The Tex. PUC staff recommended dismissal of a complaint case pitting the Tex. Payphone Assn. (TPA) against incumbent telco Valor Telecom on grounds the TPA lacks legal standing. The staff brief, submitted to the assigned administrative law judge, said the state utility code allows only “affected persons” to file utility complaints. The staff said the trade group isn’t directly affected by the alleged offenses, so it can’t complain. The TPA complaint alleged Valor assessed unreasonable and discriminatory payphone access charges, refused to unbundle payphone access lines and assessed measured usage charges on flat-rate lines. The ALJ is due to rule on the standings issue by June 7.
The SEC sued a former California Amplifier controller, accusing him of accounting fraud and insider trading, in inflating the company’s earnings during the 12 months to Nov. 2000. Richard Kusatzky allegedly concealed $5 million in manufacturing expenses to inflate California Amplifier’s profit during fiscal years 2000 and 2001 by $7.83 million, the SEC said. A total of $8.61 million of pre-tax income was overstated during that period. California Amplifier -- a major supplier of LNBs and reflector dishes to EchoStar and DirecTV -- settled a separate administrative case alleging that it didn’t have enough accounting controls. Kusatzky, who was controller Jan. 1997- March 2001, is accused of profiting by exercising all his vested options in California Amplifier and selling 15,000 shares of stock, the SEC said. Kusatzky’s trading helped him avoid more than $350,000 in losses, according to the suit filed in U.S. Dist. Court, D.C. In fiscal 2000, Kusatzky hid $5.9 million in expenses, causing California Amplifier to report a profit when it actually incurred a loss, the SEC said. For the next 3 quarters of fiscal 2001, Kusatzky concealed another $1.9 million in expenses. Kusatzky’s alleged fraud wasn’t detected because California Amplifier lacked adequate internal controls, the SEC said. California Amplifier issued financial statements generated from a spreadsheet that Kusatzky maintained separately from the company’s accounting system, the SEC said. Once Kusatzky reduced expense figures on the spreadsheet, he could falsify California Amplifier’s financial statements filed directly with the SEC, the agency said. California Amplifier officials and Kusatzky weren’t available for comment. Meanwhile, California Amplifier said first-quarter net income improved to $3 million from $1 million, as revenue soared to $41.6 million from $26.1 million on strong sales of DBS components to EchoStar and DirecTV. Materials costs have risen in recent weeks for California Amplifiers’ LNBs and reflector dish, partly because steel prices have doubled, CEO Frederick Sturm said. To broaden its business -- 96% of revenue is satellite-related -- California Amplifier seeks to expand into the Wi-Fi market. Recently acquired Vytek will oversee California Amplifier’s wireless business and has 3-4 “product opportunities” including those for in-flight entertainment and Wi-Fi-equipped vending machines, Sturm said. California Amplifier will start a beta test this month with its raster enhanced access point product for 802.11 wireless, he said.
The Office of the U.S. Trade Representative (USTR) has issued a notice requesting comments by May 17, 2004 concerning the issues raised by the U.S.' March 18, 2004 request for World Trade Organization (WTO) consultations with China regarding its value-added tax (VAT) on integrated circuits (ICs).
The SEC sued investor Alfred Teo and 10 of his relatives, friends and associates, alleging they gained millions of dollars in profits from insider trading involving Musicland and C-Cube Microsystems stock. Teo was a major shareholder in Musicland and purchased 45,000 additional shares in the company prior to it announcing Best Buy’s $685 million tender offer for the chain in Dec. 2000, SEC said in a suit filed in U.S. Dist. Court, Newark. Musicland’s stock rose 30% on news of the proposed sale. Teo sought to conceal the extent of his ownership and control of Musicland stock to avoid the risk of triggering Musicland’s shareholder rights plan, the SEC said. Teo, who had confidential “communications” with Musicland senior management prior to the announcing of the deal, concealed his purchase of nearly 6 million shares of stock above the “poison pill” trigger, officials said. After the proposed sale was disclosed, Teo sold those shares, realizing a $22 million profit. Teo is alleged to have tipped off 8 associates about the proposed sale of Musicland. The associates realized a $1.1 million profit as result of the tips, the SEC said. Teo, who also was a member of the Cirrus Logic board, is alleged to have “misappropriated non- public information” about C-Cube and purchased stock shortly before its $865 million sale to LSI Logic in 2001. At the time, Cirrus also was weighing a bid for C-Cube, but later acquired Stream Machine, which developed A/V codecs. Teo served on the Cirrus board from July 1998-April 2001. Teo purchased 35,000 shares of C-Cube stock prior to the proposed sale and realized a $180,012 profit by selling the shares after it was announced, the SEC said. Three of the defendants in the cases -- Charles Fortune, Jerrold Johnston and Lawrence Rosen, founder of online CD retailer N2K -- reached agreement with the SEC under which they returned their profits to the SEC and paid a civil penalty. The other defendants include Teo’s sister-in-law Teren Seto Handelman; John Reier, the CFO of Alpha Industries, a company controlled by Teo; Mark Lauzon, who sold raw plastic to Teo’s companies; Philip Sacks and his son, Mitchell; David Ross and Richard Herron.
