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April 30, 2004

The Rocket leads Stros over Reds

Roger Clemens showed one of the reasons tonight why he is a certain first ballot Hall of Famer and one of the three or four best pitchers in baseball history.

Not blessed with his best stuff and unable to throw any of his breaking pitches consistently for strikes, Clemens threw almost 35 pitches, walked four, and walked in a run in the first inning of the Stros' game tonight against the Cincinnati Reds. However, Clemens then settled down, began spotting his fastball effectively, did not walk another batter, and scattered five hits over six innings. He left the game without giving up another run.

In short, 41 year old Clemens without his best stuff could still shut down the Reds. He is an incredible pitcher.

The Stros cruised behind Clemens to a 6-1 win over the Reds in front of an SRO crowd of over 41,000 at the Juice Box. Wade Miller pitches on Saturday evening in the second game of the series against the Reds.

Posted by Tom at 10:59 PM | Comments (0) | TrackBack (0)

Sidley Austin tax shelter clients lose another round

This NY Times article reports that U.S. District Judge Matthew F. Kennelly of the Northern District of Illinois upheld a government order for Sidley Austin Brown & Wood to turn over a list of client names involved in tax shelters that the firm allegedly promoted, and then approved a request from the group of about 50 clients to stay the order pending an appeal. The I.R.S. and the Justice Department filed pleadings late last year demanding that the firm produce the names of more than 600 clients that the government suspects bought abusive tax shelters from 1996 through mid-October 2003. Although Sidley Austin has turned the names of clients who did not object, the group of 50 clients sued to prevent the disclosure on the grounds that their dealings with the law firm are subject to rules governing confidentiality between lawyers and their clients.

In the meantime, U.S. District Judge James B. Moran of the Northern District of Illinois denied a Jenkens & Gilchrist motion to dismiss a government lawsuit seeking to force it to turn over the names of hundreds of clients who bought certain tax shelters. In his decision, Judge Moran concluded that the names of the clients were not protected by attorney-client privilege.

Sidley Austin and Jenkens & Gilchrist are among the targets of the government's tax shelter inquiry because the firms wrote opinions attesting to the legitimacy of shelters that the U.S. Justice Department contends were questionable or illegal.

Posted by Tom at 6:25 AM | Comments (0) | TrackBack (0)

April 29, 2004

Baylor faculty members go public with criticism of move from Methodist to St. Luke's

This Chronicle story reports on a recent letter from seven Baylor College of Medicine faculty members to the Baylor Board of Trustees that predicted "a crisis of major proportions" if the Baylor Board followed through with its decision to sever Baylor's 50 year relationship with Methodist Hospital. The Baylor Board announced the decision to sever its ties with Methodist and commence a relationship with St. Luke's Episcopal Hospital on April 21, as reported earlier here.

Apparently, a group of prominent Baylor physicians tried to prevent last week's breakup between the medical school and Methodist by warning of "a crisis of major proportions" that could cause the school to "implode financially." On April 18, seven Baylor faculty members -- who are apparently either department chairs or division chiefs -- wrote the letter to the Baylor Board and the Methodist Board pleading that their affiliation not be terminated. The Chronicle reports that the letter says the following in part:

"If the St. Luke's affiliation proposal is adopted, a crisis of major proportions for Baylor will develop, and we will struggle to avoid devastating consequences. With (St. Luke's), the college will be burdened by more debt and, in fact, may implode financially."

The letter went on to say that Baylor had never "faced such an alarming crisis over its future." The letter also predicted that many Baylor's faculty members would "undoubtedly" keep their clinical practices at Methodist because Baylor and Methodist over the years have established so-called "centers of excellence" in various medical fields, including cardiovascular surgery, neurosurgery, psychiatry, ophthalmology and gene therapy. The letter contends that St. Luke's does not have the financial ability or facilities to build such programs in the near future, and also does not have sufficient operating rooms or bed space to meet Baylor's needs.

Finally, the letter predicts that some Baylor faculty members would become "voluntary faculty" to avoid moving to St. Luke's and that others would "leave Baylor and Methodist altogether." Replacing these faculty members, states the letter, would be costly and a blow to Baylor's academic prestige.

Dr. Richard Stasney, a long-time ear, nose and throat specialist at Methodist and a Baylor faculty member, was quoted in the Chronicle as saying: "It's very upsetting that a 50-year marriage ended. It's going to hurt Baylor a lot more than Methodist." Dr. Stasney was not one of the seven faculty members who signed the April 18 letter.

Read the entire article. More than a few ears are going to be burning in the Medical Center over this public disclosure.

Posted by Tom at 8:40 PM | Comments (0) | TrackBack (0)

Enron Task Force blinks, enters into new plea deal with Lea Fastow

This Chronicle article reports that Lea Fastow, wife of ex-Enron CFO Andrew Fastow, was charged with a misdemeanor tax count today and is scheduled to plead guilty at a new arraignment next Thursday. Previouwly subject to a six counts of felony tax fraud charges, the Enron Task Force superseded Mrs. Fastow's indictment today with one count of willfully delivering a fraudulent 2000 tax form to the IRS. Although this action was widely anticipated after U.S. District Judge David Hittner declined to approve a prior plea bargain, it is nevertheless an unusual step for prosecutors and greatly reduces Mrs. Fastow's exposure to a long prison term. The maximum prison sentence for the misdemeanor is 12 months, although it is expected that the Task Force will ask Judge Hittner to sentence Mrs. Fastow to a lesser sentence than the maximum.

With Mr. Fastow already having agreed to a plea deal and cooperating with them, the Enron Task Force had no desire wasting time on Mrs. Fastow 's trial when they have bigger cases pending, particularly the six-defendant Nigerian barge trial starting June 7 in front of U.S. District Judge Ewing Werlein.

Posted by Tom at 4:46 PM | Comments (0) | TrackBack (0)

Stros roll behind Pettitte

In his first game off the disabled list, Andy Pettitte threw six innings of one hit ball as the Astros took the second and final game of their weathered shortened series against the Pittsburgh Pirates, 2-0. Dan Miceli, Brad Lidge, and Octavio Dotel followed Pettitte and secured the win, facing a total of 11 batters over the final three innings and striking out six of them.

The Stros return to Houston this afternoon to begin a seven game homestand at 12-9 and a game back of the Cubs in the NL Central. My prediction about this team is proving correct as, despite several games in which they have scored over 10 runs, the club struggles mightily at the plate at times. For example, in Roy O's last three starts, the Stros have scored a total of five runs. In the last three games of this road trip, the club scored a total of five runs. Bags, Kent and Bidg all cooled off considerably on the road trip.

The Rocket pitches the first game of the series at the Juice Box on Friday evening.

Posted by Tom at 2:47 PM | Comments (0) | TrackBack (0)

Breaking news - Texas Supreme Court Chief Justice Tom Phillips to step down

Chief Justice Thomas R. Phillips announced Thursday that he will resign on September 3, 2004.

Chief Justice Phillips, the 29th chief justice of the Texas Supreme Court, will have served almost 17 years by the time he leaves the Court. He was appointed by Gov. William P. Clements to replace former Chief Justice John L. Hill, who resigned, and took office January 4, 1988. Chief Justice Phillips was elected in 1988 to finish the remainder of Hill's term and won re-election in 1990, 1996 and 2002.

He will assume the Spurgeon Bell Distinguished Visiting Chair this fall at South Texas College of Law in Houston. The following is Chief Justice Phillips' statement:

This morning I visited with the Governor and delivered to him a letter advising that I intend to resign the office of Chief Justice of the Supreme Court of Texas, effective September 3, 2004.

I believe that no secular calling is higher than to sit in judgment over disputes brought by the people to their public courts for resolution. I am most grateful for the rare opportunity to serve this great state as both a district judge and as Chief Justice of the Supreme Court of Texas. I hope that my tenure as Chief Justice has been worthy of the high standards set by my predecessors, most notably my friends and mentors John Hill, Jack Pope, Joe Greenhill and the late Robert W. Calvert. I hope that my performance in office has to some extent justified the confidence placed in me by Governor William P. Clements, who appointed me in 1988, and by the voters of Texas, who four times have returned me to office.

I am one of those truly lucky persons who reached their ultimate career goal at age 38, when I became the youngest Chief Justice since Texas joined the Union. Now, more than sixteen years later, I have the opportunity to pursue new goals, some of which I have set already, some yet to be discovered.

I will always be proud of the Supreme Court of Texas and its accomplishments during my tenure. For instance, the Court has amended the rules of procedure, evidence and court administration to reduce delay, confusion and abuse in our legal system. We have enhanced both judicial and legal ethics through new conduct rules and disciplinary procedures. We have adopted procedures to make both court case files and administrative records more open to the public. And we have taken bold steps to make civil legal services more accessible to the poor. But beyond these important administrative reforms, I am proud of this Court's commitment to the rule of law. Today, our opinions are respected across the nation for their scholarship and fairness. Our justices respect the Court's proper role of interpreting and applying the law, not inventing it. The justices I leave on the Court are men and women of the highest intellect and integrity, and it has been a privilege to work with and learn from each of them.

Of course, the Texas judiciary is still far from perfect. Many of its problems may be traced to the structure of our judicial system, which is essentially a relic of the nineteenth century. I sought a fourth term in 2002 because I believed that this Legislature would make real changes in the way we select our judges and organize our courts. Some progress was made, but not enough. Perhaps new leadership can rally public support for comprehensive reform that will give our great state the court system our people deserve.

While I pursue future career opportunities, I will spend the next academic year as the Spurgeon Bell Distinguished Visiting Chair at the South Texas College of Law in Houston. While I am leaving public office, I am not renouncing my interest in public affairs. I will speak out on judicial and other issues if and when I have something useful to contribute. Finally, I must take a moment to thank those who have made my service possible. First and foremost, I acknowledge with deep gratitude my family's sacrifices and their help. My wife Lyn left an important career at Rice University and my stepson Thomas Kirkham left his family, his friends and his school to move from Houston to Austin. They and my son Daniel, who was born since I became Chief Justice, have had to share me with boxes of petitions for review on evenings and weekends and with judicial conferences and commencement addresses on family vacations. Second, I appreciate the dedicated service of my Supreme Court staff, including my administrative assistant, staff attorneys, and law clerks, who have worked so hard to make me look good. Finally, I sincerely thank all those who supported my appointment, election, or reelection to this position.

I leave with the sure knowledge that Governor Perry will choose an excellent choice successor, just as he has chosen four excellent justices to previous vacancies on our Court. I hope that my successor finds this position as challenging and rewarding as I have.

Chief Justice Phillips is a class act and a fine jurist. He will be missed and difficult to replace. I wish him the best in his new professional undertakings.

Posted by Tom at 11:49 AM | Comments (0) | TrackBack (0)

This fellow should not apply for a job in the Phoenix area

This is dispositive proof that some newspapers confuse poor judgment with First Amendment rights.

Posted by Tom at 9:20 AM | Comments (0) | TrackBack (0)

Icahn profits on Martha's travails

In a world where reality is often more intriguing than fiction, this Wall Street Journal ($) article reports that Carl Icahn needs no stinkin' stock tips:

By now, everyone knows how Martha Stewart was alerted by a Merrill Lynch & Co. brokerage assistant that Sam Waksal, her friend and founder of ImClone Systems, was trying to sell the biotech company's shares.

Less well known, however, is the story of how financier Carl Icahn was buying ImClone shares that very day, possibly even snapping up the same shares that Ms. Stewart was unloading.

Mr. Icahn recently disclosed in a filing with the Securities and Exchange Commission that he owns 5.24 million shares of ImClone, a stake he first began accumulating with a purchase of 10,000 shares on Dec. 27, 2001, people close to the situation say.

After his purchase on Dec. 27, Mr. Icahn stopped buying ImClone for a few months. As the scandal unfolded and the share price fell to below $10 in the summer of 2002, Mr. Icahn began buying ImClone shares again, adding 3.6 million shares to his holdings. He bought the stock again earlier this year, picking up 1.63 million shares. That purchase brought his average purchase price to $19.58, according to the SEC filing.

His profit, with ImClone shares now at $70 each, the level where they were before the scandal hit would be a cool $250 million.

Shaking his head from it all, Professor Ribstein places this latest development in appropriate perspective with earlier events in this saga:

So let's take inventory. The stockbroker's tip that Martha supposedly relied on, which as I have written likely was not illegal inside information, may not even have been material. But that's ok, because she was not convicted of this non-crime, but of covering it up. The person she would have defrauded had she committed a crime has made a quarter billion dollars on the stock. The guy who invented the drug that produced these profits is already in jail.

Posted by Tom at 8:54 AM | Comments (0) | TrackBack (2)

Nortel's developing scandal

With Nortel Network Corporation's announcement yesterday of its firing of three top executives "for cause" (i.e., "we're not paying you nuttin' further"), another corporate accounting scandal appears to be warming up quickly. Nortel is North America's largest telecommunications manufacturer.

Nortel's board fired President and Chief Executive Officer Frank Dunn and two other senior officials, Douglas Beatty (former CFO) and Michael Gollogly (former controller). Moreover, the company announced that there would be a sharp downward revision of its profit for last year.

The move drove the Brampton, Ontario-based company's shares down 28% on the stock market yesterday, and raises questions about how severe the telecommunications-equipment maker's problems really are. After restating results in November, Nortel announced last month that it would restate its past results again and delay filing its 2003 financial statements with securities regulators. The Securities and Exchange Commission and the Ontario Securities Commission, Canada's main regulator, are currently investigating Nortel's accounting.

Nortel named William Owens, 63, as its new president and chief executive. Mr. Owens, who has been a Nortel director since 2002, was previously the chairman and chief executive of Teledesic LLC, a satellite communications company. He was also vice chairman of the U.S. Joint Chiefs of Staff and Commander of the U.S. Sixth Fleet during Operation Desert Storm.

Nortel said yesterday that while its audit committee "has not yet determined the full extent of the adjustments that will be required, it expects "no material impact to prior period revenues" and "no material impact" to its Dec. 31 cash balance of $4 billion. In its first restatement filed last November, Nortel said $952 million of liabilities, mainly accruals and provisions, recorded on its June 30, 2003, balance sheet should have been recorded in earlier financial statements. A spokeswoman for Nortel's longtime auditor, Deloitte & Touche, said it is "a speculative question" whether the firm should have caught Nortel's accounting problems at an earlier stage.

Here's betting that Deloitte representatives will have an opportunity to answer that "speculative question" in the various securities fraud class action lawsuits that will result from the foregoing events.

Posted by Tom at 8:16 AM | Comments (0) | TrackBack (0)

Comcast-Disney post-mortem

As reported yesterday, Comcast Corp. dropped its $48.7 billion unsolicited bid for Walt Disney Co., which put an end to a takeover battle that was in trouble from the start.

The bottom line on this saga is that Comcast's management misjudged its the market and the Disney Board's reaction to its offer. The former is reflected by the fact that, even though most stock prices fell yesterday, Comcast's stock price rose, although not much (1%). Comcast's shares are still 11% below where they were before the company's Feb. 11 offer for Disney.

The theory behind Comcast's bid was that years of poor performance at Disney and shareholder disenchantment over the leadership of Disney CEO Michael Eisner would make Disney an easy target. Initially, the bid looked interesting, but it became apparent quickly that the strategy had backfired when Disney's Board refused to discuss the offer and hired poison pill expert Martin Lipton to advise it on the bid.

Moreover, when the value of the bid fell almost immediately below the value of Disney's stock, the Disney Board could not be forced to act. Comcast's offer of 0.78 share of Comcast for every share of Disney lost its premium of $2.38 a share immediately after it was announced, reflecting that Comcast shareholders and the market generally were not bullish on the deal. That gave the Disney Board a valid reason to ignore the bid. Before the bid was dropped, the offer was worth $23.77 a share, while Disney's share price was $24.18. Inasmuch as increasing its offer for Disney in either stock or cash would have driven Comcast's own stock price down, such a bid would have made it necessary to raise its bid yet again. So, with Comcast shareholders showing no enthusiasm for the deal, Comcast essentially could not raise its initial bid, which is almost always how unsolicited takeover offers ultimately are resolved.

Despite (or perhaps because of) the failed bid for Disney, Comcast continues to do quite well financially. The revenue of its cable systems rose $4.65 billion, or 9.8%, from the first quarter of 2003, and Comcast reported a profit of $65 million, or three cents a share (compared with a loss of $297 million, or 13 cents a share a year earlier). Comcast also announced resumption of its $1 billion stock-repurchase program. With the distraction of the Disney bid gone, Comcast management can now concentrate on less sexy but more productive acquisition targets, such as Adelphia Communications Corp., the country's fifth-largest cable company, which is currently mired in bankruptcy.

Meanwhile, with Comcast's withdrawal of its offer, Disney will shift the focus back to Mr. Eisner and whether he should be retained beyond the September 2006 expiration of his personal services contract with the company. Given Disney's lackluster performance over the past decade, real questions remain whether Mr. Eisner is capable of sustaining a long-term turnaround and repairing glaring problems within the company, such as Disney's reeling ABC television network.

The Disney Board still faces angry shareholders, 45% of whom attended the Disney annual meeting last month voted to oust Mr. Eisner. Next month, a committee of Disney executives and board members will meet with representatives of several public pension fund-investors in Disney, including the California Public Employees' Retirement System, which have called on the Board to remove Mr. Eisner. The Disney Board also faces the continued public criticism of ex-directors Roy E. Disney and Stanley Gold, who issued a statement yesterday criticizing the board's "complete indifference to the will and interests of its shareholders" and the appearance that "the only 'succession plan' is to keep Eisner as CEO for as long as he wants."

Disney has projected earnings growth of more than 40% for the fiscal year that ends on Sept. 30, and it has predicted double-digit earnings growth through 2007. The company's 2004 forecast has remained steady, despite such high profile mistakes as the movie "The Alamo," which cost more than $100 million to make and has taken in only about $20 million in the U.S. since its release in early April. However, Disney's theme-park business is making a solid comeback after being hammered by the 2001 recession and the travel slump resulting from the 9/11 attacks.

The most insightful commentator on the Comcast-Disney dance has been Professor Bainbridge, who is a bit under the weather and has not yet posted his views on the withdrawn bid. Meanwhile, Professor Ribstein over at IdeaBlog notes perceptively that "the price of acquisitions is so high now that it takes a near-delusional synergy theory to make ousting management of a major company even look plausible."

Posted by Tom at 7:48 AM | Comments (0) | TrackBack (1)

More on Skilling's New York Adventure

As noted earlier here, the Enron Task Force has requested that the Court in its criminal case against former Enron CEO Jeff Skilling impose additional conditions on Skilling's pre-trial release because of Skilling's well-publicized bender in New York City on April 9 that resulted in Skilling's brief hospitalization in New York.

Now, Skilling's lawyers on Wednesday filed pleadings in the criminal case that basically assert that Skilling's New York adventure was no big deal and accuses the government of prejudicing the jury pool by improperly releasing Skilling's high blood alcohol level in the Task Force's pleadings. The Task Force is asking that Skilling be placed under a midnight curfew, restricted more in his travel, report weekly to probation department officials, and post an additional $2 million bond as a result of the New York incident.

Interestingly, Skilling's pleading does not contest that Skilling's blood alcohol content was measured at .19 during his brief hospitalization, but notes that hospital workers said that he appeared "only mildly intoxicated."

New York City hospital workers obviously have high standards for concluding that someone is "very intoxicated."

Posted by Tom at 6:31 AM | Comments (0) | TrackBack (0)

April 28, 2004

Stros lose to Pirates

After being nasty weathered out last night, the Stros wasted another strong pitching performance from Roy O and lost to the Pittsburgh Pirates on Wednesday night, 4-2. The loss was the Astros' fifth in their last seven games. Andy Pettitte comes off the disabled list on Thursday afternoon to pitch the final game of the series in Pittsburgh before the Stros come back to Minute Maid Park on Friday night behind the Rocket to begin a four game set with the Cincinnati Reds. Ricky Stone was sent down to AAA New Orleans to make room for Pettitte on the 25 man roster.

Posted by Tom at 8:44 PM | Comments (0) | TrackBack (0)

On the ground in Baghdad

Yass Alkafaji is a Northeastern Illinois University accounting professor and an émigré from Iraq. Professor Alkafaji went to Baghdad in January as the director of finance for the Ministry of Higher Education of the Coalition Provisional Authority. In this Chicago Tribune (free subscription required) interview, he relates what it's like on the ground in Baghdad. Read the entire interview, but here are a few highlights:

Alkafaji recently left Baghdad during one of the bloodiest months of the U.S. occupation. We shared chai lattes at a Starbucks in Sauganash to discuss what he saw and heard while he was there. We thought he would be full of tales of violence in Sadr City, mutilations in Fallujah and bombings in Basra. But, oddly enough, he said that while he was there, he hardly noticed these events that made headlines all over the world.

Q. You were in Iraq during some of the worst anti-American violence of the occupation. How did that affect your work?

A. I did not notice it. Even though I was in the middle of it, I was apart from it. It was not something we thought about on a daily basis. We got briefings, and we'd hear people saying things here and there. Sometimes I would receive calls from my wife, and she was telling me what was happening in the green zone, where I was living, but I didn't know it. Or we would be working in the middle of the day at our computers and we would hear explosions, boom boom, and we would simply look up and go back to work.

Q. What is your take on the mood of the Iraqi people?

A. They are thankful to the U.S. for getting rid of Saddam Hussein, and they are content that the military needs to be there. But after that, they are divided between how long should the U.S. military stay and whether they are doing a good job or not. The U.S. military presence is very visible, and they [the soldiers] are really scared, so their posture is very offensive. They see Iraqis, and they put guns in your face. They move in convoys, and they tell people to get away from them. When the convoys are in a traffic jam in the middle of Baghdad, that is the most dangerous thing. So they shout at people to get out of the way, and they drive up on the sidewalk of some stores. That creates a lot of hard feelings for the Iraqis.

Q. What about the economic and employment situation with ordinary Iraqis?

A. Most of the people are not informed of what the U.S. is doing because they don't see the visible improvement of their livelihood, especially those who don't have a government job . . . I think there is still a lot of confusion about who is the good Iraqi and who is the bad Iraqi. I think [the U.S.] has shown to the rest of the world that we are really ignorant when it comes to dealing with other cultures. We have a great military power, but when it comes to building nations we have no idea. You can see the tension in the clashes between the British and Americans in the palace. The Americans will say `do this or do that' and the British will just be shaking their head. But the British have a much longer history in the Middle East, and they know how to deal with the Arab mentality. They feel very marginalized.

Q. Depending on how people want to spin it, they characterize the recent violence as a few bad apples or a popular uprising. How do you see it?

A. Surveys show about 70 percent of the Iraqi people accept that there is a need for the American military to be in Iraq, otherwise it will be chaotic and there will be no security on the ground. Of course, if you talk to someone in Sadr City with a first-grade education, they will say otherwise. One day I was waiting seven hours to try to leave the compound to try to see my sister. We had some thugs from the Sadr group demonstrating 15 feet away saying, "We want the U.S. out." So I said, "OK, the U.S. is out and then what next? Who is going to control the country?" They don't think about the implications of what they say.

Hat tip to Daniel Drezner for the link to this interesting interview.

Posted by Tom at 8:36 PM | Comments (0) | TrackBack (0)

Comcast bid for Disney is dead

Comcast announced this morning that it is dropping its stagnating bid for Disney.

Not surprisingly, Comcast shares rose 51 cents to $30.48 in mid-morning trading on Nasdaq.

Posted by Tom at 12:26 PM | Comments (0) | TrackBack (0)

Wyeth gets hammered in Beaumont

Brilliant Houston trial lawyer John O'Quinn strikes again.

Update: Dylan over at Slithery D observes that Mr. O'Quinn's formidable talents are often misdirected.

Posted by Tom at 7:18 AM | Comments (8) | TrackBack (0)

America's health care finance mentality

Holman Jenkins of the Wall Street Journal ($) has some interesting observations about America's health care finance mentality today in his weekly Business World column. The subject of the column is the rather inane political issue involved in the importation of government subsidized prescription drugs from Canada, but Mr. Jenkins uses the subject to clear up some common misconceptions regarding how American drug companies finance development of drugs and how America's health care finance mentality affects such development.

Inasmuch as American drug company profit margins are relatively high, some politicians who are in favor of imports from Canada suggest that American drug prices are too high and that the companies are greedy, which Mr. Jenkins quickly debunks:

What can it possibly mean to call an industry "greedy"? Drug companies are said to be an unconscionable exception because their profits are comparatively high, 15.4%, when measured as a percentage of sales. But here's a question: Grocery stores have a measly return on sales of 1.4%, and liquor stores an even measlier 1%. So why does anybody invest in these businesses rather than the drug business? Last time we looked, the grocery industry and liquor stores still existed.

Such indictments of the drug industry overlook the fact that profits are a cost -- the cost of a company's capital. Nobody pays back their investors more than they are obligated to. By the same token, if your capital costs are 15.4% of your total costs, profits had better be 15.4% of your revenues or you won't be in business long. Measures of profitability, in short, tell you a lot more about an industry's need for capital than about its "greed."

And how about the demagogues' allegation that the excessive amount of money that drug companies spend on advertising is proof that they make too much money? Mr. Jenkins explains:

Wrong. Companies spend money on advertising because it generates profits, not because it consumes them. You've spent 10 years and $500 million to develop a new product and haven't rung up your first sale yet. What could be a smarter investment than spending a few dollars more to let the world know the product exists? Advertising actually makes companies more willing to invest in R&D. Capital can be earned back faster; fixed costs can be spread over a larger number of customers, allowing each to be charged a lower price.

But then Mr. Jenkins bears down on the real problem relating to financing of prescription drug development -- America's health care finance mentality:

America's real problem is that drugs have been roped into the same perverse incentives that govern most health care spending. Consumers don't weigh cost vs. benefit; drug companies focus their development efforts on drugs aimed at large populations of price-insensitive, insured patients. At the same time, consumers who don't have drug insurance and pay out of their own pockets scream bloody murder because drugs seem like a violation of a natural order in which medical care is increasingly perceived as a costless entitlement.

Think we exaggerate? Everybody noticed when HCA, the big hospital chain, earlier this month put aside $700 million to cover the bad debts of uninsured patients, who are typically good for only seven cents on the dollar. Little noticed was the fact the company also has to cover the bad debts of insured patients, who routinely skip out on their co-payments and deductibles. Nowadays these people are good for only 45 cents on the dollar on average.

Medical bills seem to have become optional to Americans when deciding which envelopes to toss in the trash unopened at the end of the month. "Hospitals are ninth" on the payment list, HCA's Chief Jack Bovender told Reuters in February, well behind mortgages, car payments and cable-TV bills. "The only thing people pay worse is the student loan program."

Read the entire column. Good stuff again from Mr. Jenkins.

Posted by Tom at 6:52 AM | Comments (0) | TrackBack (1)

April 27, 2004

Texas public school finance reform

Marc Levin is associate editor of The Austin Review, a conservative monthly journal, and President of the American Freedom Center. He writes this op-ed today in the Chronicle proposing an alternative to the rather mundane public school finance proposals currently being floated in the special session of the Texas Legislature:

One almost universal assumption in the school finance debate is that everyone must pay the same type of tax. While no tax is pleasant, what if Texans could choose how they want to pay their share of the cost of public education? The Legislature should consider completely replacing the property tax for education with an increased statewide sales tax coupled with an opt-out for Texans who choose to pay a flat income-based assessment instead.

