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By Larry O’Dell, Associated Press Writer RICHMOND, Va. — A divided Virginia Supreme Court affirmed the nation’s first felony conviction for illegal spamming on Friday, ruling that Virginia’s anti-spamming law does not violate free-speech rights.

Eds: UPDATES with reaction from Jaynes’ attorney. Moving on general news and financial services.

Jeremy Jaynes of Raleigh, N.C., considered among the world’s top 10 spammers in 2003, was convicted of massive distribution of junk e-mail and sentenced to nine years in prison.

Almost all 50 states have anti-spamming laws. In the 4-3 ruling, the court rejected Jaynes’ claim that the state law violates both the First Amendment and the interstate commerce clause of the U.S. Constitution.

“This is a historic victory in the fight against online crime,” state Attorney General Bob McDonnell said. “Spam not only clogs e-mail inboxes and destroys productivity; it also defrauds citizens and threatens the online revolution that is so critical to Virginia’s economic prosperity.”

Justice Elizabeth Lacy wrote in a dissent, saying the law is “unconstitutionally overbroad on its face because it prohibits the anonymous transmission of all unsolicited bulk e-mail including those containing political, religious or other speech protected by the First Amendment to the United States Constitution.”

Jaynes allegedly used aliases and false Internet addresses to bombard Web users with junk e-mails peddling sham products and services. The court’s majority said misleading commercial speech is not entitled to First Amendment protection.

“Unfortunately, the state that gave birth to the First Amendment has, with this ruling, diminished that freedom for all of us,” Jaynes’ lawyer, Thomas Wolf, said in a written statement. “As three justices pointed out in dissent, the majority’s decision will have far-reaching consequences. The statute criminalizes sending bulk anonymous e-mail, even for the purpose of petitioning the government or promoting religion.”

Prosecutors presented evidence of 53,000 illegal e-mails Jaynes sent over three days in July 2003. But authorities believe he was responsible for spewing 10 million e-mails a day in an enterprise that grossed up to $750,000 a month.

Jaynes was charged in Virginia because the e-mails went through an AOL server in Loudoun County, where America Online is based.

The court rejected Jaynes’ claim that Virginia’s law violates the interstate commerce clause because it regulates activity outside Virginia. Justice Steven Agee wrote that “the effects of this statute on interstate commerce are incidental and do not impose an undue burden.”

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. To report corrections and clarifications, contact Reader Editor Brent Jones. For publication consideration in the newspaper, send comments to letters@usatoday.com. Include name, phone number, city and state for verification.

Wyeth just broke it off with Belgian pharmaceutical firm Solvay on Friday. The two drug developers were supposed to team up to develop a drug to treat schizophrenia, but Wyeth suddenly decided it needed to get out. Investors also ditched Solvay; its shares slipped skidded after news of the break-up.

On Friday, the two companies announced that they’d no longer be working together to develop bifeprunox and other drugs aimed at treating schizophrenia and other psychiatric disorders. Wyeth said it decided to end the partnership after “assessing the opportunity for bifeprunox and determining it would not have sufficient commercial value for the two companies to share.” Dejected Solvay (other-otc: SVYSY - news - people ) was down 2.38 euros ($3.61), or 2.7%, to 83.25 euros ($126.41) on Euronext. Wyeth (nyse: WYE - news - people ) was also down, falling 66 cents, or 1.6%, to $41.88, in afternoon trading in New York.

The Brussels-based company is going to continue trying to make the drug work. Dr. Claus Steinborn, Solvay executive vice president for research,, said, “Solvay of course respects Wyeth’s decision…We will add the compounds again to Solvay’s portfolio and analyze all options.” Wyeth agreed to let Solvay get all development and commercialization rights in North America for bifeprunox, as well as global rights for the other compounds.