According to The Journal of Commerce, the Natural Resources Defense Council (NRDC) released a report that sharply criticized the 10 largest U.S. seaports for their environmental records, indicating that lawsuits would follow if the ports don't clean up their act. (JoC March 29-April 4, 2002, www.joc.com )
The International Trade Commission (ITC) opened an investigation into optical disc controller chips and chipsets and DVD devices from about a dozen Far East companies. Zoran Corp. and its Oak Technology subsidiary had sought the probe in a complaint filed last month at the ITC (CED March 15 p7) alleging violation of 3 patents (Nos. 6,466,736, 6,584,537 and 6,546,440) on optical drive controller technology. The complaint seeks an order barring import into the U.S. of products found to be infringing those patents. Named as targets in the investigation were: AsusTek Computer of Taiwan; Creative Technology of Singapore, and its subsidiary Creative Labs of Milpitas, Cal.; Jiangsu Shinco Electronic Group of China; Lite-On Corp. of Taiwan; MediaTek of Taiwan; Mintek Digital of Anaheim; Shinco International of Hong Kong; Teac Corp. of Japan, and its subsidiary Teac America of Montebello, Cal.; Terapin Technology Corp. of Singapore, and its Carrollton, Tex.-based subsidiary. The case was assigned to Paul Luckern, an ITC administrative law judge, who soon will schedule an evidentiary hearing, the ITC said.
The Journal of Commerce reports that non-vessel-operating common carriers (NVOCCs) have much to gain and lose in the outcome of Norfolk Southern Railway vs. Kirby which will be heard by the Supreme Court this fall. On the one hand, NVOCCs could win affirmation of their status as ocean carriers, not agents of shippers. On the other, the court's decision could open the door for shippers who have tendered cargo to an NVOCC to only be bound by the terms of the NVOCC's bill of lading, and therefore be free to collect full damages from any party in the supply chain. (See ITT's Online Archives or 03/29/04 news, (Ref:04032999 for earlier summary.)(JoC, dated March 22-28, 2004, www.joc.com )
The Federal Maritime Commission (FMC) has issued a final rule, effective April 6, 2004, that amends its regulations to allow a $21,000 optional bond rider to be filed with a licensed non-vessel operating common carrier's (NVOCC's) proof of financial responsibility, for such carriers serving the U.S. oceanborne trade with China.
Representatives from content industries urged Congress to get tough on China regarding intellectual privacy laws, and they found a receptive audience at a House Commerce Subcommittee on Commerce hearing. Subcommittee Chmn. Stearns (R-Fla.) called the March 31 hearing in anticipation of a U.S.-China Joint Commission on Trade meeting April 21-22. Among the witnesses were MPAA Exec. Vp Fritz Attaway, RIAA Senior Vp Joe Papovich and Entertainment Software Assn. Pres. Douglas Lowenstein. “Obviously, all of us would like to see increased attention to piracy and counterfeiting issues,” Stearns said. “Piracy of U.S. intellectual property in China may exceed $1 billion per year. This is a real problem for U.S. exports, and if remedied would help in balancing the U.S.-China trade deficit.” Papovich said, “Internet piracy is growing in China,” with certain websites fueling CD copying. China “must criminally prosecute major pirates, producers, traders, distributors and Internet pirates,” he said, adding today “China does not, in part because they choose not to, and in part because their law authorizes criminal prosecutions for copyright piracy only if” the revenue or profits exceed certain thresholds. Rep. Otter (R-Ida.) said Internet piracy in the U.S. contributes to the problem. “In minutes, a child in the United States can purchase a CD or a DVD and upload it on a file-sharing Internet service,” he said: “Shortly after, someone in China can download a perfect copy of that CD or that DVD, package it and illegally sell it in an open street market with little or no concern about any repercussions.” Lowenstein showed a photo of one of China’s 200,000 Internet cafes, which he said typically seat 100-300. “These cafes are the primary source of Internet access for millions of Chinese citizens, and if all of them purchased legal games that would really been a boon to the software market. But unfortunately, in most cases, the games they make available to their customers are pirate products.” He also said “China must criminalize the circumvention of technological protection measures like these mod chips I showed you and the trafficking in the circumvention devices, and they should quickly accede to the WIPO Internet Treaty.”
A House subcommittee at our deadline was marking up newly introduced legislation that would criminalize unauthorized file- sharing on P2P networks.