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Pre-1999 - Duke Energy Employee Advocate

News - October 2000

"We are not weak if we make a proper use of those means which the God of nature has placed in our
power.. the battle, sir, is not to the strong alone; it is to the vigilant, the active, the brave." - Patrick Henry

Feathering Corporate Nests
CBS MarketWatch - By Michael Collins - October 31, 2000

Investors and workers need to check the footnotes

SAN FRANCISCO (CBS.MW) -- America's old-fashioned corporate pension plans are in good shape, but that doesn't mean workers will be getting any more at retirement. And investors should be aware of how those plans are affecting the bottom line - looks may be deceiving.

The market has been very, very good to pension plans. Many are running large surpluses. Bear Stearns & Co. found that 25 percent of the companies in the S&P 500 reported income from their defined benefit pension plans in 1998. Sherwin-Williams has pension plan assets more than three times its pension liabilities. General Electric's pension assets are nearly double liabilities, fueling demonstrations by the company's retirees and unions for permanent cost-of-living increases.

At fifteen companies, according to the Bear Stearns report and CFO Magazine, pension income represented at least 10 percent of 1998's total operating income. They included Northrup Grumman, USX-US Steel; Unocal and Westvaco.

Jack Ciesielski, who publishes The Analyst's Accounting Observer, found that pension plan income was improving the bottom line at 33 percent of the S&P 100 companies in 1999. In some cases, he says, "pension plans ... are becoming almost as significant as operating assets."

So what's the problem? Nothing, if you read the annual reports closely and realize that pension plan assets - while they may improve the earnings numbers -- are not the same as cash or hard assets that can be spent or sold. In some cases pension surpluses can actually serve to hide poor operating performance by creating a generally good bottom line.

"Pension income, or improvement in pension cost, will not result in equivalent cash flows to shareholders of the plan sponsor - yet the consolidated results may lead investors to think so," Ciesielski said in a recent letter to the Financial Accounting Standards Board.

Ciesielski suggested the rules be reviewed to make it more obvious to investors when assets walled off in pension plans are affecting earnings. The surpluses now are only fully disclosed in footnotes of annual reports. Ciesielski is suggesting pension expense and income be required as a separate line item in every quarterly report…

While the reporting rules allow pension assets to become a corporate profit center, companies also need to be aware that increasing pension surpluses brings pressure for better retirement payouts.

Some are willing to ignore that pressure, and CFO Magazine says in recent years the list of companies reducing pension benefits through modifications in accruals and other changes in benefits formulas has included IBM, Duke Energy, Kmart and Lucent.

That may be good for the short-term bottom line, but in the long run it won't be good for business. Workers and shareholders alike know it's a bad idea to play around with pension assets to benefit anybody but retirees and the current and potential employees the company needs to succeed.

Firms keeping tabs on Net use
The Charlotte Observer - By RICK ROTHACKER - October 30, 2000

When a Charlotte company that makes high-tech bearings recently provided Internet access to all of its employees, it wanted to make sure workers did not abuse the privilege.

So, as allowed by the company's Internet use policy, its computer administrator set up a system to track which sites the workers were using. Then, armed with a report, supervisors began talking to employees they felt were doing too much personal Web surfing.

"It gave us a benchmark of activity," said Michelle Miller, human resources leader at Rexroth Star Linear Systems. "We don't want to restrain it totally. We just don't want it misused."

As employers nationwide crack down on Internet abuse at work, some in the Charlotte area are getting in on the act.

The goal is to make sure employees are not viewing or circulating material that could lead to discrimination or harassment suits, or wasting too much time on personal activities. Companies also don't want to tie up valuable networks with non-business uses.

Employees have little legal defense because they are using equipment owned by their employer, experts say. The only foolproof way to protect privacy is to keep Net use at the office strictly business.

"The law is not in the employees' favor," says Douglas Ey Jr., attorney with Smith Helms Mulliss & Moore law firm in Charlotte. "They need to understand that when they are at work, that's what they are there to do."

Nationally, almost three-fourths of firms said they record and review their employees' communications on the job - including phone calls, e-mail, Internet connections and computer files, according to the American Management Association. That's up from 63percent in 1997.

In Charlotte, The Employers Association found in a 1999 survey that 50percent of companies have a formal policy on e-mail use, and 43percent have policies on Internet use. The survey will be updated in 2001. "More and more of what I'm hearing is that companies are monitoring (e-mail and Internet use) or saying they have the right to," said Kenny Colbert of the association.

Employer policies vary from strict monitoring to more lenient self-policing by employees.

At First Union Corp., where seven employees were fired last year for sending sexually explicit e-mails, the company routinely monitors Internet and e-mail activity for "appropriate use," said spokeswoman Christy Phillips.

That means the company uses software to see if employees are visiting pornographic Web sites or sending e-mail with offensive language.

Duke Energy Corp. does not track employee surfing but will investigate when there is suspicion of wrongdoing, said spokesman Randy Wheeless. On rare occasions, the company has reviewed the information on employees' hard drives to investigate potential problems, but no dismissals have resulted from the reviews, he said.

Some Charlotte companies that require heavy Internet use, such as IBM Corp. and Microsoft Corp., said they allow employees to explore the Web freely, so long as they use good judgment.

As employers increase their monitoring and enforce stricter policies, the best advice for employees is to use common sense.

Employees could use encryption or privacy software on their work computer but that might not be allowed, said Evan Hendricks, editor of Privacy Times, a privacy publication in Washington.

