The Irish Independent reports that each peak-time journey on Dublin's Luas tramway costs the taxpayer around €6, even when the savings from fewer car journeys are counted, the annual Dublin economists' conference was told.

The Irish Independent also reports that Department of Education staff who have built up banks of untaken leave over more than three years have been told to clear it.

The Irish Times reports that Minister for Transport Martin Cullen was criticised yesterday for not permitting competition in the Dublin bus market.

Addressing the annual conference of the Dublin Economics Workshop in Kenmare, competition economist Pat Massey said the Republic was lagging behind the rest of the world by its failure to reform the bus industry.

In a paper entitled Delayed Indefinitely, Mr Massey, a former chairman of the Competition Authority, argued that the lack of competition allowed inefficiency to persist. He described this as a "sizeable hidden cost of social partnership".

Mr Massey contrasted the Government's stance on bus deregulation with remarks made by Mr Cullen in the Dáil last week in respect of the Ryanair bid for Aer Lingus, in which the Minister warned of a possible monopoly in air travel.

"It is somewhat disappointing that the Minister has failed to apply the same logic in the case of bus services," he said yesterday.

"Since 1998, revenues have increased by 35 per cent but operating costs have increased twice as fast. The net effect is that Dublin Bus's operating deficit has increased from just under €9 million in 1998 to almost €63 million in 2005," Mr Massey said.

He reserved particular criticism for the bus licensing system, which he said discriminated against private-sector operators.

"The record shows that private bus operators have persistently been refused licenses to operate on routes serviced by CIÉ or its various subsidiaries," he claimed.

Mr Massey said the deregulation of bus services in the UK had initially encountered problems but was ultimately successful.

Adopting a private sector approach to bus regulation need not preclude the development of integrated ticketing, Mr Massey added.

The Government must change its policies on tourism if it is to adapt to a "new age" in the sector, according to a paper presented at the conference yesterday.

Jim Deegan of the University of Limerick said the sector's full economic potential could not be achieved by relying on the Republic's traditional image.

The Irish Times also reports that the ESB is to build a new €45 million windfarm at Mountain Lodge, Co Cavan, which will produce enough power to supply 28,000 homes as the company increases its presence in renewables.

While the ESB's critics claim it maintains a dominant position in the Irish energy market, the ESB is keen to build up its renewable energy base as the Republic moves firmly in the direction of greener forms of energy.

The project is being developed by ESB's Hibernian Wind Power subsidiary in conjunction with a local partner, Galetech. Some 19 wind turbines supplied by General Electric will be installed on the farmland site.

The farm is scheduled to be finished by mid-2008 and the facility will generate in excess of 28 megawatts of electricity for the national grid.

ESB chief executive, Pádraig McManus, said: "This significant investment in clean technology represents ESB's continuing commitment to renewable energy sources. This adds to ESB's growing portfolio of investments in windfarm technology and now brings our total generating capacity from the source in excess of 100 megawatts."

He said the development fitted in with the objectives on renewables outlined in the recently published Green Paper on energy, published earlier this month along with another report by consultants Deloitte.

The Government rejected proposals put forward by Deloitte for the partial break-up of the ESB and a restructuring of the electricity supply market, which Deloitte claimed would improve efficiency and bring down prices.

However, the Minister for Natural Resources, Noel Dempsey, rejected the proposal to fragment the company.

The Irish Examiner reports that national wage agreements have given trade unions the power to push public sector workers’ wages at least 20% higher than their private sector counterparts.

NUI Maynooth economist Jim O’Leary told delegates at the Dublin Economic Workshop that prior to the benchmarking process Government-paid workers were paid on average 13% more than those in the private sector.

“Public sector trade unions in Ireland have managed to secure an exceptionally large premium for their members and have managed to maintain that premium throughout the Celtic Tiger years. Of course, they then managed to substantially increase their members’ premium, by an average margin of 9%, through the first round of the benchmarking process.”

He said that while national wage agreements were not the catalyst for a period of fewer strikes, it “cannot be ruled out” that social partnership had helped maintain a healthy industrial relations climate.

