Writing

ATLANTIC CITY — “You know what this town could use? Another casino.”

The new billboard along the Atlantic City Expressway pretty well sums up the attitude of this once-faded seaside resort, where a building boom is poised to transform the skyline.

Casino projects valued at upwards of $8 billion are either in the works or on the drawing board. Parts of the city’s famed Boardwalk are getting a facelift. Shoppers can browse high-end stores like Burberry and Tiffany & Co. at The Pier Shops at Caesars, a sea-green, four-level mall that stretches across the beach and into the Atlantic surf.

Two blocks inland, 100 new outlet stores — everything from AC Harley Davidson to Brooks Brothers — line the streets. Forty more shops will open this summer. Five years ago, this part of town was a retail no-man’s land.

Limits on building heights have been eased and construction cranes dot the sky, clustered around rising hotel towers. Overlooking it all, the 43-story Borgata Hotel Casino & Spa sparkles golden in the morning sun, a $1.1 billion mega resort whose wild success is spurring the city’s latest effort to reinvent itself.

“I think the time is right to take Atlantic City to the next level,” says Diane Legreide of the New Jersey Office of Economic Growth. “I see wonderful things in the future.”

Atlantic City’s first casino, Resorts International, opened its doors in 1978 and gaming revenues have grown modestly every year since, reaching $5.2 billion last year.

But the city’s monopoly on East Coast gaming ran its course in recent years and burgeoning competition from nearby states like Pennsylvania, New York and Connecticut is beginning to take a toll. Many analysts think 2007 may be the first year revenues decline.

The year has not started well. April revenues were off 10 percent at $396.8 million, the New Jersey Casino Control Commission reported. Slot revenues fell 12.3 percent for the month while table games were down 3.1 percent. For the first four months of the year, the city’s 11 casinos won $1.6 billion — a 4 percent drop from the same period last year.

Industry watchers point to Pennsylvania, which in 2004 legalized the use of as many as 61,000 slot machines across the state. Connecticut’s Mohegan Tribe opened the state’s first slots parlor in November, and the Mohegan Sun at Pocono Downs has so far exceeded expectations.

Two others — Harrah's Chester Casino & Racetrack and Philadelphia Park Casino and Racetrack — have since opened in the Keystone State, drawing day-trippers who might otherwise drive to New Jersey to play the slots. Two casinos are planned for the Philadelphia riverfront, including one backed by the Mashantucket Pequots, owners of the massive Foxwoods Resort Casino in Connecticut.

In New York, Yonkers Raceway added 1,400 slot machines in March, giving it a total of 5,500 games to make it one of the bigger casinos in the country. There’s also the looming threat of casino gambling coming to the Catskills, which could further lure away visitors. A partial smoking ban enacted by the City Council in February has also hurt Atlantic City’s gaming business.

As more gamblers choose to stay closer to home, industry analysts say Atlantic City needs to think big to set itself apart from its new rivals. Borgata, which opened its doors in 2003 and has since become the city’s most profitable resort, is leading the way.

Borgata is a joint venture between Boyd Gaming Corp. and MGM Mirage and was the city’s first major casino project in more than 13 years. Its high-end offerings like the Carina boutique and Wolfgang Puck American Grille have attracted a younger crowd that spends money not only on its gaming floors but also in its hotel, shops and restaurants.

Indeed, the industry likes the fact that just 73 percent of Borgata’s revenue comes from slots, table games and other gambling sources, compared with 80 percent city-wide. In Las Vegas, where casino operators have been quicker to diversify their offerings, gaming now accounts for only about 40 percent of revenues, according to Wachovia Capital Markets.

No longer can casinos offer just “a buffet and a slot product,” says Kevin DeSanctis, a former Mohegan Sun executive who heads the newly formed Revel Entertainment Group. “It will not work.”

DeSanctis laid out some of his company’s plans for a luxury seaside resort casino next to the Showboat Casino Hotel during an industry conference here earlier this month. The 5-million-square-foot project is still on the drawing board, but could cost about double what the Borgata did by the time it opens in 2011. Wall Street investment bank Morgan Stanley owns the 20-acre site.

“At the end of the day ... you're going to have to spend a lot of money to make an impact here,” DeSanctis says.

Pinnacle Entertainment Inc. is doing just that. The company will spend between $1.5 billion and $2 billion to tear down the 26-year-old Sands Casino Hotel, where the Copa Room once hosted big-name entertainers like Frank Sinatra, and erect a new casino in its place. Plans include a 2,000-room hotel, convention space, upscale shops and a large entertainment venue, all on 18 acres along the heart of the Boardwalk.

“Atlantic City again has to reinvent itself, and it's not done yet,” says Daniel Lee, Pinnacle’s chairman and chief executive officer. The project is due to open in 2011.

On the southern end of the Boardwalk, a local investor group that includes former Caesars Entertainment Inc. chief Wallace Barr says it wants to build a casino on 11 acres next to the Atlantic City Hilton Casino Resort. Analysts estimate a price tag of between $1.2 billion and $1.6 billion.

