The Los Angeles Unified School District must pay more than $17 million for breaching contracts with the developer, contractor and architect of the unfinished Belmont Learning Complex, an arbitrator ruled.
Arbitrator Steven A. Arbittier said the district harmed innocent businesses when it decided to suspend construction in August 1999 amid concerns about environmental contamination at the site, which sits atop a former oil field. The district had stopped paying its bills a month earlier.
The Board of Education decided to abandon the project altogether in January 2000, but is now seeking bids from the private sector to either finish the school or buy the property.
The arbitrator ordered the district to pay $13.5 million in damages to Temple Beaudry, the contractor; Turner/Kajima, the architectural firm; McClarand Vasquez & Partners and 49 other subcontractors. The district also must pay the firms’ attorney fees and arbitration costs.
Although the arbitrator rejected the district’s claims that the construction firms had overbilled and failed to complete work that was paid for, the $17 million was about $4 million less than the companies were seeking.
Meanwhile, the district has sued the developers and the others involved, accusing them of excessive billing and design errors.
NetZero, Juno to Merge
Westlake Village-based NetZero and Juno Online Services the last two companies offering free Internet service have agreed to merge in a deal that would create the nation’s second-largest Internet service provider.
Under the deal, NetZero would pay $70.7 million in stock for New York-based Juno. The new company, to be called United Online, would be able to reap significant cost savings from sharing a single network of computers, servers and modems, officials said, but skeptics countered that the combined company would have trouble generating enough revenues to be profitable.
Both NetZero and Juno have been trying to reduce their reliance on revenue from advertising by steering customers toward billable services and limiting the number of hours they can spend online for free. About 1 million of their combined 7 million monthly users are already paying for some services, and those payments account for 60 percent of the companies’ revenue.
The merger would put an end to a year-old squabble between the two firms. Juno accused NetZero last June of stealing a patented method for displaying advertising even when consumers are offline. NetZero countered with a suit claiming that Juno infringed its patented technology for displaying messages and ads in a separate on-screen window.
Secessionists Hail Policing Study
The Los Angeles County Sheriff’s Department could provide roughly the same level of service to the San Fernando Valley at a cost at least 40 percent less than the Los Angeles Police Department, according to a county report.
The estimates, which were provided at the request of the county agency studying Valley secession, project that the Sheriff’s Department could provide law enforcement services to the Valley for $130 million to $145 million a year, compared to the LAPD’s Valley service, which costs at least $230 million annually.
The Sheriff’s Department estimated it would incur one-time start-up costs including the assumption that it would have to build six new stations of $214 million. That start-up figure could be high, however, because cityhood advocates believe a Valley city would be able to take over the LAPD’s current stations in the Valley.
An LAPD spokeswoman said the Sheriff’s Department figure is just an estimate, and not an in-depth cost analysis. A more professional study, she said, would likely find the two agencies are similar in cost.
Financial Firm Faces Charges
Los Angeles-based Madison Financial Group and its two principals are the target of a complaint filed by securities regulators accusing them of fraudulently soliciting thousands of customers to open commodity option accounts.
The Commodity Futures Trading Commission alleges that, from April 1998 to March of this year, Madison principals Richard A. Cohen and Ronald G. Scott instructed employees to promise huge returns that could not be delivered. Madison misrepresented its performance record and failed to disclose the risks involved in trading commodity options, the complaint alleges.
Madison opened more than 2,800 accounts with a total of about $20 million in customer funds. About 97 percent of the accounts suffered net losses, the CFTC said.
Mattel Unit Fined
In the biggest civil penalty ever imposed on a toy company, Fisher Price, a New York unit of El Segundo-based Mattel Inc., has agreed to pay a $1.1 million fine to settle charges that it failed to report a fire hazard risk with a toy vehicle.
The Consumer Product Safety Commission (CPSC) said the company agreed to pay the fine in connection with charges involving safety defects in its Power Wheels toy vehicles, which were recalled in 1998.
Fisher-Price, the world’s largest preschool toy company, failed to report 116 fires involving the vehicles and reports of more than 1,800 incidents of the vehicles’ electrical components overheating, short-circuiting, melting or failing, the CPSC alleged. The incidents allegedly resulted in at least nine minor burns to children and up to $300,000 in property damage.
The vehicles, sold under nearly 100 model names and intended for children aged 2 to 7 years old, sold for $70 to $300 each.
Under federal law, companies are required to report to the CPSC if they obtain information that “reasonably suggests” their products could present a substantial risk of injury to consumers or an unreasonable risk of serious injury or death.
Disney Initiates Layoffs
Walt Disney Co. has begun laying off 1,000 workers from Burbank to Orlando, Fla. as part of its plan to eliminate 4,000 jobs companywide, about three percent of its total workforce.
Roughly 3,000 employees accepted the company’s voluntary separation program, leaving about 1,000 who will involuntarily lose their jobs between now and the end of July, a company spokesman said.
The move comes two months after Disney announced its single biggest job cut ever, blaming a soft economy that has hurt theme park attendance and advertising spending at its ABC television network. The cuts are expected to save the company about $400 million annually.
Among the areas expected to be hit hardest by the layoffs are Disney’s theme parks in Anaheim and Orlando and its feature animation department, where Disney is cutting several dozen jobs and slashing salaries by up to 50 percent in response to the unit’s declining profits, officials said. Other cuts are expected in ABC’s news operation and within Disney’s movie, music and home entertainment divisions
Suspensions in Sony Ad Scandal
Two Sony Pictures Entertainment advertising executives have been suspended without pay for 30 days for making up laudatory quotes about Sony films that were attributed to a film critic who didn’t exist.
The company declined to identify the two studio employees, except to say that one was the supervisor of the advertising department.