Such a system would have many benefits. First, it would allow for the complete elimination of highly unpopular school property taxes, which are subject to the vagaries of the appraisal process. As our society has become increasingly mobile and driven by technology, real property has become a less reliable measure of a person's wealth.

The business property tax for education, which this proposal would also eliminate, is even more antiquated. Today, many highly profitable businesses have little physical property.

Furthermore, to encourage businesses to locate in Texas as opposed to the other 49 states, most economists agree that ideally there should be no state taxes on business. The current business property and franchise taxes, a gross receipts tax, or any other business tax make Texas less attractive for business investment and undermine the competitiveness of Texas businesses in exporting goods and services.

In addition to abolishing the residential and business school property tax, this proposal would also allow for full statewide equity in school funding without recapture. No longer would school districts be dependent on the taxable value of the property within their boundaries.

On the other side of the ledger, such a system would also provide greater revenue stability for the state. The drawback of a sales tax is that revenues can decline in absolute terms during a recession. However, average income tends to increase, or at least remain constant, during all economic periods. Therefore, those who choose an income assessment would provide a buffer that would help even out state revenues over time.

Read the entire op-ed, which is quite well-reasoned and, as a result, probably has a zero chance of being noticed in the current legislative session. I don't know about you, but it seems to me rather pathetic that Texas legislators are considering basing something as important as public school finance on notoriously unreliable revenue generated from taxes on use of slot machines, consumption of cigarettes, and viewing of exotic dancers.

Posted by Tom at 8:51 AM | Comments (0) | TrackBack (0)

The Bush Administration and scientific research

Randall Parker over at FuturePundit has this excellent post that analyzes the Bush Administration's proposed funding of research in the 2005 budget, to which he concludes:

The Bush Administation's plans for research and development spending are short-sighted. Scientific advances can solve problems in ways that pay back orders of magnitude more than the original research will cost to fund. Budget deficits and huge unfunded liabilities for those who are going to become elderly in the coming decades combined with the threat of terrorism and the greater global competition for a limited supply of oil call for mammoth attempts to research and innovate our way to solutions.

Posted by Tom at 8:10 AM | Comments (0) | TrackBack (0)

The consequences of inadequate security

Daniel Drezner points to this San Francisco Chronicle article about the Iraq experience of Larry Diamond, a senior fellow of the Hoover Institute who was an advisor to the Coalition Provisional Authority in Iraq and a promoter of democratic principles in government. As Mr. Drezner's post points out, Diamond is still a promoter of democracy, but is not optimistic about Iraq, primarily because of the United States' failure to provide adequate security for the Iraqi people willing to risk commitment to democratic principles. As the Chronicle article notes:

We just bungled this so badly," said Diamond, a 52-year-old senior fellow at Stanford University's Hoover Institution. "We just weren't honest with ourselves or with the American people about what was going to be needed to secure the country."

"You can't develop democracy without security," he said. "In Iraq, it's really a security nightmare that did not have to be. If you don't get that right, nothing else is possible. Everything else is connected to that."

Diamond relates that his realization of the deficiencies in the American security force came to him while speaking to a woman's group in Baghdad:

"I had one of those moments when you cut through all the bull," he said. "I was speaking to this women's group, and one woman got up and asked, 'If we do all these things, who's going to protect us?' " Diamond recalled. "That was the moment when I said to myself, 'Oh my God, some of these women are going to be assassinated because they are here listening to me.' It just struck me between the eyes."

As the violence spread, Diamond said, he felt ever more painfully the mistake the United States had made by not sending in more troops to keep the insurgents at bay.

The American policies basically encouraged Iraqis to stand up -- only to face the threat of being mowed down for doing so, he said.

"It was totally hypocritical of us to do one and not the other," Diamond said of the lack of security.

The entire article is interesting and thought provoking, so read it all.

Posted by Tom at 8:00 AM | Comments (0) | TrackBack (0)

Analyzing mediocre intelligence

Robert Baer is a former CIA intelligence field officer who has written extensively ("Sleeping With the Devil: How Washington Sold Our Soul for Saudi Crude"; "See No Evil: The True Story of a Ground Soldier in the CIA's War on Terrorism") about how political wrangling in Washington over the past 30 years has badly damaged the ability of the CIA and other intelligence gathering agencies to generate an effective product for our nation's leaders for use in evaluating and implementing foreign policy.

In this Wall Street Journal ($) op-ed, Mr. Baer uses his extensive experience in intelligence matters to evaluate the recently declassified and now famous August 6, 2001 Presidential Daily Briefing ("PDB") that President Bush and his advisors reviewed a little more than a month before the attacks of September 11, 2001. Mr. Baer begins by explaining the nature of a PDB:

. . . PDBs are the crown jewels. They meld the best information from the CIA's clandestine sources, our embassies all over the world, the National Security Agency, the Federal Bureau of Investigation, and every other federal agency with a possible input. Like crown jewels, too, they are protected to within an inch of their lives. In all my years in the CIA, I never once was given access to a PDB, and I was by far the rule, not the exception. Compartmentation rules forbid it. Sources and methods are too valuable.

The Aug. 6, 2001, PDB, in short, represents the very best intelligence we then had on Osama bin Laden and his plans.

So, Mr. Baer asks, how good was the August 6, 2001 PDB?:

In fact, pretty awful. The first item in the PDB refers the president to two interviews that Osama bin Laden gave to American TV in 1997 and 1998. In the interviews, bin Laden promises to "bring the fighting to America," following "the example of World Trade Center bomber Ramzi Yousef." As it turns out, bin Laden was telling the truth, but that's not the point. In intelligence documents as in corporate reports and the evening news, the best stuff goes up top, and in this case the best was cribbed straight from the boob tube.

How about items two and three? The information in both relates to bin Laden's intention to attack the U.S., but it is from "liaison services" -- i.e. foreign governments. We now know from leaks what those liaison services were, but we don't know the provenance of the information. Was our friendly liaison reading it in the local paper? Was it fabricating, as happened with the Italians and the Niger yellow cake that was supposedly going to Saddam Hussein? The CIA rule used to be that you never ever trust liaison reporting unless you can confirm it with your own sources. Imagine The Wall Street Journal relying on Mad magazine for its investigative sourcing, and you'll see just where such sloppy vetting can lead.

And what of the PDB's disclosure of a bin Laden cell in New York recruiting Muslim-American youth for attacks? Mr. Baer is not impressed:

Not until three-quarters of the way through the PDB do we finally get to our own intelligence: a clandestine source who reported directly to a U.S. official that "a bin Laden cell in New York was recruiting Muslim-American youth for attacks." Why bury this seemingly valuable nugget? Perhaps because our own source was dead wrong. Sept. 11 was planned and organized in Afghanistan and Germany. The 19 hijackers found their own way here and relied on their own funds. Support inside the U.S. came from unwitting contacts. No American Muslim was recruited to help the hijackers.

What's in the PDB is damning enough, but to me, maybe the most alarming part is what's not there. In the entire document -- this crown jewel of intelligence -- there isn't a single mention of Saudi Arabia, the real Ground Zero of 9/11. Apparently, we had no idea suicide bombers were being recruited there or that cash was being raised for an attack on America.

Mr. Baer closes with a cautious observation regarding the future of American intelligence gathering:

In his testimony before the 9/11 Commission, CIA director George Tenet -- the most candid of any of the witnesses, by the way -- said we need five more years to catch up. I think he's optimistic. It takes a generation to build an effective clandestine service. In the meantime, we have no choice but to rely on the Saudis to tell us whether we need to worry about all the killing going on in the Kingdom, whether it really has the petroleum reserves it claims to have, and a lot of other issues vital to our national security.

Personally, I would like to have my own source to tell me what's happening inside the Kingdom's fire-breathing mosques. That's the only way we're going to find out if more young Saudis are being recruited and money raised for another 9/11. Until then, we're flying blind not just on Osama bin Laden but on Islamic extremism throughout the Arab world and our own. That's the opposite of intelligence.

Over the past generation, each Democratic and Republican administration has contributed in varying degrees to the progressive evisceration of the American government's intelligence gathering capability. The government's failure to anticipate the 9/11 attacks was in large part the result of that gradual weakening of intelligence over the past 30 years. Consequently, during this political season, make sure that any politician who criticizes the present administration's production or use of intelligence is not one of the politicians who was contributed to the demise of such intelligence in the first place.

Posted by Tom at 7:40 AM | Comments (0) | TrackBack (0)

Doing business in Russia -- not for the fainthearted

On the heels of this announcement regarding Russian oil giant Yukos' default on $1 billion in bank debt, this Wall Street Journal ($) article provides an excellent overview of Exxon's travails in attempting to make a major investment in Yukos. The entire article is well worth reading, and here are several excerpts:

Exxon and many other Western oil companies had big ambitions when they flocked to Russia looking for deals after the collapse of communism in 1991. Once the world's largest oil producer, the former Soviet Union represented the biggest new opportunity for the world's oil companies in a generation.

But the story of Exxon's delicate dance with Russia shows that the opportunity has been much more elusive than the oil giants and the Western political leaders hoping for an alternative to Middle Eastern oil envisioned. Russian President Vladimir Putin, whose methodical strengthening of Kremlin authority has fueled fears he is undermining democracy, has increasingly sought to keep the state's hand in the oil industry, which was almost completely privatized in the 1990s.

U.S. officials privately acknowledge that highly publicized efforts to diversify energy sources by cooperating with Russia have largely turned out to be a dry hole. Exxon officials declined to comment on anything related to a possible Yukos pact. The Kremlin press office declined to respond to a detailed request for comment.

As Exxon pursued the investment with Yukos president, Mikhail Khodorkovsky, the following exchange and incident occurred after one negotiating session:

After the session, where the exchange about Russia's oil reserves took place, Mr. Khodorkovsky was asked if the Kremlin would allow him to sell a majority stake. "Political realities here change every day," he said.

Moments later, as most panelists and audience members crossed the hall for a speech by President Putin, Mr. Khodorkovsky got an urgent cellphone call from his wife. She told him their house was surrounded by police.

As Exxon pressed on for an investment in Yukos, Russian government control tightened:

In an interview published that day on the Kremlin's Web site, Mr. Putin was asked his view of Exxon buying 40% of Yukos. Mr. Putin said he would support Exxon's activities, but that "it would be right" for Exxon to consult in advance with the Russian government on such a large deal. Russian oil-industry executives detected a cautionary tone, but Exxon officials remained confident their deal was on track, according to people familiar with the situation.

Mr. Khodorkovsky held a defiant news conference at Yukos's new Moscow headquarters the Monday after the police searches. "If the goal is to drive me from the country or put me in jail," he told a room packed with TV cameras and reporters, "they'd better put me in jail."

On Oct. 25, they did. Heavily armed agents stormed onto his rented jet at a refueling stop in Siberia. He was flown back to Moscow.

The message from Exxon's experience is clear -- Russia will gladly accept foreign investment so long as Russian control of the assets and business is not disturbed. Frankly, Russia needs a few (maybe more) of dwindling foreign investment before its unrealistic position will change.

Posted by Tom at 6:46 AM | Comments (0) | TrackBack (0)

Making peace with pot

Eric Schlosser writes this interesting op-ed in the NY Times on the continued high costs associated with the criminalization of marijuana use, in which he observes:

This year the White House's national antidrug media campaign will spend $170 million, working closely with the nonprofit Partnership for a Drug-Free America. The idea of a "drug-free America" may seem appealing. But it's hard to believe that anyone seriously hopes to achieve that goal in a nation where millions of children are routinely given Ritalin, antidepressants are prescribed to cure shyness, and the pharmaceutical industry aggressively promotes pills to help middle-aged men have sex.

Posted by Tom at 4:55 AM | Comments (0) | TrackBack (0)

April 26, 2004

Vijay wins Shell Houston Open

Vijay Singh -- the second-ranked golfer in the World Rankings -- won the rain-delayed Shell Houston Open today by two strokes with a 72 hole total of 277, 11 under par. Singh shot a 69 in the final round to hold off 48 year old Scott Hoch, who shot a 68 and finished in second place at 279. Here is the final leaderboard.

Posted by Tom at 3:40 PM | Comments (0) | TrackBack (0)

Citgo moving to Houston

Citgo Petroleum Corporation. is expected to announce today that it plans to relocate its headquarters from Tulsa, Oklahoma to Houston. In addition to the economies of being located among Houston's many major energy companies, the move makes sense because most of Citgo's vendors, and the customers of Citgo's parent -- Petroleos de Venezuela SA -- are located in Houston. Update: Here is the Chronicle story on the move.

Citgo is the nation's fourth-largest retailer of gasoline, with 13,500 outlets. It also operates three oil refineries in the United States and owns a 42 percent interest in another refinery in Houston. The company will move approximately 700 jobs to Houston, leaving about 300 in Tulsa. As an inducement to make the move, Citgo will receive a $5 million grant from the state of Texas and $30 million in low-interest loans from the cities of Houston and Corpus Christi, where Citgo operates a major refinery.

Posted by Tom at 3:32 PM | Comments (0) | TrackBack (0)

The NFL as Lake Wobegon

John McClain, the Houston Chronicle's National Football League writer, apparently believes that the NFL is a bit like Garrison Keillor's fictional Minnesota town Lake Wobegon, where "all of the children are above-average." In today's Chronicle here and here, McClain rates 23 out of the 32 NFL teams as having better than average selections at this past weekend's NFL Draft.

Posted by Tom at 10:54 AM | Comments (1) | TrackBack (0)

SCI settles class action lawsuit

Houston-based Service Corporation International, the world's largest funeral and cemetery company, announced late last week that it had entered into a memorandum of understanding to settle the securities class action lawsuit that has been pending in U.S. District Court in Houston against SCI and certain of its current and former officers since January 1999. The suit alleges that SCI made misrepresentations concerning its prearranged funeral business and other financial matters. The settlement is for $65 million, with SCI's insurers ponying up $30 million of the settlement payment.

Posted by Tom at 7:39 AM | Comments (0) | TrackBack (0)

St. Augustine was right

Randall Parker over at FuturePundit points to an interesting Erin Anderssen and Anne McIlroy article in the Canadian Globe And Mail that summarizes recent research on child development and human violence. They report that Richard Tremblay has found that two year old babies are more physically aggressive than teenagers or adults but are simply too uncoordinated to do much damage to others:

Consequently, are human beings born pure, as Rousseau argued, and tainted by the world around them? Or do babies arrive bad, as St. Augustine wrote, and learn, for their own good, how to behave in society?

Richard Tremblay, an affable researcher at the University of Montreal who is considered one of the world leaders in aggression studies, sides with St. Augustine, whom he is fond of quoting.

Dr. Tremblay has thousands of research subjects, many studied over decades, to back him up: Aggressive behaviour, except in the rarest circumstances, is not acquired from life experience. It is a remnant of our evolutionary struggle to survive, a force we learn, with time and careful teaching, to master. And as if by some ideal plan, human beings are at their worst when they are at their weakest.

St. Augustine was obviously much closer to the truth.

Read the entire post, as Mr. Parker includes a number of interesting links relating to the subject of this research. Hat tip to Tyler Cowan at Marginal Revolutions for the link.

Posted by Tom at 7:24 AM | Comments (0) | TrackBack (0)

Fiddling while Rome burns

This NY Times article reports on a couple of remarkable public meetings just outside London last week in which radical Islamic fascist clerics suggested that Tony Blair should be killed and that an Islamic flag should be hanging outside No. 10 Downey Street. The article notes as follows:

Stoking that anger are some of the same fiery Islamic clerics who preached violence and martyrdom before the Sept. 11 attacks.

On Friday, Abu Hamza, the cleric accused of tutoring Richard Reid before he tried to blow up a Paris-to-Miami jetliner with explosives hidden in his shoe, urged a crowd of 200 outside his former Finsbury Park mosque to embrace death and the "culture of martyrdom."
* * *
On Thursday evening, at a tennis center community hall in Slough, west of London, their leader, Sheik Omar Bakri Mohammad, spoke of his adherence to Osama bin Laden. If Europe fails to heed Mr. bin Laden's offer of a truce — provided that all foreign troops are withdrawn from Iraq in three months — Muslims will no longer be restrained from attacking the Western countries that play host to them, the sheik said.

"All Muslims of the West will be obliged," he said, to "become his sword" in a new battle. Europeans take heed, he added, saying, "It is foolish to fight people who want death — that is what they are looking for."

One chapter in Sheik Omar's lectures these days is "The Psyche of Muslims for Suicide Bombing."

Call me old fashioned, but I am appalled that these clerics -- one of who is already under investigation for a serious crime -- could spew this type of subversion without apparent qualm. The reason they can get away with it is explained later in the article:

Though the British home secretary, David Blunkett, has sought to strip Abu Hamza of his British citizenship and deport him, the legal battle has dragged on for years while Abu Hamza keeps calling down the wrath of God.

Despite tougher antiterrorism laws, the police, prosecutors and intelligence chiefs across Europe say they are struggling to contain the openly seditious speech of Islamic extremists, some of whom, they say, have been inciting young men to suicidal violence since the 1990's.

The authorities say that laws to protect religious expression and civil liberties have the result of limiting what they can do to stop hateful speech. In the case of foreigners, they say they are often left to seek deportation, a lengthy and uncertain process subject to legal appeals, when the suspect can keep inciting attacks.

That leaves the authorities to resort to less effective means, such as mouse-trapping Islamic radicals with immigration violations in hopes of making a deportation case stick. "In many countries, the laws are liberal and it's not easy," an official said.

Posted by Tom at 6:44 AM | Comments (0) | TrackBack (0)

April 25, 2004

No joy in Mudville

Houston was Mudville on Sunday.

First, incessant rains since Friday afternoon in Houston have played havoc with the Shell Houston Open. Third round play in the golf tournament was suspended late Sunday morning, and the third and fourth rounds will now be completed on Monday.

Second, the Rockets blew a four point lead in the final minute and a half of overtime and lost to the Lakers 92-88 in their NBA Playoff game. The Rockets are now down 3-1 in the best of seven series, and almost certainly will be eliminated in the next game on Wednesday in L.A.

Finally, the Stros wasted a brilliant pitching performance from Wade Miller and lost to the Rockies in the final game of their series, 4-1. The Stros now move on to Pittsburgh for a three game set with the Pirates starting Tuesday before coming home for a weekend series with the Reds.

Posted by Tom at 10:13 PM | Comments (0) | TrackBack (0)

Rich Uncle of America

This David Brooks NY Times books review discusses Ron Chernow's new book, "Alexander Hamilton." Hamilton is the architect of American capitalism, and Mr. Brooks' review concludes that Mr. Chernow has written the best biography yet of this fascinating but underappreciated man. For example, Hamilton's youth was no picnic:

When Alexander Hamilton was 10, his father abandoned him. When he was around 12, his mother died of a fever in the bed next to his. He was adopted by a cousin, who promptly committed suicide. During those same years, his aunt, uncle and grandmother also died. A court in St. Croix seized all of his possessions, sold off his personal effects and gave the rest to his mother's first husband. By the time he was a young teenager, he and his brother were orphaned, alone and destitute.

Incredibly, however, Hamilton overcame his tortured youth quickly to excel in the American revolutionary society and government:

Within three years he was a successful businessman. Within a decade he was effectively George Washington's chief of staff, organizing the American revolutionary army and serving bravely in combat. Within two decades he was one of New York's most successful lawyers and had written major portions of The Federalist Papers. Within three decades he had served as Treasury secretary and forged the modern financial and economic systems that are the basis for American might today.

Finally, Mr. Brooks notes that the vicious political rhetoric of our day has its roots in Hamilton's legendary disputes with Thomas Jefferson:

Though they were historic, Hamilton couldn't have enjoyed his years at the Treasury Department. These days we think our politics are nasty and partisan. But our discourse looks like a Platonic symposium compared with the vicious fighting that marked the early Republic. While they were secretaries of treasury and state, Hamilton and Jefferson waged internecine warfare that was, as Chernow notes, of ''almost pathological intensity.'' Members of each man's camp wrote abusive newspaper essays against the other. The secretary of state proposed Congressional legislation censuring the secretary of the Treasury. The Jeffersonians fabricated crude lies about Hamiltonian embezzlement schemes.

This fight was about what sort of country America should be, and what sort of people should govern. Hamilton embraced the urban, enterprising virtues: vigor, drive, competition. Jefferson dreamed of a country that would be pastoral, egalitarian and decentralized. Hamilton won the battle, but not the affections of posterity.

Hamilton has always been one of the most fascinating and enigmatic of the Founding Fathers. In many ways, he is the most quintessential American of them all. As such, I am looking forward to reading this interesting new book.

Posted by Tom at 10:03 PM | Comments (0) | TrackBack (0)

Stros win; go for sweep today

Roger Clemens won his fourth straight National League game as the Stros beat the Colorado Rockies on Saturday for the second straight day, 8-5. The Astros are now 7-1 on the road in the young season, and they go for the series sweep behind Wade Miller on Sunday afternoon.

Posted by Tom at 1:21 PM | Comments (0) | TrackBack (0)

April 24, 2004

Texans beat Broncos, 13-7; er, make that 'Stros top Rockies

The 'Stros beat the Rockies 13-7 in a typical Coors Field game on Friday night or, as Astros' color man Jim DeShaies put it, "the Astros went on a 10 to 2 run to take control of the game."

Games at Coors Field are often quite strange. Yesterday, the grounds crew worked all day to remove four inches of snow from the field that had fallen on Thursday night. Because of the high altitude, the baseball flies further when hit. Pitchers are well aware of this, so they tend to pitch more defensively, which usually makes matters worse for them. Sometimes, a pitcher will look like he is dominating a hitter for several pitches and then suddenly, the hitter will whack the next pitch into the adjoining county. So, when watching games at Coors, you just have to get used to that type of thing.

Mike Lamb had a career game for the 'Stros with four hits and six RBIs, and Brandon Duckworth gave up five hits and four runs in five innings (that's like giving up three hits and a run in seven innings anywhere else) to pick up the win. Denver native Brad Lidge struck out the last four Rockies batters of the game, which is tantamount to striking out the entire lineup anywhere else.

The Rocket goes for his fourth win today in his second career start at Coors.

Posted by Tom at 6:46 AM | Comments (0) | TrackBack (0)

April 23, 2004

Uncorporations

Professor Ribstein over at IdeaBlog has assembled a bright and provocative program for his conference on "Uncorporations" at the University of Illinois College of Law this weekend. The ubiquitous Professor Bainbridge has a working paper and is giving a talk on whether courts should scrap veil-piercing theories, and there are nine other working papers on various topics relating to personal liability in the context of corporate and limited liability partnership law. All of the working papers that are being discussed at the conference are online and can be reviewed here. If you are involved in business law, I highly recommend that you take some time and review these creative and insightful papers.

Posted by Tom at 6:35 PM | Comments (0) | TrackBack (1)

The hidden costs of nationalized health insurance

Pierre Lemieux, who is an economist with the University of Quebec in Outaouais and with the Independent Institute in California, has written a revealing op-ed in today’s Wall Street Journal ($) regarding the hidden costs of Canada’s nationalized health care finance system and the devastating effect those costs are having on the quality and timeliness of Canadian health care:

The Canadian system is built around a compulsory public-insurance regime that provides most medical and hospital services free. Of course, it is not free for the taxpayer, who finances the system at a rate of 22% of all taxes raised in Canada. The Canadian government pays about 71% of total Canadian health care expenditures, compared to 44% paid by the government in the U.S. This translates into public health expenditures of 6% of GDP in Canada and 7% in the U.S. — a rather small difference. More than three-quarters of the difference in total expenditures is due to higher private expenditures in the U.S. Why are private health expenditures so low in Canada? The main reason is that they are illegal, which gets us to the heart of the system's hidden costs.

Canadian public health insurance is not only compulsory, it is also monopolistic. The system is administered by provincial governments under strict guidelines imposed by federal law and federal subsidies. Private insurance covering publicly insured services is illegal. Physicians are forbidden to accept private payments above the fees billed to the government. Hospitals are public or non-profit, and tightly regulated. Physicians' fees are determined -- or "negotiated" -- by provincial agencies. Prices of drugs are controlled. In short, the public supply of medical services is rationed, and there is little private alternative. Hence the apparent low cost of the system.

The hidden costs include the poor quality of services, and the costs imposed on customers (aptly called "patients" in this case) who have to wait in queues.

Quality is subjective and can only be evaluated through consumer choices, but the government won't let consumers make choices and vote with their feet if they are not satisfied. Anecdotal evidence of questionable quality is everywhere. In a recent piece in Montreal's Gazette, a Canadian related her own experience, and contrasted the "kindness, discretion and professionalism" of staff in U.S. hospitals, with the frequent rudeness of unionized personnel in the Canadian system.

Long waiting lines are a fixture of the system. The Fraser Institute, a Vancouver think tank, has calculated that in 2003, the average waiting time from referral by a general practitioner to actual treatment was more than four months. Waiting times vary among specialties (and, less wildly, among provinces), but remain high even for critical diseases: The shortest median wait is 6.1 weeks for oncology treatment; excluding radiation, which is longer. Extreme cases include more than a year's median wait for neurosurgery in New Brunswick. The median wait for an MRI is three months. Since 1993, waiting times have increased by 90%.

Waiting lines impose a real cost, which is approximated by what individuals would be willing to pay to avoid them. Waiting costs include health risk, lost time (especially for individuals whose time is most valuable), pain and anguish. Socialist systems are notoriously oblivious to anguish, discomfort, humiliation and other subjective factors which bureaucrats cannot measure or don't value the same way as the patient does.
* * *
Liberalization proposals are met by the "two-tier system" bogey man -- that if choice is allowed an unequal system will develop. But if directly paying a doctor is illegal, there are legal ways to jump the queues. As pointed out by Professor Livio Di Matteo of Lakehead University in Ontario, what now exists is a three-tier system. The very rich (like Robert Bourassa, the late Premier of Québec) go to the U.S. for rapid, personalized, high-tech treatments. The second tier is made of "the well informed and aggressive, who can push their way to the front of the treatment line." The poor and those with no connections get stuck in the queue.

At least two Indian groups are now considering building private clinics or hospitals on their land — just as other sorts of illegal-elsewhere trade thrive on Indian reserves. Yet, Canadians who patronized such clinics would still be prohibited from purchasing private insurance to cover the service, leaving the opportunity only to the wealthiest.

As noted by Harvard professor Patricia Dantzon, another hidden cost of the Canadian system comes "from forcing everyone to have the same level and type of insurance," whatever their individual preferences are.

One last cost should not be ignored: the loss of personal responsibility and the habit of dependence on the state. Opinion polls show that Canadians are generally proud of their public health insurance. Indeed, for most people, any basis for comparison has been made illegal. Auberon Herbert, a libertarian Member of Parliament in late 19th century England wrote, "If government half a century ago had provided us all with dinners and breakfasts, it would be the practice of our orators today to assume the impossibility of our providing for ourselves."

This insightful piece dovetails with a discussion that I have been having with fellow Houston blogger Milton over at Trivial Pursuits regarding the flaws in America’s health care finance system and how self-insurance could be deployed to improve competition between health insurance products currently in the marketplace. One example of self-insurance that is an attractive alternative to many current health insurance products is the woefully underpublicized Health Savings Account (“HSA”) concept that was enacted into law last year. To introduce the concept, it is helpful to review how American health care costs are currently financed.