The antipsychotic drug was expected to be a real cash cow, but the U.S. Food and Drug Administration ruled last year that bifeprunox was not effective enough to be approved in light of other products in existence and development. The FDA also requested further investigation into a patient who died while participating in clinical trials. The ominous signs didn’t bode well for future sales. Solvay plans on carrying out new trials that will probably take an additional two years. It is planning to get approval in Europe starting next year.

Reuters contributed to this story.

Street Sinks On Economic Worries

On The Move: Citigroup

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Massive losses from the credit crisis have brought the world together.

On Friday, UBS reported that losses from the global credit market crisis will likely top $600 billion, with banks and brokers responsible for more than half of that.

“Our global banks team estimates total industry losses in this financial crisis should reach north of $600 billion, of which listed banks and brokers should account for ‘only’ $350 billion,” said Geraud Charpin, a credit strategist at UBS, in a note entitled: “Wide Spreads - Here To Stay.” Some $160 billion of that $350 billion has already been written off, the note said.

UBS’s report came while U.S. markets were reeling from more bad news from the financial sector and a fresh round of weak economic data, led by American International Group (nyse: AIG - news - people )’s record loss. (See: ” AIG Sparks Selling Spree”) The pain of AIG’s $11 billion in write-downs related to subprime mortgages is accentuated because Wall Street had previously viewed the company as above those problems. (See: “AIG Says House In Order”) “AIG’s $15 billion write-down is the clearest indication banks are not the only ones to suffer potential losses,” Charpin said.

More ominously, UBS also said that the impact of the crisis is likely to be stronger than currently expected. “To cut a long story short, if we had a ‘rhetoric index’ measuring the tone of messages from our economics team, it would have been dropping since last September,” the study said.

On Thursday U.S. Federal Reserve Chairman Ben Bernanke warned that some small U.S. banks might go under during the current stress, which has been prompted by housing market problems, but that the country’s banking system remained solid. (See: “Mixed Messages”)

Reuters and Thomson Financial News contributed to this article

Street Sinks on Economic Worries

On The Move: Citigroup

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FRANKFURT (AFP) - German automaker Volkswagen on Friday said its full-year 2007 net profit jumped nearly 50 percent on solid sales.

Net earnings came to 4.12 billion euros (6.3 billion dollars), surpassing the 3.95-billion-euro consensus forecast of analysts polled by Thomson Financial News.

Sales rose 3.8 percent to 108.89 billion euros from 104.87 billion in 2006, below the consensus forecast of 109.46 billion euros.

Pretax profit at 6.5 billion euros surpassed the 2006 figure of 2.009 billion and was considerably higher than the company's target of at least 5.1 billion.

Analysts had penciled in 5.70 billion.

Volkswagen proposed to raise its dividend to 1.80 euros per share from 1.25 eur per share ae year earlier.

It said that in 2008, it expected deliveries to customers to exceed the record set in 2007, with sales figures rising in Asia-Pacifc and in central and eastern Europe. Sales overall are also projected to be higher than 2007.

"The further optimization of our processes and our continued systematic cost discipline will also have a positive impact on earnings development," it said, adding operating profit should then be higher in 2008 form 2007.

VW said 2007 deliveries reached a record level of just under 6.2 million vehicles, which represents a growth of 7.9 percent.

VW was due to release its official full year results on March 13.

By Dan Caterinicchia, AP Business Writer WASHINGTON — Regulators and aircraft manufacturers are not keeping adequate tabs on the quality of plane parts made domestically and abroad, potentially raising risks for fliers, government investigators said in a report released Friday.

The Transportation Department’s inspector general’s office says the Federal Aviation Administration has failed to conduct enough audits to determine whether manufacturers’ quality-assurance systems are working.

Investigators found “widespread discrepancies” at 20 of 21 suppliers they reviewed, including the age of equipment used to make airplane parts and the frequency of product testing prior to shipping parts to airplane manufacturers.

“The pervasive nature of the discrepancies we identified indicates that manufacturers and FAA must improve their oversight processes,” the report said.

