TV network wary after past racial slur by celebrity chef Paula Deen

One of U.S. celebrity chef Paula Deen's employers said on Thursday it was monitoring the controversy over her admission that she has used a racial slur in the past, while Deen's own company said the cooking star does not condone racism.

In a May 17 court deposition that surfaced on Wednesday, Deen, who is white, was asked if she had used the so-called N-word, a racial epithet directed against African-Americans, to which she responded: "Yes, of course."

 

The Food Network, which broadcasts two popular shows featuring Deen and her Southern cooking, said it was keeping an eye on the flap resulting from her statements that have been widely criticized on social media.

"Food Network does not tolerate any form of discrimination and is a strong proponent of diversity and inclusion," the network said.

The videotaped deposition was taken as part of a lawsuit by a former employee of Paula Deen Enterprises, Lisa Jackson, who is suing Deen and her brother Earl "Bubba" Hiers in their home state of Georgia for racial and sexual discrimination in the workplace.

Deen said she had used the racial epithet when describing, probably to her husband, how a black man robbed a bank where she was working. She said she had used the word since, "but it's been a very long time."

The lawsuit alleges that, while discussing with Jackson plans for Hiers' 2007 wedding, Deen said she wanted a "true southern plantation-style wedding" and used the slur to describe the black men she would want serving at the wedding dressed in white shirts, black shorts and bow ties. In the deposition, Deen said she referred to the race of the servers as black.

Jackson's lawyer, S. Wesley Woolf of Savannah, did not return calls seeking comment. An attorney for Deen said the author of more than a dozen cookbooks was looking forward to her day in court and did not condone any use of racial epithets.

In a statement on Thursday about the deposition, Deen's company, Paula Deen Enterprises, said she "recounted having used a racial epithet in the past, speaking largely about a time in American history which was quite different than today.

"She was born 60 years ago when America's South had schools that were segregated, different bathrooms, different restaurants and Americans rode in different parts of the bus. This is not today," the statement added.

(Editing by Colleen Jenkins and Andre Grenon)

Gandolfini gone, 'Sopranos' may get only brief bump

A spike in sales of "The Sopranos" DVDs, downloads and merchandise based on the mafia series following star James Gandolfini's death may only be short-lived and likely won't provide much of a windfall for HBO and its parent Time Warner Inc.

Sales of DVDs on the retail site Amazon shot up in the hours immediately following the 51-year-old star's death in Italy on Wednesday. "The Sopranos: The Complete Series," which sells for $124.99 on the site, by late Thursday had jumped to second place among best-sellers from 1,463 on that list.

 

The series' first season was also ranked No. 4 on Apple's iTunes list.

"It's a one-day wonder, and it won't last," said Alan Gould, media analyst with Evercore Partners, who follows Time Warner.

Old episodes will likely generate a lot of streaming, especially since kids are home from college, but it's unlikely to last beyond four to six months, said TV consultant, Adam Armbruster, a partner with Eckstein, Summers, Ambruster and Co.

"In the past 24 hours it's gotten more press than it has ever gotten," said Armbruster. "The mass public will be curious about why this man earned so much attention. It's not a long-term thing."

HBO streams "The Sopranos" on its HBO Go service, an online service available at the moment to about 6.5 million of its subscribers, who get it as part of their subscription to a cable or satellite service.

That won't likely get them many new subscribers, said Matthew Harrigan, an analyst with Wunderlich Securities, who follows the company.

"It's a mild positive, in a wretched sort of way," he said.

HBO doesn't license the show to Netflix for streaming.

The premium cable channel sold old episodes to the cable channel A&E in 2005 for an estimated $2.5 million an episode, generating $195 million for HBO over the term of the five-year contract, according to news reports at the time.

That deal ended, and HBO hasn't said whether it intends to seek another TV contract.

USHERED IN NEW ERA

"It's not the kind of program you can show on broadcast TV. There'd be too many scenes to delete," says Bill Carroll, vice-president and director of programming for Katz Television Group, which advises TV stations and others on buying syndicated programming.

"The Sopranos" earned Gandolfini three Emmy Awards as best lead actor in a drama series and was considered by many critics the finest drama to have aired on U.S. television.

It also is credited with ushering in a new era of American TV drama, which today is flourishing across the cable spectrum. Today's line-up means less need to revert to showing oldies like "The Sopranos."

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"Cable channels have too many original programs to take it these days," said Carroll. "James Gandolfini will have his moment when people will admire his artistry, but it's likely to come at the appropriate moment at the Emmys or Oscars."

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Amazon put a picture of the show's DVD box on its site to memorialize the late actor within an hour of his passing. The retailer quickly took it down when it generated negative attention online. An Amazon spokeswoman had no immediate comment on the incident.

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Beyond "The Sopranos," there will still be opportunities to see Gandolfini in front of the camera this year and next.

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Fox Searchlight, a unit of News Corp, will be releasing "Animal Rescue," a crime drama in which he had a role.

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He and Julia Louis-Dreyfus also star in a comedy directed by veteran TV director Nicole Holofcener for which Fox Searchlight hasn't set a release date.

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HBO may have to grapple with whether to allow Gandolfini's return to the network. The actor was set to appear in "Criminal Justice," a seven-episode drama to which HBO gave the green light in May to begin production. Gandolfini, who plays an ambulance-chasing lawyer, appears only in the final minute of the show's pilot, according to the industry blog Deadline Hollywood.

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(Edited by Mary Milliken and Eric Walsh)

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UPDATE 1-U.S. senator says Booz Allen hired convict for classified job

Senator Bill Nelson said contractor Booz Allen Hamilton had hired an employee convicted of lying to the U.S. government for a position in which he would handle classified documents.

Nelson, a Florida Democrat, called on the Senate Intelligence Committee to conduct an investigation broadly into how contractors are handling employees with top secret clearance.

He said he is alarmed by the combination of this incident and the more recent revelation that a National Security Agency contractor who worked for Booz Allen Hamilton leaked sensitive government documents.

Nelson, in a letter to Senate Intelligence Chair Dianne Feinstein, said these incidents merit a probe "to determine more broadly how private contractors are managing the hiring and monitoring of employees who have top secret clearance from the government."

 

A spokesman for Booz Allen Hamilton declined to comment.

Nelson said he was reminded earlier this week of a situation in which Booz Allen Hamilton hired a man to work as a counter-threat finance analyst at MacDill Air Force Base in Florida.

Before being hired by Booz Allen Hamilton, the man had received one of the highest levels of security clearances despite having been previously convicted in 2008 of lying to government officials and sentenced to three years of probation, Nelson said in the letter.

The incident received media coverage in 2011. It is not clear exactly when Booz Allen Hamilton hired the man.

"Is there a pattern with these contractors that they are not minding the store?" Nelson separately told reporters.

Nelson said in his letter that he agrees with Feinstein that legislation may be needed to limit or prevent certain contractors from handling highly classified data. Feinstein last week called for that type of legislation.

He also said the Senate Intelligence Committee should probe how private contractors screen, hire and monitor employees who need top secret clearance.

UPDATE 3-Sprint raises Clearwire bid, wins key investor support

Sprint Nextel Corp raised its buyout offer for Clearwire Corp to $5 per share on Thursday and announced support from a key group of dissident shareholders, likely ending a bitter battle with rival suitor Dish Network Corp.

Sprint, currently Clearwire's majority shareholder, has been fighting publicly with Dish over Clearwire since January as both companies want Clearwire's vast trove of valuable wireless airwaves to help them compete in wireless services.

Clearwire put its support behind the latest offer, representing the second major blow in a matter of days against Dish Chairman and founder Charlie Ergen, who wants to expand his satellite TV company into the wireless market.

 

Earlier this week Ergen had to back out, at least for now, from a battle with Japan's SoftBank Corp to buy Sprint itself.

