Fresh scandals topped headlines

NEW YORK — Greed is not good, but it makes for powerful headlines.

Look back at the highlights — and the depths — of business news over the past year, and it’s the alleged breaches of trust that stand out.

The still-evolving economic rebound and the stock market’s comeback were also among the biggest stories. But schemes, scandals and allegations of self-enrichment topped the news in 2003, according to U.S. newspaper and broadcast editors surveyed by The Associated Press.

They named the trading abuses in the mutual fund industry as the year’s biggest business story. The continuing parade of scandals involving a long list of companies and executives was chosen as the second most important headline.

Other stories centering on questions of trust also helped shaped the business environment over the past year, including the scandal surrounding Wall Street analysts and the furor that erupted at the New York Stock Exchange over executive pay.

Some of last year’s top stories, including a succession of interest rate cuts by the Federal Reserve and airline bankruptcies, were notably absent from this year’s list. But this marks the second consecutive year in which scandal led editors’ list of stories — even if the cast of characters changed a bit.

Here, according to the AP survey of editors, are the top 10 business stories of 2003:

1. Mutual funds abuse: They were supposed to treat all investors equally, giving individuals with small nest eggs access to professional management and instant portfolio diversity. But investigations by state and federal officials revealed that insiders and big investors were gaming the system with the help of some of the nation’s most prominent mutual fund families. Authorities fingered executives at companies including Putnam Investments, Invesco Funds, Pilgrim Baxter and Alliance Capital Management, and the scandal forced the departure of Richard Strong from the mutual fund company that bears his name.

2. Corporate scandals: How to explain a $6,000 shower curtain? Or a CEO who shows shareholders a video of himself singing a ditty called "Honk if You Love Honkytonk"? Chalk both up to another year of scandals centered on some of the nation’s most well-known business figures. A succession of probes laid out disturbing revelations about dealings centered on HealthSouth Corp. and its former CEO, Richard Scrushy; investment banking star Frank Quattrone; Former Tyco titan Dennis Kozlowski; and ImClone’s Sam Waksal and his ties to home doyenne Martha Stewart. Meanwhile, the Enron investigation entered its third year and Boeing chief Phillip Condit resigned in the wake of controversies involving the company’s defense business.

3. Economy turns: The experts said the recession was brief and ended way back in November 2001. But well into this year, businesses and workers were still waiting for evidence of a turnaround that they could believe in. The signs grew strong by fall when figures showed the economy grew add at an impressive 8.2 percent annual rate in the third quarter — the fastest pace in nearly two decades, with even the gasping manufacturing sector beginning to stir. But while the economy has begun to add a limited number of jobs, the employment market remains a major question mark.

4.Stocks rebound: Investors were battered when the market plunged in 2000, then bruised as it lurched through three years of painstaking jolts and twists. But they still found reason for faith in 2003, betting aggressively on the economy and corporate profits with money that helped the major indexes to soar.

5. Medicare overhaul: A Republican-controlled Congress, backed by President Bush, took hold of a signature issue for Democrats, pushing through legislation that will create a new prescription drug benefit for older Americans. But the measure, including huge subsidies for health insurers, drew fire from many critics, pitting factions in each party against one another and sparking outrage among some seniors who saw the AARP’s endorsement of the measure as a betrayal.

6. Wall Street research: In the frenzy of the bull market, investors made their bets, in part, by listening to the Wall Street analysts paid to study companies. But state and federal regulators, led by New York State Attorney General Eliot Spitzer, exposed widespread evidence that analysts had inflated their ratings to win firms’ favor. The investigation led to a $1.4 billion settlement with some of the nation’s largest investment firms, and hopes for reform.

7. NYSE uproar: Dick Grasso, chairman of the world’s richest financial market, tried to quell criticism in August by forgoing $48 million in accrued pay. But that still left him with nearly $140 million and he resigned when he and the exchange’s board were lambasted by regulators and traders. Grasso’s departure led to an overhaul of the board and its governance procedures, with a new CEO, John Thain of Goldman Sachs, set to take over in January.

8. Blackout whodunnit: The largest blackout in U.S. history shut power to homes and businesses from the Northeast to the upper Midwest and parts of Canada in mid-August. But even before the lights came back on, the questions began. Energy officials eventually pinned responsibility on power line failures in Ohio that investigators said should have been contained by operators at FirstEnergy Corp.

9. Prescription drugs: Fed up with high prices, U.S. consumers increasingly turned to Canadian Internet pharmacies and middlemen to buy cheaper prescription drugs. But the pharmaceutical industry struck back, cutting down on shipments to Canada while regulators worked to shut down storefront discounters.

10. China trade: Chinese factories pumped out exports, with the largest share going to U.S. consumers. The trend could lead to a $120 billion U.S. trade deficit with China next year, by far the largest ever with any country.