There are 15 countries — including Mexico, Portugal, Turkey, Pakistan and India — that produce parts for U.S. aircraft manufacturers without bilateral trade agreements, meaning “FAA has no assurance that these countries are providing adequate oversight of the operations of suppliers in their countries,” the report says.

The inspector general said FAA officials in December agreed with most of the findings and recommendations after seeing a draft of the report.

Recommendations include bolstering inspector training and assessing product-quality risks at suppliers that produce flight-critical parts.

Boeing (BA), Pratt & Whitney, and General Electric Aircraft Engines were among the manufacturers the federal inspectors contacted or visited during the audit that began in February 2004 and ended last November. Suppliers that were visited or contacted include Alcoa Fastening Systems and two units of Honeywell International (HON).

Boeing representatives declined immediate comment Friday afternoon.

Some lawmakers recently expressed concern about the FAA’s inspector staffing. Elsewhere, the Teamsters union and a business traveler trade group earlier this month called for a moratorium on aircraft maintenance done overseas because they say foreign locations are not properly regulated.

Contributing: AP Writer Matthew Daly

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. To report corrections and clarifications, contact Reader Editor Brent Jones. For publication consideration in the newspaper, send comments to letters@usatoday.com. Include name, phone number, city and state for verification.

The good news about January’s slowing U.S. consumer spending growth is that it wasn’t as bad as analysts had expected. However, when coupled with a relatively higher rate of inflation, the slack consumer spending points to a bigger problem. If these trends continue, many already-squeezed Americans will have trouble staying afloat because their salary bumps aren’t keeping up with the aggressive tide of U.S. inflation.

The Commerce Department announced Friday that personal income rose 0.3% in January, down from December’s 0.5% rate. The personal consumption expenditures price index measures inflation, and it went up 0.4% in January versus a 0.3% increase in the previous month. Indications of rising inflation were supported by this increase in prices for consumer products. (See “Surprise! Inflation Looking Worrisome”)

Wages and salaries were up 0.5% and disposable income, adjusted for inflation and taxes, only went up 0.1% for the second month in a row. Perhaps most ominous was that personal savings were down, falling 0.1% in January. American piggy banks have been getting leaner for the last three months.

Calvin Coolidge said, “There is no dignity quite so impressive, and no independence quite so important, as living within your means.” This feat has been getting harder for consumers and thinned wallets are going to hurt several industries vulnerable to discretionary consumer spending.

Dean Foods (nyse: DF - news - people ) is alread feeling the souring effect of short-spending consumers. The Dallas-based milk producer said it’s getting hurt by an “extremely difficult” economic environment. Its stock was down $1.11, or 4.8%, to %21.88. (See “Dean Food’s Shares Sour”)

Advertising dollars will be harder to capture in a hungry environment. Yellow pages publisher “R.H. Donnelley (nyse: RHD - news - people ) said that selling upcoming adspace is really is very challenging and have lowered its outlook Thursday. Donnelly is down $1.90, or 20.3%, to $7.44. (See “R.H. Donnelly Investors Turn Yellow” )

Consumer Spending No Reason To Leap

On The Move: Citigroup

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MUMBAI -

With an eye on upcoming elections India’s Finance Minister Palaniappan Chidambaram Friday waived farm debts and cut personal taxes, in an attempt to boost consumption amid slowing economic growth.

In his fifth annual budget presentation, the minister increased exemption limits for personal taxes to 150,000 rupees ($3,755.16), from 110,000 ($2,753.79) rupees, in a nation where only a third of the population pays taxes. He left corporate tax rates and surcharges unchanged.

Chidambaram increased the reach of the service tax, by including services companies like stock and commodity exchanges, asset management firms, clearinghouses and customized software makers.

He also increased budget outlays for the health sector by 15% and for the education sector by 20% and proposed setting up 16 new universities. Defense spending got a 10% increase.

