Business Desk

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The New York Sun

NATIONAL


AMERICAN AND UNITED AGREE TO CUT CHICAGO FLIGHTS TO STEM DELAYS


United Airlines and American Airlines agreed to cut Chicago O’Hare flights for six more months to reduce delays, the U.S. Department of Transportation said.


UAL Corp.’s United will cut 20 arrivals between noon and 8 p.m. and AMR Corp.’s American will cancel 17, the department said in a statement. Other carriers have agreed to maintain existing flights or shift departures or arrivals out of peak periods, said Brian Turmail, an agency spokesman. Delays will fall 20% by the end of the year under the agreement, the department said.


O’Hare was the most congested American airport this year through June, as 36% of flights were delayed or canceled, the U.S. Bureau of Transportation Statistics said. The airport is a major transfer point for passengers of American and United, the world’s two biggest airlines.


– Bloomberg News


MARKETS


N.Y. OIL RISES TO A RECORD AS U.S. REFINERS BOOST OPERATIONS


Crude oil prices rose to a record $47.45 a barrel in New York after the Energy Department said American refineries increased production and gasoline demand rose to the highest level this year.


Refinery usage jumped to 95.8% from 94.7% in the week ended Friday. Crude oil for September delivery rose 52 cents, or 1.1%, to close at $47.27 a barrel on the New York Mercantile Exchange, a record closing price. Futures reached $47.45, the highest intraday price since oil began trading in New York in 1983. Oil is up 53% from a year ago.


In London, the October Brent crude-oil futures contract rose 4 cents at $43.03 a barrel on the International Petroleum Exchange. The September Brent futures contract reached $44.11 Monday on the last day of trading. It was the highest price since futures began trading in 1988.


“The September contract expires on Friday, and as a result you are seeing refiners come in buying,” said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, which markets wholesale gasoline and heating oil. “Refiners, who have been living with just-in-time deliveries for years, put off buying futures in the hope that prices would fall.”


New York oil has set intraday records all but one day since July 30 on concern shipments from Russia, Venezuela or Iraq would be disrupted.


– Bloomberg News


LUMBER PRICES SOAR TO 10-YEAR HIGH ON FLORIDA’S BUILDING DEMAND


Lumber prices in Chicago rose to the highest in 10 years on increased demand as Florida’s homeowners and businesses rebuild after Hurricane Charley, the strongest storm to strike America in 12 years.


Lumber futures for September delivery rose $15, the maximum allowed by the Chicago Mercantile Exchange, to $442 per 1,000 feet of two-by-fours, the highest for a most-active contract since March 1994.The 3.5% gain was the biggest in seven months.


Charley struck Florida’s southwest coast on Friday, causing $11 billion in residential losses, Florida’s Department of Financial Services said.


Home Depot Inc. shipped an extra 440,000 sheets of plywood into Fort Myers and Tampa area stores before the storm and froze prices in the state.


“We have seen significant increases” in lumber sales in the hardest-hit Florida towns of Punta Gorda and Port Charlotte, said the vice president of lumber merchandising at Atlanta-based Home Depot, Ron Jarvis. Sales in other parts of the state hit by Charley have been “sporadic,” he said. “Rebuilding probably takes weeks to months to get under way.”


The Chicago exchange increased its limit for price swings yesterday after futures rose by $10, the previous maximum, in the past two sessions. The price surged 9.5% since last Thursday. A futures contract is an agreement to buy or sell a commodity at a specific price and date.


Home Depot increased its lumber inventory threefold in distribution centers in New Orleans, Tampa, and Miami by July 15 in preparation for the hurricane season, Jarvis said.


“Prior to the hurricane, we sold a tremendous amount of plywood for wind and door security, and after the hurricane, we have seen sporadic sales,” he said.


The company doesn’t use futures to lock in lumber prices and isn’t selling the wood at a loss now, he said. The price freeze on plywood in Florida will be “as long as possible,” he said.


– Bloomberg News


INTERNATIONAL


PARMALAT’S BONDI SUES DELOIT TE AND GRANT THORNTON


Parmalat Finanziaria SpA’s chairman, Enrico Bondi, sued Deloitte Touche Tohmatsu and Grant Thornton International for at least $10 billion in damages, alleging that the two accounting firms helped the Italian foodmaker hide the true state of its finances before its collapse in 2003 under 14 billion euros ($17 billion) of debt in Italy’s biggest bankruptcy.


Mr. Bondi, 69, alleged in a complaint filed in Chicago that auditors from Deloitte, the world’s second-largest auditing firm, “abdicated their responsibility to see that the company’s financial statements fairly stated its true financial condition,” according to the complaint filed in the circuit court of Cook County, Ill.


The suit accused auditors from Grant Thornton, the sixth-biggest accounting firm, of “setting up fictitious companies and structuring fake transactions whose only purpose was to siphon off billions of dollars in assets.” Audits performed by both firms were “grossly inadequate and willfully malfeasant,” the suit said.


Both accounting firms called the charges illegitimate and vowed to defend their positions vigorously.


Parmalat itself was “responsible for a fraud that, according to the testimony to date, pervaded its former executives and board of directors,” Deloitte spokeswoman Oriana Pound said in a statement on the behalf of Italian member firm Deloitte & Touche SpA. The charges, she said, had nothing to do with international umbrella firm Deloitte Touche Tohmatsu.


– Bloomberg News


CITIGROUP BOND TRADING INVESTIGATED BY BRITISH REGULATOR


Citigroup Inc., the world’s biggest bank, is being investigated by the British market regulator over “unusual trading activity” in European government bonds earlier this month. Citigroup sold about 10 billion euros ($12.3 billion) of securities on August 2 and bought back 4 billion euros of them at cheaper prices half an hour later, said people last week who compete with Citigroup and were involved in the trades. “This investigation may lead to formal disciplinary proceedings,” the British Financial Services Authority said in a Regulatory News Service statement. David Cliffe, a spokesman at the FSA in London, said an “enforcement team” yesterday started investigating the matter. He declined to say whether the regulator was also investigating individuals.


MTS SpA, the Italian company that says it handles about half of the electronic transactions in European bonds, on August 10 limited trading in government debt after one bank “surprised the market” by selling about 200 securities in a two minute period. It didn’t identify the bank concerned.


“We will of course cooperate fully as with any regulatory inquiry,” said Andrea Hurst, a Citigroup spokeswoman in New York. “Beyond that, it is not appropriate for us to comment.”


– Bloomberg News


REGULATORY


SEC VOTES TO BAN ‘DIRECTED BROKERAGE’ BY MUTUAL FUNDS


The Securities and Exchange Commission voted 5-0 yesterday to prohibit mutual-fund firms from directing business to brokers as a reward for selling fund shares to investors. SEC Chairman William Donaldson said the practice of directed brokerage “presents opportunities for abuse” that can benefit fund managers and brokers at the expense of fund shareholders.


Mutual funds will still be able to use selling brokers to execute trades under the new SEC rule, but must have policies and procedures in place to preclude “quid pro quo” arrangements that pose conflicts.


“Prohibiting directed brokerage makes sense,” said SEC Commissioner Harvey Goldschmid. Although the SEC had previously allowed the practice, Mr. Goldschmid said “putting it behind us is just the right thing to do.”


SEC Commissioner Cynthia Glassman agreed. The practice of directing brokerage poses conflicts, she said, because fund managers may pick brokers who do the best job of selling fund shares, rather than those that offer the best trading.


– Dow Jones Newswires


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