Next door at the Hilton, plans are in the works to spend as much as $1.2 billion to build a 1,000-room hotel tower and to double the size of the gaming floor at what was Atlantic City’s smallest casino. Gaming mogul Steve Wynn opened the luxury resort in 1980 as the Golden Nugget.

Meantime, Trump Taj Mahal, Harrah’s Atlantic City and the Borgata are spending $1.2 billion to build new hotel towers that will add 2,500 rooms when they open next year.

To be sure, not all is shiny and new in this seaside resort town of 40,000, which fell on hard times in the mid-1900s with the demise of its once-grand hotels. Visitors to the Boardwalk can still get a tattoo at Lucky Lou’s or a $20 “full-body” massage in one of the storefronts tucked between the T-shirt vendors and fortune tellers.

But signs of change abound. The New Jersey Casino Reinvestment Development Authority last fall announced a $100 million project to tidy up the Boardwalk’ façade. The work is already under way.

The CRDA, using tax dollars paid by the casinos, also helped develop The Quarter at Tropicana, a three-story complex of shops and restaurants that aims for an Old Havana feel that opened in 2003.

Just off the Boardwalk, The Walk is an urban streetscape that links the casino district to the Atlantic City Convention Center about seven blocks away. Dozens of outlet stores, restaurants and nightspots like The 40/40 Club, a $4 million upscale sports bar co-owned by Jay Z, line the streets.

Baltimore-based Cordish Co. and the CRDA developed The Walk, which is set to expand in coming months and could ultimately include residential housing and more hotel rooms.

Industry executives and analysts say a stable regulatory environment and low gaming-tax rate (9.25 percent compared to about 55 percent in Pennsylvania) are helping attract the investment needed to expand beyond slot machines and all-you-can-eat buffets. And the demographics are excellent: 36 million adults over the age of 24 live within a six-hour drive.

“The reality is that there will be competition in the region,” says Andrew Zarnett, a gaming-industry analyst at Deutsche Bank.

“The competition has convenience as their advantage. I don't underestimate that. But the guys that build destinations — true resorts like the Borgata — they will be absolute winners. There's no doubt about it.”

14 May 2007

HARTFORD — First came the petty thefts. Quarters taken from the coin jar. The filched debit card. Then came the excuses.

Next, the arrests. For selling pot to an undercover cop. For stealing cash from a dorm-room buddy.

To the half-dozen parents gathered in a basement room at the Wheeler Clinic here on a frigid February night, their children’s descent into gambling addiction was as quick as it was painful. Now the three couples find themselves thrust onto the front lines of a growing problem — parents of the first generation of kids to be bombarded by the ante-up, feel-good message of gambling.

They let The Day sit in on a counseling session on the condition that their names and the names of their children not be used in a story. Such is the stigma, they say, of youth problem gambling.

He got deeper in debt. He was playing (Internet poker) all night and sleeping all day. There were certain signs that we just totally missed. We questioned in our mind, but we never really did anything about it.

As gambling becomes anchored in the mainstream, health officials say they’re dealing with a small but growing number of adolescents and college-age kids struggling with addiction. Clinics across the state that until a couple of years ago hadn’t treated any teenagers now see a few new patients monthly.

Every month, Foxwoods Resort Casino and Mohegan Sun each turn away about 400 people under the age of 21, some of them wielding fake IDs to try to get past security guards. Counselors say older siblings or friends sometimes serve as “modern bookies,” with Internet bets made surreptitiously with a parent’s credit card.

At home, kids are barraged with poker on network and cable television, where NBC’s “Poker After Dark“ airs alongside the “World Series of Poker” on ESPN and “The World Poker Tour” on the Travel Channel. Visitors to Bravo’s Web site, Bravotv.com, can play Texas Hold ’Em for fun 24-hours-a-day if they say they are at least 18 years old.

Once, a 21st birthday meant celebrating at a bar with friends. “Now, a majority say ‘I can’t wait until I’m 21 to go to the casino,’ ” says Scott Guay, program coordinator for the Wheeler Clinic’s addiction recovery services. “It seems like there’s been a real shift in the rite of passage.”

He’s a big kid and got into the casinos pretty easily. Usually almost always went home broke. Everything he won he gave back.

Connecticut officials are starting to take notice.

The state’s Department of Education and Department of Mental Health and Addiction Services are spending $200,000 to take on the issue, money earmarked by state Sen. Andrea Stillman, D-Waterford, in last year’s state budget.

The two state agencies are teaming up with a group of Yale University scientists and the Connecticut Council on Problem Gambling to survey high school students in the state to get a better picture of how widespread gambling and other risky behaviors — like drug and alcohol use — are among teenagers. The problem gambling council, based in Guilford, is funded largely by Foxwoods and Mohegan Sun.

