Chicago beer firm Crown Imports is caught in antitrust fight

An antitrust brouhaha in Washington has thrown the future of Crown Imports, a Chicago-based beer importer, into question.

The company, which ranks third in U.S. beer sales volume, is a joint venture between New York-based Constellation Brands Inc. and Mexico's Grupo Modelo, which makes Corona Extra, the leading imported beer in the U.S., and other brands. Crown sells Modelo brands as well as China's Tsingtao.

As part of its proposed sale to Anheuser-Busch InBev, Grupo Modelo agreed to sell its 50 percent stake in Crown to Constellation Brands for $1.85 billion. The separate transaction was meant to ease possible antitrust concerns that the merger would eliminate Crown Imports as a competitor.

But on Thursday the U.S. Department of Justice filed an antitrust suit against AB InBev to block its acquisition of Grupo Modelo. Antitrust officials said the merger would further increase the concentration of the U.S. beer market, leading to higher prices for American consumers.

The lawsuit said the sale of Modelo's interest in Crown Imports to its partner would only create "a facade of competition" between AB InBev and the importer.

"In reality, Defendants' proposed 'remedy' eliminates from the market Modelo — a particularly aggressive competitor — and replaces it with an entity wholly dependent on ABI," the Justice Department said in the lawsuit.

The suits cites as evidence part of an internal memo that Crown's chief executive, Bill Hackett, wrote to employees after the transactions were announced in June. According to the suit, Hackett wrote, "Our #1 competitor will now be our supplier ... it is not currently or will not, going forward, be 'business as usual.'"

Under the terms of the proposed merger with Modelo, AB InBev also had the option to terminate its agreement with Crown Imports after 10 years, giving it full control of Corona distribution.

Constellation Brands on Friday attacked the Justice Department, saying in a statement that the suit "demonstrates its incomplete understanding" of the proposed merger. Constellation and AB InBev have indicated that they plan to challenge the suit.

In a detailed defense, Constellation said its full control of Crown would improve competition, not harm it. According to the lawsuit, Modelo controls about 7 percent of U.S. beer sales, far behind AB InBev's market-leading 39 percent.

Constellation attempted to ease concerns that AB InBev's merger with Modelo would lead to higher prices. Hackett said in a statement: "Our Crown team independently develops, implements and refines pricing, promotional and sales strategies for each of our brands in the U.S."

The proposed beer merger had reduced uncertainty hanging over Crown Imports because the Modelo-Constellation joint venture was set to expire at the end of 2016. The Justice Department action creates a new level of uncertainty, said Benj Steinman, president of Beer Marketer's Insights, a beer industry trade publication.

"Crown's fate is hanging in the balance," Steinman said.

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March planned for Hadiya Pendleton; reward up to $30K

As community members marched in memory of Hadiya Pendleton today, officials announced the reward for information in the slaying of the King College Prep sophomore has been increased to $30,000.

Chicago Police Superintendent Garry McCarthy and other police officials were expected to join several pastors at her high school, King College Prep, to announce the increased reward. After that, an anti-violence march in Hadiya's honor started at King, 4445 S. Drexel Blvd.

Hadiya had just finished her final exams at King College Prep, and was hanging out with friends from the school's volleyball team when she was gunned down Tuesday in Harsh Park, in the 4400 block of South Oakenwald Avenue. Thursday afternoon, police announced the reward for information leading to an arrest in the shooting had increased to $24,000, up from $11,000 announced Wednesday.

Dozens of adults and children marched this afternoon from King Prep High School to Harsh Park, the scene of the shooting.

They were escorted by at least six police vehicles as the crowd chanted, urging anyone with information about Pendleton's slaying to come forward.

"If you know who did this, turn them in!" shouted Melvin, a man who led the march but did not want to provide his last name out of fear of retaliation. "If you don't support this, next it might be you!"

When the march reached Harsh Park, Melvin urged Chicago police to hire more new officers, not just redistribute desk workers.

Raven Barnes, 18, a King College Prep senior who was friends with Hadiya, said she "always had a smile on her face."
 
"I never thought it would happen to Hadiya because she's one of the nicest people," Barnes said. "She didn't deserve it."
 
Hadiya recently broke up an "altercation" between Barnes and another girl, Barnes recalled. She said Hadiya convinced her to avoid the conflict and swear off fighting with other girls for good.
 