Dish declined comment on the new Clearwire offer.

Several analysts said they now expect Sprint to prevail.

"We believe Clearwire shareholders will approve the $5 offer from Sprint regardless of any new overtures from Dish," said BTIG analyst Walter Piecyk.

On top of the higher price, which gives Clearwire an enterprise value of more than $14 billion - or a roughly 14 percent premium over Dish's bid, Sprint also had Clearwire change its governance rules making it harder for a rival bidder.

The changes include a break-up fee of $115 million that Clearwire would have to pay if the latest deal fails.

Clearwire shares closed up 34 cents, or 7 percent, at $5.04 on Nasdaq. Sprint shares rose 7 cents, or 1 percent, to $7.07 on the New York Stock Exchange.

MONTHS OF PRESSURE, INTENSE NEGOTIATIONS

The improved offer was the result of months of pressure from Clearwire shareholders as well as two rival bids from Dish, which first offered $3.30 per share for Clearwire in January.

Clearwire had recommended last week that shareholders accept Dish's more recent $4.40 per share offer for their shares and vote against Sprint's May offer of $3.40 per share.

Sprint said it now has support from shareholders with 45 percent of Clearwire's minority shares, just shy of the more than 50 percent it needs to take over the company.

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For example, it said it has commitments from a group of four activist shareholders that own about 9 percent of Clearwire's voting shares to support the deal.

Clearwire Chief Executive Erik Prusch said he was confident the deal can win over enough shareholders.

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"That's completely different to where we were a short time ago," said Prusch who said the offer ended several days of intense negotiations between Sprint and Clearwire. Clearwire's efforts were led by Dennis Hersch, the head of its special committee, and John Stanton, Clearwire's chairman.

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"The difference with this is that it comes with the validation of a group of our minority shareholders," Prusch said.

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The group of four shareholders - Mount Kellett Capital Management LP, Glenview Capital Management LLC, Chesapeake Partners Management Co, Inc and Highside Capital Management LP - had publicly complained about Sprint's offer priced and teamed up to negotiate for a higher price.

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The latest offer was the third time Sprint raised its bid since its first December offer to buy Clearwire's minority shares for $2.90 each..

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The latest Sprint offer came just days before Clearwire shareholders were expected to vote down its previous $3.40 per share offer.

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Clearwire postponed a June 24 shareholder vote until July 8 to give shareholders time to review the new offer.

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Shareholders had complained that Sprint's previous offer was too low even before Dish made its counterbid at the end of May. Analysts and investors told Reuters that Sprint would need to raise its bid or risk a contentious relationship with Dish as a minority shareholder.

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U.S. FDA expands "morning after" pill approval after court order

The U.S. Food and Drug Administration on Thursday expanded its approval of the so-called "morning after" contraceptive pill to include all women of child-bearing age to comply with an order from a U.S. District court.

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The FDA said the Plan B One-Step emergency contraceptive, which is sold by Teva Pharmaceutical Industries, would be made available as an over-the-counter (OTC) product without age or point-of-sale restrictions.

Plan B One-Step is a single dose pill intended to reduce the chance of pregnancy following unprotected sex or suspected contraceptive failure, such as a broken condom.

"Over-the-counter access to emergency contraceptive products has the potential to further decrease the rate of unintended pregnancies in the United States," Janet Woodcock, long-time director of the FDA's Center for Drug Evaluation and Research, said in a statement.

The FDA initially objected to, and appealed, a court decision ordering it to remove age restrictions on the pill.

Earlier this month, the agency notified a U.S. District Court judge in New York of its intent to comply with the court's April 5, order instructing it to make the emergency contraceptives available OTC without restrictions on age or point is sale, such as forcing women to ask pharmacists for the product.

The "morning after" pill was originally approved in 2009 without a prescription for women age 17 and older and as a prescription-only option for women younger than 17.

In April of this year, it was approved for nonprescription use for women as young as 15, but the court ordered age restrictions be removed for all women able to bear children.

S.Korean shipper STX Pan Ocean seeks protection from US creditors

The bulk shipper STX Pan Ocean Co Ltd filed for protection under U.S. bankruptcy law on Thursday to shield its assets from creditors in the United States, less than two weeks after filing for court receivership in South Korea.

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STX sought protection under Chapter 15 under the U.S. bankruptcy code with the federal bankruptcy court in Manhattan.

The company had previously said it needed protection because it faced "a liquidity crunch" that left it unable to obtain sufficient funds to repay its debt, which recently totaled about 5.51 trillion won (now US$4.81 billion).

 

In Thursday's filing, two court-appointed administrators for STX said the company has struggled with a shrinking profit margin amid a decline in the value of dry bulk shipping contracts. They said STX has several long-term contracts that will prove profitable and around which it intends to reorganize.

The filing seeks recognition of the Korean proceeding as a "foreign main proceeding," and to halt a variety of existing and potential litigation and claims in the United States.

Non-U.S. companies use Chapter 15 to block creditors who want to file lawsuits or tie up assets in the United States.

The case is In re: STX Pan Ocean Co, U.S. Bankruptcy Court, Southern District of New York, No. 13-12046.

UPDATE 2-Sour gas leak prompts evacuations in Alberta town

A pipeline carrying deadly sour natural gas ruptured in Turner Valley in southern Alberta on Thursday, prompting the evacuation of some of the town's 2,100 residents, the Alberta Energy Regulator said.

 

The regulator said it is working with pipeline owner Legacy Oil and Gas Inc and the local government of Turner Valley, about 60 kilometers (37 miles) southwest of Calgary, to respond to the leak. The gas contains 1 percent hydrogen sulfide.

While no injuries have been reported due to the leak, hydrogen sulfide can cause serious injury or even death at levels as small as 100 parts per million. In smaller doses, it will cause irritation to eyes, nose and throat.

"The Town of Turner Valley has evacuated some residents as a precautionary measure. Legacy Oil and Gas has enacted its emergency response plan and is taking measures to manage the incident," the regulator said in a statement.

Turner Valley and many other municipalities in southern Alberta, including the city of Calgary, had already declared states of emergency on Thursday as heavy rains swelled rivers and streams and forced the closure of the TransCanada Highway, the country's main east-west route, near Canmore, 100 kilometers west of Calgary.

Legacy Oil and Gas said in a statement the leak had been caused by impacts from trees and other debris on a flow line in rising floodwater. The line is attached to its natural gas well, Royalite 19, in the Turner Valley.

The company said it was in the process of shutting down the line at the time due to the flooding.

"The Town of Turner Valley was already evacuating residents in the area of the leak in response to the flooding. As a precaution, Legacy worked with Turner Valley emergency services to evacuate additional residents in the area," Legacy oil said.

Legacy said its own air quality monitoring had not detected levels of hydrogen sulfide that would "exceed regulated levels for public health."

UPDATE 4-Oracle's software sales disappoint, stock plummets

Oracle Corp missed expectations for software sales and subscriptions for the second straight quarter, sending its shares plunging as investors worried CEO Larry Ellison may have trouble getting the technology giant back on track.

On Thursday, Oracle executives forecast that new software sales and subscriptions will rise 0 percent to 8 percent this quarter and blamed weakness in the past quarter on disappointing sales in Asia and Latin America.

 

Oracle, which is trying to fend off Salesforce.com and other increasingly aggressive rivals focused on providing software over the cloud or Internet, plans to move its stock listing to the New York Stock Exchange in July from the Nasdaq, a major win for the older bourse.

Executives said the move was in shareholders' best interests, without elaborating. Oracle also said it would double its quarterly dividend to 12 cents a share.

"Organic growth is slowing and the company has a lot of pressures it has to deal with. They're late to the cloud and playing catch-up," said Mark Moerdler, an analyst at Bernstein. "Doubling the dividend - they're trying to deliver a message that their ability to deliver significantly more cash to investors is going to continue."