Mr O’Leary believes there is a simple explanation to the phenomenon of a soaring public sector wage bill: “There was enough money around to give public sector unions the wage increases necessary to placate them. After all, the economy has been growing so rapidly and Exchequer revenues have been so buoyant over most of the period concerned that governments have been able to sharply increase public sector pay while simultaneously reducing taxes. In other words, there has been no particular pressure to seriously restrain the growth of public sector pay.”

Mr O’Leary said the institution of social partnership has exerted some incremental influence.

“Arguably it has conferred much greater political leverage on public sector trade unions than they would otherwise enjoy,” he said.

“Government will not walk away. Public sector union leaders know that. And that gives them enormous bargaining power. In this scheme of things, the private sector parties (employers and unions) are second order players.”

The Financial Times reports that Banca Popolare Italiana on Sunday night agreed to merge with Banca Popolare di Verona e Novara, its larger rival, in a deal that values the co-operative bank at about €8.2bn.

Verona is offering cash and stock that values BPI at about €12 per share, based on last Friday’s closing prices, people familiar with the matter said, with cash accounting for less than 30 per cent of the value of the offer. Fourteen members of BPI’s board voted in favour of the Verona offer after a day-long meeting on Sunday, while just 2 favoured a rival bid by Banca Popolare dell' Emilia Romagna, a smaller lender.

A formal announcement is expected before the market opens on Monday. The merger ends a drawn out search for a buyer by BPI, which was at the centre of the scandal that rocked Italian banking last year, ultimately forcing the resignation of the governor of the Bank of Italy. It is also the latest step in the accelerating consolidation among Italian banks.

The battle for control of BPI has gripped Italy’s co-operative lenders, which publicly listed but are often strongly linked to a particular region and enjoy extensive takeover protections under Italian law. Mergers between the popolari banks are seen as a key step in the consolidation of Italian banking, which is still highly fragmented when compared with other European countries.

The new governor of the Bank of Italy, Mario Draghi, has made it clear that the country’s banks must set aside their regional rivalries or face foreign takeovers. The deal will now move to a shareholder vote whose outcome is far from certain.

BPI’s decision to favour Verona, which is regarded as the more transparent and better-managed of its two remaining suitors, is likely to receive a positive response from institutional investors, who are thought to hold around 70 per cent of BPI’s shares. However, shareholders of the popolari banks are limited to one vote regardless of the size of their holding. As a result, the 30 per cent of BPI shares in the hands of small shareholders will prove pivotal to winning approval of the deal.

Verona is expected to stress that it will respect BPI’s links with the local community in its home town of Lodi. BPI was advised by Mediobanca and Rothschild, while Goldman Sachs advised Verona. It is thought that the combined bank will retain its co-operative status, though as by far the largest popolare bank it will have to work hard to demonstrate to investors that its standards of governance are equal to those of Italy’s largest private-sector banks. Analysts expect that Fabio Innocenzi, Verona’s chief executive, will lead the combined bank.

The FT also reports that most chief executives of UK businesses want Britain to renegotiate its membership of the European Union and take back powers from Brussels, the biggest survey of its kind for years found.

The increasing burden of EU legislation was seen by the majority of 1,000 chief executives polled by ICM as outweighing the benefits of the single market, even among businesses that did the most trade with the EU.

Chief executives who said they distrusted the European Commission outnumbered those who said they trusted the Brussels bureaucracy by more than two to one.

Only the European Court of Justice achieved a positive trust score among the EU institutions.

The survey was commissioned by Open Europe, a UK business-backed think-tank that lobbies to turn the EU into a looser trading area, and was born out of the anti-euro No campaign. The businesses questioned by ICM included a range of sizes, with a quarter employing more than 250 and a quarter employing four or fewer.

Larger businesses tended to be less sceptical about the EU but still showed much disenchantment. While 60 per cent of chief executives overall wanted the UK to renegotiate membership of the EU, support for renegotiation among those from the larger companies was 52 per cent.

