin supply.

“The idea that oil could rise a lot further before it reaches a tipping point is really slipping into investors’ psyche,” said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.

Earnings from a handful of major retailers, including Target (TGT.N: Quote, Profile, Research), could shed more light on how much the rising costs of fuel and food and deteriorating home prices are affecting consumer spending paydayloans. Investors also will be keeping a keen eye on inflation data.

“If oil prices continue to move up, with Memorial Day coming up, I think traders and investors will be very cautious,” said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

The Memorial Day holiday in the United States typically marks the start of the summer driving season.

For the week, the Dow Jones industrial average gained 1.9 percent, while the Standard & Poor’s 500 Index .SPX advanced 2.7 percent and the Nasdaq Composite Index .IXIC climbed 3.4 percent.

At the close on Friday, the S&P 500 was within 3 percent of being in the black for the year, while the Dow needs to gain about 2.2 percent and the Nasdaq about 4.8 percent.  

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WASHINGTON — Rigorous airline maintenance audits recently ordered by federal regulators are likely to yield the most headaches for travelers flying Northwest, American and United airlines.

Those carriers have the oldest fleets, on average. The older the jet, the more likely it requires time-consuming, and potentially flight-grounding, government-ordered inspections, analysts and regulators agree.

"Older planes will usually have more (airworthiness directives) simply because they’ve been around longer," said Federal Aviation Administration spokesman Les Dorr.

Northwest Airlines Corp.’s fleet of roughly 350 planes has the oldest average age at nearly 18 years old, followed by AMR Corp.’s American Airlines at 15 years, and UAL Corp.’s United Airlines at 13, according to the companies’ most recent annual reports.

"We don’t have any concerns related to the age of the fleet," said Northwest spokeswoman Tammy Lee, adding that the carrier is retiring about 10 of its oldest aircraft this year.

Northwest is well positioned to pass the current review, having gone through a rigorous FAA maintenance oversight process after a mechanics strike in 2005, Lee said. Showing compliance with this FAA audit is "a voluminous process … (but) a procedural issue and record-keeping issue," she said.

Reports of shorted wires, evidence of worn-down power cables, and fuel system reviews conducted by the manufacturer, Boeing Co., led to the airworthiness directive on the MD-80 aircraft that were grounded last week by American, Alaska Airlines and other carriers, inconveniencing hundreds of thousands of travelers. That government order carried an effective date of Sept. 5, 2006, and airlines had 18 months to comply.

The first round of FAA audits over a two-week span last month _ prompted by revelations that Southwest Airlines Co. flew dozens of planes that had missed inspections — checked 10 airworthiness directives that apply to each carrier’s fleet. The second phase, which runs through June 30, will check 10 percent of the orders that apply to each airline’s fleet.

American, which operates many different aircraft, said it was working to comply with about 180 different directives, according to its annual report filed in February no fax payday loans. Northwest and United did not specify the amount. The FAA does not have an accurate count of how many apply to each carrier’s fleet, Dorr said.

"We have no concerns about the age of our fleet in regards to maintenance," American spokesman Tim Wagner said in an e-mail Friday. "Our only concern about the age of our fleet, our MD-80s in particular, is that they are less fuel efficient than some of the more modern airplanes," which is why the carrier is taking delivery of some new Boeing 737-800s earlier than expected.

The nation’s largest carrier canceled another 200 flights Saturday morning before returning all of its 300 grounded jets to service, bringing the total number of cancellations last week to nearly 3,300. The average age of American’s MD-80s average 18 years old, Wagner said.

To be fair, flying on U.S. airlines has never been safer. The last U.S. crash of a jumbo jet was in November 2001, when an American Airlines flight plummeted into a New York City neighborhood, killing 265 people.

"We don’t have old planes in the air," said Harlan Platt, a finance professor at Northeastern University in Boston who follows corporate turnarounds. The age of plane refers to the fuselage, while most of the parts are replaced every three to seven years, he added.

But as government scrutiny of safety procedures rises, flight delays and cancellations could get worse, particularly for carriers with older fleets, said Bob Harrell of New York-based travel and aviation consulting firm Harrell Associates. About 35 percent of the U.S. fleet is more than 25 years old, according to the International Air Transport Association.

United last month said it will ground and sell back to lessors 15 to 20 older aircraft that are less fuel-efficient than others in its 460-plane fleet. Megan McCarthy, a spokeswoman for the nation’s second largest carrier, said Friday, "Our primary responsibility is the safety of our customers and our employees, and there is no obligation we take more seriously."

