Tax Shelter Indictments
Federal authorities unsealed conspiracy charges against eight former officials of KPMG and a lawyer who were accused of helping wealthy clients evade at least $2.5 billion in taxes. The indictment came as a federal judge approved a deal to defer prosecution of KPMG itself. Attorney General Alberto R. Gonzales acknowledged that the government had considered the fate of KPMG's 18,000 employees in striking a $456 million settlement with the firm. The defendants said they were simply following policy set out in the tax code.
1.1 Million More in Poverty
Despite healthy economic growth, 1.1 million more Americans fell into poverty in 2004, while household incomes stagnated and earnings fell, according to the Census Bureau's annual report on income, poverty and health insurance. The report highlighted the reasons for voter discontent with the economy. Median household income stood at $44,389 last year, down from the 2003 level of $44,482, and that figure was boosted by more people going to work for lower earnings. The poverty rate rose to 12.7 percent from 12.5 percent.
Hedge Fund Allegations
A scandal deepened at the Bayou Group, a $400 million hedge fund and brokerage firm based in Stamford, Conn., when federal prosecutors sued the firm, alleging that it had begun defrauding investors in 1998, just a year after it was formed. The lawsuit, filed by David N. Kelley, the U.S. attorney in Manhattan, seeks the forfeiture of all assets held by Bayou, which was run by Samuel Israel III. It says Bayou misled investors by grossly overstating gains and assets and by engaging in transactions intended to produce outsized returns.
SAIC: The Next Big IPO
In a stock offering that could rival Google's, Science Applications International Corp. said it would go public early next year, aiming to raise $1.7 billion. SAIC is the largest privately held defense contractor, with government work accounting for 87 percent of its $7.2 billion in revenue. It expects to cash in on the post-Sept. 11 government spending boom, with the chief beneficiaries being its 35,000 shareholders, including many current and former employees. The firm has 16,000 employees in the Washington area.
Intelsat Expands Its Orbit
Intelsat Ltd. of the District agreed to buy PanAmSat Holding Corp. for $3.2 billion in a deal that would create the world's largest commercial satellite company, with 53 satellites and annual revenue of more than $1.9 billion. The companies have complementary businesses; Intelsat has major contracts with the U.S. government, while PanAmSat has a big business carrying broadcast television transmissions and a greater presence in North America. The merger requires approval from antitrust regulators and the Federal Communications Commission.