DEALS

Penn National's buyers pull out

Philadelphia —- Two investment firms pulled the plug Thursday on their $5.82 billion acquisition of Penn National Gaming Inc. after the racetrack and casino operator's stock tumbled. Penn National will get $225 million in cash as a termination fee, plus $1.25 billion in what amounts to no-cost capital until 2015. The company said its board was unwilling to negotiate a reduced buyout price and that the settlement was preferable to suing the buyers.

GE Aviation buys engine maker

Fairfield, Conn. —- General Electric Co.'s aviation unit is entering the market for small twin-engine turboprop aircraft, which it calls the industry's fastest-growing segment. GE Aviation said Thursday that it has purchased the assets of Walter Engines, a manufacturer of small turboprop engines and machined parts for the aviation industry. Cincinnati-based GE Aviation did not disclose terms of the deal. Walter Engines is based in the Czech Republic and has manufactured aircraft engines since 1923.

ECONOMY

EU Central Bank raises interest rate

Frankfurt, Germany —- Wary of higher energy and commodity prices, the European Central Bank raised its benchmark interest rate Thursday by a quarter percentage point to 4.25 percent, a move it hopes will help curtail rising inflation in the 15 countries that use the euro. The move comes despite worries in some quarters that it could dampen growth, but ECB President Jean-Claude Trichet said at a news conference that the fundamentals of Europe's economy "are sound" and that the bank was focused on inflation —- which he said could remain high "for a more protracted period than previously thought."

FINANCIAL

Mortgage rates shift course, drop

Washington —- Rates on 30-year mortgages, which had been rising for five straight weeks, declined this week as signals from the Federal Reserve eased worries about imminent rate increases. Freddie Mac, the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 6.35 percent this week. That was down from 6.45 percent last week, which had been the highest level since last September. Rates on 15-year fixed-rate mortgages dropped to 5.92 percent, down from 6.04 percent last week. The five-year adjustable-rate mortgage fell to 5.78 percent, down from 5.99 percent last week. The rate on a one-year adjustable-rate mortgage declined to 5.17 percent from 5.27 percent.

Trading profits at banks decline

Washington —- U.S. banks' trading profits fell 84 percent in the first quarter as they continued to be slammed by losses on mortgage-linked securities and other complex financial instruments. Banks' trading gains of $1.13 billion were down from $7 billion in the year-ago period, according to a report Thursday from the Treasury Department's Office of the Comptroller of the Currency. Still, the results were good compared with trading losses of nearly $10 billion in the fourth quarter of 2007 —- the first-ever such loss for U.S. banks.

LEGAL

Whistle-blower files suit vs. UBS

Boston —- A former broker with UBS AG filed a whistle-blower complaint, alleging the firm forced him to resign after he cooperated with state regulators investigating sales of risky investments to Massachusetts cities and towns. Timothy Flynn's complaint alleges top UBS officials knew last winter that auction-rate securities could be on the verge of failing but continued to press brokers to portray them to customers as safe —- advice that proved costly when the more than $300 billion market for such investments collapsed in February. The complaint says UBS "failed and refused to disclose to its employees and clients that auction-rate securities were not truly liquid despite UBS' misleadingly marketing them as such." Switzerland-based UBS denies the allegations in Flynn's June 11 complaint, which was reported Thursday by The Boston Globe.

Drug makers to appeal Ala. verdict

Montgomery —- Two large pharmaceutical companies said Thursday they will appeal a jury verdict ordering them to pay more than $114 million for overcharging Alabama's Medicaid program for prescription drugs. GlaxoSmithKline PLC and Novartis AG announced plans to appeal to the Alabama Supreme Court as the state sent letters to 69 other drug companies telling them they had 30 days to settle drug-pricing lawsuits against them. GlaxoSmithKline attorney Don Jones said the company did not commit fraud, as claimed by the state, and it would appeal its judgment of almost $81 million. "We think the evidence was clear we reported clear and accurate prices, and the state knew what the prices we reported represented," Jones said. Officials with Novartis said in a news release that they would appeal their "unfounded" $33 million verdict.

Mistrial declared in lawyers' case

Covington, Ky. —- A judge declared a mistrial Thursday in the case of two lawyers charged with defrauding clients of $65 million in a diet-drug settlement after jurors said they could not reach a verdict. The jury had considered the case against suspended lawyers William Gallion and Shirley Cunningham Jr. for eight days. A third defendant, Melbourne Mills Jr., was acquitted earlier this week. All faced a single charge of conspiracy to commit wire fraud. The lawyers were accused of keeping millions of dollars that should have gone to plaintiffs in a $200 million settlement of a class-action lawsuit over the diet drug fen-phen, which was recalled after some studies indicated it could cause heart damage.

Lilly urged to settle Zyprexa case

A federal judge, after finding enough evidence of fraud by Eli Lilly & Co. to warrant a jury trial, urged the drug maker to settle claims seeking as much as $7.7 billion for overpricing its top-selling Zyprexa medicine for schizophrenia and bipolar disorder. U.S. District Judge Jack Weinstein said there is "reliable information" that Lilly made "excessive claims" about the drug's usefulness and wrongly denied some side effects.

YouTube records to be examined

San Francisco —- A federal judge has ordered Google to turn over to Viacom its records of which users watched which videos on YouTube. The order raised concerns among YouTube users and privacy advocates that the video viewing habits of tens of millions of people could be exposed. But Google and Viacom said they were hoping to come up with a way to protect the anonymity of the site's visitors. Viacom also said that the information would be safeguarded by a protective order restricting access to the data to outside lawyers, who will use it solely to press Viacom's $1 billion copyright lawsuit against Google.