He also cut excise duties on pharmaceutical goods–exempting AIDS drugs entirely–and small and hybrid cars and abolished duties on wireless data cards. Jewelry exports, which suffered last year as the rupee appreciated against the dollar, also got duty relief on select gems.

In the pharmaceuticals sector, Chidambaram gave tax concessions for outsourced research and development. “The budget is very positive in terms of expanding the scope of outsourced R&D, while excise reduction will benefit customers,” said Ranbaxy (other-otc: RBXZF - news - people ) Chief Executive Malvinder Singh. As to whether consumers should expect rate cuts on drugs soon, Chidambaram said, “market forces will determine that,” adding that Indian drugs were already among the lowest priced in the world.

Indian automakers were expecting some budget relief after their sales suffered last year because of tightening interest rates. Loans finance a preponderance of the passenger vehicles purchased in India.

“The budget was about populist measures, but the finance minister has shown some commitment to financial reforms” said D. K. Joshi, chief economist at Crisil, the Indian arm of ratings agency Standard and Poor’s. “He’s given a fillip to growth by reducing excise duties on key sectors like autos, and has put more money to spend into the hands of consumers.”

Chidambaram forecast that the revenue deficit will be 1% of the GDP for the fiscal year 2009, while the fiscal deficit is expected at 2.5%, down from an estimated 3.3% in this year.

Economic growth for the quarter ended Dec. 31 stood at 8.4%, compared to 8.9% in the previous quarter, the government said Friday. Last fiscal year, GDP growth was 9.6%.

Agriculture has “struck a disappointing note,” Chidambaram said in Parliament. Growth rates in the primary sector are expected to be about 2.8% for the year ending March 31. Agriculture accounts for the livelihoods of about two-thirds of India’s population, and consequentially has a powerful voting base.

Farmers don’t pay taxes in India. And on Friday, Chidambaram attempted to ensure that those in need also don’t have to repay loans. He announced a debt relief package that is expected to cost the exchequer 600 billion rupees ($15 billion), putting additional pressure on government finances.

In defense of the spending, the Harvard-educated Chidambaram pointed out that growth in India was still not all-inclusive, and this would be one way to correct the imbalance. “If we can find a way of writing off these loans and providing money to the banks, the banking system strengthens. The banks will have more money to lend and that will stimulate the economy,” he told journalists in New Delhi.

Last year, Prime Minister Manmohan Singh estimated the government’s food, fertilizer and oil subsidies were likely to exceed $25 billion. But, as the ruling coalition faces elections in five states this year and general elections that must be held before May 2009, it wants to ensure the voters are happy.

The markets, however, were none too happy with the budget, after Chidambaram hiked taxes on short-term capital gains, to 15%, from 10%. The benchmark Sensex on the Bombay Stock Exchange ended the day down 1.4%, to 17,578.72. The National Stock Exchange’s Nifty closed 1.2% to the down side, at 5,223.50.

“The measures are likely to have a short-term impact on the markets, but there’s no immediate cause for concern,” said Samiran Chakraborty, chief economist at ICICI Bank. “Though the government is indicating there could be further measures to tackle capital flows if they don’t moderate on their own.” Last year, a surge of capital inflows increased inflationary pressures, prompting the central bank to tighten interest rates. Inflation for the week ended Feb. 16 stood at a high of 4.89%, an eight-month high.

For the commodity markets, Chidambaram added a 12% service tax charge, prompting complaints from the managing director of the Multi-Commodity Exchange, Jignesh Shah. The software services industry wasn’t particularly pleased, either, with the finance minister’s refusal to extend a tax holiday. But Infosys (nasdaq: INFY - news - people ) Chief Financial Officer V. Balakrishnan qualified his criticism, noting that personal tax breaks would take the pressure off technology companies on wage hikes. And the government’s increases on education should help resolve a glaring talent shortage in India.