"She just was a person who hated violence," Barnes said. "She didn't want any violence ... ever. It's just so sad that violence took her life."

Hadiya and the others had sought shelter from a rainstorm under a canopy at the park around 2:20 p.m. Tuesday when a gunman jumped a fence, ran toward them and opened fire, police said.

As the teens scattered, Hadiya and two teenage boys were shot. Hadiya was hit in the back and pronounced dead at Comer Children's Hospital less than an hour after the shooting. The wounds suffered by the boys were not life-threatening.

Police Superintendent Garry McCarthy stressed that neither Hadiya nor anyone in the group she was with were involved with gangs. But it appears the gunman mistook the students for members of a rival gang, he said. The shooter was last seen fleeing in a white Nissan.

“These were good kids by everything that I learned," McCarthy said at a Wednesday news conference. "Wrong place at the wrong time.”

Pastor Courtney Maxwell, the family’s pastor, has offered $6,000, increasing the reward to $30,000, according to the statement. 

Hadiya was shot a little more than a week after performing with the King College Prep band in the Washington, D.C. area during President Barack Obama's inauguration festivities. The shooting occurred in a park about a mile north of Obama's Kenwood home.

The shooting has drawn the attention of both the White House, which is pushing for national gun control, and City Hall as Chicago closes on a violent January. Hadiya was the 42nd homicide victim this year in the city, where killings last year climbed above 500.

Hadiya's father, Nathaniel Pendleton, pleaded for someone to step forward and bring the 15-year-old's killer to justice.

"She was destined for great things," he said.

Hadiya was a majorette with the band at King, one of the city's elite selective-enrollment schools. She dreamed of going to Northwestern University and talked about becoming a pharmacist or a journalist, maybe a lawyer.

Police have reported no arrests.

Chicago Tribune reporter Patrick Svitek contributed.

chicagobreaking@tribune.com

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This Week’s Social Media Power Rankings: The Return of Swatch

The social media sphere is an increasingly noisy place, especially for brands. But hiding somewhere in the static are strong signals from companies reaching their customers in innovative ways. The Social Business Index from the Dachis Group provides a (free) real-time ranking of more than 30,000 global brands based on their social performance. Every week we’re taking a tally of who’s getting heard, what they’re saying, and why it matters.

RELATED: This Week’s Social Media Power Rankings: Cisco Has a Warrior

As you can see, there wasn’t much movement in the top 10. But if you look at number 17, you’ll see Diageo had the biggest jump this week. If that name doesn’t sound familiar, it’s the company that owns more familiar brands like Guiness, Johnnie Walker and Ketel One. So props to them and our livers—now let’s look at what happened outside the top 20:

RELATED: This Week’s Social Media Power Rankings: Cheers to Heineken

“Cisco’s rise in the Social Business Index this week was supported by the social efforts behind ‘the world’s largest classroom.’” Lizzie Steen of the Dachis Group told us. What she’s referring to is the  The Cisco Networking Academy— a public/private program that provides technology and career education to more than four million students across 10,000 academies in 165 countries.  And that sounds serious, but as Steen points out, part of its success is there’s an emphasis on fun. Steen writes: 

Two engineers, Ian and Dan, set up two servers and decorated them with flower lights while studying for their certification from Cisco. The photo received more than 1,200 likes and 186 shares from the the site’s 460 thousand fans.  Overall, the CNA page has balanced a dense subject matter with a collaborative and fun posts, making the learning process more global and human.

Swatch proved that it’s never too early to start prepping for Valentine’s Day.  As the Dachis Group’s Joe Pinaire points out, their very popular True Love (has nothing to hide) campaign and its new A la Folie watch contributed to Swatch’s boost this week. “From Taiwan to Chile, the brand has leveraged countless regional Facebook presences to let their fans know the clock is ticking on the seasonal special,” Pinaire told us. “And fans have taken to this messaging, as the brand’s bevy of original and creative photo content has garnered love from around the globe,” he added. That photo content was specified and regionalized for their fans,  featuring pictures of a Spanish store floor redesign promoting the watch and the watch thriving in the hustle of Vienna city-life and the new O’Hare airport store. “Swatch also launched a Twitter contest using their global handle (@swatch), encouraging Belgian, Dutch, English, Spanish, and Swiss fans to declare their #TrueLove (because it has nothing to hide–right?) in exchange for a chance to win the seasonal watch and a travel voucher.” And if there’s something people love more than Valentine’s Day, it’s a free contest.

