Business and Finance

Bill Montgomery has a substantial lead on Rick Romley in the Republican race for Maricopa County Attorney.

As of 9 p.m. Montgomery led Romley 50 percent to 38 percent. By 10 p.m. the Associated Press called the race for Montgomery.

Sheriff Joe Arpaio is backing Montgomery and has run ads critical of Romley quick guaranteed personal loans. Montgomery's win is also seen as a victory for Arpaio.

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General Motors is getting its fourth CEO in just under 18 months, as the company announced that Ed Whitacre will leave the post Sept. 1, to be succeeded by another auto industry outsider, former Nextel Communications CEO Dan Akerson.

The move comes on the same day the automaker reported its best quarterly profit in six years, and with a filing expected within days to detail plans to bring the company public again.

"This seems to be about the IPO. GM wants the issue of succession planning off the table," said Jeremy Anwyl, the head of Edmunds.com.

Whitacre, 68, will remain as chairman of GM until the end of the year, at which time Akerson will assume that title as well. He has held the top job only since the GM board asked for the resignation of then-CEO Fritz Henderson on Dec. 1.

Whitacre said he had always planned to give up the top job at GM as soon as possible, and that he’s confident in the choice of Akerson.

"It was my duty to help restore the company to greatness and I didn’t want to stay a day beyond that," said Whitacre. "Dan and I have been close for a number of months. He’s been on the board. He’s been very involved. I think this will be a very smooth transition."

Akerson, 61, who has been on the GM board for just over a year, is now managing director and head of global buyout for private equity firm Carlyle Group. He has been CEO of three other companies, although none in the auto industry.

He served as CEO and chairman of Nextel from 1996 to 1999, and stayed on as non-executive chairman until 2001. In 1999 he became chairman and CEO of XO Communications, helping to restructure that specialty communications company. He had previously served as chairman and CEO of General Instrument Co.

Whitacre has made widespread changes in GM senior management since taking office, and Akerson told reporters he didn’t anticipate making significant additional changes going forward.

"At this stage the biggest management transition is me," he said.

The U.S. Treasury Department, which owns 61% of GM’s common shares that it received in return for the taxpayer bailout of the company last year, issued a statement saying the decision was made by GM’s board and did not require Treasury’s approval. It praised both men, though.

"We are very grateful to Ed Whitacre, whose invaluable leadership and vision have helped position General Motors for a successful return to long-term viability and helped protect the taxpayers’ considerable investment in the company," it said. "Dan Akerson is proven and well-respected with a depth of experience as a CEO in a wide range of major companies."

Just a week ago Whitacre told reporters that he would like the Treasury Department to sell its entire 61% stake in GM at the time of its initial public offering later this year. He said the company was being hurt by the stigma of being known as "Government Motors."

But despite the Obama administration’s stated desire to try to sell its stake in GM as soon as possible, virtually no one expects Treasury to sell its entire stake at the outset for fears that flooding the market with that many shares would drive down the price.

Before Whitacre assumed the top job, GM was known as a behemoth that experienced management change at a near glacial pace.

Henderson, who had been GM employee his entire adult life, had only had the job since March 30, 2009, when the Obama administration asked for the resignation of Rick Wagoner as one of the conditions for the government’s bailout of the company. Wagoner had also been a GM-lifer.

But GM has brought in a number of top executives from outside the company and the industry since December, including chief financial officer Chris Liddell, who was recruited away from Microsoft (MSFT, Fortune 500). 

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Elizabeth Warren doesn’t look or sound scary. She’s a 61-year-old Harvard Law School professor from Oklahoma who has written personal finance books, some with her daughter.

But conservatives and some bankers are trying to kill any chance that Warren - a consistent critic of the financial sector before it was cool to be one - will run the consumer financial protection agency that’s part of the Wall Street reform measure just signed into law by President Obama.

Naysayers, such as Senate Minority Leader Mitch McConnell, R-Ky., say they just don’t trust her - although he doesn’t say why.

"I think there’s a lot of controversy around Elizabeth Warren’s services," McConnell said Tuesday in a media briefing. "It is an extraordinarily powerful position with an incredibly large budget and authority that is constrained by almost nothing. And, therefore, the person that does serve in that capacity is going to have to be trusted by everyone."

Warren, who chairs a congressionally appointed watchdog panel over the federal bailout, is not the only candidate for the job. But she is the one everyone is watching.

Her ideas for a regulator for financial products became the template for the new agency, which is tasked with regulating mortgages and credit cards, as well as making new rules for much of the financial industry and enforcing them at the largest banks.