The survey asks students how much they are gambling, what problems they’re experiencing and what kind of prevention might be helpful to them, says Chris Armentano, director of the state Department of Mental Health and Addiction Services’ Compulsive Gambling Treatment Program in Middletown.

Another survey funded by Armentano’s program is gauging perceptions about gambling among middle school and high school students, teachers, coaches and administrators. Schools in Groton, Waterford, Norwich and Voluntown are among the 93 taking part across the state.

Combined, the data will be the most comprehensive the state has collected on the subject of adolescent gambling. Health officials hope the results will grab the attention of parents and educators when the reports are released in March.

“Gambling, at this point, is like drugs were in the mid- to late-’60s,” says Armentano. “Young people knew a heck of a lot more than adults did in terms of what kids were doing with drugs.”

For Christmas, we'd give him scratch tickets. Everybody got scratch tickets. It was fun.

Separate from the studies, health officials are borrowing a program created in Missouri called “Beat Addiction: Choose the Right Path,” aimed at raising awareness among students in grades seven through 12. They’re shopping the curriculum to health educators and school superintendents across the state.

Teens are particularly vulnerable to developing addictive behaviors as their bodies go through radical biological changes and peers and popular culture exert a stronger influence.

“A lot goes on in people's lives in adolescence,” says Dr. Marc Potenza, an assistant professor of psychiatry at Yale University School of Medicine and director of the Yale Problem Gambling Clinic.

The gambling habits of college students are also getting a closer look. The Citizens’ Task Force on Addictions in New London County has launched a three-year, $60,000 program to examine and address problem gambling at Mitchell College and Connecticut College.

The task force is one of 14 regional action councils created by the state legislature in 1989 to help communities deal with substance abuse and gambling addiction.

Michele Devine, the group’s executive director, says the survey will determine college students’ attitudes and perceptions about gambling. Those results will be used to provide services on the campuses to minimize addictions.

“It’s not about not gambling,” Devine says. “It's about being aware of the risks.”

As parents, we’d all like to just pretend it didn’t happen and go on with our lives the way they were before. But you’re really changed forever. I don’t know that you can ever have life the way it was before.

Counselors say too few people — parents, lawmakers and educators alike — are aware of those risks. Some high schools still hold casino nights. NCAA basketball pools are popular in the classroom. Parents buy lottery tickets for their children.

“The messages for the youth are all very positive, very glamorous and very attractive and seductive,” says Patricia Devendorf, program coordinator for the Bettor Choice Gambling Treatment Program at Wheeler Clinic. “There are no prevention messages about gambling.”

Politically, gambling can be a thorny issue in a state that collects millions of dollars each month from slot machines and lottery receipts. Last year, Mohegan Sun and Foxwoods alone sent $427 million to state coffers.

“Are we really going to be willing to say, ‘Hey, this isn’t the great thing we say it is?’” asks Guay, at Wheeler Clinic.

He was just throwing his whole life away. He was so into it that he didn’t realize it.

Southeastern Connecticut’s two casinos say they’re serious about keeping minors off their gaming floors. Kids under 21 try to gain entry to Mohegan Sun’s gambling areas on an average of 2,450 times a month, a spokesman says, and the casino escorts minors off the gaming floors about 400 times a month.

Casino security officials use scanners to verify driver’s licenses. Cocktail waitresses, card dealers and slot-machine attendants are trained to keep a lookout for the underage, while surveillance cameras keep watch from above.

“We are very focused on the issues of underage gambling and drinking,” says Mitchell Etess, Mohegan Sun’s president and chief executive. “We are constantly working to reinforce our policies. It’s something we are very sensitive to and we know the population is very sensitive to.”

Contributions from the two casinos make up most of the half-million-dollar annual budget of the Connecticut Council on Problem Gambling, which among other things operates a 24-hour-a-day problem-gambling helpline, says Executive Director Marvin Steinberg. The state lottery contributes about $75,000 a year.

Meantime, young people continue to find new ways to wager on the Internet and elsewhere.

President Bush signed legislation recently that makes it illegal for a bank to transfer money to a Web site that offers gambling, but it remains to be seen if it will tame what Steinberg calls the “Wild West” culture of online gambling.

“The more forms of gambling, the more people gamble,” says Steinberg. “The more people gamble, the greater the problem gambling. It just goes hand-in-hand.”

He talks about it now. He says he would sit for hours scratching (lottery tickets) in his car. He’d meet up with his friends who’d say, ‘Come out, we’re going somewhere.’ He’d say ‘No, I’ll catch up with you later.’ Then they’d come back an hour later and the guy’d say, ‘Dude, you’ve been here two hours scratching tickets?’ And he’d say, ‘Yeah.’

18 February 2007

WASHINGTON — A divided U.S. Supreme Court Tuesday said a Florida court erred when it ordered the recount of thousands of presidential ballots in the state, handing George W. Bush a potentially decisive victory in his quest for the White House.

