Week in Review

ImClone’s Ex-CEO Faces Insider Trading Charges

Another week, another bombshell from corporate America. On Wednesday, the former chief executive of biotechnology company ImClone Systems Inc. was arrested on charges of violating insider-trading laws.

Samuel D. Waksal, 54, who stepped down last month amid deepening questions about his family’s trading of ImClone stock, was accused of tipping off two relatives to impending bad news from the Food and Drug Administration about the company’s top drug prospect.

Thursday, Waksal appeared before a House committee but declined to answer questions, instead asserting his 5th Amendment rights.

But his brother, Harlan W. Waksal, who replaced him as ImClone CEO, did testify, telling lawmakers that he phoned his brother with news that the FDA was about to reject the firm’s application to market cancer drug Erbitrux.

Harlan Waksal’s testimony before a subcommittee of the House Energy and Commerce Committee seemed to corroborate key elements of the government’s case against Samuel Waksal.

Genentech to Pay City of Hope $300 Million

A Los Angeles County jury awarded City of Hope National Medical Center $300.2 million in compensatory damages after finding that its former collaborator, Genentech Inc., breached the 26-year-old contract that launched the biotechnology revolution.

Genentech-funded research at City of Hope produced the first biotechnology drug, human insulin, creating an industry--and the seeds of an epic legal battle that could play out in court for years to come.

By a 9-3 vote, jurors found that Genentech failed to pay the Duarte-based cancer hospital royalties on nearly two dozen other drugs, including the hepatitis B vaccine, that stemmed from City of Hope research.

Jurors also found, voting 10 to 2, that Genentech, based in South San Francisco, acted with malice or fraud. The jury will reconvene this week to determine punitive damages.

If the award withstands an expected appeal, it could be an extraordinary windfall for medical researchers at City of Hope, a world-renowned nonprofit cancer center. It also would be a huge financial blow to biotech giant Genentech, an industry leader with $2.2 billion in annual sales.

Univision to Acquire Hispanic Broadcasting

Univision Communications Inc. said it will acquire the nation’s largest Spanish-language radio network, Dallas-based Hispanic Broadcasting Corp., in a $3.5-billion stock deal that would round out its portfolio as a media conglomerate.

Los Angeles-based Univision commands more than 70% of the Spanish-language TV market and owns three record labels but had no voice in radio before this deal. Hispanic Broadcasting owns 55 radio stations, including five in Los Angeles, the nation’s largest Latino market.

The deal would bolster the company’s growing music division by giving Univision artists valuable exposure and air time on popular radio stations in the nation’s top Latino markets.

Judge OKs Unocal

Abuse Lawsuit

A group of Burmese refugees won a landmark victory when a Los Angeles judge ruled that Unocal Corp. could be tried for human rights violations, including forced labor, that allegedly occurred during construction of a $1.2-billion natural gas pipeline in Myanmar.

Superior Court Judge Victoria Gerrard Chaney’s ruling means that if the case goes to trial in September as scheduled, Unocal would become the first U.S. corporation held to answer in an American courtroom foreigners’ allegations of abuse abroad.

The case is being watched closely in business and legal circles because of its implications for other multinational corporations.

State’s Unemployment Rate Edges Down

California’s unemployment rate dipped to 6.3% in May, further evidence that the state’s economy is on the mend.

That’s down from a revised 6.5% in April. But the number of workers on business and government payrolls, considered to be the most reliable measure of the labor market’s health, declined by 9,000 jobs last month, signaling that recovery may be a long way off for the state’s job seekers.

Under pressure to improve profitability and unsure of the economy’s pep, companies continue to hold off on hiring as employers trim positions rather than create them.

The state’s unemployment rate improved last month in part because some discouraged workers dropped out of the labor force.

ICN Pharmaceuticals Chairman Steps Down

Milan Panic, the man who said he was “born to fight” even when it wasn’t a good idea, chose not to, announcing that he will step down as chairman and chief executive of ICN Pharmaceuticals Inc., the company he started in Los Angeles 42 years ago.

Panic’s decision, made two weeks after dissident shareholders took control of the ICN board of directors, marks the end of a successful but controversial stewardship that saw the firm grow from a $200 stake and a converted washing machine into a global research-based pharmaceutical business.

“There are better things in life to do than to fight, and I am 72. It’s time for me to consider doing something else,” Panic said. “If it helps the company, then I will do well [as a shareholder] and my grandchildren will do well.”

Just how well the Costa Mesa-based company will do without Panic at the helm is uncertain.

Many analysts had predicted that ICN stock would rise once Panic’s control of the company had ended, because ICN’s past is as colored by Panic’s problems as anything else, they said.

Andersen Judge Answers Key Jury Question

The judge presiding over the Arthur Andersen criminal trial was thrust into uncharted territory when jurors asked her whether they could convict the firm even if they couldn’t agree on which Andersen executive violated the law.

U.S. District Judge Melinda Harmon, after acknowledging there was a lack of case law on the issue, ruled that jurors could convict the firm of obstruction of justice even if they disagree on which executive was guilty.

The jury, which was sequestered, had been deliberating for nearly two weeks when they told Harmon they had failed to reach a unanimous decision.

She then read a special instruction, called an Allen charge, asking the panel to renew efforts to reach a verdict and avoid a mistrial.

The next day, the jury asked the judge for clarification on the issue, which legal scholars concede was a gray area with little, if any, precedent.

Jurors continued their deliberations into Saturday.

Construction Begins on Toyota’s Tijuana Plant

Mexico’s President Vicente Fox kicked off construction of a Toyota Motor Co. automotive factory in Tijuana that over time may bring an influx of investments and thousands of jobs to the Mexican state of Baja California.

Fox also provided new impetus for construction of a proposed rail line to link Baja with the Western U.S. transportation grid.

By transferring operating rights of such a line to the state from the federal government, Fox hopes to jump-start a $250-million proposal to make Ensenada a major rail-linked container cargo center.

Bochco Copyright Lawsuit Reinstated

In an embarrassment for A-list TV producer Steven Bochco, a federal appeals court ruled that his defunct CBS hospital drama, “City of Angels,” bore a “striking” resemblance to a series idea allegedly pitched to him a decade ago by a Los Angeles couple.

The U.S. 9th Circuit Court of Appeals ruling reinstates a lawsuit filed in March 2000 by businessman Jerome C. Metcalf and his wife, Laurie, alleging that Bochco infringed their idea. That lawsuit was tossed out last year.

The ruling does not mean that Bochco was found to have copied their idea, only that the Metcalfs have a right to sue him over it.

From Times Staff

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For a preview of this week’s business and economic news, please see Monday’s Business section.