In HP-Autonomy debacle, many advisers but little good advice

(Reuters) - When Hewlett Packard acquired Autonomy last year for $11.1 billion, some 15 different financial, legal and accounting firms were involved in the transaction -- and none raised a flag about what HP said Tuesday was a major accounting fraud.

HP stunned Wall Street with the allegations about its British software unit and took an $8.8 billion writedown, the latest in a string of reversals for the storied company.

HP Chief Executive Meg Whitman, who was a director at the company at the time of the deal, said the board had relied on accounting firm Deloitte for vetting Autonomy's financials and that KPMG was subsequently hired to audit Deloitte.

HP had many other advisers as well: boutique investment bank Perella Weinberg Partners to serve as its lead adviser, along with Barclays. Banking advisers on both sides of the deal were paid $68.8 million, according to data from Thomson Reuters/Freeman Consulting.

Barclays pocketed the biggest banker fee of the transaction at $18.1 million and Perella was paid $12 million. The company's legal advisers included Gibson, Dunn & Crutcher; Freshfields Bruckhaus Deringer; Drinker Biddle & Reath; and Skadden, Arps, Slate, Meagher & Flom, which advised the board.

On Autonomy's side of the table were Frank Quattrone's Qatalyst Partners, which specializes in tech deals and which picked up $11.6 million.

UBS, Goldman Sachs, Citigroup, JPMorgan Chase and Bank of America were also advising Autonomy and were paid $5.4 million each. Slaughter & May and Morgan Lewis served as the company's legal advisers.

While regulators in the United States and the United Kingdom, as well as the Federal Bureau of Investigation, are likely to spend many months if not years investigating what happened, legal experts said on Tuesday that it wasn't clear if any of the advisers would ultimately be held liable.

"The most logical deep pocket would be the acquired firm's auditors, who should have allegedly caught these defalcations," said James Cox, a professor at Duke University law school who specializes in corporate and securities law. Since both auditors missed the problems and it appeared to have taken HP a while to catch it after it took over Autonomy, the auditors may have a strong defense.

"You can have a perfectly sound audit and still have fraud exist," he said. A Deloitte UK spokesman said the company could not comment and would cooperate with any investigations.

The law firms and the bankers will likely argue that they were not hired to review the bookkeeping and had relied on the opinion of the auditors, securities law experts said.

Multiple sources with knowledge of the HP-Autonomy transaction added that the big-name banks on Autonomy's side were brought in days before the final agreement was struck. These sources said the banks were brought on as favors for their long relationships with the companies, in a little-scrutinized Wall Street practice of crediting -- and paying -- investment banks that actually have little do with the deal.

LAWSUITS, REPUTATIONS AT STAKE

Plaintiffs lawyers said they were taking calls from investors about HP on Tuesday. Darren Robbins, a San Diego-based plaintiff lawyer who represents shareholders, said the tech icon appears to have spent billions on a shoddy company without undertaking the proper due diligence, and thus misrepresented its finances to investors.

"I think they have serious troubles," he said.

But plaintiff lawyers may have difficulty bringing so-called derivative lawsuits against professional services firms, said Brian Quinn, an M&A professor at Boston College Law School. In those cases, plaintiff lawyers can sue third parties, such as auditors, on behalf of HP -- but they must convince a judge that HP's board is unfit to pursue those claims itself. In this situation, though, HP's board disclosed the alleged fraud itself, Quinn said.

Even if the bankers and lawyers escape any legal problems, they could suffer a reputational hit. The scrutiny could be particularly unwelcome for Perella Weinberg: the firm advised Japanese camera maker Olympus' acquisition of British Gyrus -- a transaction that prompted investigations in the United States, United Kingdom and Japan into fees and payments made by Olympus.

Olympus had hired Perella to execute the transaction, which included a fee paid to "advisers" of $687 million - way beyond the usual scale for a transaction valued at only $2 billion. Perella was not implicated in the matter.

