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FBI expands probe of HealthSouth's CEO
Birmingham, Ala. >> The FBI has expanded its accounting-fraud probe of HealthSouth Corp.'s chief executive, Richard Scrushy, to include an examination of his private investments.Scrushy set up private companies that dealt in airplanes, radio programs and yachts. Some did business with HealthSouth, which did not report the transactions as required by law, a company spokesman said. U.S. investigators also want to determine whether HealthSouth overbilled Medicare, the U.S. government health insurance program, the Federal Bureau of Investigation said. The inquiry includes facts surrounding the suicide of an accountant who worked for one of 11 private companies Scrushy established, the FBI said.
"Mr. Scrushy is being looked at very thoroughly, and that would include all his interests, not just HealthSouth," said Craig Dahle, a spokesman for the FBI office in Birmingham.
The ability of investors to track down Scrushy's assets and how he got them will be crucial to recovery of any damages in the fraud suit shareholders filed against him and HealthSouth, the largest operator of rehabilitation hospitals. HealthSouth, which has more than a dozen clinics in Hawaii, lost access to a $1.25 billion credit line this week, may default on a $350 million bond payment April 1 and is considering bankruptcy.
The SEC, which accused Scrushy last week of inflating earnings by $1.4 billion and assets by $800 million, needs to know what Scrushy is worth and whether any part of his wealth was obtained illegally. The SEC will seek civil penalties from Scrushy, who founded HealthSouth in 1984 and has sold $247 million in company stock since 1987.
Outrigger adds Australia resort
Outrigger Hotels & Resorts has reached an agreement to manage the $47 million Outrigger Ettalong Beach Resort, 53 miles north of Sydney, Australia.The resort is under development and is slated for completion by late 2004.
Outrigger recently opened its ninth property in Australia, the 166-suite, $15 million waterfront Outrigger Hervey Bay Resort in Queensland.
Honolulu-based Outrigger operates or has under development nearly 50 hotels and resort condominiums in the Pacific, and plans to operate 20 resorts in Australia, New Zealand and neighboring islands by 2005.
ON THE MAINLAND
ImClone stock rises on cancer drug prospects
NEW YORK >> ImClone Systems Inc. stock rose more than 5 percent yesterday on the prospect that its cancer drug could be on the market in Europe by next year.Germany's Merck KGaA said yesterday it believes tests it conducted on Erbitux meet regulatory requirements to apply to European authorities for review, and if approved the drug could be on the market in 2004. Merck, which is not related to the American drug maker Merck & Co., licensed the rights to develop and market Erbitux outside North America from ImClone. Final study results are expected in May. Shares in ImClone rose 98 cents to close yesterday at $18.36 on the Nasdaq Stock Market.
Cathay Pacific to pare flights as disease spreads
Hong Kong >> Cathay Pacific Airways Ltd., Hong Kong's largest carrier, said it will reduce flights as a deadly pneumonia outbreak prompts passengers to cut travel.The airline will announce details Monday, said Tony Tyler, Cathay's director of corporate development. The Ming Pao daily reported yesterday that Cathay will cut as many as 15 flights.
The new disease, known as severe acute respiratory syndrome, has infected 1,485 people worldwide and killed at least 53, according to the World Health Organization. At least 425 people in Hong Kong have the illness.
NYSE to delist United's stock
CHICAGO >> The New York Stock Exchange announced yesterday it would stop trading in United Airlines parent UAL Corp. because the bankrupt carrier's stock had fallen below $1 a share for a 30-day period.The widely expected delisting is effective April 3, when United plans to begin selling its stock on the OTC Bulletin Board.
United said the move would have no effect on customers or operations.
The announcement came the same day leaders of United's union representing baggage handlers and public contact workers sent members a letter suggesting an eleventh-hour deal to salvage their labor agreement was possible.
United's stock closed yesterday up 1 cent at 85 cents.
US Airways ends pilot pension plan
ALEXANDRIA, Va. >> A federal judge gave his final approval yesterday to US Airways' termination of its pilots' pension plan, clearing the way for the airline to emerge from bankruptcy protection next week.The pension issue had been the last hurdle to the airline emergence. The Federal Pension Benefit Guarantee Corp. gave its approval yesterday morning to the pension plan, and U.S. Bankruptcy Judge Stephen Mitchell approved it Friday afternoon.
Airline spokesman Chris Chiames said the airline will work through the weekend to clear up technical matters so it can emerge from bankruptcy protection on Monday.
Fleming likely to restate earnings
DALLAS >> Grocery distributor Fleming Cos., which has operations in Hawaii, said yesterday it would probably restate past earnings, needs more time to complete its financial report for 2002 and is trying to line up new financing.Fleming indicated that its lenders were unlikely extend new credit and it is talking with vendors and others for new short-term financing.
Unless it can line up that financing, Fleming "now believes that its 2002 financial statements will likely include a going concern uncertainty," the company said. That was a reference to the possibility that its auditor may express doubts in the report about the company's ability to stay in business.
New Sprint CEO gets rich pact
KANSAS CITY, Mo. >> Gary Forsee, new chief executive officer of Sprint Corp., will be richly compensated for his decision to return to the telephone company from rival BellSouth Corp.Gary Forsee, 52, will paid at least $2.75 million in salary and bonus this year, according to filing Friday with the Securities and Exchange Commission.
His base salary will be $1.1 million under the contract, which runs through Dec. 2, 2007. Forsee made $713,000 last year at BellSouth, where he was vice chairman and head of domestic operations.
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