Consumer Spending No Reason To Leap

On The Move: Citigroup

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HONG KONG -

Even with domestic A-shares having dropped 30% from their peak recently, the outlook for China’s equities market is still clouded, in light of some 2.7 trillion yuan ($380 billion) worth of new shares this year will be introduced into a fragile market that has never experienced such volumes, Morgan Stanley forecast.

There is a reason Ping An Insurance (other-otc: PNGAY - news - people ) and other listed Chinese enterprises are rushing to conduct their massive refinancing plans despite negative investment sentiment: Two major sources of locked shares are now looming on the A-shares market horizon.

Currently, about 74.4% of the Chinese domestic A-share market, worth 24.6 trillion yuan ($3.5 trillion), is restricted from trading. These shares, mostly held by different government bodies, will be progressively released over the next five years. According to the timetable set by China’s State-Owned Assets Supervision and Administration Commission, 1.6 trillion yuan ($225 billion) worth of shares could be sold in 2008. Including the unsold A-shares carried forward from 2007, Morgan Stanley predicted the total disposable overhang this year would add up to 2.7 trillion yuan ($380 billion), accounting for 32% of the market free float.

Besides the shares being successively unlocked by different government units, institutional investors that have participated in China’s new listings in the past few years are also poised to dispose of their shares. Morgan Stanley said there were $64.5 billion worth of new shares floated in 2007, and 30.4% of those shares are locked up as IPO investments subscribed by institutions for as much as three years. Those shares will be flooding the market from 2009 onwards.

With the prospect of huge oversupply of shares diluting the equities market, Jerry Lou, China strategist of Morgan Stanley, said, “We continue to hold our bearish view.” He judged that “the pressure will actually worsen as we approach 2009, with the enormous unlocked share overhang becoming disposable in mid-year–and the pressure is likely to last until early 2010.”

From a sectoral standpoint, “financials and energy would expect the most substantial equity supply from unlocked shares compared to their respective sector free float,” Lou specified.

Consumer Spending No Reason To Leap

On The Move: Citigroup

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COLUMBUS, Ohio (AP) — Victoria’s Secret, the lingerie company that introduced the Very Sexy bra, the Fantasy Bra, and the Internet server-crashing fashion show, has become “too sexy” for its own good, its top executive says.

“We’ve so much gotten off our heritage … too sexy, and we use the word sexy a lot and really have forgotten the ultra feminine,” said Sharen Turney, Victoria’s Secret’s chief executive, in a call with industry analysts Thursday.

Victoria’s Secret was launched with the idea that Victoria was manor-born and lived in London, Turney said.

“I feel so strongly about us getting back to our heritage and really thinking in terms of ultra feminine and not just the word sexy and becoming much more relevant to our customer,” Turney said.

Turney said Victoria’s Secret has gotten younger with a strong focus on its successful Pink line of lingerie and loungewear created for college-age women, and has tried to chase those customers

Turney said Victoria’s Secret wants to increase its level of sophistication.

“We will also reinvent the sleepwear business and focus on product quality,” she said. “Our assortment will return to an ultra feminine lingerie brand to meet her needs and expectation.”

Sales at Victoria’s Secret, like many clothing retailers, have been slipping.

Victoria Secret’s parent, Limited Brands (LTD), said Wednesday that its fourth-quarter profit fell 12% and that its first-quarter earnings would come in below Wall Street expectations.

Same-store sales at Victoria’s Secret fell 2% in 2007, with sales in the fourth quarter dropping 8%.

The chain was started in San Francisco in 1977 by Roy Raymond, who said he was embarrassed trying to buy lingerie for his wife and hoped to provide a comfortable place for men to shop.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. To report corrections and clarifications, contact Reader Editor Brent Jones. For publication consideration in the newspaper, send comments to letters@usatoday.com. Include name, phone number, city and state for verification.  Enlarge By Dan MacMedan, USA TODAY

LONDON - If she truly existed, Laura Croft would have been trembling Friday in fear that for the first time in her 12-year career, she might see a pink slip. SCi Entertainment, the British video game firm that makes the Tomb Raider series, is axing a quarter of its workforce in an attempt to raise £50 million ($99 million) and plug a heavy loss it incurred in the first half of 2007.

