Convicted on Retrial
For New York prosecutors, the second time was a charm. Last year's initial trial of former Tyco International executives L. Dennis Kozlowski and Mark H. Swartz ended in a hung jury. But on retrial, another jury found them guilty on 22 counts of taking $170 million in unauthorized compensation and pocketing another $430 million in ill-gotten profits from stock options. There was still no verdict, however, from Birmingham, where a jury is weighing federal charges against HealthSouth founder Richard M. Scrushy.
A Showdown Looming
General Motors told the United Auto Workers it will begin cutting health benefits for retirees next month unless workers and retirees agree to pay significantly more than the current 7 percent of their health care costs. The union, saying it would never reopen a current contract, threatened a strike. The Wall Street Journal reported that GM wants to shave $2 billion from its health tab over the next two years, but union leaders want the company to cut dividends and executive pay before they agree to concessions.
Pleading for Its Life
Hoping to stave off criminal charges, KPMG acknowledged that former partners had engaged in "unlawful conduct" by devising and peddling abusive tax shelters that cost the Treasury billions of dollars. While other accounting firms had moved to resolve allegations, KPMG had previously taken a hard line and engaged in bare-knuckle legal tactics that angered prosecutors. In its apology, the accounting giant said it had fired those most responsible, reformed its governance structure and begun to cooperate in the ongoing investigation.
Contracting Tax Cheats
Government auditors reported that thousands of federal contractors, collectively, owed more than $3 billion in unpaid taxes. The report cited contractors who reportedly used money withheld for payroll taxes to buy luxury houses and vehicles. Another contractor simply closed one firm and opened another when unpaid tax bills got too high. Senators called on officials to stop awarding contracts to deadbeat firms, but the IRS commissioner said confidentiality rules now prevent his agency from disclosing tax information.
Minding Mortgage Giants
Prospects dimmed for legislation that would create a new regulator for Fannie Mae and Freddie Mac. Senate Banking Chairman Richard C. Shelby (R-Ala.) said he wouldn't agree to diverting 5 percent of the mortgage giants' profits to an affordable housing trust that some conservatives call a "slush fund." That fund, however, was a key component of a House bill that won bipartisan support in the House Financial Services panel. The White House, meanwhile, continues to push for stricter limits on how many mortgages Fan and Fred can own.