TOP STORIES--SEPT. 22-27

Three to Plead Guilty in Homestore Probe

Three former executives of Homestore Inc. will plead guilty to criminal charges and pay $4.6 million to settle civil charges in connection with an alleged phony-revenue scheme.

The cases against the former executives of the Westlake Village-based Internet company were announced by U.S. Atty. Gen. John Ashcroft, who said the Homestore investigation was an example of the Bush administration’s pledge to crack down on corporate corruption.

In a complaint filed in federal court in Los Angeles against the three former executives, prosecutors allege that a “major media company,” identified by federal sources as AOL Time Warner Inc.’s America Online unit, was involved in “round-trip” financial transactions in 2001 that allowed Homestore to inflate its financial results by booking its own money as advertising revenue.

AOL said its deal with Homestore “was appropriate.”

*

Fed Lets Rate Stand, but Two Members Oppose

Federal Reserve policymakers acknowledged that the nation’s economic recovery remained wobbly and could be damaged by war with Iraq. But with two members opposed, they voted to leave their signal-sending interest rate unchanged for a 10th straight month.

Policymakers left the so-called federal funds rate, the interest that banks charge each other for overnight loans, at a four-decade low of 1.75%, where it has been since December.

But the central bank, for the first time, revealed immediately after the vote that there had been disagreement about the rate decision. It said that of the 12-member board, Fed Gov. Edward M. Gramlich and Dallas Federal Reserve Bank President Robert D. McTeer Jr. wanted to lower rates.

Some analysts interpreted the disclosure as a sign that the Fed was preparing for further cuts--perhaps significant ones--if the economy weakens.

*

Disney’s Pressler Named Chief Executive of Gap

Paul Pressler, the head of Walt Disney Co.’s $6-billion theme-park division, was named to succeed retiring Gap Inc. Chief Executive Millard “Mickey” Drexler, who led the retailer for two decades.

Pressler, 46, who made his name in consumer products and formerly oversaw Disney Stores, is inheriting a tough job. San Francisco-based Gap has suffered through two years of fashion and financial missteps. The retailer has more than 4,200 Gap, Banana Republic and Old Navy stores worldwide.

The departure of Pressler dealt an unexpected blow to Disney chief Michael Eisner’s efforts to turn around the ailing entertainment giant. Pressler was viewed by some as a potential successor to Eisner and his leaving is likely to revive criticism from investors that the CEO has not mapped out a clear succession plan.

*

Peregrine Files for Bankruptcy Protection

Software maker Peregrine Systems Inc. filed for Chapter 11 bankruptcy protection and sued its auditor, Arthur Andersen, accusing it of fraud, negligence and failure in its performance of its duties. Peregrine is seeking $1 billion in damages.

In its bankruptcy filing, the company disclosed that it had received a subpoena from the Justice Department. Alleged financial misdeeds at Peregrine, whose chairman is San Diego Padres owner John J. Moores, already are under investigation by the Securities and Exchange Commission.

Peregrine executives say the blame lies with Andersen, because the auditor failed to alert the board of directors when Peregrine management changed its accounting methods--changes that could have raised red flags about what executives were doing. Peregrine fired Andersen in April.

Andersen denied the accusations.

*

Global Crossing Swaps Misled, Documents Show

E-mails and other documents released by congressional investigators showed that executives at Global Crossing Ltd. misled their bankers as well as investors in undertaking controversial swaps of capacity on their telecommunications networks to boost revenue and meet financial forecasts.

The disclosure could give lawmakers important ammunition as a House Energy and Commerce subcommittee prepares to grill Global Crossing founder and Chairman Gary Winnick this week. Global Crossing filed for bankruptcy protection in January.

The e-mails point to a compelling motive for the firm’s obsession with meeting quarterly projections and completing last-minute capacity swaps to do so.

*

Billionaire Seeks to Purchase Dole Food

Billionaire David H. Murdock announced his intentions to buy Dole Food Co. in a transaction valued at about $2.3 billion.

Murdock, company chairman, owns about 24% of the nation’s largest fresh-produce business. He offered to buy remaining shares for $29.50 apiece and assume about $1 billion of debt.

But several shareholders said the deal was not as good as it could be, causing speculation that Murdock might have to raise his bid.

Murdock, 79, has a history of buying companies when market conditions are favorable. The most recent transaction was taking real estate company Castle & Cooke Inc. private two years ago.

*

ESPN to Launch Spanish Sports Channel in 2003

ESPN said it would launch , ESPN Deportes (ESPN Sports), a 24-hour Spanish-language sports channel, next year.

The move would tap into one of television’s fastest-growing markets: the 10.7 million Latino households in the U.S., a potential viewing audience of more than 35 million.

But it also puts ESPN in competition with Spanish-language networks that use sports as a cornerstone of their programming and that have locked up some key broadcast rights to sports popular with Latino audiences.

*

PUC May Have Broken Law in Edison Rescue

A federal appeals court said the California Public Utilities Commission may have broken state laws when it hammered out an agreement in secret last October with Southern California Edison that allowed the utility to begin paying the huge electricity debts it ran up during the energy crisis.

The U.S. 9th Circuit Court of Appeals asked the California Supreme Court to rule on three potential violations of state law by the PUC in crafting a rescue plan for Edison. That plan allows Edison to keep electricity rates at current high levels until the utility’s power debts are paid.

If the state Supreme Court agrees that the PUC violated these laws, including open-meeting requirements and portions of the landmark law that deregulated the state’s investor-owned utilities, the bailout agreement would be void, said Judge Sidney R. Thomas, writing for the three-judge panel.

Edison and the PUC pointed to the court’s rejection of challenges under federal law.

*

Music Labels Consider Suing Bertelsmann

Several record labels and music publishers are debating whether to sue German media powerhouse Bertelsmann, owner of the BMG label, for allegedly helping Napster Inc. users infringe song copyrights.

If successful, a lawsuit could fetch as much as $1 billion--the amount that Napster would be on the hook for if each alleged copyright violation resulted in a maximum fine of $150,000. That would dwarf the $90 million Bertelsmann has lent Napster since October 2000.

The potentially costly twist stems from evidence recently unearthed in Napster’s Delaware bankruptcy case showing that Bertelsmann exerted more control over Napster’s service than previously known.

A Bertelsmann spokeswoman and executives at rival labels declined to comment. The Recording Industry Assn. of America is staying out of the fight because it represents Bertelsmann and the other labels.

*

Also

* Adelphia Communications Corp. founder John J. Rigas, two of his sons and two other former company executives were indicted on federal charges of defrauding the cable-television operator of more than $2.5 billion.

* Citigroup Inc. will pay $5 million to settle NASD charges that former analyst Jack Grubman misled investors by recommending Winstar Communications Inc. as the telecommunications company was sliding into bankruptcy.

* WorldCom Inc.’s former controller, David Myers, pleaded guilty to charges he participated in a multibillion-dollar accounting fraud that drove the company into bankruptcy. .

* Vivendi Universal Chief Executive Jean-Rene Fourtou vowed to not pay nearly $20-million severance to his predecessor, Jean-Marie Messier.

*

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