Business Digest

ERNST FACES CONFLICT CHARGE: Ernst & Young was charged by regulators with compromising the independence of its audits of PeopleSoft Inc. by entering a business venture with the software company. The Securities and Exchange Commission alleged that Ernst and PeopleSoft jointly developed and marketed a software product from 1994 to 2000. During this period, Ernst also was auditing the company's finances. The SEC ordered that a hearing be held on the case before an administrative law judge within 60 days to determine whether sanctions should be imposed on Ernst & Young. Ernst is contesting the case.

ANDERSEN TRIAL: Jurors in Arthur Andersen LLP's obstruction trial watched a video in which an Andersen partner, Michael Odom, tells audit team managers that destroying documents up to the day before litigation is filed was "great" because "whatever might have been of interest to anybody is gone and irretrievable." The video was among evidence presented by prosecutors to demonstrate Odom and Nancy Temple, an in-house Andersen lawyer, urged compliance with the policy as the Enron scandal loomed. Andersen lead attorney Rusty Hardin told reporters after testimony concluded Monday it was ironic prosecutors were building a case about document destruction with documents the firm had made an effort to save.

FORD PICKS CFO: Ford Motor Co. has lured former high-ranking executive Allan Gilmour out of retirement to serve as chief financial officer. Gilmour replaces Martin Inglis, who has been appointed group vice president of business strategy. Both moves are effective immediately. Gilmour, 67, retired from Ford in 1995 after a 34-year career that included serving as vice chairman, as a member of the office of the chief executive and on the company's board of directors. Ford shares rose 1 cent to $16.73.

ANOTHER ADELPHIA EXECUTIVE RESIGNS: Adelphia Communications Corp. reported the loss of another top executive, with the resignation Sunday of James R. Brown as vice president of finance. Adelphia founder John Rigas, company chairman and chief executive, and his son, Timothy, chief financial officer, resigned last week. The resignations came in the wake of the company's revelation that it had failed to disclose $2.3-billion in borrowing by the Rigas family and partnerships for which the company might bear liability.

KMART TALLIES COSTS: Kmart Corp. reported expenses of as much as $1.05-billion in the first-quarter as it cut prices and prepared to close stores and fire workers. The retailer had a loss of $2.42-billion last year. The discount retailer is also reviewing the compensation of executives and other aspects about how the business was run as part of its internal review of former management. Its shares rose 5 cents to $1.11.

TREASURY AUCTION: Interest rates on short-term Treasury securities were mixed in Monday's auction. The Treasury Department sold $17-billion in three-month bills at a discount rate of 1.73 percent, down from 1.75 percent last week. An additional $15-billion was sold in six-month bills at a rate of 1.90 percent, up from 1.87 percent. The new discount rates understate the actual return to investors: 1.76 percent for three-month bills and 1.946 percent for a six-month bill. In a separate report, the Federal Reserve said Monday that the average yield for one-year constant maturity Treasury bills rose to 2.40 percent last week from 2.31 percent the previous week.

Lowe's Cos. Inc.

The home improvement retailer easily surpassed Wall Street's expectations for the quarter ended May 3. Lowe's also raised its earnings expectations for the second quarter and the rest of the year. Lowe's is headquartered in Wilkesboro, N.C.

Toys 'R' Us Inc.

Cost-cutting and strong Internet sales helped the Paramus, N.J., retailer narrow its loss for the quarter ended May 4. The results were better than the consensus forecast of analysts, who expected a loss of 5 cents a share.

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