Seven of the justices concluded that the statewide ballot count ordered Friday by the Florida Supreme Court had constitutional problems that “demand a remedy.”

However, the justices disagreed on what that remedy should be. Five justices concluded that a recommendation by Justice Stephen Breyer — ordering a “constitutionally proper” recount with a Dec. 18 deadline, would violate Florida election law.

Instead, the majority’s decision, in Breyer’s words, was “simply to reverse the lower court and halt the recount entirely.”

“The judgment of the Supreme Court of Florida is reversed, and the case is remanded for further proceedings not inconsistent with this opinion,”the court wrote.

Tuesday’s ruling came in the form of an unsigned declaration from the court, along with five written opinions.

The high court’s ruling marks a major — and perhaps fatal — political blow to Vice President Al Gore’s presidential hopes. The Democrats have other legal challenges pending, but with time running short they appear to be long shots.

Tuesday is the date for naming Florida’s 25 electors under a provision of federal law that shields them from a challenge in Congress. The Electoral College casts votes for president Dec. 18.

The candidate who wins Florida will become the nation’s 43rd president.

In the ruling, the justices said the recount ordered by the Florida court lacked uniform standards. That meant voters would likely be treated differently depending on which county they lived in, a violation of the U.S. Constitution’s equal protection clause, they said.

“The recount mechanisms implemented in response to the decisions of the Florida Supreme Court do not satisfy the minimum requirement for non-arbitrary treatment of voters necessary to secure the fundamental right,” the unsigned portion of the ruling said.

“The want of those rules here has led to unequal evaluation of ballots in various respects,” the court added.

The issue before the justices was a decision from the Florida Supreme Court, which on a 4-3 vote Friday ordered statewide manual recounts of thousands of presidential ballots. Barely 24 hours later, the U.S. Supreme Court halted the counting and announced it would hear a Bush challenge to the state court ruling.

When the counting stopped Saturday, an unofficial tally by the Associated Press put Bush’s lead at 177 votes statewide. Six million Florida voters cast ballots on Nov. 7.

The ruling broke down like this: Chief Justice William H. Rehnquist and Justices Antonin Scalia, Clarence Thomas, Sandra Day O’Connor and Anthony M. Kennedy made up a majority that found a constitutional problem — but one that had no remedy.

Justice Breyer and Souter also had concerns with the court-ordered recount, but said those problems could be cured by setting uniform standards and allowing the recount to proceed until Dec. 18, when the Electoral College meets.

Justices John Paul Stevens, Ruth Bader Ginsburg, David H. Souter and Stephen Breyer filed dissents, which made up most of Tuesday’s opinion.

Indeed, Stevens wrote a blistering appraisal of the majority’s ruling, saying it showed a unstated lack of confidence in the impariality of state judges who decide whether recounts should be held.

“Time will one day heal the wound to that confidence that will be inflicted by today’s decision,” Stevens wrote, joined by Ginsburg and Breyer.

“One thing, however, is certain. Although we may never know with complete certainty the identity of the winner of this year’s presidential election, the identity of the loser is perfectly clear,” he added. “It is the nation’s confidence in the judge as an impartial guardian of the rule of law.”

Chief Justice Rehnquist and Justices Scalia and Thomas filed a separate concurring opinion, concluding that they had even more problems with the Florida recount.

They contended that the state high court’s interpretation of Florida election statues “distorted them beyond what a fair reading required, in violation of Article II” of the constitution, which says legislatures have the authority to select electors.

They also argued that it violated federal law that provides electors a “safe harbor” from congressional challenge if the vote is held under laws enacted before election day.

The Florida court “significantly departed from the statutory framework in place on November 7, and authorized open-ended further proceedings which could not be completed by December 12, thereby preventing a final determination by that date,” they said.

Gore attorney David Boies argued Monday that the state court was simply interpreting the Florida election law “according to the legislature’s designated ‘manner’” for choosing the state’s 25 electors.

While the justices sent the case back to the Florida high court for further proceedings, it appeared that the order was simply boilerplate language that would have no practical impact.

In a dissent, Justices Breyer and Souter said the court should have sent the case back to Florida with instructions to set uniform procedures for a recount.

“To recount these manually would be a tall order, but before this court stayed the effort to do that the courts of Florida were ready to do their best to get that job done,” Souter wrote. “There is no justification for denying the state the opportunity to try to count all the disputed ballots now.”

The U.S. Supreme Court on Saturday halted the recount while it considered Gov. Bush’s appeal. The justices heard arguments in the case barely 48 hours before issuing Tuesday’s ruling.

Justice Ginsburg also filed a dissent, in which Stevens, Souter and Breyer joined in part.

“The extraordinary setting of this case has obscured the ordinary principle that dictates its proper resolution: Federal courts defer to state high courts’ interpretations of their states’ own laws,” she wrote.

Justice Breyer, in a separate dissent, worried that the appearance of the court’s split decision in the highly politicized case could undermine the public’s confidence in the court itself.

