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June 30, 2004

Stros edge Cubs

The Rocket pitched seven stellar innings, Bidg cranked two solo yaks, and Brad Lidge hurled two innings of clutch relief as the struggling Stros rode Carlos Beltran's ninth inning tater to a 3-2 win over the Cubs at Wrigley on Wednesday afternoon.

Clemens was his usual pit bulldog self, giving up only a run on five hits with five walks in his seven innings. Lidge bailed the Stros out of another relief pitcher mess that Miceli produced in the eighth, and then mowed the Cubs down in order in the ninth. Although it does not show up in the box score, Everett made at least three difficult plays in the field that kept the Cubs from gaining any momentum.

The mismatch of the season takes place in the rubber game as the Stros' Pete Munro takes on the Cubs' Astro-killer, Mark Prior on Thursday afternoon. The Stros return to the Juice Box for a weekend series with the Rangers before visiting the Padres and the Dodgers in the following week leading up to the All-Star game on July 13th at the Juice Box.

Posted by Tom at 6:55 PM | Comments (4) |

The tale of a tax shelter lawyer

This NY Times article reports on the interesting story of tax shelter lawyer Raymond J. Ruble, a former Manhattan-based partner with Sidley Austin Brown & Wood. Mr. Ruble was well-known at Sidley, Austin for his aggressive work on tax strategies for investors, and was one of the biggest earners for the firm.

However, Mr Ruble is at the center of a government investigation into Sidley, Austin's promotion of abusive tax shelters. In October, Mr. Ruble was dismissed, a highly unusual move by such a prestigious law firm. Days earlier, government investigators told the firm that millions of dollars from a San Francisco-based seller of tax shelters had gone - apparently unknown to the law firm - into a Delaware trust created by Mr. Ruble.

At least four civil lawsuits name Mr. Ruble and his former employer as defendants. Some of the lawsuits contend that he also worked with Ernst & Young and Deutsche Bank, among others, to promote a variety of abusive tax shelters.

The entire article is interesting reading, and includes the following tidbit on Mr. Ruble's promotion of tax shelters in a continuing education publication:

In any case, in an article, "The Professional Responsibilities of a Tax Lawyer in the Context of Corporate Tax Shelters," published by the Practicing Law Institute in its course handbook series for lawyers, Mr. Ruble argued that tax lawyers had a first duty not to the tax system but to their clients.

He began the article by quoting from the Gospel of Matthew: "No man can serve two masters."

Posted by Tom at 7:25 AM | Comments (0) |

June 29, 2004

Stros fall to Cubs

Bidg's drop of a fly ball in the seventh resulted in two unearned Cub runs and a 7-5 Cub victory over the Stros in the first game of their key three game series at Wrigley.

Neither Kirk Bullinger nor David Weathers could hold Stros' leads after Andy Pettitte muddled through five innings without good command. Pettitte ended up giving three runs on four hits with three walks and seven K's. Miceli looked to have bailed Weathers out, but Biggio's error sealed the win for the Cubs.

Carlos Beltran belted his first yak for the Stros and JK and Ensberg both had extra base hits to generate most of the Stros' runs. However, Kent injured his hamstring on his double and appears headed to the disabled list, and Bidg and Bags continue to scruff. Despite their long and heralded service to the ballclub, the Stros are clearly suffering at the plate from their first baseman and leftfielder's lack of production. Meanwhile, Jason Lane inexplicably has not been seen in the past four games.

Just to make sure that the evening was a complete downer, the Stros announced that Wade Miller -- 7-7 with a 3.35 ERA -- was being placed on the disabled list because of an a sore shoulder. Miller has been inconsistent this season, and has suffered from a lack of command. He is one of the league leaders in walks, which means he is at risk of throwing more pitches in fewer innings than other pitchers. Newly-acquired Jeremy Griffiths (acquired as a throw-in in the Hidalgo trade) was called up from AAA New Orleans to replace Miller in the rotation, a move that does not say much about the quality of the Stros' AAA pitching prospects. The Stros did make at least one positive move on Tuesday in that they replaced Tim Redding in the rotation with Pete Munro, a move that they should have made weeks ago.

The Rocket takes the hill for the Stros in Wednesday afternoon's game against the Cubs' Matt Clement. That game may be the first must win game for the Stros in this once promising, but now quickly fading, season.

Posted by Tom at 9:59 PM | Comments (0) |

Promising new approach to treating Alzheimer's

This Wall Street Journal ($) article reports on a significant advancement for the next generation of Alzheimer's treatments, Neurochem Inc says it will begin recruiting patients for a large efficacy trial of its drug Alzhemed in the next few weeks.

Unlike current drugs that generally treat the symptoms of Alzheimer's, the new drugs target the underlying illness itself. The goal of these new these new medicines are to halt the devastating progression of the disease or prevent it entirely. Alchemed is at the cutting edge of the new medicines that offer hope to the 4.5 million Americans struck with the memory-robbing illness.

Alzhemed, which helps prevent the formation of the plaques many scientists believe are the culprit in Alzheimer's disease, could be on the market within four years. The new study will enroll 950 patients over 18 months at 70 sites in the U.S. and Canada.

For a long time, Alzheimer's research was a depressing area that simply was not producing any insights to a possible cure for the disease. That is changing, as the clinical trials described in this article appear quite promising.

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

Big law firms' numbers up

This Wall Street Journal ($) article reports on the annual American Lawyer review of law firm finances, which found that America's richest law firms got even richer last year.