Meanwhile, the most controversial banker involved in the HP-Autonomy deal, Frank Quattrone of Qatalyst, represented Autonomy and played a key role in getting HP to pay a high price.

A star investment banker in the 1990s, Quattrone had worked at Morgan Stanley, Deutsche Bank and Credit Suisse, and helped arrange some of the biggest tech initial public offerings of the era, including Amazon.com Inc and Cisco Systems Inc.

But his time at the top of Silicon Valley was curtailed by charges that he blocked an investigation into IPO kickbacks. After two trials failed to resolve his case, he ultimately reached a deal with prosecutors.

His return to the Silicon Valley M&A scene has impressed many in the tech world.

"His reputation is at an all-time high right now," said Dan Scheinman, the former head of mergers and acquisitions at Cisco who has worked with Quattrone on several deals.

Analysts almost uniformly deemed the $11.1 billion he got HP to pay for Autonomy as overly rich -- a compliment to him at the time, but possibly a hollow success if HP's allegations prove true.

(Reporting By Nadia Damouni and Nicola Leske in New York and Andrew Callus in London. Additional reporting by Dan Levine in San Francisco.; Editing by Peter Lauria, Jonathan Weber, Muralikumar Anantharaman, Janet McBride)

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Boxer 'Macho' Camacho critical in Puerto Rico

SAN JUAN, Puerto Rico (AP) — Hector "Macho" Camacho was clinging to life Wednesday after being shot in the face while in a car, with doctors and his family expected to decide whether to remove the former boxing champion from life support.

Doctors initially had said Camacho was in critical, but stable condition and expected to survive after he was shot Tuesday night in his hometown of Bayamon. But his condition worsened overnight and his heart stopped at one point, said Dr. Ernesto Torres, director of the Centro Medico trauma center in San Juan.

"He's battling minute to minute. This is the most important fight of his life," Torres told The Associated Press outside the hospital in the Puerto Rican capital.

Torres said doctors were trying to determine the boxer's level of brain activity.

The specialists will then consult with other doctors and Camacho's mother, who flew in Wednesday from New York, to discuss whether he should be removed from life support, said Ismael Leandry, a longtime friend and former manager who was also at the hospital.

"We just have to wait to see if 'Macho' gets better. It's a hard battle," Leandry told AP.

Torres said Camacho's mother, Maria, spent about 20 minutes with her son, one of the most dynamic boxing personalities of his era, and was expected to return for a second visit on Wednesday night.

"His mother came and she is devastated," he said. "She knows the prognosis is not at all favorable."

A godson, Widniel Adorno, said the family has discussed the possibility of organ donation but no final decision has been made.

The 50-year-old Camacho was outside a bar in a parked Ford Mustang with a friend when he was shot in the face. The friend, identified as 49-year-old Adrian Mojica Moreno, was killed. Police said two assailants fled in an SUV but no arrests have been made and no motive has been disclosed.

Camacho was rushed to Centro Medico, where doctors initially said the bullet passed through his jaw and lodged in his shoulder. Torres said the bullet damaged three of the four main arteries in his neck and fractured two vertebrae, which could leave him paralyzed if he were to survive.

Steve Tannenbaum, who has also represented Camacho in the past, had been told earlier by friends at the hospital that the boxer would make it.

"This guy is a cat with nine lives. He's been through so much," he said. "If anybody can pull through it will be him."

Friends and family members waited anxiously at the hospital, fondly recalling Camacho's high-energy personality and his powerful skills in the ring.

"He was like a little brother who was always getting into trouble," said former featherweight champion Juan Laporte, a fellow Puerto Rican who grew up and trained with Camacho in New York.

Camacho has been considered one of the more controversial figures in boxing, but also popular among fans and those who worked in the sport.

"The Macho Man was a promoter's dream," renowned promoter Don King told AP. "He excited boxing fans around the world with his inimitable style. He was a nice, amiable guy away from the ring."

King had promoted Camacho but was caught off guard by news of the attack on the former champion. "What a tragedy this is," he said. "I'm very sorry for Hector and his family. My prayers go out to him."