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SEOUL–Special prosecutors probing claims of corruption at Samsung Group took their investigation to the very top yesterday, questioning its chair for nearly 11 hours over allegations the iconic conglomerate used a slush fund to bribe influential legal figures.

Lee Kun-hee, who has run South Korea’s biggest industrial group for two decades, appeared for questioning at the office of the independent counsel examining the claims.

Surrounded by a throng of reporters, the 66-year-old Lee, moving slowly and speaking softly, stopped briefly to answer questions, saying he had nothing to do with directing the alleged fund.

The independent counsel, established by parliament and approved by South Korea’s previous president, is focused on allegations raised by Samsung’s former top lawyer.

Kim Yong-chul claimed in November that Samsung had $200 million (U.S.) in the slush fund and used it regularly to bribe prosecutors and judges. He also said that Lee’s wife used some of the money to purchase expensive works of art from abroad.

Samsung vociferously denied the allegations when they were raised.

Lee, whose father established the conglomerate 70 years ago, is widely credited with turning its flagship Samsung Electronics Co. into a top global brand during his tenure by transforming the corporate culture into one focused on quality.

Samsung Group – with interests ranging from shipbuilding to leisure – is widely respected by South Koreans as the global face of their economy payday loans. Samsung, however, is controversial, with many South Koreans also feeling the family-run conglomerate has too much power and influence in society.

"I’ve come here to raise the voice of the people’s desire, that the criminal behaviour of Lee Kun-hee should thoroughly be revealed, investigated, and he should be punished," Chung Jong-kwon, a protester, said outside the special counsel’s office before Lee arrived.

Lee himself took aim at such opinions, telling reporters they were to blame for propagating negative portrayals of Samsung.

"I have never thought of (Samsung) as a criminal organization," Lee said when questioned. "I think the problem is with you reporting that."

Prosecutors, who began the investigation in January, questioned Lee’s wife, who heads a Samsung art museum, for more than six hours Wednesday. His son and brother-in-law and senior Samsung officials have also endured hours of questioning.

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NEW YORK — Shares of Merck & Co. and Schering-Plough Corp. fell to record lows Monday, as analysts warned new clinical data would cause sales of their blockbuster cholesterol drug Vytorin to fall further.

The companies market Vytorin through a joint venture, but earlier this year, partial results from a clinical study showed that it was no more effective at limiting plaque buildup than Merck’s Zocor, a drug that is already available in generic form. Full results of that study were released Sunday.

Vytorin is a combination of Zocor and Schering-Plough’s drug Zetia.

Schering-Plough shares plunged as low as $14, touching their lowest levels since August 1996. Merck shares fell as low as $36.82, their lowest since June 2006.
Leading physicians are now recommending the use of older drugs called statins before putting patients on Vytorin. Many physicians had prescribed Vytorin in lieu of higher doses of statins because of what some said was an undue fear of side effects.

"There was an irrationality to begin with," said Dr. John LaRosa, president of State University of New York Downstate Medical Center.

One ultimate result of the outcome could be a tightening of regulatory standards at the FDA when it comes to approving cholesterol drugs, LaRosa said.

Federal and New York state officials have been investigating why results of the study were not released for nearly two years after the study ended.

On Monday, a congressional committee investigating the issue released some damning evidence same day payday loans.

The Senate Finance Committee said even the researcher who led a crucial study of the drug angrily accused Vytorin makers Merck & Co. and partner Schering-Plough Corp. of withholding negative results to boost sales.

A letter from the committee’s ranking Republican, Sen. Chuck Grassley of Iowa, states that delaying results of the study affected medical decisions and put financial burdens on patients and the federal government, which has paid hundreds of millions of dollars for Vytorin.

Wall Street expects prescriptions of Vytorin to decline further in the wake of a recommendation to use the drug only after initial therapy with older drugs like Pfizer Inc.’s Lipitor and AstraZeneca PLC’s Crestor.

Lehman Brothers analyst Charles Butler downgraded Schering-Plough shares on the news, and cut his price target on the stock by more than 40 percent.

He said prescriptions of Vytorin will keep falling, and because Schering-Plough relies heavily on the joint venture, he slashed his profit estimates over the next five years.

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The U.S. Department of Justice has launched a criminal investigation into whether Alcoa Inc (AA.N: Quote, Profile, Research), one of its subsidiaries and people connected with the unit committed fraud, corruption and bribery in its relations with customer Aluminum Bahrain B.S.C. (Alba).

In a motion filed Thursday with the U.S. District Court in Pittsburgh, the Justice Department asked the court to put a temporary hold on a Alba’s civil suit against Alcoa, the world’s largest supplier of alumina, the principal raw material used in making aluminum.