Before the financial crisis, she was already the authority on mounting credit card debt. And her books about the financial decline of the middle class have been must-reads in the consumer advocacy community for years.

Warren’s nomination would send a strong signal that the White House is willing to stand behind an aggressive regulator who will emphasize consumer needs over bank needs. White House spokesman Robert Gibbs called her "very confirmable" on Monday.

Warren declined to be interviewed, through a spokesman.

While several banking lobbying groups declined to talk about Warren for publication, several academics point to her prolific record warning against banking industry "tricks and traps" to explain why she shouldn’t get the gig.

"Her first presumption is not that the markets work fine, but that the markets don’t work and we need to intervene," said former Republican Senate Banking staffer Mark Calabria of the Cato Institute, a libertarian think tank. "She argues that borrowers are tricked and mislead, and the credit system is predatory."

Conservatives also say they know she will be an aggressive advocate, and that tougher rules under her reign could come at the expense of credit availability and jobs.

"Cracking down on Wall Street means that some people won’t get a loan. There are jobs that won’t be created. Cars that won’t be sold," said Phillip Swagel, a visiting professor at Georgetown University, who was an assistant Treasury secretary during the George W. Bush administration. "Is she able to switch from advocacy to the thinking of the big picture of society?"

But consumer advocates and even some powerful lawmakers say a healthy distrust of the banking sector is what America needs right now after the last few decades, when regulators placed too much trust on banks.

"She’s a tenured Harvard law professor and she has an understanding of how out of balance the responsibilities and obligations are right now between lenders and borrowers," said Tamara Draut, vice president of policy and programs for Demos, left-leaning think tank in New York.

Watchdog panel acrimony

Another fear among those at federal agencies is that Warren would use the consumer regulator job as a bully pulpit to push ideas that go farther than what makes administration officials comfortable.

Warren runs the Congressional Oversight Panel, a congressionally appointed watchdog group of five who are charged with oversight of the 2008 financial crisis bailout.

When Treasury Secretary Timothy Geithner testified before the oversight panel last spring, Warren’s first question was why Treasury wasn’t asking for the same kind of management shake-ups at big banks as they were in the auto industry.

"Do you think the banks are better managed than the auto companies?" she asked.

Generally, most lawmakers like Warren’s tough questions and have praised her work - including Republicans such as Sen. Chuck Grassley, R-Iowa, and Sen. Olympia Snowe, R-Maine, who last year filed a failed amendment to attempt to get the panel subpoena power.

But on a few occasions her enthusiasm has irked fellow panel members, notably those who don’t share her views. Of the five original panel members, only the three appointed by Democrats have stayed put. Three Republicans have stepped down.

And a top complaint penned by those who resigned is that the panel sometimes steps beyond its primary role as a watchdog, especially when it offered "controversial" policy alternatives they believe stretch the panel’s defined mission.

"Good oversight may not always attract the same headlines as controversial policy proposals, but it is valuable; more important, this is the task assigned to the panel," wrote one of those who left, former Sen. John E. Sununu, last August. "The Panel is not, however, a policy-making body."

Rep. Jeb Hensarling, R-Texas, wrote in December that the main reason he was resigning was because the panel "too often focuses upon making policy recommendations to Congress in place of critical and badly needed oversight."

Sununu declined to be interviewed, and Hensarling didn’t return calls in time for publication.

In response, Congressional Oversight Panel spokesman Peter Jackson said that six of the committee’s last seven reports have been approved unanimously. He added that the panel is required, by law, to make policy recommendations.

The two Republicans currently serving on the oversight panel said in a statement that they’ve liked working with Warren. They found her "quite willing to modify her views if presented with well-reasoned cogent arguments," wrote J. Mark McWatters, a tax attorney, and Kenneth Troske, a University of Kentucky economics professor. 

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Federal testimony on the Gulf of Mexico oil spill Friday revealed that an alarm system on the Deepwater Horizon rig had been “inhibited” for about a year before the rig exploded and sank in April.

Sensors that detect combustible or toxic gases were still active, relaying the message to the computer system, but the trigger for an audible or visual alarm was disabled.

According to numerous media reports, the platform’s chief electronics technician Mike Williams told the six-member federal inquiry panel that he had asked about the alarm being partially disabled about a year before the accident and was told by supervisors that it was done to prevent false alarms waking crews up at all hours of the night no faxing payday loan.

Williams told the committee that no audio or visual alarms were activated the night of the April 20 fire.

The joint hearing, held by the U.S. Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement, was held near New Orleans Friday.

The Houston Business Journal is providing continuous coverage of the Gulf oil spill.