The fighter's last title bout came against then-welterweight champion Oscar De La Hoya in 1997, a loss by unanimous decision. He last fought in May 2010, losing to Saul Duran. Tannenbaum said they were looking at a possible bout in 2013.

"We were talking comeback even though he is 50," he said. "I felt he was capable of it."

Camacho was born in Bayamon, one of the cities that make up the San Juan metropolitan area

He left Puerto Rico as a child and grew up mostly in New York's Harlem neighborhood, one of the reasons he later earned the nickname "the Harlem Heckler."

He went on to win super lightweight, lightweight and junior welterweight world titles in the 1980s.

Camacho has fought other high-profile bouts in his career against Felix Trinidad, Julio Cesar Chavez and Sugar Ray Leonard. Camacho knocked out Leonard in 1997, ending what was that former champ's final comeback attempt.

Camacho has a career record of 79-6-3.

In recent years, he has divided his time between Puerto Rico and Florida, appearing regularly on Spanish-language television as well as on a reality show called "Es Macho Time!" on YouTube. In San Juan, he had been living in the beach community of Isla Verde, where he would obligingly pose for photos with tourists who recognized him on the street, said former pro boxer Victor "Luvi" Callejas, a neighbor and friend.

"We all know what Macho Camacho has done, but in the last couple of months he hasn't been in any trouble," Callejas said as he kept vigil outside the hospital. "He has been taking it easy. He's been upbeat."

Drug, alcohol and other problems have trailed Camacho since the prime of his boxing career. He was sentenced in 2007 to seven years in prison for the burglary of a computer store in Mississippi. While arresting him on the burglary charge in January 2005, police also found the drug ecstasy.

A judge eventually suspended all but one year of the sentence and gave Camacho probation. He wound up serving two weeks in jail, though, after violating that probation.

His wife also filed domestic abuse complaints against him twice before their divorce several years ago.

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Associated Press writers Ben Fox in San Juan, Puerto Rico and David Skretta in Kansas City contributed to this report.

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US abortions fall 5 pct, biggest drop in a decade

NEW YORK (AP) — U.S. abortions fell 5 percent during the recession and its aftermath in the biggest one-year decrease in at least a decade, perhaps because women are more careful to use birth control when times are tough, researchers say.

The decline, detailed on Wednesday by the Centers for Disease Control and Prevention, came in 2009, the most recent year for which statistics are available. Both the number of abortions and the abortion rate dropped by the same percentage.

Some experts theorize that some women believed they couldn't afford to get pregnant.

"They stick to straight and narrow ... and they are more careful about birth control," said Elizabeth Ananat, a Duke University assistant professor of public policy and economics who has researched abortions.

While many states have aggressively restricted access to abortion, most of those laws were adopted in the past two years and are not believed to have played a role in the decline.

Abortions have been dropping slightly over much of the past decade. But before this latest report, they seemed to have pretty much leveled off.

Nearly all states report abortion numbers to the federal government, but it's voluntary. A few states — including California, which has the largest population and largest number of abortion providers — don't send in data. While experts estimate there are more than 1 million abortions nationwide each year, the CDC counted about 785,000 in 2009 because of incomplete reporting.

To come up with reliable year-to-year comparisons, the CDC used the numbers from 43 states and two cities — those that have been sending in data consistently for at least 10 years. The researchers found that abortions per 1,000 women of child-bearing age fell from about 16 in 2008 to roughly 15 in 2009. That translates to nearly 38,000 fewer abortions in one year.

Mississippi had the lowest abortion rate, at 4 per 1,000 women of child-bearing age. The state also had only a couple of abortion providers and has the nation's highest teen birth rate. New York, second to California in number of abortion providers, had the highest abortion rate, roughly eight times Mississippi's.

Nationally since 2000, the number of reported abortions has dropped overall by about 6 percent and the abortion rate has fallen 7 percent.

By all accounts, contraception is playing a role in lowering the numbers.