MANUFACTURING

Youth beds recalled because of design

Washington —- About 9,350 youth beds were recalled Thursday because the toy chest that's attached to the bed can entrap children. The Consumer Product Safety Commission says a 22-month-old boy in Roseville, Calif., was killed when the lid of the toy chest on his LaJolla Boat Bed fell on his head. The recall involves two youth beds by Bayside Furnishings of San Diego, Calif. The beds are the LaJolla Boat Bed and the Pirates of the Caribbean Twin Trundle Bed. They were sold at Costco and other stores nationwide from January 2006 to May 2008.

Lockheed wins TSA contract

Lockheed Martin Corp. won a contract valued at $1.2 billion to provide human resources services to the Transportation Security Administration. The work includes a six-month transition followed by a one-year base period, with annual renewal options that may extend the contract for a total of 8 1/2 years, the TSA said Thursday in a statement. Lockheed's duties will include handling recruitment, hiring, payroll and benefits.

TRADE

WTO chief blasts U.S. farm subsidies

Brussels, Belgium —- The WTO chief says European and American farm subsidies are partly responsible for high food prices because they undermine farming in developing countries. World Trade Organization chief Pascal Lamy said Thursday that the food supply is not growing fast enough —- especially in poorer nations that still have large areas of land that could be farmed. But he said the countries' capacity to grow food has been damaged by a lack of investment, as well as farm subsidies in rich nations that allow the EU and United States to export food cheaply to developing countries.

U.S., EU urged to shift biofuel policy

Brussels, Belgium —- Europe and the United States must reconsider their biofuel policies because of rising food prices around the world, aid officials and food policy experts said Thursday. Speaking at an international conference on food supplies, many also warned that some countries' restrictions on agricultural exports were severely hindering access to food and called for more investment to increase food production in the developing world. EU Agriculture Commissioner Mariann Fischer Boel responded by promising to present plans next Tuesday for new financial aid to farmers in developing countries to buy fertilizers and seeds. She gave no details on the value of the package but said it would come from unspent EU farm funds.

TRANSPORTATION

More airlines go cashless in-flight

Don't bother hitting the ATM before boarding your flight —- your airline may no longer be accepting cash. Starting Aug. 5, Alaska Airlines will become the latest carrier to go cashless for in-flight purchases such as headphones, cocktails and snacks. Other airlines that have gone cashless include Frontier, JetBlue, AirTran, Virgin American and Midwest. The "cashless cabin" is fast becoming the norm as more goods are sold in-flight and the hassles grow for making exact change, said Mike Boyd, a Colorado-based aviation consultant. Flight attendants practically have to walk on with a cash drawer," he said. Northwest Airlines still accepts cash only for purchases on domestic flights. Delta and American airlines accept cash and credit cards, representatives said.

Canada's Jazz Air to cut 270 jobs

Halifax, Nova Scotia —- Canada's Jazz Air said Thursday that it will cut 270 employees, or about 5.4 percent of its work force, as the regional discount airline reduces capacity by 5 percent. The job cuts follow the mid-June move by Jazz Air's primary customer, Air Canada, to cut 2,000 jobs as it reduces its flying by 7 percent. "The decrease in Air Canada's need for Jazz's services necessitates a reduction in staff. These are difficult times for our industry," Joseph Randell, president and chief executive of Jazz, said in a statement Thursday. The regional carrier has a commercial agreement with Air Canada, in which Air Canada buys all of Air Jazz's fleet capacity.

Virgin Atlantic opposes alliance

London —- An alliance involving British Airways, American Airlines and Iberia should be blocked, competitor Virgin Atlantic Ltd. said Thursday, amid reports the three are close to applying for U.S. antitrust immunity to form a trans-Atlantic joint venture. The three airlines aim to reach an accord on profit and revenue sharing this month, the Financial Times reported, citing executives at the carriers. "BA has been in talks with American Airlines and Iberia for some time, but no decisions have been reached," said BA spokeswoman Cathy West. BA and AMR Corp.'s American, the world's largest carrier, have failed in the past to win an exemption from U.S. antitrust laws to work more closely together because of their dominance at London's Heathrow Airport, where the pair have more than half the capacity to and from the United States. However, they are expected to argue that the competitive situation has changed since the "open skies" agreement between the United States and the European Union came into force in March, allowing airlines to fly to and from any point in the U.S. and the EU.

Continental offers early retirement

Continental Airlines Inc. is offering some workers early retirement as it prepares to cut 3,000 jobs to help offset record fuel costs. The retirement program is in addition to a buyout package and leaves of absence the carrier already is offering to encourage workers to leave, Julie King, a Continental spokeswoman, said in an interview Thursday. Unlike the earlier programs, the retirement offer includes cash. Continental is retiring 67 planes, trimming seating capacity by 11 percent and dropping service to 15 cities around the world.

Feds OK changes in China service

US Airways Group Inc. and Northwest Airlines Corp., seeking to pare capacity because of rising fuel costs, won U.S. permission to suspend some China flights without losing rights to fly there later. US Airways can begin its new Philadelphia-Beijing flights March 25, 2010, one year later than planned, the U.S. Department of Transportation said. Northwest can suspend the daily U.S.-Guangzhou cargo flights it was operating, the agency said. The government denied seven carriers' request for blanket authority to suspend international routes, saying it will decide requests individually. US Airways, Northwest, American, United, Delta, Continental and Alaska Air made the request.