So, no cheating, but do you know how many Facebook fans Intel and its Ultrabooks have? Over 16.5 million. That also means a lot of social media juice. “Last week, the Ultrabook took in the sights in New York City and Paris. In New York, an Ultrabook posed within view of the inimitable Empire State Building with the caption, ‘Empire State of Mind’, showing off its amazing form factor and the Intel i7 chip that powers it,” the Dachis Group’s Charles Lim told us.  The photo generated more than 130 thousand likes, 1,600 comments and six thousand shares—it’s a photo of a computer people.  Lim explains:

Like car lovers, electronics enthusiasts react positively to photos of gear that they already own or would like to own. This is because electronics, like cars, are aspirational and functional and inspire lust and passion.  It also helped that the photo was a shout-out to the cultural hub of America.  …

These posts are well tuned to a global brand campaign that appeals the traveler, gets local voices involved, inspires contests and instills the notion that the Ultrabook can go anywhere you go.

Methodology: A project of the Dachis Group, a social business professional services group, the Social Business Index analyzes the conversations on social platforms such as Twitter, Facebook, YouTube, and others. The index, which currently covers approximately 25,0000 companies and 27,000 brands, detects behaviors and activities exhibited by these companies and analyzes their execution and effectiveness at driving outcomes such as brand awareness, brand love, mind share, and advocacy. The Atlantic Wire takes a snapshot of the rankings at the end of the day on Sundays.

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Macklemore & Ryan Lewis score unlikely hit

NASHVILLE, Tenn. (AP) — The rapper Macklemore thinks there’s a simple reason the hit “Thrift Shop” appears to be going viral: It dares to be different.

“There’s a certain sound that has kind of flooded the mainstream airwaves as far as hip-hop music,” he said a few hours after taping a performance on “Late Show with David Letterman” on Thursday night with producing partner Ryan Lewis. “The beat doesn’t sound anything like that, the lyrics are kind of completely polar opposite from what you hear from most commercial rap records and it’s got a hook that’s very catchy. So I think that you combine those three things and it equates to an original sounding song that’s refreshing to the audience that hears it.”

Listeners have responded with rare enthusiasm to the song about “poppin’ tags” to develop your own unique sense of swag. “Thrift Shop” sits atop the Billboard Hot 100 radio airplay chart, the Nielsen SoundScan Digital Songs chart and is the No. 1 song on Spotify for two consecutive weeks. Only one other song, Bruno Mars‘ “Locked Out of Heaven,” has reached the top of those lists simultaneously.

The Seattle-based duo has sold 2.3 million copies so far — a million in the last month alone — and sales continue to grow week to week. Macklemore, whose real name is Ben Haggerty, said he and Lewis thought the song might appeal to a “niche demographic” and didn’t envision it becoming a single. The song’s sense of humor is key, but Haggerty says there’s also a deeper message about individuality and modern culture’s obsession with expensive fashion.

“The more expensive the better is kind of the American way and if you spent $ 600 for a sweatshirt, then that makes it better,” Haggerty said. “And I don’t necessarily think that’s the case. If it’s a $ 600 sweatshirt that’s fresh, that’s fantastic if it looks great. But to me to just pay a ridiculous amount of money for something just because of the logo isn’t creative and it’s just unfortunate that people equate spending money to style.”

___

Online:

http://macklemore.com

___

Follow AP Music Writer Chris Talbott: http://twitter.com/Chris_Talbott.

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Well: Gluten-Free Muffin Recipes

For people who need to eliminate gluten from their diet, baking becomes a challenge. Beginners often find gluten-free baked goods too dense. Even the Recipes for Health columnist Martha Rose Shulman didn’t like the flavor of a commercial gluten-free flour mix, which left her gluten-free cookies and tart-shells with a strong taste of bean flour. As a result, she created her own gluten-free mix for baking muffins. She writes:

My son Liam still doesn’t know that the muffins he has been devouring all week are gluten-free.

I put together my own gluten-free flour mix, one without bean flour, and turned to America’s favorite Gluten-Free Girl, Shauna James Ahem, for guidance. I was already thinking about making muffins, and I wanted a mix that could replace the whole wheat flour I usually use in conjunction with other grains or flours. Her formula for a whole-grain flour mix is simple – 70 percent ground gluten-free grain like rice flour, millet flour, buckwheat flour or teff (the list on her site is a long one) and 30 percent starch like potato starch, cornstarch or arrowroot.