New York City based Wachtell, Lipton, Rosen & Katz topped the list with average profits per partner of $2.58 million. Other New York firms, helped by the Wall Street recovery, dominated -- claiming 13 of the top 15 spots.

Strong revenue growth generated a 9.8% increase in average profit per equity partner to $930,700. Nonequity partners made an average $357,597 per partner.

Posted by Tom at 7:22 AM | Comments (0) |

Lay and lawyers in D.C. to try and meet with Enron Task Force

On the heels of an extraordinary front page NY Sunday Times interview, the Chronicle reports that former Enron CEO Ken Lay is in Washington, D.C. this week to lobby for a meeting between the Lay's lawyers and the prosecutors working on the Enron Task Force.

I expect that Lay will be indicted soon, maybe even before the July 4th weekend.

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

June 28, 2004

United, this is getting monotonous

The federal Air Transportation Stabilization Board announced today that it was not going to change its its June 17 decision to deny United Airlines government backing for a government credit enhancement that was the central component of United's reorganization plan in its pending chapter 11 case. United will now be forced to retool its reorganization plan based upon the higher financing costs that it will incur in the private market.

Hurt by a slowing economy and the Sept. 11, 2001 terrorist attacks on New York and Washington, United initially applied for $1.8 billion in loan guarantees in June 2002, just before the deadline for airline applications. The company's request was the largest of the 16 carriers that applied to the panel that was created after the September 11 attacks to help airlines lower the cost of new capital.

The loan board initially denied United in December 2002, which resulted in United filing its chapter 11 case. United has reduced costs and shrunk its operations in chapter 11, but the company's operations still are not particularly competitive with the emerging low-cost airlines that have expanded their market share dramatically over the past two years.

As noted here earlier, the ATSB's decision is the correct one. The creditors and employees with stakes in United's survival should share the full economic risk of reorganizing the company. The risk of loss and threat of failure are much better and more powerful inducements to reorganizing a big company correctly than government largesse that often covers up and delays changes that need to be made.

Posted by Tom at 12:50 PM | Comments (0) |

SCOTUS sentencing decision reviewed

In this article, the Wall Street Journal ($) does a good job of summarizing the initial reactions to the U.S. Supreme Court's decision last week in Blakely v. Washington, a decision that could have major implications for the federal sentencing guidelines and, for at least eight states, holds that judges cannot increase a defendant's sentence based on facts and behavior that were not presented to a jury. Though the decision involved just one state's sentencing system, legal specialists on guidelines say that the decision could affect the guidelines under the federal system.

The federal sentencing guidelines evolved from the Sentencing Reform Act passed by Congress in 1984. Congress created a commission to set guideline ranges that specify sentences for each class of convicted person. Courts generally select sentences from within the range based on the consideration of acts or behavior of the defendant that often was not the subject of the criminal charges. Legal sentencing guideline specialists say the Supreme Court's ruling in Blakely could invalidate everything within that range except for the lowest level.

In Blakely, the majority said all facts essential to the sentence must be tried before a jury. Federal and many state sentencing guidelines currently involve finding facts during the non-jury sentencing phase that may increase a convict's time served. Blakely would appear to hold that all such facts would have to be charged and tried before a jury, or those facts are formally waived for sentencing purposes.

Yesterday's decision is the second in a week questioning the validity of sentencing laws. Last Friday, U.S. District Judge William Young ruled that federal sentencing laws were unconstitutional because they gave prosecutors too much power.

Moreover, the Journal article speculates that another sentencing appeal that will be closely watched as a result of Blakely is the sad case of Jamie Olis, the midlevel executive of Dynegy Corp. who was recently convicted and sentenced to 24 years based partly on an expert's estimate of the amount of market value that was lost as a result of the fraud in which Mr. Olis participated. The Journal article states that the government expert's estimate was not presented to the jury. However, my recollection is that the government expert's testimony on that subject was presented to the jury, but not rebutted by the defense during trial, and that U.S. District Judge Sim Lake concluded that he could not consider the defense expert's estimate post-trial if it was not presented during trial.

Look for Professor Ribstein to comment on these developments upon his return from vacation.

Posted by Tom at 11:52 AM | Comments (0) |

Confessions of a "rich" businessman

Howard Blake is the pen name of a small businessman from the Midwest, who has written this AEI Online article that is brilliant in its simplicity. By Democratic Party standards, Mr. Blake and his wife are wealthy and should be taxed more. However, Mr. Blakes points out that appearances can be deceiving, particularly in economic matters:

From that $71,000 of actual cash flow, subtract our federal tax payments of $24,539 and our state income taxes of around $4,000, and you find that our cash available for living expenses is actually around $43,000. Sufficient for our needs. But clearly a good deal short of true wealth.

I suppose my wife and I do what we do because we like to. We must, because if you divide our $43,000 of spendable income last year by the 6,000 hours of labor, much of it manual, that the two of us put into our business (we kept track), our time works out to be compensated at around $7.50 an hour. Just the same, incentives do matter. And it is a concrete fact that cash alone fuels our growth. With more cash, our business will grow faster; we're a small player in a big industry, and the market is there for additional growth. We're constrained only by the availability of investment capital, and that has to be generated by our business.

My wife and I have a passion for our little enterprise. It's been our life for 20 years, demanding whatever creative abilities we have, consuming most of our waking moments, focusing our energies on producing the best products we can, and beckoning us to work seven days a week to ensure good service for our customers.