Workers can also use outside e-mail accounts through Hotmail or Yahoo!, but employers would be able to track heavy use of those Web sites, he said.

Perhaps the best defense for workers is old-fashioned solidarity, he said.

"If it starts getting heavy-handed, employees have to stand up for themselves," he said. "In this tight job market, they have leverage."

Taiwan Ends Construction of Its 4th Nuclear Plant
T The New York Times - October 28, 2000

HONG KONG, Oct. 27 - President Chen Shui-bian of Taiwan halted construction today on a nuclear power plant that had been championed by the country's former officials and had come to symbolize the wide gulf between them and the new president.

Prime Minister Chang Chun- hsiung, who announced the decision, said building a fourth nuclear plant in Taiwan was unnecessary and would create unacceptable environmental and safety hazards.

"We have to make a rational, responsible and conscientious choice for the sake of Taiwan's posterity," Mr. Chang said. "I believe that today we can tell our children that we made a brave and correct choice." The decision, though expected, enraged the Nationalist Party, which Mr. Chen swept out of power in March after a half-century in power. The Nationalists said the $5.5 billion project was critical to Taiwan's economy and reputation among foreign investors…

GOP Group To Air Pro-Nader TV Ads
The Associated Press - October 28, 2000

WASHINGTON (AP) - In a pre-election twist, Republicans are buying TV ads featuring Ralph Nader in states where votes for the Green Party candidate might tip the outcome to George W. Bush.

The ads use clips of Nader attacking Democrat Al Gore, although he was equally critical of Bush in the same speech. Republicans hope the commercials will help Bush by persuading would-be Gore voters to back Nader instead.

Democrats suggested that the ads, produced by the Republican Leadership Council, will backfire if voters turned off by deceptive politics learn who is behind them. And the GOP ads could reinforce the argument that a vote for Nader amounts to a vote for Bush.

Polls show Nader, a longtime consumer activist who concedes he can't win, has support of 5 percent or more in a half dozen states including California, crucial to Gore with its top prize of 54 electoral votes. The conventional wisdom is that because Nader is more liberal than either Bush or Gore, his supporters would otherwise vote Democratic.

The new Republican ads are to begin airing Monday in Wisconsin, Washington and Oregon, states that are part of Gore's base and where Nader is polling well. The Republican Leadership Council plans to spend at least $100,000 and hopes to raise more over the weekend to increase the ad buy.

An abortion rights group, meanwhile, was increasing its ad buy to $1.5 million, with commercials in key states urging Nader supporters to reconsider, arguing that a vote for Nader helps Bush.

The GOP ad takes sound bites from a Nader speech to the National Press Club Wednesday.

``Al Gore is suffering from election year delusion if he thinks his record on the environment is anything to be proud of,'' Nader says. An announcer interjects: ``What's Al Gore's real record?''

Nader says: ``Eight years of principles betrayed and promises broken.''

Nader has been equally critical of Bush, calling him "a big corporation running for president disguised as a person."

Advertising experts say they can't recall another time when a major party organization has run ads helpful to a minor party candidate.

The effort might backfire, said Darrell West, who studies political ads at Brown University and predicted many voters will see it as cynical and opportunistic.

"Even politicians don't want to come across as being too opportunistic,'" he said.

Still, West noted, many voters won't realize Republicans are paying for the ads, even though they identify the RLC as sponsor.

Bush advisers say they're concerned that the ads will remind voters that supporting Nader helps Bush, and they fear a backlash if voters assume that Bush is behind the tactic.

The Republican Leadership Council, a moderate GOP group, has been helpful to Bush before, airing ads during the primaries critical of challenger Steve Forbes. Many on the RLC board were early Bush supporters. But Mark Miller, the group's executive director, said the Bush campaign had nothing to do with the new ad.

The Gore campaign labeled the ads deceptive. Vice presidential candidate Joe Lieberman said he was confident the public won't be fooled.

``For Republicans to be putting Ralph Nader on television in a paid ad, certainly might lead your average observer to be cynical,'' he said.

The Gore campaign has been taking Nader more seriously in recent days. Gore addressed Nader's candidacy directly on Thursday, and Lieberman courted Nader supporters in Oregon Friday.

``I ask you to think how you would feel when you wake up Nov. 8 and Bush has carried Oregon,'' Lieberman told a voter he met in Portland. The voter, Mike Manning, said later that he was unconvinced.

``I understand the ramifications if Bush gets in,'' Manning said. ``It's a matter of conscience.''

Nader, running a low-budget campaign, is not currently airing any television commercials of his own and it's possible that the RLC will end up spending more on pro-Nader media than Nader himself.

At a news conference in Des Moines, Iowa, he said only that outside groups have the right to run the ads.

``I'm sure the two parties in their desperation are now trying to use different people against their opponents. That usually happens. you can't stop it. This is America,'' he said.

Nader has had to repeatedly defend himself against people arguing that his candidacy will help Bush.

``Whether Gore or Bush gets into the White House doesn't mean that much, because the permanent corporate government in Washington is really determining policy,'' Nader said Friday on ABC.

He hopes to get 5 percent of the popular vote so the Green Party can qualify for federal money in 2004.

The RLC ads will run initially in four markets: Eugene and Portland, Ore.; Madison, Wis., and Seattle.

Nader appears to be hurting Gore most clearly in Oregon, where Bush has a small lead while Nader attracts as much as 10 percent support. Nader is attracting about 5 percent in Washington and Wisconsin polls, although Gore still leads Bush.