Concern over EU legislation was greater among chief executives of the bigger businesses, with 70 per cent who thought regulation was increasing, compared with 59 per cent for the survey as a whole.

The survey comes a week after Günter Verheugen, EU enterprise commissioner, said his drive to simplify Brussels legislation had fallen behind schedule and that the business cost of complying with the regulations was up to €600bn (£404bn) a year.

The New York Times reports that in early March, executives from Movie Gallery, a big movie rental chain, held a private conference call for their lenders to talk about how disastrous 2005 had been for the company. A string of Hollywood flops had kept customers away. More people were recording movies from television instead of renting them from a store. The executives said they needed more time to fix the problems, which included more than $1 billion in debt.

Most of the roughly 200 lenders were not bankers, but hedge funds. And what they heard was supposed to be confidential: it was inside information, as valuable to investors as a tip about an imminent takeover.

During the next two days, though, Movie Gallery’s shares were heavily traded, and its stock plummeted 25 percent.

A coincidence? Regulators are not so sure. The Securities and Exchange Commission is now looking into whether any of the hedge funds on the private call with Movie Gallery took their inside knowledge of the company’s struggles and traded on it. Movie Gallery announced earnings results to the public nearly two weeks after the private conference call.

The Movie Gallery case provides a window onto the growing power of hedge funds in financial markets, and raises questions about their role in how information flows on Wall Street. Hedge funds have become a dominant force in the New York and London stock exchanges, and now account for roughly half of all trading in those markets. But they also have recently become major players in the more opaque debt market, which includes bonds as well as loans, and is more than one and a half times as big as the stock market.

“If hedge funds are privy to inside information and they invest in different securities all over the capital structure, this raises lots of concerns” said Alistaire Bambach, assistant director for the Northeast regional office of the S.E.C. She declined to comment on any open investigation.

The power shift in the loan market has prompted the trade association for lenders to develop new guidelines, to be announced today, governing how confidential and material — meaning potentially market-moving — nonpublic information is used.

“There are laws against insider trading: you can’t trade securities on the basis of material nonpublic information,” said Elliot Ganz, general counsel of the industry group, the Loan Syndications and Trading Association. That goes for hedge funds as well as any other entity that owns or trades loans.

Lending was once a clubby world dominated by banks, which are highly regulated and go to great lengths to separate their various lines of businesses. To keep bankers from possibly sharing inside information with traders, some banks even separate their divisions on different floors and use coded identification tags to restrict access.

But hedge funds, which do not generally face such strict regulatory oversight, tend to be smaller than banks and have fewer information barriers. At some funds, the person trading loans, who may have access to confidential information, often sits next to the person trading the bonds — or, in some cases, may be the same person.

“You can’t put an ethical wall down the middle of someone’s brain,” said Herbert F. Bohnet, a lawyer at Ropes & Gray who represents hedge funds.

Many hedge funds have put in place information barriers to guard against trading on inside information. Silver Point, a $6 billion hedge fund focused on investing in various kinds of debt, physically separates the people who have inside information from those who do not, among other measures. “Silver Point has a sophisticated information barrier,” said Adam Weiner, a spokesman for the fund.

Some funds choose to restrict their trading. For example, Highland Capital Management, a $28.5 billion investment management firm that operates hedge funds, and Silver Point each say that when their public side receives any nonpublic information about a company, it restricts itself from trading any securities in that company. Other funds, to avoid even the appearance of having a trading edge, simply opt to receive only public information.

The hedge fund business has exploded in recent years, with more than 9,000 funds now managing more than $1.2 trillion for pension funds, endowments and wealthy individuals. Part of the appeal to these sophisticated investors is the funds’ greater freedom to bet on different markets, including exotic and risky investments. Many institutional investors use them to diversify their portfolios.

These funds are paid enormous fees — typically, 2 percent of the assets they manage and 20 percent of the profits — for the bets they make that pay off.