Every dollar that an employer pays in employee health insurance premiums avoids income and payroll taxes. For the employee with average income, this generous tax subsidy means that government is effectively paying for almost half the cost of the employee’s health insurance.

On the other hand, if the same employer tries to deposit that same dollar into a savings account for the benefit of the employee from which the employee could control the payment of medical expenses, then the government taxes the dollar and grabs almost half of it before it reaches the savings account.

Accordingly, America’s tax laws provide a generous subsidy for third-party insurance and none for individual self-insurance. In so doing, our tax laws promote use of third-party bureaucracies to pay for even minor discretionary health care expenses despite the fact that such expenses would be managed much more efficiently if patients paid them on their own.

The new health savings accounts address this defect in the health care finance system, at least to an extent. The legislation gives deposits into HSAs the same tax advantages as those granted to an employer’s health-insurance premiums. In so doing, individual self-insurance can now compete with third-party insurance on the same financial basis and individuals can now control some of their financial investment in health-care without a tax penalty.

However, even more importantly, the HSA legislation addresses in a rational manner the knotty social issue -- that is, how do we allocate dollars between health care and other goods and services? Or stated another way, how do we decide which medical procedures are worthwhile and which ones are not? There are basically three ways:

● In countries such as Canada with nationalized health insurance, government makes the decisions (either directly or indirectly) in an arbitrary, inefficient, and often unfair manner;

● The second method is to restrain spending using the techniques of managed care. Over the past 15 years of increasing managed care in the American health care finance system, most of us have experienced, at best, the irritation, and, at worst, the capriciousness of having employers and large insurers ration health care for us; and

● Finally, the third option is to allow individuals to make their own choices between health care and other uses of their money through vehicles such as HSAs.

In that connection, the HSA is the most flexible health care finance product currently on the market. HSAs allow individuals and their employers to make deposits each year equal to their health insurance deductible (there is currently a limit on the size of the deductible and a supplemental insurance policy is required to cover catastrophic illness or injury expense in excess of the amounts deposited in the HSA). The funds in the HSA grow tax free and the funds may be used to pay such things as health care expenses that would not otherwise be covered by third party insurance, insurance premiums while the owner of the account is changing jobs, and health expenses during retirement.

However, the new law is not perfect. For example, as noted above, the maximum amount that can be deposited into an HSA in any year is currently somewhat limited. Consequently, the combined cost of depositing funds in the HSA and paying for the supplemental insurance that is required can turn out to be more expensive than simply buying a third party policy with a relatively high deductible.

Moreover, products such as HSAs are only part of the solution to the problems in America’s health care finance system. From my vantage point, some sort of nationalized insurance or federally-backed private insurance is still going to be necessary for people who simply cannot afford to fund HSAs or buy private insurance, and for people with severe medical problems who cannot afford the costs attendant to those problems. In regard to these groups, the tough issue is how do you ration the health care? Or, stated another way, there must eventually be a political consensus on the limitations of such federally-insured health care. Otherwise, we simply have created another federal program that balloons into yet another governmental financial debacle.

However, for those of us fortunate to be reasonably healthy and productive, the concept of HSAs is a viable alternative to higher cost private health insurance. I encourage you to examine the product as an alternative to your current health insurance policy.

Posted by Tom at 10:11 AM | Comments (0) | TrackBack (1)

The DeBakey-Cooley rift

One of the most well-known stories of Houston lore -- yet not discussed publicly much -- is the long-time rift that has existed between two giants of cardiovascular surgery and of Houston's amazing Texas Medical Center, Dr. Michael DeBakey of the DeBakey Heart Institute and the Baylor College of Medicine, and Dr. Denton Cooley of the Texas Heart Institute at St. Luke's Episcopal Hospital. That rift has resulted in Dr. DeBakey and Dr. Cooley rarely speaking to each other over the past 40 years.

As a result of the major announcement of this past Wednesday that Baylor College of Medicine is changing its primary teaching facility from Methodist Hospital to St. Luke's, Dr. DeBakey (of Baylor) and Dr. Cooley (or St. Luke's) are being forced to speak to each other again, at least to a limited extent. As this Chronicle artice reports, the first meeting occurred yesterday when both Dr. DeBakey and Dr. Cooley attended a meeting in which the historic agreement linking Baylor and St. Luke's was consummated. Cooley, 83, and DeBakey, 95, shook hands and greeted each other, then sat down at a table where institutional leaders signed contracts making St. Luke's the primary teaching hospital for Baylor. As the Chronicle report notes:

The pair's relationship dates back to 1951, when DeBakey offered Cooley a job at Baylor, allowing the Houston native to return home after completing his training at Johns Hopkins University School of Medicine in Baltimore. For the next decade the two would collaborate closely.

Cooley left in 1962 to found the Texas Heart Institute, acknowledging that directly competing with DeBakey in the same hospital became problematic. The two remained friends and were both still on the Baylor faculty, but no longer operated together.

In 1965, DeBakey participated in a federally funded program to design an artificial heart. Within a few years he had a device that some physicians felt was ready for human trials, but DeBakey believed it needed more work.

Then, to international acclaim in 1969, Cooley performed the first artificial heart implant in the chest of 47-year-old Haskell Karp, a dying heart surgery patient. Karp lived with the heart in his chest 65 hours before dying shortly after a heart transplant.

But Cooley's notoriety was quickly tarnished after DeBakey said the heart was identical to one under development in the Baylor labs, and that Cooley had used it without permission.

Cooley said he and Dr. Domingo Liotta, who also designed artificial hearts in DeBakey's lab, had built the heart privately, and that he had no choice but to use the heart because the patient's life was in jeopardy.

In a 2004 interview, Methodist heart surgeon Mike Reardon said the episode "stole DeBakey's shot at a Nobel Prize. What Mike needed was one crowning event to make him a candidate. And that was going to be the artificial heart."

After the incident the American College of Surgeons voted to censure Cooley and, amid a dispute with the trustees of Baylor, Cooley resigned from the institution. DeBakey changed his focus and decided funds would be better spent developing pumps to assist failing hearts. Such devices became the mainstream treatment for patients with failing hearts.

Posted by Tom at 7:44 AM | Comments (0) | TrackBack (0)

We officially have a controversy on the Tour

As noted here earlier, it appeared that Tour pro Stewart Cink improved his lie on the shot that set up his winning birdie putt to beat Ted Purdy on the fifth playoff hole of the MCI Heritage Class Golf Tournament last Sunday. Although several television viewers called in to report Cink's apparent rules violattion, Tour officials quickly denied the alleged rules violation after Cink sunk his birdie putt and delared the popular Cink the tournament champ.

Now, it appears that ruling went over about as well as a turd in the punchbowl with a number of Tour players. Today, the Chronicle reports that Purdy in particular is not pleased:

"Every player that's come up to me said `I got robbed,' and everybody around the world is saying the same thing," said Purdy upon completion of his first round Thursday at the Shell Houston Open.

"I bet the founders (of golf) in Scotland, our forefathers, are rolling over in their graves."

Inasmuch as it was clear from the telecast that, in sweeping away loose impediments, Cink created an indentation behind his ball to lessen the risk that his wedge would bounce off the surface of the waste bunker before striking his ball, Purdy is not buying the Tour rules officials' reasoning on the dispute. Purdy had a phone conversation with Slugger White, the PGA Tour tournament director and referee in chief, on Wednesday about the controversy. After shooting an even-par 72 in the first round of the Shell Houston Open at Redstone Golf Club, Purdy expressed continued skepticism about the ruling and the message it sends. According to Purdy, White felt everything in the waste area was movable.

"Why Stewart was being so careful, I don't know," Purdy said.

Because Cink was in a waste area and not a bunker, he could ground his club, take practice swings and remove loose impediments.

"But it's still sand, it's still crushed shells," Purdy said. "I think the rule needs to say you can't move the sand.

"Apparently Slugger doesn't believe in sand."

In fact, the rules are already clear that what Cink did was wrong. Rule 13.2 of the Rules of Golf states in relevant part as follows:

13-2. Improving Lie, Area of Intended Stance or Swing, or Line of Play A player must not improve or allow to be improved: • the position or lie of his ball, by any of the following actions: • creating or eliminating irregularities of surface, [or] • removing or pressing down sand, loose soil, replaced divots or other cut turf placed in position . . .

Cink improved his lie and should have been called on it. Purdy should have won that golf tournament.

Posted by Tom at 6:43 AM | Comments (2) | TrackBack (0)

Cards sweep 'Stros

The Cardinals completed the sweep of the Astros on Thursday night by squeezing in a run in the 12th to take a 2-1 victory. Roy O and Jason Marquis were locked in a pitching dual for most of the game, and you had a sense that it was not the Astros' night when the team's fastest player, Adam Everett, was thrown out at third base in the 7th on a nice throw from Jim Edmunds (close play, though). Of course, Biggio followed with an RBI single, which would have plated two and won the game if Everett had not been nailed.

The series revealed the Astros' weakness that I noted earlier here on Opening Day -- that is, this team will struggle to score runs during stretches of the season. They scored only 10 in three games against the Cards, and six of those were in the blowout loss in the second game of the series. The 'Stros now move on to Denver for a three game set with the Rockies this weekend (Brandon Duckworth starts the opener in place of the rehabbing Andy Pettitte), then move on to Pittsburgh for three before returning to the Juice Box next Friday for a four game series with the Reds.

By the way, one of the highlights of the game last night was a real free-for-all between two fans in the stands during the bottom of the 11th. One of the two fellows involved in the fight quickly got the upper hand and was really hammering the other guy when the police finally broke it up. The police escorted one of the two guys from the stadium, but I couldn't tell whether it was the fellow who got creamed or the winner by TKO who got removed.

Posted by Tom at 5:09 AM | Comments (0) | TrackBack (0)

April 22, 2004

SCOTUS turns down Clarett motion for stay

As expected, the U.S. Supreme Court turned down football player Maurice Clarett's motion to stay the Second Circuit's order of earlier this week that bars Clarett and similarly situated underclassmen from this weekend's NFL Draft pending the Second Circuit's final adjudication of the NFL's appeal of the U.S. District Court decision that enjoined the NFL from barring Clarett and similarly situated underclassmen from the NFL Draft. The SCOTUS' reasoning was the same as the Second Circuit's. Inasmuch as the NFL has already agreed to conduct a supplemental draft for Clarett and others like him before the upcoming NFL seaosn if the Second Circuit upholds the District Court's decision, SCOTUS concluded that there was no material harm to Clarett and the others in barring them from this weekend's draft pending the Second Circuit's ruling on the merits of the NFL's appeal.

Posted by Tom at 2:57 PM | Comments (0) | TrackBack (0)

Libertarian dilemma

From the "News in Brief" section of the Onion:

Libertarian Reluctantly Calls Fire Department

CHEYENNE, WY—After attempting to contain a living-room blaze started by a cigarette, card-carrying Libertarian Trent Jacobs reluctantly called the Cheyenne Fire Department Monday. "Although the community would do better to rely on an efficient, free-market fire-fighting service, the fact is that expensive, unnecessary public fire departments do exist," Jacobs said. "Also, my house was burning down." Jacobs did not offer to pay firefighters for their service.

Posted by Tom at 7:17 AM | Comments (0) | TrackBack (0)

VDH on the lessons of Vietnam

Victor Davis Hanson answers the following question on his website:

My question is about the lessons of Vietnam. In your book, 'Carnage and Culture' . . . you point out that millions died as a result of our withdrawal. You also point out the hypocrisy of the left in ignoring this point. It seems like we're now in the exact same situation as we were then, a tenuous military situation in Iraq and the radical left screeching to get out. How do we avoid the catastrophic mistake of Vietnam?

Hanson: We must hope that we are folk more like that of the Okinawa-generation than the Mogadishu public. If we take Fallujah, and alienate and end Sadr’s militia, then the reconstruction will be back on track—offering more of a moral boost than before the present turmoil. The entire struggle depends on whether the United States believes we are in a real war— or whether we think this is a criminal matter. Imagine May 1945 in the midst of trying to dislodge the Japanese from Sugar Loaf Hill: would we engage in national inquiry about who got us into the war with Japan? Or blame each other over Pearl Harbor? Become despondent from horrific footage of suicide bombers? Cease the assault and ask to parley with Japanese generals? Or begin a national debate about leaving the Pacific to avoid such seemingly senseless carnage?

Posted by Tom at 7:08 AM | Comments (0) | TrackBack (0)

Tax issues in business bankruptcies

Paul Asofsky, a partner in Weil, Goshal & Manges' Houston office, has written this helpful article on tax issues that arise in business bankruptcy cases. The following is the abstract of the article:

Any company considering bankruptcy should be aware of certain routine tax procedural items, and this article addresses a number of those issues. The bankruptcy claims resolution process and the requirements of return filing are discussed. Additionally, the effects of bankruptcy on tax audits are touched on.

There is a distinction between liabilities that arise prior to the filing of the bankruptcy petition and those that come forward after the filing of the petition. This distinction of whether a tax liability is pre-petition or post-petition as well as the payment and refund consequences of each is discussed in length.

The most controversial issue within this area deals with the status of tax liabilities for the taxable year in which the bankruptcy petition is filed. Tax authorities adhere to the position that such a liability is a post-petition liability because the tax must not be paid until the last day of the taxable year which is a date following the filing of the bankruptcy petition. However, debtors take the opposing position that the liability should be considered pre-petition, and three Courts of Appeals have adopted their argument and instituted a bifurcation rule in their jurisdictions. The effects of these decisions as well as the determination and payment of pre-petition liabilities are addressed, and a discussion of post-petition interest on tax claims concludes the article.

Hat tip to the TaxProf Blog for the line to this article.

Posted by Tom at 6:49 AM | Comments (0) | TrackBack (0)

Big Medical Center news: Baylor picks St. Luke's over Methodist

In a move that has been expected for over a year but nevertheless shakes the foundation of Houston's huge Texas Medical Center community, Baylor College of Medicine announced yesterday that it is ending its 50 year primary affiliation with Methodist Hospital as its main teaching hospital and entering into an agreement to make St. Luke's Episcopal Hospital its primary teaching hospital.

Baylor (which has no affiliation with Baylor University in Waco) is one of two medical schools in the Medical Center (the University of Texas Health Science Center is the other) and the older of the two. In addition to the financial considerations that induced Baylor to make the move, the affiliation with St. Luke's now gives Baylor a direct relationship with two of the Medical Center's best hospitals, St. Luke's and its world-renowned affiliate, Texas Children's Hospital.

Although the severing of the Baylor-Methodist relationship is unfortunate in several respects, it may turn out to be a good thing for the Medical Center as a whole if Methodist and UT agree that Methodist would become UT's main teaching facility in the Medical Center. Such a relationship would give Methodist a direct relationship with another of the Medical Center's world recognized hospitals -- UT's M.D. Anderson Cancer Center and would either supplement or replace UT's existing relationship with the Memorial Hermann Hospital System. UT's relationship with Memorial Hermann has always been hindered by Memorial Hermann's relatively limited presence in the Medical Center, where its only hospital is Hermann Hospital, which is much smaller than either Methodist or St. Luke's.

Posted by Tom at 4:48 AM | Comments (1) | TrackBack (0)

April 21, 2004

Redding checking flights to New Orleans

Tim Redding's start this season went from mediocre to disastrous this evening as the Redbirds lit him up for 8 runs in three and two thirds innings on their way to routing the 'Stros, 12-6. Just for good measure, Jim Edmunds cranked a grand salami off of Ricky Stone in the fifth to make sure that the 'Stros didn't have any illusions about making a game of it.

Redding now attempts to avoid Manager Jimy Williams for the next several days as the skipper contemplates calling up either Jared Fernandez (54 ERA, but 8 scoreless innings since going down to AAA New Orleans) or rehabbing Carlos Hernandez (0.84 ERA in 10 innings at New Orleans) to replace the listing Redding in the starting rotation.

Roy O will take the hill as the 'Stros try to salvage one game of the three game set with the Cards tomorrow night. After that game, the Astros go to Denver and Pittsburgh before returning home for a series next weekend against the Reds.

Posted by Tom at 9:31 PM | Comments (0) | TrackBack (0)

Why Health Care Has No Wal-Mart

This short BusinessWeek Online story does a good job of summarizing the reasons why America's health care finance system hinders the decline in prices in health care that Americans have enjoyed in many other sectors of the economy, most notably retail sales (ala the Wal-Mart reference). One big reason noted:

Sometimes, however, Americans use more care because they think it's free, or almost free. And that's one big reason why health care hasn't become Wal-Mart-ized. When you buy that DVD player, you whip out your credit card and pay with your own money. That makes you want to comparison shop for the best deal. But when it comes to buying drugs, consumers have little incentive to shop around. If you have good insurance, you're going to pay the same $10 or $15 whether you need the most expensive drugs or not.

A recent study that looked at drugs used to treat arthritis pain provides some insight. Arthritis sufferers can buy relatively inexpensive over-the-counter treatments, such as Motrin or similar generics, or much more costly prescription medications called cox-2 inhibitors, such as Celebrex or Vioxx. Both kinds provide equal pain relief, but the cox-2 drugs may reduce the chances of stomach bleeding or ulcers.

The study concluded that people with good drug insurance were twice as likely to get the more expensive drugs than those without insurance, whether they were at risk for bleeding or not. If someone else -- the insurance company -- is paying, price doesn't matter.

Hat tip to the Mises Economics Blog for the line to this article.

Posted by Tom at 9:11 PM | Comments (0) | TrackBack (0)

Three Duke Energy traders indicted

Three former executives involved in Duke Energy's energy trading operation have been indicted in what the local U.S. Attorney's Office contends was a fraudulent scheme to attain bonus compensation through making part of Duke Energy's trading operations look profitable when they really were not.

Timothy Kramer, 40, former vice president of Duke Energy North America. Todd Reid, 41, former vice president, and Brian Lavielle, 33, a former trader were charged with racketeering, wire and mail fraud, and falsification of corporate books and records. All of them pled not guilty today and were released on $100,000 bond. If convicted on all counts, the defendants face prison sentences of anywhere from five years to life, in addition to forfeiture of $7 million in "false gains" plus penalties of up to $9 million.

The gist of the indictment is that the defendants allegedly ginned up phony electricity and natural-gas trades to boost trading volumes and inflate profits in a trading book that was the basis of their annual bonuses. The indictment alleges that there were 400 rigged trades that produced a $50 million profit in the trade book used for bonus calculations between March 2001 and May 2002. The schemes are alleged to have inflated bonuses for the defendants by a total of at least $7 million.

Moreover, this is the first federal case that I know of in which senior-level executives have been accused of devising schemes to generate trading profits in a "mark-to-market" book that determined bonuses, on one hand, and to enter losses in an "accrual" book that had no bearing on bonuses, on the other. Duke and many other energy trades used mark-to-market accounting to record profit and loss for energy contracts that might not settle for many years. However, the mark to market accounting method has come under intense scrutiny since the demise of Enron Corp. in late 2001 because of the latitude that the method allows in recording results.

Interestingly, the amount of money involved in the alleged fraud is relatively small when compared with Duke Energy's pretax profits in 2001 from energy trading. Wholesale energy trading that year generated a pretax profit of $1.34 billion, and Duke's wholesale-trading profits more than tripled from 2000 to 2001.

Posted by Tom at 8:20 PM | Comments (0) | TrackBack (0)

Skilling's New York adventure comes under scrutiny

The bizarre tale of former Enron CEO Jeff Skilling's hospitalization in New York a couple of weeks ago took another twist as the Enron Task Force filed pleadings in the pending criminal case against Skilling today contending that Skilling's conduct violated terms of his pre-trial release arrangement.

As expected, Skilling was stone drunk when he was hospitalized (he had a blood alcohol level of .19, which is very drunk). In its pleading filed today, the Task Force does not specify any proposed modification to the terms of Skillings' pre-trial release, probably because they are still scratching their heads over the incident themselves.

On a serious note, Skilling is facing a criminal trial in an extremely unfavorable venue that, if he loses, probably will result in what amounts to a life sentence in federal prison. Such pressure must be generating incredible stress on Skilling, in addition to the stress he is enduring from his decimated business career. People will do unusual things under rxtraordinary stress. My sense is that Judge Lake will understand that will move the case past this incident without much comment.

Posted by Tom at 6:45 PM | Comments (0) | TrackBack (0)

Did Cink improve his lie?

Tour professional golfer Stewart Cink won the MCI Heritage Golf Tournament last Sunday at Hilton Head over Ted Purdy by making a birdie on the fifth playoff hole. However, on his approach shot to the green on that hole, it appeared that Cink improved the lie of his ball in a waste bunker by creating an indentation behind the ball so that his sand wedge would be less likely to bounce off the surface before striking the ball. Cink proceeded to hit the shot stiff to within six feet of the pin and sunk the birdie putt for the win.

Rule 13.2 of the Rules of Golf provides in relevant part as follows:

13-2. Improving Lie, Area of Intended Stance or Swing, or Line of Play A player must not improve or allow to be improved: • the position or lie of his ball, by any of the following actions: • creating or eliminating irregularities of surface, [or] • removing or pressing down sand, loose soil, replaced divots or other cut turf placed in position . . .

Television showed Cink removing loose impediments behind his ball (which he is allowed to do) and then, on a close up, a clear indentation behind the ball where Cink was removing the loose impediments. Accordingly, several television viewers called in to Tournament officials and reported the apparent rules violation, which would have resulted in a penalty to Cink that would awarded the victory to Purdy. Upon reviewing the matter immediately after Cink's birdie putt, Tournament officials ruled that no violation had occurred and confirmed Cink's victory.

Here is the explanation of the Tournament officials' ruling on the matter, which I find less than convincing. Hat tip to Mr. Poon (the low handicap blogger) for the link.

Posted by Tom at 7:41 AM | Comments (0) | TrackBack (0)

Is American health care more productive?

Tyler Cowan over at Marginal Revolution and Jane Galt at Asymmetrical Information have interesting posts on the productivity of American health care, health care cost, and related statistics. Mr. Cowan concludes that Americans pay more for health care than other countries, but get better health care in return. We die sooner than people in other countries because we eat too much and exercise too little, among other facts. Similarly, Ms. Galt points out that many of the outcomes measured in the health care debate are both difficult to measure between countries, primarily because many have non-health-care contributing factors. Both posts are insightful and well worth reading.

As each of these posts reflect, generalized nationalized health care is no panacea for the problems that we face in America's health care finance system.

Posted by Tom at 6:50 AM | Comments (6) | TrackBack (0)

Clarett seeks stay from SCOTUS

The Maurice Clarett v. NFL case went to the U.S. Supreme Court yesterday as Clarett's attorneys filed a motion requesting that SCOTUS stay the Second Circuit's Monday ruling that barred Clarett from being eligible for this weekend's NFL Draft.

Although I believe that Clarett's position in this case is the correct one, my sense is that this motion to SCOTUS does not have much of a chance. The Second Circuit's order barring Clarett from the draft was premised on the notion that the NFL had agreed to conduct a supplemental draft before the 2004 NFL season for Clarett and other underclassmen if the NFL lost on the merits of its appeal to the Second Circuit. Accordingly, the Second Circuit reasoned that there was little damage to Clarett by barring him from this weekend's draft while the Second Circuit considered the NFL's appeal on the merits. I suspect that Justice Ginsburg, who drew Clarett's motion to SCOTUS, will likely have a similar view, although the inherent weakness of the NFL's underlying case might persuade her that the NFL has no reasonable likelihood of success on the merits of its appeal, in which case she could justify staying the Second Circuit's order barring Clarett from the draft.

Posted by Tom at 6:36 AM | Comments (0) | TrackBack (0)

April 20, 2004

Cards down 'Stros

The Cards beat the Astros 5-3 on Tuesday evening. Reggie Sanders and Albert Pujols homered for the Cards, and Sanders made a nifty catch in right field that robbed Bags of a homer. Wade Miller pitched O.K. for the 'Stros, giving up five runs on five hits (one walk) in six innings, but his relief help let in two of those runs the inning that he came out. Tim Redding faces Cards' ace Matt Morris in game two of the series on Wednesday night at 6:05 p.m. at Minute Maid Park.

Posted by Tom at 10:55 PM | Comments (2) | TrackBack (0)

Judge sets Lea Fastow trial to begin June 2

U.S. District Judge David Hittner kept the pedal to the metal in the Lea Fastow trial today by scheduling the case to begin on June 2. Everyone still expects that the government and counsel for Ms. Fastow will cut a deal that will be acceptable to Judge Hittner, but time is definitely growing short to hammer out such a plea bargain and have Judge Hittner approve it.

The Enron Task Force is also scheduled to go to trial on June 7 in U.S. District Judge Ewing Werlien's court in the case known as the "Nigerian Barge case" against six former Enron and Merrill Lynch executives.

Posted by Tom at 1:01 PM | Comments (0) | TrackBack (0)

More Shelby Steele on gay marriage

This earlier post reviewed a Shelby Steele op-ed on gay marriage as a civil rights issue. Now, Mr. Steele has posted this additional New Republic Online piece that responds to Andrew Sullivan's criticism of his original piece. This is good and measured writing on a needlessly divisive issue. Review it with pleasure.

Posted by Tom at 9:06 AM | Comments (0) | TrackBack (0)

More on Shell reserve estimate fiasco

The NY Times and the Wall Street Journal ($) both report extensively on the report to the Royal Dutch/Shell board regarding Shell management's mishandling of reserve estimates. Here are the prior posts over the past couple of months on this developing scandal. As this matter deteriorates into such things as intercompany emails and dinner conversations, it is only matter of time before the drama is the subject of either a Congressional hearing or, better yet, an afternoon soap opera.

Posted by Tom at 8:04 AM | Comments (0) | TrackBack (0)

SEC files unusual brief in WorldCom "fraud on the market" class action

This NY Times article reports on an unusual brief that the Securities and Exchange Commission has filed in Citigroup's appeal of the class certification order in the WorldCom class action securities fraud case.

This particular appeal involves the "fraud on the market" theory, which is explained in this prior post. In their unusual brief, SEC lawyers argue that analysts such as Citigroup's Jack B. Grubman do affect the price of a company's stock and bonds and may be held accountable for misrepresentations they may make. On the other hand, Citigroup is contending that its analysts' enthusiasm for WorldCom securities is irrelevant, that institutional investors ignore analysts' reports, and that analysts' opinions - including those of Mr. Grubman - are simply part of a conglomeration of information and do not have a distinct effect on securities prices. Accordingly, Citigroup lawyers are contending that each individual investor should have to prove that he was harmed by the analysts' opinions in individual cases, which, if adopted by the appellate court, would effectively scuttle the class action. Oral argument in the appellate court is scheduled for May 10, so stay tuned.

Posted by Tom at 7:54 AM | Comments (0) | TrackBack (0)

Wilmer and Hale & Dorr merge

Washington-based law firm Wilmer Cutler Pickering and Boston-based Hale & Dorr have announced their merger, which will create one of nation's largest law firms. Both of these firms were mid-sized major firms that compete with larger multinational firms, so the merger makes some sense in that the combined firm will be on a similar footing to those larger firms.

In that connection, Professor Ribstein over at Ideablog has interesting post that on the merger that points out that it could be a good thing for some big firms to grow even bigger:

[L]egal ethical rules constrain law firms from getting as big as they need to get. In particular, restrictions on non-competition agreements prevent firms from binding lawyers to the firm. These restrictions also constrain firms from compensating lawyers in ways that get them to focus on the long-term interests of the firm.