For this week’s recipes, I used what I had, which was brown rice flour, potato starch and cornstarch – 20 percent potato starch and 10 percent cornstarch — and that’s the basis for the nutritional analyses of this week’s recipes. I used this mix in conjunction with a gluten-free meal or flour, so the amount of pure starch in the batters is much less than 30 percent.

When you bake anything it is much simpler and results are more consistent if you use grams and scale your ingredients. This is especially true with gluten-free baking, since you are working with grain and starch formulas. Digital scales are not expensive and I urge you to switch over to this method if you like to bake. I have given approximate cup measures so the recipes will work both ways, but scaling is more accurate.

Here are five ways to bake gluten-free muffins:

Gluten-Free Banana Chocolate Muffins: These dark chocolate muffins taste more extravagant than they are.

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Gluten-Free Cornmeal, Fig and Orange Muffins: A sweet and grainy cornmeal mixture makes for a delicious muffin.

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Gluten-Free Whole Grain Cheese and Mustard Muffins: A savory muffin with a delicious strong flavor.

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Gluten-Free Buckwheat, Poppy Seed and Blueberry Muffins: The buckwheat flour is high-fiber and makes a dark, richly-flavored muffin.

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Gluten-Free Cornmeal Molasses Muffins: Strong molasses provides a good source of iron in an easy-to-make muffin.

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Jobless rate climbs to 7.9% in January

U.S. job growth grew modestly in January and gains in the prior two months were bigger than initially reported, supporting views the economy's sluggish recovery was on track despite a surprise contraction in output in the final three months of 2012.

Employers added 157,000 jobs to their payrolls last month, the Labor Department said on Friday. There were 127,000 more jobs created in November and December than previously reported.

The unemployment rate, however, edged up 0.1 percentage point to 7.9 percent.

The closely watched report also showed an increase in hourly earnings and solid gains in construction and retail employment.

Coming on the heels of data on Wednesday showing a surprise contraction in gross domestic product in the fourth quarter, that should ease any worries the economy was at risk of recession, even though the unemployment rate ticked up.

GDP contracted at a 0.1 percent annual rate in the fourth quarter, largely because of a sharp slowdown in the pace of inventory accumulation and a plunge in defense spending.

A monster storm that hit the East Coast in late October also weighed on output, a drag that should lift this quarter.

Federal Reserve officials said on Wednesday that economic activity had “paused,” but they signaled optimism the recovery would regain speed with continued monetary policy support. The Fed left in place a monthly $85 billion bond-buying stimulus plan.

Economists polled by Reuters had expected employers to add 160,000 jobs and the unemployment rate to hold steady at 7.8 percent last month.

The Labor Department also published benchmark revisions to payrolls data going back to 2008. It said the employment level in March 2012 was 422,000 higher on a seasonally adjusted basis than previously reported.

It also introduced new population factors for its survey of households from which the unemployment rate is calculated. This had a negligible effect on the major household survey measures.

MODEST JOB GROWTH

Job growth in 2012 averaged 181,000 a month, but not enough to significantly reduce unemployment. Economists say employment gains in excess of 250,000 a month over a sustained period are needed.

Though the unemployment rate dropped from a peak of 10 percent in October 2009, that was mostly because some unemployed Americans gave up the search for work because of weak job prospects.

The share of the working age population with a job has been below 60 percent for almost four years.

All the job gains in January were in the private sector, where hiring was as broad-based as it was in December and declines in public sector employment remained moderate.

Steady job gains could help the economy weather the headwinds of higher taxes and government spending cuts. A payroll tax cut expired on Jan. 1 and big automatic spending cuts are set to take hold in March unless Congress acts.

The goods-producing sector showed a third month of solid gains, with manufacturing employment advancing for a fourth straight month. Construction payrolls increased 28,000, adding to December's healthy 30,000 gain.

Construction jobs are expected to rise further as the housing market recovery gains momentum. Housing is expected to support the economy this year, taking over the baton from manufacturing.

Within the vast private services sector, retail jobs increased by a solid 32,600 jobs after rising 11,200 in December. Retail employment has now risen for seven straight months. Education and health payrolls added 25,000 jobs in January after employment grew by the most in 10 months in December.

Government payrolls dropped by 9,000 last month after falling 6,000 in December. The pace is moderating as local government layoffs, outside education, subside.

