Business briefs for April 20, 2004

Tuesday, April 20, 2004 | 11:18 a.m.

Scheid to replace Whiston as CEO

Janus Capital Group Inc. said Chief Executive Mark Whiston is stepping down as the U.S. mutual fund company struggles to settle allegations that it permitted improper trading that hurt investors.

Whiston, 42, is being succeeded by Steve Scheid, 50, a former Charles Schwab Corp. executive who has been chairman of Janus since January, the company said in a statement. Janus, which oversees about $150 billion for clients, also said costs from the trading investigation may include sanctions and fee cuts, and have a "material" effect on the Denver-based firm.

Janus is trying to reach settlements with New York Attorney General Eliot Spitzer, the Securities and Exchange Commission and Colorado authorities over allegations that it allowed short-term trades that may have contradicted prospectuses and reduced fund returns.

With Whitson's departure, "Janus may now be able to reach a resolution with regulators," said Geoff Bobroff, an industry consultant in East Greenwich, Rhode Island, and an ex-SEC attorney. Janus may end up paying at least $200 million, he said.

Ex-exec Druyun pleads guilty

Darleen Druyun, a former U.S. Air Force official who helped negotiate a proposed $23 billion contract to buy Boeing Co. aerial tankers months before she went to work at the company, pleaded guilty to a conspiracy charge.

Druyun, 56, who was hired by Boeing in January 2003, has been under federal investigation for discussions she had with former Boeing Chief Financial Officer Michael Sears while she was helping oversee Air Force acquisitions.

U.S. District Court Judge T.S. Ellis III accepted Druyun's guilty plea at a hearing today in Alexandria, Virginia. She faces up to six months in prison under federal sentencing guidelines.

Analyst: Kilts won't join Coca-Cola

Gillette Co.'s James Kilts will remain as chairman of the world's largest razor maker and not become the chief executive of Coca-Cola Co., according to Citigroup Inc. analyst Wendy Nicholson.

Nicholson's report to clients disputes a note Monday from Morgan Stanley analyst William Pecoriello, who said Coca-Cola's board may hire Kilts, 56, to replace Douglas Daft, 61. Daft said in February he's retiring by the end of the year.

Shares of Gillette yesterday dropped 3.9 percent on concern Kilts may depart, while Coca-Cola added 2.1 percent.

Nicholson said Kilts is likely to stay at Gillette because he extended his contract last month through January 2006.

Gillette spokesman Eric Kraus and Coca-Cola spokesman Ben Deutsch didn't immediately return calls. They declined to comment yesterday on Pecoriello's report.

Citi shareholders re-elect Weill

NEW YORK -- Citigroup chairman Sanford I. Weill easily survived an effort by the California Public Employees' Retirement System to unseat him at the bank's annual meeting today.

Weill and the other 14 directors on the Citi board were re-elected "by not less than 94 percent of those (votes) cast," according to Michael Helfer, Citi general counsel who served as secretary of the meeting.

Helfer declined to give the total for each director, saying the figures would be included in Citi's next filing with the Securities and Exchange Commission.

Phone company exits bankruptcy

MCI Inc.'s exit from the biggest U.S. bankruptcy leaves the company with the challenge of persuading investors it can turn around shrinking sales after shedding $35 billion of debt.

The 21-month restructuring of MCI, formerly WorldCom Inc., erased $74 billion of pretax income after an $11 billion accounting scandal drove it into bankruptcy. Ownership of MCI, the second-largest U.S. long-distance phone company, goes to bondholders including Mexican billionaire Carlos Slim.

"These guys do have to prove to bond investors, rating agencies and equity investors that it's a viable operation," said Philip Melville, head of credit research at US Bancorp Asset Management.

"When-issued" shares of the reorganized MCI, created so the stock can trade during bankruptcy, fell $1.77 to $17.98 at 11:07 a.m. today on electronic exchanges, their lowest level since they started trading in November.