Overall, Oracle's revenue stood unchanged at $10.9 billion in the period, the company's fiscal fourth quarter, ended May 31. That missed the $11.122 billion analysts had expected on average, according to Thomson Reuters I/B/E/S.

More closely watched revenue from new software sales and Internet-based software subscriptions rose 1 percent to $4 billion, short of an average forecast of about $4.2 billion, according to FBR Capital analyst Daniel Ives.

Shares of the software company fell more than 8 percent to $30.46 after hours, after closing down 2.6 percent at $33.21 on the Nasdaq.

"This is just really bad," said Kim Forrest, a senior analyst with Fort Pitt Capital Group. "I don't really trust after-hour trading to accurately reflect what the stock will do the next day. But it shows you how frustrated shareholders are right now."

Most analysts recommend buying shares of Oracle, according to StarMine Professional, with many expecting a pickup in performance as the global economy improves and corporate customers become more willing to spend on IT.

Others say the 36-year-old tech company's era of fast growth and lofty margins, when it could dictate prices because of its premier market position, may be waning.

Smaller, aggressive companies are offering competitive products at prices that often undercut Oracle, whose strategy is to integrate cloud software with its own hardware for greater efficiency.

BY THE NUMBERS

Investors scrutinize new software sales because they generate high-margin, long-term maintenance contracts and are an important indicator of future profit. The company had forecast a 1 percent to 11 percent rise in new software license and cloud subscription revenue for its fiscal fourth quarter.

Ellison blamed Oracle's performance on the poor global economic environment. "It was clearly an economic issue, not a product, competitive issue," he told analysts on a conference call.

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Chief Financial Officer Safra Catz said deals Oracle missed in the fourth quarter did not go to competitors, but instead were put off or shrank from their original sizes. She previously blamed Oracle's rapidly expanding salesforce for a severe miss in software sales in the third quarter.

Net profit for the fourth quarter rose 10 percent to $3.8 billion, or 80 cents per share. On an adjusted basis, Oracle earned 87 cents per share.

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Revenue from Oracle's hardware division, which it acquired through the $5.6 billion purchase of Sun Microsystems in 2010, fell 13 percent to $849 million.

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Oracle had forecast that hardware product revenue for the May quarter would fall between 12 percent and 22 percent.

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The division's revenue has fallen every quarter since Oracle closed the Sun deal, but Ellison said in December he expected hardware systems revenue to start growing in the May quarter.

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UK cost agency turns down Sanofi bowel cancer drug

Sanofi's new bowel cancer drug Zaltrap is not worth using on Britain's state health service given its high price, the country's healthcare cost watchdog said on Friday.

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The National Institute for Health and Clinical Excellence (NICE) said the medicine was clinically effective but it could not be considered a cost-effective use of National Health Service resources - even though Sanofi offered a discount.

 

The draft decision, which is now open to consultation, will be a disappointment for the French drugmaker and its U.S. biotech partner Regeneron Pharmaceuticals. It is not a complete surprise, however, since NICE previously turned down a similar medicine, Avastin, made by Roche.

Zaltrap, like Avastin but through a different approach, blocks a protein called VEGF that tumours employ to create blood vessels that provide them with nutrients.

The cost of Zaltrap has also been in the spotlight in the United States, after doctors at New York's Memorial Sloan-Kettering Cancer Center decided last November not to use the $11,000-a-month drug. Sanofi, according to the hospital, responded by offering it to all health providers at a 50 percent discount to the wholesale price.

UPDATE 1-Testing shows big improvement in Lockheed unmanned minehunter

An unmanned minehunting vehicle developed by Lockheed Martin Corp has shown improved reliability in new tests, moving it a step closer to use on U.S. warships, the Navy said on Thursday.

An improved version of the Remote Minehunting System has completed 850 hours of testing, paving the way for 10 weeks of development and operational testing this fall, which should allow the system to go into use in 2015.

"Ultimately, this system is going to take sailors out of the minefield," Steve Lose, the Navy's program manager for the Lockheed system, told Reuters in a telephone interview.

 

Hunting for mines in harsh, murky waters is a critical mission for the Navy. It is keen to shift that work to unmanned systems and keep sailors out of harm's way. Sea mines are inexpensive weapons that are readily available to terrorists, rogue nations and potential adversaries.

Lockheed's Remote Minehunting System combines a diesel-powered, stealthy unmanned vehicle, or Remote Multi-Mission Vehicle (RMMV), with advanced sonar sensors to help Navy ships search for mines faster and more efficiently.

The RMMV sends real-time visual images back to the ship and allows them to be collected for future analysis.

Lose said the testing completed last week showed the equipment operated successfully much longer than expected before breaking down. The mean time between failures, an engineering term used to gauge a system's reliability, was well above the predicted 115 hours, up from 45 hours previously and far exceeding the Navy's 75-hour requirement.

The system is a key part of the mine countermeasures package planned for the Navy's new Littoral Combat Ships, smaller vessels used close to shore. Early technical and reliability issues prompted the Navy to require improvements. Delays in fielding that system, and a separate anti-submarine warfare package, have sparked concerns in Congress, which is keeping a close watch on the LCS program.

Lockheed and Australia's Austal are building two different models of the new warships, which are designed to help patrol coastal areas, find mines and chase down potential attackers.

The Navy decided three years ago to halve its planned order of RMMVs to 54, which raised the cost of each of the remaining vehicles and triggered a review. The reliability improvements were imposed as a condition for allowing the $1.4 billion program to continue.

Completion of the extensive at-sea testing of the system, coupled with a recent contract for its integration onto the new LCS warships, is good news for Lockheed.

If the next phase of testing goes well, Lockheed stands to receive orders for 44 more RMMVs in coming years, Lose said.

Lockheed said it would work closely with the Navy to get the new equipment on board the ships as quickly as possible.

"With the completion of the reliability testing, we are a big step closer to addressing the need for a safe, efficient mine warfare capability for the U.S. Navy," Steve Froelich, program director at Lockheed's mission systems unit, told Reuters in an emailed statement.

Lockheed also sees good export prospects for its LCS warship, a steel monohull which can be operated by a far smaller crew than earlier U.S. warships, said Pat Dewar, senior vice president for corporate strategy and business development.

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"LCS is an extremely capable ship, especially at that price point," Dewar told Reuters in an interview at the Paris Airshow. He said Saudi Arabia was in "close dialogue" with the U.S. Navy about buying LCS ships or larger U.S. destroyers.

The Navy plans to buy 50 of the new combat ships in coming years for a total of $34 billion. It is buying the weapons systems, including the minehunting package, separately.

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Second United Dreamliner diverted with oil-related problem

United Airlines said on Thursday one of its Boeing Co 787 Dreamliners was diverted from its trans-Atlantic flight plan because of a low oil indication, making it the second 787 flight in three days to be cut short due to an oil-related problem.

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United flight 125 from London's Heathrow airport to Houston diverted to Newark, New Jersey due to a low oil indication, United said in an emailed statement. The airline said the aircraft landed normally and without incident around 2:15 p.m. local time and customers were put on other flights.

 

The unscheduled diversion follows an incident on Tuesday, when a United 787 on its way to Tokyo from Denver was diverted to Seattle after an indication of a problem with an oil filter in an engine. That plane also landed without incident.

Boeing said the two incidents were not related.

"We will work with United and General Electric to complete the appropriate maintenance and testing activities, and return the airplane to service," Boeing said in an emailed statement. "This is not related to the issue another United airplane experienced earlier this week."

General Electric Co, the maker of the engines on United's 787s, did not immediately respond to requests for comment.

