Business Desk

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

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NEW YORK SUN CONTRIBUTOR

STATE


N.Y. OFFICIALS SAY LOANSHARKS GOUGING MILITARY FAMILIES


New York Attorney General Eliot Spitzer yesterday announced his civil lawsuit that accuses N.Y. Catalog Sales and its owner, John Gill, of violating state loan sharking laws in its three stores, two of which are outside the Fort Drum Army base north of Syracuse.


Mr. Spitzer said Mr. Gill provided up to $500 in high-interest loans masked as catalog sales in Jefferson and Washington counties. Borrowers get $50 in high-interest loans for every $15 that they spend on overpriced merchandise, he said.


Borrowers pay with a postdated check that the stores cash on the borrowers’ next payday. But often families need to borrow again to cover the cost and fall deeper in debt, Mr. Spitzer said.


Mr. Spitzer said the catalog sales are supposed to disguise the high-interest payments. Senator Schumer, meanwhile, says military families are being targeted nationwide.


Mr. Schumer is urging the Federal Deposit Insurance Corp. to close what he calls a loophole that allows lenders to partner with a bank in a state with weaker regulations then offer loans with interest ranging from 400 to 900 percent. The New York Democrat says this “rent-a-charter” scheme can allow the lenders to operate even in states such as New York, with tough loansharking laws. Mr. Gill didn’t immediately respond to a request for comment left with a spokeswoman at the company, which operates under the corporate name JAG NY. Mr. Spitzer said the “vast majority” of customers buy the merchandise or gift certificates to receive cash. Most gift certificates are never redeemed, he said. “This is a transparent attempt to evade New York laws that prohibit loan sharking,” he said. No complaints about N.Y. Catalog Sales were received by the staff judge advocate at Fort Drum, said Master Sgt. Sharon Opeka. She said, however, such loans are a concern and Army Community Services offers financial advisers to military families and soldiers. “There is a concern in general because we don’t want soldiers or a family member out there getting loans they have to pay exorbitant amounts of interest on,” Ms. Opeka said.


– Associated Press


ECONOMY


MANUFACTURING ACTIVITY ROSE IN AUGUST


Manufacturing activity rose in August for the 15th consecutive month, but at a slower rate than in July, according to a monthly report released yesterday by the Institute for Supply Management, a research group.


The ISM’s index for manufacturing activity stood at 59% in August, 3 percentage points below the 62% recorded in July and just below the level that analysts were expecting.


Nonetheless, the survey, together with a separate report showing that construction spending hit an all-time high in July, painted an overall positive picture for the economy and suggested that despite some bumps the economic expansion remained solid.


Any reading in the ISM index above 50 means that manufacturing is expanding, while below 50 means activity is contracting. The index has been above 50 since June 2003.


Overall, the ISM report indicated healthy activity in the manufacturing sector, while showing some weak spots such as concerns among manufacturers over rising energy costs, higher prices for basic materials, especially steel, and slowing growth in sales.


“August was another good month for the manufacturing sector,” said the director of the monthly survey for the ISM, Norbert Ore, in a statement. He said that while the rate of growth slowed in the month, overall conditions for American manufacturers are “still quite positive” as both new orders and production levels remain high.


Mr. Ore said many businesses are still rating their businesses as “strong,” while some are beginning to see new orders taper off. He attributed a growth in inventories as part of a catch-up strategy to meet higher sales demand. Separately, the Commerce Department reported that construction spending bounced back in July to the highest level on record. Following a lull in June, the spike in July meant that the value of buildings put in place came in at a seasonally adjusted annual rate of $997.2 billion, an all-time high level and a 0.4% increase over June. The gains were broadly based, with spending by private builders on residential units and spending by government on big public works projects each coming in at all-time highs in dollar terms. The manufacturing report is compiled every month by the Tempe, Ariz.-based ISM group, and compiles information on orders, pricing and other data on commonly used manufacturing supply materials such as steel, aluminum, gasoline, cardboard, latex, and lumber.


– Associated Press


NATIONAL


GENERAL MOTORS, FORD SAY AUGUST U.S. AUTO SALES FELL


General Motors Corp., Ford Motor Co., and DaimlerChrysler AG said August U.S. sales declined as gasoline prices near records and a drop in consumer confidence cut demand for cars and trucks. Ford said it will reduce fourth-quarter production. Sales at General Motors, the world’s largest automaker, fell 14% from a year earlier to 406,623. Ford, the no. 2 American automaker, said sales dropped 13% to 271,394. DaimlerChrysler, the world’s fifth-largest automaker, said total American sales fell 5.7% to 196,018, with Chrysler down 6.5%. Sales at Japan’s Honda Motor Co. and Nissan Motor Co. fell, with Nissan’s down for the first time this year.


Gasoline prices at the start of August were 25% higher than at the beginning of the year, according to the U.S. Energy Department.


General Motors said last week it will cut orders as much as 5% the rest of the year for Hummer H2, which gets among the worst gas mileage of any vehicle in the U.S. Hummer H2 sales fell 26% in the first seventh months of this year. General Motors also raised incentives as high as $6,000 this month on some trucks and SUVs to increase sales.


– Bloomberg News


REGULATORY


ACCOUNTING BOARD SAYS OPTION COSTS MUST BE AT MARKET VALUE


American accounting rule makers, rejecting arguments from some computer executives that stock option values are too difficult to estimate, voted that awards should be treated as an expense based on a market value.


The Financial Accounting Standards Board, which sets American rules under authority of the Securities and Exchange Commission, is preparing to issue a final version of a new rule that will force companies to make options a cost. In a meeting at its Norwalk, Conn., headquarters yesterday, the board reiterated that companies should use a valuation formula similar to those for pricing options that can be bought and sold on exchanges.


Some companies, including Intel Corp., Cisco Systems, and Genentech Inc., have opposed the rule, saying it would crimp profit and be too difficult to value employee options. Supporters of the rule including billionaire investor Warren Buffett and Vanguard Group founder John Bogle have said that market-based formulas can be adapted to tally employee options.


“We’ve got a suitable, absolute and relative level of reliability” on estimating option values, said board member Katherine Schipper. “It is just an estimate.”


Critics, such as Intel Chief Executive Officer Craig Barrett, say there are too many variables and too much guessing in figuring option values and that the rule may curtail awards to employees.


– Bloomberg News


SEC BARS FORMER PRIVATE-EQUITY EXECUTIVE FROM INDUSTRY


The Securities and Exchange Commission on Wednesday barred Charles B. Spadoni, a former executive at private-equity firm Triumph Capital Group, from the securities industry.


Mr. Spadoni, 55 years old, accepted the ban without admitting or denying the SEC’s findings. He was convicted in July 2003 of using bribes to win business from Connecticut’s pension system.


From 1997 to 2003, Mr. Spadoni was general counsel of Triumph Capital, a Boston firm that manages private-equity funds. He still faces SEC civil charges of failing to disclose $2 million of payments to friends of former Connecticut Treasurer Paul Silvester.


Some of the money was then funneled to Mr. Silvester, according to the SEC. The money was allegedly intended to reward Mr. Silvester for investing $200 million with Triumph.


Richard Asche, an attorney for Mr. Spadoni, didn’t immediately return a call.


– Associated Press

NY Sun
NEW YORK SUN CONTRIBUTOR

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.


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