“That confidence is a public treasure,” Breyer wrote. “It has been built slowly over many years, some of which were marked by a Civil War and the tragedy of segregation. It is a vitally necessary ingredient of any successful effort to protect basic liberty and, indeed, the rule of law itself.”

The case is Bush vs. Gore, 00-949.

12 December 2000

WASHINGTON — Weighing a historic appeal that could decide the presidency, several U.S. Supreme Court justices Monday seemed skeptical of a Florida court ruling that ordered the recount of thousands of contested Florida election ballots.

Some justices worried that the recount standards varied from county to county and expressed concern that ballots might be treated differently depending on were a voter lived.

“That’s bothering a lot of us here,” said Justice David H. Souter, who’s often aligned with the court’s more liberal jurists.

Still, it was far from clear how the justices will decide the case. Souter and Justice Stephen Breyer early on in the session wondered aloud whether the case could be returned to the Florida courts with instructions to adopt a uniform ballot counting standard.

Attorneys for Texas Governor George Bush and Vice President Al Gore sought to make their respective cases during 90 minutes of oral argument, the second time this month that the nation’s high court has meet in an extraordinary session to consider disputed presidential ballots.

At issue is a decision from the Florida Supreme Court, which on a 4-3 vote Friday ordered statewide manual recounts of thousands of presidential ballots. Barely 24 hours later, the U.S. Supreme Court halted the counting and announced it would hear a Bush challenge to the state court ruling.

Bush’s attorney, Theodore Olson, argued that Florida’s high court ruling ran afoul of the U.S. Constitution and federal law when it ordered statewide recounts. David Boies, who represents Gore, urged the justices to allow the hand counts to resume.

A ruling in the case, Bush vs. Gore, 00-949, could come quickly.

Arguing for the Texas governor, Olson told the justices that the state high court “issued a new, wholesale, post-election revision of Florida election law” when it ordered statewide recounts.

Federal law provides a “safe harbor” that protects state electors appointed under laws in existance prior to election day. And Article II, Section 1 of the U.S. Constitution says that each state shall appoint its electors “in such a manner as the legislature thereof may direct.”

Justice John Paul Stevens wondered aloud whether the Florida Supreme Court did indeed make significant changes to state election law.

Souter suggested that the Florida court may have simply been interpreting the statute. If that was the case, “than I don’t see how you can find an Article II violation,” he told Olson.

Justice Anthony M. Kennedy said he was troubled by the possibility that the court changed the election law after Nov. 7. He said that the Florida justices effectively shortened the period under which ballots could be “contested.”

“Seems to me that the legislature could not have done that by a statute without it being a new law,” he told Boies, suggesting that the Florida Supreme Court couldn’t either. “I’m troubled by that.”

Perhaps the most interesting scenario suggested during Monday’s extraordinary session was the possibility that the high court could craft ballot-counting standards and order the recount to continue.

The Bush camp has argued that the existing standard — based on figuring out a voter’s “intent” — is far too subjective.

Breyer asked Bush attorney Olson what standards would be fair.

“Penetration of the ballot card would be required,” Olson responded. Souter asked whether the Leon County Circuit Court — where this case was originally heard and which hears

election contests in the state — could formulate uniform recount rules.

“That would be feasible, wouldn’t it,” he asked.

“I think it would be feasible,” Olson said.

Justice Ruth Bader Ginsburg suggested that the “voter intent” standard was valid because “at least those words come from the legislature.” But Justice Sandra Day O’Connor said voters should have followed the rules in the first place and made sure their ballots were completely punched.

“Why isn’t the standard the one that voters are instructed to follow, for heaven’s sake,” O’Connor asked.

Boies, Gore’s attorney, argued that the Florida Supreme Court ruled properly when it ordered the recount. The court’s decision, he said, didn’t rewrite state election law.

Boies faced uncertain prospects during the 45 minutes he was allotted to argue Gore’s case. Five of the high court’s nine justices voted Saturday to halt the recount, with Justice Antonin Scalia saying that the majority “believe that the petitioner (Bush) has a substantial probability of success.”

There was little sign from Monday’s questioning that their positions had changed.

Scalia was joined by the court’s more conservative leaning justices: Clarence Thomas, Kennedy, O’Connor and Chief Justice William H. Rehnquist.

Stevens, Souter, Breyer and Ginsburg dissented.

“The Florida court’s ruling reflects the basic principle, inherent in our Constitution and our democracy, that every legal vote counts,” Stevens wrote.

Watching Monday’s argument was an assortment of Capitol Hill lawmakers and former White House cabinet officials. Children of Gore and Richard Cheney, the Republican vice presidential candidate, were also on hand.

The serious mood in the courtroom was broken on a couple of occasions when Miami attorney Joseph Klock twice misidentified justices to whom he was directing remarks. At one point, Scalia jumped in with a question, prefacing it by saying, “Mr. Klock, I’m Scalia.” The courtroom erupted with laughter.

