"The grand jury will be active for some time. Stay tuned; there will be more to come." -- U.S. Attorney James Burns in Chicago, after Archer Daniels Midland agreed to a $100 million fine for price-fixingEDITED BY LARRY LIGHTReturn to top
A PIG-OUT FOR CORPORATE PARENTS
COME NEXT YEAR, DOZENS OF companies may start buying up shares of their subsidiaries held by the public. Why? A rule change the Financial Accounting Standards Board is mulling likely will make such deals cheaper for the parent corporation.
At issue is the bookkeeping treatment of so-called goodwill, accounting for the premium that the parent must pay to buy the stock it doesn't own. Under current FASB rules, goodwill is written off against earnings for 40 years. But with the proposed rules, expected in early 1997, there would be no such charge for a parent.
Big money is involved. Today, says Lehman Brothers Managing Director Robert Willens, if Harcourt General bought the 49% of retailer Neiman Marcus it doesn't have, the goodwill charge would knock $25 million off Harcourt's yearly earnings--15% of its 1995 profits.
Here's why the FASB change should goad parent companies to buy all of a subsidiary. A 51% owner can keep just 51% of its subsidiary's earnings. A 100% owner gets every penny. The FASB plan would be good news for public shareholders--they could sell out to the parent for a premium. Possible FASB plays: Exxon and its 70%-owned Imperial Oil, and American Home Products and Immunex (55%). Neither will comment.EDITED BY LARRY LIGHTReturn to top
MEXICO: VIVA LAS VEGAS?
MEXICO MAY BE THE NEXT tourist spot with casino gambling. Outlawed since 1938, casinos are becoming more attractive as an economic boost. President Ernesto Zedillo Ponce de Leon says he may introduce legislation legalizing casinos this fall.
Studies estimate that 10 casinos in prime tourist spots such as Cancun and Acapulco would bring up to $1.5 billion in investments for hotels and gaming facilities, and $1 billion or so in added yearly tourism revenue. Proponents argue the casinos would help attract tourists from rival tropical destinations, including Jamaica and Aruba. Major U.S. operators, such as Harrah's Entertainment, are eyeing Mexico.
Zedillo cautions that it must first be clear that Mexico's regulators can police the industry to avoid infiltration by drug traffickers and money launderers. That's also a concern of U.S. casino companies, which want to invest in Mexico but must pass muster with U.S. regulators, even in international operations.EDITED BY LARRY LIGHT By Geri SmithReturn to top
JEROME KOHLBERG: THE LAST ANGRY MONEYMAN
BUYOUT SPECIALIST JEROME Kohlberg has a new target: campaign finance. Kohlberg, best known as a founder of Kohlberg Kravis Roberts, is so upset by money's corrosive effect on politics that he's funding a group to push reform in Congress.
Kohlberg's Campaign Reform Project launched a newspaper ad campaign on Oct. 15 asking candidates to disclose their finances sooner and in more detail, plus make the data more accessible online. Now, a candidate's quarterly reports don't give such info as a donor's cumulative contribution totals. Kohlberg says he's spent $1 million, and will fork over an equal amount yearly to his group.
The financier is offended by, among other things, both parties' attempts to shake down wealthy contributors. He should know. For the past decade, he's been an active giver, mostly to Democrats.
Kohlberg, 71, left KKR in 1987 after disagreeing philosophically with the oufit's aggressive style. He now has his own investment firm, Kohlberg & Co., but two years ago turned over day-to-day operations to his son, James.EDITED BY LARRY LIGHT By Richard S. DunhamReturn to top