He also poses a threat in Minnesota, Maine and Michigan. In this extraordinarily tight national race, one or two states could make the difference in who is elected.

The RLC's Miller said the ads are partly a response to commercials being run by the National Abortion and Reproductive Rights Action League, which argue that a vote for Nader is a vote for Bush.

``Ralph Nader doesn't believe that,'' Miller said.

NARAL said Friday it was tripling its spending on anti-Nader ads to $1.5 million, airing them in Seattle; Portland, Maine; Burlington, Vt.; Eugene, Ore. and Albuquerque, N.M., in addition to Minneapolis, Madison, Wis., and Portland, Ore., where they are already running.

Meanwhile, some Nader supporters are getting anxious about the possibility of costing Gore the election. A Web site is urging those who live in swing states to become ``Nader traders'' by agreeing to vote for Gore if a Gore-supporting friend who lives in another state agrees to vote for Nader.

And groups that support abortion rights, gay rights and the environment are setting out on a five-state tour next week arguing that a vote for Nader helps Bush.

Nader Supporters Revel in Virginia 'Luxury'
The Washington Post - By Chris L. Jenkins - October 27, 2000

Meet Brett Wilson, a Democrat from Charlottesville. In the last two election cycles, he supported President Clinton and U.S. Sen. Charles S. Robb (D) even when he didn't agree with them--afraid that voting otherwise would tip the scales to the Republicans.

But come Nov. 7, the Democrats may not have Wilson's unwavering support. After carefully looking at the Virginia political landscape, he thinks he will go Green and vote for Ralph Nader, not only because of Nader's policies but because Wilson sees Vice President Gore landing behind Texas Gov. George W. Bush in Virginia on Election Day.

"A couple of months ago, when I first learned that a Democrat hadn't won in Virginia since [President Lyndon B.] Johnson, it really made me think that a vote for Nader might give my vote more weight," said Wilson, 36, a self-employed computer program instructor. "It's only been since then that I've become more of a [Nader] supporter as I've listened to him speak and paid more attention to his platform."

An interesting political phenomenon appears to be playing out in Virginia. While Democrats out west are concerned that a vote for Nader could help Bush capture such close states as Washington and Oregon, Bush is so far ahead in the Old Dominion that a Nader vote takes on a different meaning.

Liberals in Virginia argue that a vote for Gore may actually be the wasted vote. A vote for Nader, conversely, could help the candidate reach the 5 percent mark needed for the Green Party to receive federal funds in the next election. Nader also is competing for the not-as-likely 10 percent threshold in Virginia so the Green Party can gain a place on the state ballot in 2004. Converted Democrats argue that goal is worth their votes.

"I think living in Virginia certainly gives me the luxury of voting for Nader," said Jane Lehr, 24, a part-time graduate student at Virginia Tech in Blacksburg. "But I also think I would have a hard time voting for him if I lived in a battleground state, because I would want to make sure that I didn't help tip the scales to Bush."

Such sentiments have played right into the strategy of state Nader organizers. Their message to undecided Democrats is that helping the Green Party makes their votes count more than if they supported Gore. Although Green officials added that they always push the ideological differences between Nader and Gore, the practical reasons for supporting Nader often enter their campaign.

"We've heard more and more from people that they feel as if they can vote the way they want to vote, for Nader, because of the probability that Gore will not win here," said Sherry Stanley, a spokeswoman for the Green Party in Virginia. "It's become an important part of what we tell any listeners."

Although Gore is way behind in every Virginia poll, the vice president's supporters say it's still to early to make definitive decisions about their candidate's chances in the commonwealth. They point out that Clinton came within several percentage points of winning in 1996.

"I don't see how anybody can predict what these next 12 days are going to hold," said Craig K. Bieber, executive director of the Democratic Party of Virginia. "We're pulling out all the stops to promote Democrats in Virginia, and we still think Vice President Gore has a chance to win."

A looming question for Green Party supporters in Virginia, of course, is whether their candidate will garner enough votes to reach either of their goals. Nader continues to flirt with his 5 percent national goal but seems to be far off his state goal. That has not deterred Wilson, the computer instructor.

"I feel very comfortable with my decision to vote for Nader here," he said, adding that he still plans to vote for Robb. "I'm a little tired of feeling I should vote for the lesser of two evils."

Schools weigh corporate-naming policy
The Charlotte Observer - By CELESTE SMITH - October 23, 2000

How about the Coca-Cola cafeteria? Or the Gateway computer lab? Or the Nike gymnasium?

Such names could be coming to Charlotte-Mecklenburg schools.

The school board is considering a policy to permit some campus areas, under special circumstances, to be named after a corporate entity that makes "significant contributions" to the school or district.

Several board members said they are open to the idea. They're expected to vote on the proposal Tuesday. Although the proposed policy could apply to any school, Superintendent Eric Smith said it was crafted with a particular one in mind: the technical high school now under construction in west Charlotte.

The school's focus will be preparing students for careers in computer science, manufacturing, transportation, construction, environmental and health sciences.

That means students will need training time on expensive equipment that tight school budgets can't always handle, Smith said. So the district plans to ask businesses for help in the form of funds or equipment. Offering to name a lab, school wing or other campus area after these businesses may encourage these corporate donations, he said.

"Within that high school, we're going to have various laboratories that will need to be outfitted," he said. This would "assure us that the type of equipment students are being trained on are still relevant in the workplace."

