In Business This Week: Headliner
Warren Buffett: An Offer Steinberg May Refuse
The unraveling of Saul Steinberg's Reliance Group took an intriguing turn when Warren Buffett surfaced last week with a way for Steinberg to offload some of his troubled insurance company onto Berkshire Hathaway. But no one expects even Buffett's Midas touch to save Reliance.
Buffett brings a marquee name to a company badly tarnished by ongoing losses, the specter of bankruptcy, and huge debts, including $237.5 million due on Nov. 10. What Berkshire proposes is a reinsurance deal: taking some of Reliance's liabilities, then paying claims as they start coming due several years later, and in the meantime making money off the assets that Reliance would hand over.
"I don't see why Saul Steinberg may go along with that," says longtime Steinberg watcher David Schiff of Schiff's Insurance Observer newsletter. Steinberg, with his family, owns 40% of Reliance. Says Reliance: "We've been in discussion with various parties." Berkshire declined to comment on its plans.By Pamela L. Moore in Greenwich, Conn.Return to top
Housecleaning at Bank One
Solidifying his control of troubled Bank One, CEO James Dimon on Aug. 22 accepted the resignation of rival Verne Istock as president of the Chicago bank. Istock, a 37-year veteran who was acting CEO until Dimon took over in March, will retire Sept. 30. Analysts welcomed the news. "Istock was clearly of the old guard, very much wanted Dimon's job, and was viewed as one remaining roadblock," says First Union Securities analyst Bradley Vander Ploeg. Six Bank One directors, including Istock, also will quit in September, cutting the board to 13. The smaller number, says Dimon, will make the bank "more nimble." With a second-quarter loss of $1.27 billion, Dimon and his new crew of managers--many from his ex-employer, Citigroup--could use some agility.Edited by Anne NewmanReturn to top
A Brouhaha over Embryonic Cells
On Aug. 23, The National Institutes of Health trod into an ethical thicket with guidelines allowing limited use of human embryonic stem cells in federally funded research. These stem cells are progenitor cells, capable of becoming any part of the body and possibly treating everything from cancer to Alzheimer's disease. But they come from human embryos, raising serious moral questions. While the guidelines only allow research using cells derived from "excess" embryos discarded by in vitro fertilization clinics, abortion foes in Congress are opposed. But scientists are applauding. "It would be immoral not to pursue [stem cell] research, given that it has potential to save lives," says Stanford University biochemist and Nobel Laureate Paul Berg.Edited by Anne NewmanReturn to top
MP3.com: One More Hurdle Cleared
Sony settled its copyright infringement suit with MP3.com, setting the stage for online music users to tune in Ricky Martin, Miles Davis, and other Sony artists over the Net. But not just yet. Sony is the fourth major record company to settle, following EMI, Warner Music, and BMG Entertainment. MP3.com agreed to pay each an estimated $20 million, plus a licensing fee each time a user listens to a song stored in a "digital locker" that it maintains. But the service can't start until MP3.com settles with the remaining major, Universal Music, and music publishers.Edited by Anne NewmanReturn to top