REGULATION

FRIST DEFENDS STOCK SALE; COX RECUSES HIMSELF

WASHINGTON – Senate Majority Leader Frist, a Republican of Tennessee, said yesterday he acted properly in ordering the sale of HCA stock held in a blind trust, but welcomes a SEC investigation of the transaction. Dr. Frist ordered the sale weeks before HCA reported lower-than-expected earnings, driving stock prices down roughly 15%.

Meanwhile, the chairman of the Securities and Exchange Commission, Christopher Cox, citing his past work as a congressman, is recusing himself from the agency’s review of Dr. Frist’s stock sale. With the Securities and Exchange Commission inquiry, and questions being asked about the affair by the U.S. Attorney of New York, Dr. Frist has been under increasing pressure to offer an explanation.

Speaking to reporters yesterday, Dr. Frist said the sale had been planned for months and was an effort to divest himself of his remaining financial interest in the company his family founded to avoid any possible appearance of a conflict of interest with his current – or possible future – office.

– Dow Jones Newswires

REAL ESTATE

HOME SALES SURGE IN AUGUST, DEFYING PREDICTIONS

Sales of previously owned homes unexpectedly surged in August, and prices reached an all-time high, defying predictions that the housing market was peaking. Existing home sales rose 2% to a 7.29 million annual pace last month, the second-highest level on record, the National Association of Realtors said yesterday. The median price rose 15.8% to a record $220,000 and the supply of homes for sale increased.

– Bloomberg News

GREENSPAN POINTS TO ‘SPECULATIVE ACTIVITY’ IN HOUSING MARKET

The jump in sales of second homes suggests the recent surge in housing prices is being driven more by speculation than it has in the past, the Federal Reserve chairman, Alan Greenspan, said. Sales of vacation houses, or homes that aren’t always occupied by owners, are “arguably at historically unprecedented levels,” Mr. Greenspan said in the text of his remarks to the American Bankers Association annual convention in Palm Desert, Calif. “This suggests that speculative activity may have had a greater role in generating the recent price increases than it customarily has had in the past.”

– Bloomberg News

TECHNOLOGY

JUDGE REJECTS SETTLEMENT PLAN FOR ORACLE’S ELLISON

An agreement by the chief executive of Oracle, Larry Ellison, to pay $100 million to charities to settle a shareholder lawsuit was rejected by a California judge who said the company shouldn’t have to pay plaintiffs’ attorneys fees. Judge John Schwartz in Redwood City, Calif., rejected the settlement at a hearing today. Oracle, the world’s no. 3 software maker, would have paid lawyers for the shareholders about $24 million in fees, according to the settlement.

– Bloomberg News

PHARMACEUTICALS

PLAINTIFF IN SECOND MERCK TRIAL APPEARS AT COURT

ATLANTIC CITY, N.J. – Fearing a warning about Vioxx’s cardiac risks would hurt the painkiller’s sales, Merck battled with federal regulators for two years to keep the information out of the “warnings” section of the package insert, the company’s top marketing official testified yesterday. Under questioning by plaintiff’s attorney Chris Seeger, David Anstice said Merck forecast a $500 million drop in sales for the $2.5 billion-a-year blockbuster drug if Merck lost its bid to instead put information about heart attack risks in the insert’s less-urgent “precautions” section.

It was during those negotiations between Merck and the Food and Drug Administration that Frederick “Mike” Humeston suffered a heart attack, two months after he began taking Vioxx, said Mr. Seeger. Merck prevailed on the label issue, but withdrew the drug from the market last September. Mr. Humeston, a 60-year-old postal worker in Boise, Idaho, is suing Merck in the second product liability trial over Vioxx, which he blames for his September 18, 2001, heart attack. Merck, which is facing 5,000 such lawsuits, says the painkiller wasn’t to blame.

– Associated Press

IN BRIEF

Gasoline futures declined and crude oil was little changed after Hurricane Rita struck only a glancing blow to Houston’s oil hub, home to 12% of the nation’s refineries … Boeing and its striking machinists union agreed to a contract that increases pension payments and keeps workers’ medical insurance costs unchanged … Walgreen reported disappointing fourth-quarter profit growth of 1.4% after Hurricane Katrina closed stores and sales had their smallest gain in more than 10 years … Billionaire investor Warren Buffett is expected to testify in the trial of his investment firm’s lawsuit accusing the Internal Revenue Service of denying it $16.3 million in tax deductions. The trial began yesterday … Microsoft is upgrading its software to let advertisers target ads to specific audiences by age and location, matching a similar service offered by search leader Google.

– Bloomberg News and Dow Jones Newswires