●O TALK TO US

Do you have a favoritememory of a visit to Dis-neyland? Write us aone-paragraph memoryand attach a photo, andthe Register will include itin our coverage of the 50thanniversary of the openingof Disneyland. Includeyour name and city of resi-dence, and e-mail to: dis-neylandmemories@ocre-gister.com.

Tell us your bestDisney memory

Stocks ● Indexes ended avolatile session moderatelyhigher as investors eyedsoaring oil prices andawaited inflation and retailsales figures today andWednesday. Business 6

Indexes settlefor modest gains

Companies ● MorganStanley chairman and CEOPhilip Purcell announcedplans to retire after a se-ries of high-profile depar-tures. Business 6

Insurance ● One-fourth ofU.S. residents withouthealth insurance are im-migrants, a study found.Business 10

Morgan StanleyCEO plans to retire

●O NATION

●O MARKETS

●O COMING UP

How to reach usWrite:

Register Business sectionP.O. Box 1 1 626Santa Ana, CA 927 1 1 - 1 626

Phone: (7 1 4) 796-498 1Fax: (7 1 4) 796-3685E-mail: business@ocregister.comRead the Register online at:

www.ocregister.com/business

Dow 30 industrialsClose: 1 0,522.56Change: +9.93

Nasdaq composite indexClose: 2,068.96Change: +5.96

O.C. Bloomberg indexClose: 465.67Change: +2.20

10-year Treasury yieldClose: 4.09%Change: +0.04

Oil Nymex, per barrelClose: $55.62Change: +$2.08

●O O.C./REGION

Bravo for Loretta Sanchez.The Santa Ana congresswo-

man last week wouldn’t letFed boss Alan Greenspan slipoff the bubble hook.

Greenspan, the nation’s topbanker, is at-tempting animprobablehigh-wirehousing act.He’s warningfolks aboutsky-highhome pricesand riskylending prac-tices whileclaiming thenational

economy is in near perfectcondition.

Like any observant OrangeCountian, Sanchez knows theincredible wealth the housingboom created.

She and her husband paid$208,000 for their Santa Anaresidence in 1998, “and it’sprobably quadrupled in valuesince,” she says.

But a county’s worth ofsuch easy money – no less anation’s worth – would bebadly missed in the economy ifhome profits evaporated.

Last Thursday, Greenspangave an economic pep talk to acongressional hearing, anevent where he’s too fre-quently treated with kidgloves.

Sanchez chose to confrontthe Fed czar on his seeminglyconflicting views. In a Q&Asession, she asked how slow-downs in some hot housingmarkets – Orange County, forone – could not have nationalimplications.

Greenspan replied by ad-mitting that sluggish housingwould translate to a “slowingof consumption expenditures”with even severe serious re-gional implications.

But local pain won’t spread,Greenspan insisted. “Not thatit will have no effect, but Idon’t perceive it on net to be amajor macroeconomic effect.”

When I spoke to Sanchez byphone after Greenspan’s Capi-

BUBBLEDEBATETURNS

FROTHY

JONATHANLANSNER

REGISTERCOLUMNIST

THE $500,000HOUSING MARKET

REP. LORETTASANCHEZ

TAKES BULLISHGREENSPAN

BY THE HORNS.

SEE LANSNER ● PAGE 5

It’s your business ●

Small-business writer JanNorman tells how a New-port Beach company en-courages foreign trade.Coming in Business Monday

Small firm boostsits foreign trade

●O HOUSINGSMARTS

Ask the experts ● Betterto move or remodel? Insome cases, buying a homewith features you want ischeaper, the founder of RemodelOrMove.com says.Business 5

Buying can beatout remodeling

Labor ● The United FarmWorkers is asking consum-ers to stop buying Gallowine, saying the Californiavintner isn’t treating work-ers fairly in contract nego-tiations. Business 3

UFW urges boycottof all Gallo wines

BUSINESST H E O R A N G E C O U N T Y R E G I S T E R T U E S D A Y , J U N E 1 4 , 2 0 0 5

Melanie Harvey was browsing her e-mail lastwinter when she came across a letter from aMinnesota boutique owner.

The woman chronicled the relentlesswave of snowstorms that curtailed foot traffic around hermodest boutique and how one product she stocked reli-giously was so highly coveted, customers braved bittertemperatures to acquire it.

If it hadn’t been for The Original Seatbeltbag byHarveys, the woman wrote, her business wouldn’t havesurvived the winter.

Dana and Melanie Harvey started their handbag busi-ness nine years ago, making a handful of bags each day.

The durable, inimitable Seatbeltbag placed their brandover the shoulders of celebrities and then on pages of

HAUTE DOG: Dana and Melanie Harvey’s boxer Rocky models a Seatbeltbag.

PHOTOS: CINDY YAMANAKA, THE REGISTER

Beltingoutquality

Iconic handbag craftedfrom seat belts is aboutto go international.

By CHANTAL LAMERS

THE ORANGE COUNTY REGISTER

Fine detailsThe Original Seatbeltbag by Harveys started in1 996.