11 December 2000

Pfizer Inc., stung by the loss of a potential blockbuster cholesterol drug and facing competition from generics, is likely to redouble its efforts to cut costs with layoffs and to boost its product pipeline by acquiring smaller pharmaceutical or biotechnology firms in coming months.

The nation’s largest drug maker is expected to announce new measures to shore up its balance sheet when it meets with industry analysts in New York on Jan. 22, the day it will report its fourth-quarter earnings. Among the possibilities: more reductions to its worldwide stable of 100,000 salespeople, scientists and manufacturing workers and the shuttering of additional plants.

“They’re so bloated in some areas,” said Jason Napodano, who follows the drug industry for Zacks Equity Research. “They've got all these levels of organizational structure between the CEO and the guys in the lab that they’ll probably look to streamline that.”

Jeffrey Kindler, a corporate lawyer tapped in July to remake the drug company, faces some difficult challenges in his new job as chairman and chief executive. In early December, Pfizer was forced to scrap its promising cholesterol drug torcetrapib after an unexpected number of deaths and other complications in a clinical trial.

Moreover, Pfizer must contend with growing competition from makers of generic drugs. Several of the company’s drugs, with combined annual sales of $14 billion, have lost or will lose patent protection from 2003 to the end of this year. Lipitor, the company’s top drug with sales of about $13 billion last year, faces generic competition in 2011.

There are some bright spots for Pfizer. The company is flush with cash, estimating that it will have $34 billion to work with over the next couple of years. It plans to use up to $17 billion of that to continue acquiring or partnering with pharmaceutical and biotech companies with promising drugs in development.

Pfizer said it could spend as much as $10 billion to buy back stock in 2007, and analysts say it might also repay short-term debt, bolstering the bottom line. Meantime, sales of some of its newer products, like Chantix, a smoking-cessation drug, Exubera, an inhalable insulin, and Sutent, a cancer drug, are expected to grow.

“Pfizer’s drug portfolio is unmatched in terms of breadth and depth in the global drug market,” Standard & Poor’s analyst Herman B. Saftlas told clients last week. While his firm downgraded the stock to a “hold” on the torcetrapib news, Saftlas said Pfizer’s size and financial resources continue to give it important competitive advantages over its rivals.

Banc of America Securities analyst Chris Schott said in a research note last month that he was maintaining a “buy” recommendation on the stock based on the strength of its drug pipeline and because “the company’s cost-cutting abilities are under-appreciated by the market.”

But some on Wall Street worry that the drugs Pfizer has under development won’t make up for the hit it will take when Lipitor loses patent protection. The company, which spent about $7.4 billion on research and development in 2006, is desperately in need of new blockbusters, Napodano said.

“The reason that they’re in this position is because of all the generic exposure they’ve got,“ he said.

In Groton, Pfizer’s largest research facility, employees say rumors of layoffs are swirling in anticipation of the Jan. 22 presentation to Wall Street analysts.

The company has already announced the closure of its Groton manufacturing plant, which will eliminate 300 jobs. That site could become home to additional research operations, Pfizer officials have said.

Shuttering the Groton plant was part of broader restructuring, dubbed “Adapting to Scale,” which Pfizer launched in 2005 to trim $4 billion in annual costs over the next several years. In November, Pfizer reduced its U.S. sales force by 20 percent, or 2,200 jobs.

Kindler has vowed to refocus on cost cutting to create a leaner, more nimble company, and analysts expect that to accelerate with the loss of torcetrapib.

Indeed, it was torcetrapib that the company was banking on to fill the void when Lipitor goes “off-patent” in 2011. The prospective drug, developed in Groton, would be combined with Lipitor to raise the body’s production of good cholesterol while reducing levels of bad cholesterol. It was seen as a potential breakthrough in the fight against cardiovascular disease.

The drug’s failure isn’t likely to damage Kindler’s credibility, because he only recently took the top position, Prudential Equity Group analyst Tim Anderson said in a report last month.

“Torcetrapib biting the dust, while clearly a negative, does remove a big source of uncertainty,” he wrote. “The next big uncertainty is (earnings per share) growth in 2011 and beyond, but that is far away and many things can change between now and then.”

14 January 2007

Southeastern Connecticut will remain home to Pfizer Inc.’s largest research-and-development operation even after it slashes its global workforce by 10 percent, or 10,000 jobs, over the next two years.

The world’s largest drug maker announced the cuts Monday as part of a broader corporate overhaul designed to shave as much as $2 billion in costs by next year. The restructuring includes closing manufacturing plants and research facilities here and abroad, and consolidating R&D work at four U.S. sites.

That means scientists in Groton will focus their research on cardiovascular diseases, infectious diseases and neuroscience. About 100 jobs related to oncology research will be moved from Groton to the company’s La Jolla, Calif., site, and cardiovascular-related research jobs in La Jolla could move to Groton.