In other words, without ethical rules, big law firms would get even bigger, and more independent from clients. The result might be that lawyers would be more, rather than less, loyal to the long-term interests of clients and society. Ethics can be viewed as yet another product of free markets.

Posted by Tom at 7:37 AM | Comments (0) | TrackBack (0)

Enron, Judge Gilmore, and the Rolling Stones

The Chronicle reports here that the Enron criminal case against several individuals formerly involved in Enron's Broadband unit has induced U.S. District Judge Vanessa Gilmore to begin quoting the Rolling Stones:

Citing nonlegal scholar Mick Jagger, a federal judge Monday scolded defense attorneys in an Enron case, basically telling them to stop whining.

"We have the Jagger doctrine here. You can't always get what you want, but if you try really hard, you get what you need," U.S. District Judge Vanessa Gilmore told lawyers in the Enron broadband case, paraphrasing the Rolling Stones song.

Posted by Tom at 7:28 AM | Comments (0) | TrackBack (0)

The end of liberal hope in Russia

Joshua Rubenstein, a regional director of Amnesty International and the author of "Stalin's Secret Pogrom" pens this Wall Street Journal ($) review of James H. Billington's new book, "Russia In Search of Itself," and notes as follows:

More than a decade after the collapse of the Soviet Union, the West has only begun to confront a disheartening paradox: That at the height of Mikhail Gorbachev's program of glasnost and perestroika in the late 1980s, the prospects for democratic reform seemed more promising than they do today in a nominally democratic post-Soviet era.

The Russian media, including television news, once carried far more critical discussions of Stalin's crimes. Intellectual journals reached millions of readers and explored the country's history and politics, and its economic failings. And the parliamentary elections of 1989 confirmed that liberal, independent-minded figures, like the physicist and veteran dissident Andrei Sakharov, could run against the Communist Party and command sizable support.

But the country's badly managed attempts at capitalism and democracy in the 1990s have soured a majority of the population. Privatizatsiia, or privatization, of the country's industrial and natural resources has resulted in such an audacious pattern of grand theft that Russians have coined the term prikhvatizatsiia, or confiscation, to mock the process. The brutal war in Chechnya continues to inflict untold suffering on civilians. Meanwhile the rule of law is a hollow shell. Since 1994, nine members of the country's Parliament, and 130 journalists, have been murdered, no doubt because they either sought to expose the truth about official corruption and organized crime or because their political activity got in the way of someone's plans to turn a fast buck.

And Mr. Billington does not lay the blame for these developments solely at the feet of Russian President Vladimar Putin:

Vladimir Putin alone is not responsible for this collapse of liberal hopes. It was Boris Yeltsin who insisted on too much power for the office of the presidency. And with increasing government control of the mass media, there remain few outlets for critical reporting on Mr. Putin's policies. The increasing appeal of Russian nationalism has brought with it frequent, physical attacks on foreign-looking outsiders, including dark-skinned people from the Caucasus, African students and even U.S. Embassy Marine guards, as well as assaults on Jews and Jewish institutions. Mr. Putin has condemned such provocations only half-heartedly. . . Under Mr. Putin's leadership, the country is moving toward "some original Russian variant of a corporatist state ruled by a dictator, adorned with Slavophile rhetoric, and representing, in effect, fascism with a friendly face." In other words, a type of regime that seeks to maintain order "through a Pinochet interlude."

Posted by Tom at 7:18 AM | Comments (0) | TrackBack (0)

Fukuyama on the next chapter in Iraq

Francis Fukuyama, professor at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins and award winning author, writes this excellent op-ed in today's Wall Street Journal ($) in which he analyzes the tough issues that the United States will be facing in the next stage of reconstruction in Iraq. First, Professor Fukuyama addresses the non-issues (the June 30 deadline, more international involvement, etc.), which seem to get more media play than the real issues, but then turns to the four major issues, the first of which is security:

Once we get past these nonissues, there are at least four very large problems that have to be solved before we get to a democratic Iraq. The first is so obvious that it does not need to be stressed here: security. A great deal of the good nation-building work of improving the electricity supply, roads, schools, and hospitals, as well as the billions of dollars the U.S. has dedicated to these tasks, are now stuck in the pipeline because many of the thousands of aid workers and contractors there find it too dangerous to leave their fortified compounds. At the same time, there is good reason to think that much of the recent violence will subside. Muqtada al-Sadr, the violent Shiite cleric whose Mahdi militia caused so much trouble throughout southern Iraq, miscalculated in staging a grab for power earlier this month. He is in the process of being isolated by his fellow Shiite clerics, and will likely be disarmed though a combination of negotiations and force.

The second issue is preserving the state's "monopoly on legitimate violence":

Much less easily solved is the second major problem, that of Iraq's other militias. If the classic definition of a state is its monopoly of legitimate violence, then the new Iraq is not going to qualify for statehood anytime soon. We have seen in the past two weeks the deficiencies of the new Iraqi army, civil defense corps, and police, all of which have had units that have remained passive, refused to obey orders, or even switched to the other side. If you are a Kurd or Shiite today, it would take a great leap of faith to trust the security of your family to these new institutions.

It is thus not surprising that all of the major Shiite groups and not just Sadr's followers have been frenetically building their own militias over the past few months. The Badr brigades, which are associated with the Iranian-influenced Supreme Council for the Islamic Revolution in Iraq, and the armed cells of the al-Dawa party, are potentially more powerful than the Mahdi militia. They are biding their time and building strength even as their political wings participate in the Iraqi Governing Council. The Kurds, for their part, have had their own Peshmerga forces to defend their interests for the past decade now.

The Coalition Provisional Authority is deep into a negotiation over what is called "demobilization, disarmament, and reintegration" -- DDR, in nation-building lingo -- which would dismantle these militias and fold them into the new national institutions. But the Shiite groups won't disarm unless the Kurds do so as well, and in the current climate of violence it is very hard to see what kinds of incentives the U.S. can offer to bring this about.

The third problem is that of Kurd-Shiite relations:

The third major problem has to do with long-term Kurdish-Shiite relations. The Transitional Administrative Law that was signed in early March contains a provision that any article of the new constitution can be vetoed by a two-thirds vote in any three of Iraq's 18 governorates, effectively giving the Kurds veto power over the entire constitution. The Kurds want this because they remain deeply suspicious that the Shiite groups, including those associated with Ayatollah Sistani (who up to this point has been a force for moderation), will seek to impose Sharia law once the constitutional process is under way. Mr. Sistani, for his part, has been equally vehement that this provision be removed. If the Kurds and Shiites cannot figure out how to share power, it is hard to see where the political basis for the new Iraq lies.

Finally, the fourth is how best to integrate the Sunni's into the Iraq government:

The final problem has to do with how to integrate the Sunnis who are at the center of the current troubles in cities like Fallujah and Ramadi. Contrary to some media reports, it is not clear that a Sunni "silent majority" could not one day find representation in political parties willing to contest power via the ballot box rather than the gun. But after the demise of the Baath Party, they are the least politically developed of all of Iraq's major groups. Prior to the Marines' Fallujah offensive, various democracy-promotion groups such as the National Democratic Institute and the International Republican Institute had been making some headway in organizing democratic Sunni political parties. How the Fallujah standoff will be resolved, and what will remain of any residual Sunni goodwill toward the new Iraq in its aftermath, are open questions now.

Then, Professor Fuyukama concludes with words of prudent wisdom regarding the task at hand:

If we make progress in solving these four problems, and if we get through the two elections outlined by President Bush, we should not kid ourselves about what will emerge at the end of the process. The new Iraqi state will be more legitimate than any other state in the Arab world, but it will also likely be very weak and dependent on outside assistance. It may be an Islamic Republic, in which religion plays a more significant role than the U.S. would like; its armed forces may be a hodgepodge of militias that will crack apart under stress; it will likely face a continuing violent insurgency fed by outside terrorists; its writ is unlikely to extend to important parts of Iraq.

Thus if part of the vision being offered to the American people is the prospect that we will be able to disengage militarily from Iraq in less than two years, the administration should think again. It will be extremely difficult to stick to the timetable outlined by the president, and even if the U.S. do it will have big lingering commitments. The American public should not be blindsided about the total costs of the reconstruction, as it was about the costs of the war itself. For all of the reasons offered by President Bush, it is absolutely critical that America stay the course and ensure that Iraq becomes a stable, democratic country.

Given the incessant criticism during the political season regarding America's mission to clean up the Iraq mess, it is refreshing to read the constructive thoughts of Professor Fuyukama regarding the tough issues that need to be addressed and resolved.

Posted by Tom at 6:56 AM | Comments (0) | TrackBack (0)

Sharon's simple plan

Richard Z. Chesnoff, author of "Pack of Thieves" about the Nazi plundering of European Jews during the WWII era, has long been one of America's most prominent reporters on foreign affairs. Richard is also the brother of my old friend David Z. Chesnoff, who is one of Las Vegas' most prominent criminal defense lawyers (and also Britney Spears' lawyer in her recent annulment case, but that's another story).

In this NY Daily News op-ed today, Richard insightfully and succinctly explains Ariel Sharon's innovative withdrawal plan in regard to moving the chronically intractable Israeli-Palestinian conflict toward resolution:

Sharon's plan is brilliant in its simplicity - a sort of uncontestable, one-way divorce. Unwilling to wait any longer for the Palestinians to stop terror and negotiate peace seriously, Sharon plans single-handedly to disengage Israeli forces from Gaza, withdraw the 7,000 Jewish settlers who currently live there, turn control of the desert strip over to the Palestinians and begin to do the same in the West Bank by dismantling some Israeli settlements there as well.

At the same time, Sharon announced that Israel plans to complete the controversial security barricade it has been building to keep out Palestinian suicide bombers. Moreover, until a final peace settlement is drawn up, several significant West Bank settlements will remain on the Israeli side of the barricade.

Of course, Sharon doesn't want the Palestinians to see Israel's withdrawal from Gaza as a reward for Arab terrorism. He has been making sure to drive that point home by weakening the terrorists before the Israeli Army pulls out. Hence, the recent targeted killing of Hamas leader Sheik Ahmed Yassin and Saturday's successful hit on Abdel Aziz Rantisi, the pediatrician-cum-killer who took over from Yassin. In case Hamas & co. still don't get the message, the Israelis also have announced that even after withdrawal, their army will counterstrike if Gaza-based terrorism continues.

One of the best parts of Sharon's plan is his offer to turn over the buildings and homes in Israel's soon-to-be-abandoned Gaza settlements to needy Palestinian families. There's one condition: Some international body will have to guarantee that the homes actually go to refugee families and not to Hamas terrorists or friends of Arafat and other well-connected Palestinians. Without that guarantee, Sharon said, he'll have the settlements dynamited before the Israelis leave.

And then there is the most important of all declarations: America is backing the Israelis on their position that the so-called right of return is valid only for entry into a future Palestinian state and not to the Jewish state, thus thwarting the Arab attempt to destroy Israel by cramming millions of so-called Palestinian refugees down its throat.

And Richard concludes with an observation and a recommendation for the Palestinians:

The Palestinians have a long history of rejecting Israeli offers, only to see the dream of peace, prosperity and their own state recede farther over the horizon. This time, they should accept Sharon's plan not as an outrageous insult but as a great opportunity.

Above all, they should remember that next time, the chances are that they'll be offered even less.

Posted by Tom at 6:33 AM | Comments (2) | TrackBack (0)

April 19, 2004

Appeals court bars Clarett from NFL draft

In a surprising ruling reported here, a three judge panel of the the Second Circuit Court of Appeals barred former Ohio State running back Maurice Clarett from participating in next week's National Football League annual draft of collegiate players. Here are the prior posts on the Clarett case.

From the news report, it appears that the appellate court simply issued a short order barring Clarett from the draft, reasoning that any damage to Clarett from the stay was minimal because the NFL has agreed to hold a supplemental draft for Clarett and other underclassmen who are not eligible for next week's draft before the upcoming NFL season if Clarett prevails on the merits of the case. Consequently, look for the Second Circuit to issue a more detailed decision soon on the merits of the NFL's appeal of the lower court ruling that made Clarett eligible for the next week's NFL draft.

Posted by Tom at 4:31 PM | Comments (0) | TrackBack (0)

Kerry on Meet the Press

Tim Russert grilled John Kerry yesterday on his prior statements about Vietnam, and Kerry fumbled badly in answering the questions. Here is the transcript of the interview, via Powerline.

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WSJ Golf section

It's Shell Houston Open week in Houston, and the Wall Street Journal ($) has a timely section in today's edition that focuses on the troubled golf business. Although professional golf tournaments continue to do well as a television product, the rest of the golf business is not doing well at all, burdened by over-construction of golf courses and a lagging supply of golfers. As usual, the Journal staff does a fine job of covering the various sectors of the golf industry. Check it out.

Posted by Tom at 6:32 AM | Comments (0) | TrackBack (0)

April 18, 2004

Stros beat Brew Crew again; 1st "down on the farm" report

The Rocket picked up his third win of the young season as the 'Stros cruised by the Milwaukee Brewers for the third straight day, 6-1. Clemens spaced four hits over seven innings, walked one, struck out seven, and even knocked in his second RBI of the season. With the win, the 'Stros are now 9-4 and in first place in the NL Central. The Stros are off on Monday and then begin a three game series with the St. Louis Cardinals at Minute Maid Park on Tuesday.

The following is the first in a series of "down on the farm" reports that I will post periodically throughout the season to provide information on the Astros' primary MLB prospects playing in the club's minor league system. The development of minor league prospects is the lifeblood of most Major League Baseball teams, and the Astros are no exception to that rule. Indeed, the Astros' consistent success over the past decade (four division titles and five second place finishes) is attributable to the club's development of such players as Craig Biggio, Lance Berkman, Richard Hidalgo, Roy Oswalt, Wade Miller, and Billy Wagner.

Although most experts considered the Astros' minor league system as one of the best in Major League Baseball over the past decade, that is no longer the case. For the first time in recent memory, the Astros have no grade A prospects in the minors, which led Baseball America to rank the Astros' minor league system 29th out of the 30 MLB teams at the beginning of this season. There are a number of reasons for this decline, but the most troubling one is that the Astros' delayed until last season to include a "high-A" team in its minor league system. Accordingly, in prior seasons, the lack of a high-A team in the 'Stros' system forced the organization to promote players from its mid-A team in Lexington to AA Round Rock, which often caused players to be overmatched. For example, shortstop prospect Tommy Whiteman and catcher prospect John Buck are examples of good prospects who struggled at AA Round Rock after being promoted from mid-A ball. The Astros corrected this deficiency in their system by fielding a high-A team in Salem, Virginia during the 2003 season.

The first prospects to be evaluated in this series are those on the Astros' AAA team, the New Orleans Zephyrs. Unfortunately, there is not much to report from New Orleans, which is the weakest of the Astros' minor league teams. New Orleans is currently 4-7, in last place, and not hitting. The best news is that the pitching staff is reasonably strong, and that Carlos Hernandez has pitched well in his first two starts as he continues his comeback from shoulder surgery.

In the 2001 season, Hernandez was considered at least as good a pitching prospect as Roy Oswalt and pitched very well during the Astros' pennant drive that season. However, Hernandez partially tore his labrum in his pitching shoulder in a baserunning mishap that season, and he opted to rehab the injury without surgery. Hernandez started off O.K. in the 2002 season, but after 117 decreasingly effective innings, the 'Stros' elected to put him on the disabled list and he had the surgery to repair the labrum that he probably should have had after the 2001 season.

Hernandez rehabbed the shoulder and did not pitch during the 2003 season, and then started his comeback in winter league baseball after last season. He progressed well during spring training, but his endurance and fastball speed have not returned to what they were during 2001 season. The 'Stros are taking a prudently cautious approach with Hernandez, allowing him to pitch only five innings in each of his first two starts this season. Nevertheless, he has given up only one earned run to date, and appears to be making steady progress. If that progress continues, then he should be ready to contribute to the Astros' staff by midseason.

The other top pitching prospect on the New Orleans staff is Taylor Buchholz, a 22 year old righthander who was one of the two young pitchers that the Astros received from Philly in the Billy Wagner deal. Buchholz looked decent in the spring, but he has been hammered in his first two outings at AAA. Look for him to spend the entire season at New Orleans and, if he develops steadily, to compete for a rotation spot next spring.

The other two pitchers who could help the Astros this season are Jared Fernandez (he of the 54 ERA, just recently sent down) and Chad Qualls, a 25 year old righthander who has pitched reasonably well while gobbling up a large number of innings the past two seasons at AA Round Rock. Although Fernandez started off horribly this season, he pitched well for the 'Stros for most of last season, and it is not unusual for knuckleballers to turn it around at any time (in fact, he pitched six scoreless innings for New Orleans today).

Other news from New Orleans is not promising. John Buck, who as recently as a year ago was considered to be Astros fans' solution to the Brad Ausmus problem. However, after being jumped from mid-A ball to AA Round Rock in 2002, Buck fell apart, losing the plate discipline and power that he had displayed in low-A ball. The 'Stros then promoted him to AAA New Orleans in 2003, where Buck's performance became even worse (although he was injured for a couple of months last season). Buck's stunted development was one of the reasons that the Astros' overpaid Ausmus (yet again) in another contract extension, and Buck's early performance at New Orleans reflects that he may be the poster child for premature advancement in a minor league system -- six hits (one double, the rest singles) in 31 plate appearances, two walks, and seven strikeouts. Buck is not yet 24, so he is still young enough to turn it around. But as the scouts say in the bush leagues, the numbers don't lie.

Similarly, none of the other everyday players at AAA are performing very well. Second baseman Chris Burke, a top choice from the 2001 draft out of the University of Tennessee, may become a decent utility infielder, but he has exhibited neither the on base average nor the slugging percentage that would make him a front line MLB second baseman. In fact, the only New Orleans player hitting decently is 27 year old outfielder Mike Hill, who has the look of a career minor leaguer and is probably not more than a fifth outfielder prospect for a MLB club.

Consequently, the time is now for the Astros. Other than Hernandez and maybe Buchholz, Fernandez, and Qualls, there is not any help at the AAA level. My next "down on the farm" report will be on the prospects at AA Round Rock, which are more promising.

Posted by Tom at 10:08 PM | Comments (0) | TrackBack (0)

The man "who believed the solution to every human problem was death"

Richard Pipes, a professor emeritus of history at Harvard, reviews Simon Sebag Montefiore's new book on Josef Stalin, ''Stalin: The Court of the Red Tsar'' in today's NY Times Review of Books. The entire review is well worth reading, and this tidbit about Stalin's post-WWII mood is a good sample:

Stalin emerged from the war utterly exhausted and more than ever convinced of his infallibility. In his last years he became inordinately capricious, suspecting everyone and ready to jettison on trumped-up charges even his most loyal followers. He spent much time vacationing in his lavish palaces. He indulged in drunken orgies, where he would force his ministers to dance for his amusement: ''He made the sweating Khrushchev drop to his haunches and do the gopak that made him look like 'a cow dancing on ice.' '' The Polish security boss, Jacob Berman, was made to waltz with Molotov.

Posted by Tom at 8:06 AM | Comments (0) | TrackBack (0)

April 17, 2004

Martin Lipton and the Disney board

This NY Times article reports on corporate attorney Martin Lipton's work with the board of Walt Disney Company in connection with the sputtering Comcast takeover bid.

Mr. Lipton is famous in corporate legal circles as being one of the lawyers who devised the poison pill strategy, which is an anti-takeover strategy that Professor Bainbridge explains much better than I can.

However, Disney was never really in a position to adopt a poison pill strategy in regard to the Comcast bid. Inasmuch as the Board has already been heavily criticized for its unwavering support of CEO Michael Eisner despite Disney's lackluster performance over the past several years, a poison pill strategy would be widely viewed as the Disney Board again supporting a strategy mainly benefitting Mr. Eisner and an unproductive management team at the expense of Disney's shareholders.

Nevertheless, as the Times article reports, Mr. Lipton has made a strong impression on the Disney board members, and his close friend Mr. Eisner has to date weathered the corporate storms relating to the Comcast bid and Disney's lagging stock price:

Indeed, if there was any dissension on Disney's board about the fate of Mr. Eisner before Mr. Lipton arrived on the scene, there is none now.

With Mr. Lipton in, out went Cravath, Swaine & Moore, the white-shoe law firm that had been working with the Disney board to help swat away Roy E. Disney's mob of irate shareholders. Cravath could hardly be counted on to rescue the company and protect Mr. Eisner's job. (Technically, Cravath resigned the account, but what else could it do?)

After Mr. Lipton's arrival, several independent Disney directors raised the issue of whether they should be seeking out their own lawyers and bankers to help evaluate the situation separately from Mr. Eisner and management. Naturally, the idea was summarily rejected, according to executives close to the board. The board's other advisers were hardly independent, either: Alan D. Schwartz, president and co-chief executive of Bear Stearns, is a close friend and longtime adviser to Mr. Eisner. Gene T. Sykes, a managing director of Goldman Sachs, has similarly had a long relationship with Mr. Eisner, as has Morton A. Pierce, a partner in Dewey Ballantine, the company's regular outside counsel.

Of course, new independent advisers would interfere with Mr. Lipton's game plan. In a telling memorandum Mr. Lipton sent to all his clients last year, he wrote, "There is no need for the board to create a special committee to deal with a major transaction, even a hostile takeover, and experience shows that a major transaction is best addressed by the full board."

That advice may be right under some circumstances, but between Comcast's bid for Disney and Roy Disney's effort to oust Mr. Eisner, it is hard to believe that any adviser hired to be a sage and savior on both issues could be anything but conflicted. Mr. Lipton declined to comment. A spokesman for Disney called him "a world-renowned lawyer and expert" whose "reputation and integrity are beyond reproach."

Posted by Tom at 9:56 PM | Comments (0) | TrackBack (0)

'Stros continue to roll

The Astros beat the Milwaukee Brewers 14-5 on Saturday night for their second win in the third of their current four game series. Bidg and Mike Lamb each had three run jacks, and Hidalgo continued his torrid early season hitting with two doubles and four RBI's.

The 'Stros used six pitchers (why, Jimy, why?) in the rout, including newly-acquired Chad Harville, who pitched a scoreless inning. Roger Clemens takes the hill on Sunday afternoon seeking his third win of the season as the Astros close out the series with the Brew Crew. On Tuesday, the 'Stros open a three game series with the St. Louis Cardinals at Minute Maid Park.

Posted by Tom at 9:33 PM | Comments (0) | TrackBack (0)

Hiding money in Swiss accounts is getting harder

This NY Times article reports on the increasing difficulty of secretly stashing ill-gotten money in Swiss bank accounts. The article notes as follows:

According to a report in March from the Paris-based Financial Action Task Force on Money Laundering, which is supported by 32 countries, only seven jurisdictions - the Cook Islands, Guatemala, Indonesia, Myanmar, Nauru, Nigeria and the Philippines - now qualify as "non-cooperative" in international efforts to block the flow of illicit funds.

Less than four years ago, the list comprised 15 countries, including many in the Caribbean, like the Cayman Islands, that have now been removed. . .

Not surprisingly, Switzerland has no wish to be associated with this list of shame, and its bankers say they have been tightening their controls since 1977.

That does not alter the fact that Switzerland's bank secrecy laws, dating to 1934, impose far fewer obligations to report customers' affairs than laws elsewhere.

* * *
But there is a counterimage that resurfaced in the 1990's, when Swiss banks were discovered to have denied survivors access to funds deposited by Holocaust victims. The Swiss National Bank, moreover, was obliged to acknowledge that it had accepted deposits of Nazi gold during World War II.

More than anything, the disclosures undermined Swiss respectability and persuaded the bankers that their image needed a makeover to protect an industry that employs 110,000 people and accounts for 11 percent of the country's economic output.

Indeed, as the enforcement of regulations on illicit money has tightened, Swiss banks have become more cooperative with investigators, he said. Since Sept. 11, 2001, for example, Swiss authorities have frozen $26 million in 82 accounts said to be linked to Al Qaeda or the Taliban . . .

In addition to the foregoing, the Swiss banking bar is a remarkably small and close knit group. If clear proof exists that the Swiss banking system is being used to facilitate a criminal purpose, then, in my experience, members of the Swiss banking bar have been quite helpful in facilitating discovery of information relating to the funds and accounts in question.

Posted by Tom at 9:13 PM | Comments (0) | TrackBack (0)

Pick your own playoff opponent

Stuart Benjamin over at the Volokh Conspiracy makes this interesting proposal that the top seeds in the NBA playoffs ought to be able to pick their own opponent in each round of the playoffs. Inasmuch as the first round of the NBA playoffs is only mildly more interesting than the utterly boring NBA regular season, my sense is that Stuart's suggestion has merit and might spice things up a bit.

Posted by Tom at 1:28 PM | Comments (0) | TrackBack (0)

The Passion Experience Tour

My old friend Chris Tomlin of Austin, Texas and his running buddy, Louie Giglio of Atlanta, Ga. are two of the subjects of this NY Times article today regarding their participation in the fabulously successful Passion Experience Tour, which is a series of Christian worship gatherings for college students that combines the groundswell of evangelical Christian spirit among young adults with talented leaders from the contemporary Christian music field. These are remarkable folks pursuing a wonderful and productive ministry, so the entire article is a refreshing and interesting read.

Although Chris continues to excel on the contemporary Christian music scene, he still has not been able to overcome my consistent throttling of him on the golf course.

Posted by Tom at 12:47 PM | Comments (0) | TrackBack (0)

Ernst & Young gets hammered

As these earlier posts report, big four accounting firm KPMG has been keeping its defense lawyers quite busy. Now it appears that fellow big four firm Ernst & Young is getting into the act.

Floyd Norris of the NY Times reports today on an unusual court order that the chief SEC administrative judge issued yesterday that fined E&Y a cool $1.7 million and precludes the firm from taking on new audit clients in the U.S. for six months as a penalty for the firm's improper conduct in auditing PeopleSoft, Inc. at a time in which the firm maintained a highly profitable consulting arrangement with the company.

The six-month suspension ties the longest suspension on signing new business ever imposed on one of the leading accounting firms. In 1975, Peat Marwick, a predecessor of KPMG, accepted a similar six-month suspension as part of a settlement of charges that it failed to audit several companies properly, including Penn Central, the railroad that went bankrupt back in the early 1970's.

Posted by Tom at 11:41 AM | Comments (0) | TrackBack (0)

Stros deal Saarloos

The Astros swapped young righthanded pitchers with the Oakland A's Friday, trading Kirk Saarloos (who had been pitching at AAA New Orleans) for Chad Harville. Here is the Astros' press release on the deal, which the Chronicle dutifully fails to supplement with better analysis of the deal.

My sense is that the A's got the better of this deal because they got a promising young pitcher in Saarloos when they would have lost Harville had htey not made the deal (Harville was out of options and had demanded that the A's give him his outright release rather than return to the minors).

Saarloos was a third round draft choice of the Stros in the 2001 draft, and he shot up the organization when he dominated the AA Texas League in the first half of the 2002 season. The Stros called him up in both the 2002 and 2003 seasons, but that is where Saarloos ran straight into Jimy Williams' impatience with developing young ballplayers and Williams' disdain for Saarloos' less than blazing fastball (Saarloos patterns his pitching style after Greg Maddux).

