WEEK IN REVIEW

Yield-burning off the back burner

Three government agencies ganged up on CoreStates Financial Corp., which agreed to pay $3.7 million to settle yield-burning charges. The conclusion of the three-year investigation clears the way for the Philadelphia bank’s purchase by First Union Corp. this week and is expected to set the pattern for similar cases, involving complex tax law in the refinancing of municipal bonds.

It was a merger that got CoreStates in trouble in the first place. When it bought Meridian Capital Markets two years ago, it also picked up a number of transactions with Pennsylvania municipalities suspected of the practice.

They’ll get some of the money, as apparently innocent parties, but the bulk will go to the U.S. Treasury. It was the first time the Securities and Exchange Commission, the Justice Department and the Internal Revenue Service worked together.

But please to call it…research

Ever wonder how fund managers spend their lunch hours? Well, PaineWebber Inc. managing director Orhan Sadik-Kahn, 69, who runs the Russian Partners Fund, spent seven or eight years of nooners romping with Russian-born Inga Banasewycz, 28, she alleges.

The former model is in New York Supreme Court suing the married father of grown children for $3.5 million in damages, citing emotional distress and breach of contract. Miss Banasewycz said he dumped her for one of her friends and is having her evicted from the fancy apartment he paid for on East 57th Street in New York.

Mr. Sadik-Kahn’s lawyer called her suit baseless, accused her of double dipping and extortion because she had successfully squeezed his client for money three years ago, and admitted that once upon a time the two had had a “personal relationship.”

The newspaper in Greenwich, Conn., where Mr. Sadik-Kahn lives, reported that someone bought up all the copies of the New York Post and the Daily News, which played the story prominently, before anyone could see them.

Cyber slipup

The Charles Schwab Corp. computer system crashed Monday, putting the biggest mutual fund supermarket effectively out of business for two hours. Not only was trading kaput for 1.5 million online customers, but because brokers couldn’t call up customers’ account info, phone trades didn’t happen either. The data center took the rap.

Earlier that day, Schwab said it was expanding its online trading to Britain. Stiff upper lip, all.

Voting optional

The SEC quietly approved a New York Stock Exchange rule making it easier for companies to issue stock options to execs. No longer do they have to get shareholder approval as long as at least 20% of employees are eligible and half aren’t officers.

A Big Board spokesman told investors not to worry about the dilution of shareholder oversight, because now there are clear rules where only guidelines had existed. Well, if you say so.

Achtung!

Deutsche Bank AG isn’t satisfied with managing $210 billion worldwide. The Frankfurters, said Michael Dobson, head of Deutsche’s asset management unit, see “some gaps which we want to look at filling as we go forward in the next few years,” adding that he wants to double his unit’s profitability within four years. He says the bank will open the throttle on its expansion efforts both in Europe and the United States.

Hold the kraut

One place the Germans won’t be expanding is into Credit Lyonnais. The government-owned French bank is on the block, but its chairman, Jean Peyrelevade, said Deutsche Bank need not apply. On the other hand, ABN Amro Holding NV is the hollandaise sauce to Parisian asparagus. The French sent the bank’s offering book to Amsterdam years ago and ABN Amro is interested in all or part, says chairman Jan Kalff. Still, he muses, “a lot of water will flow through the Seine before we get to that point.” Or pont.

Cendant class action

Wasting no time, former HFS Inc. stockholder Peter Freudenberg filed a class action suit in federal court in New Jersey on behalf of everybody who got Cendant Corp. stock in exchange for HFS shares. Cendant trades in the 22 range, down from 40 earlier in the month, after, as you recall, it reported “accounting irregularities” that cut its reported 1997 profits by $100 million.

Past is prologue

American Express’s income rose 15% in the first quarter fueled by its fastest-growing division, Financial Advisors. Its earnings climbed 18% to $168 million. . .Goldman Sachs Group LP, which is not going public no matter what the Financial Times writes, spokesman John Rogers insists, is looking to expand into 700,000 square feet of office space at 2 Broadway in New York. That’s a block or so away from the big brown building it already fills to overflowing on Pearl Street and just down the street from the Museum of American Financial History, where all those former partnerships are remembered. . .Also thinking of moving is the New York Stock Exchange, which wants to expand across Broad Street but which is threatening to move way across Broadway to Battery Park City. . .Bankers Trust New York Corp. hired Eugene Ludwig, whose five-year term as comptroller of the currency expired this month, as vice chairman. He’ll start May 11 and have a lot to do with securities underwriting. . .Foreign banks, including Chase Manhattan Corp., may have to write off a total of $56 billion in bad loans to Indonesia. . . Synovus Financial Corp. (Gesundheit), shook up its top management and put vice chairman Walter M. “Sonny” Deriso Jr. in charge of asset management.

Bloomberg News contributed to this report