NATIONAL BRIEFING

Friday, July 4, 2008

AUTOMOTIVE

GM May Launch Its Own Mini Car

General Motors is considering a new Chevrolet mini car for the United States as it reworks its product lineup to cope with a dramatic consumer shift to more fuel efficient vehicles, a spokesman said.

GM spokesman Dee Allen said bringing the Chevrolet Beat to the U.S. market is among the options the company is studying. About the size of a Honda Fit or Toyota Yaris, the Beat is a front-wheel-drive, three-door hatchback.

The Beat, to be built in South Korea, will be rolled out in other global markets faster than it would in the United States, Allen said. The car still must be engineered to meet U.S. safety and emissions standards, he said.

U.S. mini car sales are up nearly 31 percent for the first half of the year, even though the total U.S. auto market is down more than 18 percent, according to Autodata Corp.

LEGAL

Former Refco CEO Sentenced

Phillip Bennett, the former chief executive of Refco, was sentenced to 16 years in prison Thursday for fleecing investors of more than $2.4 billion in a fraud that destroyed the world's largest independent commodities broker.

The sentence marks the latest chapter in the decline and fall of Bennett, 59, who built Refco into a global commodities trading empire only to see it unravel in 2005 after the company disclosed an accounting deception.

Prosecutors said Bennett engineered fraudulent transactions to take bad debt off the company's balance sheet at the end of reporting periods, so investors and others would not know about them. Bennett pleaded guilty in February to 20 counts of fraud, conspiracy, money laundering and lying to auditors and others. His plea came just a month before he was set to go to trial.

U.S. District Judge Naomi Buchwald ordered Bennett to be kept under house arrest in his New Jersey home until he surrenders to a federal facility in September. After serving his sentence, Bennett is to be deported to his native Britain.

Bennett, who at Refco's peak was a billionaire, will forfeit all his assets as part of his sentence.

Whistle-Blower Complaint at UBS

A former broker with UBS filed a whistle-blower complaint alleging that the firm forced him to resign after he cooperated with state regulators investigating sales of risky investments to Massachusetts cities and towns.

Timothy Flynn's complaint alleges that top UBS officials knew last winter that auction-rate securities could be on the verge of failing but continued to press brokers to portray them to customers as safe -- advice that proved costly when the more than $300 billion market for such investments collapsed in February.

UBS spokesman Kris Kagel said the firm took no improper actions against Flynn. "Mr. Flynn made the decision to resign of his own volition," Kagel said. "UBS therefore denies the allegations in his claim and plans to defend itself vigorously."

MERGERS & ACQUISITIONS

Penn National Takeover Canceled

Two investment firms pulled the plug on their $5.82 billion acquisition of Penn National Gaming after the racetrack and casino operator's stock price tumbled.

The firms, Fortress Investment Group and Centerbridge Partners, will pay for pulling out. Penn National will get $225 million in cash as a termination fee, plus $1.25 billion in what amounts to no-cost capital until 2015.

Penn National said its board was unwilling to negotiate a reduced buyout price and that the settlement was preferable to suing the buyers to force the acquisition.

HOUSING

Toll Brothers Rating Cut to Junk

Toll Brothers, the largest U.S. luxury home builder, had its credit rating lowered to junk by Moody's Investors Service as weak demand deepens the housing recession and cuts into earnings.

The rating on the company's senior unsecured notes was reduced to Ba1 from Baa3, Moody's said. The cut affects $1.1 billion of debt, Joseph Snider, a senior credit officer at Moody's, said.

"While the company is one of the only remaining homebuilders that is currently generating earnings before impairment charges, Moody's does not expect this to continue," Moody's said.

Toll Brothers, based in Horsham, Pa., reported its third consecutive quarterly loss on June 3 as tumbling demand forced the company to write down land values.

CONSUMER SAFETY

Salmonella Outbreak Widens

The number of people infected with a rare form of salmonella that authorities think is being spread by raw tomatoes increased to 887 people in 38 states and the District of Columbia.

Federal investigators hunting for the source said this week that while they still suspect raw tomatoes as the cause, they are also looking at other types of produce.

Compiled from reports by Washington Post staff writers, the Associated Press, Reuters and Bloomberg News.