In my view, Williams never really gave Saarloos a fair shot in the Astros' less than stellar starting rotations of the 2001-2002 seasons, and so Saarloos was stuck in the Astros' revolving door bullpen of the last two seasons, which is not his strong suit. This season, Saarloos did not pitch well early in the spring, but then recovered nicely, only to be told that there was no way he was going to make the Opening Day roster and that the 'Stros were trying to peddle him. He promptly went to AAA New Orleans and was bombed in his first two starts there. However, Saarloos is only 25, and his minor league numbers indicate strongly that he will eventually be an effective 200 inning per season major league control artist with low walk and home run rates. Consequently, the Astros have really given up a talent in this deal.

And Harville? Well, he is a 27 year old fireballer who was a relief pitcher for the A's last season. Here's how Baseball Prospectus 2004 analyzes him:

The whole right-handed Billy Wagner thing just hasn't worked out. Harville, once renowned for his small stature and tremendous fastball, pitched well for the [AAA Sacramento] RiverCats, but once again didn't look particularly great in Oakland. He still throws very hard, but didn't look completely comfortable with his improving curveball, and occasionally couldn't find the strike zone with a sherpa and a GPS unit. He's out of options, so he has to make the club out of spring training if the A's want to keep him, and he's still a reasonable bet to be a good pitcher in some role. If and when that actually happens is a matter of speculation.

So, in sum, a deal involving two pitchers of differing styles, both of whom have decent potential. I would have stuck with Saarloos, but perhaps this is one of those deals where both pitchers will thrive in new surroundings. With the Astros' pitching staff of flame-throwers, Harville will certainly have a lot of company in that department.

Posted by Tom at 11:22 AM | Comments (0) | TrackBack (0)

April 16, 2004

Roy O mows down the Brew Crew

I cruised down to Minute Maid for the 'Stros Friday night game against the Brewers, and I was treated to a masterful performance by Astros ace Roy Oswalt. Roy O shut out the Brew Crew on 3 singles, no walks, and 10 strikeouts as the 'Stros rolled, 2-0. The 'Stros didn't hit much either and Roy O is a notoriously fast worker on the mound, so the game took only an hour and 58 minutes.

Brandon Duckworth gets his first start as an Astro in Saturday's game as Andy Pettitte's replacement in the 'Stros' rotation. Note that most Saturday games this season will begin at 6:05 p.m., an hour earlier than other 'Stros' night games.

Posted by Tom at 10:56 PM | Comments (0) | TrackBack (0)

Jimy, why do you do the things you do?

The following is from Dayn Perry over at Baseball Prospectus about the rather odd moves of Astros' manager Jimy Williams:

Jimy Fun

I got a little excited when I read a headline hinting that Astros manager Jimy Williams might use closer Octavio Dotel in non-save situations. . . . Then I read the article under the headline. It turns out Williams indeed plans on using Dotel in non-save situations, but those situations won't be high-leverage spots in the middle innings; rather, it'll be when the ‘Stros have a four-run lead in the ninth. Yeah, a four-run lead. The war to maximize bullpen efficiency just endured its Tet Offensive.

According to . . . Keith Woolner, from 1980-1998, there was a 2.3 percent chance of a team surrendering four or more runs in any given inning. In other words, Williams is burning his best reliever--one of the game's best relievers, in fact--in a situation where he has, on average, a 97.7 percent chance of success. At this juncture, Williams doesn't have much confidence in his corps of supporting relievers, but this is precisely what he shouldn't be doing. Let Dotel work some of the critical-mass innings that would otherwise be going to people like Ricky Stone; don't exhaust him in gimme frames like the ninth inning of a four-run game.

Need more reasons to fear for Houston's chances with Jimy at the switch? Well, Morgan Ensberg, who in a just meritocracy would be the Astros' starting third baseman every day, was on the bench Tuesday night for the third time in eight games. This time, Jimy ramped up his Sacco-and-Vanzetti treatment by benching Ensberg in favor of Jose Vizcaino. Why? Yeah, I'm aware that Vizcaino was 9-for-10 in his career against Cards starter Jeff Suppan, but if Ensberg's manager can find justification to bench him based on a 10-AB sample, then the bar for handy rationalization isn't set too high. Ensberg deserves better.

As noted here earlier, Williams' questionable handling of Ensberg last season may have cost the 'Stros a Central Division pennant in the close race against the Cubs. I do not see the race being any easier this season, so here's hoping that Williams does not let his stubborn adherence to baseball myths undermine his team's chances for success.

Posted by Tom at 11:53 AM | Comments (0) | TrackBack (0)

VDH's latest

Victor Davis Hanson's latest piece on NRO is up. As always, it is worth reading in its entirety, and the following should pique your interest:

We are glad when dictators fall like Milosevic, the Taliban, and Saddam did. But we all prefer that they tumble spontaneously — even though we accept privately that such is never the case in this present unipolar world, where all the smug talk about the U.N., EU, and multilateralism means absolutely nothing without the will and skill of the American military. So let us feel terrible about not preempting the genocide in Rwanda; let us hate ourselves for belatedly preempting in vain to save a quarter-million Bosnians and Kosovars in the Balkans; and then let us be ashamed even more that we finally really were preempting to take out a mass-murderer in Iraq — and let us scream and slur about all this all at once!

Deep down we know that some sort of freedom is what most Iraqis want — and what Islamic extremists in and outside Iraq most fear. But we wish its creation to proceed flawlessly without loss of blood or treasure. And at all times we insist on gratitude from those we aid, who are humbled, perhaps even furious, because we are giving them precisely what they seek — but also what in the past they lacked the resources, skill, or courage to obtain on their own.

Posted by Tom at 9:23 AM | Comments (0) | TrackBack (0)

Sexual deception as a murder defense

The Curmudgeonly Clerk evaluates a novel defense theory in a California (where else?) case involving a murder of a transsexual.

Posted by Tom at 9:01 AM | Comments (0) | TrackBack (0)

New Fifth Circuit "fraud on the market" decision

The Fifth Circuit recently issued this opinion that examines the investor reliance presumption under the fraud on the market theory in securities litigation. Under that theory, investors are entitled to a presumption that they relied on a misrepresentation so long as the company's shares were traded on an efficient market. An interesting twist to that theory is that the investors are not entitled to the presumption if they cannot establish that the misrepresentation actually affected the market price of the stock.

In this particular case, the plaintiffs apparently could not prove that the defendants' positive public statements regarding the company (which turned out to be false) had increased the company's stock price. Accordingly, the Fifth Circuit reasoned that the plaintiffs were entitled to the presumption of reliance only to the extent that they could tie the earlier false positive statements to the subsequent decline in stock price after the true negative public statements hit the media. The Fifth Circuit observed:

We are satisfied that plaintiffs cannot trigger the presumption of reliance by simply offering evidence of any decrease in price following the release of negative information. Such evidence does not raise an inference that the stock’s price was actually affected by an earlier release of positive information. To raise an inference through a decline in stock price that an earlier false, positive statement actually affected a stock’s price, the plaintiffs must show that the false [positive] statement causing the increase was related to the statement causing the decrease. Without such a showing there is no basis for presuming reliance by the plaintiffs.

This is yet another in a long line of Fifth Circuit decisions that require strong proof of reliance in fraud cases. Hat tip to the Rule 10b-5 Daily for the link to this decision.

Posted by Tom at 8:50 AM | Comments (0) | TrackBack (0)

Brew Crew clubs Stros

Astro-killer Ben Sheets mowed down the hometown boys for the second time in less than a week last night, 6-2. About the only positive aspect of the game for the Stros was Craig Biggio's 35th lead off home run in the first inning. Roy O tries to get the Stros back on track tonight in the series' second game.

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Be careful what you put in emails

That's what former Royal Dutch/Shell executive Walter van de Vijver is saying these days.

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EnCana to buy Tom Brown for $2.7 billion

This NY Times article reports on Toronto-based EnCana Corporation's $2.7 billion cash offer to buy Denver-based independent oil and gas producer Tom Brown, Inc., which the Tom Brown board accepted yesterday. The price includes $350 million in Tom Brown debt that EnCana will assume. EnCana is Canada's largest producer of natural gas.

Posted by Tom at 7:45 AM | Comments (0) | TrackBack (0)

Continental and Southwest Airlines release quarterly earnings reports

Houston-based Continental Airlines narrowed its first-quarter loss, and Dallas-based Southwest Airlines scratched out a small profit as both airlines struggled with higher fuel prices.

Continental, the nation's fifth-largest airline in terms of traffic, had a net loss of $124 million ($1.88 per share) in the first quarter, compared with a loss of $221 million ($3.38 per share) for the first quarter of last year. Revenue jumped 11% to $2.27 billion from $2.04 billion. Business travel remained weak, as only 32.7% of Continental's revenue came from high-priced business fares, down 4.8 percentage points from a year earlier. Fuel costs at Continental's mainline operation jumped 6.1% over the high prices airlines faced a year ago amid Iraq war preparations.

The combination of high fuel costs and low fares has made for a very difficult environment for airlines, Continental's chairman and chief executive, Gordon Bethune, warned "This is not sustainable. This industry doesn't work at $38-a-barrel oil."

Southwest, the sixth largest U.S. airline, remained profitable through the combination of lower costs than competing airlines and strong hedges it had in place against higher fuel prices. First-quarter net income rose 8.3% to $26 million from $24 million a year earlier while earnings per share remained flat at three cents. Revenue rose 9.8% to $1.48 billion from $1.35 billion, and the company offset higher fuel costs with $63 million of commodities hedging gains. Southwest's mix of full-fare traffic, typically business travelers, was 36%, about the same as in the year-earlier period.

In other Continental news, this NY Times article reports on Continental's offer to buy Colombia's financially troubled airline, Avianca.

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Enron criminal trial postponement rejected

This Chronicle story reports on an interesting development in the Enron-related criminal case commonly referred to as the "Nigerian Barge case." U.S. District Judge Ewing Werlein rejected one of the defendants' request for a postponement of a July trial setting to allow the defendants additional time to sift through over 2 million pages of documents relating to the case. Consequently, for the first time since the controversial Arthur Andersen trial over two years ago, it now appears that the Enron Task Force is actually going to have to try a case.

The Nigerian Barge case is a particularly interesting one because it involves the government's attempt to convict former Enron and Merrill Lynch executives of participating in a commercial transaction of the type that is common throughout the business world. The Enron Task Force contends that the entire Nigerian Barge deal in which Enron sold an interest in some barges off the coast of Nigeria to Merrill Lynch was a sham because Merrill Lynch would not have done the deal but for former Enron CFO Andrew Fastow's oral assurance that Enron would broker a sale of the barges for Merrill Lynch the following year. Fastow did indeed broker a sale of the barges the following year to one of his infamous "off-balance sheet partnerships" that hid roughly $40 billion of Enron debt.

According to the government's theory, if Fastow's oral assurance to Merrill Lynch was binding on Enron, then the sale of the barges was not a true arm's length sale and, as a result, Enron's accounting for the transaction as a true sale was fraudulent. Under the government's theory, the fact that the written agreements entered into between Enron and Merrill Lynch contained a provision that made Fastow's oral assurrance unenforceable is irrelevant. The contract was false and a part of the sham because Merrill Lynch would not have done the deal but for Fastow's oral assurances.

Other than Mr. Fastow's probable testimony of dubious credibility (he is cooperating with the government under a draconian plea bargain in an attempt to minimize his jail time to ten years), the government's primary evidence of the alleged sham nature of the deal appears to be the "nervousness" that several Merrill executives openly expressed about the deal in emails prior to Merrill consummating the transaction. The government interprets that nervousness as evidence that the Merrill executives knew that the deal was a sham and that they could be caught participating in a fraud with Enron.

However, there is another (and in my mind, more reasonable) interpretation of Merrill's nervousness regarding the deal -- that is, they were really nervous about the deal, not because they thought it was a sham and a fraud, but because they knew that they could not rely on Fastow's oral assurance that Enron would broker a sale of the barges the following year. Accordingly, their nervousness was that they might be making a bad investment that would result in having to hold the barges for a long, rather than short, term. Stated another way, the Merrill executives were nervous because they knew that this was a real deal in which the deal documents controlled the rights of the parties, and that Fastow's oral assurances to get them to do the deal could not be enforced if Enron failed to live up to them.

The Chronicle also has this piece today on the Enron grand jury in Houston and its members' cozy relationship with the Enron Task Force attorneys.

Posted by Tom at 7:10 AM | Comments (0) | TrackBack (0)

April 15, 2004

Stone and Castro: aging irrelevances

America's most overrated movie director, Oliver Stone, has interviewed his old pal, Fidel Castro, for yet another mind-numbing documentary. The Miami Herald's Glenn Garvin has written this piece on the latest Stone-Castro lovefest, and he captures the absurdity of the moment wonderfully:

Having revived the Western with Deadwood and the gangster genre with The Sopranos, HBO is taking on science fiction/fantasy. Looking For Fidel, Oliver Stone's latest round of pattycake with Fidel Castro, resembles nothing so much as one of those old the-land-that-time-forgot movies, with a couple of lumbering stop-action dinosaurs wrestling harmlessly in front of a crowd of natives that's trying hard not to look bored while it waits for evolution to take its course.

Looking For Fidel came about after Castro cracked down on dissidents last May, just as an earlier Stone documentary, Comandante, was about to debut on HBO. The network, embarrassed to be screening a kissy-face hagiography at the same time Castro was carrying out assembly-line executions and clapping his political opponents in prison by the score, ordered Stone to go back to Cuba and interview Castro about the crackdown.

The result is this collision of two aging irrelevancies, an antiquarian dictator who has already outlived his ideology and a once-talented director whose face is as puffy and dissolute as his films.

Stone occasionally prods Castro with an uncomfortable question about free speech or secret trials. But followups are non-existent, and mostly Stone allows the dictator to stage his own little set pieces for the cameras. In one, Castro generously meets with some accused hijackers, who with straight faces say 30 years in prison would be a generous sentence.

In another, he walks among adoring throngs of Cubans, whose burbling praise for the Revolution was so wildly delusional (they claim, among other things, that Cuba is the only country in the world where blacks are permitted to own businesses) that I had to wonder if they weren't a deliberate attempt at sabotaging the documentary.

At times, it's hard to tell who is less lucid, Stone or Castro.

Stone, halting and distracted, seems to be reciting a list he learned 20 years ago as he ticks off the Latin American countries supposedly less democratic than Cuba -- including Brazil and Chile, both now governed by socialists.

Castro, meanwhile, suffers through some seriously senior moments. What are we to make of this impromptu little speech? ''Today, with a computer and a dozen compact disks, you can hold all the literature ever written,'' he tells Stone. ``So many things have changed. I do not know why the world has been making so much progress to end up in this. I am so sorry for the younger generation.''

Other times, his meaning is all too clear. If Cuba is poor, Castro insists, it's because of the U.S. embargo. If people are so desperate to leave Cuba that they'll fling themselves into the ocean on inner tubes, it's because the United States encourages them. If any Cubans oppose him, it's because they're on the CIA payroll. Anything and everything that's wrong in Cuba can be traced back to a policy made in Washington, never in Havana.

If it were otherwise, Castro swears, he would quit at once: ''If you can prove to me that under the current circumstances in Cuba, that would be the best thing for the country and the most useful thing for this country, I would be willing to step aside.'' Yes, comandante, we have a word for that in English. We call it elections.

Hat tip to Virginia Postrel for the link to this hilarious review.

Posted by Tom at 9:00 PM | Comments (0) | TrackBack (0)

Corporate jets and shareholder returns

The following is the compelling synopsis of NYU finance professor David Yermack's paper, "Flights of Fancy: Corporate Jets, CEO Perquisites, and Inferior Shareholder Returns", which will not go over well in certain boardrooms:

This paper studies perquisites of major company CEOs, focusing on personal use of company planes. For firms that have disclosed this managerial benefit, average shareholder returns under-perform market benchmarks by more than 4 percent annually, a severe gap far exceeding the costs of resources consumed. Around the date of the initial disclosure, firms' stock prices drop by an average of 2 percent. Regression analysis finds negative associations between CEOs' personal aircraft use and their compensation and percentage ownership, in accord with Jensen-Meckling (1976) and Fama (1980), but both relations have small magnitude.

Hat tip to Marginal Revolution for the link.

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Does big government really stunt productivity?

This NY Times review reports on economic historian Peter H. Lindert's comprehensive analysis in his new book, "Growing Public" (Cambridge University Press), in which he contends that there is little empirical evidence to support the modern economic maxim that higher government spending or higher taxation necessarily deters economic growth.

In his new book, Professor Lindert examines, among other things, levels of taxes, public investment in education, transportation and health care, and social transfers such as Social Security. In so doing, he concludes that there is a contradiction between conventional economic wisdom and the evidence:

"It is well known that higher taxes and transfers reduce productivity," he writes. "Well known - but unsupported by statistics and history."

He finds that high spending on such programs creates no statistically measurable deterrent to the growth of productivity or per capita gross domestic product. As many nations in Europe built welfare states after World War II, they continued to grow faster than the United States, a nation with low social spending.

Read the entire review. As the United States confront the prospect of higher public spending on such programs as health care and education, Professor Lindert's book appears to be a timely resource for addressing the economic and social implications of such spending.

Posted by Tom at 7:36 PM | Comments (1) | TrackBack (0)

Statistical analysis, NBA style

As noted in these earlier posts, the statistical analysis of baseball that Bill James invented over 20 years ago has changed the way baseball players are evaluated. Now, the success of Mr. James' statistical analysis is being applied to improve the evaluation of basketball players.

This Washington Times article by Patrick Hruby reports on the work of Wayne Winston, an Indiana University professor, in applying sabermetric statistical analysis to National Basketball Association players. As with sabermetric evaluation of baseball players, Professor Winston's evaluation of NBA players is often contrary to conventional (and usually wrong) viewpoints. About LeBron James, the 19 year old rookie who is the consensus choice for NBA Rookie of the Year, Professor Winston points out:

"Nobody should be talking about LeBron James and Carmelo Anthony," he says. "They should be talking about Dwyane Wade. It's a crime."

"James rates as an average NBA player," says Winston, a professor of decision sciences at Indiana University. "That's good since very few rookies rate that high. But Wade's a real impact player for Miami. He ranks 21st best in the league in terms of changing the chances of your team winning a game."

Professor Winston's evaluation program is called Winval, which rates and ranks the value of every NBA player. The system ignores traditional measures such as assists and rebounds to answer a more basic question: That is, does a team play better or worse when a particular player is on the floor? Winval's ratings are weighted to take into account every player on the floor. For every time segment a player is in a game, the system tracks the other nine players on the floor, the length of the segment of play, and the score at the start and end of the segment.

"We don't care if you never score a point," Winston says. "If you make plays and help your team win, you don't have to score."

The result of all that math? Rankings that sometimes refute conventional NBA wisdom. High-scoring players like Vince Carter, Dirk Nowitzki and likely MVP winner Kevin Garnett are among Winval's top 10. But so is San Antonio's Bruce Bowen, an unsung defensive specialist who averages just 6.8 points a game.

On offense, Bowen makes the defending league champs less than a point a game better than an average NBA player. On defense, however, the Spurs are 10 points a game stingier with Bowen on the floor.

Sacramento's Brad Miller and Denver's Nene fare well for similar reasons, while the Nuggets' Anthony, the Kings' Mike Bibby and New York's Stephon Marbury rate lower than you might expect.

"Marbury's one of the top 10 players on offense," Winston says. "Everybody thinks this guy is a great player. But when he's on defense, he gives it all back."

Winval even gives its users insight into the off-court lives of some of the players:

A few years back, Winston couldn't figure out why Jason Kidd's normally stellar rating had taken an abrupt nosedive. It later came out the All-Star guard had been involved in a domestic altercation with his wife.

"DeShawn Stevenson, on Utah last year, his rating was really bad for two weeks," Winston says. "The next week, I found out he was suspended from the team. So we can spot these guys having problems. We don't know if they're marital, psychological, injuries. But if a guy starts playing [bad], we know it.

This is the type of research that might get me interested in the NBA again. However, the league continues to do well financially, so they could care less about my lack of interest.

Hat tip to the DA for the link to this interesting story.

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Damages? We don't need no stinkin' damages!

This recent Fourth Circuit opinion concludes that a liability finding under Rule 10b-5 in a private securities case does not necessarily require an award of damages.

In this case, a short seller publicized negative statements about a company in which he held a substantial short interest. Shareholders of the company sued the short seller on the theory that his statements were material misrepresentations that defrauded the market and caused the company's stock price to decline in value. The jury in the case returned a verdict that held the short seller liable, but awarded a big fat zero in damages. As one would expect, the shareholders on appeal argued that the jury finding of liability required the award of damages in some amount.

Noting that it was a case of first impression, the Fourth Circuit disagreed and noted that courts "often refer to the fact of proximately caused damage and the amount of proximately caused damage as involving separate, although related, inquiries." Thus, the Court reasoned in affirming the lower court's judgment of no damages, a jury could find that "(1) the plaintiff proved the defendant's fraud constituted a substantial cause of plaintiff's loss and so find the defendant liable but (2) the plaintiff failed to provide a method to discern, by just and reasonable inference, the amount of plaintiff's loss solely caused by defendant's fraud, and so refuse to award the plaintiff any damages."

Hat tip to the 10b-5 Daily for the link to this case.

Posted by Tom at 6:42 AM | Comments (0) | TrackBack (0)

Golf rules in plain English

This Chronicle story reports on a new book, "The Rules of Golf in Plain English," co-written by Houston personal injury lawyer Jeff Kuhn and Dallas-based legal writing guru Bryan Garner, which "brings order and clarity to the Rules of Golf as mandated by the United States Golf Association and the Royal and Ancient Golf Club." Mr. Kuhn is a volunteer USGA rules official who got the idea of rewriting the Rules of Golf during one of Mr. Garner's seminars on legal writing.

Perhaps Messrs. Kuhn and Garner will tackle the Internal Revenue Code next? ;^)

Posted by Tom at 6:24 AM | Comments (0) | TrackBack (0)

Tax Day thoughts

This Journal Economic Committee report does a good job of concisely explaining the progressive nature of the United States' income tax system. The report contains this classic observation:

Collectively, the bottom 40% of earners thus pays little or nothing in income taxes. (Like all taxpayers, however, they do face the time, frustration, and monetary costs of preparing their taxes and complying with the complex tax code.)

While I have no problem with the progressive nature of the American tax system, the complexity of the system continues to be one of those outrageous aspects of American life that seems impervious to change. The Republicans occasionally talk about tax simplification, but then do nothing meaningful about it. The Democrats don't even talk about it. Granted, the politics of simplifying the American income tax system is fraught with interest group obstacles. However, there are few political initiatives that would do more to improve Americans' perception of their government than income tax simplification.

Meanwhile, Penn psychology professor Jonathon Baron and USC professor Edward J. McCaffery have published "Masking Redistribution (or its Absence)", the abstract of which provides as follows:

Research has shown that people vary widely in their support or opposition to progressive taxation. We argue here that the perception of progressiveness itself is affected by the nature of the tax system and by the way it is framed, or presented. Experiments conducted over the World-Wide Web and using within-subject design demonstrate that subjects suffer from a range of heuristics and biases in understanding and supporting progressive or redistributive taxation. After reviewing some prior results, we report three new studies. Two of them indicate that people do not sufficiently appreciate the reduction of progressiveness that results from the use of tax deductions to partly reimburse private expenditures. The third indicates that people do not fully appreciate the reduction in progressiveness that results from cuts in government services.

Hat tip to the Law and Economics blog for the link to this article.

Posted by Tom at 4:51 AM | Comments (0) | TrackBack (0)

BioMed Central

My late father was a professor of medicine at both the University of Iowa and University of Texas medical schools. As a result of his influence, I have an interest in following developments in medical research.

I have been reviewing an interesting website for those interested in medical and science research. BioMed Central is an independent publishing house committed to providing immediate free access to peer-reviewed biomedical research. All the original research articles in journals that BioMed Central publishes are immediately and permanently available online without charge or any other barriers to access. This commitment is based on the view that open access to research is central to rapid and efficient progress in science and that subscription-based access to research is hindering rather than helping scientific communication.

BioMed Central is a creative and informative use of the Web to facilitate medical research. If you are interested in such research, I encourage you to take a look. Hat tip to Blog 702 for the link.

Posted by Tom at 4:27 AM | Comments (1) | TrackBack (0)

April 14, 2004

Break'em up!

The Stros completed a 5-1 road trip this afternoon by plastering the Cards 11-1 to sweep the series from the Redbirds. Berkman and Bags each had three run dingers, and Biggio also had three RBI's. Despite walking seven and throwing only 60 of his 121 pitches for strikes, Wade Miller somehow shut out the Cards over 7 innings to notch the win.

The Stros are now 6-3, and are returning to Minute Maid Park for a four game set with the Brew Crew over the weekend, and a three game series with the Cardinals beginning next Tuesday. Tim Redding will be on the hill for the 'Stros in the homestand opener Thursday night.

Posted by Tom at 7:56 PM | Comments (0) | TrackBack (0)

The incongruities of foreign policy

One day they burn our flag and hurl vile insults. The next day, this. Sigh.

Posted by Tom at 6:49 AM | Comments (0) | TrackBack (0)

Governing by Crisis

The Washington Post's Robert J. Samuelson in this op-ed makes the following interesting observations regarding the way in which our government tends to deal with problems:

One truth is that government often operates by crisis. People do hard things only when forced by events. A superb example is the aging of baby boomers. As is well known, the over-65 population will double between now and 2030. With Social Security, Medicare and other retiree programs representing about two-fifths of the federal budget, this aging threatens huge spending increases, big tax increases, larger deficits, or -- to minimize those problems -- significant cuts in retiree benefits or other spending. Faced with these realities, what have successive presidents and Congresses done? Absolutely nothing. Here's the connection with terrorism: Even when problems are widely understood, pragmatic politicians avoid unpopular measures. In this they usually reflect public opinion. Everyone knows baby boomers will strain future budgets, yet there's no clamor for corrective policies. We lapse into willful ignorance, hoping -- against evidence and logic -- that what we suspect must happen somehow won't. So it was with terrorism, though with more excuses. The facts there weren't well known (the terrorists weren't telling us their plans). Ordinary Americans and foreign policy "experts" alike didn't grasp the threat or what might be done to oppose it. Only Sept. 11 awakened us.

Until recently this common-sense appraisal seemed to describe the prevailing views of the public, the media and most politicians. Clarke changed that. The resulting controversy rests on the unstated notion that if the Bush administration had only taken his advice more seriously, it might somehow have prevented Sept. 11. This is a fiction, but it's a fiction that must be maintained, because if it isn't, then Clarke's criticisms -- and their political overtones -- lose much of their practical relevance. So we get Hollywood-on-the-Potomac. Politicians and the media engage in sanctioned make-believe. They splice together memos and meetings and, by silence and innuendo, suggest that Sept. 11 was preventable. Therefore, someone's to blame.

And what does this dilemma in American government portend for the future? Mr. Samuelson is not optimistic:

Whoever wins in November must face the larger dilemma of American democracy. Government can adopt painful policies only with public support. But that materializes only if most Americans believe that the problem being addressed is real and worth the requested sacrifices -- in money, inconvenience or lives. Sadly, what it often takes to convince the public is suffering the very problem we're trying to prevent. The solution to the dilemma proposed sanctimoniously by scholars and pundits is "leadership." Politicians (particularly presidents) should convince the public of the need to act before it's too late.

