Morgan Stanley Dean Witter, which has been hit by a $1.35 billion discrimination suit filed by a black former employee, suspended two legal department employees and started an investigation into a $10,000 payment made to a police informant whose tip led to the arrest of a former employee. The former employee, Christian Curry, was arrested after he allegedly tried to plant racist e-mail messages into the firm's computers to bolster a discrimination suit he planned to file. Prosecutors dropped charges against Curry after they discovered Morgan Stanley had paid $10,000 to informer Joseph Luethke, who has denied having been paid.

Equity mutual funds had about $11.3 billion in new investments in May, a 55 percent slowdown from April and a continuation of a trend that started last August after financial markets tumbled, analysts said. The amount of money that flowed into stock funds in the first five months of this year is the lowest since 1995, according to the Investment Company Institute, the industry's trade group, and analysts' projections. "The slowdown can be explained by volatile markets and the fact that more Americans are using the Internet to buy stocks," said Raymond Liberatore, an analyst at Financial Research, a firm that tracks fund flows.

America Online said in a filing with the Securities and Exchange Commission that it plans to raise $4.5 billion by selling an unspecified amount of additional common stock, preferred stock and bonds. One of AOL's largest shareholders, Sprint Communications, also filed notice that it plans to sell its 28.8 million shares of AOL, which are worth more than $3.3 billion.

Yahoo, the leading Internet search service, said it bought closely held Encompass for about $130 million in stock. Encompass makes software that allows users to register information automatically when they get a new personal computer, hook onto their Internet service provider and get on Yahoo. Yahoo will be able to give ready-made software to its business customers, including computer makers, Internet service providers, advertisers and merchants that connect users to the World Wide Web.

Avis Rent a Car, the nation's second-largest car-rental company, agreed to provide wheelchair-accessible shuttle buses at all of its airport locations, the Justice Department announced. The agreement resolves a 1996 complaint by a wheelchair-using traveler who argued that Avis violated the Americans With Disabilities Act by not providing an accessible bus between Detroit Metro Airport and Avis's off-site rental facility. Avis agreed to ensure that each of its 36 airport shuttle systems has at least one wheelchair-accessible vehicle by Dec. 31, 2000.

TLC Beatrice International Holdings, in a final act by one of America's largest black-owned companies, said it will sell its foreign ice cream operations and liquidate its assets. Beatrice will sell its Spanish and Canary Islands ice cream operations to La Casera SA's Iberian Beverage Group of Spain for $191 million, composed of cash and a $120 million promissory note. Privately-held Beatrice began selling off its businesses after its founder, Reginald F. Lewis, died in 1993, and there was no clear successor to take it over.

The FTC announced charges against Screen Test U.S.A., accusing the company of using a screen test for children to con parents into buying company products. Parents who saw television, radio or Internet ads and called the company were told to bring their children in for a $45 screen test. After the company informed parents that their children had passed the screen test, scouts put pressure on the families to buy packages of photographs costing $495 to $795.

The Federal Communications Commission raised the funding for the controversial E-rate program by nearly $1 billion. The program, which helped fund Internet and telephone services for 80,000 schools and libraries in its first year, is to receive a total of $2.25 billion for the year beginning July 1.

First Union amended its agreement to buy Everen Capital to guarantee Everen shareholders will receive $31 worth of First Union stock for each of their shares, or a total of about $1.1 billion. Charlotte-based First Union, which this week warned that its earnings for the year would be about 15 percent less that its earlier forecast, may have to issue more stock to buy Chicago-based Everen under the new agreement. First Union's shares declined more than 17 percent since the original agreement was reached last month.

Fox Entertainment Group is launching a cable and Internet network devoted to health care. The Health Network was formed through a merger of Fox's Fit TV and America's Health Network, whose early financial backers included former Columbia/HCA Healthcare Corp. CEO Richard L. Scott and former Columbia/HCA president David T. Vandewater.

NYLCare Health Plan of the Mid Atlantic has agreed to pay a $100,000 penalty, half of which is suspended, to settle findings by the Maryland Insurance Administration that it improperly "downcoded" medical claims, paying for a lower level of care than a physician provided. The company, a subsidiary of Aetna, also agreed to oversee compliance with Maryland insurance laws.

Microsoft co-founder Paul Allen, striking his second cable TV deal in two days and fourth in a week, said he's buying Denver-based Fanch Communications. No price was disclosed for privately held Fanch, which will put Allen's Charter Communications squarely in the No. 4 spot in the U.S. cable industry, behind AT&T, Time Warner and Comcast. Fanch has about 547,000 subscribers, boosting Charter's base of subscribers to about 5.5 million.

Infinity Broadcasting, the radio arm of CBS, said it will buy Outdoor Systems, the nation's largest outdoor advertising company, for $6.5 billion in stock. Infinity will also assume $1.8 billion in Outdoor Systems' debt. The deal will give CBS a wider array of options to offer advertisers. Phoenix-based Outdoor Systems has about 110,000 outdoor advertising spaces such as billboards in major markets throughout the United States, Canada and Mexico.

The House Commerce Committee's subcommittee on finance approved a bill to revamp the nation's banking and financial services laws. The measure was approved after the subcommittee voted 18 to 9, essentially along party lines, to reject a privacy amendment offered by Rep. Edward J. Markey (D-Mass.) that would have allowed consumers to block financial companies from sharing personal information about their customers among their affiliates. The bill will go to the full Commerce Committee for consideration in mid-June.

The Federal Trade Commission has approved the $13.5 billion merger of supermarket giants Kroger and Fred Meyer, paving the way for creation of the largest grocery store chain in the nation. In a joint release, the companies said the terms of the approval require the sale of eight stores in Arizona, Wyoming and Utah. After the closing, the new company, which will operate under the Kroger name, will have 2,200 stores in 31 states operating under such names as Kroger, Ralphs Supermarkets, Smith's Food & Drug Stores, Fred Meyer, Quality Food Centers and King Soopers. Combined sales for the new company would have been $43 billion in 1998.

The United Farm Workers, stung by losing a pivotal vote to represent strawberry workers, accused an inexperienced rival organization of coercion in winning over the employees. Workers for Coastal Berry, the nation's largest strawberry grower, voted in favor of representation by the upstart Coastal Berry of California Farm Worker Committee. UFW President Arturo Rodriguez blamed interference by anti-union growers who feared a victory at Coastal Berry might spread to other berry fields.

Campbell Soup named Philip Lippincott chairman. The Campbell director and former chairman and chief executive of Scott Paper, 63, succeeds David Johnson, 66, who gave up the chief executive's position in July 1997 and said he would retire as chairman. The change is effective Aug. 1. Dale Morrison will remain president and CEO.

RECALLS

General Motors said it was recalling about 35,000 1998 and 1999 Cadillac Sevilles because of an electrical short that could cause an engine compartment fire. A fire could occur with the engine off and the car key removed, GM said.

EARNINGS

Costco, the biggest U.S. chain of warehouse-club stores, said its fiscal third-quarter earnings rose 24 percent, to $105.9 million, as it added more services and increased its profitable private-label offerings.

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