Other R&D jobs are expected to come to southeastern Connecticut as part of the shakeup, which Chairman and Chief Executive Officer Jeffrey Kindler said will leave Pfizer better equipped to compete in a fast-changing business.

But Groton and New London, where Pfizer employs about 5,000 people, could lose other jobs when the company trims away several layers of middle management.

Pfizer spokeswoman Liz Power said the company doesn’t yet know how many jobs will be lost or gained in Groton and New London. Employees have been told to expect more details in the next couple of months.

“In terms of job numbers, it’s far too soon to say how the other shifts going on in the organization will impact Groton and New London,” Power said. She said the announcement “was very difficult for colleagues to hear.”

Employees got details of the restructuring in meetings Monday, including a midday standing-room-only gathering at the Groton campus. Later, Pfizer executives publicly unveiled the plans in a presentation to Wall Street analysts in New York, which many employees followed on the company’s Web site.

“Pfizer is a great company with a great future,” Kindler told analysts. “But we are facing significant challenges in a profoundly changing business. Fundamental change is imperative, and it must take place right now.”

Indeed, Pfizer must deal with growing competition from generic drugs as it loses patent protections on some of its top sellers. In 2011, its best-selling drug Lipitor — a cholesterol fighter that generated just under $13 billion in sales last year — will go “off-patent.”

On Monday, Kindler vowed to redouble efforts to tout Lipitor’s “unique package of benefits” and introduce campaigns in support of newer drugs like Chantix, for smoking cessation, and Exubera, an inhalable insulin. Pfizer will also step up efforts to acquire or partner with smaller companies that have promising products or technologies under development.

The centerpiece of the plan, though, is the move to cut 10,000 jobs worldwide, a figure that includes about 2,000 positions recently trimmed from Pfizer’s U.S. sales force. Manufacturing sites in Brooklyn, N.Y., and Omaha, Neb., will close, and the company also hopes to sell a plant in Feucht, Germany.

From 2003 to 2008, Pfizer will have cut its worldwide manufacturing sites from 93 to 48.

Pfizer also said it will close three U.S. research sites in Michigan, including one in Kalamazoo, where the company will keep a large manufacturing and animal health operation. Research sites in Nagoya, Japan, and Amboise, France, are also slated to close.

The savings, projected to be as much as $2 billion by next year, will allow Pfizer to shift hundreds of millions of dollars into drug discovery and development work, said John LaMattina, head of Pfizer Global Research and Development.

Some local business leaders think Groton and New London may have dodged a bullet.

“It’s good news, but it’s also a challenge,“ said Tony Sheridan, president of the Chamber of Commerce of Eastern Connecticut. “Pfizer has the potential of growing, but it will only grow if we can show the scientists of the world that this is a fabulous place to live, that we have the best schools, the best transportation systems and the best place to raise a family.”

23 January 2007

WASHINGTON — The Supreme Court Monday reaffirmed its landmark Miranda ruling, saying police should continue to abide by the 30-year practice of warning suspects of their right to remain silent.

Ruling 7-2, the justices struck down a seldom-used 1968 statute that was meant to reverse the high court’s Miranda decision two years earlier. Known as Section 3501, the law allowed prosecutors to use a voluntary confession even if police didn't warn a suspect of his Miranda rights.

Writing for the majority, Chief Justice William H. Rehnquist said the Miranda warnings — which include the right to remain silent and to have an attorney present during questioning — have a constitutional dimension that can't be undone by Congress.

“We conclude that Miranda announced a constitutional rule that Congress may not supersede legislatively,” Rehnquist wrote.

He added: “We decline to overrule Miranda ourselves.”

Much of the high-profile debate centered on whether the Miranda rules have a “constitutional dimension” that “cannot be superseded merely by legislation,” as the Justice Department argued.

Solicitor General Seth P. Waxman said Miranda was drawn from the Fifth Amendment’s protection against self-incrimination. Waxman and James W. Hundley, who represented the robbery suspect in the appeal, noted that the Supreme Court has consistently applied Miranda to cases arising in state courts. If Miranda wasn‘t based on a constitutional right, then the high court couldn’t require local police to follow its rules, they reasoned.

The justices agreed, and pointed out that Miranda has been applied by the courts for years. They said there was no reason to overrule it now.

“Miranda has become embedded in routine police practice to the point where the warnings have become part of our popular culture,” Rehnquist wrote for the majority. ”While we have overruled our precedents when subsequent cases have undermined their doctrinal underpinnings...we do not believe that this has happened to the Miranda decision.”

Rehnquist is one of the court’s more conservative justices, so it came as a surprise that he wrote the ruling upholding Miranda.

Justices Antonin Scalia and Clarence Thomas, who often find themselves aligned with the chief justice, dissented.

“Today’s judgment converts Miranda from a milestone of judicial overreaching into one of judicial arrogance,” Scalia wrote.