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Rockville-based Emergent BioSolutions Inc., which supplies the government with the only regulator-approved vaccine for Anthrax, boosted its full-year forecast for sales and earnings based on rising sales of that vaccine.

The company now forecasts full-year revenue of between $275 million and $300 million, up from a forecast in May of between $235 million and $255 million. It expects 2010 net income of between $40 million and $50 million, compared to its previous forecast of between $20 million and $30 million.

As much as $190 million in 2010 revenue will come in the second half of the year, it says, after a contract modification that increases the number of doses of BioThrax the government will buy for its stockpile this year.

“We are extremely pleased with the results of our continuous process improvement program for BioThrax and expect this program to drive the maintenance of positive production metrics going forward,” said Emergent BioSolutions (NYSE: EBS) Chief Operating Officer Daniel Abdun-Nabi.

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A concrete panel on the facade of the O’Donnell Park parking structure has been ordered removed as a precautionary measure to ensure public safety.

The panel is adjacent to a spot from where a 30-foot, 27,000-pound concrete slab fell from the structure, killing a 15-year-old boy and injuring three others as the made their way to Summerfest.

The order came at the recommendation of County Executive Scott Walker, in conjunction with on-site engineers, the Sheriff’s Department, the District Attorney’s Office and Milwaukee County corporation counsel.

Since the June 24 accident, access to the parking structure has been limited and Milwaukee County has been inspecting the remaining facade panels to determine whether they are securely attached to the structure.

Based on the ongoing inspection, it has been determined that it is necessary to remove the concrete facade panel that is currently in place over the entrance into the parking structure from Lincoln Memorial Drive, according to a statement from the county no fax payday advance.

Steps have been taken to secure the precast concrete section until its removal, the county said. The facade removal will be done at the direction of the Milwaukee County District Attorney’s office. The date and time of the removal has not been determined, but will take place “as soon as arrangements can be made,” county officials said.

Once the piece is removed, it will be placed in secure storage as potential evidence in the ongoing investigation, according to the statement.

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The U.S. Supreme Court on Monday lifted a 2007 ban on Monsanto Co.’s Roundup Ready alfalfa that was supposed to protect conventional and organic growers from having their crops tainted by cross-pollination.

The court’s 7-1 vote reversed a lower court ruling and makes it possible for the U.S. Department of Agriculture to approve planting of genetically engineered alfalfa seeds on an interim basis until a final decision is made next spring.

Perhaps more importantly, Monday’s ruling may have broader implications for the approval of other biotech crops, including Monsanto’s Roundup Ready sugar beets, which are the subject of another court battle.

"This Supreme Court ruling is important for every American farmer, not just alfalfa growers," David F. Snively, Monsanto senior vice president and general counsel, said in a statement.

"All growers can rely on the expertise of USDA, and trust that future challenges to biotech approvals must now be based on scientific facts, not speculation."

The Center for Food Safety, a Washington-based group opposed to genetically modified crops, said the victory was a hollow one for Monsanto and other backers of genetically engineered crops because the USDA must still complete an environmental impact statement before it can deregulate Roundup Ready alfalfa.

Biotech crop developers favor a more streamlined regulatory process to get products to market without having to wait the several years it takes to complete a more thorough environmental analysis.

"The bottom line for us is that planting is still illegal, as it was," George Kimbrell, a senior staff attorney for the Center for Food Safety, said in an interview. "The Department of Agriculture can take further action that will allow planting, but the court held that it would require an (environmental impact statement), and our right to challenge it has been preserved."

Based on Monday’s ruling, the USDA is now free to allow farmers to plant genetically modified alfalfa seeds with restrictions designed to limit cross-pollination and contamination of conventional alfalfa crops.

The USDA said it was moving forward with plans to complete the regulatory review of Roundup Ready alfalfa in time for the planting season next spring. The agency issued a 1,476-page draft environmental impact statement in December that reported no significant effect from the seeds on the environment or human health.

The alfalfa case represents the Supreme Court’s foray into the debate over genetically engineered crops, which have been available since Monsanto began selling Roundup Ready soybeans in 1996.

Like those first biotech soybeans, Monsanto’s alfalfa is genetically modified to withstand applications of glyphosate, the active ingredient in Roundup weed killer.

While Roundup-resistant crops make it easier for growers to combat weeds because they can spray entire fields without damaging the primary crop, organic and conventional alfalfa growers fear contamination by pollen from the genetically modified plants that can be carried between fields by bees.

Two conventional alfalfa growers and several environmental groups, including the Center for Food Safety, filed a lawsuit in 2006 that challenged the USDA’s decision a year earlier to deregulate biotech alfalfa.