Diversions of planes due to technical problems are not uncommon, but the 787 is under the microscope due to the financial importance of Boeing's new carbon-fiber plane and its checkered production history.

The airplane was more than three years late coming off the production line and finally entered service in late 2011. It was grounded worldwide in January after lithium-ion batteries overheated on two of its jets in about a week, and only resumed commercial service in May after Boeing installed a redesigned battery system on the 50 jets in service.

Rio Tinto's says Oyu Tolgoi first exports delayed by Mongolia govt

Rio Tinto said its plan to start shipping copper from the $6.2 billion Oyu Tolgoi copper mine on Friday has been delayed at the request of the Mongolian government.

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"Oyu Tolgoi is ready to start its first shipments of copper concentrate from its Mongolian mine and all necessary permits to do so have been received from relevant authorities," Rio Tinto spokesman Bruce Tobin said.

"However, plans to start shipping on Friday 21 June have been postponed at the request of the Government of Mongolia."

 

The company, whose Turquoise Hill Resources Ltd unit owns 66 percent of the mine, had earlier planned an event to mark the first shipment on June 14 which was then rescheduled to June 21.

UPDATE 1-CME raises margins for gold as prices drop

The CME Group Inc, parent of the Chicago Board of Trade, raised initial margins for Comex gold after prices plunged to their lowest in three years on Thursday.

Gold prices plunged over 5 percent to the lowest in three years on Thursday, leading a global market rout one day after the U.S. Federal Reserve gave its most explicit signal yet that it plans to wind down the era of easy money.

The exchange operator raised Comex 100 Gold Futures (GC)initial margins for speculators 25 percent to $8,800 per contract from $7,040.

 

Spot gold hit a low of $1,276.19 an ounce on Thursday, marking its lowest level since Sept. 21, 2010. US Gold hit a low of $1,275.40.

CME also lifted Platinum futures NYMEX (PL) initial margins for speculators by 12.5 percent to $3,465 per contract from $3,080.

Platinum dropped 4.2 percent to $1,363.80 an ounce on Thursday. It touched a low of $1,355.20.

Spot gold was trading up 0.40 percent at $1,282.76 and spot platinum was trading up 0.18 percent at $1,359 by 2305 GMT.

Margin changes were effective after the close of business on Friday, June 21.

Margins are deposits paid by investors in futures markets, where full payment is made when contracts mature, to an exchange or clearing house to cover the risk of default by that investor and typically are based on the largest most-likely daily market move.

UPDATE 2-ADM says in talks to sell multi-billion dollar cocoa unit

Archer Daniels Midland Co said on Thursday it is in talks to sell its cocoa business in a further sign that the U.S. agribusiness giant is focusing on expanding its footprint in the burgeoning global grains sector.

A sale of ADM's cocoa division, one of the world's largest and estimated to be worth $2 billion, would be the second major deal in the industry in just over six months.

"We are currently engaged in discussions about the potential sale of our cocoa business," a statement said. The company is one of the four "ABCD" companies that have dominated the global trade in agricultural goods for decades.

 

The identity of potential suitors is not known, although the Illinois-based company first sounded out potential purchasers about 18 months ago and has held more discussions recently, the Financial Times reported on Thursday citing people familiar with the situation. The newspaper was the first to report the talks.

Few other details were available, but the move comes as Swiss company Barry Callebaut, the world's largest industrial chocolate maker, finalizes its $1 billion acquisition of Petra Foods' cocoa operations, tightening its grip on the global cocoa market.

Cocoa processors have been hit by weak prices for cocoa ingredients such as cocoa butter, liquor and powder due to a global oversupply.

Prices on ICE U.S. Futures hit two-month lows on Thursday of $2,152 per tonne. That is 77 percent off the all-time highs of above $3,800 in March 2011.

The move also underscores ADM's shift towards the grains sector betting on growing demand from China, the world's No. 1 wheat producer and consumer.

The company is awaiting Chinese regulatory approval for its $3 billion takeover of Australia's GrainCorp, the largest bulk grain handler on the Australian east coast.

ADM's cocoa and other processing division reported net sales of $3.7 billion in 2012, a touch higher than the year before, accounting for about 4 percent of the company's total net sales.

It said results for the segment declined $57 million to $183 million, making up 7 percent of the company's operating profit.

Cocoa production is still relatively unorganized, with farmers in West Africa, the world's biggest growing region, often operating independently on small farms.

The industry is also under more scrutiny than other food commodities for its environmental impact and sourcing of raw materials.

ADM is one of the four "ABCD" companies alongside Bunge Ltd , Cargill Inc and Louis Dreyfus Corp.

Asteroid-mining firm meets $1 million crowd-funding goal

A start-up asteroid mining firm that launched a crowd-funding campaign to gauge interest in a planned space telescope reached its $1 million goal, company officials said on Thursday.

Bellevue, Washington-based Planetary Resources intends to build and operate telescopes to hunt for asteroids orbiting near Earth and robotic spacecraft to mine them.

 

The company, whose financial backers include Google's founders, also envisions a companion educational and outreach program to let students, museums and armchair astronomers make use of the first telescrope that Planetary Resources plans to build, called Arkyd.

Three weeks ago, Planetary Resources launched a crowd-funding initiative on Kickstarter to assess interest in the project and set a goal of raising $1 million by June 30.

"It surpassed that amount Wednesday night," company spokeswoman Stacey Tearne wrote in an email.

"We currently have 12,000-plus backers who have pledged just over $1.07 million," Tearne said.

For a pledge of $25, participants can make use of a "space photo booth," by sending a picture to be displayed on the telescope so a remote camera can snap an image, with Earth in the background, and transmit it back.

For $200, participants can actually use the telescope to look at an astronomical object.

The Kickstarter campaign complements the company's ongoing efforts to design and build Arkyd. Investors include Google executives Larry Page and Eric Schmidt, as well as Ross Perot Jr., chairman of the real estate development firm Hillwood and The Perot Group.

UPDATE 2-Mongolia tells Rio Tinto to delay Oyu Tolgoi copper exports

Rio Tinto said its plan to start exporting copper from the $6.2 billion Oyu Tolgoi copper mine on Friday has been delayed at the request of the Mongolian government, ahead of a presidential election on June 26.

Journalists had been invited last week to attend a ceremony at the copper and gold mine on June 14 to mark the first exports. That was postponed to June 21, but the event was again cancelled at the last minute.

 

"Oyu Tolgoi is ready to start its first shipments of copper concentrate from its Mongolian mine and all necessary permits to do so have been received from relevant authorities," Rio Tinto spokesman Bruce Tobin said on Friday.

"However, plans to start shipping on Friday 21 June have been postponed at the request of the government of Mongolia."

The company declined to comment on what was behind the latest delay.

The event on June 14 had been postponed due to a demand from the government that Rio Tinto keep all export revenue in Mongolia, Prime Minister Norov Altankhuyag said earlier this week.

That issue has been resolved, people familiar with the situtation said. The agreement that governs the Oyu Tolgoi project gives Rio Tinto the freedom to put the export revenue anywhere it wants, they added.

Given the company's accounts in Mongolia had been temporarily frozen earlier this year, keeping funds there would not be an attractive option.

Rio, operator of the mine, has been producing at Oyu Tolgoi for several months, and has been aiming to start exports by the end of June.

"Rio Tinto is keen to start shipping as soon as possible in order for the benefits from Oyu Tolgoi to start flowing to all parties, including the people of Mongolia," Tobin said.

"Shipping will commence as soon as the gvernment indicates its support for us to do so."

Rio has said since February it would not begin exporting until it resolved disputes with the Mongolian government over royalties, costs, management fees and project financing. Rio's Turquoise Hill Resources unit owns 66 percent of the mine, with the remainder owned by the Mongolian government.