Board members haven't talked about how a company's name would be displayed, but "I would expect it to be appropriate to the area in question," said board member Jim Puckett.

"A library would obviously have a different approach than a cafeteria or a football stadium." Officials with the N.C. Department of Public Instruction didn't know of any examples of schools naming campus areas after businesses, although there are plenty of instances in the Carolinas and elsewhere of schools teaming up with businesses for everything from school supplies to computers to pizza lunches. Such partnerships have triggered a debate in school districts in Texas, New Hampshire, California and elsewhere over how involved companies should be with schools…

But others worry that corporate influences can go too far. That concern spawned the California-based Center for Commercial-Free Public Education, which argues that schoolchildren become easy targets for advertising when their school districts use scoreboards sponsored by soda companies, or cafeterias contract to sell a company's product...

Duke Energy: Brainwashing at an Early Age

Many Large U.S. Companies Paid No Taxes
Reuters - By Kristin Roberts - October 20, 2000

NEW YORK (Reuters) - Some of the largest U.S. companies paid no income tax between 1996 and 1998 despite earning billions of dollars during those years, according to a recent study.

Drugs giant Pfizer Inc., banking group J.P. Morgan & Co. and automaker General Motors Corp. were among the 41 companies that not only paid zero tax but received $3.2 billion in rebate checks, the study found.

The study, released this week, was done by the Institute on Taxation and Economic Policy, a nonprofit organization based in Washington. The institute is associated with the Citizens for Tax Justice, another nonprofit organization that supports tax reform and says the U.S. tax system favors the wealthy.

``With significant help from Congress, corporations appear to be finding ways around the tax reforms adopted in 1986,'' said Robert S. McIntyre, a principal author of the study, in reference to an overhaul of the U.S. tax system 14 years ago meant to close many loopholes.

The study analyzed 250 companies, their profits and the amount of taxes paid during the years of 1996, 1997 and 1998 -- a period when U.S. corporate profits grew more than 23 percent, according to government statistics.

Under the federal tax code, corporations pay 35 percent of their profits in income tax. The average tax rate, or the ratio of taxes to profits, is often much lower due to tax credits and write-offs allowed under law.

The average tax rate in 1996, for example, was 25.8 percent, according to data from the Treasury Department (news - web sites)'s Office of Taxation.

The study found that the 41 companies reported $25.8 billion in pretax U.S. profits. With a 35 percent tax rate, they would have paid some $9 billion in taxes. Instead, they received rebates, the group said.

More than half of the companies, or 133, of those studied paid less than half the statutory tax rate in at least one of the three years, the institute said…

One example is a long-standing provision in the tax code allowing companies to deduct gains from employee stock options. A corporation will, for instance, issue employees options that vest over three years. After that period, the employee can exercise those options at the previously agreed price.

The difference between the price actually paid and the price of that stock on the market is recorded as compensation by the corporation.

``That's a major compensation deduction for companies without the cash outflow. That will certainly lower your tax base,'' said Kevin Johnson, partner at accounting firm Silverman Linden Higgins LLP.

Of the 250 companies studied, the institute said it found 233 of them had received stock-option benefits over the 1996-1998 period, lowering their taxes by $25.8 billion.

Companies May Have Used ISO Data To Up Prices
Dow Jones - By Jason Leopold - October 18, 2000

LOS ANGELES -(Dow Jones)- Electricity generators may have used real-time plant activity reports from the state's grid operator to their advantage in California's wholesale electricity market, according to an official with the Western Systems Coordinating Council.

Federal and state regulators are probing California's wholesale electricity market, looking for signs of market manipulation. The agencies are expected to complete separate investigations into California's power crisis in about two weeks.

They could force generators to pay back hundreds of millions of dollars if the probe determines generators manipulated the market using the real-time data, Dow Jones Newswires has learned from a high level source at the state's Attorney General's office.

At issue is real-time information the California Independent System Operator provided the Western Systems Coordinating Council, an governmental organization that monitors electricity reliability in the western U.S., about power plant activity in the state.

The real-time information allows market participants, which include companies such as Duke Energy North America (DUK), Reliant Energy (REI) and Southern Energy Co. (SO), to access data via an Internet site that shows how much capacity a plant with more than 200 megawatts has online at any given moment. Data about a power plant outage can also be obtained.

Data Intended To Be Used To Monitor Grid Reliability

The information was intended to be used to monitor electric reliability on the grid by the WSCC and 30 other transmission operators in the western U.S. But in order to allow other grid operators to access the data, the ISO was forced to make it available beginning in March 1999 to all market participants, according to WSCC standards and practices. Last month, however, the ISO's attorney's alerted the WSCC that the "data is being used against them and to game the market," according to Bill Commish, director of dispatch with the WSCC. Commish is in charge of the real-time database and ensures that the ISO is providing the state's power plant activity to the WSCC.

Commish said generators could use the information to withhold supply and drive up power prices or to identify transmission congestion in a particular region and use that to gouge customers.

However, the ISO, which controls about 75% of the state's power grid and real-time market, may have violated a FERC rule because it is required to keep such information confidential for 90 days, an ISO attorney told the WSCC. Beginning Monday, the ISO will no longer provide such information to the WSCC or other market participants. The source in the Attorney General's office said the investigation is focusing on a number of companies who may have used the information to manipulate the market and earn a "hefty" profit. The source said the Attorney General is paying close attention to companies that posted huge profits during the third quarter as a result of high wholesale profits in California.