Shares in SCi Entertainment (other-otc: SCETF - news - people ) dropped 22.3%, or 11.75 pence (23 cents), to 41 pence (82 cents), on Friday afternoon in London, as investors dismissed Chief Executive Phil Rogers’ cost-cutting strategy. Rogers said Friday that the company was culling 270 jobs in order to cut £14 million ($28 million) in annual operating costs by the end of June 2008 and would also scrap 14 games currently being developed. The company will instead focus on bigger titles like Championship Manager and Tomb Raider.

SCi Entertainment needs to raise $99 million because the costs of terminating a series of ill-conceived computer games had spiraled out of control. In the first half of 2008, it had posted a loss of more than £80 million ($159 million). Another part of the problem is competition from Nintendo, which has driven down the price of the games SCi makes for the Sony Playstation.

“SCi Entertainment is in need of serious change,” said Rogers in a press release. Rogers became chief executive of SCi in January, replacing the company’s founder, Jane Cavanagh.

In September, SCi had announced that it was in “extremely preliminary” takeover discussions with an unnamed firm. (See: “Lara Croft Has A Suitor”) The termination of those discussions, along with a profit warning by SCi Entertainment, spurred pressure from shareholders on Cavanagh to resign, which she did in January.

Analysts have said that while blockbuster games like Tomb Raider and Hitman would be attractive to potential buyers, the operational infrastructure of SCi has probably put at least some suitors off. SCi’s other problem is that it has a poor reputation for developing new high-quality games.

SCi Entertainment scored a major coup in 2006, when it acquired its much larger rival Eidos, giving it the coveted Tomb Raider games.

Oddly, alongside the job cuts, SCi Entertainment is still recruiting, albeit for its Eidos division. The company said on its Web site that it was recruiting for a number of positions at Eidos Montreal and Eidos Sweden.

Consumer Spending No Reason To Leap

On The Move: Citigroup

Read All Comments var url = “2008/02/29/tomb-raider-sci-markets-equity-cx_po_0229markets18.html”; if(validStoryForRating(url)) { if(typeof rtsUtil==”object” && typeof rtsUtil.addRts==”function”) rtsUtil.addRts(”fdcrtsid”,{comments:true,rate:true,source_type:”story”,source_id:”2008/02/29/tomb-raider-sci-markets-equity-cx_po_0229markets18.html”,z:”1″,op:”init”}); } else { document.getElementById(’fdcrtsid’).style.display = ‘none’; } function validStoryForRating(url) { var yearIsPost2005 = yearIsPast2005(url); if((url.indexOf(”feeds/”) != -1) && (url.indexOf(”/hscout/”) != -1 || url.indexOf(”/ap/”) != -1 || url.indexOf(”/options/”) || url.indexOf(”/afx/”) != -1)) { if(yearIsPost2005) return true; } else if(url.indexOf(”lists/”) != -1) { if(yearIsPost2005) return true; } else if(url.indexOf(”global/”) != -1) { if(yearIsPost2005) return true; } else if(url.indexOf(”fyi/”) != -1) { if(yearIsPost2005) return true; } else if(url.indexOf(”forbesglobal/”) != -1) { if(yearIsPost2005) return true; } else if(url.indexOf(”forbes/”) != -1) { if(yearIsPost2005) return true; } else if(url.indexOf(”video/”) != -1) { if(yearIsPost2005) return false; // video not rated YET } else if(yearIsPost2005) return true; // default story post 2005 else return false; return false; } function yearIsPast2005(url) { var parts = url.split(”/”); for(var i = 0; i = 2005) return true; } } return false; }