In 2007, a federal district court ordered that USDA’s Animal Plant Health Inspection Service erred by deregulating Roundup Ready alfalfa without preparing an environmental impact study. The court banned distribution of the genetically modified alfalfa but allowed farmers who had already purchased seeds to plant. The 9th U.S. Circuit Court of Appeals upheld the ruling.

Monday’s majority opinion, written by Justice Samuel Alito, said the district court "abused its discretion" by imposing the sweeping ban on biotech alfalfa, and should have allowed the USDA to partially deregulate the crop while the environmental study was ongoing.

Justice John Paul Stevens was the lone dissenter. Justice Stephen Breyer didn’t take part in the decision. His brother is the district court judge who ordered the 2007 ban.

Before the ban took effect, Roundup Ready alfalfa was planted on about 220,000 acres — less than 1 percent of the 23 million acres of alfalfa grown nationwide.

Alfalfa is the fourth-most widely grown U.S. crop behind corn, soybeans and wheat, according to the USDA. It is mainly used for livestock feed, and much of what is grown is exported.

Creve Coeur-based Monsanto, the world’s largest seed company, developed Roundup Ready alfalfa but licenses the technology to Forage Genetics, an alfalfa breeder.

The biotech alfalfa case has been closely watched by the agriculture industry, biotechnology groups and environmentalists because of the potential ripple effect of any decision affecting genetically modified crops. In a brief filed in the Monsanto case, for instance, rice growers contended that contamination of long-grain rice had already cost their industry $1 billion.

Meanwhile, the next legal skirmish over genetically modified crops shifts back to the West Coast next month.

That’s when a federal district court will consider the next steps after ruling last year that the USDA erred by approving Monsanto’s Roundup Ready sugar beets without an environmental impact statement.

In that case, U.S. District Judge Jeffrey White decided not to implement a nationwide injunction similar to the ban on alfalfa. But he didn’t rule out ordering a permanent ban later this year.

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Georgina Gustin of the Post-Dispatch contributed to this report.

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Mortgage borrowers hurt by the Gulf oil spill may qualify for temporary relief from paying their mortgages, without fear of losing their homes.

Citigroup’s (C, Fortune 500) CitiMortgage unit announced Wednesday that it would suspend all foreclosure sales and filings for 90 days, through Sept. 17, on its Gulf properties. The policy applies only to first mortgages that Citi owns on homes that are within 25 miles of the coast.

Fannie Mae, the government-supported mortgage company, also touted its own relief policy Wednesday, saying that servicers of Fannie-backed loans may immediately suspend or lower payments on mortgages for borrowers whose income or property were affected by the spill.

"This was a reiteration of special relief policies that Fannie Mae has had for a while," said Janis Smith, a spokeswoman for Fannie.

"Borrowers who hope to obtain relief under this policy should call their servicers right away," Smith said. "They should not sit around waiting for a call."

Under the Fannie Mae program, servicers can offer to postpone or lower payments for up to 90 days, during which the servicer is expected to verify the borrower’s income loss or the damage the oil spill may have done to their property.

Freddie Mac, the other government-supported mortgage giant, will grant up to six months forbearance to victims of the oil spill.

Other lenders have similar policies in place; all of them are trying to get the word out so that borrowers hit by the disaster know that these options are available.

During these forbearance periods interest continues to accrue, so borrowers aren’t exactly getting a free lunch.

It is, however, an opportunity for these homeowners to avoid laying out cash when they can least afford to do so.

They’ll eventually have to pay the money back — if they keep their homes. 

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AIG and Prudential PLC formally terminated a deal for an Asian life insurance unit on Thursday that would have accelerated AIG’s bailout repayment to the U.S. government.

The announcement comes two days after AIG rejected Prudential’s reduced bid for AIA, AIG’s Hong Kong-based life insurance division. In early March, the companies had agreed upon a $35.5 billion price tag for AIA. But it became apparent over the past few weeks that Prudential’s shareholders were not going to accept the deal.

Prudential attempted to renegotiate the terms of the deal with AIG, offering $30.375 billion instead. Prudential PLC is not related to the American insurer Prudential Financial Inc.

AIG has said that it considers the sale of AIA to be a crucial component of its effort to repay the more than $130 billion it has borrowed from U.S. taxpayers. The troubled insurer had planned on using the proceeds of the sale to pay down $25 billion of its debt to the Federal Reserve.

When the deal was first announced on March 1, AIG’s Chief Executive Robert Benmosche said the deal would allow AIG "to realize value on a faster track to repay U.S. taxpayers" and will give the company "greater flexibility" with its restructuring plans.