Headquarters: Santa Ana

Production: 1 00,000 bags per year

Employees: 45

Annual revenue:$ 1 0 million

Price range for a handbag: $66 to $ 1 50

Harveys (lingerie and apparel):Launched in 2002

Anticipated revenue (Harveys) for 2005:$2 million

Sold at: Nordstrom and Girlshop.com

Web sites: www.seatbeltbags.com andharveysboutique.com

SEE SEATBELTBAG ● PAGE 4

SAN FRANCISCO ● A little-noticed appellate-court rulingagainst Borders Group sets aprecedent that could enableCalifornia to force some majorInternet retailers to start pay-ing state sales tax for books,

music and other goods soldonline to state residents, anal-ysts said Monday.

Whether California tax col-lectors use the precedent to goafter Borders, Barnes & No-ble, Amazon.com and otheronline retailers remains to beseen. But independent book-sellers and other “bricks-and-

mortar” retailers have beencheering, saying the rulingshould remove what they sayis their Internet competition’sunfair advantage.

“There are a lot of online re-tailers who are watching thisintently,” said Tom Dressler, aspokesman for the state At-torney General’s Office.“Clearly, online retailing isgrowing, so one would thinkthe potential revenue problemis fairly substantial.”

Businesses can avoid payingsales taxes to states wherethey have no physical pres-ence, according to a 1992 U.S.Supreme Court ruling.

Borders says it has nevercollected sales tax for booksand music sold over the In-ternet to California residents,even though the Ann Arbor,Mich.-based corporate parentoperates 129 California storesunder the Borders and Wal-denbooks brands, as well as a

414,000-square-foot distribu-tion center in the state.

Borders says it doesn’t haveto collect California salestaxes because its online divi-sion – since outsourced toAmazon.com – doesn’t own orlease property in the state. AllWeb orders were received andprocessed outside the state.

Precedent set on Web sales tax‘Bricks-and-mortar’ retailers cheer theappellate-court ruling against Borders.

By KIM CURTIS

THE ASSOCIATED PRESS

MORE ON BORDERSRULING: Borders can’t separate

Web, retail stores. Business 3

Cardiac Science Inc. said Monday that thehealth-care division of General Electric Co.will become the exclusive distributor of its au-tomatic heart defibrillators to hospitals in theUnited States and Canada – a deal that shouldhelp boost the Irvine-based company’s reve-nue as it prepares to merge with QuintonCardiology Systems Inc. of Bothell, Wash.

The deal builds on a previous agreement, in

which Cardiac Science makes defibrillatorsunder the GE brand name for sale abroad.

Defibrillators, which are used in schools,government buildings and other public places– including Disneyland – deliver electricshocks to revive victims of cardiac arrest.

Raymond Cohen, the chief executive ofCardiac Science, spoke with the Register onMonday about the GE deal and the impendingmerger with Quinton.

GE to distribute Cardiac Science defibrillators

NEXT STEP:Raymond Co-hen, CardiacScience CEO,is waiting onSEC approvalof a mergerwith QuintonCardiologySystems.

FILE PHOTO: PAUL E. RODRIGUEZ, THE REGISTER

Exclusive deal estimated to be worth up to $30 million.

By BERNARD J . WOLFSON

THE ORANGE COUNTY REGISTER

SEE COHEN ● PAGE 4

A clutch Seatbeltbag

The first Seatbeltbag was made

from belts Dana was ready to scrap

after pulling them from a Buick he

was restoring.

Business 4 | Tuesday, June 14, 2005 FROM PAGE 1 The Orange County Register

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Q: How big is this new deal foryou? Put a number on it.A: Previously we had dis-cussed the value of this GErelationship being somethinglike $20 (million)-$30 millionto the company over the lifeof the multiyear agreement.... Suffice it to say that hav-ing the largest medical com-pany in our business market-ing these productsexclusively in their primarymarkets, which is the hospi-tals, certainly is going to addvalue to Cardiac Science.Q: What impact does this dealhave on your planned mergerwith Quinton Cardiology?A: I think it’s a very positivemove because it helps to letour shareholders know thatGE has in fact consented toassign the agreement to thenew entity. That was a bigconcern that was in the mar-ket. The second piece is thatthis will contribute revenueto the new company post-merger, and in the shortterm, it means we won’t haveto be putting a separate salesforce in place to sell theseproducts directly into thesehospitals. Q: How much of your overallbusiness will GE represent?A: Maybe it’s going to countfor 5 to 10 percent. It’s not asif this is going to be 30 or 40percent of our business. Also,the combined entity is ex-pected to have revenue ap-proaching $200 million ayear.Q: Which is about three times

your current sales?A: Exactly right.Q: So where do things standwith the merger?A: Currently, we are waitingfor the SEC to deem ourmerger proxy filing “effec-tive.” As soon as we get thegreen light from the SEC,which is anticipated in earlyJuly, we will go to the share-holders for the vote. There’stypically a four- to five-weekprocess to collect those prox-ies.Q: So you expect the deal toclose in early August?A: That’s what we’re hoping. Q: My understanding is the newheadquarters will be in Washing-ton. Where are you going to be?A: I will be chairman of theboard of the combined enti-ties, and I will maintain myresidence in Orange County,because I love O.C., man. Wewill maintain a reasonablepresence here. We have all ofour research and develop-ment for our defibrillator linein Lake Forest, and sales andmarketing will continue to behere. Q: Cardiac Science is still losingmoney, as it has for the pastseveral years. Why?A: In order to achievebreak-even we need a certainamount of quarterly revenueto get there. At the end ofthe day, we feel the companycan get to profitability soonerby doing this merger than itwould as a standalone com-pany.Q: Namely, instantaneously?A: That’s what’s being antici-pated, yes.