Sounds simple, but it's risky in practice, as Bush has shown. In Iraq, he offered just such leadership. Believing Saddam Hussein had weapons of mass destruction -- but not knowing for certain -- he presented the strongest case possible to the public or (to critics) deliberately overstated the case. Now, he's suffering a backlash because the weapons haven't materialized and the war's aftermath has proved obstinately messy.

Political hazards explain why presidents are usually unwilling to get too far ahead of public opinion or even to lead it. We think we control our destiny when we've often consigned it to chance and crisis. Clarke testified that before Sept. 11, a basic problem in strengthening anti-terrorism programs was that "we were not able to point to -- and I hate to say this -- body bags. You know, unfortunately, this country . . . requires body bags sometimes to make really tough decisions."

Hat tip to Asymmetrical Information for the link to Mr. Samuelson's piece. Also, check out Ms. Galt's piece on Hindsight Bias on that blog. Very insightful.

Posted by Tom at 6:35 AM | Comments (2) | TrackBack (0)

President Bush's statement

President Bush is not an articulate man, and he is not, as we lawyers like to say, "quick on his feet" in responding to questions extemporaneously (on the other hand, President Clinton was very good at this). However, last night, I thought that the President's statement at the beginning of his press conference was quite good. Here it is in its entirety:

Good evening. Before I take your questions, let me speak with the American people about the situation in Iraq.

This has been tough weeks in that country. Coalition forces have encountered serious violence in some areas of Iraq. Our military commanders report that this violence is being instigated by three groups: Some remnants of Saddam Hussein's regime, along with Islamic militants have attacked coalition forces in the city of Fallujah. Terrorists from other countries have infiltrated Iraq to incite and organize attacks. In the south of Iraq, coalition forces face riots and attacks that are being incited by a radical cleric named al-Sadr. He has assembled some of his supporters into an illegal militia, and publicly supported the terrorist groups, Hamas and Hezbollah. Al-Sadr's methods of violence and intimidation are widely repudiated by other Iraqi Shia. He's been indicted by Iraqi authorities for the murder of a prominent Shia cleric.

Although these instigations of violence come from different factions, they share common goals. They want to run us out of Iraq and destroy the democratic hopes of the Iraqi people. The violence we have seen is a power grab by these extreme and ruthless elements.

It's not a civil war; it's not a popular uprising. Most of Iraq is relatively stable. Most Iraqis, by far, reject violence and oppose dictatorship. In forums where Iraqis have met to discuss their political future, and in all the proceedings of the Iraqi Governing Council, Iraqis have expressed clear commitments. They want strong protections for individual rights; they want their independence; and they want their freedom.

America's commitment to freedom in Iraq is consistent with our ideals, and required by our interests. Iraq will either be a peaceful, democratic country, or it will again be a source of violence, a haven for terror, and a threat to America and to the world. By helping to secure a free Iraq, Americans serving in that country are protecting their fellow citizens. Our nation is grateful to them all, and to their families that face hardship and long separation.

This weekend, at a Fort Hood hospital, I presented a Purple Heart to some of our wounded; had the honor of thanking them on behalf of all Americans. Other men and women have paid an even greater cost. Our nation honors the memory of those who have been killed, and we pray that their families will find God's comfort in the midst of their grief. As I have said to those who have lost loved ones, we will finish the work of the fallen.

America's armed forces are performing brilliantly, with all the skill and honor we expect of them. We're constantly reviewing their needs. Troop strength, now and in the future, is determined by the situation on the ground. If additional forces are needed, I will send them. If additional resources are needed, we will provide them. The people of our country are united behind our men and women in uniform, and this government will do all that is necessary to assure the success of their historic mission.

One central commitment of that mission is the transfer of sovereignty back to the Iraqi people. We have set a deadline of June 30th. It is important that we meet that deadline. As a proud and independent people, Iraqis do not support an indefinite occupation -- and neither does America. We're not an imperial power, as nations such as Japan and Germany can attest. We are a liberating power, as nations in Europe and Asia can attest, as well. America's objective in Iraq is limited, and it is firm: We seek an independent, free and secure Iraq.

Were the coalition to step back from the June 30th pledge, many Iraqis would question our intentions and feel their hopes betrayed. And those in Iraq who trade in hatred and conspiracy theories would find a larger audience and gain a stronger hand. We will not step back from our pledge. On June 30th, Iraqi sovereignty will be placed in Iraqi hands.

Sovereignty involves more than a date and a ceremony. It requires Iraqis to assume responsibility for their own future. Iraqi authorities are now confronting the security challenge of the last several weeks. In Fallujah, coalition forces have suspended offensive operations, allowing members of the Iraqi Governing Council and local leaders to work on the restoration of central authority in that city. These leaders are communicating with the insurgents to ensure an orderly turnover of that city to Iraqi forces, so that the resumption of military action does not become necessary. They're also insisting that those who killed and mutilated four American contract workers be handed over for trial and punishment. In addition, members of the Governing Council are seeking to resolve the situation in the south. Al-Sadr must answer the charges against him and disband his illegal militia.

Our coalition is standing with responsible Iraqi leaders as they establish growing authority in their country. The transition to sovereignty requires that we demonstrate confidence in Iraqis, and we have that confidence. Many Iraqi leaders are showing great personal courage, and their example will bring out the same quality in others. The transition to sovereignty also requires an atmosphere of security, and our coalition is working to provide that security. We will continue taking the greatest care to prevent harm to innocent civilians; yet we will not permit the spread of chaos and violence. I have directed our military commanders to make every preparation to use decisive force, if necessary, to maintain order and to protect our troops.

The nation of Iraq is moving toward self-rule, and Iraqis and Americans will see evidence in the months to come. On June 30th, when the flag of free Iraq is raised, Iraqi officials will assume full responsibility for the ministries of government. On that day, the transitional administrative law, including a bill of rights that is unprecedented in the Arab world, will take full effect.

The United States, and all the nations of our coalition, will establish normal diplomatic relations with the Iraqi government. An American embassy will open, and an American ambassador will be posted.

According to the schedule already approved by the Governing Council, Iraq will hold elections for a national assembly no later than next January. That assembly will draft a new, permanent constitution which will be presented to the Iraqi people in a national referendum held in October of next year. Iraqis will then elect a permanent government by December 15, 2005 -- an event that will mark the completion of Iraq's transition from dictatorship to freedom.

Other nations and international institutions are stepping up to their responsibilities in building a free and secure Iraq. We're working closely with the United Nations envoy, Lakhdar Brahimi, and with Iraqis to determine the exact form of the government that will receive sovereignty on June 30th. The United Nations election assistance team, headed by Karina Parelli (phonetic), is in Iraq, developing plans for next January's election. NATO is providing support for the Polish-led multinational division in Iraq. And 17 of NATO's 26 members are contributing forces to maintain security.

Secretary of State Powell and Secretary of State Rumsfeld, and a number of NATO defense and foreign ministers are exploring a more formal role for NATO, such as turning the Polish-led division into a NATO operation, and giving NATO specific responsibilities for border control.

Iraqi's neighbors also have responsibilities to make their region more stable. So I am sending Deputy Secretary of State Armitage to the Middle East to discuss with these nations our common interest in a free and independent Iraq, and how they can help achieve this goal.

As we've made clear all along, our commitment to the success and security of Iraq will not end on June 30th. On July 1st, and beyond, our reconstruction assistance will continue, and our military commitment will continue. Having helped Iraqis establish a new government, coalition military forces will help Iraqis to protect their government from external aggression and internal subversion.

The success of free government in Iraq is vital for many reasons. A free Iraq is vital because 25 million Iraqis have as much right to live in freedom as we do. A free Iraq will stand as an example to reformers across the Middle East. A free Iraq will show that America is on the side of Muslims who wish to live in peace, as we have already shown in Kuwait and Kosovo, Bosnia and Afghanistan. A free Iraq will confirm to a watching world that America's word, once given, can be relied upon, even in the toughest times.

Above all, the defeat of violence and terror in Iraq is vital to the defeat of violence and terror elsewhere; and vital, therefore, to the safety of the American people. Now is the time, and Iraq is the place, in which the enemies of the civilized world are testing the will of the civilized world. We must not waver.

The violence we are seeing in Iraq is familiar. The terrorist who takes hostages, or plants a roadside bomb near Baghdad is serving the same ideology of murder that kills innocent people on trains in Madrid, and murders children on buses in Jerusalem, and blows up a nightclub in Bali, and cuts the throat of a young reporter for being a Jew.

We've seen the same ideology of murder in the killing of 241 Marines in Beirut, the first attack on the World Trade Center, in the destruction of two embassies in Africa, in the attack on the USS Cole, and in the merciless horror inflicted upon thousands of innocent men and women and children on September the 11th, 2001.

None of these acts is the work of a religion; all are the work of a fanatical, political ideology. The servants of this ideology seek tyranny in the Middle East and beyond. They seek to oppress and persecute women. They seek the death of Jews and Christians, and every Muslim who desires peace over theocratic terror. They seek to intimidate America into panic and retreat, and to set free nations against each other. And they seek weapons of mass destruction, to blackmail and murder on a massive scale.

Over the last several decades, we've seen that any concession or retreat on our part will only embolden this enemy and invite more bloodshed. And the enemy has seen, over the last 31 months, that we will no longer live in denial or seek to appease them. For the first time, the civilized world has provided a concerted response to the ideology of terror -- a series of powerful, effective blows.

The terrorists have lost the shelter of the Taliban and the training camps in Afghanistan. They've lost safe havens in Pakistan. They lost an ally in Baghdad. And Libya has turned its back on terror. They've lost many leaders in an unrelenting international manhunt. And perhaps most frightening to these men and their movement, the terrorists are seeing the advance of freedom and reform in the greater Middle East.

A desperate enemy is also a dangerous enemy, and our work may become more difficult before it is finished. No one can predict all the hazards that lie ahead, or the costs they will bring. Yet, in this conflict, there is no safe alternative to resolute action. The consequences of failure in Iraq would be unthinkable. Every friend of America and Iraq would be betrayed to prison and murder as a new tyranny arose. Every enemy of America and the world would celebrate, proclaiming our weakness and decadence, and using that victory to recruit a new generation of killers.

We will succeed in Iraq. We're carrying out a decision that has already been made and will not change: Iraq will be a free, independent country, and America and the Middle East will be safer because of it. Our coalition has the means and the will to prevail. We serve the cause of liberty, and that is, always and everywhere, a cause worth serving.

Now, I'll be glad to take your questions. I will start with you.

Posted by Tom at 6:24 AM | Comments (0) | TrackBack (0)

Judge Filemon Vela dies

Long-time federal district Judge Filemon Vela, 68, died Tuesday afternoon in Harlingen after a short battle with cancer. President Carter appointed Judge Vela to the federal bench in 1980. Judge Vela's family has scheduled a funeral Mass for 9 a.m. Friday at the Special Events Center in Brownsville.

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April 13, 2004

Stros smoke Cards again

The Rocket fired 62/3rds innings of two hit ball as the Astros' beat the Cardinals 5-3 for their second straight win in St. Louis. Berkman, Everett and red-hot Hidalgo each hit solo shots, and Jeff Kent's two run double in the seventh gave the Stros a comfortable three run lead. Things got a bit testy in the bottom of the ninth when Dotel gave up back to back dingers to Edmonds and Rolen, but he finally settled down and put down the uprising.

Wade Miller pitches as the Stros go for the sweep on Wednesday afternoon before returning home for a four game weekend series with Milwaukee.

In other Astros news, Jared Fernandez, he of the remarkable 54 earned run average, was sent down to AAA New Orleans and replaced on the roster with Mike Gallo, a 26 year old lefty reliever in his second MLB season who performed reasonably well for the Stros during the second half of last season and who had pitched well in his first few appearances this season at New Orleans.

Posted by Tom at 10:16 PM | Comments (0) | TrackBack (0)

Incompetence refined

A running joke among Houstonians for the past several years is that Houston's downtown streets have resembled those of Beirut during the civil war there. This is due to a horrendously managed and coordinated street rebuilding project that has been going on in downtown Houston ever since early in the administration of former Mayor Lee Brown. Consequently, this announcement comes as no surprise to any Houstonian.

Posted by Tom at 4:02 PM | Comments (0) | TrackBack (0)

NCAA supports the NFL position in Clarett case

According to this Chronicle story, the NCAA filed a legal brief Monday in support of the NFL's appeal to keep former Ohio State running back Maurice Clarett out of this year's NFL draft. Previous posts on this lawsuit can be reviewed here.

NCAA President Myles Brand commmented that the NCAA is supporting the NFL not because of its economic interests (umm?), but rather because eliminating the rule would lead more college athletes to make poor decisions:

"If not reversed, this decision is likely to unrealistically raise expectations and hopes that a professional football career awaits graduation from high school and that education can therefore be abandoned," Brand said. "The result could be a growing group of young men who end up with neither a professional football career nor an education that will support their life plans."

This is an extremely disappointing position coming from Dr. Brand, who was supposed to bring some academic integrity to the NCAA. In short, Dr. Brand is taking the position that the NFL and NCAA should be allowed to engage in violations of anti-trust law to prevent a few young football players from making a bad decision (i.e., to opt for the NFL before they are ready over a subsidized college education).

Note to Dr. Brand -- in America, people are generally free to make bad decisions. Rather than taking this dubious position, the NCAA should be working with the NFL to establish a true minor football league to accomodate the hundreds of football players who really have no desire or business being in college while preparing to take a stab at professional football. That system has worked well for years in baseball, and college baseball has flourished in the Sun Belt over the past decade as a result. Until NCAA football quits being a glorified minor league for the NFL, the college football scandals that arise annually will continue to undermine the integrity of intercollegiate athletics.

Posted by Tom at 9:42 AM | Comments (0) | TrackBack (0)

The economics of Fenway Park

Via the Sports Economist, here is an interesting Alan Greenburg story on how Boston Red Sox management is managing the economics of playing in the smallest big league ballpark while competing against the richest sports team in America, the New York Yankees.

Posted by Tom at 9:21 AM | Comments (0) | TrackBack (0)

Sally Jenkins on Mickelson's Masters win

Dan Jenkins is my favorite writer about golf. However, his daughter, Washington Post sportswriter Sally Jenkins, is clearly an up and comer in that field. She has written this fine piece today on how Phil Mickelson overcame past failures in major golf tournaments to win this year's Masters Golf Tournament.

Posted by Tom at 9:08 AM | Comments (0) | TrackBack (0)

Professor Ribstein on questionable white collar prosecutions

Professor Ribstein at Ideablog is providing consistently insightful observations regarding the troubling trend of prosecutors to take on currently popular but ethically questionable criminal cases against corporate executives. Today, Professor Ribstein explores the agency costs of such prosecutions from the prosecutor's side, and observes that many of these corporate executive prosecutions are an easy out for the prosecutors:

My point is that catching real criminals is hard work. The reason is that real criminals know that they're criminals and that they have to work hard at not getting caught. Yet prosecutors are paid to catch crooks, and if they don't get results they get fired, or at least don't move onto to the jobs they really want, like governor or senator.

How much easier would be the lives of the Eliot Spitzers of the world if they could go after people who didn't know they were criminals when they were committing their crimes? Even better -- how about if their behavior wasn't even clearly criminal when it was committed? They wouldn't cover their tracks, or at least not very well. No more 7 years sitting in cars and talking to Adriana. All you have to do is look at expense accounts, or movies of parties on Sardinia.

Professor Ribstein concludes with these words of wisdom:

Of course we would prefer that prosecutors put the real bad guys away. But it's nice for them if we let them off the hook when they grab headlines by bagging some slow-moving rich business people.

The best antidote is for the press and the rest of us, instead of lapping up the momentary satisfaction that corporate "thieves" are getting their just deserts, reflect on the damage this is doing to risk-taking, and ask whether this is the best use of prosecutorial resources.

The only comment that I would add to the Professor's analysis is that federal judges also should play a key role in evening the currently unbalanced playing field in prosecutions of corporate executives.

Federal judges have the power and discretion (at least in areas other than sentencing guideline matters) to rein in questionable prosecutions of corporate executives. For example, federal judges should not allow prosecutors to sledgehammer corporate executives with indictments containing dozens of duplicative counts simply to pressure the executive to cop a plea rather than risk a life prison sentence if he elects to defend himself against the charges.

When principles of prosecutorial discretion are subordinated to the fame of popular prosecutions of corporate executives, the Article III protection from the passions of the moment that our justice system provides to federal judges is one of our society's most important counterbalances to the state's awesome prosecutorial power. This protection allows our judges to make unpopular but just decisions. In the current politically-charged climate of white collar prosecutions, true justice requires that our federal judges exercise that power.

Posted by Tom at 8:52 AM | Comments (2) | TrackBack (1)

IRS can discover identity of KPMG tax shelter clients

This NY Times article reports on federal Northern District of Texas Judge Barefoot Sanders' decision yesterday that upheld the Internal Revenue Service's efforts to obtain the names of two KPMG clients who bought a tax shelter that the IRS contends is abusive. The two investors had previously sued KPMG in an attempt to prevent the disclosure. The decision is another setback for KPMG in this messy situation for the firm, which is the subject of previous posts here, here, here, and here.

Posted by Tom at 7:53 AM | Comments (0) | TrackBack (0)

Enron partners buy out interest in troubled India plant

This NY Times article reports that The Bechtel Group and the General Electric Company, partners of Enron Corporation in the troubled Dabhol Power Company in India, have bought Enron's 65 percent share of Dabhol to recoup part of the $1.2 billion they invested in the failed $3 billion venture. Bechtel and GE, which were the two main contractors for the plant, each previously had a 10 percent stake in Dabhol.

Dabhol was one of several major Enron foreign investments that were poorly structured and unprofitable, eventually contributing to the financial problems that forced Enron into bankruptcy. The background into the Dabhol power plant deal are explained well in the best book on the demise of Enron, Bethany McLean and Peter Elkind's "The Smartest Guys in the Room -- The Amazing Rise and Scandalous Fall of Enron."

Posted by Tom at 7:42 AM | Comments (0) | TrackBack (0)

Wiseguy Philosophy - "I kill therefore I am"

This NY Times book review examines a new collection of essays called "The Sopranos and Philosophy: I Kill Therefore I Am" (Open Court Publishing, $17.95). The book is the seventh in Open Court Publishing's "Popular Culture and Philosophy" series that is described as "philosophy with training wheels". Previous books explored pop culture franchises including "Seinfeld," "The Simpsons," "The Matrix," "Buffy the Vampire Slayer" and "Lord of the Rings."

Interestingly (and thankfully), not all pop culture is fit for philosophical examination, said the editor of the series, William Irwin, an associate professor of philosophy at King's College in Wilkes-Barre, Pa. Mr. Irwin said he rejected book proposals on the long-running television shows "Friends" and "E.R." because "they lacked the basic depth and literacy for a thorough philosophical discourse."

Posted by Tom at 7:26 AM | Comments (0) | TrackBack (0)

'Stros-Rockets joint venture wins summary judgment

This Chronicle story reports on the summary judgment that a joint venture comprised of the Astros and the NBA's Houston Rockets obtained yesterday in their lawsuit seeking a declaratory judgment that the Astros' television contract with Fox Sports Network allowed the Astros to opt out of the contract in favor of a better deal. The summary judgment removes a major obstacle for the team-owned Houston Regional Sports Network, which would carry Rockets games in 2005 and Astros games beginning in 2006. The network would end a two-decade relationship between the Astros and FSN's predecessors (Home Sports Entertainment), one of the nation's first regional sports networks.

This litigation highlights two important considerations regarding sports media contracts. First, in the quickly changing environment of media broadcasting, long term contracts are risky for both sides. In this particular contract, the Astros were the ones who were losing out, but it is at least as common for the media party to lose big on these contracts, as CBS has discovered in regard to its NCAA Basketball Tournament contract.

Secondly, following the lead of the New York Yankees, baseball clubs are increasingly inclined to own their own media outlets to maximize their ability to generate revenue. Major League Baseball is the only major professional sport without a salary cap on players' salaries and its teams also do not share any meaningful media revenue. Consequently, baseball clubs are constantly under pressure to increase their sources of revenue. That is the bet that the Astros are making in establishing the Houston Regional Sports Network.

Posted by Tom at 6:48 AM | Comments (0) | TrackBack (0)

Stros improbably top Cards

A big part of baseball's attractiveness is its utter unpredictability. By any measure, Monday's game between the Astros and the Cardinals should have been a cake walk for the Redbirds. Due to Andy Pettitte going on the disabled list, the 'Stros started Jared Fernandez, a journeyman knuckleball pitcher. The Cards were starting Houston native and former University of Houston pitcher, Woody Williams, who has owned the 'Stros over the past several seasons.

So, what happens? The Stros score four runs in the top of the 1st off of Williams, and then the Cards score four runs off of Fernandez in 1/3rd of an inning in the bottom of the first. The game then settles down until the 8th, when the Stros put it away behind Craig Biggio's three run double, his third of the game, to win 10-5. Richard Hidalgo was the other big run producer for the Stros, hitting a three run dinger in the 1st and a sac fly in the 8th.

Grizzled observers of the Stros are starting to wonder just how bad those pictures are that Fernandez apparently possesses of manager Jimy Williams and Astros GM Gerry Hunsicker. Williams continues to trot Fernandez into games despite the fact that, after last night's game, he has an earned run average of 54!

Roger Clemens goes for the Stros in the second game of the series in St. Louis this evening.

Posted by Tom at 6:33 AM | Comments (0) | TrackBack (0)

April 12, 2004

VDH expands on the consequences of appeasement

In this earlier post from last week, historian Victor Davis Hanson expounded on the futility of appeasement. In this longer City Journal piece, Dr. Hanson expands on the consequences and causes of the appeasement of radical Islamic fascists that has occurred over the past 25 years since the radical Iranians seized the American hostages in 1979. The entire piece is an excellent history lesson, and here are a few of Dr. Hanson's pearls of wisdow:

The twentieth century should have taught the citizens of liberal democracies the catastrophic consequences of placating tyrants. British and French restraint over the occupation of the Rhineland, the Anschluss, the absorption of the Czech Sudetenland, and the incorporation of Bohemia and Moravia did not win gratitude but rather Hitler’s contempt for their weakness. Fifty million dead, the Holocaust, and the near destruction of European civilization were the wages of “appeasement”—a term that early-1930s liberals proudly embraced as far more enlightened than the old idea of “deterrence” and “military readiness.”

* * *
As long ago as the fourth century b.c., Demosthenes warned how complacency and self-delusion among an affluent and free Athenian people allowed a Macedonian thug like Philip II to end some four centuries of Greek liberty—and in a mere 20 years of creeping aggrandizement down the Greek peninsula. Thereafter, these historical lessons should have been clear to citizens of any liberal society: we must neither presume that comfort and security are our birthrights and are guaranteed without constant sacrifice and vigilance, nor expect that peoples outside the purview of bourgeois liberalism share our commitment to reason, tolerance, and enlightened self-interest.

Most important, military deterrence and the willingness to use force against evil in its infancy usually end up, in the terrible arithmetic of war, saving more lives than they cost. All this can be a hard lesson to relearn each generation, especially now that we contend with the sirens of the mall, Oprah, and latte. Our affluence and leisure are as antithetical to the use of force as rural life and relative poverty once were catalysts for muscular action. The age-old lure of appeasement—perhaps they will cease with this latest concession, perhaps we provoked our enemies, perhaps demonstrations of our future good intentions will win their approval—was never more evident than in the recent Spanish elections, when an affluent European electorate, reeling from the horrific terrorist attack of 3/11, swept from power the pro-U.S. center-right government on the grounds that the mass murders were more the fault of the United States for dragging Spain into the effort to remove fascists and implant democracy in Iraq than of the primordial al-Qaidist culprits, who long ago promised the Western and Christian Iberians ruin for the Crusades and the Reconquista.

Then, after describing the numerous specific attrocities that radical Islamic fascists perpetrated on the United States through four administrations, and the failure of any of those administrations to confront the fascists effectively, Dr. Hanson observes as follows:

[T]he primary cause for our surprising indifference to the events leading up to September 11 lies within ourselves. Westerners always have had a propensity for complacency because of our wealth and freedom; and Americans in particular have enjoyed a comfortable isolation in being separated from the rest of the world by two oceans.

Finally, Dr. Hanson lays it on the line with both Democratic and Republican Administrations' failure to confront the leading exporter of radical Islamic fascism, Saudi Arabia:

Neither oil-concerned Republicans nor multicultural Democrats were ready to expose the corrupt American relationship with Saudi Arabia. No country is more culpable than that kingdom in funding extremist madrassas and subsidizing terror, or more antithetical to liberal American values from free speech to religious tolerance. But Saudi propagandists learned from the Palestinians the value of constructing their own victimhood as a long-oppressed colonial people. Call a Saudi fundamentalist mullah a fascist, and you can be sure you’ll be tarred as an Islamophobe.

Even when Middle Easterners regularly blew us up, the Clinton administration, unwilling to challenge the new myth of Muslim victimhood, transformed Middle Eastern terrorists bent on destroying America into wayward individual criminals who did not spring from a pathological culture. Thus, Clinton treated the first World Trade Center bombing as only a criminal justice matter—which of course allowed the United States to avoid confronting the issue and taking on the messy and increasingly unpopular business the Bush administration has been engaged in since September 11. Clinton dispatched FBI agents, not soldiers, to Yemen and Saudi Arabia after the attacks on the USS Cole and the Khobar Towers. Yasser Arafat, responsible in the 1970s for the murder of a U.S. diplomat in the Sudan, turned out to be the most frequent foreign visitor to the Clinton Oval Office.

Take the time to read the entire article. Dr. Hanson is shooting straight with us, and it is not comforting. Thanks to my friend Bill Hesson for the pointer to the article.

Posted by Tom at 4:35 PM | Comments (0) | TrackBack (0)

UT assistant Haith to coach Canes

Mike DeCourcy of The Sporting News is reporting that Frank Haith, 38, associate head basketball coach at the University of Texas for the past three seasons, will be named the new head coach of the University of Miami Hurricanes basketball program this week.

Haith has been a key recruiter for the strong Texas basketball program over the past several years. Although Texas is known more for its football team, the Texas basketball program has actually been better than the football program lately. The Horns have made it to three straight NCAA Tournament Sweet Sixteens and reached the Final Four in the 2002-03 season. Haith also has also worked as an assistant coach at Wake Forest, Texas A&M, Penn State and UNC Wilmington.

Posted by Tom at 2:03 PM | Comments (0) | TrackBack (0)

Was that "Remember the Alamo" or "Forget the Alamo"?

This Wall Street Journal ($) story reports that The Walt Disney Co.'s $100 million production of "The Alamo" tanked over the weekend, grossing only an estimated $9.2 million domestically.

The failure is not well-timed. Disney and its chief executive officer, Michael Eisner, are under pressure to meet or exceed the company's financial targets of 30% earnings growth in the wake of a shareholder revolt that resulted in the Disney board stripping Mr. Eisner of his chairman title.

Disney's film studio, which had a great year in 2003, has been trying to make it through a shaky stretch of its release schedule this year without a major bomb. "The Alamo," however, is a clear loser that may struggle to take in even $25 million or $30 million in U.S. theaters at its present pace. Moreover, its prospects overseas are believed to be poor because few foreigners know about the historical event upon which the movie is based. Although the failure of a single film typically doesn't affect the stock price of Disney much, it is imperative for Disney management to keep its share price up in order to fend off the Comcast, Inc. unsolicited all-stock offer for the company that Disney's board rejected in February.

