O’Melveny & Myers, L.A.'s venerable law firm, is expected to reelect Arthur Culvahouse as chairman, despite a majority of partners initially supporting other candidates. According to The Recorder, that majority apparently couldn’t decide on a preference among the four other possibilities. Does the name Culvahouse ring a bell? Perhaps that’s because the former counsel to President Reagan was tapped by McCain earlier in the year to head up the VP search team (which of course proved to be unnecessary when McCain made his selection from the Yellow Pages). By the way, both the LAT and WP reported that Culvahouse interviewed Palin at length last week (even though he was also chasing down information about Minnesota Gov. Tim Pawlenty as late as last Thursday, the day that Palin was selected). But back to O'Melveny, which has become an increasingly fractious firm. The grousing is over everything from profitability to a shift in focus to the offices back east (Culvahouse himself is based in Washington). The Recorder gets into some of the discontent:

Former partners say the profit numbers and a geographical culture shift have led to dissatisfaction. As the firm has expanded, there was necessarily more emphasis placed on growth in offices outside of L.A., one former partner said. "The economic performance of the firm has been flat; there's an East-West divide between the partners on each coast; and there's a perceived breakdown of the traditional values of collegiality and transparency, and people blame Culvahouse," said one former partner. "There was a lot of resentment that the L.A. office was no longer the center of the universe," said another former partner who had worked in Los Angeles.

Back-to-school struggle: Wal-Mart posted higher-than-expected August sales, but aside from several discounters (Costco also did well) it was a tough slog. Target posted a 2.1 percent decline today, which was actually better than analysts' estimates, while Limited Brands Inc., the owner of the Victoria's Secret lingerie chain, said that same-store sales fell 7 percent. From Bloomberg:

More customers visited malls at the end of the month than during the ``extremely weak'' first few weeks of August, according to Adrienne Tennant, a retail analyst at Friedman, Billings, Ramsey & Co. Teen retailers, especially those with the most promotions, had the largest amount of shoppers, and many stores struggled to get people to buy at full price, she wrote in a Sept. 2 research note. "You'll see a compressed back-to-school shopping season this year, with consumers waiting until they have to spend really and waiting for the best prices," Patrick McKeever, a retail analyst for Greenwich, Connecticut-based MKM Partners LLC, said today in a Bloomberg Television interview.

Another bad day for stocks: Told you September is the cruelest month. The Dow is down more than 200 points - just a lot of bad economic news out there. (AP)

Mervyn's sues ex-owners: The department store chain says it's in bankruptcy protection because a high-powered investment group stripped the company of its valuable real estate and then nearly doubled its rent. The deal was kind of funky: Cerberus Capital and Sun Capital Partners purchased Mervyn's for $1.26 billion as two separate transactions - one for the retailer and a second one for the retailer's real estate. That enriched the private-equity firms while leaving the retail operations insolvent, according to the suit. (WSJ)

C-17 still lives?: The general in charge of the Air Force's cargo fleet said that additional military demands could prompt new orders for the Boeing cargo plane, which is assembled in Long Beach and employs 5,000 workers. But he added that there was no need for an updated version of the C-17, which Boeing has proposed. From the LAT:

Despite Air Force resistance, Boeing could find more willing advocates within the Army, which is expected to need a larger cargo plane to transport a new family of armored vehicles that it is developing over the next decade. Boeing has been pushing the C-17B with the Army in hope that the Army can persuade the Air Force to consider the new aircraft.

Platinum Equity gets funding: Who says it's tough raising private equity money? Investors committed $2.75 billion to a new leveraged buyout fund launched by Bev Hills-based buyout firm - $1.25 billion more than the amount targeted. CEO Tom Gores, who has acquired 91 companies since founding the firm in 1995, acknowledges that the credit crunch might force him to put up more cash for businesses he buys. (LAT, LABJ)

Signs for Convention Center: The city would collect $2 million a year under a plan in which Anschutz Entertainment Group, owners of Staples Center, would install electronic signs on the Convention Center. A City Council committee approved the plan, which would provide downtown with more of those huge images peddling hamburgers or whatever. (LAT)

Bobby Kotick of Santa Monica-based Activision makes his debut on Vanity Fair's New Establishment list, the magazine’s annual ranking of the top 100 movers and shakers. Kotick is No. 72, and if that doesn't seem like a big deal, consider that Russian Prime Minister Vladimir Putin is in the top spot and Rupert Murdoch is second. Kotick has been getting lots of press since Activision acquired Vivendi's Blizzard Entertainment division, which focuses on multi-player online game. Here's what VF says about Kotick:

SPHERE OF INFLUENCE: Last year Activision surpassed longtime market leader Electronic Arts to become the world’s biggest-selling video-game-maker when Kotick, 45, acquired Vivendi’s Blizzard Entertainment division, maker of World of Warcraft, the massively multi-player online game that has generated more than $1 billion in sales. The jewel of his portfolio: Guitar Hero, a billion-dollar seller that lets would-be rockers strum along on a fake guitar.

