Attorneys for former Enron CEO Jeff Skilling today formally appealed his 2006 convictions over his role in Enron’s collapse. In a packed New Orleans courthouse, a three-judge panel of the 5th U.S. Circuit Court of Appeals is considering if Skilling’s conviction was rightfully obtained. Defense attorney Daniel Petrocelli petitioned for Skilling’s immediate release from prison. Skilling is citing an appeals court verdict two years ago that threw out guilty verdicts on three Merrill Lynch bankers who were accused of helping Enron inflate its profits. Judges said a key government theory was flawed. Prosecutors argued the bankers robbed Enron shareholders of “honest services,” but the court noted that the defendants did not personally gain. Even if two ten-year fraud convictions are overturned, Skilling would still have to serve a 52-month sentence for insider trading and lying to the company’s auditors. Skilling and company founder Ken Lay were convicted in May 2006 on 19 counts of fraud, conspiracy, insider trading and lying to auditors. Lay died two months later and his convictions were vacated. Skilling reported to a federal prison in Minnesota in December 2006 to begin his 24-year sentence.
Federal Reserve Chairman Ben Bernanke is warning lawmakers that a recession “is possible,” adding that the economy may shrink over the first half of this year. Bernanke’s testimony to the Joint Economic Committee has been a much more pessimistic assessment of the economy’s immediate prospects in terms of dealing with housing, credit and financial crises. He told lawmakers that it appeared likely that Gross Domestic Product will not grow much over the first half of 2008 and could even contract slightly. GDP measures the value of all goods and services produced within the United States and is the best barometer of the country’s economic health. Under one rule, six straight months of declining GDP would constitute a recession. However, Bernanke says that he expects more economic growth in the second half of this year and into 2009.
Orders to U.S. factories have fallen for a second straight month. The worse-than-expected performance is further evidence that a prolonged slowdown in housing and a severe credit crunch are raising risks of a recession. The Commerce Department reported Wednesday that factory orders dropped by 1.3 percent in February, about double the downturn that economists had been expecting. Orders fell an even bigger 2.3 percent in January, which had been the largest decline in five months. The falloff was widespread, with steep declines in orders for motor vehicles, various types of heavy machinery and demand for iron and steel.
Houston homeowners with State Farm insurance will see higher rates this summer. The Texas Department of Insurance has approved their request to raise rates an average 2.8 percent, with coastal residents seeing the biggest jump in rates. Harris county residents will see an average increase of 8.9 to 10.3 percent if they also have a vehicle insured by the company. Those without auto insurance will see an average home insurance hike of 21.6 to 23.2 percent.
The Federal Reserve has cleared the way for JPMorgan Chase to acquire Bear Stearns’ bank holdings. The approval allows JPMorgan to acquire Bear Stearns Bank & Trust in Princeton, N.J. In a controversial move, the Fed last month backed a $29 billion lifeline as part of JPMorgan’s takeover of troubled Bear Stearns, the nation’s fifth-largest investment house, which was on the brink of bankruptcy. The company had invested heavily in risky mortgage-backed securities that eventually soured with the collapse of the housing market. JPMorgan isn’t required to obtain the Fed’s prior approval to acquire Bear Stearns companies. According to the Fed, Bears Stearns is the 45th-largest bank in New Jersey, controlling deposits of approximately $398 million. The Fed says upon completion of this acquisition, JPMorgan would remain the country’s third-largest bank.
U.S. Treasury Secretary Henry Paulson says he told Chinese leaders that Washington is making progress in resolving the U.S. credit crisis but cautioned there will be “more bumps” ahead. Paulson met on Wednesday with President Hu Jintao and Beijing’s new point man on strained relations with Washington, Wang Qishan. Paulson said he explained that the United States was going through a “period of turmoil” but the economy remains fundamentally strong. “I believe we are making progress” in calming troubled credit markets, he said. However, he cautioned that the problems would require more hard work. “I continue to think there will be some more bumps in the road,” he said. Paulson declined to give details on what Chinese leaders said to him.
United Airlines is testing dozens of Boeing 777s to make sure components of a cargo fire suppression system are operating effectively. The Chicago-based airline says testing will be done on its fleet of 52 777s. It’s warning passengers to be prepared for delays and cancellations. United says a review of maintenance records shows a test on one of five bottles in the fire suppression system hadn’t been performed. The subsidiary of UAL Corporation alerted authorities. United carried out unscheduled maintenance on seven of its Boeing 747 jets last month but found no safety-related issues. The Federal Aviation Administration has been checking maintenance records at all domestic airlines.
Asarco is seeking approval from a bankruptcy court in Texas to enter into a $5 million financing deal under its chapter 11 restructuring. The Arizona-based copper-mining company said it needs the financing because its $75 million bankruptcy loan expired in December. Details are in court documents filed Monday in the U.S. Bankruptcy Court in Corpus Christi. Asarco had previously won bankruptcy court approval of a $75 million loan from the CIT Group/Business Credit in December 2005. But the loan expired after two years, and Asarco said CIT Group chose not to renew the loan “in light of the debtor’s cash reserves.”