Some experts cite a government study released earlier this year suggesting that about 60 percent of teenage girls who have sex use the most effective kinds of contraception, including the pill and patch. That's up from the mid-1990s, when fewer than half were using the best kinds.

Experts also pointed to the growing use of IUDs, or intrauterine devices, T-shaped plastic sperm-killers that a doctor inserts into the uterus. A study released earlier this year by the Guttmacher Institute, a nonprofit organization that does research on reproductive health, showed that IUD use among sexually active women on birth control rose from less than 3 percent in 2002 to more than 8 percent in 2009.

IUDs essentially prevent "user error," said Rachel Jones, a Guttmacher researcher.

Ananat said another factor may be the growing use of the morning-after pill, a form of emergency contraception that has been increasingly easier to get. It came onto the market in 1999 and in 2006 was approved for non-prescription sale to women 18 and older. In 2009 that was lowered to 17.

Underlying all this may be the economy, which was in recession from December 2007 until June 2009. Even well afterward, polls showed most Americans remained worried about anemic hiring, a depressed housing market and other problems.

You might think a bad economy would lead to more abortions by women who are struggling. However, John Santelli, a Columbia University professor of population and family health, said: "The economy seems to be having a fundamental effect on pregnancies, not abortions."

More findings from the CDC:

— The majority of abortions are performed by the eighth week of pregnancy, when the fetus is about the size of a lima bean.

— White women had the lowest abortion rate, at about 8.5 per 1,000 women of child-bearing age; the rate for black women was about four times that. The rate for Hispanic women was about 19 per 1,000.

— About 85 percent of those who got abortions were unmarried.

— The CDC identified 12 abortion-related deaths in 2009.

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Justin Bieber won't face charge for May encounter

LOS ANGELES (AP) — Prosecutors decided not to file any charges against Justin Bieber after investigators found no evidence that the pop star had kicked and punched a photographer after leaving a movie theater last month, a document obtained Wednesday states.

Prosecutors had been asked by police to consider filing a misdemeanor battery charge against Bieber, but Los Angeles County sheriff's investigators found no visible injuries, video or photographs to confirm the allegations by the photographer.

Bieber, 18, was leaving the theater in suburban Calabasas with girlfriend Selena Gomez on May 27 when he had the encounter in a parking lot.

A doctor found only superficial injuries, and deputies observed no injuries on the man after the incident, the document states.

Authorities interviewed several witnesses but none reported seeing Bieber kick the man, and they noted that the photographer kept taking photos as the two singers left the location, according to the charge evaluation worksheet prepared by the district attorney's office.

"All the photos and video taken during this incident by the many photographers were obtained and reviewed," the document states. "There are no photos of a physical altercation."

The case was rejected on Oct. 22 and first reported Wednesday by celebrity website TMZ.

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Anthony McCartney can be reached at http://twitter.com/mccartneyAP

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Judge rejects 9/11 suit against United

United Airline employees help passengers at the check-in counter in Terminal 1 at Chicago O'Hare International Airport. (Stacey Wescott, Chicago Tribune / November 15, 2012)

Reuters

9:48 a.m. CST, November 21, 2012

United Airlines bears no responsibility for suspected security lapses at a Maine airport that allowed hijackers onto the American Airlines plane that crashed into one of the World Trade Center towers on Sept. 11, 2001, a federal judge ruled.

U.S. District Judge Alvin Hellerstein on Wednesday granted a request by United and its parent United Continental Holdings Inc. to dismiss negligence claims brought by Larry Silverstein, the leaseholder of the World Trade Center property.

The decision concerned the destruction of 7 World Trade Center, the North Tower that collapsed hours after being pierced by debris stemming from the crash of AMR Corp.'s American Airlines Flight 11 into 1 World Trade Center.

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Elmo puppeteer resigns amid new sex allegation

Kevin Clash, who created the persona and voice of Elmo on 'Sesame Street,' has resigned amid a new accusation that he had sex with an under-aged youth. (Nov. 20) (Source: Associated Press)

Reuters

12:59 p.m. CST, November 20, 2012

NEW YORK—

Kevin Clash, the puppeteer behind the “Sesame Street” character Elmo, resigned on Tuesday following new allegations that he had sex with an underage boy, adding to an ongoing controversy involving one of America's most popular children's brands.