Average hourly earnings rose four cents last month. Hourly earnings have been rising steadily. They were up 2.1 percent in the 12 months through January.

“It may be that we are now getting to a point in the labor market where we are going to see an upward creep in average hourly earnings,” said RDQ Economics' Ryding, chief economist at RDQ Economics in New York.

“That's going to be good for the consumer and they need help because they are being whacked by the payrolls tax increase,” he said before the release of the report.

The length of the workweek for the average worker was steady at 34.4 hours for a third straight month.
 

US Change in Nonfarm Payrolls data by YCharts

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Huge fire out at Wis. plant: 'There are 300 workers without a job'

More than 300 firefighters from 80 departments across two states battle an eight-alarm fire at a produce company in Burlington, Wis. (Stacey Wescott/Chicago Tribune)

By Peter Nickeas and Amanda Marrazzo




Tribune reporters

1:34 p.m. CST, January 31, 2013

A raging fire at a Wisconsin egg processing plant was brought under control shortly before noon today, but Burlington Mayor Bob Miller said its impact will be felt for a long time in his community and beyond.

Echo Lake Farms Produce Company “is one of the largest employers of the city,” Miller said at a news conference. “There are now 300 workers without a job.”

“I have not seen a fire with this impact,” added Burlington Fire Chief Richard “Dick” Lodle, who has headed the department in southeastern Wisconsin since 1992.

Firefighters from 88 departments in Wisconsin and northern Illinois helped battle the blaze, which started at about 6 p.m. Wednesday. Lodle said the firefighters from other companies have been sent home.

The investigation into the cause continues. It started in a 25,000-square-foot production area of the 70,000-square-foot facility. The second shift was working at the time, but Lodle could not say how many employees were in the area. He noted there we no injuries.

The production area, called “the breaking room,” is where workers separate eggs from their shells. The egg is then sold to restaurants, grocery stores and food suppliers, according to Miller.

“We hope to rebuild and reopen as soon as possible,” Miller said. “We want them to rebuild and put people back to work.”

Company representatives were not available for comment.

Lifelong Burlington resident Scott Ebert called the city a "wonderful, close-knit community."

A maintenance man at the Veterans Terrace banquet hall, where firefighters all morning came in to warm up and grab some food supplied by local business, Ebert said many friends from high school work at Echo Lake.

"Hopefully they'll be able to get back to work," he said.

Miller noted that a meeting is scheduled for workers on Wednesday, when company officials will explain benefits that are available to them.

pnickeas@tribune.com
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Glut of R-rated movies putting Box Office on overload

LOS ANGELES (TheWrap.com) – “Bullet to the Head,” the guns-blazing, axe-swinging action film from Sylvester Stallone, arrives Friday and is the latest violent, R-rated movie to open in January. The month itself could be rated “R” – for Repetitious.

Nine of the 11 movies released widely since the start of the year and Friday are rated “R.” Of last weekend’s top 10 films, eight carried the restricted rating, which requires youngsters under 17 to be accompanied by an adult.

Hollywood distribution executives regularly maintain that variety in the marketplace –including films with a range of ratings – is essential to doing strong overall business. January, traditionally a slow box-office month, is running roughly 10 percent ahead of last year. But last week was the first week to be down from 2012, and it’s possible the preponderance of R-rated offerings is taking a toll.

“There’s been one PG-13 release this month – ‘Mama’ – and it went right to No. 1,” Exhibitor Relations senior analyst Jeff Bock told TheWrap, “and I expect ‘Warm Bodies’ will do the same this weekend.”

“Warm Bodies,” which comes out Friday from Lionsgate, is a PG-13 teenage zombie romance based on a young adult novel. “There has to be a degree of pent-up demand from kids out there,” Bock said.

It’s violence more than sex that’s driving the R-rated trend. Two of the nine releases –”Texas Chainsaw” and “Hansel and Gretel: Witch Hunters” – were 3D gore fests. Three – “Parker,” “Broken City” and “Gangster Squad” – were crime dramas. Two – “The Last Stand” and Warner Bros.‘ “Bullet to the Head” – are action films, and two were comedies: “The Haunted House” and “Movie 43.”

Several R-rated films have scored at the box office this month. Best Picture Oscar nominees “Zero Dark Thirty,” “Django” and “Silver Linings Playbook” over performed. “Texas Chainsaw” and “Hansel and Gretel” both went to the head of the class with openings in the $ 20 million range.