The latest delay may be to stave off controversy ahead of the presidential poll, as Oyu Tolgoi is the biggest foreign investment in the country and resource nationalism has been a major election issue.

President Tsakhia Elbegdorj, seen as more friendly to foreign investors, is expected to win re-election.

By 2020, Oyu Tolgoi is expected to boost Mongolia's economy by about a third. In the first 10 years, its annual output is expected to average 330,000 tonnes of copper and 495,000 ounces of gold.

REUTERS SUMMIT-Box's sales model evolves as "inevitable" IPO nears -CEO

Box, the closely watched data storage company, is shifting its growth strategy ahead of an initial public offering that could come in 2014, Chief Executive Aaron Levie told the Reuters Global Technology Summit.

In its early years as a scrappy startup, Levie advocated a sales strategy that sought to convince individual employees or small units within larger companies to use his service for free, before charging them for additional features.

 

The 8-year-old Mountain View, California-based company has swapped that "freemium" business model and is now investing heavily in selling directly to chief information officers at the top of the corporate hierarchy, Levie said.

He acknowledged the expense associated with such a strategy but said it was necessary.

"You get to a certain scale where that business model hits a limit. There's no way to sell to Procter & Gamble, Coke, Disney, Walmart" without a direct sales effort, Levie said at the summit in San Francisco on Wednesday. "We have to go to talk to that CIO and have a consultative process with that buyer. They might be living with that decision for the next decade."

Levie's comments are part of an ongoing debate in Silicon Valley about growth strategies for software companies that cater to businesses.

Shaken by a series of disappointing IPOs in the consumer tech sector such as Zynga Inc and Groupon Inc, investors have funneled money into enterprise-focused startups. But there has been little consensus over how exactly the industry should win customers and grow their business.

Levie, who has talked up his company's IPO prospects, said its sales have risen 100 percent over the past year, without disclosing specifics. Half of Box's employees are now in sales, he added.

The 28-year old acknowledged the threat from larger companies like Microsoft Corp and Google Inc that could use economies of scale to offer lower prices for pure storage space. But he hoped to differentiate Box by offering more industry-specific functions such as features for healthcare providers to securely share documents on the cloud, Levie said.

Levie ruled out another round of pre-IPO fundraising for Box, which had last received a $125 million capital infusion last July that valued the company at $1.2 billion.

But he called an IPO "inevitable."

"It's something that's absolutely on our mind," Levie said. "Over time we intend to probably do more acquisitions and having that public currency is helpful for that."

"But don't hold your breath about this year," he added. "Don't call your stockbroker yet."

Follow Reuters Summits on Twitter @Reuters_Summits

Gandolfini gone, 'Sopranos' may get only brief bump

A spike in sales of "The Sopranos" DVDs, downloads and merchandise based on the mafia series following star James Gandolfini's death may only be short-lived and likely won't provide much of a windfall for HBO and its parent Time Warner Inc.

Sales of DVDs on the retail site Amazon shot up in the hours immediately following the 51-year-old star's death in Italy on Wednesday. "The Sopranos: The Complete Series," which sells for $124.99 on the site, by late Thursday had jumped to second place among best-sellers from 1,463 on that list.

 

The series' first season was also ranked No. 4 on Apple's iTunes list.

"It's a one-day wonder, and it won't last," said Alan Gould, media analyst with Evercore Partners, who follows Time Warner.

Old episodes will likely generate a lot of streaming, especially since kids are home from college, but it's unlikely to last beyond four to six months, said TV consultant, Adam Armbruster, a partner with Eckstein, Summers, Ambruster and Co.

"In the past 24 hours it's gotten more press than it has ever gotten," said Armbruster. "The mass public will be curious about why this man earned so much attention. It's not a long-term thing."

HBO streams "The Sopranos" on its HBO Go service, an online service available at the moment to about 6.5 million of its subscribers, who get it as part of their subscription to a cable or satellite service.

That won't likely get them many new subscribers, said Matthew Harrigan, an analyst with Wunderlich Securities, who follows the company.

"It's a mild positive, in a wretched sort of way," he said.

HBO doesn't license the show to Netflix for streaming.

The premium cable channel sold old episodes to the cable channel A&E in 2005 for an estimated $2.5 million an episode, generating $195 million for HBO over the term of the five-year contract, according to news reports at the time.

That deal ended, and HBO hasn't said whether it intends to seek another TV contract.

USHERED IN NEW ERA

"It's not the kind of program you can show on broadcast TV. There'd be too many scenes to delete," says Bill Carroll, vice-president and director of programming for Katz Television Group, which advises TV stations and others on buying syndicated programming.

"The Sopranos" earned Gandolfini three Emmy Awards as best lead actor in a drama series and was considered by many critics the finest drama to have aired on U.S. television.

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It also is credited with ushering in a new era of American TV drama, which today is flourishing across the cable spectrum. Today's line-up means less need to revert to showing oldies like "The Sopranos."

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"Cable channels have too many original programs to take it these days," said Carroll. "James Gandolfini will have his moment when people will admire his artistry, but it's likely to come at the appropriate moment at the Emmys or Oscars."

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Amazon put a picture of the show's DVD box on its site to memorialize the late actor within an hour of his passing. The retailer quickly took it down when it generated negative attention online. An Amazon spokeswoman had no immediate comment on the incident.

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Beyond "The Sopranos," there will still be opportunities to see Gandolfini in front of the camera this year and next.

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Fox Searchlight, a unit of News Corp, will be releasing "Animal Rescue," a crime drama in which he had a role.

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He and Julia Louis-Dreyfus also star in a comedy directed by veteran TV director Nicole Holofcener for which Fox Searchlight hasn't set a release date.

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HBO may have to grapple with whether to allow Gandolfini's return to the network. The actor was set to appear in "Criminal Justice," a seven-episode drama to which HBO gave the green light in May to begin production. Gandolfini, who plays an ambulance-chasing lawyer, appears only in the final minute of the show's pilot, according to the industry blog Deadline Hollywood.

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UPDATE 2-U.S. contractor that vetted Snowden is under investigation

A U.S. government watchdog is examining a contractor that conducted a 2011 background investigation into Edward Snowden, the source of recent leaks about U.S. secret surveillance programs.

Patrick McFarland, the inspector general for the U.S. Office of Personnel Management, told lawmakers on Thursday that his office is probing USIS, a Falls Church, Virginia-based company that is the largest private provider of federal government background checks.

The USIS investigation predates the Snowden scandal, but McFarland told the homeland security subcommittee hearing that there are now concerns that USIS may not have carried out its background check into Snowden in an appropriate or thorough manner.

 

The hearing helped underscore questions lawmakers have about the widespread use of contractors in sensitive intelligence work and the oversight of those employees.

Not only is much intelligence work handled by contractors, but private contractors also conduct roughly 75 percent of federal government background checks, according to lawmakers.

Snowden, who disclosed details of the U.S. government's vast phone and Internet surveillance, was a contractor formerly employed by Booz Allen Hamilton who worked at a National Security Agency facility in Hawaii.

USIS conducts federal employee background checks for the Office of Personnel management, the government agency primarily responsible for overseeing such investigations.

"Yes, we do believe that there - there may be some problems," McFarland said of Snowden review.

Senator Rob Portman said the government has a history of flaws in how it deals with security clearances, and said it is particularly critical to properly vet contractors. "Done poorly it can be incredibly damaging," said the Republican from Ohio.

Senator Claire McCaskill described the probe into USIS as a criminal investigation into allegations the company systemically failed to adequately conduct investigations under its contract.

But USIS said in a statement that it has never been informed that it is under "criminal investigation". It said it received a subpoena for records from McFarland's office in January 2012.

"USIS complied with that subpoena and has cooperated fully with the government's civil investigative efforts," the statement said. Regarding Snowden, USIS said it does not comment on confidential background investigations.