Searching for different returns from the stock and bond markets, hedge funds found fertile ground in the loan market. Institutions, including hedge funds, bought $224 billion of loans in 2005, compared with $50 billion in 2000, according to Reuters Loan Pricing Corporation. The percentage owned strictly by hedge funds is not known.

When a public company takes out a loan, it generally agrees to provide the lender with certain information, sometimes including monthly financial updates. Investors in a public company’s stock or bonds, by contrast, receive only quarterly reports.

If a company is considering whether to refinance debt or secure financing for a merger or acquisition, it may share those intentions with lenders. If a company is having problems that threaten to break the terms of its loans, it has to disclose that to its lenders, too.

As part of their role as lenders, hedge funds have also grown prominent in corporate bankruptcies, where they can make a cheap bet on a company’s recovery by buying its debt. By owning the debt, they can become powerful creditors and serve on committees that have a large say in the future of a company.

“Hedge funds have become a dynamic force in Chapter 11 cases,” said Harvey R. Miller, vice chairman at Greenhill & Company and the former head of the bankruptcy and reorganization group at Weil, Gotshal & Manges. “Where you used to have a syndicate of banks, today you have a syndicate that is mostly hedge funds, and it would appear they have different objectives than a syndicate of banks used to have. Their horizons are much shorter.”

Hedge funds have come to dominate certain riskier segments of corporate lending, including the second-lien loan market. In this market, if a borrower defaults, the primary lender gets repaid before the secondary lender; in exchange for shouldering this risk, that second-lien lender earns a higher interest rate from the borrower. In the first half of this year, companies borrowed $12.4 billion in second-lien loans, an increase of 195 percent over the same period in 2003, according to Reuters L.P.C.

A number of hedge funds are particularly active in extending and trading loans, including Highland Capital Management, Canyon Capital and Silver Point Capital. All three funds owned part of Movie Gallery’s loans, though each of them said they were not on the March 6 private conference call.

Determining whether any of Movie Gallery’s loan holders misused information will be difficult. The company’s stock had been volatile in the months before the private call because of the expensive acquisition of the Hollywood Entertainment movie rental chain. New technologies such as video-on-demand also worried many investors, as did the growth of DVD sales by discount retailers such as Wal-Mart.

Still, the trading patterns were unusual. Movie Gallery held two conference calls on March 6: one for lenders who agreed to receive only public information, and one for those who receive private information.

The next day, the price of its bonds fell to $63, from $65, and the stock dropped 5 percent, to $3.11. That evening, Debtwire, a subscription-only news service for debt-market traders, published some of the contents of the private meeting, attributing it to people who had been on the call. The next day, the bonds fell almost 10 percent and the stock more than 20 percent.

The situation at Movie Gallery raises tougher questions for regulators than more typical trades on inside information, such as someone getting wind of a big merger before it happens. Did the private information from the call become “public” once it has been released over Debtwire? Trading on public information is, of course, perfectly legal.

Movie Gallery, meanwhile, has hired advisers to help turn itself around. Its stock closed at $2.17 on Friday, down 73 percent from its closing price a year ago. Andrew Siegel, a spokesman for Movie Gallery, declined to comment.

As much as the S.E.C. is trying to root out instances of actual insider trading, it is also scrutinizing the broader issue of how companies manage the information they have access to as debt holders. In one case in 2005, for example, the S.E.C. sued Van D. Greenfield and his fund, Blue River Capital, accusing them of using fake trades to secure a position on the WorldCom creditors committee. That position enabled him to get inside information while his fund continued to trade in the securities of the company.

While the S.E.C. did not charge the fund with insider trading, it accused Blue River Capital of failing to have information barriers in place to prevent the misuse of such information.

Blue River withdrew its registration as a securities dealer and now operates as a private investment vehicle for the people who run it, according to Arthur S. Linker, Mr. Greenfield’s lawyer. Mr. Greenfield settled the case last year without admitting or denying guilt and, through his lawyer, declined to comment.

Mr. Miller of Greenhill said that the issue of managing secrets was a serious one for the industry. Walls may be in place, but people still run into each other outside the walls. “It is hard to be foolproof,” he said.

