Updates: Airlines, El Paso, AIG

Pay cuts at Mesa Air, US Airways, Delta; restatement for El Paso; special-purpose entities created by AIG for PNC; Whitehall settles with U.S. Attorney's Office, civil plaintiff; Royal Ahold admits that it used documents improperly.


• Mesa Air Group Inc. is the latest airline to cut the pay of senior managers; on Friday the company announced that it will reduce their salaries by 23 percent. Bankrupt US Airways Group Inc. and its pilots agreed on about $300 million in pay and benefit reductions, according to Bloomberg; it is still negotiating with flight attendants, and customer-service personnel, and reservation agents. Earlier last week Delta Air Lines Inc. instituted an across-the-board pay reduction of 10 percent for executives, supervisory and administrative personnel, and front-line employees, with smaller reductions for some entry-level posts.

• Following an overstatement of its proved natural-gas reserves by 41 percent, El Paso Corp. finally released its long-awaited restatement. For 2001, the largest U.S. pipeline operator revised its reported profit of $93 million to a loss of $447 million. For 2002, it revised its loss of $1.47 billion to a loss of $1.75 billion.

• American International Group Inc. announced that the Department of Justice has launched an investigation into the insurance giant, on substantially the same matter covered by last month’s Wells notice served by the Securities and Exchange Commission. The Justice Department and the SEC are looking into deals marketed to PNC Financial Services Group by a unit of the insurer. In 2002, reported the Associated Press, the commission found that AIG helped PNC create three special-purpose entities to remove $762 million of underperforming loans and volatile venture-capital investments from PNC’s balance sheet.

• Whitehall Jewellers Inc. announced that it agreed to pay a total of $13 million to settle a probe by the U.S. Attorney’s Office for the Eastern District of New York and a lawsuit by Capital Factors Inc. Whitehall was one of 14 defendants in the suit. Capital Factors had alleged that Cosmopolitan Gem Corp., a former vendor, defrauded Capital into advancing funds to the vendor by misrepresenting its finances and profitability. Capital had also alleged that Whitehall and other jewelry retailers helped or participated in the alleged fraud.

Last year, Whitehall also announced the Securities and Exchange Commission had undertaken a formal inquiry; according to the company, it has “fully cooperated with the SEC in connection with this formal investigation.”

• Dutch supermarket conglomerate Royal Ahold has admitted that it improperly used documents in reporting its results, according to The New York Times, and agreed to pay $9.9 million to avoid criminal prosecution. Last week, the Dutch public prosecutor’s office issued a statement saying that it was convinced Ahold, under its previous management, had committed offenses including “the publication of a false balance sheet, deception of the public,” forgery, and defrauding the auditor, the Times added.

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