SECURITY CONSEQUENCES

Snowden, who is believed to be hiding in Hong Kong, went public in a video released by Britain's Guardian newspaper on June 9 as the source of documents about the U.S. government's surveillance programs.

An Icelandic businessman said on Thursday he has readied a private plane to take Snowden to Iceland if the government grants him asylum.

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Snowden had a Top Secret/Sensitive Compartmented Information level clearance.

Senators at the hearing on Thursday said they were concerned about whether people receiving top secret clearances are being properly vetted.

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"It is a reminder that background investigations can have real consequences for our national security," McCaskill said of Snowden's leaks. McCaskill, a Democrat from Missouri, chairs the contracting oversight subcommittee of the Senate's Homeland Security Committee.

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McCaskill said she was worried that there appears to be a pattern of falsified background checks. She pointed to how at least 18 investigators handling the checks have been convicted of falsifying investigations since 2007.

_4">

Senators also raised concerns about a 2009 watchdog investigation that found about 87 percent of OPM investigative reports used to make clearance decisions had incomplete documentation.

_5">

Merton Miller, an official in OPM's Federal Investigative Services unit, said the high number was the result of employers not cooperating or subjects being deployed to hostile areas where investigators could not conduct interviews.

_6">

He acknowledged his agency needs clearer quality standards. "Quality is in the eye of the beholder," Miller said.

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Separately, Senator Bill Nelson on Thursday called for a Senate Intelligence Committee investigation into how contractors are handling employees with top secret clearance.

_8">

The Democrat from Florida is concerned there is a pattern of disturbing incidents. He pointed to a previous scandal in which Booz Allen Hamilton had hired an employee convicted of lying to the U.S. government for a position in which he would handle classified documents.

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Senate Intelligence Chair Dianne Feinstein has already called for legislation that would limit contractors' access to highly classified information.

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OUTSOURCING

_11">

McCaskill said USIS also has a contract to support the OPM by managing and overseeing background investigations, an arrangement she said appears to put USIS in a position of oversight of its own work. She added that the company received $200 million last year from OPM.

_12">

Security investigations for federal employees used to be conducted mainly by a large staff of full-time investigators who were civil servants at the OPM.

_13">

In 1996, the investigative functions of OPM were privatized and the resulting company, USIS, was awarded a contract with OPM to conduct background investigations for security clearances on employees of more than 95 federal agencies.

_14">

On its website, USIS says it presently has 100 federal contracts.

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USIS is owned by a larger investigative company called Altegrity, which in turn is principally owned by private equity firm Providence Equity Partners.

UPDATE 1-USDA tests grain, probes Colorado storage site in GMO wheat mystery

The U.S. Agriculture Department, probing how a genetically engineered trait entered an Oregon wheat field and the extent of the contamination, has tested a dozen wheat samples and is looking at a national seed storage facility in an effort to resolve the mystery and calm a troubled market for U.S. wheat exports, a spokesman said on Thursday.

The government has tested eight samples of seed and four grain samples and none of the more than 100 tests conducted have turned up positive for the experimental genetically engineered trait that was found contaminating the Oregon wheat field this spring, said Ed Curlett, a spokesman for the USDA.

 

Curlett said the government tested nine "pools" from each of the 12 samples for detection of as small a contamination level as 0.003 percent, or roughly one in about 30,000 kernels.

"Our ongoing investigation seeks to determine how the incident with GE wheat in Oregon occurred, and all leads are being pursued," he said.

Industry players remain on edge as the wheat harvest in the Pacific Northwest nears, and farmers fear they will have problems selling their wheat as the mystery of how the contamination happened and how widespread it is remains unsolved.

"People are so concerned," said Blake Rowe, chief executive of the Oregon Wheat Commission. "Until the customers are back, that won't change."

Rowe and another Oregon wheat representative met Tuesday with USDA officials in Washington and are writing a letter laying out for USDA what the industry and customers need to restore market stability, including a rapid test to assure supplies are free of the GMO trait. More detail from USDA on exactly what its investigation is revealing is also needed, he said.

'ROUNDUP READY' TESTS HALTED

USDA has yet to specify details on the type of wheat under suspicion after the rogue biotech wheat plants were found in April in a farm field in Oregon. The farmer who discovered the plants had been trying to kill them off with Roundup weed-killer, and when they would not die, he had them tested at Oregon State University. Those tests, and subsequent government tests, confirmed the presence of the genetically modified herbicide-resistant trait for wheat developed by Monsanto Co more than a decade ago.

Monsanto had hoped to commercialize its "Roundup Ready" wheat, but broad market opposition to biotech wheat led the company to stop field tests in 2005.

The USDA said Thursday it is investigating whether any of the experimental wheat was shipped to a government seed storage facility in Colorado. Monsanto officials said earlier this month that when the company closed its field trials, it told participants they could ship some seed materials to the Colorado facility, called the National Center for Genetic Resources Preservation.

Claire Cajacob, head of Monsanto's wheat project, said it is routine for Monsanto to store experimental seed both at its own facilities and at the government location.

The national center is designed to preserve a collection of genetic resources for U.S. agriculture and includes a small catalog of genetically altered and patented seed material from companies like Monsanto, as well as a wider selection of publicly available materials.

Officials with the center said Thursday they were uncertain whether or not they had ever received the experimental wheat in question, and the USDA's Curlett said how much, if any, seed was sent there, and if it was all accounted for, was one part of the government's investigation.

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As the probe continues, some foreign buyers continue to shy away from the western white wheat variety grown in Oregon and other states. This week marked the fourth in a row that Japan's Ministry of Agriculture avoided the U.S. western white grade in a regular weekly wheat purchase.

Japan was one of first nations to shun U.S. white wheat imports after the May 29 USDA announcement of the discovery of the genetically engineered wheat.

_2">

USDA maintains that there is no evidence that any biotech wheat has entered commercial supplies.

_3">

Plane makers squeeze suppliers as sales soar

It should be a bonanza for suppliers: $135 billion in new orders booked by Boeing ( id="symbol_BA.N_0">BA.N) and Airbus ( id="symbol_EAD.PAEAD.PA) at the Paris Airshow this week.

_1">

Yet companies that make everything from overhead bins to cockpit controls are under mounting pressure to cut prices.

 

One such company is Renton Coil Spring, which has products on the biggest world's jetliner, the Airbus A380, on Boeing's jets and even fighter aircraft including the F16.

Boeing and others are asking it to make production more efficient and to share the savings in a growing "pay-to-play" system, said Charles Pepka, CEO of the company based in Renton, Washington.

Partnering for Success is what Boeing CEO Jim McNerney calls it - a way for Boeing to help suppliers to install the same lean-manufacturing techniques Boeing is using to improve quality and speed at its own factories.

From Boeing's point of view, this helps suppliers to cut costs, and Boeing simply wants to share the gains.

But the hit to profit margin leaves suppliers bristling.

"It's like a game of poker," said Pepka. "You have to figure out if they want 15 percent or will be OK with 0.1 percent."

PRICING CONUNDRUM

Aircraft manufacturers say they have no choice. Operating margins at global commercial and defense plane and finished equipment makers averaged only 6.4 percent last year, according to a forthcoming report by Deloitte

In contrast, the profit "upstream" in the supply chain was 12.8 percent - double what the plane makers earned.

The plane makers say they can't raise their prices because they must wage a brutal sales war to keep winning orders.

Airlines can't pay more for planes because they operate on very thin profit margins, too, and do not want to raise fares for fear of choking off demand for travel.

In their drive to reduce costs, aircraft manufacturers have asked suppliers to become "super suppliers" that can perform engineering and design work on plane parts, instead of simply following blueprints drawn up by plane makers, as in the past.

Suppliers are also required to contribute to the capital cost of new planes and tool up their factories, often before they are paid.