Generators would be forced to refund customers and utilities and criminal charges may be filed against the companies, the source said.

Politicians Enjoy Sweet Retirement Package
Philadelphia Daily News - By Craig Linder - October 13, 2000

WASHINGTON - As politicians fight about the best way to repair Social Security, few members of Congress are looking to change their own retirement system.

Members of Congress enjoy a generous two-pronged retirement system that combines Social Security with another, corporate-style benefit. All told, pensions for senior lawmakers can easily reach six figures.

First of all, though, put to rest the rumor that your representative in Washington doesn't have to pay into Social Security.

They pay 6.2 percent of the first $76,200 of their salary, just like everyone else. And like every other employer, the federal government matches the members' contributions - with your tax dollars, of course.

But the real sweetener comes from the two additional benefit plans that members of Congress, like all federal employees, can choose to join.

The first, called the Civil Service Retirement System, is available to members of Congress who took office before 1984. Under this plan, lawmakers receive Social Security and an annual pension based on their length of service and their highest salary while they were in Congress.

Members of Congress who are part of CSRS pay 8.4 percent of their salaries to the plan and the government matches their contribution. A lawmaker who earned the base salary of $141,300 would pay a total of $16,592 to the system - $11,868 to CSRS and $4,724 in Social Security.

Lawmakers who participate in the CSRS can choose to have their contributions and benefits from Social Security deducted from their contributions and benefits to CSRS, allowing them to take home more of their salary, but giving them fewer benefits when they retire.

The second plan, which covers most current members of Congress, is the Federal Employees Retirement System. Roughly 2.8 million active federal employees, from senators to postal workers, participate in FERS, which pays $40 billion each year to 2.4 million retirees.

Like the older congressional retirement plan, FERS provides retiring lawmakers with Social Security and a pension, but it also offers a defined-contribution plan, which is similar to a 401(k).

Lawmakers who chose FERS receive a pension based on their years of federal employment and military duty and their highest salary level. They also enjoy an annual cost-of-living increase.

Members of Congress pay 1.3 percent of their salary into the defined benefit plan and the government contributes about 11 percent of their salary to the fund each year.

A member of Congress who earns the $141,300 base salary would pay $7,125 - $4,724 to Social Security and $2,401 to FERS.

The 401(k)-like plan allows members to contribute up to 10 percent of their pre-tax salary into one of three investment plans.

Both plans allow members of Congress to retire at age 50 if they have served the government for at least 20 years, or at age 62 after five years of service.

How does Congress' retirement plan compare to the average American's? Pretty well, it would seem.

The average pension income for a retiree in 1994, the most recent year for which data is available, was $3,500, James Delaplane, a vice president with the American Benefits Council, said.

Compare that to the $50,203 annual average pension income of a retired member of Congress in 1998, according to a Congressional Research Service report. Or to former President Gerald Ford, who receives $261,000 a year in presidential and congressional pensions, according to the National Taxpayers Union.

A 1998 report to Congress said that FERS is "generous" compared to retirement plans in the private sector. According to that report, only 8 percent of private plans offer the cost-of-living increase that federal employees enjoy, and only a few allow members to retire and receive a full benefit as early as the federal plan.

Critics of government spending like the National Taxpayers Union have chafed at the "generous" retirement plans for years and have called on Congress to overhaul its system.

"The best possible thing Congress could do would be to take a page from the evolving retirement plans of the private sector and eliminate the guaranteed pension," keeping only the Social Security benefit and the 401(k)-style plan, said Pete Sepp, the vice president for communications of the Alexandria, Va.-based nonprofit group.

But members of Congress have been loath to tinker with their own benefits. A drive to overhaul the system following the "Republican revolution" of 1994 quickly fizzled.

Tax Bill
Dow Jones - By Fowler W. Martin - October 12, 2000

WASHINGTON -(Dow Jones)- U.S. Senate Republican leaders said Thursday they plan to move tax legislation next week at the same time Congress attempts to wrap up work on various bills needed to fund the government during the fiscal year that began Oct. 1.

In comments to reporters, Senate Majority Leader Trent Lott and deputy Republican Senate leader Don Nickles, R-Oak, pointed to next Wednesday or Thursday as the current target for one last attempt enact tax cuts before the November elections.

Details of the prospective package haven't been disclosed, but it is expected to center on tax breaks aimed at promoting retirement security and stimulating economic growth in distressed communities. A Clinton administration-backed initiative that would repeal the U.S. Foreign Sales Corporation export tax break and replace it with an alternative regime designed to comply with World Trade Organization rules is also likely to be part of the package.

Lott initially attempted to move the FSC replacement bill separately under an expedited procedure. That move twice failed when some Democrats in the Senate objected, a tactic that could now backfire on them if the FSC provisions turn out to be a locomotive pulling a variety of largely Republican initiatives through the enactment process.

Inclusion of both the FSC initiative and various community development tax breaks in the prospective package would give it something of a must-pass character. Clinton might be forced to swallow objections to some other provisions, such as proposed big increases in contribution limits for Individual Retirement Accounts, in order to prevent the European Union from launching large-scale retaliation against U.S. exporters and to secure enactment of his anti-poverty tax proposals.