The NYT also reports that Dr. William W. McGuire, a medical entrepreneur who built the UnitedHealth Group into a colossus in its field, was forced to resign from the company yesterday and to give up a portion of the $1.1 billion he holds in harshly criticized stock options.

UnitedHealth, one of the nation’s two largest health insurers, also dismissed its general counsel and a member of its board in what amounted to a sweeping overhaul of its governance practices and leadership ranks. The options that Dr. McGuire had been granted over the years have led to criminal and civil investigations and public disapproval.

In a sweeping report released yesterday that was highly critical of management, a law firm hired by UnitedHealth to investigate the timing of stock options concluded that the company was riddled with poor controls and conflicts of interest. The report, which the company posted on its Web site, found that UnitedHealth had backdated options to maximize employees’ compensation.

The company said yesterday that the disputed options would be repriced from the lowest share price for the years in question to the highest prices, scaling back the earnings of Dr. McGuire and others. The company did not say precisely how much its executives would give up.

The developments are the most dramatic to date since federal regulators started looking into the widespread practice of backdating stock options. More than 100 companies have come under scrutiny over the unlikely coincidence of stock options being granted again and again to senior executives on dates when the company’s share price was low, a tactic that guaranteed the maximum profit when the options were turned into cash.

Executives at several companies have already been forced to resign, and at UnitedHealth Group, it was announced that five other directors would be forced out over the next three years.

At UnitedHealth, there was significant evidence that options were backdated for employees at all levels of the company between 1994 and 2002. But among the most substantial and egregious, according to the law firm’s report, were those awarded to Dr. McGuire, the company’s longtime chairman and chief executive. Of the 12 options grants issued to Dr. McGuire, three just happened to be priced at the stock’s lowest price that year.

The Justice Department, the Minnesota Attorney General’s office, the Securities and Exchange Commission and the Internal Revenue Service are all investigating UnitedHealth’s options practices.

Most of the companies implicated in backdating controversies so far are Silicon Valley start-ups or firms with technology roots, where options with favorable dates were considered a recruitment tool in the dot-com boom. UnitedHealth, which has a market capitalization of $66 billion, is one of the few large blue-chip companies to stumble over the issue, and its problems underscore how prevalent the practice has been. Scrutiny over backdating also comes at a time of increasingly loud criticism of excesses of executive pay.

At UnitedHealth, even the man named to replace Dr. McGuire as chief executive has been a beneficiary of backdated options: Stephen J. Hemsley, who has been Dr. McGuire’s top lieutenant, will lose a sizable portion of his options, the company said.

“Mr. Hemsley has voluntarily agreed to reprice all options awarded through 2002 to the annual high share price for each year, and to take any other appropriate action to eliminate any possible financial benefit from options-related issues,” UnitedHealth said. Other senior UnitedHealth executives, including Dr. McGuire and the resigning general counsel, David J. Lubben, will take similar actions, the company said.

In a lengthy and somewhat contrite statement after a board meeting yesterday, UnitedHealth announced that it would take a series of steps recommended by an outside law firm, Wilmer Cutler Pickering Hale & Dorr, which had been hired by a special committee of UnitedHealth directors. The seven-month investigation led to a showdown that ended late yesterday after Dr. McGuire and the UnitedHealth board was presented with the findings.

In their report, investigators from Wilmer Cutler found that “most of the 29 stock grants” that accounted for nearly 450 million stock options that the company awarded between 1994 and 2002 “were likely backdated.”

The report also found that a grant of one million stock options to Dr. McGuire and 500,000 options awarded to Mr. Hemsley in connection with their 1999 employment contract were probably backdated. But the company’s outside investigators appeared to clear Mr. Hemsley, finding that he “had little or no role in the negotiation of, or the process leading up to, the option award” related to the contract.

Investigators, moreover, painted a picture of “inadequate” internal controls and a senior management team that failed to set an appropriate tone at the top. But the report attempted to clear the directors on the compensation committee of any legal wrongdoing. “The directors were entitled to presume that matters brought before them for action were procedurally proper and consistent with applicable legal and accounting standards,” the report concludes.