"You get paid when it flies," said Ingrid Jorg, senior vice president at Aleris International, a global aluminum supplier based in Cleveland, Ohio. In December the company opened a $350 million aluminum mill in China, which it hopes will be cleared to produce its first aerospace material next summer.

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Suppliers also are expected to increase the speed of production to keep pace with the rising demand for jets.

_1">

The 500 new jetliners ordered in Paris this week add to a backlog of more than 9,600 aircraft waiting to be built by Boeing and Airbus. Suppliers must show they can ensure no hitches in output as factories speed up fill those orders.

_2">

CONSOLIDATION

_3">

Those demands are driving a parallel trend: consolidation.

_4">

As smaller suppliers approach these hurdles, some find they lack the financial strength and broader engineering ability they need and are forced to consider selling.

_5">

Large suppliers, meanwhile, are looking to buy smaller operators to gain technology and specialist skills.

_6">

Tom Captain, aerospace and defense leader at Deloitte, said that he spent much of his time at the Paris Airshow working with suppliers who want to sell their companies.

_7">

As for the rest, they just have to "step back and understand this is a new reality", he said.

_8">

At Renton Coil Spring, meanwhile, CEO Pepka sees the trend clearly, but he is less than enthused by managers who come in wanting to change how he does things and pay him less.

_9">

"You don't want them to run your business," Pepka said.

_10">

(Editing by David Goodman)

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New Heinz owners shake up management after takeover

H.J. Heinz Co announced the departure of 11 executives on Thursday in a management shakeup less than two weeks after its new owners, 3G Capital and Berkshire Hathaway Inc ( id="symbol_BRKa.N_0">BRKa.N), closed their $28 billion acquisition.

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The world's largest ketchup maker revealed a new management team of 11 executives, nine of whom are already with Pittsburgh-based Heinz.

 

"This announcement demonstrates the power and potential of meritocracy at work here at Heinz," said Bernardo Hees, who recently became chief executive officer after leading Burger King Worldwide Inc ( id="symbol_BKW.N_1">BKW.N), another 3G investment.

Two of the new executives have ties to 3G, a private equity firm with Brazilian roots and a reputation for aggressive cost-cutting.

One is Paulo Basilio, whose appointment as chief financial officer was announced on June 7, when the deal closed. The other is Eduardo Pelleissone, who joins as executive vice president of operations from America Latina Logistica, a Brazilian logistics company.

3G co-founder Alex Behring is also a co-founder and former CEO of America Latina Logistica. Brazilian financier Jorge Paulo Lemann, another 3G co-founder, helped put together the deals that formed beer giant Anheuser Busch InBev ( id="symbol_ABI.BR_2">ABI.BR).

Behring appeared at a Pittsburgh news conference in February to discuss the Heinz deal, and reassure anxious local crowds that the company would remain based there and would continue to support local philanthropy. He said at the time it was too soon to talk about cost cuts.

Earlier this month, Heinz said it would cut 45 jobs at a factory in Britain that produced infant milks destined for China, saying that such an arrangement was "not efficient or sustainable in the long term".

As a result, the UK factory will focus on infant milks for Europe and other products for the UK, it said.

A company spokesman declined to comment on whether there would be any job cuts in the United States. The company said successors for vacant business unit president roles will be named shortly.

(Reporting by Martinne Geller in New York; Editing by Bernard Orr)

SEC charges China MediaExpress, CEO with fraud

The Securities and Exchange Commission charged defunct company China MediaExpress and its chief executive officer on Thursday with misleading investors, the agency's latest case alleging fraud at a U.S.-listed China-based company.

The SEC alleges that China MediaExpress falsely reported increases in its business operations, profits and overall financial condition as soon as it became a publicly traded company in October 2009 through a backdoor method known as a "reverse merger."

 

Its chairman and chief executive, Zheng Cheng, also signed and attested to the accuracy of false public filings, and later tried to pay off a senior accountant who was investigating possible fraud at the company, the SEC alleged.

An attorney for the company did not immediately return a call or email seeking comment.

Nasdaq delisted the company's stock In May of 2011. The SEC deregistered its securities in March 2012.

The China MediaExpress case is the latest in a long-running crackdown by the SEC into accounting fraud at China-based companies that are listed on U.S. stock exchanges. Often the companies listed through reverse mergers with dormant shell companies.

Accounting scandals at many of these companies have prompted auditor resignations, and led the SEC to launch investigations into the companies, their executives and their auditors.

To date, the SEC said its Cross-Border Working Group has filed more than 65 fraud cases against companies or executives, and deregistered the securities of more than 50 companies.

The SEC in December charged the Chinese affiliates of Deloitte, KPMG, PricewaterhouseCoopers, BDO and Ernst & Young with violating the law by refusing to hand over documents to aid the agency's investigations.

That case is still pending, and a hearing in the SEC's administrative court on the matter is slated for July 8.

In this latest case, the SEC said China MediaExpress falsely claimed in its 2009 annual report that it had $57 million in cash on hand when it only had a cash balance of $141,000. It also misrepresented its cash balances in press releases as well.

After it misrepresented its financial condition, the SEC said the stock price tripled to more than $20 a share. The company's auditor resigned in March 2011.

The company's audit committee launched an internal investigation and hired a Hong Kong forensic accounting firm. The SEC said Zheng tried to bribe the accountant handling the probe with $1.5 million, but the accountant refused.

(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn)

VW's Audi swaps R&D chiefs as criticism grows: source

Volkswagen's ( id="symbol_VOWG_p.DE_0">VOWG_p.DE) Audi unit will swap development chiefs for a second time in less than a year, causing a stir at the luxury carmaker as it fights to close the gap with rival BMW.

Wolfgang Duerheimer, previously CEO of ultra-luxury brands Bentley and Bugatti, will be sacked 10 months after becoming Audi development chief and replaced by VW brand research head Ulrich Hackenberg, a person familiar with the matter told Reuters on Thursday.

German magazine Spiegel Online reported the latest reshuffle earlier in the day.

The departure of Duerheimer, a former Porsche executive, follows growing criticism by top managers at VW group who think their premium brand's surge is losing momentum.

Audi, which touts "advancement through technology", has become a follower of technology trends too often set by luxury-market leader BMW ( id="symbol_BMWG.DE_1">BMWG.DE) and is too dependent on China, a senior VW group executive said in a recent interview.

 

"Audi doesn't uncover new market segments and too often borrows VW group technology," said Ferdinand Dudenhoefer, head of the CAR think tank at the University of Duisburg-Essen, Germany. "Their sales slogan doesn't meet the requirements."

A spokesman for parent VW declined to comment. Audi did not return calls seeking comment.

Duerheimer's dismissal comes only 10 months after the last management shake-up at Audi forced three executives out of their jobs.

While Duerheimer stopped the planned electric versions of the two-seater R8 supercar and the diminutive A1 hatchback, BMW is preparing to launch this year its i3 electric vehicle that sports a lightweight carbon-fiber skeleton.

The i3's arrival throws Audi further behind its main rival on an alternative powertrain technology that may drive future growth and ends the brand's pioneering role in lightweight construction, said Dudenhoefer, noting Audi in 1994 launched the first premium car worldwide with a body fully made of aluminum.

Still, Audi is making good progress in sales after eclipsing Daimler's ( id="symbol_DAIGn.DE_2">DAIGn.DE) Mercedes as the world's second-biggest luxury carmaker two years ago, shrinking the gap with BMW to no more than 11,000 cars after five months this year.

Hackenberg, Duerheimer's successor, has pioneered VW's modular platform strategy that may help the German multi-brand group to hit the top of the global sales chart several years ahead of its 2018 target.