"The Alamo" opened to mixed reviews last weekend.

Posted by Tom at 12:01 PM | Comments (0) | TrackBack (0)

Coke general counsel quits

This Wall Street Journal ($) story reports on the continuing turmoil at the top executive levels of Coca-Cola Company as its general counsel, Deval L. Patrick, has resigned amid criticism from some company directors over his handling of government investigations and a shareholder class action lawsuit relating to allegations of accounting fraud. Here is the NY Times article on the resignation.

The company's board is already conducting its first-ever outside search for a new chairman and chief executive to succeed Douglas Daft, who plans to retire later this year. Steven J. Heyer, Coke's president and chief operating officer, probably will leave the company if isn't named to replace Mr. Daft.

The U.S. attorney's office in Atlanta and the Securities and Exchange Commission have been conducting wide-ranging investigations into Coke since last summer after a former company auditor made allegations of accounting fraud in a wrongful-termination lawsuit against the company. Mr. Patrick had no role in the alleged misconduct.

One of the most serious allegations is that Coke engaged in "channel stuffing" and overstated its financial results in recent years by shipping excessive beverage concentrate to bottlers in Japan, North America and elsewhere. On a related note, a federal district court in Atlanta denied Coke's motion to dismiss a shareholder's class-action lawsuit filed in 2000 and allowed the plaintiffs to pursue discovery on several parts of the lawsuit, including the channel stuffing allegations.

Posted by Tom at 6:41 AM | Comments (0) | TrackBack (0)

Draft Shell report pins blame on former key executives

This Wall Street Journal ($) story reports that a draft Royal Dutch/Shell Audit Committee report primarily blames Shell's former chairman, Philip Watts, and former exploration-and-production chief, Walter van de Vijver, for the company's massive energy-reserve overbooking that was revealed earlier this year. As reported earlier here, Shell's boards ousted Messrs. Watt and van de Vijver early last month. The report -- prepared by Shell's audit committee and a team of outside attorneys from law firm Davis Polk & Wardwell -- is currently circulating among board members and investigators.

In early January, Shell dramatically reduced its estimate of oil and natural gas reserves by 20%, which is a key investor evaluation tool of an energy company's value. Last month, Shell again trimmed its reserves and announced that it was delaying its annual report until the completion of further reserve reviews. As a result, investigators in Europe and the U.S., including the Securities and Exchange Commission, are probing Shell's previous overstatements relating to its reserves.

Posted by Tom at 6:21 AM | Comments (0) | TrackBack (0)

April 11, 2004

Mickelson wins The Masters

Phil Mickelson won The Masters Golf Tournament in dramatic style with a clutch 12 foot birdie putt on the 72nd hole to edge Ernie Els by a stroke. Here is the NY Times article on Mickelson's victory.

As everyone who follows golf knows, it is Mickelson's first victory in one of golf four major tournaments (Masters, U.S. Open, British Open, PGA) and finally lifts from Mickelson's back the baggage of being "the best golfer never to have won a major."

This afternoon was the best day of the Masters since Jack Nicklaus' dramatic victory at the age of 46 eighteen years ago in 1986 (has it really been that long?). The final nine of Augusta National Golf Club is legendary -- there are two par fives that are legitimate eagle holes (13 and 15), two relatively short but testy par threes (12 and 16), an incredibly difficult par four (11), four solid par fours (10, 14, 17, 18), and nine greens that are severely undulating and lightning quick. Consequently, wild scoring swings can occur because, although eagles and birdies are quite possible, bogies and double bogies are looming everywhere if a player makes even the slightest error.

This final day of the Masters had more memorable shots on the back nine than any final day in Masters history. Within ten minutes of each other, Padraig Harrington and Kirk Triplett had holes-in-one of 16. K.J. Choi -- a fellow resident of The Woodlands, Texas -- holed a 225 yard five iron on the incredibly difficult 11th hole for an eagle, and then played superbly with playing partner Els down the stretch to finish in third place. After jump starting his round with an eagle at the 8th hole, Els stiffed a five iron on 13 to set up a 15 footer for another eagle, followed immediately by a clutch 20 foot putt for birdie by Mickelson on the devlish 12th hole. 46 year old Bernhard Langer remained in contention for his third Masters title until his 235 yard three iron hit the false front on the 15th hole and trickled agonizingly into the pond that fronts that green. And then Mickelson birdies 16 to tie Els, and then birdies 18 (after hitting a 303 yard drive with a 3 metal!) to win his first major golf tournament. Mickelson received a huge assist on his winning birdie putt from his playing partner Chris DiMarco, who blasted out of a greenside bunker to set up a putt on the same line as Mickelson's. Accordingly, DiMarco's putt gave Mickelson a good read for his birdie putt. These are just a few of the incredible shots that occurred today and does not include the pressure 5-10 foot putts that each competitor made to remain in the hunt.

Folks, television sports just does not get any better than this.

Mickelson's win is surprising only because he has been so close and failed in many prior major golf events. It's always been a mystery among Tour players why Mickelson had not won a major. He has all the tools -- power off the tee, great shotmaking ability, and a fabulous short game. Moreover, Mickelson is legendary among Tour players for his ability to excel in pressure situations during the players' "big bet" practice rounds before various tournaments. After a rather poor 2003 season, Mickelson used the off-season to make his swing more compact and controlled, and to work on his short game. The work is paying off, as he has now won two tournaments this season (the Bob Hope Desert Classic was the other one), finished third in the Players' Championship and the AT&T Pebble Beach, and had four other top ten finishes. As you would expect, he is the leading money winner on the Tour.

Now that Mickelson has the monkey off his back, it is time to figure out who is the new "best player never to have won a major golf tournament." My initial list of candidates includes Colin Montgomerie (actually, he's probably not good enough to win a major anymore), Darren Clarke, Stuart Appleby, Padraig Harrington, Robert Allenby, and the incredible Jay Haas.

Posted by Tom at 8:10 PM | Comments (2) | TrackBack (0)

Stros beat Brew Crew; move on to St. Louis

Roy O gave the 'Stros six strong innings and Lance Berkman hit his third career grand salami today as the Stros beat the Milwaukee Brewers 7-4 to take two of three in the series. Berkman's grand slam was unusual for the switchhitter because he hit it from the right side, which is his less productive side of the plate (his slugging percentage last season was 100 points less from the right side than it was from the left side).

The Stros now move on to St. Louis for a three game series before returning to Houston for a four game series with the Brew Crew beginning on Thursday.

Posted by Tom at 6:49 PM | Comments (0) | TrackBack (0)

Mom, look what I have in my Easter basket!

From an Easter egg hunt in Flint, Michigan:

Children on Easter Egg Hunt Find Guns

April 10, 2004 11:17 p.m. EST

FLINT, Mich. - A group of children hunting for Easter eggs Saturday during a church event found two loaded handguns outside an elementary school.

Flint police said officers were called to the scene and also recovered a BB gun and a broken toy gun on the grounds of Gundry Elementary School. No one was injured, Sgt. Michael Coote said.

One of the guns discharged when it was dropped, according to a police report, but it was unclear who dropped it.

The pastor of Ruth Street Baptist Church told WJRT-TV of Friday that one of the handguns had a bullet in the chamber, and the other handgun's clip had bullets in it.

"It's terrible that something like this has happened," Pastor Namon Marshall told the station.

Coote said he did not know how long the guns had been in the park.

Police opened an investigation after confiscating the weapons.

Posted by Tom at 9:33 AM | Comments (0) | TrackBack (0)

Building a better educational system

This NY Times article explores the Finnish educational system, of which Tyler Cowen over at Marginal Revolution points out:

1. Finnish children do not start school until they are seven years old. Most Finnish children do start day care from about the age of one, given that most mothers work.

2. Educational spending is a very modest $5,000 per student per year.

3. There are few if any programs for gifted children.

4. Class sizes often approach 30.

5. "Finland topped a respected international [educational] survey last year, coming in first in literacy and placing in the top five in math and science."

6. Finnish teachers all have a Master's degree or more.

7. Finnish teachers all enjoy a very high social status.

8. Reading to children, telling them folk tales, and going to the library are all high status activities.

9. TV programs are often in English, and subtitled, which further supports reading skills. (This should also serve as a jab to those who complain about the global spread of American TV shows.)

Mr. Cowen's post includes a number of good links to other sources reflecting the success of the Finnish education model, and then he provides the following insightful observation:

The United States performs remarkably well when it harnesses status and approbational incentives in the right direction. We have done this for business entrepreneurship, but we are not close when it comes to education. When it comes to economics, we have to move away from our near-exclusive emphasis on monetary incentives.

Given the tradition of local control over public schools in the United States, is it possible for the federal government to initiate and sustain the policies necessary to create the incentives necessary to improve public education in this country?

Posted by Tom at 9:23 AM | Comments (0) | TrackBack (0)

April 10, 2004

Brew Crew pounds Stros

Milwaukee's Ben Sheets overpowered the Astros today as the Brewers won easily, 6-1. Sheets gave up four singles in six innings, walked none, and struck out 10. Tim Redding pitched decently for the Stros, but he gave up a three run jack to Wes Helms in the fifth, and that was more than enough for the Brew Crew the way Sheets was mowing down the Stros hitters. The Stros attempt to salvage the series Sunday afternoon behind Roy O.

In worse news, lefthander Andy Pettitte was sent back to Houston and placed on the 15 day disabled list today because of a strained left elbow. An MRI was performed at The Methodist Hospital in Houston on Thursday and revealed inflammation in Pettitte's left elbow and a strain in his flexor tendon. Righthanded reliever Brandon Backe was called up from Class AAA New Orleans.

Posted by Tom at 8:59 PM | Comments (0) | TrackBack (0)

Ms. Manners is a gem

I am a big Judith Martin (a/k/a Ms. Manners) fan. My wife passed along to me Ms. Manners' typically insightful piece of advice to one family's problem:

Dear Miss Manners:

What should we "loving family members" do after our "beloved family member":

1. Marries, has three children, divorces a man;

2. Asks us, "Why didn't you tell me you thought he was a creep?"

3. Has a long-distance lover for four years (not during marriage) -- whom we all really like -- but who never seems quite able to move to her city even after three job and city changes -- due to career opportunities -- and has canceled vacations with her (and us) at the last minute;

4. Flies to see her lover every other weekend because it's "easier" for her than for him;

5. Cries to family members about her finances, how hard it all is for her, and about her ex-husband not letting her move with the children to her lover's city;

6. Becomes very resentful when we family members finally tell her that maybe her lover isn't playing fair with her?

Were we wrong in addressing our fears to her? I now fear for our future relationship with HER.

Ms. Manners: You must realize that you were wrong to think it would help. Much as Miss Manners sympathizes with the desire to shout warnings when observing someone pursuing disaster, she recognizes that there is a time to give up.

The answer to your relative's accusation that you failed to warn her should be the formula you use when tempted to issue futile advice: "We were (or are) relying on your judgment."

The hope is that this will eventually make her realize that she doesn't have any, but Miss Manners is afraid that it might be a long wait.

Posted by Tom at 9:49 AM | Comments (0) | TrackBack (0)

DDT and the law of unintended consequences

This NY Times article reports on yet another tragic result of the law of unintended consequences -- the ban on DDT that the wealthy West pushed on Third World countries has caused millions of deaths from malaria.

Posted by Tom at 9:39 AM | Comments (0) | TrackBack (0)

The travesty of the Reliant Resources criminal case

As noted earlier here, Houston-based Reliant Resources and four individuals are facing a criminal prosecution in San Francisco in connection with the shutting down of California power plants in 2000 allegedly to increase the price of electricity in that state.

William Anderson over at the Mises Economic Blog has posted this cogent analysis that persuasively contends that the indictment makes no sense from an economic standpoint and can only be explained in political terms. The entire post is well worth reading, and here are a couple of Mr. Anderson's points:

The California electricity fiasco has been well-documented in the press, and on this page as well. Economists like George Reisman have destroyed the many myths that sprang up while the state was suffering through rolling blackouts and extremely high wholesale rates. However, as is usually the case when energy issues come to the fore, in the end the political classes always lay all the blame upon energy producers. (This is logical, as the only other alternative would be for politicians to blame themselves, which is an impossibility in this politicized age.)

* * *
[A]t the risk of being a voice in the wilderness, let me say that the only fraudulent thing here is the indictment itself. As one who has devoted much of his time to the study of federal crimes, I can say that once again we have a case in which government prosecutors have built a series of “crimes” around an activity that was perfectly legal. Furthermore, the indictment not only alleges criminal behavior where there was none, but also goes one step further: it attempts to repeal the laws of economics. (In other words, if Ashcroft is correct here, then perhaps one can expect federal goon squads to conduct raids on economics professors whenever they attempt to explain laws of supply and demand.)

Mr. Anderson then addresses the fundamental economic illogic of the theory of the government's case:

There is another problem, one that the government has conveniently ignored. If a reduction in supply of a good, ceteris paribus, leads to price increases, then the addition of supply must lead to price decreases. In other words, if Reliant’s alleged actions first led to price increases, then when Reliant’s plants came back on line – and other producers rushed into the market to take advantage of the price increases by providing more electricity – the prices would then fall.

Unless there were government interference in the market for electricity, withholding electricity in order for a company to enjoy higher prices would be a self-defeating strategy. As noted previously, not only would the addition of later supplies drive down the price, the higher prices would entice companies selling electricity elsewhere to divert their supplies to California, thus placing more electricity for sale than had been their previously.

Second, since shutdowns and startups are costly activities, companies like Reliant that would use such strategies would likely be making themselves worse off in the long run. That is because the gains from higher prices would be short-lived at best, and when one factors in the startup and shutdown costs, then the company would ultimately earn a lower net income than it would have received had it kept the plant on line.

Now, I am not saying anything that would be particularly profound, at least to an economist or someone in the electricity business. Furthermore, the article does not say if the “scheme” even worked. Yes, it does say that prices rose, but it does not say that later they came back down. In other words, if Reliant had the “power” to “manipulate” the market, as the DOJ indictment alleges, then why did electricity prices eventually fall, as was the case in California, and prices were falling even before the government stepped in with unwise price controls over the western power grids.

Mr. Anderson then sums up with laser-like precision:

The California electricity crisis provided the opportunities for people to learn about the dangers of price controls. Instead, we have learned yet another lesson about the political classes and how they will “manipulate” the political “markets” (if I may use such a term) to turn the truth on its head. Furthermore, this indictment sets a very bad precedent in the energy markets as a whole.

That is because the United States has not seen a new oil refinery built since the Gerald Ford Administration in the mid-1970s, and refineries are being pushed to the limits. That means that any time a refinery is temporarily shut down for explosions, accidents, or even simple maintenance, that the DOJ now is going to look to see if criminal indictments can be handed down against oil producers for “withholding fuels.”

As the power of governments at all levels has grown exponentially in recent decades, so has the prison population of this country. That is no accident. Today, we see more and more the government using criminal charges as a way not only to punish supposed “criminals,” but also to engage in political manipulation. The Reliant indictments simply are another cog in the giant wheel of federal injustice.

A suggestion for defense attorneys in the Reliant Resources case -- Mr. Anderson just might be a wonderful defense expert witness!

Posted by Tom at 9:32 AM | Comments (1) | TrackBack (0)

April 9, 2004

Stros pound Brew Crew

The Astros hammered the Milwaukee Brewers this afternoon, 13-7, behind the pitching of Wade Miller and the hitting of Jeff Bagwell and Richard Hidalgo. Miller went 6 innings and gave up 2 runs on four hits, while Bags went nuclear, hitting two home runs (one of which was his sixth career grand slam), scored 3 runs, and collecting 12 total bases and 5 RBI. Hidalgo's 4 RBI performance was almost an afterthought. The 'Stros raked Brewer pitching for 14 hits, 6 of which were for extra bases.

About the only downside of today's game was the continued struggles of relief pitchers Jared Fernandez and Brandon Duckworth, who combined to give up 5 runs in an inning and a third during mop up duty. Fernandez is a knuckleballer who had his moments last season for the Astros, but he has been consistently bad this season throughout the spring and the first few games. Duckworth came over to the 'Stros in the offseason in the Billy Wagner trade, and he has been mediocre in his initial appearances. With the pitching depth that the Astros have at their AAA team in New Orleans, both of these players would be well-advised to step it up or they could find themselves on a plane to the Crescent City quickly.

The 'Stros play the Brew Crew in afternoon games the next two days before moving on to St. Louis for a three game series beginning on Monday.

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New Sponsor of the IRS

From the incomparable Stu's Views:

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Jeff Skilling's New York adventure

Former Enron CEO Jeffrey Skilling was taken to a hospital early today after several people called police saying he was pulling on their clothes and accusing them of being FBI agents. New York police found Skilling at 4 a.m. at the corner of Park Avenue and East 73rd Street and determined he might be an "emotionally disturbed person."

Update: This Chronicle follow up story contains Skilling's contention that he and his wife were attacked and that no bizarre behavior as reported in the initial story took place. The NY Times is calling the matter a "police incident."

Posted by Tom at 3:49 PM | Comments (0) | TrackBack (0)

Initial Reviews of "The Alamo"

The new Disney movie "The Alamo" opens this weekend, and the initial reviews are reasonably good.

Ebert likes it.

Bruce Westbrook in the Chronicle wants to like it, but does not want to be accused of being parochial if he admits it.

Joel Morgenstern in the WSJ ($) generally does not like it.

The NY Times review cannot bring itself to like it.

If you are interested in the background to the Battle of the Alamo, I recommend "Texian Iliad," a 1996 masterpiece on the Texas Revolution written by Stephen L. Hardin, a professor of history at Victoria College in southeast Texas.

Posted by Tom at 12:00 PM | Comments (0) | TrackBack (0)

Well, at least that's one way to make an impression

Easter Bunnies -- beware! Hat tip to the Southern Appeal for the link.

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But the pink hair has got to go

The following is from The Telegraph's story of today on the first round of The Masters Golf Tournament:

At 10.45 there was an air of eager expectancy around the first tee as people waited for Ian Poulter. Having been advised to play down his hair, Poulter had said he would make up for it with his clothes. Yesterday, true to his word, he was out and about in pink. Pink visor, pink trousers and pink and white striped shoes.

On Wednesday night, Charles Howell, one of the tour's practical jokers, had used his southern drawl to impersonate a member of Augusta's championship committee. Having dialled Poulter, he told the Englishman that word had reached the committee that he was not planning to be as soberly clad as they would wish.

Poulter, who was completely taken in, had a question for the official.

"What about Doug Sanders?" he asked, in a reference to the garish dress of the runner-up in the 1970 Open.

"We weren't happy about that, either," returned Howell.

So the conversation continued until Howell decided enough was enough on the eve of the player's first Masters.

Posted by Tom at 10:22 AM | Comments (0) | TrackBack (0)

MLB salaries down slightly

This ESPN.com article analyzes the current Major League Baseball salary information, concluding that the median salary for ballplayers (i.e., the salary at which exactly half the players are above that salary and half the players are below that salary) is $800,000, down from a high of $975,000 in 2001. That figure is really more important than the average salary ($2.49 million), which is driven up by a relatively small number of extraordinarily high salaries. ARod is the highest paid player ($21.7 million) for the fourth year in a row, and behind him on the highest-paid list were Boston's Manny Ramirez ($20.4 million), Toronto's Carlos Delgado ($19.7 million), the Yankees' Derek Jeter ($18.6 million) and San Francisco's Barry Bonds ($18 million).

Posted by Tom at 10:10 AM | Comments (2) | TrackBack (0)

Proving mens rea in corporate criminal cases

This Wall Street Journal ($) article addresses the knotty problem of proving mens rea (i.e., intent) in corporate criminal cases. As the Journal article notes, the problem, in short, is this:

It may be obvious that an executive did something wrong, but that doesn't mean he intended to do anything wrong.

And therein lies the biggest hurdle for prosecutors in corporate-corruption cases. Prosecutors must prove not only that the accused did something bad but also that they meant to do something bad.

The article notes that proving criminal intent becomes particularly difficult when ccorporate executives commit wrongful acts openly and on advice of counsel, accountants and consultants:

Many executives accused of improper accounting argue that they had no criminal intent by insisting that that they relied on advice or approval from lawyers, boards of directors or auditors. "In dealing with arcane areas," an advice-of-counsel defense can be "a silver bullet," says George Canellos, a former federal prosecutor. Prosecutors often counter that the defendant didn't give the lawyer complete information.

In the Tyco trial, a key defense argument was that the defendants operated openly. All of their actions, they stressed, were recorded in company records, known by numerous employees and, in many cases, by outside auditors. Jurors say those arguments echoed powerfully, leading about half to lean toward acquittal initially. "It was something the defense hammered on, with a lot of effectiveness," says juror Peter McEntegart.

And, as Professor Ribstein notes over at Ideablog:

Things get even murkier in securities fraud cases, where the perpetrator is not only not stealing, but may actually think he's being loyal to shareholders by, for example, protecting their shares from short-term earnings glitches.

Of course this thinking is misguided and wrong, but should it be criminal? Criminalization discourages beneficial risk-taking. Even worse, applying criminal law to ordinary behavior risks diluting the moral force of the law.

Professor Ribstein makes an insightful point. If we criminalize business risk-taking partly because it is difficult to prove criminal intent in most business cases, then we are eventually going to discourage business risk-taking, which will have detrimental consequences on economic development and job creation.

To make matters worse, demagogues in the political field have seized upon corporate executives as popular political enemies. Thus, they have promoted criminal laws that assess criminal sanctions that are completely out of proportion to the nature of the business crime -- just plug the name "Jamie Olis" into this blog's search engine to read about a prime example of that phenomenom. Moreover, those same politicians have also passed laws that constrict the power of judges to use their discretion and good judgment to modify a criminal sanction to make it appropriate to the crime.

The bottom line is this -- railing against capitalist roaders may be good politics, but it is contrary to fundamental American principles of justice.

Posted by Tom at 8:42 AM | Comments (0) | TrackBack (1)

Were the Fallujah victims lured into an ambush?

This NY Times story provides the basis for the theory that the four victims of the Fallujah incident last week were set up for the ambush.

Posted by Tom at 7:29 AM | Comments (0) | TrackBack (0)

What's really currently going on in Iraq

It's sad to say, but most Americans are informed on current events through television news reports that are intrinsically superficial in nature. As a result, opinions are often formed through emotional reactions to images, as opposed to thoughtful consideration and discussion of underlying issues.

Take, for example, this week's increase in Iraqi resistance to the U.S.-led coalition. Television news reports show graphic images of the fighting and the casualities, but rarely explores the underlying political struggles that are at the root of the violence.

In this op-ed in today's Wall Street Journal ($), Reuel Marc Gerecht, a former CIA Middle East specialist and currently a resident fellow at the American Enterprise Institute, provides an excellent overview of the political conflicts that are causing the current uptick in violence in Iraq. The entire piece is a must read, and here are a few of Mr. Gerecht's pertinent points:

The dogged violence in the Sunni areas of Iraq since early summer has fortified the impression throughout the Shiite community that the historic Sunni will to power did not end with the fall of Saddam Hussein and the collapse of the Baath Party. Privately, if not publicly, senior Shiite clerics [including Grand Ayatollah Ali Sistani, the country's pre-eminent Shiite divine] are thankful that the Americans have persevered in their country. Shiites are, however, also uneasy and embarrassed by America's occupation, by the need for American protection. It is enormously difficult for the Shiite clergy, which has a profound sense of being the country's most steadfast defender against both foreign and domestic enemies, to be beholden to Americans (and their former British overlords). It is difficult to forgive the Americans for the "betrayal" -- the ugly word in Arabic is khiyana -- in 1991, when George H.W. Bush encouraged Iraqis to rise up, the Shiites did, and Saddam slaughtered them by the tens of thousands while U.S. aircraft flew overhead.

Mr. Gerecht then explains how Muqtada al-Sadr, the young Shiite cleric who is leading most of the current Iraqi resistance, fits into the picture:

Muqtada al-Sadr is an unaccomplished young cleric who has no chance to prosper through the normal channels of scholarly advancement. Like Iran's Ayatollah Khomeini, he intends to shake, if not destroy, the traditional establishment so that explicitly political clerics, who are more fond of street power than of Islamic law, can become the de facto rulers of Iraq. He and his followers need chaos to thrive. They are gambling that they can spark the propensity for violence in Iraqi society and produce a chain reaction that Ayatollah Sistani cannot stop. Ideally, the Grand Ayatollah will have no choice but to join the ranks of the young firebrand. What charisma Sadr possesses derives in great part from his ability to encourage such violence and survive. And his allure has grown enormously owing to American incompetence.

By early fall 2003, it was perfectly clear to the Shiite clergy, as well as to the Pentagon, that Sadr had been complicitous in the death of American soldiers, yet the CPA did not seize him. All Iraqis, particularly the traditional clergy, know that Sadr has an awe-inspiring bloodline -- his uncle Baqir al-Sadr, murdered by Saddam in 1980, was one of the great radical Shiite clerics of the 20th century; and Muqtada's father, Sadiq al-Sadr, was a relatively inconsequential cleric, once favored by Saddam, who, as he rose, bravely challenged the dictator until he, too, was assassinated in 1999. America's early inaction against Sadr has made it much more difficult for the traditional clergy to dismiss him as an uneducated and thuggish son of a noble family.

Then, he addresses the key political problem within Iraq:

Sadr has played on a growing perception in the Shiite community that the Transitional Administrative Law -- the interim constitution that will, in theory, guide Iraqi politics until a final constitution can be written in an elected constituent assembly -- is an unfair and unworkable document. Americans and highly Westernized Iraqis are proud of the Law's guarantees for individual, especially, women's rights. However, it cedes authority over any future constitution to "two-thirds of the voters in three or more governorates," who have the power to veto a final document. This means the Kurds, who are likely to vote as a bloc, have essentially complete control over the future shape of any Iraqi democracy.

For Ayatollah Sistani, and probably for most Shiites, this grants the Kurds, for whom the Shiites have until now borne no ill will, too much power. The Kurds, who are 20% of the population and have been brutalized for decades by Sunni Arab regimes, of course don't see it that way. Shiite objections, which are unlikely to go away, will be a serious challenge for the CPA, which desperately wants to believe that it currently has a workable blueprint for a transitional Iraqi government. Quite understandably, it has no desire to open up the Administrative Law to a rewrite, particularly since Iraq has become more volatile, and agreement among Iraqis could even be more difficult to achieve than before.

However, we all need to understand the risk the U.S. is running by refusing to have a more open, public debate in Iraq about the transitional constitution and government. If the Shiites have the impression that they are once again being cheated of an effective democratic majority, then it is entirely possible that the consensus among Shiites about America's beneficial presence in their country could quickly end. Sadr's argument to his flock -- that military force is the best way to ensure a Shiite victory -- could start to look very appealing.

Finally, Mr. Geracht sees as the solution to the current violence:

Muqtada al-Sadr's guerrilla attacks are a wake-up call for both the Americans and Ayatollah Sistani. The Americans need to crush Sadr's al-Mahdi army; Sistani needs to ensure he has control in Najaf. And then both parties, plus the Arab Sunnis and the Kurds, need publicly to discuss again, however acrimoniously, the Transitional Administrative Law. The transfer of Iraqi sovereignty on June 30 could be a meaningless day if the Shiites see it as a step backward from democracy.