Section 3501 has been largely ignored over the years. But it was revived last year in a case involving a Maryland bank robbery suspect named Charles Thomas Dickerson. Dickerson had asked a judge to throw out statements he made to federal agents at an FBI field office in Washington. He said the statements were made before investigators read him his rights, in violation of Miranda.

A district court agreed.

26 June 2000

WASHINGTON — A U.S. appeals court Friday upheld a 1994 U.S. law banning assault-style weapons, rejecting a challenge by two gun makers who said they were unfairly singled out by the ban.

Navegar Inc. and Penn Arms Inc. also argued that Congress had exceeded its powers to regulate interstate commerce when it crafted the statute.

Three weapons specifically banned by the law — the Intratec TEC-9, TEC-DC9 and TEC-22 — were manufactured by Miami-based Navegar. Penn’s Street Sweeper and Striker semiautomatic shotguns were also among those banned.

An attorney for the companies, Richard E. Gardiner of Fairfax, Va., said the ruling will likely be appealed to the nation’s top court.

“The Supreme Court, particularly in the last several years, has not been loathe to remind Congress that there are limits to its powers,” Gardiner said.

The companies challenged the law in 1995, in part arguing that Congress ran afoul of the Constitution’s commerce clause by meddling in an area traditionally left to the states. The appeals panel, however, disagreed.

“Congress was well aware that there was significant interstate traffic in semiautomatic assault weapons and that state laws and existing federal firearms regulations were inadequate to control the flow of these weapons across state lines,” Circuit Judge Patricia M. Wald wrote for the panel.

The gun makers also argued that the law was an unconstitutional “bill of attainder” because it specifically singled them out for punishment without benefit of a trial.

The obscure constitutional provision was meant to protect against legislative punishments such as a death sentence or imprisonment, and laws that bar certain people — Communist Party members, for example — from specific jobs, the court noted.

“In this case, the ban on semiautomatic assault weapons raises no concern that Congress is singling out (the gun makers) for punishment because they are disloyal or disfavored,” Wald wrote. “Congress has rather singled out certain weapons as dangerous and disproportionately linked to crime.”

Wald was joined in the opinion by Circuit Judges Laurence H. Silberman and David S. Tatel.

The ban left both companies with big inventories of gun parts for weapons they could no longer make. Navegar held in its inventory more than 40,000 TEC-DC9 and TEC-22 frames and thousands of dollars in parts. Penn, based in Punxsutawney, Pa., was left with $58,000 worth of parts for its Striker 12 series of shotguns.

8 October 1999

NEW ORLEANS — A trio of Baby Bells urged a federal appeals court Thursday to uphold a ruling that scrapped key parts of the landmark 1996 telecommunications-reform law.

SBC Communications Inc. (SBC), along with Bell Atlantic Corp. (BEL) and U S West Inc. (USW), say the law unfairly hinders efforts by the regional Bell companies to enter the lucrative long-distance market. A federal judge in Texas last year agreed, and declared sections of the law unconstitutional.

“Of all the options to it, Congress selected the one the Constitution foreclosed on for 200 years,” Harvard professor Laurence Tribe told a three judge panel from the Fifth U.S. Circuit Court of Appeals here. “It seems to me Congress chose the worst of all worlds here.”

At issue is a suit filed last July by SBC, the San Antonio-based Baby Bell. SBC argued that the law amounted to an unconstitutional “bill of attainder” by singling out the regional Bells for punishment. Local carriers that were never part of the Bell system, like GTE Corp. (GTE), were free to offer long-distance calling, SBC noted.

But the nation’s top antitrust cop, Assistant Attorney General Joel Klein, said the Bells weren’t being punished by the law’s long-distance provisions. Indeed, he told the panel, the carriers got some “real tangible benefits” when Congress passed the law.

“They got some benefits, they got some burdens,” said Klein. “Now they want to connect that to a bill of attainder?”

The Federal Communications Commission, through the Justice Department, appealed the New Year’s Eve ruling from U.S. District Judge Joe Kendall of Dallas. Long-distance carriers including MCI Communications Corp. (MCIC), AT&T Corp. (T) and Sprint Corp. (FON) are backing the government’s challenge.

Kendall’s ruling would have allowed the SBC to jump into the long-distance market even before the carrier had taken steps called for in the law to open its local calling network to rivals. Kendall in February agreed to freeze his decision while the case winds its way through the appeals process.

The appeals panel heard more than an hour of arguments Thursday afternoon. The judges, all Republicans, peppered both sides with questions but offered little to signal which way they might ultimately rule.

Still, a hint of skepticism greeted some of the Bells’ arguments. In an exchange with Tribe, Circuit Judge E. Grady Jolly suggested that the long-fought legislation was welcomed by the regional Bells once it was finally passed.

“It’s like a quid pro quo,” Jolly said. “You gave up something, you got something. How can a quid pro quo ever be punishment?”

Tribe responded: “You don’t trade constitutional rights.” He said the Bells made well known their objections to the long-distance provisions in the law, but were pleased with the rest of the legislation.

9 July 1998