The administration has serious reservations about the IRA provisions because they arguably wouldn't stimulate much new savings (relatively wealthy taxpayers would simply shift funds from taxable accounts to tax-sheltered accounts) and because they might discourage small business owners from establishing pension plans under which they would have to set aside funds for their employees as well as themselves. With sharply higher annual contribution limits, they could take care of their own retirement needs through IRAs alone, the Treasury fears.

Also awaiting possible last-minute legislative action, perhaps as part of the same overall package, are a variety of business-related tax breaks positioned to accompany a $1.00 increase in the minimum wage, currently $5.15 an hour. The proposed boost would be spread over two years. Republicans want to give small business and their owners benefits totalling about $75 billion over 10 years to cushion the impact of the minimum wage boost while Democrats insist the scope of any such breaks should be held to the $20 billion to $30 billion range.

The outlook for the proposed tax breaks is somewhat cloudy at present because, by all accounts, Republicans aren't discussing their ideas with Democrats. At present, Capitol Hill aides say, all of the action is at the Republican staff level where experts are trying to work out the details of a bill that would probably make a significant end run around the traditional legislative process.

While the House of Representatives has passed all of the proposed initiatives, many with significant bipartisan support, most haven't been approved by the Senate and some haven't even been acted upon by the Senate Finance Committee.

With time running short and Republicans anxious to avoid having the tax bill become a target for politically sensitive amendments proposed by Democrats, the legislation will probably be packaged as though it were a compromise between legislation cleared earlier by both houses. It may then be attached to one of the remaining spending bills.

Such a procedure would be aimed at both accelerating the process and shielding the Republican bill from any changes before it reaches the White House. Democrats are expected to complain bitterly about the process and seek ways to have some of their ideas included.

Anticipating that one way or another, the President has enough leverage to force Republicans to compromise at some point in the process, Democrats have in recent days been rallying their tax troops in anticipation of an intense, last-minute battle…

Democrats also hope to use their leverage to make sure that the proposed retirement security tax package contains provisions aimed at helping low- and moderate-income taxpayers save for retirement. The Senate Finance Committee version of the initiative has a low-income savers credit, albeit considerably less generous than one the Clinton administration proposed, but the House bill doesn't.

On another front, House Ways and Means Committee Chairman Rep. Bill Archer, R-Texas, recently pledged to make every effort to ensure that Congress expands and makes permanent tax-favored Medical Savings Accounts before the end of the current session. The Clinton administration is strongly opposed to that idea and if it is included in the forthcoming package, the President might find it hard to sign the bill. In principle, Democrats would like to insist on their versions of targeted marriage and estate tax relief as part of an eventual compromise, but legislators and their tax aides concede that is an unrealistic hope. Clinton vetoed earlier Republican initiatives in those areas and with the November elections approaching, Republicans aren't ready to back down. They would rather campaign on the President's rejections of their approach to marriage and estate tax relief than settle for something reflecting Democratic priorities. The Republican attempt to produce an end-session tax bill started a couple of weeks ago with a meeting between House Majority Leader Rep. Richard Armey, R-Texas, and Summers. The meeting initially appeared to be an overture aimed at working out a possible compromise in advance of final legislative action, that didn't turn out to be the case…

Among other things, Summers reportedly told Armey that if the Republican leadership wanted to pass an end-session tax bill, they should get the members of the two tax writing committees involved. So far, that hasn't happened either. Rather, in contrast to the traditional legislative process, key decisions are currently being made at the leadership level in both Houses of Congress with tax committee members essentially relegated to the role of bystanders or providers of technical advice.

Among other things, the current informal process, occurring entirely behind closed doors, could give rise to a certain amount of mischief in that it is easy for special interests to get small, but significant favors, inserted into bills crafted in that fashion.

Any final tax package is likely to include a number of miscellaneous provisions along with the high-profile, major initiatives.

M.B.A. Candidates
The Wall Street Journal - By Jess Bravin - October 10, 2000

LAS VEGAS -- When news broke late last month that three former executives of McKesson HBOC Inc. had been charged in a multimillion dollar fraud scheme, Steve Behunin, a manager with a recently sold McKesson division, was already in prison.

Mr. Behunin, operations director for Sparkletts Water Products Co., now a unit of Groupe Danone SA of Paris, wasn't involved in the alleged crime. But he was at Nellis Federal Prison Camp outside Las Vegas to learn from criminals, as part of his midcareer pursuit of a master's degree in business administration at Pepperdine University. The Malibu, Calif., school sends students here as part of its business-ethics curriculum, to demonstrate what can happen when career ambition crosses the line to criminality. "The best of us can be tempted," says Mr. Behunin, 45 years old, who found himself picturing what his former bosses would look like in prison duds. "This is real."

Call it "Scared Straight: The Club Fed Edition." Just as in the celebrated 1978 documentary, "Scared Straight," which chronicled a group of juvenile delinquents brought to a state prison for an encounter with hardened convicts, the Pepperdine program aims to produce "virtuous managers" -- or at least deter white-collar crimes -- by introducing students to former bankers, managers and entrepreneurs who ran afoul of federal law.

At Nellis, the M.B.A. candidates meet prisoners "who are like themselves," says James T. Martinoff, the finance professor who created the program and has been running it for 13 years. Many of the inmates at the facility "have the same drives and ambitions that they do, but maybe went a little too far."