With the benefit of hindsight, we now know that former President Bush's decision in 1991 to abandon support for the anti-Saddam forces within Iraq was an unfortunate error. We are now paying the political and military price for that mistake in our current effort to stabilize Iraq. That should make our resolve to succeed greater amid our recognition that it is never easy to bring the relative grace of consensual government to people who have known only brutal repression over the past generation.

Posted by Tom at 7:11 AM | Comments (0) | TrackBack (0)

April 8, 2004

VDH on the futility of appeasement

Victor Davis Hanson's NRO column this week explores the futility of appeasement toward radical Islamic fascists. The entire column is excellent, and the following are several of his insightful observations:

The sad truth is that civilization itself is engaged in a worldwide struggle against the barbarism of Islamic fundamentalism. Just this past month the killers and their plots have been uncovered in London, Paris, Madrid, Pakistan, and North Africa — the same tired rhetoric of their hatred echoing from Iraq to the West Bank. While Western elites quibble over exact ties between the various terrorist ganglia, the global viewer turns on the television to see the same suicide bombing, the same infantile threats, the same hatred of the West, the same chants, the same Koranic promises of death to the unbeliever, and the same street demonstrations across the world.

Looking for exact professed cooperation between an Islamic fascist and the rogue regime that finds such anti-Western violence useful is like proving that Mussolini, Tojo, and Hitler all coordinated their attacks and worked in some conspiratorial fashion — when in fact Japan had no knowledge of the invasion of Russia, and Hitler had no warning of Pearl Harbor or Mussolini's invasion of Greece.

In fact, it didn't matter that they were united only by a loose and shared hatred of Western liberalism and emboldened by a decade of democratic appeasement. And our fathers, perhaps better men than we, didn't care too much for beating their breasts about the exact nature of collective Axis strategy or blaming each other for past lapses, but instead went to pretty terrible places like Bastogne, Anzio, and Okinawa to put an end to their enemies all.

Now, in the middle of this terrible conflict, unlike the postbellum inquiry after Pearl Harbor, we are holding acrimonious hearings about culpability for September 11. And here the story gets even more depressing than just political opportunism and election-year timing. After eight years of appeasement that saw repeated attacks on Americans, Pakistani acquisition of nuclear weapons under Dr. Khan, and Osama's 1998 declaration of war against every American, we are suddenly grilling, of all people, Condoleezza Rice — one of the few key advisers most to be credited for insisting on using our military, rather than the local DA, to defeat these fanatics.
* * *
Everything that the world holds dear — the free exchange of ideas, the security of congregating and traveling safely, the long struggle for tolerance of differing ideas and religions, the promise of equality between the sexes and ethnic groups, and the very trust that lies at the heart of all global economic relationships — all this and more Osama bin Laden, Saddam Hussein, and the adherents of fascism in the Middle East have sought to destroy: some as killers themselves, others providing the money, sanctuary, and spiritual support.

We did not ask for this war, but it came. In our time and according to our station, it is now our duty to end it. And that resolution will not come from recrimination in time of war, nor promises to let fundamentalists and their autocratic sponsors alone, but only through the military defeat and subsequent humiliation of their cause. So let us cease the hysterics, make the needed sacrifices, and allow our military the resources, money, and support with which it most surely will destroy the guilty and give hope at last to the innocent.

Posted by Tom at 10:06 PM | Comments (0) | TrackBack (0)

Reliant Energy Services indicted

Reliant Energy Services -- a unit of Houston-based Reliant Resources -- and four current and former Reliant employees were indicted on federal criminal charges today in connection with the shutting down of California power plants in 2000 allegedly to increase the price of electricity in that state. Here is a copy of the indictment.

The six-count indictment returned by a federal grand jury in San Francisco results from allegations that Reliant Energy illegally manipulated prices during June 2000 by shutting down four of its five power plants during a two-day period. Reliant Energy and the individuals were each charged with four counts of wire fraud, one count of commodities manipulation, and one count of conspiracy. Reliant Resources issued this statement in response to the indictment.

The four Texans indicted are Jackie Thomas, 49, a former vice president of Reliant Energy's power-trading division; Reggie Howard, 37, a former director of the west power trading division; Lisa Flowers, 37, a term trader; and Kevin Frankeny, 42, manager of western operations.

Posted by Tom at 6:03 PM | Comments (0) | TrackBack (0)

Bruce Edwards dies

Bruce Edwards -- professional golfer Tom Watson's long-time caddie who redefined the job of being a professional caddie -- died today after a year long battle with amyotrophic lateral sclerosis. That disease is better known as Lou Gehrig's Disease, after the former New York Yankee slugger who died of the same illness. Mr. Edwards was 49 at the time of his death.

Last night at the Masters Golf Tournament in Augusta, Ga., Mr. Edwards was awarded the Ben Hogan Award, given annually by the Golf Writers Association of America to an individual who continued to be active in golf despite a physical handicap or serious illness. Mr. Edwards is also the subject of author John Feinstein's new book, "Caddie for Life: The Bruce Edwards Story."

Mr. Edwards's struggle over the past year inspired Mr. Watson to have the best year a 53-year-old golfer ever had -- he won two senior majors (British Open and the Tradition) along with $1.8 million in prize money and was named the player of the year on the Champions Tour. Watson also earned a $1 million tax-deferred annuity that he donated to A.L.S.-related charities, notably the Driving4Life, A.L.S. Therapy Development Foundation in Cambridge, Mass. The 4 represents Mr. Gehrig's Yankees' uniform number.

Posted by Tom at 2:04 PM | Comments (0) | TrackBack (0)

Transcript of oral argument in Pledge of Allegiance Supreme Court case

Here is a copy of the transcript of the recent U.S. Supreme Court oral argument in the "under God"/Pledge of Allegiance case.

Posted by Tom at 7:02 AM | Comments (0) | TrackBack (0)

Mossberg on new Verizon wireless Internet access

Walter Mossberg writes a fine weekly technology column for the Wall Street Journal. In today's column ($), Mr. Mossberg gives a favorable review of Verizon Wireless' new wireless broadband service, which, by the end of 2005, will allow users to connect a laptop, PDA, or celphone to the Internet at real broadband speeds from almost any location in every major U.S. metropolitan area. Mr. Mossberg has been testing the service, and reports as follows:

I'm not talking about the spread of more Wi-Fi "hot spots" in airports, coffee shops and similar places. I'm talking about wireless high-speed Internet service that you can use just about anywhere -- even on the street or in a car.

This isn't a pipe dream. I've been testing Verizon's new service, called BroadBand Access, on a laptop around Washington, D.C., one of the first two cities where the company has rolled it out. I am very impressed. It is simple to set up and works just like any other broadband connection, with your normal Web browser and e-mail program.

Based on a new cellphone technology called EV-DO (short for Evolution-Data Optimized), the new Verizon service is as fast as most wired DSL lines, and it worked effortlessly almost everywhere I tried it in a wide swath of Washington and its suburbs.

This is the next logical step in allowing computer users to access the Internet from virtually anywhere within a city. With Verizon's marketing muscle, this could be a huge money maker for the company if they can offer the service for a low enough price to attract users to supplement their existing Internet connection with this service.

Posted by Tom at 6:50 AM | Comments (0) | TrackBack (0)

Shell reassigns reserve finance executive

This Wall Street Journal ($) story reports on Royal Dutch/Shell Group's reassignment of Frank Coopman, the former top financial executive in its exploration-and-production business. Before a shakeup earlier this year, Mr. Coopman was the chief financial officer of Shell's business units that were primarily responsible for booking Shell's reserves. Disclosures earlier this year about its reserve accounting have prompted U.S. and European securities regulators to open investigations into Shell and led to industrywide constroversy over how energy companies estimate their oil and gas reserves.

Mr. Coopman's reassignment is the latest in a reshuffling of senior Shell management since Chairman Philip Watts and Walter van de Vijver, former head of Shell's upstream division, were fired last month. Shell's board ousted Sir Philip and Mr. van de Vijver after Shell disclosed that it would reduce by 20% the oil and gas reserves it reports in filings to the Securities and Exchange Commission.

Posted by Tom at 6:21 AM | Comments (0) | TrackBack (0)

Increasing good cholesterol

This NY Times article reports on a preliminary University of Pennsylvania and Tufts University study that found that an experimental drug can sharply increase levels of H.D.L. -- the so-called "good" cholesterol -- and, thus, potentially offer an entirely new way to help prevent heart attacks. The new drug -- called torcetrapib -- also reduced low density lipoprotein, or L.D.L. in the tests.

Doctors currently concentrate on lowering bad cholesterol by giving patients statin drugs, which are researchers believe have reduced heart attacks in Americans by about one-third. This new study is a part of an initiative to reduce heart disease further by increasing good cholesterol.

This related Wall Street Journal article relates how Pfizer Inc. is investing $800 million on human tests of torcetrapib, which is the most that any drug company has ever committed to spend on a clinical test in an effort to obtain regulatory approval of a drug.

Posted by Tom at 6:08 AM | Comments (0) | TrackBack (0)

Kerr-McGee to buy Westport

Oklahoma City-based Kerr-McGee Corp. announced plans Wednesday to buy Denver-based Westport Resources Corp. in a $2.5 billion stock deal that will significantly expand Kerr-McGee's oil and natural gas holdings in Texas and the Rockies. The newly-acquired properties will increase Kerr-McGee's daily production volume by more than a third, and will extend Kerr-McGee's current Gulf Coast property portfolio into the Rocky Mountain area. The deal is expected to close in the third quarter of this year.

Posted by Tom at 5:06 AM | Comments (0) | TrackBack (0)

April 7, 2004

Clemens is the ultimate stopper

41 year old Roger Clemens threw 7 one hit innings in his first start as a Houston Astro in leading the 'Stros to a 10-1 mangling of the San Francisco Giants. Here is the NY Times article on the game and Clemens' pre-game telephone conference with Yankees' owner George Steinbrenner.

Clemens -- who is the best pitcher of his generation and one of the best of all-time -- turned in a dominating performance as he struck out nine and even chipped in with a hit (I think it was like the fifth hit of his career; he's been an American League pitcher for a long time). Bags, Hidalgo, and Kent hammered homers, and Biggio doubled twice and scored twice. The 10 runs felt good after the Stros struggled to score in the first two games of the series.

The Stros now hit the road for a week as they play in Milwaukee and St. Louis. They return to Minute Maid on Friday, April 16th against the Brew Crew.

Posted by Tom at 8:55 PM | Comments (0) | TrackBack (0)

Lea Fastow withdraws guilty plea

U.S. District Judge David Hittner announced to a crowded federal courtroom this morning that he would not accept the plea arrangement between the Enron Task Force and Lea Fastow. The judge declined to tell Lea Fastow what his sentence would be if she were to enter a guilty plea, anyway, and that she would have to decide whether to take the risk of his sentence. Mrs. Fastow declined and withdrew her guilty plea. Here is the NY Times article on the hearing.

Here is a copy of Mrs. Fastow's Memorandum in support of the plea bargain.

The parties now saddle up and are scheduled for a Brownsville, Texas trial, with jury selection starting in June. Mike DeGeurin -- Dick DeGuerin's brother despite the different last name spellings -- ably represents Mrs. Fastow.

Although an unusual development, Judge Hittner's refusal to accept the plea bargain is probably not that big a deal. It will not affect Andrew Fastow's cooperation with the Task Force under his plea bargain, which is already extensive. Probably the biggest impact is that it may force the Task Force actually to try a case against a former Enron official, rather than simply hammer them into a plea bargain through filing of multi-count indictments that place the defendant at risk of what amounts to a life sentence if he or she dares to assert their innocence at a trial on the charges.

Another interesting dynamic that is not mentioned in the news reports is that I believe that Judge Hittner has never been thrilled with the Enron Task Force's approach in prosecuting Mrs. Fastow. From the beginning, the prosecution of Mrs. Fastow was pursued to exert pressure on her husband. Knowing Judge Hittner, he may be holding the Task Force's feet to the fire in this case because he does not appreciate the Task Force using a questionable prosecution to pursue goals in other criminal cases.

Posted by Tom at 11:02 AM | Comments (0) | TrackBack (1)

This is pretty lively for Ft. Worth

It's not every day that a GOP candidate for a House seat in Fort Worth has to explain pictures of himself in makeup and womens' clothing.

Posted by Tom at 7:54 AM | Comments (0) | TrackBack (0)

UT Law attracts top business law prof

Brian Leiter reports in this post that Bernard Black, the George E. Osborne Professor at Stanford Law School and a leading figure in corporate law and law and economics, has accepted an offer to teach at the University of Texas School of Law.

Posted by Tom at 7:46 AM | Comments (0) | TrackBack (0)

More on the sad case of Jamie Olis

Larry E. Ribstein is the Richard & Marie Corman Professor of Law University of Illinois College of Law in Champaign. Professor Ribstein runs an interesting business law blog called Ideoblog, and yesterday he posted this timely item about a CLE program that he was attending in which the criminal case of former Dynegy executive Jamie Olis (previously discussed here, here and here) was being discussed. The entire post is well worth reading, and here is a sampling of his observations:

[David U. Gourevitch, defense attorney and former SEC enforcement attorney] notes that there has been a "new wave" of white collar prosecutions, with sentences "going through the roof." The latest guidelines will lead to treason -- or drug-type life sentences -- for first time corporate defrauders.

[Michael Clark, a Houston litigator] re Jamie Olis: he notes that Olis had no prior record, no personal benefit. This was a standard "cookie jar reserve" case where Dynergy had structured earnings to meet Wall Street expectations. An expert witness contested the government's damage-causation theory. He also notes that this 20-plus year sentence was without the enhancement that will be imposed in future cases under SARBOX.

Gourevitch points out that a few years ago such a case didn't even merit an injunction. The recent prosecutions all involve common and pervasive practices. Conduct that was considered common and close to the line is now viewed by prosecutors as "way over the line." An example is what happened with the mutual fund sentences [more on mutual funds in a later post]. Some critical differences from the past include parallel investigations, very speedy, with investigations and prosecutions unfolding in just a few months. So just as business has gotten faster, so has criminal investigation of business.

Posted by Tom at 7:32 AM | Comments (0) | TrackBack (0)

History Channel apologizes

This earlier post relates the story of how The History Story had inexplicably ignored a generation of evidence analysis in airing a documentary earlier this year that implicated former President Lyndon B. Johnson in the assassination of President John F. Kennedy. The History Channel publicly apologizes this evening when it broadcasts an evaluation of the earlier documentary that concludes that it and the channel were irresponsible. The History Channel exhibits admirable integrity and contrition in apologizing for its error in broadcasting the poorly researched and highly inflammatory documentary on the Kennedy Assassination.

Posted by Tom at 6:37 AM | Comments (0) | TrackBack (0)

Lea Fastow plea bargain

This morning, Lea Fastow -- wife of former Enron CFO Andrew Fastow -- will learn whether federal District Judge David Hittner will accept her plea bargain with the Enron Task Force.

Posted by Tom at 6:19 AM | Comments (0) | TrackBack (0)

April 6, 2004

This is not looking good

The 'Stros dropped the second game of the opening series of the season to the Giants on Tuesday night, 7-5. Frankly, the warning signs for this team are already glaring after only two games.

Andy Pettitte was cruising through 3 and 2/3rd's innings when he walked Marquis Grissom (not a bad move; Grissom can only hit lefties) to load the bases to get to the light-hitting Neifi Perez. This is how Baseball Prospectus 2004 describes Perez:

Is Neifi Perez the worst hitter of all-time? We won't go into the detailed arguments here, but he has a case, along with Hal Lanier and a few others. He's still an excellent fielder, and he might be able to help a team if he's used mostly as a late inning defensive sub. But regardless of how good a fielder he is, the thought of Neifi Perez breaking camp as the starting San Francisco shortop should be terrifying to Giants fans.

Perez promptly doubled, driving in all three runs. Then, two innings later, he whacks Pettitte again by doubling off of Tal's Hill in center to drive in another run. So, the story line of this game is that Pettitte made Perez look like A-Rod. At least for one game.

In the meantime, Jimy ("I like veterans") Williams has four promising young sluggers on this team who are capable of being regular players (Lance Berkman, Richard Hidalgo, Morgan Ensberg, and Jason Lane). The rest are either formerly good hitters in various states of decline (Biggio, Bagwell, and Kent), one below average hitter who has the potential to be average (Adam Everett) and one horrible hitter (Brad Ausmus).

In tonight's game, Williams played two (Berkman and Hidalgo) of his four promising hitters. This team simply does not hit well enough to score sufficient runs without regular contributions from its best hitters. A good case can be made that Williams inexplicable platooning last season of the emerging slugger Ensberg with the below average veteran Geoff Blum may have cost the Astros the Central Division Pennant (which they lost by one game to the Cubs). If Williams continues that same trend this season by insisting on platooning Ensberg with the newly-acquired Mike Lamb, and failing at least to platoon the promising Lane in centerfield with the fading Biggio, then Astros GM Gerry Hunsiker needs to give Williams a pink slip quickly. Williams just may be that "baseball man" who is a good coach, but is overmatched as a manager.

Posted by Tom at 11:21 PM | Comments (0) | TrackBack (0)

Check out the Sports Economist today

Professor Sauer over at the Sports Economist has several really interesting posts to check out today:

A discussion of a recent New Yorker article that addresses economic historians' thoughts on variations in human height.

Here and here, a discussion of the financial and economic issues relating to local government subsidies of stadiums; and

The myth of the "balanced book" as it relates to bets on sporting events, focusing on the three point shot at the buzzer of the last Saturday night's UConn - Duke basketball game.

All are excellent posts on interesting topics. Check them out.

Posted by Tom at 4:45 PM | Comments (0) | TrackBack (0)

Corporate tax receipts

This Wall Street Journal ($) article reports on a new General Accounting Office disclosure that more than 60% of U.S. corporations didn't pay any federal taxes for the boom years of 1996 through 2000.

Corporate tax receipts have decreased markedly as a share of overall federal revenue in recent years. In 2003, corporate tax receipts dropped to 7.4% of overall federal receipts, which is the lowest rate since 1983 and the second-lowest rate since 1934. Collections from the federal corporate income tax rose from $171 billion in 1996 to more than $200 billion in 2000. Receipts fell over the next three years, bottoming out at $131.8 billion in 2003, which is the lowest annual total since 1993. They are projected to reach $168.7 billion this year.

Predictably, politicians are already attempting to gain political mileage out the GAO disclosures:

"Too many corporations are finagling ways to dodge paying Uncle Sam, despite the benefits they receive from this country," said Sen. Carl Levin (D., Mich.), who requested the study along with Sen. Byron Dorgan (D., N.D.). "Thwarting corporate tax dodgers will take tax reform and stronger enforcement."

Of course, Senator Levin fails to mention that corporations simply pass higher corporate taxes on to consumers through charging higher prices for the corporation's goods.

And from the other side of the political spectrum:

Conservatives depicted the GAO report as an argument for tax-code overhaul for both corporations and individuals. Dan Mitchell, a fellow at the Heritage Foundation, a conservative think tank, also noted in corporations' defense that they have an obligation to shareholders to pay as little tax as they legally can.

While this is closer to the correct response than Senator Levin's, it artfully dodges the fact that the Bush Administration -- even with a Republican-controlled Congress -- has done precious little to overhaul the utterly absurd federal income tax code.

Until either political party gets serious about tax reform in this country, expect to continue having stories such as this treated as a political football that is put away once the political campaign is over.

Posted by Tom at 2:12 PM | Comments (0) | TrackBack (0)

5th Circuit on group pleading of fraud allegations

In this recent decision (Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., No. 02-1055 (5th Cir. March 31, 2004)), the 5th Circuit held that the group pleading doctrine for pleading a company's public statements (such as press releases or regulatory filing statements) as a basis for fraud against corporate officers does not withstand the Private Securities Litigation Reform Act of 1995 (PSLRA)'s specificity requirements. The Court observed that the PSLRA requires that untrue statements be set forth with particularity as to each individual defendant and that scienter be pleaded with regard to 'each act or omission sufficient to give rise to a strong inference that the defendant acted with the required state of mind.'" In short, based on the PSLRA's repeated references to "the defendant," the 5th Cirtcuit concluded that Congress intended for plaintiffs to inform each defendant of the specific factual allegations attributable to his particular alleged fraud. In so holding, the 5th Circuit noted as follows:

Significantly, this court has never adopted the “group pleading” doctrine, even before the PSLRA. While the PSLRA does not explicitly abolish the doctrine, it was not necessary to do so because Congress never made this judicial creation law to begin with. Even prior to the PSLRA, section 10(b) and Rule 10b-5 required plaintiffs to identify the roles of the individual defendants, and describe their involvement, if any, in preparing the misleading statements. [citation deleted] Even if this court were to conclude that the “group pleading” doctrine existed in the absence of the PSLRA, it cannot withstand the PSLRA's specific requirement that the untrue statements or omissions be set forth with particularity as to "the defendant" and that scienter be pleaded with regard to "each act or omission" sufficient to give "rise to a strong inference that the defendant acted with the required state of mind."

* * *

[C]orporate officers may not be held responsible for unattributed corporate statements solely on the basis of their titles, even if their general day-to-day involvement in the corporation's affairs is pleaded. However, corporate documents that have no stated author or statements within documents not attributed to any individual may be charged to one or more corporate officers provided specific factual allegations link the individual to the statement at issue.

In sum, this is another in a long line of 5th Circuit decisions that require specific factual allegations to sustain a fraud claim against a defendant. Hat tip to The 10b-5 Daily for the link to this decision.

Posted by Tom at 12:59 PM | Comments (0) | TrackBack (0)

"I object," said the fish

Crescat Sententia noticed the following observation from 7th Circuit Judge Richard Posner's opinion on the disclosure of Northwestern Memorial Hospital abortion records. Got to remember this one next time I'm pursuing a motion to quash discovery:

We're still at a loss to understand what [the government] hopes to gain from such discovery. (We begged the government's lawyer to be concrete.) Of course, not having seen the records, the government labors under a disadvantage, although it has surely seen other medical records. And of course, pretrial discovery is a fishing expedition and one can't know what one has caught until one fishes. But Fed. R. Civ. P. 45(c) allows the fish to object, and when they do so, the fisherman has to come up with more than the government has been able to do in this case despite the excellence of its lawyers.

Posted by Tom at 12:29 PM | Comments (0) | TrackBack (0)

Move to the money

This BusinessWeek Online article provides a good summary of the groups and individuals who are throwing big bucks at the Presidential candidates. It's always good to have this information handy when evaluating the integrity of a politician's position on a particular issue.

Posted by Tom at 12:06 PM | Comments (0) | TrackBack (0)

Dan Jenkins on the 1954 Masters

Bar none, Dan Jenkins is the best writer on golf of our time. In this Golf Digest article, Mr. Jenkins relates his story about the 1954 Masters in which the legends Sam Snead and Ben Hogan dualed in an 18 hole Monday playoff. The entire article is a must read, and the mercurial Mr. Jenkins introduces us to the subject as follows:

When you're a fledgling youth-type adult, it appears that all people in their 40s look old enough to be in a painting hanging on the wall of a stately home in England. It's not until you limp into your 70s that people in their 40s look too young to vote, and college cheerleaders closely resemble Yorkshire terriers.

I point this out to explain why I wrote what I did 50 years ago when I was a fledgling youth-type adult sportswriter for a Fort Worth newspaper covering the Masters in Augusta.

This is the 50-year anniversary of that particular Masters. The 1954 Sam Snead-Ben Hogan Playoff Masters. What I wrote so astutely was that this was undoubtedly the last time we would see these two wonderful immortals go head-to-head for a major championship, seeing as how they were so ancient. They were nearing 42, after all.

Posted by Tom at 12:00 PM | Comments (0) | TrackBack (0)

Oops!

Emergency workers are sometimes lowering the chances that heart attack victims will survive by improperly administering CPR.

Posted by Tom at 11:40 AM | Comments (0) | TrackBack (0)

Health care industry eschews new technology

On virtually every visit to a private doctor's office, I am amazed at the amount of clerical staff that even relatively small offices employ. Having run a law office for many years, I understand that the amount -- and productivity -- of clerical staff is an important component in the overall profitibility of the office. There is no discernible reason why that principle should be any different in most doctors' offices.

This NY Times article may explain a part of this phenomenom. Despite pressure from an array of interest groups, only a few dozen medical centers across the country are making full use of the latest computerized patient safety systems. Hospitals and doctors contend that they have good reason to be cautious about the new technology because they believe that the computerized systems will never repay their multimillion-dollar cost, or will be outmoded or cost much less in a few years. Moreover, many doctors complain that using the systems to write prescriptions and order tests diverts them from patient care and running their offices on already stressful workdays.

The coordination of technology with patient care and medical practice business operations is one of the most challenging problems in the complicated field of health care finance at this time. This is an issue that we all need to follow closely.

Posted by Tom at 11:37 AM | Comments (0) | TrackBack (0)

Yeah, but do they have rubber chicken?

This NY Times article relates some airline industry executives' frustration with the glowing media reports that low-budget airlines such as Southwest Airlines and JetBlue have been receiving recently. The article is a good summary of where the airline industry stands at this point, and includes the following classic Warren Buffett analysis of the industry generally:

Now anyone who really, truly understands the economics of airlines is probably too smart, or unstable, to be working for either an airline or a newspaper. As Warren E. Buffett has often pointed out, if one tabulates all of the airline industry's finances since the day the Wright Brothers bounced into the air at Kitty Hawk in 1903, one will discover that, cumulatively, there has not been a single penny of profit. (Mr. Buffett has also suggested that, in hindsight, shooting down the Wright Brothers on that beach would have been a reasonable financial, if not moral, move.)

Posted by Tom at 11:07 AM | Comments (0) | TrackBack (0)

Friday Night Lights

Some of my non-Texan friends chide me that the phrase "Texas culture" is an oxymoron. However, Texas actually is a place rich in many distinctly interesting cultures, and the following are a few noteworthy books and movies that explore those cultures.

Texas author Larry McMurtry has brilliantly explored the diversity of Texas culture in many of his novels. His Pulitzer Prize-winning novel "Lonesome Dove" and the extraordinary television mini-series based on the book (with Robert Duvall and Tommie Lee Jones in th lead roles) captures many of the frontier aspects of Texas culture. Similarly, Mr. McMurtry's "Last Picture Show," -- which Peter Bogdanovich made into a fine movie -- is an exceptional depiction of West Texas culture, just as his alternately hilarious and heart-wrenching "Terms of Endearment" (also made into a wonderful movie starring Shirley McLaine, Debra Winger and Jack Nicholson) is an insightful view into the upper crust of Houston culture.

One of my favorite movies about Texas is John Sayles' movie "Lone Star," which is a fine murder mystery set in the complicated culture of Texas' Rio Grande Valley near Texas' border with Mexico. As the characters in this movie remind us on several occasions, "This isn't Houston, ya know."

But one of the most popular books about Texas culture is H.G. Bissinger's "Friday Night Lights," the definitive book on the fascinating culture of Texas high school football. In this fine book, Mr. Bissinger examines the spirit of one of Texas high school football's most successful programs: the Odessa Permian Panthers. Set in a city in decline in the West Texas desert, Mr. Bissinger explores the town, the school, the coaches, the team, its players, and how -- for better and for worse -- the team becomes the town's identity. The picture is not always pretty, but the image is impossible to forget.

"Friday Night Lights" is now about to become a movie.