Then every four years the Democratic nominee for President informs us we don't pay enough taxes. We are called greedy and self-serving special interests. We're told that we are "rich," and that we have wealth only because we are lucky.

I have described my financial situation in some detail in the hope that this snapshot will help people understand who most of the top 5 percent of taxpayers really are, and how taxes affect the folks who make America work. I know I'm fortunate, but I certainly don't feel rich. I have fond hopes of some day becoming wealthy (a goal I share with most of my fellow citizens), and a tax policy that encourages my efforts toward that end would not only benefit me, but the rest of society as well. But the reality is that my wife and I have to work extremely hard every day just to hold our current position.

We've been managing our finances with care, investing in our business with the kind of concentration that comes from spending our own money, and providing jobs for dozens of our neighbors. I dare say that the country benefits from our stewardship--and that of hundreds of thousands of other "rich" people just like us--more than it would from any of John Kerry's plans for our money.

In representing business people over the past 25 years, I have learned that non-business people often grossly underestimate how hard it is to run a business profitably and well. Also overlooked or underappreciated is the great benefit that communities derive from the employment that is generated through small businesspeople's willingness to undertake the risk of their enterprise. Mr. Blake's article explains a big part of the reason why running a business is such a formidable task, made even more so in this current climate in which many normal business practices are being criminalized. Hat tip to Newmark's Door for the link to Mr. Blake's piece.

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

The Selling of the Expos

In the first of a three part series, this Washington Post article by Steve Fainaru examines the tactics that Major League Baseball Commissioner Bud Selig is using in auctioning the Montreal Expos off to the highest bidder among several investor groups and American cities. The article provides an excellent background on how Selig and Major League Baseball owners have used baseball's anti-trust exemption and public financing of stadiums to increase the value immensely of MLB franchises, an approach that several expert commentators -- particularly Professor Sauer over at the Sports Economist -- have criticized on economic and political grounds.

The entire article is well worth reading, and includes nuggets of information such as the following about Jeffrey Loria, the former majority owner of the Expos who ended up owning the Florida Marlins after Selig engineered a swap of franchises when MLB bought the Expos several years ago. Loria's handling of the Expos is the subject of litigation brought by Loria's limited partners, who were pursuing that litigation even as New Yorker Loria's new team was playing in last season's World Series. You certainly did not hear about the following on the MLB broadcast as the World Series Trophy was being handed to Loria and the Marlins:

On their way out of Montreal, Loria and Samson stripped the franchise. With them went computers containing scouting reports on every Expos player, dozens of signed home run balls, even life-size cutouts of the team's former superstar right fielder, Vladimir Guerrero. The Expos' limited partners, meantime, became unwitting owners of 6 percent of the Marlins. In July 2002, they filed a racketeering suit in U.S. District Court in Miami. It charged Loria, Samson, Selig, DuPuy and the Office of the Commissioner of Baseball of illegally conspiring in what the suit called an "Expos Elimination Enterprise."

The ongoing suit could complicate baseball's plans for the Expos. The limited partners have 90 days to seek an injunction if baseball tries to move the team.

Last October, Loria's Marlins miraculously found themselves in the World Series against the New York Yankees. "Can you imagine?" anguished one of the limited partners. "I'm sitting here. I'm an owner of the Florida Marlins. I'm rooting for the Yankees!"

And then, of course, the Marlins won.

This spring, nearly all the limited partners received World Series rings, even as they continued to sue Loria and Major League Baseball for racketeering in U.S. District Court.

Read the entire article.

Posted by Tom at 6:09 AM | Comments (0) |

June 27, 2004

Roy O and Beltran step up

Roy O pitched eight innings of shut out ball and Carlos Beltran scored the only run and made a spectacular catch to take away another as the Stros salvaged the third game of their weekend series with the Rangers, 1-0. Even when they win, this Stros team is tough to watch, as the Astro In Exile attests.

Oswalt was spectacular, giving up four hits in eight innings, walking none (he hit one batter), and fanning nine. Lidge looked good again in closing, and Beltran's over the wall catch in the first immediately goes on ESPN's ten best catches of the season.

As they leave Arlington for Chicago, the Stros are 39-36 and six and a half games back of the NL Central leading Cards. Apart from the great acquisition of Beltran, nothing has changed much for the club since my last analysis of the Stros' season two weeks ago. Apart from Berkman and now Beltran, the hitters are a bunch of slap single hitters with little power. The pitchers have continued a trend of generally improving performances, but Redding's performance has been among the worst in the league and, thus, pulls the staff's overall improved performance down.

Here are the Stros' hitters' runs created against average ("RCAA," explained here) through Saturday's games, courtesy of Lee Sinins:

Lance Berkman 40
Jeff Bagwell 13
Craig Biggio 9
Mike Lamb 8
Jeff Kent 4
Carlos Beltran 1
Eric Bruntlett 1
Jason Lane 0
Morgan Ensberg -3
Orlando Palmeiro -3
Jose Vizcaino -3
Raul Chavez -5
Adam Everett -6
Richard Hidalgo -6
Brad Ausmus -14

The Stros' team RCAA of 36 ranks fifth in the National League overall, which is behind division rivals Reds (64), Cubs (48) and just a bit in front of the Cards (30).

Even though he has cooled off over the past two weeks, Berkman remains one of the best hitters in baseball, and Beltran would have a solid 20 RCAA if you include his RCAA from his time with Kansas City this season.