The modularity enables VW to design, engineer and build a variety of vehicle size and shapes - from a subcompact Polo hatchback to a full-size, seven-passenger crossover - at lower cost and in shorter time.

Hackenberg, a close confidante of Volkswagen CEO Martin Winterkorn, served at Audi before in various development-related positions between 2002 and 2007, assisting Winterkorn, who was then still head of the brand.

(Additional reporting by Christiaan Hetzner; Editing by Marilyn Gerlach, Elaine Hardcastle and Dale Hudson)

Perelman company reaches another settlement with government

A company owned by Ronald Perelman has agreed to pay $720,000 to settle Department of Justice charges over a stock purchase, the second time this month that the billionaire financier agreed to penalties to resolve civil charges by the federal government.

MacAndrews & Forbes Holdings agreed to make the payment to end an antitrust case over its failure to report its June 2012 purchase of more shares in Scientific Games Corp ( id="symbol_SGMS.O_0">SGMS.O), which provides lottery and gaming services, despite passing an ownership threshold requiring such reporting, the Justice Department said.

The accord follows an unrelated June 13 settlement in which Revlon Inc ( id="symbol_REV.N_1">REV.N) agreed to pay $850,000 to settle U.S. Securities and Exchange Commission charges that it deceived shareholders and independent directors about a failed 2009 transaction with Perelman to take the cosmetics company private. MacAndrews & Forbes owns more than three-quarters of Revlon.

 

Both settlements require court approval.

In Thursday's case, the government said the purchase of Scientific Games shares required Perelman's firm under the federal Hart-Scott-Rodino law to report its stake to the Justice Department and the Federal Trade Commission.

These agencies have powers to block mergers, and can demand notice when a shareholder is amassing a large stake in a company. MacAndrews & Forbes later made a corrective filing.

Christine Taylor, a MacAndrews & Forbes spokeswoman, called the failure to file a "technical and inadvertent mistake" that the company reported on its own and which involved no financial benefit. She said new safeguards are in place to avoid a repeat.

According to regulatory filings, Perelman owns roughly 38 percent of Scientific Games, whose market value was about $966 million as of Wednesday's close.

Forbes magazine in March estimated that Perelman, 70, was worth $12.2 billion, making him the world's 79th-richest person.

The case is U.S. v. MacAndrews & Forbes Holdings Inc, U.S. District Court, District of Columbia, No. 13-00926.

(Reporting by Jonathan Stempel in New York; Editing by Carol Bishopric)

Facebook rolls out video for Instagram

Facebook Inc introduced video for its popular photo sharing application Instagram in an attempt to go to head-to-head with rival Twitter.

The world's No. 1 social network said on Thursday its more than 130 million Instagram users can now record and post 15 second videos on the platform.

 

The move takes aim at Twitter's Vine video platform that allows users to record and share six-second videos.

"There's definitely a one-upmanship going on," said Brian Blau, research director, at Gartner.

Facebook Chief Executive Mark Zuckerberg and Instagram co-founder Kevin Systrom were on hand to unveil the offering at Facebook's Menlo Park, California headquarters.

Among the features of Instagram video, which works with Apple's iOS and Google Android operating system, are a video stabilization technology and spate of custom design filters.

Facebook bought Instagram for $1 billion in April 2012 as a way to keep its users hooked on new features weeks before the social media network became a publicly traded company.

Instagram is part of Facebook's mobile strategy as it seeks to get more advertising revenue.

More than 60 million people in the United States regularly watched video on their phones last year, according to research firm eMarketer. Almost 75 million are expected to do so this year.

(Reporting by Jennifer Saba in New York; Editing by Leslie Gevirtz)

Madoff trustee cannot sue big banks, U.S. court rules

The trustee seeking money for Bernard Madoff's victims suffered a big defeat as a federal appeals court rejected his bid to recover nearly $30 billion from JPMorgan Chase & Co. and other banks he accused of aiding in the swindler's fraud.

The 2nd U.S. Circuit Court of Appeals in New York said on Thursday trustee Irving Picard lacked standing to pursue a variety of claims on behalf of former Madoff customers.

 

It also said that because Picard "stands in the shoes" of the former Bernard L. Madoff Investment Securities LLC, he could not pursue other claims on behalf of the firm's bankruptcy estate over a fraud that the firm itself orchestrated.

Thursday's 3-0 decision, written by Chief Judge Dennis Jacobs, is a victory for JPMorgan, which had been Madoff's main bank, as well as Britain's HSBC Holdings Plc, Italy's UniCredit SpA and Switzerland's UBS AG.

Unless Picard successfully appeals, it also limits how much he will have to distribute to victims of Madoff's Ponzi scheme once the recovery process is complete. That process began soon after Madoff's December 11, 2008 arrest, and may last years more.

"In dollars, it's a significant defeat, and it's a shame for defrauded victims because the purpose of a trustee is to recover funds for them," said Kathy Bazoian Phelps, a partner at Diamond McCarthy in Los Angeles and co-author of: "The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes."

According to his website, Picard has so far recovered $9.35 billion, slightly more than half of the $17.3 billion of customer principal he has said was lost.

Amanda Remus, a spokeswoman for Picard, said the trustee is reviewing the decision and is still pursuing more than $4 billion of separate claims against bank defendants in the federal bankruptcy court in Manhattan.

Picard is a partner at the law firm Baker & Hostetler.

"RED FLAGS"

Thursday's decision upheld rulings by U.S. District Judges Colleen McMahon and Jed Rakoff in Manhattan, which the 2nd Circuit called "well-reasoned."

Those rulings dismissed roughly $19 billion of claims against JPMorgan, $8.6 billion of claims against defendants including HSBC and UniCredit, and $2 billion of claims against UBS and many other defendants, the 2nd Circuit said.

Picard had argued that the banks ignored "red flags" of fraud, often to win more fees and commissions for services they provided to Madoff and his firm, and should pay their "fair share" to cover victims' losses.

JPMorgan spokesman Joseph Evangelisti and UBS spokeswoman Karina Byrne said their respective banks are pleased with the decision. Marco Schnabl, a partner at Skadden, Arps, Slate, Meagher & Flom representing UniCredit, said he is also pleased with the decision. HSBC spokeswoman Juanita Gutierrez declined to comment.

"EQUITY HAS ITS LIMITS"

Citing a legal doctrine known as "in pari delicto," Jacobs said Picard could not assert claims on the firm's behalf to recover for fraud caused by the firm itself.

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He also said the federal Securities Investor Protection Act, which helps protect customers of failed brokerages, does not let Picard assert a variety of claims on their behalf.

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The 2nd Circuit also set aside Picard's contention that giving him greater power would reduce the chance of "windfalls" for Madoff's enablers and increase recoveries for victims.

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"No doubt, there are advantages to the course Picard wants to follow," Jacobs wrote. "But equity has its limits; it may fill certain gaps in a statute, but it should not be used to enlarge substantive rights and powers."

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The judge added in a footnote that "it is not obvious why customers cannot bring their own suits" against the banks.

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Phelps, the attorney and author, said there could be hurdles, including whether customers have legal standing to bring particular claims, or "can afford to litigate against large, well-funded banks."

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Picard has filed more than 1,000 lawsuits against banks and other defendants to recover more than $103 billion, a sum inflated by triple damages on some claims.

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Madoff, 75, pleaded guilty in March 2009 and is serving a 150-year sentence in a North Carolina federal prison.

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Prosecutors have estimated his Ponzi scheme was valued at $64.8 billion, reflecting amounts customers supposedly held at his firm prior to his arrest.

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The cases are In re: Bernard L. Madoff Investment Securities LLC, 2nd U.S. Circuit Court of Appeals, Nos. 11-5044, 11-5051, 11-5175 and 11-5207.

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(Reporting by Jonathan Stempel; Editing by John Wallace and Dan Grebler)

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