The announcement came just a week after another man recanted his claims that Clash, 52, had sex with him when he was 16 years old.

“Unfortunately, the controversy surrounding Kevin's personal life has become a distraction that none of us wants, and he has concluded that he can no longer be effective in his job and has resigned from Sesame Street,” New York-based Sesame Workshop, the company behind the show, said in a statement.

“This is a sad day for Sesame Street,” it added.

In a lawsuit filed on Tuesday, Cecil Singleton is seeking more than $5 million in damages from Clash. Singleton claims he met the then 32-year-old puppeteer in 1993 in a gay chat room when he was 15.

It added that on numerous occasions over a period of years Clash engaged in sexual activity with Singleton.

A representative for Clash was not immediately available for comment on Tuesday.

The unnamed 23-year-old man who first accused Clash recanted his claims last week, saying the relationship was consensual. Clash had denied the allegations and acknowledged a past relationship with his accuser. He added the pair were both consenting adults at the time.

“I am a gay man. I have never been ashamed of this or tried to hide it,” Clash said at the time, adding that he was taking a break from the TV show to deal with the situation.

Sesame Workshop said the allegations involving Clash came to its attention in June when the first accuser first contacted the company by email.

The Elmo character debuted on “Sesame Street” in 1979. While Clash was the third performer to animate the child-like shaggy red monster, Sesame Workshop credits him with turning Elmo into the international sensation he became.

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HP alleges Autonomy wrongdoing, takes $5 billion charge

(Reuters) - Hewlett-Packard Co on Tuesday took a massive $5 billion charge, claiming a raft of improprieties, misrepresentation and disclosure failures at software firm Autonomy, which it acquired last October for $11.1 billion.

HP said it discovered "serious accounting improprieties" and "a willful effort by Autonomy to mislead shareholders" after a whistleblower came forward.

The latest charge, which follows a nearly $11 billion charge last quarter for its EDS services division, is the latest blow to HP. The technology company has been roiled in the past few years by a revolving door of CEOs, overall management turnover and challenges in its core personal computer and printer businesses.

Former Autonomy Chief Executive Mike Lynch, who was pushed out in May, "flatly rejected" HP's allegations.

"The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false," a Lynch spokeswoman said in a brief statement to Reuters.

HP took $8.8 billion in charges in the fourth quarter, with $5 billion tied to the problems at Autonomy.

HP said it has referred the matter to the U.S. Securities and Exchange Commission's enforcement division and the UK's Serious Fraud Office for civil and criminal investigation. It said it will take legal action to recoup "what we can for our shareholders."

HP informed both the SEC and the Serious Fraud Office over the past week. Both agencies declined to comment.

HP's stock slid to a 10-year low, losing 11.2 percent to $11.81 in afternoon trading. Shares are down nearly 50 percent year to date.

INFLATED SALES, REVENUE

HP alleged that Autonomy's former management inflated revenue and gross margins. It said Autonomy executives mischaracterized revenue from low-end hardware sales as software sales and booked some licensing deals with partners as revenue, even though no customer bought the product.

HP said it began an internal investigation, including a forensic review by PricewaterhouseCoopers of Autonomy's historical financial results, under HP General Counsel John Schultz after the whistleblower came forward.

Schultz said since the accounting troubles occurred prior to the acquisition, it took a long time before the company was in a position to make the news public.

"Not surprisingly, Autonomy did not have sitting on a shelf somewhere a set of well-maintained books that would walk you through what was actually happening from a financial perspective inside the company," he said. "Indeed critical documents were missing from the obvious places, and it required that we look in every nook and cranny."

HP CEO Meg Whitman said her predecessor, Leo Apotheker and the former chief strategy officer, Shane Robison, were the key people behind the Autonomy acquisition.