Bags' 13 is deceptive because that is only the eighth or ninth best RCAA among first basemen in the National League (Jim Thome is leading NL first basemen with an RCAA of 41 and Sean Casey is second at 37). Biggio continues his fine season, but is not among the top NL producers in left field. With the exception of Lamb, the rest of the club continues to scruff. Note that JK's performance is barely above-average despite the propoganda of a great season that the Chronicle exudes about him, and Everett's negative six figure should place him at the bottom of the lineup, where Jimy Williams had him in the game today.

Finally, the veteran outmaker -- Ausmus -- now has the sixth worst RCAA figure among NL starters, and it is clear that Chavez makes the Stros a better team offensive and defensively (he threw another baserunner out today in a key situation) when he replaces Ausmus. Don't hold your breath that Williams will notice, though. Ausmus is a veteran who "handles pitchers" well, whatever that means.

Here are the Stros' pitchers' runs saved against average ("RSAA," explained here):

Roger Clemens 15
Wade Miller 8
Brad Lidge 7
Octavio Dotel 4
Mike Gallo 3
Dan Miceli 3
Pete Munro 3
Andy Pettitte 3
Kirk Bullinger 2
Roy Oswalt 2
David Weathers 0
Brandon Backe -3
Chad Harville -3
Ricky Stone -3
Jared Fernandez -6
Brandon Duckworth -10
Tim Redding -13

The Stros' team RSAA of 12 ranks seventh in the National League overall, which is behind division rivals Cubs (33), Cards (28), and Brewers (44).

There is actually much good news here. With Pettitte's return and Roy O's RSAA figure uncharacteristically low, both of their RSAA should improve over the next several weeks. The Stros would realize a big benefit from simply replacing Redding with Munro, which should happen unless the Stros' management goes brain dead. If Pettitte, Oswalt, Miller, and Lidge all trend toward joining the Rocket at the double digit RSAA level, then that will reflect a strong pitching staff for the second half of the season.

Based on current team RCAA and RSAA figures, the Cubs actually should be leading the NL Central by a long shot, so they are actually underperforming more in the win-loss column than the Stros. If performances remain relatively steady (that assumption does not always hold), look for the Cubs to overtake the Cards after the All-Star break, and expect the Stros and Cards to battle it out for second place in the NL Central. I still expect the Reds and Brewers to tail off, the Reds because of abysmal pitching (their great first half hitting will likely tail off in the second half of the season) and the Brewers because of their poor hitting (but they are getting very good pitching, which could keep them in the race longer than the Reds).

The Stros close out the first half of the season with seven games over the next week, four against the Cubs at Wrigley and then a weekend series at the Juice Box next weekend against the Rangers. The club really needs to step it up during these games because losing most of those games against these two good teams could put the Stros so far down by the All-Star break that any hitch in their giddyup in the second half of the season will drop them quickly out of the race for a playoff spot.

Posted by Tom at 4:40 PM | Comments (0) |

June 26, 2004

Ken Lay gives an incredible interview on Enron

In an unusually bold move in connection with an incredibly difficult case to defend, former Enron chairman and CEO Kenneth Lay is the subject of a wide-ranging interview on the Enron criminal investigation that appears in this NY Times Sunday front page article.

Normally, a defense attorney would never allow a client under scrutiny from multiple grand juries to discuss the subject of those investigations on the front page of the NY Times. However, the Enron case is not normal, and Mr. Lay's able defense attorneys likely figure that Lay will be indicted and has nothing to lose at this point in attempting to mount a public relations campaign in a probably futile attempt to counter the extraordinarily negative image that anyone related to Enron evokes throughout American society.

Mr. Lay said that he had remained silent on the advice of lawyers, but is coming forward now to explain his views of a story that he says has become infused with myths. While not saying so explicitly, he suggested that he was motivated by a desire to tell his side both to the prosecutors on the Justice Department?s Enron Task Force who have been investigating him and the citizens of Houston who may well sit in judgment on him.

That said, the article is simply astounding given Lay's current situation:

"If anything, being friends with the Bush family, including the President, has made my situation more difficult,'' Mr. Lay said in a recent interview, "because it's probably a tougher decision not to indict me than to indict me.''
Now, on the eve of what may be the government's final decision on whether to charge him with a crime, Mr. Lay is talking for the first time about the company's collapse in 2001 and the scandal that enveloped it. In more than six hours of interviews with The New York Times, Mr. Lay remained steadfast in his expressions of innocence, even as he acknowledged, as head of the company, accountability for the debacle rests rightfully with him. "I take full responsibility for what happened at Enron,'' said Mr. Lay, 62. "But saying that, I know in my mind that I did nothing criminal.''

And even though Mr. Lay takes full responsibility, that does not stop him from pointing the finger of fault against others, including his probable main accuser:

As Mr. Lay describes it, the Enron collapse was the outgrowth of the wrong-headed and criminal acts of the company's finance organization, and specifically its chief financial officer, Andrew S. Fastow. He says that both he and the board were misled by Mr. Fastow about the activities and true nature of a series of off-the-books partnerships that played the decisive role in the company's collapse.
In the end, Mr. Lay said, the Enron story is one of corrupt executives in a finance organization led by Mr. Fastow, the former chief financial officer, who took advantage of the company for their own personal benefit and ultimately destroyed it. Mr. Fastow has pleaded guilty to fraud and is cooperating with the government.