The suit also names affiliate Alcoa World Alumina LLC, former Alcoa World Alumina Vice President of Marketing William Rice and Victor Dahdaleh, an agent of Alcoa and Alcoa World Alumina, as defendants.

“The Alba complaint alleges numerous facts which, if true, could be relevant to the government’s criminal investigation and a potential criminal trial,” the department wrote in its motion.

Last month, Alba, one of the worlds largest smelting firms, filed suit seeking more than $1 billion from Alcoa, accusing the firm of participating in a 15-year conspiracy involving overcharging, fraud and bribery.

In the suit, Alba accused the defendants of steering payments for alumina to companies abroad in order to pay kickbacks to a Bahraini government official.

Alba, which is 77 percent owned by the government of Bahrain, also accuses the defendants of overcharging it for alumina payday advance. It did not name the official to whom bribes were allegedly paid.

According to the suit, the bribes were sent through a series of shell companies controlled by Alcoa and resulted in hundreds of millions of dollars in overpayments. 

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The U.S. trade deficit grew larger in January as imports, including crude-oil prices, zoomed to all-time highs.

The latest snapshot of trade activity, reported by the Commerce Department on Tuesday, showed the country’s trade gap increased to $58.2 billion. That was up from a trade shortfall of $57.9 billion in December.

Imports of goods and services climbed to a record high of $206.4 billion in January.

The trade gap widened even as exports of U.S.-made goods and services totaled a record high of $148.2 billion in January.
Federal officials say W.R. Grace and Co. has agreed to pay $250 million as reimbursement for government expenses in the investigation and cleanup of asbestos in Libby, Mont.

The U.S. Justice Department and the U.S. Environmental Protection Agency said Tuesday the sum is the highest in the history of the federal Superfund program of environmental cleanup.

The $250 million deal settles a claim the government filed to collect money for past and future costs of cleaning Libby schools, homes and businesses contaminated with asbestos.

Google Inc.’s long-anticipated acquisition of online ad service DoubleClick Inc. is expected to turn the Internet search leader into an even more powerful marketing vehicle.

The $3.1 billion deal, completed Tuesday after nearly a year of regulatory wrangling, also may intensify the pressure on Microsoft Corp. and Yahoo Inc paydayloans.com. to resolve their stormy courtship.

Google took control of DoubleClick a few hours after Europe’s antitrust regulators removed the final stumbling block by approving a deal that was announced 11 months ago.

U.S. regulators cleared the transaction in December.

A conservative group is ending its two-year boycott of Ford Motor Co. for donations to what it calls gay organizations.

Ford said Tuesday, however that it has decreased overall charitable spending and advertising in recent years because of financial losses.

The Tupelo, Miss.-based American Family Association says the automaker has met its conditions, including not making donations to gay organizations and ceasing almost all advertising in gay publications.

Ford said in a statement Tuesday that its principles haven’t changed.

A California appeals court said a woman who was paralyzed after her Ford Explorer rolled over is entitled to $82.6 million in damages from the carmaker.

The 4th District Court of Appeal was asked by the U.S. Supreme Court to review the case after Ford Motor Co. appealed the award, arguing that it was being punished even though the design of the vehicle met federal safety standards.

Benetta Buell-Wilson was driving on an interstate east of San Diego in January 2002 when she swerved to avoid a metal object and lost control of her 1997 Explorer, which rolled 4

A Washington-based advocacy group has threatened to sue St. Louis-based Anheuser-Busch Cos. for marketing caffeinated drinks that contain alcohol. The Center for Science in the Public Interest claims A-B’s Bud Extra and Tilt drinks deliberately appeal to young consumers and that Web and magazine marketing imply that consuming alcohol and caffeine together allows people to drink more alcohol.

It is threatening similar lawsuits against Miller Brewing Co.

The center said A-B could avoid potential lawsuits in state courts if it agrees to stop selling alcoholic beverages that contain caffeine, guarana or ginseng and give up profits from the sale of Tilt and Bud Extra payday advance.

A-B said the formulation and labeling for Bud Extra and Tilt have been approved by federal authorities, and that the products are lawful in states where available.
The brewer said it will "vigorously defend (its) legal right" to compete within the category.

— JEREMIAH MCWILLIAMS

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Allen Tate Realtors will buy Rigby Co. Realtors, marking its entry into Upstate South Carolina.

Financial terms of the agreement weren't disclosed.

Allen Tate will take over Rigby's offices in Easley and Greenville, S.C.

Allen Tate Realtors is part of the Charlotte-based Allen Tate Co., the largest residential real estate firm in the Carolinas paydayloans. The company has 1,600 Realtors and 400 additional employees.

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