Now that the deal has fallen through, AIG may consider an initial public offering for AIA, an option that the company had initially proposed last year. An IPO would take much longer to complete than a direct sale, and the recent market turmoil may dictate a lower price for the unit.

According a regulatory filing, AIG will receive a termination fee from Prudential worth £152.6 million ($223.9 million) on July 1.

Shares of AIG (AIG, Fortune 500) rose more than 1% in premarket trading Thursday. 

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Even in good times, the relationship between franchisors and their franchisees tends to be fraught. Toss in an economic downturn and things get downright nasty. Iconic brands are facing revolts in the trenches from owners fed up with their corporate parent.

Later this month, a Los Angeles jury trial will begin on a seven-years-old and still festering fight between UPS (UPS, Fortune 500) and a group of disgruntled franchisees of Mailboxes Etc., which UPS acquired in 2001. Quiznos recently settled a class-action lawsuit with its franchisees, while Burger King remains mired in a court battle with store owners over a $1 promotion for double cheeseburgers that cost more than a buck to produce.

Garth Snider, president of FranchiseOpportunities.com, a site that advertises franchises for sale, says the level of complaints by franchisees and franchisors alike "is commensurate with the hard economic times we’re experiencing. This wasn’t an issue three or four years ago, when there was plenty of money to go around, because franchisors weren’t looking to be as aggressive with their pricing."

When margins are razor-thin and sales slip, disputes are more likely to blow up into major skirmishes. The Quiznos fight featured complaints that Quiznos forced franchisees to buy food and supplies at inflated prices while setting retail prices so low that store owners couldn’t make a profit. Discounts — like those Burger King offered on its double cheeseburgers — are another flashpoint. T.G.I. Friday’s had a small war with its franchisees last year over a two-month promotion that slashed sandwich prices to a money-losing $5 each.

"It’s the divergence between generating volume by forcing your franchisees to charge lower prices and the net effect of that on the actual business owner, who still has to pay the same royalty and the same price for goods," says Justin Klein, a partner in Marks & Klein in Red Bank, N.J., and lead attorney for the Quiznos plaintiffs. "Essentially, it still costs you $5 to make the sandwich but you’re forced to sell it at $3.95."

The pressures come on all sides. One of Klein’s current franchisee clients is being forced by its parent company to extend operating hours — even if those extra hours aren’t profitable. "Forcing them to stay open longer means they have more employees there," he says.

Life in the trenches

Tish Reisman, owner of a Rita’s Italian ice outpost in Tampa, Fla., is facing many of the typical franchisee frustrations. She signed with the Trevose, Pa.-based parent company in June 2007, paying $65,000 for a two-store agreement. Reisman grew up in Philadelphia and had a fondness for Rita’s. She believed that in Florida "Italian ice would be a no-brainer."

The first store opened in March 2008. The problems began just six months later.

A competing Rita’s opened five miles away. A corporate marketing campaign required her to stand in front of Wal-Mart and Kmart stores handing out coupons, sucking up time and resources she couldn’t spare. Rita’s requires her to sell every new flavor it introduces for 24 days — even if it tanks.

"In November, I had to sell caramel apple, which I was throwing away every two days," she recalls. Rita’s projected waste from introducing new flavors is 7% and Reisman was given credit for that, but her actual waste was closer to 22%. "It would have been better if I could have decided what flavors would sell, rather than being forced to sell all of them."

Reisman lost $86,000 the first year she was in business and hasn’t been able to afford to open her planned second store. She’s sunk more $300,000 into the franchise. A single mother with four children, Reisman is worried about bankruptcy.

Jim Rudolph, CEO of Rita’s, says the coupon program and new flavor introductions have been successful for other franchisees. The company has been working with Reisman, he says, getting her rent reduced, offering incentives to potential buyers of her franchise, and negotiating with banks on her behalf.

"I feel terrible for her, but we also cannot be responsible for the unfortunate situation she’s gotten herself into," he says.

That’s the common line franchisors take when store owners run into trouble: You’re on your own.

Industry veteran says they’ve seen a few concessions to the economic downturn. "We’re seeing franchisors responding by temporarily deferring royalty payments," says David Kaufmann, a franchise attorney and partner with Kaufmann Gildin Robbins & Oppenheim in Manhattan. "Some have escalated corporate contributions to marketing programs, some are letting franchisees that promised to open new units now push that further into the future."

But Quiznos attorney Klein expects that even when the economy recovers, franchisees and franchisors will continue warring over the financial terms of their arrangement.

"I don’t think things like value meals and other low-priced promotions are going to stop," he says. "They are very popular with consumers." 

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