?At our core, regrettably, we had a chief financial officer and a few other people who in fact mismanaged the company?s balance sheet and finances and enriched themselves in a way that once we got into a stressful environment in the marketplace, the company collapsed,? he said. ?But by the same token, most and I mean 98 percent of the people who worked at Enron were good, honest, hardworking individuals. They were not crooks.?

And what about Mr. Lay's former net worth of almost a half billion?:

The years since the Enron collapse have transformed Mr. Lay. The changes in his financial status are stunning. At the beginning of 2001, Mr. Lay said, he had a net worth in excess of $400 million ? almost all of it in Enron stock. Today, he says his worth is below $20 million, and his total available cash not earmarked for legal fees or repayment of debt is less than $1 million.

The article goes on to do a reasonably good job of explaining Lay's Enron stock sales during the company's demise in late 2001, most of which were forced sales to meet margin calls. Those stock sales are reportedly a big part of the current criminal investigation against Lay, who continues to maintain his innocence of any criminal wrongdoing:

Despite the rumblings that criminal charges against him could well be imminent, Mr. Lay says he is sanguine. ?I know in my mind I did nothing wrong and nothing criminal,? he said. ?But I?d say if it does happen, it?s a great miscarriage of justice.?

But, if faced with indictment, would Mr. Lay consider pleading guilty? ?Absolutely not.?

Read the entire article.

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

Stros lose to Rangers again

Hank Blalock cranked a tie-breaking eighth inning yak off of Dan Miceli to lead the Rangers to an 8-7 win over the Stros on Saturday afternoon in Arlington.

The Stros' Tim Redding pitched batting practice for the Rangers, giving up ten hits and six runs over four innings. Hopefully, the only reason that Redding remains in the rotation is because Andy Pettitte has not yet returned to the rotation. However once Pettitte returns, there simply is no reason not to hand the ball every fifth day to Pete Munro rather than Redding, who now has among the worst statistics of any starting pitcher in the National League.

The Stros hitters still are not hitting on all cylinders, but Barry Bonds, Jr. did nail a bases loaded double to tie the game at seven during a four run uprising in seventh. However, a season long power drain continues to plague Bags (slugging percentage of .470 this season against a career .546) and Ensberg (.354 slugging percentage compared with .530 last season), while manager Jimy Williams inexplicably insists on maximizing at bats for Everett (slugging percentage of .361) by batting him second in the order and playing unproductive hitters such as Viz (slugging percentage of .357) and Bruntlett (last night, slugging percentage of .403 in 67 career AB's) rather than arranging the lineup to make sure that better hitters such as Lamb (slugging percentage of .550) and Lane (lifetime slugging percentage .522) are playing as much as possible. It is becoming increasingly clear to me that the Stros' margin for error in scoring runs is not large enough to compensate for Williams' dubious personnel decisions.

Roy O attempts to bail the Stros out during the Sunday afternoon game against the Rangers, as the Stros prepare to go to Wrigley for four with the Cubs next week that may just determine whether this club will be able to contend for a playoff spot during the remainder of this once promising season.

Posted by Tom at 8:32 PM | Comments (1) |

VDH takes stock of the war and the home front

In his latest NRO column, Victor Davis Hanson is bullish on the prospects for a successful conclusion of the Iraqi front of the war against the radical Islamic fascists, but more bearish on American society's capacity to sustain the effort necessary to achieve that successful conclusion:

As we neared three years of fighting in World War II, Patton was stalled near Germany for want of gas, V-2 rockets began raining down on England, and we were fighting to take the Marianas in preparation for future B-29 bases. In comparison, what exactly is our current status in this, our confusing third year of war against Islamic fascists and their autocratic sponsors?

Unlike the Cold War, when our tactical options were circumscribed by nuclear enemies, today the world's true powers are decidedly unfriendly to radical Islam ? and growing more so daily.

Two-thirds of al Qaeda's leadership are either dead or in jail. Their sanctuaries, sponsors, and kindred spirits in Afghanistan and Iraq are long gone. Detention is increasingly common for Islamicists in Europe and America. The Hamas intifada has failed. Its implosion serves as a warning for al Qaeda that Western democracies can still fight back. There is also a lesson for America that even in our postmodern world most people still admire principled success: No one is lamenting the recent targeted killings of Hamas bullies or the preemptive assassination of suicide bombers.

We are winning the military war in Iraq and Afghanistan. The terrorists are on the run. And slowly, even ineptly, we are achieving our political goals of democratic reform in once-awful places. Thirty years of genocide, vast forced transfers of whole peoples, the desecration of entire landscapes, a ruined infrastructure, and a brutalized and demoralized civilian psyche are being remedied, often under fire. All this and more has been achieved at the price of political turmoil, deep divisions in the West ? here and abroad ? and the emergence of a strong minority, led by mostly elites, who simply wish it all to fail.

Whether this influential, snarling minority ? so prominent in the media, on campuses, in government, and in the arts ? succeeds in turning victory into defeat is open to question. Right now the matter rests on the nerve of a half-dozen in Washington who are daily slandered (Bush, Rumsfeld, Cheney, Rice, Wolfowitz), and with brilliant and courageous soldiers in the field. They are fighting desperately against the always-ticking clock of American impatience, and are forced to confront an Orwellian world in which their battle sacrifice is ignored or deprecated while killing a vicious enemy is tantamount to murder.

No, we ? along with those brave Iraqis who have opted for freedom ? could very easily still lose this war that our brave troops are somehow now winning.

Read the whole column.

