National business briefs for Feb. 4

Service firms grow at fastest pace in 11 months

U.S. service companies grew at the fastest pace in 11 months in January as companies started hiring to keep up with rising demand.

The Institute for Supply Management said Friday that its index of nonmanufacturing activity jumped to 56.8 percent in January from 53 percent in December. The survey's employment index soared to 57.4 percent, its highest level since February 2006. Any reading above 50 indicates expansion.

The trade group of purchasing managers surveys businesses including restaurants, hotels, retailers, financial services firms and construction companies. The service sector employs nine out of 10 U.S. workers.

American Airlines CEO: no US Airways merger

As American Airlines winds its way through bankruptcy court, CEO Tom Horton is pouring cold water on the idea of a merger with US Airways.

Doug Parker, CEO of US Airways, recently confirmed that his airline has hired advisers to examine the possibility of bringing the carriers together.

But Horton, in comments made to the Dallas Morning News editorial board Thursday, seemed to dismiss any suggestion of a merger. "This is not US Airways' first attempt at this. This is a small company very strategically limited, I would argue — not any international flying, hubs of less strategic importance," Horton said.

On Thursday, Horton pointed to US Airways' checkered past in the merger arena.

"This will be their fourth try at this: Twice for United, once for Delta while they were restructuring, now American. I would argue that this will be every bit as successful as their prior tries," Horton said.

Former CFO testifies against Texas financier

Texas financier R. Allen Stanford helped fake profits for his Caribbean bank and funnel millions of depositors' dollars to a secret Swiss bank account used for personal expenses, bribes to regulators and employee bonuses, the man who was in charge of the tycoon's books told jurors Friday.

James M. Davis, the former chief financial officer for Stanford's companies, testified the financier's bank never reported an unprofitable year because he and Stanford fabricated figures for annual reports and other documents.

Prosecutors claim Stanford bilked investors out of more than $7 billion in a massive Ponzi scheme centered on the sales of certificates of deposit from the bank on the island of Antigua.

Davis said the false numbers were meant to hide the fraud and show CDs purchased by investors were doing well and the bank itself was on solid financial footing.

"Was Stanford uncomfortable with reporting too high a (profit) number?" prosecutor William Stellmach asked Davis, the prosecution's star witness. "No," Davis said before a packed courtroom.

Stanford's attorneys contend the financier was a savvy businessman whose financial empire, headquartered in Houston, was legitimate. They have suggested Davis, who worked 21 years for Stanford, is behind the fraud.

Stanford is on trial for 14 counts, including mail and wire fraud, and faces up to 20 years in prison if convicted.

Elsewhere

• The board of directors for Micron Technology Inc. has named President and Chief Operating Officer Mark Durcan as the company's interim chief executive officer. The move came hours after CEO and Chairman Steve Appleton died in a plane crash at the airport in Boise, Idaho. Appleton was flying an experimental plane Friday morning and crashed moments after takeoff. Micron officials say the board of directors will meet this weekend to name a permanent CEO. Durcan announced last week his intention to step down in August from his executive position at the memory-chip maker.

• Hewlett-Packard Co. ushered in Meg Whitman as its CEO with a $16.5 million compensation package that hinges on the one-time politician's ability to lift the stumbling technology company's stock price during the next two years. Last year's pay consists almost entirely of 1.9 million stock options valued at $16.1 million, according to documents filed Friday. Whether Whitman ever gets an opportunity to cash in most the options will depend on whether HP's market value rises substantially from its depressed level when HP fired her predecessor, Leo Apotheker, as CEO in September. HP disclosed Whitman would be getting the stock options shortly after her hiring but didn't specify their value then.

• The European Union's data protection authorities have asked Google to delay the rollout of its new privacy policy until they have verified that it doesn't break the bloc's data protection laws. Google publicized its new privacy rules — which regulate how the Web giant uses the enormous amounts of personal data it collects through its search engine, email and other services — with much fanfare last week. Since then, it has launched a huge publicity campaign informing its users around the globe of the policy, which is set to come into force on March 1.

• Retail sales in the 17 countries that use the euro unexpectedly fell during the crucial month of December, official figures showed Friday, raising fears of a looming recession in the single-currency bloc. Eurostat, the European Union's statistics office, said retail sales dropped 0.4 percent during the month, in contrast to expectations for an increase of the same amount.

From wire reports