COHEN: Companywill become profitable

FROM PAG E 1

magazines such as Elle andMaxim.

Harveys is expected to beltout up to 100,000 bags thisyear from its manufacturingand distribution center onSanta Ana’s outskirts. Reve-nue from the bags is projectedat $10 million.

The success of the bag al-lowed Melanie the financialleverage she needed to launcha lingerie brand in 2002, fol-lowed by a women’s clothingline. Together the apparellines, produced outside theirSanta Ana facility, are ex-pected to earn $2 million insales this year.

“When we first started out,”said Melanie Harvey, “ourmarketing strategy was to an-swer the phone.”

Now the couple is taking acrack at answering interna-tional calls. Harveys is gearingup to hawk the Seatbeltbagoverseas, working on licensingagreements with Japan, Ger-many, France, Canada, Aus-tralia, New Zealand and SouthKorea.

It could mean another fi-nancial boost for Harveys,which started operations athome. For more than 18

months, the nest was surren-dered to eight employees, mul-tiple phone lines and stacks ofinvoices.

“Just so people thought ourcompany was bigger, I’d usedifferent names when I madesales or collection calls,” Mela-nie said. “My mother was theinspector.”

Since the average bag takesabout 10 yards of seat belt anda little less than three hours to

complete, Harveys quicklyoutgrew its home turnedwarehouse. (Raucous big rigsthat rolled up their quietstreet to deliver supplies andtake away shipments werewearing on neighbors, too).

It rented two 900-square-foot spaces in Orange, withbeach cruisers used in be-tween.

But developing new prod-ucts was challenging, espe-cially considering manufactur-ers made seat belts in just fivecolors.

The couple sweet-talkedsecretaries, scoring appoint-ments with executives. Whendemand escalated and theycould order in bulk, they gotthe colors they wanted – pink,green, purple and orange.

Harveys carries almost 20colors and designs now, in-cluding limited-edition check-ered bags such as the green-and-white “Tennis Pro” andthe pink-and-brown “Neapol-itan.”

Taxi Cab Yellow and Con-vertible Blue are recent addi-tions to old favorites such asPinto Orange, Race Car Redand the color that started itall, Buick Brown.

The first Seatbeltbag wasmade from belts Dana wasready to scrap after pullingthem from a Buick he was res-toring. Melanie asked him tomake her a bag, and he stayed

up all night, crafting the bagfrom a flak weave techniquehe learned from his grand-mother when he was a child.

In addition to a variety oftotes, clutches, backpacks andmessenger bags, Harveys cre-ated wallets (Lindsay Lohanowns one) and diaper bags (apregnant Brittany Spears re-quested one).

The 12,000-square-footSanta Ana space Harveys oc-

cupies filled up quickly. Har-veys bought office space nearMainPlace mall in Santa Ana.The 1,600 square feet of spacewill allow more room for cre-ative teams to dream up newproducts and focus on designand marketing.

Burgeoning Harveys mer-chandise includes Seatbeltgear for men and Seatbelt lug-gage.

Harveys encourages con-sumers to write in about theirSeatbeltbag. Melanie readsthrough hundreds of e-mails aweek, posting the “Top 10”stories.

One memorable letter camefrom a woman who was in amotorcycle accident. Thewoman skid across the roadand suffered third-degreeburns. Her Seatbeltbag sep-arated her hip from the road,and her hip wasn’t injured.

The woman said she stilluses the bag today.

Overseas companies houndDana Harvey, insisting thatthey can make the Seatbelt-bag faster and cheaper. ButDana Harvey won’t have it.

“We want to keep it here,”Dana said. “We think it’s fun.”

“They may be able to do itcheaper, but it’s important tous to maintain quality.”

SEATBELTBAG: Home-basedbusiness burst out of its seams

FROM PAG E 1

Harveys is gearing up to

hawk the Seatbeltbag

overseas, working on

licensing agreements with

Japan, Germany, France,

Canada, Australia, New

Zealand and South Korea.

CONTACT THE WRITER:

(7 1 4) 796-24 1 3 or

clamers@ocregister.com

ADD-ON: Melanie

Harvey wears a Tote

Snap Seatbeltbag and a

top from her clothing

line at her Santa Ana

office. Making the bag

created the leverage

for Harveys to launch a

clothing line.

CINDY YAMANAKA, THE REGISTER