Posted by Tom at 12:02 PM | Comments (0) |

The doping scandal investigation

Sally Jenkins, fresh off of hammering Tiger Woods for his behavior during last weekend's U.S. Open, goes after the United States Anti-Doping Agency and its investigative tactics in this Washington Post column. Ms. Jenkins observes:

Let's see if we can sum up the conduct of this investigation so far:

Sprinter Marion Jones has been dragged through the accusatory mud without a formal charge. A purported, damning version of Tim Montgomery's grand jury testimony, which was by law secret, has been illegally leaked and he now faces total ruin and a lifetime ban from his sport. The twenty-some other athletes who testified before the BALCO grand jury must also worry if their testimony will be aired and used against them, too.

I'll say it straight out: I believe Marion Jones when she says she's innocent, based on what is a persuasive piece of evidence in her favor. In the last four years, Jones has not gotten faster. She's gotten slower. Whatever Jones may be taking, it isn't performance enhancing.

Here is an example of the kind of job USADA is doing in its inquiry into Jones's ties to BALCO. Several weeks ago, Jones met with a trio of USADA officials, including Madden. They presented her with a calendar that purported to be her BALCO doping schedule. It bore several notations and the initials MJ.

"That's not my calendar," she said.

"Then why does it have your sprint times on it?"

Jones replied evenly, "If those are my sprint times, then I just shattered the world record by a second."

The sprint times on the calendar could not have been those of Jones, or of any woman. They were too fast. The USADA representatives didn't even recognize the difference between the sprint times of a male and a female.

You get an uneasy feeling from watching USADA's bumbling zealots. You get the feeling they'd waive the U.S. Constitution if they could -- which is a pretty unsettling thing to feel about an organization that is funded by U.S. taxpayer dollars and a grant from the White House.

There is one good product of the USADA's bumbling investigation -- more work for defense attorneys!

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

Good news on the Iraqi Front

Daniel Drezner reports good news on the Iraqi front.

Posted by Tom at 9:54 AM | Comments (0) |

June 25, 2004

Stros scruff against Rangers

Kenny Rogers kept the Stros off balance all Friday night as he led the Rangers to a 3-1 win in the opening game of the Long Star Series.

Rogers made it look like the Stros played 18 innings the night before rather than the Rangers. He gave up only two singles and a double, walked only one and threw less than 100 pitches in chalking up his 10th win of the season. Meanwhile, Stros starter Wade Miller was all over the place, walking six and throwing 116 pitches in five and a third. Miller is among the league leaders in walks, and that lack of command is keeping him from being anything other than a barely above-average pitcher.

I've been quiet on the Jimy Williams front lately, but tonight he fielded just a ridiculous lineup. He has a team that is struggling at the plate and he bats Everett second (sorry, Jimy, Everett is a below average hitter regardless of how many times he lays down a sacrifice bunt), he DH's JK so that he can play the punchless Brumlett at second, and, of course, we always have the incredible out machine Ausmus. That's a third of the lineup that cannot hit their weight. By playing Kent at second, Williams could have DH'ed either Lamb or Lane and there is absolutely no reason with Beltran around to be batting Everett second in the lineup.

Wake up, Jimy. Your team is struggling. Play as many of your good hitters that you can and bat them more than your below average hitters. This is not rocket science.

Things could get ugly on Saturday as Tim Redding tees it up for the Rangers' potent lineup. My bet is that Redding's RSAA (explained here) is well into negative double digits once the Rangers get through with him.

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

June 24, 2004

Stros win and close trade for Beltran

The Stros nipped the Pirates 3-2 at the Juice Box on Thursday night as the Rocket picked up his 10th win of the season and the struggling Stros won for the fourth time in five games.

However, the bigger news out of the Juice Box on Thursday night was that the Stros consummated a trade that will bring star Kansas City centerfielder Carlos Beltran to Houston for reliever Octavio Dotel and AAA catcher John Buck (the Royals then shipped Dotel to Oakland for a couple of minor league prospects).

First, the game. The Rocket was his usual dependable self, scattering four hits and two runs over seven innings. Miceli and new closer Brad Lidge closed out the victory as Morgan Ensberg had the game winning hit for the second time in three games.

Now, the trade. Beltran is one of the best young players in baseball, with a .368 on base average, a slugging percentage of .527, and an RCAA (explained here) of 17 this season. Dotel has been one of the best relievers in baseball over the past three seasons, but he was having a down season so far and Lidge is ready to handle the closer's role. Buck was once the Stros' best minor league prospect before his development was derailed a couple of years ago by injuries and the club's failure to field a high A farm team until last year. However, Buck has rebounded nicely this season at AAA New Orleans and is likely ready for an opportunity to play in the bigs.

So, although far from a great deal (at least as of yet), the trade is a reasonable gamble for the Stros, who were probably going to finish third (at best) in the NL Central if they played a pat hand the rest of the season. Beltran is clearly the type of player who can elevate the Stros' performance level to equal that of the Cubs and Cards. Of course, the downside is that Beltran is probably a three month rental for the Stros, as his uber-agent Scott Boras has already announced that he is going to auction Beltran's talents to the highest bidder on the free agent market after this season. Don't look for the Stros to win that horse race.

Hopefully, Beltran will be in the Stros' lineup on Friday night as they send Wade Miller to the hill in the first game of the Lone Star Series with the hard-hitting Rangers at Arlington. Redding and Roy O will pitch the next two games of the series.