Apotheker was ousted as CEO in September 2011 after just 11 months on the job and Robison left soon after.

"Most of the board was here and voted for this deal, and we feel terribly about that," said Whitman on a call with analysts. "The board relied on audited financials, audited by Deloitte. Not Brand X accounting firm, but Deloitte," she said, adding that KPMG was hired to audit Deloitte.

"Neither of them saw what we now see after someone came forward to point us in the right direction," Whitman said.

Other advisers who worked on the deal included Qatalyst Partners, the investment bank run by technology investment banker Frank Quattrone; UBS; Goldman Sachs; Citigroup; JPMorgan Chase and Bank of America for Autonomy. Perella Weinberg Partners and Barclays Capital advised for HP.

Law firms for Autonomy were Slaughter & May and Morgan Lewis. The firms for HP included Gibson, Dunn & Crutcher; Freshfields Bruckhaus Deringer; Drinker Biddle & Reath; and Skadden, Arps, Slate, Meagher & Flom, which advised the board.

Lynch said he was "shocked to see" HP's allegations, adding that its due diligence prior to the acquisition was "intensive." He said HP's senior management was "closely involved with running Autonomy for the past year."

In response, Whitman said on CNBC the company stands by its findings.

In a statement, Apotheker said he was "stunned and disappointed" by the revelations and offered to make himself available to HP and the authorities to get to the bottom of the matter.

Robert Enderle, a tech analyst at the Enderle Group, said he has never seen such a potential misrepresentation of financials.

"You have to rely on what the firm gives you during due diligence and I've never seen a misstatement at this level," Enderle said.

If the charges are true, it could result in a massive punitive damages award for HP, Enderle said.

Other analysts hoped it was the end of the bad news for the company.

"This kind of feels like the last of the bad news," Forrester analyst Frank Gillett said.

FOURTH-QUARTER LOSS

The Autonomy allegations and announcement of the charge coincided with the reporting of a fourth-quarter loss for HP.

Net revenue fell 6.7 percent to $29.96 billion for the fourth quarter ended October 31 from $32.12 billion a year earlier. Analysts, on average, expected $30.43 billion, according to Thomson Reuters I/B/E/S.

Revenue from all of its main business units declined, with the personal computer division recording the steepest drop at 14 percent.

HP reported a quarterly net loss of $6.85 billion, or $3.49 a share, versus a profit of $239 million, or 12 cents, a year earlier.

The sprawling company, which employs more than 300,000 people globally, is undergoing a restructuring aimed at focusing on enterprise services in the mold of International Business Machines Corp.

"To put it bluntly ... this story has been an unmitigated train wreck, and it seems every time management speaks to the Street, there is new negative incremental information forthcoming," said ISI Group analyst Brian Marshall.

(Reporting by Poornima Gupta in San Francisco, Nicola Leske in New York and Supantha Mukherjee in Bangalore; Additional reporting by Paul Sandle; Editing by Peter Lauria, Saumyadeb Chakrabarty and Jeffrey Benkoe)

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Rutgers to announce its joining Big Ten

NEW YORK (AP) — Rutgers is leaving the Big East for the Big Ten and cashing in on the school's investment in a football program that only 10 years ago seemed incapable of competing at the highest level.

The school will make its decision official Tuesday at a news conference on its campus in Piscataway, N.J., with Big Ten Commissioner Jim Delany joined by Rutgers University President Robert Barchi and athletic director Tim Perenetti.

Rutgers will leave the Big East, where it has been competing since 1991. The move follows Maryland's announcement Monday that it was departing the Atlantic Coast Conference to join the Big Ten in 2014. Rutgers will be the Big Ten's 14th member.

Rutgers also plans to join its new conference in 2014, though the Big East requires 27 months' notification for departing members. The Scarlet Knights will have to negotiate a deal with the Big East to leave early.

Whenever Rutgers enters the Big Ten, it will be the culmination of one of the most remarkable turnarounds in college sports.