CRIB: A Beverly Hills home adorned with art from modern masters such as de Kooning.

FATHER FIGURE: Casino magnate Steve Wynn wrote a $300,000 check to Kotick, who dropped out of the University of Michigan to develop graphical software for the Apple II. (Steve Jobs pronounced it “garbage.”) The start-up failed, but in 1990 Wynn helped him take over Activision.

MEMENTO: A letter from Warren Buffett on his office wall.

Little help for consumers: Gas prices have plunged nearly 75 cents a gallon since the middle of June, but there's not been much relief beyond the pump. As reported by the NYT, Procter & Gamble plans to maintain the 7 percent to 10 percent increase in prices it charges retailers for items made with ingredients derived from oil.

“Everybody still feels there is too much uncertainty to be clear about what action they should take,” said Ali Dibadj, an analyst at Sanford C. Bernstein, who specializes in companies that use oil-based raw materials in making a variety of consumer products. “They won’t immediately drop their prices.”

By the numbers: The average price of gas in L.A. is $3.882 a gallon, according to the government's latest survey, down from $3.951 last week. That's still more than a buck higher than a year ago. Meanwhile, oil is trading at around $108 a barrel.

Palin the businesswoman: This might come as a shock, but it’s not a pretty picture. The Republican VP nominee failed to disclose her stake in an Anchorage car wash when she was running for governor, as is required. The business itself didn't pay fees or submit paperwork. Here’s the kicker: The warning letter was written on state letterhead, which carried Palin's name at the top, next to the state seal. (Washington Post)

Abu Dhabi in Hollywood: Not satisfied with last year's $1 billion deal to make movies and video games with Warner Brothers, Abu Dhabi Media is starting a new subsidiary that will spend another $1 billion more on feature-length films. There have been a bunch of recent partnerships between Hollywood and Middle Eastern governments, the latest way for the studios to find suckers…. er, that would be investors, to finance films. From the NYT:

Some hedge funds that invested in slates of films found themselves stung when movies flopped at the box office. Other funds have been hurt by the credit crisis. But entertainment executives, by and large, do not consider money from the oil-rich Middle East as a replacement for slowing hedge fund dollars. Because of cultural and religious issues, financing from the Middle East, especially those from a government used to controlling the media, is unlikely to come without restrictions.

"Cops" on set: They wear LAPD uniforms and carry guns and sit next to CHP-type motorcycles. But most of these "movie officers" are not working police officers. That means that they're not accountable to the department. So Police Chief William Bratton wants the LAPD to take over the job of handling security on movie sets - except that Hollywood isn't happy about it. From the LAT:

Union officials, production workers and studio executives say such a change would raise filming costs and create scheduling bottlenecks that could further erode the local movie and TV production industry. In the last decade, L.A. has seen a steady outflow of feature film projects to other states and countries, many of which offer lucrative production rebates that aren't available in California.

John Malone maneuvers DirecTV: The plan is to spin off its Liberty Media's entertainment unit, which owns half of the El Segundo-based DirecTV and all of Starz Entertainment, into a separate company (Malone controls Liberty). As noted in DealBook, it's a move away from Liberty trading as three separate tracking stocks. The problem with tracking stocks is that they don't represent companies, but business units within the main company.

Greg Maffei, president and chief executive of Liberty, said the move “will create a stronger currency and allow greater flexibility to pursue our strategic objectives” — which sounds like a hedged way of saying that Liberty Entertainment could be better-positioned to make acquisitions. There has been lots of recent speculation about whether DirecTV and Dish Network (formerly known as EchoStar) might try to revisit the merger that regulators shot down in 2001.

SAG update: The Screen Actors Guild sent its 120,000 members a newsletter that summarizes SAG’s position in the current standoff with the networks and studios, along with some questions to be filled out on a returnable postcard. SAG says it's a way to inform members of the companies' contract offer, but the companies say that the questions and information are skewed. SAG's contract expired June 30 and actors continue to work under its terms. (Variety)

Asia expansions: Videogame publisher THQ Inc. is opening an office in Shanghai in order to pursue development and partnerships. Later this year, the Agoura Hills company launches a free-to-play, micro-transaction game designed specifically for Asia. Also, shoe maker Skechers USA will expand its wholesale distribution in Hong Kong and Macau through a new partnership. LABJ stories are here and here.