But too many movies of the same sort can leave some demographic groups underserved, as well as limit a film’s playability. For example, there’s a good chance MGM and Paramount’s action fantasy “Hansel and Gretel” might have done better had teenagers been able to get in without bringing an adult.

“With some films,” explained distribution chief Don Harris of Paramount of “Hansel and Gretel,” “you really don’t have a choice. From the time it was conceived, this one was going to be an R-rated movie and there was no amount of editing or tweaking that was going to change that.”

Harris noted that of the top four comedies released last year, three – Universal‘s “Ted” and “This Is 40,” and Warner Bros.‘ “The Campaign” – were rated R.

“That is clearly a developing genre,” Harris said, “with a high ceiling.” Exhibit A might be “Ted,” which has taken in $ 515 million worldwide, with nearly $ 300 million coming from overseas.

The other top comedy, “Parental Guidance” from Fox, has very much benefited from its PG rating. “We were the only true family movie in the market place for weeks, and it paid off,” Fox distribution chief Chris Aronson said. “Parental Guidance” has taken in about $ 70 million since opening on Christmas Day.

The trend won’t end any time soon. After this Super Bowl weekend, both of the following week’s wide releases – the Universal comedy “Identity Thief” and the Open Road Films crime drama “Side Effects” – are rated R.

It won’t be until Valentine’s Day that things will change. On that Thursday, the PG-13 Warner Bros. drama “Beautiful Creatures,” the PG-13 Relativity romance “Safe Haven” and the Weinstein Company’s PG animated film “Escape From Planet Earth” will all hit theaters. The latter will be the first kids film to hit the marketplace since Disney re-released “Monsters Inc.” in December.

But those who like their film mayhem full-on needn’t despair. Fox’s Bruce Willis action film “A Good Day to Die Hard” opens that day, too. And it’s rated R.

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During Trial, New Details Emerge on DuPuy Hip

When Johnson & Johnson announced the appointment in 2011 of an executive to head the troubled orthopedics division whose badly flawed artificial hip had been recalled, the company billed the move as a fresh start.

But that same executive, it turns out, had supervised the implant’s introduction in the United States and had been told by a top company consultant three years before the device was recalled that it was faulty.

In addition, the executive also held a senior marketing position at a time when Johnson & Johnson decided not to tell officials outside the United States that American regulators had refused to allow sale of a version of the artificial hip in this country.

The details about the involvement of the executive, Andrew Ekdahl, with the all-metal hip implant emerged Wednesday in Los Angeles Superior Court during the trial of a patient lawsuit against the DePuy Orthopaedics division of Johnson & Johnson. More than 10,000 lawsuits have been filed against DePuy in connection with the device — the Articular Surface Replacement, or A.S.R. — and the Los Angeles case is the first to go to trial.

The information about the depth of Mr. Ekdahl’s involvement with the implant may raise questions about DePuy’s ability to put the A.S.R. episode behind it.

Asked in an e-mail why the company had promoted Mr. Ekdahl, a DePuy spokeswoman, Lorie Gawreluk, said the company “seeks the most accomplished and competent people for the job.”

On Wednesday, portions of Mr. Ekdahl’s videotaped testimony were shown to jurors in the Los Angeles case. Other top DePuy marketing executives who played roles in the A.S.R. development are expected to testify in coming days. Mr. Ekdahl, when pressed in the taped questioning on whether DePuy had recalled the A.S.R. because it was unsafe, repeatedly responded that the company had recalled it “because it did not meet the clinical standards we wanted in the marketplace.”

Before the device’s recall in mid-2010, Mr. Ekdahl and those executives all publicly asserted that the device was performing extremely well. But internal documents that have become public as a result of litigation conflict with such statements.

In late 2008, for example, a surgeon who served as one of DePuy’s top consultants told Mr. Ekdahl and two other DePuy marketing officials that he was concerned about the cup component of the A.S.R. and believed it should be “redesigned.” At the time, DePuy was aggressively promoting the device in the United States as a breakthrough and it was being implanted into thousands of patients.

“My thoughts would be that DePuy should at least de-emphasize the A.S.R. cup while the clinical results are studied,” that consultant, Dr. William Griffin, wrote.

A spokesman for Dr. Griffin said he was not available for comment.

