BIZ WATCH

A CONNECTING FLIGHT FOR DELTA AND CONTINENTAL?

Things are going so well for Delta and Continental airlines, No. 3 and No. 5 in the industry, respectively, that they are talking about merging to become No. 1. Then, presumably, they could really kick some tails. An acquisition of Continental, twice bankrupt and now en route to record earnings, by once struggling Delta would create a giant with more than $18 billion in revenues. But the consolidation could reduce competition. "I see the Justice Department digging in their heels and not allowing this acquisition to go through," says Michael Bradley, a finance professor at the Fuqua School of Business at Duke University.

A merger could spur copycat deals as competitors rush to keep up. Delta, in fact, has been squawking over plans by American Airlines to merge its transatlantic operations with British Airways. Delta, it seems, doesn't want too much airline capacity in the hands of anyone else.

UPDATE: THE CORPORATE CRIME FILES

Even though Charles Keating spent 4 1/2 years in prison for his starring role in the $3.4 billion collapse of Lincoln Savings & Loan, the poster boy for the 1980s S&L scandals that cost taxpayers nearly $500 billion was still able to thumb his nose at prosecutors last week.

A U.S. District judge in Los Angeles tossed out Keating's 1993 conviction--and 12 1/2-year sentence--for fraud. The judge, whose ruling could lead to a retrial, said several jurors were prejudiced by knowledge of Keating's 1991 conviction on similar charges in a California state court. That verdict vaporized too: a federal appeals court overturned it last April on grounds that Judge Lance Ito (of O.J. fame) had given jurors improper instructions.

All of which could be heartening to three disgraced executives of the Archer Daniels Midland Co. who were charged with price fixing last week. Under indictment are Michael Andreas, who is the son of chairman Dwayne Andreas and on leave as executive vice president of ADM; Terrance Wilson, who ran the company's corn-processing division; and, surprisingly, whistle blower Mark Whitacre. Although Whitacre was the mole at meetings in which price fixing was allegedly discussed, his work did not shield him from charges. It did no doubt figure in ADM's admission of guilt and payment of a $100 million penalty in October for conspiring to fix the price of the feed additive lysine. Whitacre has stopped cooperating with the FBI, leaving the government with plenty of videotape but no chief witness.

FIDELITY'S FICKLE YEAR CONTINUES

Stars keep falling out of the firmament at Fidelity Investments, the Boston-based mutual-fund giant. Last week Brian Posner, the highly regarded manager of the popular Equity Income II Fund, left to join E.M. Warburg Pincus and Co., a much smaller New York house. Posner's departure is troubling for Fidelity because he was the post-cowboy model the firm has been promoting to restore confidence among investors; each of Fidelity's 15 biggest funds was trailing the S&P 500 at the end of November. Posner, 35, has been steady and successful since he took over the Equity Income fund in April 1992. Under his management it has grown from $2.1 billion to $14.8 billion for a 16.9% annual return, fifth among 60 similar funds.

A COURSE IN HOW TO MAKE SOME BUCKS