In 2002, the Scarlet Knights football team went 1-11 under second-year coach Greg Schiano, who then seemed like the latest coach incapable of reviving a program that had been the laughingstock of major college football for more than a decade.

However, the team made steady improvement on the field as the university made the huge financial commitments necessary to support a major college football program.

Facilities were upgraded, the on-campus stadium was expanded and as Schiano started to win, his salary began to rise into the millions. Not everyone on campus embraced the idea of turning Rutgers into a big-time football school, and it did come at a cost.

The expanded and renovated stadium cost of $102 million. The school had hoped to raise the money through private donors, but fell short. Rutgers scaled back plans for the expansion and issued bonds and borrowed money to complete the project.

In 2006, the school had to cut six varsity sports, including men's tennis and crew. As the football program has become a consistent winner — Rutgers has gone to a bowl six of the last seven years — the athletic department has received tens of millions in subsidies from the university.

Schiano left for the NFL last year, and Rutgers hired longtime assistant Kyle Flood, who has the Scarlet Knights poised to take make another big step in their development. No. 21 Rutgers (8-2) is in position to win its first Big East championship and go to a BCS game for the first time.

In the Big Ten, the amount of revenue Rutgers receives from the league's television and media deals should quadruple in the short-term and could be even more than that in years to come.

The Big Ten reportedly paid its members about $24 million dollars last year. The Big East's payout to football members last year was $6 million.

In exchange, the Big Ten gets a member in the largest media market in the country, and new presence along the East Coast, with Rutgers and Maryland as north and south bookends.

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Elmo actor Kevin Clash resigns amid sex allegation

NEW YORK (AP) — Elmo puppeteer Kevin Clash has resigned from "Sesame Street" in the wake of an allegation that he had sex with an underage youth.

In its statement Tuesday, Sesame Workshop said "the controversy surrounding Kevin's personal life has become a distraction that none of us want," leading Clash to conclude "that he can no longer be effective in his job."

"This is a sad day for Sesame Street," the company said.

In a statement of his own, Clash said "personal matters have diverted attention away from the important work Sesame Street is doing and I cannot allow it to go on any longer. I am deeply sorry to be leaving and am looking forward to resolving these personal matters privately."

As the announcement was made, a lawsuit was being filed in federal court in New York charging Clash with sexual abuse of a second youth. The lawsuit alleges that Cecil Singleton, then 15 and now an adult, was persuaded by Clash to meet for sexual encounters.

The lawsuit seeks damages in excess of $5 million.

Clash, who had been on "Sesame Street" for 28 years, created the high-pitched voice and child-like persona for Elmo, a furry, red Muppet that became one of the most popular characters on the show and one of the company's most lucrative properties. Sesame Workshop produces "Sesame Street" in New York.

Clash's exit followed a tumultuous week that began on Nov. 12 with a statement from the company that Clash had requested a leave of absence following the charge by a man in his early 20s that he had had a relationship with Clash when he was 16.

Clash denied the charge from that man, who has not been publicly identified, calling it "false and defamatory."

Clash, the 52-year-old divorced father of a grown daughter, acknowledged that he is gay in that statement.

Sesame Workshop, which said it was first contacted by the accuser in June, said it had launched an investigation that included meeting with the accuser twice and meeting with Clash. Its investigation found the charge of underage conduct to be unsubstantiated.

The next day Clash's accuser recanted his charge, describing his sexual relationship with Clash as adult and consensual. Clash responded that he was "relieved that this painful allegation has been put to rest."

In addition to his marquee role as Elmo, Clash had served as the show's senior Muppet coordinator and Muppet captain. He won 23 daytime Emmy awards and one prime-time Emmy.

In 2006, he published an autobiography, "My Life as a Furry Red Monster," and was the subject of the 2011 documentary "Being Elmo: A Puppeteer's Journey."

Though it remained unclear who might take over for Clash performing as Elmo, other "Sesame Street" puppeteers have been trained to serve as his stand-in, Sesame Workshop said.

"Elmo is bigger than any one person," the company said last week.