The scandal, which included blurbs for such Sony films as “The Animal” and “A Knight’s Tale,” was initially uncovered by Newsweek Magazine, which questioned the identity of film critic David Manning of the Ridgefield Press in Ridgefield, Conn.
Sony, which quickly admitted the critic was fictional, said the company has instituted a new system of checks and balances involving both the publicity and advertising departments to ensure the accuracy of quotes contained in future advertising campaigns.
‘Real-Time’ Meters Installed
A new electric meter designed to reduce demand during peak hours by enabling utilities to calculate bills based on when power is used will get its first test with Los Angeles businesses.
The new program, introduced by Gov. Gray Davis, could reduce electricity use by as much as 240 megawatts this summer, officials said.
The Los Angeles Department of Water & Power will install more than 3,400 real-time electricity meters at commercial and industrial customers with peak electricity demand of 200 kilowatts or greater. Such customers include office buildings, supermarkets and manufacturing operations.
Wholesale electricity costs more when demand is high, so such metering encourages businesses to reschedule shifts, conserve or shift energy use to take advantage of lower prices during times of low electricity demand. Under the state plan, customers with real-time meters will be able to shave 15 percent off their electricity bills by reducing peak energy use.
The are being funded through AB 29X, legislation Davis signed in April that set aside $35 million for their purchase and installation.
Customs Leaving Terminal Island
The U.S. Customs Service has signed a $63 million lease deal with TrizecHahn Corp. to move its Los Angeles operation from Terminal Island to a Long Beach office tower.
About 350 employees of the Customs agency’s Los Angeles/Long Beach Area Port of Entry will move from the aging Terminal Island Office to the 383,000-square-foot Shoreline Square as a result of the deal, which was signed by the General Services Administration.
The transaction, one of the biggest Long Beach office leases in recent years, includes rent payments that increase at specified dates over the course of the lease term, along with funds slated for customizing the offices.
Tenet to Buy Daniel Freeman
In a deal that would change its status from a non-profit to a for-profit operation, struggling Daniel Freeman Hospitals has agreed to be purchased by Tenet Healthcare Corp. for $55 million.
But Tenet’s bid is being opposed by a group of doctors who want to buy the Roman Catholic hospitals in Inglewood and Marina del Rey.
Tenet Healthcare owns 30 hospitals in Southern California, including Centinela Hospital Medical Center in Inglewood. Some residents feared the company might close or reduce Freeman’s Inglewood operations to avoid duplication of Centinela services.
A Tenet spokesman said both hospitals would remain open, although some duplicate services might be cut back. Tenet has also vowed to keep up Daniel Freeman’s charitable care for the indigent.
A Daniel Freeman official said most of the proceeds from the sale would be used to off the hospitals’ debts.
Litton Sale Complete
Northrop Grumman Corp. has completed the final step in its acquisition of longtime rival Litton Industries Inc. by converting Litton’s preferred stock into the right to receive $35 per share in cash.
Northrop, a $15 billion global aerospace and defense company agreed to buy shipbuilder and electronics-maker Litton last December in a deal worth $5.1 billion. Northrop paid $80 for a common share and $35 for series B preferred shares.
Stan Lee Indictment
Federal prosecutors are preparing to seek the extradition from Brazil of Stan Lee Media co-founder Peter Paul, who has been indicted on charges of manipulating company stock and bilking investors out of $25 million.
In addition to Paul, the indictment also named former Stan Lee Media Executive Vice President Stephen M. Gordon, stock promoter Charles Kusche and Jeffrey Pittsburg, a Wall Street analyst, as participants in an alleged conspiracy to commit securities fraud. Stan Lee, the legendary creator of such characters as Spider-Man and the X-Men while employed by Marvel Comics, was not charged. The defendants face maximum sentences of 15 years in prison if convicted.
According to the indictment, the defendants used various methods to inflate the price of Stan Lee Media stock. Paul and Gordon allegedly hired Pittsburg to trumpet the shares to investors with bogus reports.
The company has laid off the bulk of its 165 employees and filed for Chapter 11 bankruptcy protection in February.
Gemstar Denies Investigation
Emphasizing that the company has not been accused of any wrongdoing, Gemstar-TV Guide International Inc. confirmed that it has been contacted by U.S. Department of Justice investigators.
A story published by Reuters news service said the Justice Department was investigating whether Gemstar violated antirust laws in the interactive programming market.
Gemstar officials said the federal investigators simply asked for information related to last year’s $14 billion merger between Gemstar and TV Guide.
Meanwhile, Gemstar announced it signed a 20-year licensing agreement with Adelphia Communications Corp., a leading cable TV operator. Under the agreement, Adelphia has committed to using Gemstar’s interactive program guide software on more than 85 percent of its systems.
Record Smoking Award
Handing the tobacco industry its worst defeat stemming from a case brought by an individual plaintiff, a Los Angeles jury has ordered Philip Morris Inc. to pay more than $3 billion in damages to a cancer-stricken Marlboro smoker.
In the latest evidence that California has become a major legal hurdle for the tobacco industry, the jury awarded about $5.5 million in compensatory damages and $3 billion in punitive damages to Topanga-area resident Richard Boeken, 56, who suffers from lung and brain cancer. Jurors found Philip Morris, the country’s biggest cigarette maker, guilty on all eight of Boeken’s claims, including negligence, misrepresentation, fraud and selling a defective product.
Such large awards are often reduced by the trial judge or overturned on appeal, and a Phillip Morris spokesman said the company would ask the judge to set aside the verdict, and failing that, will file an appeal.
The Boeken verdict far exceeds any prior jury award to a single smoker and is one of the largest jury awards against any corporate defendant.