The A.S.R., whose cup and ball components were both made of metal, was first sold by DePuy in 2003 outside the United States for use in an alternative hip replacement procedure called resurfacing. Two years later, DePuy started selling another version of the A.S.R. for use here in standard hip replacement that used the same cup component as the resurfacing device. Only the standard A.S.R. was sold in the United States; both versions were sold outside the country.

Before the device recall in mid-2010, about 93,000 patients worldwide received an A.S.R., about a third of them in this country. Internal DePuy projections estimate that it will fail in 40 percent of those patients within five years; a rate eight times higher than for many other hip devices.

Mr. Ekdahl testified via tape Wednesday that he had been placed in charge of the 2005 introduction of the standard version of the A.S.R. in this country. Within three years, he and other DePuy executives were receiving reports that the device was failing prematurely at higher than expected rates, apparently because of problems related to the cup’s design, documents disclosed during the trial indicate.

Along with other DePuy executives, he also participated in a meeting that resulted in a proposal to redesign the A.S.R. cup. But that plan was dropped, apparently because sales of the implant had not justified the expense, DePuy documents indicate.

In the face of growing complaints from surgeons about the A.S.R., DePuy officials maintained that the problems were related to how surgeons were implanting the cup, not from any design flaw. But in early 2009, a DePuy executive wrote to Mr. Ekdahl and other marketing officials that the early failures of the A.S.R. resurfacing device and the A.S.R. traditional implant, known as the XL, were most likely design-related.

“The issue seen with A.S.R. and XL today, over five years post-launch, are most likely linked to the inherent design of the product and that is something we should recognize,” that executive, Raphael Pascaud wrote in March 2009.

Last year, The New York Times reported that DePuy executives decided in 2009 to phase out the A.S.R. and sell existing inventories weeks after the Food and Drug Administration asked the company for more safety data about the implant.

The F.D.A. also told the company at that time that it was rejecting its efforts to sell the resurfacing version of the device in the United States because of concerns about “high concentration of metal ions” in the blood of patients who received it.

DePuy never disclosed the F.D.A. ruling to regulators in other countries where it was still marketing the resurfacing version of the implant.

During a part of that period, Mr. Ekdahl was overseeing sales in Europe and other regions for DePuy. When The Times article appeared last year, he issued a statement, saying that any implication that the F.D.A. had determined there were safety issues with the A.S.R. was “simply untrue.” “This was purely a business decision,” Mr. Ekdahl stated at that time.

This article has been revised to reflect the following correction:

Correction: January 30, 2013

The headline on an earlier version of this article described the start of the DePuy trial incorrectly. It began last week, not Wednesday. The error was repeated in an earlier summary.

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Slot maker WMS Ind. to be sold for $1.5B

Gaming machines maker WMS Industries Inc. is being swallowed up by larger rival Scientific Games Corp. for $1.42 billion in cash and debt.

The deal announced Thursday values WMS at $26 a share -- nearly 60 percent higher than the stock's closing price on Wednesday. Shares shot up in early trading Thursday after the deal was announced, rising 54 percent to reach $25.14, just under its 12-month high.

Scientific Games primarily makes instant lottery tickets and software. Executives said on a conference call that grabbing WMS will allow it to quickly expand its offerings in arcade-type games, slots and video poker.

While Scientific Games executives on a conference call rejected the characterization that WMS is in the midst of a "turnaround," business has certainly been improving in recent months for the Waukegan-based game maker.

WMS, formerly Williams, said in November is fiscal 2013 first-quarter profit tripled on a combination of higher revenue and lower costs. 

The revenue was driven by new initiatives, including social gaming on Facebook and mobile phones, that's paid off.

Those new ventures have compounded the growth WMS has seen as it gambled on some other new outposts for its business.

In September, it received one of the first licenses to operate online poker games in Nevada, the only state other than Delaware to legalize some form of Internet gambling.                       

Online sites in Nevada are expected to go live in early 2013, but only people physically within that state's borders will be able to play. For everyone else, there's WMS's Facebook app, "Jackpot Party Social Casino."

The companies plan to save about $90 million through operating efficiencies by the third year they're combined. They expect the deal to close by the end of the year, pending regulatory and other approvals.

Executives say they are still working out the details on how the combined company will be run, so there's no word yet on whether the company's headquarters will remain in Illinois or if there will be any layoffs. A spokeswoman for WMS didn't immediately return a call seeking comment.

sbomkamp@tribune.com | Twitter: @SamWillTravel

WMS data by YCharts

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