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Hostess, unions agree to mediation

Hostess Brands Inc agreed in court on Monday to enter private mediation with its lenders and leaders of a striking union to try to avert the liquidation of the maker of Twinkies snack cakes and Wonder Bread.

Hostess, its lenders and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union agreed to mediation at the urging of Bankruptcy Judge Robert Drain of the Southern District of New York, who advised against a more expensive, public hearing regarding the company's liquidation.

"My desire to do this is prompted primarily by the potential loss of over 18,000 jobs as well as my belief that there is a possibility to resolve this matter," Drain said.

The 82-year-old Hostess was seeking permission to liquidate its business, claiming that its operations have been crippled by a bakers strike and that winding down is the best way to preserve its dwindling cash. Hostess suspended operations at all of its 33 plants across the United States last week as it moved to start selling assets.

Heather Lennox, a lawyer for Hostess, said it would be hard for Hostess to recover from the damage it sustained due to the strike even if an agreement was forthcoming. Yet following the hearing, Hostess Chief Executive Officer Gregory Rayburn told reporters that there was always a chance Hostess could be saved.

"I think we have to see what unfolds," Rayburn said. "My impression is that the judge wants to understand the parties' positions and some of their logic, but it doesn't change our financial position.

"I'm happy to have the help," he added, referring to Drain's mediation following a breakdown of communication between Hostess and the union. "Maybe the judge will help. But can I handicap how it's going to go? No way."

A lawyer for Hostess' creditors' committee declined to comment.

The court-sanctioned mediation could make both sides more willing to give, said Nick Kalm, a communications consultant specializing in labor relations.

"It makes it much more likely that the company will put forward something that is less draconian... and the union will take it. The union realizes they are out of options," said Kalm.

BEHIND CLOSED DOORS

The BCTGM called the strike on November 9 after Hostess sought and won court approval to impose wage and benefit cuts.

Unlike other unions representing workers at Hostess, the BCTGM did not contest Hostess's action -- which allowed it to reject a collective bargaining agreement and impose its offer.

Given the fact that the union did not fight Hostess's motion in court, Judge Drain said it was "somewhat unusual to say the least, and perhaps illogical" that the union would then strike against it.

"Its an odd approach," Drain said. "Before thousands of people are put out of work it would seem to me worthwhile for both the union and the debtors to explore why that happened."

Drain also questioned whether the union had held discussions with competitors or potential suitors about a shiftover of jobs, saying the union's response to Monday's motion implied that it sees "meaningful sales available out there beyond the piecemeal sales that this motion contemplates."

A lawyer for the union did not immediately return a phone call seeking comment on whether such discussions had taken place.

BUYERS MAY EMERGE

Analysts have said Hostess' brands, which also include Nature's Pride, Dolly Madison and Drakes, are expected to draw interest from rivals including Flowers Foods, Pepperidge Farm owner Campbell Soup Co and Mexico's Grupo Bimbo.

Brian Boyle, a food industry investment banker at D.A. Davidson & Co, said it was hard to gauge the value of the Hostess assets, given that there are a lot of plants that are old and inefficient.

"The other wild card is whether you're going to see different buyers emerge for different segments of the business. So Flowers Foods, for instance, might want the cake segment and Bimbo could want the bread piece. So it comes down to 'are the parts greater than the whole?'," Boyle said. "In either case, significant labor and benefits concessions will be required."

Private equity firm Metropolous & Co said on Friday it was interested in pursuing the company, and on Monday, Fortune reported that Sun Capital Partners was interested. Sun Capital did not return a call seeking comment.

The company did have a potential white knight at one point, according to Hostess. Last spring, an outside equity investor had made a viable proposal that would help the company reorganize, it said, but the Teamsters union refused to agree to changes to the pension program and the outside investor walked away.

The company spent the summer and fall negotiating with all of the 12 unions trying to find a common path to reorganization, and did gain certain agreements with the Teamsters and many of the other unions, though not the BCTGM. At the same time the company started putting together a liquidation plan.

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