The report also said that the financial relationships between Dr. McGuire and the board member who resigned yesterday, William G. Spears, who headed the board’s compensation committee when Dr. McGuire’s employment agreement was negotiated in 1999, “created a conflict of interest.” Mr. Spears served as a trustee for two trusts for Dr. McGuire’s children and managed as much as $55 million of Dr. McGuire’s money. He also managed millions of dollars managed for Mr. Hemsley.

Acting on the law firm’s recommendations, the board said it would replace, within three years, all of the directors on its compensation committee who had approved the improper options. The company also said it would create new senior executive posts to oversee ethics and compensation.

Dr. McGuire, an internist and lung specialist, will not leave empty-handed: he will still take home hundreds of millions of dollars from stock options. Over his 18 years at UnitedHealth, he banked more than a half billion dollars. UnitedHealth said last night that it was still negotiating whether he would receive a $5.1 million a year pension, which is called for in his employment contract.

Dr. McGuire is by far the best known, most powerful and most richly compensated business leader to be toppled by challenges to pay packages that were inflated by stock options based on favorable, low purchase dates. Options are typically granted at the current market price of the stock, to avoid adverse tax and accounting consequences.

Options-dating issues led to the resignation from the Apple Computer board two weeks ago of Fred D. Anderson of a former chief financial officer of Apple, but the company said that Steven P. Jobs, chief executive of Apple, had not benefited from improper equity awards.

The United Health board faced formidable challenges at its meeting yesterday. Dr. McGuire is a superstar executive with one of the best track records in American business, and losing him could undermine the confidence of Wall Street investors. The statement released by UnitedHealth, which is based in Minneapolis, pointed out that under Dr. McGuire’s leadership, the company’s stock price had risen by almost 8,500 percent.

But not acting posed considerable legal and financial risks for the company and the directors themselves. For some compensation committee members who remain on the board, ousting Dr. McGuire over stock option improprieties might mean implicating themselves.

Wall Street analysts said investors, who have driven down United’s stock price by more than 20 percent this year, are likely to be jolted by the departure of the widely admired Dr. McGuire but may be reassured by the promotion of Mr. Hemsley, “the guy who makes things happen” at the company, said Sheryl Skolnick, a health care analyst at the CRT Capital Group.

The uproar over backdating erupted at a time when dozens of companies were forced to restate earnings to reflect option awards, under new accounting rules. UnitedHealth said in May that restating could cut as much as $286 million from profits for 2003, 2004 and last year.

The Justice Department has brought charges against officers at two companies — Brocade Communications and Comverse Technology — over options backdating, and with dozens of cases under review, more charges could be on the way. Boards, meanwhile, have forced out more than two-dozen executives, including five in the past week. And scores of companies are rushing to restate their results in time for this quarter’s earnings, so they do not face legal and financial exposure for additional delays.

In an apparent effort to get ahead of the official investigators, in March, a special committee of UnitedHealth’s independent directors began examining the 45,000 separate stock option grants made to company employees. The following month, the committee hired William R. McLucas, a former S.E.C. enforcement director, and his team of investigators, Wilmer Cutler Pickering Hale & Dorr, to lead the review.

There are also questions about the an unusual clause woven into Dr. McGuire’s 1999 employment contract that allowed him to choose the grant date of his stock options by providing “oral notification” to the human resources or compensation committee chair. While there is nothing illegal about such a provision, compensation specialists say the practice could lead to abuse. The clause was eliminated last year.

Most analysts have continued to recommend the stock during its slide, but Matthew Borsch, who follows UnitedHealth at Goldman Sachs, predicted that United’s share price “will fall further now with the certainty of Dr. McGuire’s departure.”

Ms. Skolnick or CRT Capital Group had other concerns. She said the changes announced yesterday were “good” but added that “the scary thing” was the possibility that past stock-dating practices may still lead to costly penalties. “I worry that something bad must have happened,” she said.