Does it work? Prof. Martinoff says the program has been a success because, to his knowledge, no participant has ever been arrested. He says his surveys show that, in reflection, half the students say that they had made unethical business decisions in the past, and more than one-third realize that some of their prior business transactions "might have been criminal." Nearly 90% of his alumni, the professor says, report that the Nellis program gave them an "ethical anchor" for making future business decisions. On the other hand, he says that in previous years students seeking help raising funds for their entrepreneurial efforts have called upon two of his ex-convict guest lecturers -- Mark Morze, who, as an executive in the Los Angeles carpet-cleaning outfit ZZZZ Best Co., helped swindle more than $70 million from investors in the mid-1980s, and Ted Wolfram, a former stockbroker from Toledo, Ohio, who served 10 years for embezzling approximately $50 million.

"It's as if they forget that these are ex-felons and are won over by their charisma," Prof. Martinoff says. "Not everybody gets the message that we want them to have."

Gathering at the Treasure Island hotel and casino on Las Vegas Boulevard, the 56 students in this year's program began with an evening orientation highlighted by Messrs. Morze and Wolfram. "I'm a fox, I'm a fraudster. I was the biggest liar in North America," crowed Mr. Morze, 49, an energetic former college football player who has parlayed his notoriety into a career as a motivational speaker. ("I guess crime does pay," he joked.) He also described the horrors of 53 months in prison, including watching one inmate smash in another's skull in a dispute over a chicken wing.

The more reflective Mr. Wolfram, lamenting that he had "defrauded my customers, my partners, my family and myself," leaned on Oscar Wilde to make his point: "Remember `The Picture of Dorian Gray'? That's what my soul looked like," Mr. Wolfram, 70, told the students. Another consequence of his fraud convictions: Friends won't let him be the banker when they play Monopoly.

The next morning, beneath a mammoth billboard touting Siegfried and Roy, the students, dressed in business attire to distinguish themselves from the inmates, boarded the bus for the eight-mile trip to Nellis. Such Vegas landmarks as the Elvis-a-Rama Museum and the Flamingo hotel, the legacy of mobster Bugsy Siegel, soon gave way to the Mojave Desert and the low-slung complex of bungalows that make up the prison.

Nellis is no San Quentin. The minimum-security institution and its 556 inmates are largely free to move about the facility during the day. But there are few happy campers at a prison camp, particularly among the white-collar crooks who have shed power ties for khaki uniforms, and six- or even seven-figure salaries for 12 cents an hour performing menial chores at the adjacent Nellis Air Force Base.

To hear some of the inmates tell it, the line they crossed between legal and criminal behavior was thin indeed. "We are exactly like you," inmate Darrell Van Brocklin, a former bank president serving nine years for fraud and money laundering, told the students. "If you think that a good set of ethics will keep you from going to prison, you are mistaken." Protesting his innocence, he likened his conviction to a random act of violence dealt by overzealous prosecutors. He warned the mostly male students that, if statistics hold, "two of you gentlemen are going to prison."

With his white hair and bifocals, the 57-year-old Mr. Van Brocklin retains the looks and demeanor of the finance executive he once was, before a jury found he had made more than $1 million by manipulating the sale of loans held by his Rapid City, S.D., bank. But, acting as master of ceremonies for the inmate panel, Mr. Van Brocklin launched a critique of the justice system that could have come from the most incendiary radical, attributing his confinement to the fact that "the prison industry is geared to having a constant flow of cattle."

A somewhat different spin came from Robbin McLaurin, aka Robbin Nelson, 43, serving 10 years for a running a telemarketing scam in Las Vegas.

"My biggest crime was my arrogance," Mr. McLaurin said. "I thought everything I was doing was legal and ethical until it was challenged." Nonetheless, he allowed that "people are extremely greedy," and added: "I capitalized on that." (According to Mr. McLaurin's indictment, his scheme involved falsely telling victims they had won prizes of up to $1 million, which would only be paid after they sent him thousands of dollars in "taxes and fees.")

Prof. Martinoff asked Mr. McLaurin if his actions could have passed this test: "Would you have done it if you had explained it to your wife?"

"She would say, `Don't do it!' " Mr. McLaurin replied. "I'd say, `Look, we're talking about millions of dollars. Just be quiet and keep driving that Mercedes.' "

Some students had trouble relating the egregious acts of the criminals to the more mundane ethical dilemmas they face each day. Thyonne Gordon, 37, a producer at a Web publisher in Marina del Rey, Calif., said that she and her colleagues often can spot a simple fix to help a client's software run better. "But do we tell them? No," she said. "We basically shrug our shoulders and say, `Your tools are not working. You're going to have to use our tools' " -- at greater expense.

Such business behavior may be legal, but is it ethical? The Nellis visit didn't help Ms. Gordon answer that question. "I don't need to be scared straight. I'm already scared of prison," she said, noting with some envy that students in the import-export class got a field trip to Japan.

Other students, meanwhile, walked away filled with sympathy for the inmates.

"Ten years for a nonviolent crime? I don't see that as helping society," said Vince Monteparte, 35, a software-company manager from San Diego. The convicts, he said, were businessmen eager to make their fortunes. "A lot of the things they aspired to, I aspire to. And sometimes we all get trapped in pursuit of those goals," Mr. Monteparte said, before heading off to the craps tables.

Richard Hutchin, 54, president of an aerospace manufacturer in Calabasas, Calif., was one of the few participants in a class exercise who found it improper to read a subordinate's private e-mail, even though it usually is lawful for an employer to do so. "There seems to be about 10% of the class that can relate to the issue," he said.

Mr. Hutchin wondered if some of his classmates might end up spending considerably longer than a day at a place like Nellis.