There's nothing mysterious about what's going on: Between 1990 and 2007, Los Angeles County had a net gain of 1.4 million new residents, but added only 194,554 housing units. This jobs/housing imbalance is one of the reasons why the city is so fixated on mixed use projects near public transit corridors (forgetting about the impact such development would have on existing congestion, and ignoring existing rules prohibiting much of the building, and sidestepping the slim odds of expanded rail service). Anyhoo, the Los Angeles Business Council says in a new report that the lack of workforce housing undercuts the area's competitiveness and squeezes out low and middle income residents. In 2007, according to the council, a family earning the countywide median income of $53,000 spent more than 50 percent of their earnings to purchase. That compares with the recommended 30 percent. So yes, there is a big housing problem, but the city still hasn’t the first clue on how to effectively deal with it. The council's findings will be laid out at Friday’s Mayoral Housing Summit.

Here's more evidence that much of the home sales activity these days is happening under stress. Research firm RadarLogic finds that nearly a third of all June home sales in L.A. and Orange Counties were made by "motivated sellers," which are typically financial institutions, foreclosure service firms, and auction-related sellers. A year ago, it was only 5.1 percent. Even Phoenix is trailing L.A., at 29.5 percent. Actually, these stunning numbers are in line with Dataquick statistics showing that Socal foreclosures accounted for 41.1 percent of all June resales. That ranged from 18.9 percent in Orange County to 62.3 percent in Riverside County.

There’s lots of attention today to an excerpt of Michael Wolff's book on Rupert Murdoch in the October Vanity Fair. Even for a guy who has been profiled to death - and who by all accounts is pretty transparent - Murdoch still manages to surprise. Perhaps most intriguing is his malleable view of the conservative agenda – and of Fox News. That’s apparently the result of his younger wife Wendi, who hangs out with a left-leaning crowd.

For a long time he was in love with the Fox chief, Roger Ailes, because he was even more Murdoch than Murdoch. And yet now the embarrassment can’t be missed—he mumbles even more than usual when called on to justify it; he barely pretends to hide the way he feels about Bill O’Reilly. And while it is not possible that he would give Fox up—because the money is the money; success trumps all—in the larger sense of who he is, he seems to want to hedge his bets. Just before the New York Democratic primary, when I found myself undecided between Clinton and Obama, I said to Murdoch (a little flirtation, like a little gossip, softens him), “Rupert, I don’t know who to vote for—so I’m going to give you my vote. You choose.” He paused, considered, nodded his head slowly: “Obama—he’ll sell more papers.”

Early in the piece, Murdoch is seen reporting out a story.

He’d been out the night before and gotten a tip. Now he was trying to nail it down. His side of the conversation was straight reporter stuff: Who could he call? How could he get in touch? Will they confirm? Barked, impatient, just the facts. Here was the old man, in white shirt, singlet visible underneath, doing one of the same basic jobs he’d been doing since he was 22, having inherited the Adelaide News in Australia from his father. And he was good at it. He was parsing each answer. Re-asking the question. Clarifying every point. His notepad going. He knew the trade. Of how many media-company C.E.O.’s could that be said? This wasn’t a destroyer of journalism—this was a practitioner. On the other hand, he was trying to smear somebody. At the dinner party he’d attended—since his marriage to Wendi Deng, he’s become an unlikely fixture at fashionable tables—he heard that a seniormost Hillary Clinton operative was a partner in an online porn company. He didn’t like the operative, didn’t like—no matter how much he had tried—Hillary Clinton. So it didn’t much matter that the story itself seemed far-fetched and tenth-hand. It was juicy and would slime somebody he thought was … a slime.

Not that this has much to do with business or L.A., but I noticed that Intrade, the futures market for all kinds of predictions about current events, has the chances of Sarah Palin being withdrawn as the VP nominee at 12.5 percent. It's been as high as 18 percent and as low as 3 percent, a reflection of the very low trading volume - so far - as well as the uncertainty about where this story will go. By the way, Barack Obama's chances of winning the election have risen slightly, to 61.5 percent.

*Update: If you're looking for a good fright, check out a piece posted this morning on the Huffington Post in which Palin addresses the graduating class of commission students at her one-time church, Wasilla Assembly of God. Besides painting the war in Iraq as a messianic battle in which the United States is acting out the will of the Lord ("Our national leaders are sending [U.S. soldiers] out on a task that is from God," she exhorted), Palin said that a $30 billion natural gas pipeline project that she wants built in the state is also God's will. She asked the assembled students to "pray for that."