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TOP STORIES -- Feb. 23-28 | Week in Review

March 02, 2003

RJ Reynolds Charged

in Smuggling Case

R.J. Reynolds Tobacco Holdings Inc. and a Japan Tobacco Inc. unit were charged with fraud by Canadian police after a 4 1/2-year investigation of the smuggling of tobacco products from the United States.

Authorities filed six counts of fraud and one of conspiracy to commit fraud against three subsidiaries of R.J. Reynolds, the second-largest U.S. tobacco company, the Royal Canadian Mounted Police said.

Canadian authorities allege that from 1991 to 1996, the accused companies defrauded Canada and the provinces of Quebec and Ontario of more than $804 million in taxes and duties. The firms also are accused of supplying black-market tobacco products from Canadian factories by shipping the goods to the United States, where the companies knew they would be turned around and smuggled back into Canada to dodge taxes.

The companies charged are Japan Tobacco's JTI-Macdonald Corp., formerly known as RJR-Macdonald Inc.; and R.J. Reynolds units R.J. Reynolds Tobacco Co., R.J. Reynolds Tobacco International Inc. and Northern Brands International Inc. Several executives were also charged.

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Revised Data Show

Deeper State Recession

California's latest recession has proved to be far deeper and longer than previously estimated, the government said, with job losses at the depths of the downturn reaching 290,000 -- nearly triple what state officials had reported before.

The revisions by the state Employment Development Department show that the labor market was much weaker between spring of 2001 and early 2002, particularly in Northern California, in large part because of huge losses in the state's technology sector.

The new figures suggest California's road to recovery could be more difficult than that of the nation. The loss of high-paying high-tech jobs has wreaked havoc on the state's tax revenue.

Revised jobless figures also show that California officials understated unemployment rates in late 2002, with December's rate hitting a six-year high of 6.9%, up substantially from the 6.6% previously reported.

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VaxGen's AIDS Vaccine

Fails in Tests; Shares Fall

Shares in biotechnology company VaxGen Inc. plunged 71% last week after the company revealed that its five-year, $100-million trial of an experimental AIDS vaccine failed to protect people from the human immunodeficiency virus.

The failure of the largest human trial yet for an HIV vaccine throws VaxGen's future into question. The Brisbane, Calif.-based company has no licensed products and has only about seven months of cash remaining.

VaxGen's management said its ability to tap investors for additional financing would depend largely on the results of a second, smaller vaccine trial that is winding up in Thailand. But investors expressed impatience with VaxGen as the company's shares hit a 52-week low. They closed Friday at $3.76 on Nasdaq.

"The disappointment comes from working in AIDS. This is no doubt a challenging little bug," VaxGen President Donald P. Francis said.

VaxGen also is at work on vaccines for smallpox and anthrax.

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PUC Orders Probe of

Sempra-Owned Utilities

A divided state Public Utilities Commission ordered an investigation of whether two Southern California utilities put the interests of their parent company ahead of their customers.

The commission voted 3 to 2 to examine whether Southern California Gas Co. and San Diego Gas & Electric Co. sought to maximize the profit of parent company Sempra Energy at the expense of ratepayers. If commissioners find that ratepayers were harmed, the result could be a toughening of PUC rules.

Critics have said that Sempra's operations create situations in which actions that benefit shareholders could cost consumers more money.

Sempra officials said their utilities and other business units have worked to avoid conflicts of interest and improper sharing of information.

"There was no new evidence a proceeding like this was merited," spokesman Doug Kline said.

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Peregrine Chairman

and 3 Directors Resign

Peregrine Systems Inc. Chairman John J. Moores and three other members of the software maker's five-member board resigned in a deal aimed at clearing the air with creditors and moving the company's bankruptcy reorganization case along.

Moores, owner of the San Diego Padres baseball team, and the outside directors stepped down Friday, when the firm submitted audited financial statements to U.S. Bankruptcy Court.

The company reduced by $509 million its reported revenue for the period from April 1, 1999, through Dec. 31, 2001, because of accounting irregularities.

Revenue of $1.34 billion was originally reported for that period, Peregrine said. The company said it lost $11.36 a share in the fiscal year ended March 31, 2002, $13.32 a share for fiscal 2001 and $2.12 the previous year.

Peregrine, based in San Diego, filed for Chapter 11 bankruptcy protection in September. Creditors have been fighting in recent months to replace Moores and the other board members with an independent trustee.

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More Investors Throw In

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