Posted by Tom at 10:17 PM | Comments (0) |

McMurtry on "My Life"

Larry McMurtry, Texas' finest novelist and the author of the incomparable 1986 Pulitzer Price winner Lonesome Dove, reviews former President Bill Clinton's autobiography My Life in this NY Times Review of Books review. Mr. McMurtry gives the book a generally positive review, and observes the following:

During the silly time when Clinton was pilloried for wanting to debate the meaning of "is," I often wondered why no one pointed out that he was educated by Jesuits, for whom the meaning of "is" is a matter not lightly resolved.

To judge from this book, Clinton has never been able to understand why Kenneth Starr, the special counsel appointed to investigate Whitewater, pursued him so ferociously. The answer is to be found in the soil Kenneth Starr sprang from. His hometown, Thalia, Tex., lies along what local wits sometimes refer to as the "Floydada Corridor," a bleak stretch of road between Wichita Falls and Lubbock that happens to run through the tiny town of Floydada, Tex. It's a merciless land, mostly, with inhabitants to match. Towns like Crowell, Paducah and Matador lie on this road, and nothing lighter than an elephant gun is likely to have much effect on the residents. Proust readers and fornicating presidents will find no welcome there.

Posted by Tom at 9:18 AM | Comments (1) |

The legacy of business risk

From the always entertaining Stu's Views:

risk of doing business.gif

Posted by Tom at 7:03 AM | Comments (0) |

Methodist Hospital continues on the offensive

After the controversial split earlier this year (previous posts here) with longtime partner Baylor College of Medicine, The Methodist Hospital has been announcing a series of bold moves as it attempts to define its post-Baylor research and teaching role in Houston's famed Texas Medical Center. Yesterday, Methodist announced its boldest move yet -- a 30 year primary affiliation agreement with Cornell University's Weill Medical School in New York City.

No one can of another teaching hospital-medical school partnership in which such a vast distance separated the from its medical school. According to the Chronicle article on the deal, Methodist President Dr. Ron Girotto downplayed the mileage separating the hospital from Cornell, saying "distance is not an obstacle. Technology today makes anything possible -- the sharing of information, quality data and collaboration on research and patient care."

Cornell's Weill Medical College's primary teaching hospital has long been New York-Presbyterian Hospital which is one of the largest hospitals in the country. That affiliation will not change, as Methodist's deal with the medical school includes a Methodist affiliation with New York-Presbyterian, also.

Still unclear from Wednesday's announcement is how the affiliation deal will work in practice. Given the distance between Houston and New York, the relationship would appear to limit the typical type of faculty-student relationships that a teaching hospital typically enjoys with a medical school. Under the agreement, Methodist physicians can choose to have faculty appointments at Cornell, which Methodist believes will be a lure in recruiting. Methodist also contends that the affiliation will accelerate the development of the hospital's new research institute, which it recently announced.

Notably, the affiliation with Cornell and New York-Presbyterian is not an exclusive arrangement, and Methodist will continue to search for other medical school partners. Methodist forsees having multiple affiliations and are open to other ones in Texas. In that connection, talks are still ongoing between Methodist and the University of Texas Health Science Center at Houston, the other medical school in the Medical Center.

Posted by Tom at 6:20 AM | Comments (0) |

Enron Task Force adds charges in Nigerian Barge case

The Enron-related criminal case dubbed the "Nigerian Barge case" would already be in trial but for a conflict with the Judge's previously scheduled vacation that resulted in a postponement of the trial until mid-August. Using that delay to their advantage, the Enron Task Force yesterday filed a superceding indictment that added two new wire fraud charges against all six defendants and a new false statement charge against Defendant Dan Boyle, the former vice president of Enron's Global Finance unit. Previous posts on this case may be reviewed here.

The Chronicle article on this development speculates that the superceding indictment may result in a further postponement in the trial of the case, but that's highly unlikely. Inasmuch as the charges relate to the same transaction as the previous indictment in the case, there probably is not any unfair prejudice to the defendants in indicting them on the new charges, although the late indictment coming a month and a half before trial certainly calls into question the Task Force's handle on the case. If the new charges would justify a postponement of the trial date for the defendants, U.S. District Judge Ewing Werlein would probably dismiss the new charges before he would postpone the current August 16 trial date.

Posted by Tom at 5:53 AM | Comments (0) |

June 23, 2004

Stros stumble

Newly-acquired David Weathers served up Jason Kendall's first career grand salami and that's all she wrote as the Pirates cruised to a 7-2 win over the Stros at the Juice Box on Wednesday night.

Stros starter Pete Munro actually pitched reasonably well, giving up four hits and four runs over six and a third. But Weathers really screwed the pooch, giving Kendall only his second yak of the season. The Stros bats -- not exactly bursting with energy these days -- went into deep sleep after Kendall's tater put the game out of reach.

The biggest Stros news of the day was the rumor that the Stros were dangling Octavio Dotel as trade bait in a proposed three way deal with Oakland and Kansas City that would bring Carlos Beltan to the Stros. Beltran, 27, is one of the best young players in baseball, so he would be a wonderful addition to the Stros. However, the proposed deal violates the "too good to be true" because the term of Beltran's $6 million contract expires at the end of this season and my sense is that the Stros would not give up Dotel to rent Beltran for half the season. So, any such deal would probably have to involve working out a new deal with Beltran, which is a long shot at best given his prospects on the free agent market. Thus, I recommend not to get too worked up over this proposed deal -- I just don't think it will happen.