"The two characteristics of the potential criminal are arrogance and greed," Mr. Hutchin said he had learned. "And there are a couple of people in my class who share those characteristics."

Janet Krueger Elected as Board Member
COMMON - News Release - October 3, 2000

COMMON Names New Board Members

CHICAGO, October 3, 2000 COMMON, the world's largest group of users involved with IBM and IBM-compatible information technology, today announced the name of the newest member to its Board of Directors.

Janet Krueger was recently elected to a three-year term on the Board of Directors by the COMMON membership. Krueger, a consulting software engineer for Andrews Consulting Group in Rochester, Minnesota, has been a COMMON Member for more than 20 years, as well as an award winning speaker. She won the Distinguished Service Award in 1999. Krueger will take her seat on COMMON's Board of Directors following the COMMON Fall 2000 Conference and Solution Center, which takes place October 22-26 in Baltimore, Md. The COMMON conference has been rated by Computerworld as one of the most valuable user conferences in the industry.

Current Board members Robert Cozzi and Janice Caldwell were re-elected to three-year terms. COMMON's Board of Directors is composed of nine members. In June, each COMMON individual member and member representative was mailed a ballot and asked to vote for three Board members from a slate of six candidates.

The Phantom of the Pension Fund
The New York Times - By FRED BROCK - October 1, 2000

AUL J. FROMMERT, 61, works for Xerox as a quality and safety manager in Webster, N.Y. He has been with the company for 36 years. His retirement account is worth about $1 million and should provide him with a retirement income of about $5,000 a month.

Or so he thought.

About five years ago, said Mr. Frommert, who had been looking forward to retiring in 2001, he noticed a reference in his Xerox retirement fund statement to "prior distribution." He didn't understand it and started asking about it.

His questions led to the discovery that instead of the $5,000 a month he had been counting on at age 62, he would actually get less than $20, because of the curious way Xerox took account of a break in service, from 1985 to 1989, when he left to start his own business.

When he left in 1985, Mr. Frommert said, Xerox required him to withdraw the pension fund balance - then about $140,000 - that he had accumulated since 1960. Under the Employment Retirement Income Security Act, or Erisa, returning employees must be given credit for previous years of service or be allowed to buy them back. So when he was rehired in 1989, he was given retirement credit for his first 25 years, and he said Xerox led him to believe that it would somehow deduct the $140,000 already paid to him when it came time to calculate his pension.

What Mr. Frommert says he wasn't told - and didn't find out until five years ago - is that Xerox makes such deductions in a way that would all but obliterate his benefits.

Xerox created a "phantom" account, pretending that it contained the $140,000 Mr. Frommert had been paid, and had it "grow" on paper as if it had been invested over the years. At retirement, the "phantom" account would be deducted from the real one.

Unlike the real pension money, though, the phantom account was considered to have been placed in a very aggressive stock fund, growing at an estimated rate of 22 percent a year, retroactive to 1985. At that rate, the phantom account has been steadily catching up with Mr. Frommert's real account, which is based simply on years of service and age, to the point that it is now just a few thousand dollars behind. Subtract one from the other, and voilà, a $20 monthly pension.

Because he had not been told what was going on, Mr. Frommert said, he asked Xerox to calculate his pension more realistically - but to no avail. He said he even offered to surrender his previous years of service and accept only the benefits accumulated since he came back in 1989, as if he had been a new hire. Still, he said, the company said no.

Last November, Mr. Frommert sued Xerox in Federal District Court in New Haven, seeking a pension unravaged by the phantom account. "I'm in a pickle," he said. "I have an 11-year-old son. I'm going to have to continue working if this suit isn't resolved in my favor."

A spokesman for Xerox, which is based in Stamford, Conn., said the company would not comment on pending litigation.

Since last November, 40 more rehired Xerox employees have joined the suit. Mr. Frommert and the plaintiffs' lawyer, Robert H. Jaffe, estimate that up to 1,500 of Xerox's 53,250 domestic employees could unwittingly be in the same pickle.

Alan H. Clair, 57, another plaintiff, said he loves working for Xerox but called the pension predicament "gut- wrenching." He added, "With one hand, Xerox credited us with our previous service; then with another, invisible, hand, they took it away."

The situation provides a lesson in the importance of knowing all the ins and outs of your company retirement account, especially if you have been rehired after quitting or retiring. But because both the laws and companies' policies can be blindingly complex, and sometimes misleading, it is not always easy. Norman Stein, a professor of pension law at the University of Alabama, says that any changes made in pension plans during the last decade have probably hurt employees.

He is especially critical of so- called cash-balance plans, which many companies are adopting. In a traditional plan, benefits based on a combination of age and service build sharply toward the end of an employee's career; in a cash-balance plan, benefits build uniformly each year.

"Most cash-balance plans have been designed to hurt older employees," he said. So after years of having "a plan that is not good for young people when they're young, when they get older they get a plan that's not good for older people," he said. "And companies are often cleverly misleading about this."

Professor Stein said there has been a shift in corporate attitudes toward pension plans since the mid- 1980's, partly because any excess money in them can now be added to a company's operating profit. "It used to be that pension plans were viewed as belonging to the people covered by them," he said. "The new ideology is that this money belongs to the company and its stockholders, or its management. If the employees want it, there has to be warfare for them to get it. This has had a devastating effect on retirement policy."

He doesn't need to tell that to Mr. Frommert.

News - September 2000