In other positive news, Andy Pettitte had a good outing this evening in Round Rock and will likely come off the DL for his next start. Look for Tim Redding to be the odd man out as Munro is pitching better and deserves a shot at the fifth spot in the rotation.

The Rocket tries to make sure the Stros take three out of four against the Bucs on Thursday night before the Stros ship off to Arlington to battle the vastly-improved Rangers in the World Series of Texas this weekend.

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

United revises bid for federal financing

As noted in this earlier post, the federal Air Transportation Stabilization Board announced last week that it had rejected Chicago-based United Airlines' application for a $1.6 billion federal loan guarantee, which was the foundation of United's reorganization plan to emerge from its pending chapter 11 bankruptcy case.

Well, that government credit enhancement is just too attractive to pass up. Yesterday, only six days after the Board's rejection of the prior proposal, United Airlines scaled back its request for federal loan guarantees to $1.1 billion from $1.6 billion and offered several other concessions in an effort to obtain the Board's approval of the request.

Interestingly, Sen. Peter Fitzgerald (R., Ill.), a staunch opponent of the airline-aid program, yesterday asked the acting inspector general of the Treasury Department to investigate whether "any inappropriate political pressure or intimidation has been or is being applied to" the Treasury nominee on the loan board.

If the ATSB ultimately turns United Airlines down for a third time, the carrier will be forced to overhaul its business plan, cut its expenses further and hunt for a financing package in the open market, which, of course, is exactly what United Airlines should be required to do. Inasmuch as the company is reasonably flush with cash (that's one of the advantages of operating in chapter 11 for a long time), United isn't in any immediate danger of liquidation. However, United's unrestricted cash, which was nearly $2 billion as of March 31, is projected to fall to under $800 million by year end. Airline analysts estimate that a comfortable level of unrestricted cash for an airline the size of United would be at least three times that amount. That's why United is trying so hard to obtain this federal credit enhancement and also why the ATSB should not grant it.

Meanwhile, the Wall Street Journal's Holman Jenkins, Jr. expands on Professor Ribstein's position that good economic policy not only allows companies to thrive, but also to die:

What should be causing beads of sweat on the policymaking community's collective brow is a structural impasse that makes it nearly impossible for failing airlines to die. Blame the bankruptcy courts, international route regulation, foolish antitrust prejudices or misguided investors. Blame Congress, which shouts "oligopoly" at any hint of an airline disappearing. Whatever the culprit, the country's in a bad fix. It has too many network carriers trying to shrink their way to profitability when what we really need are fewer, bigger network airlines. Three such carriers would be plenty and two would probably be enough in a world where regional jets are coming on strong and where low-cost, entrepreneurial operators will show up on any route when money's to be made by undercutting the incumbent.

Meanwhile, low-cost airlines now account for 29% of the business, up from single digits 15 years ago. They're moving out onto the longer-hop routes (partly because fewer Americans rely on the plane for short trips since the security hassles tipped the balance in favor of driving). Frontier, Southwest and others are even developing what look suspiciously like hubs and spokes.

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

June 22, 2004

Stros win third in a row

The struggling Stros are showing signs of life thanks to the lowly Pirates as they reeled off their third win in a row at the Juice Box on Tuesday night, 5-4.

Roy O pitched a gutty eight innings, giving up nine hits but no walks, and threw an incredible 24 first pitch strikes to the 33 batters that he faced. Morgan Ensberg came up with the key hit, a two out, two run triple in the seventh that came after the Stros had left a bushel full of runners on base in scoring position with less than two outs throughout the game.

You have to feel good for Ensberg getting the big hit, but the reality is that he has been extremely disappointing this season, with no yaks (after hitting 25 taters last season) and a paltry slugging percentage of .358, which is the same as the light-hitting Viz. In comparison, Barry Bonds, Jr.'s is slugging at an incredible .633 and Bidg, Bags and Kent are all ranging between .470 and .510, which is where Ensberg should be.

Pete Munro takes the hill tomorrow night as the Stros try to keep it going in the third game of the four game set with the Bucs. After the Thursday game, the Stros travel to Arlington for the first part of their annual home and home series with the Rangers.

Posted by Tom at 9:51 PM | Comments (0) |

Chiseling in on Oscar Wyatt's Enron asset play

Reuters reported Tuesday that Enron Corp. has received an offer for its CrossCountry Energy unit from an unidentified "investment-grade company" that is substantially larger than the earlier bid that Houston oilman Oscar Wyatt's company made earlier this year. This Chronicle story reports that the new suitor for the assets is Southern Union Co.

Wyatt and his financial partners (which includes Citigroup) offered Enron $2.2 billion for CrossCountry, a collection of Enron's North American natural gas pipelines. The Wyatt offer included $1.74 billion in cash, the assumption of $461 million in debt, and a $25 million "stalking horse" fee if Wyatt's group were to be outbid for the pipelines.

The new offer includes about $55 million more in cash and is not conditioned on the payment of a "stalking horse" fee. Consequently Enron's largest unsecured creditors are now requesting that U.S. Bankruptcy Judge Arthur Gonzalez accept the new offer instead of the bid from the Wyatt-led consortium. A hearing is scheduled on the matter this Thursday in New York.

Posted by Tom at 3:24 PM | Comments (0) |

Enron criminal defendants: This is your Judge!

One U.S. District Judge is doing something about the federal sentencing guidelines.

Here is the opinion.

Here is a follow-up NY Times article on the opinion.

Posted by Tom at 10:41 AM | Comments (0) |

Another tax shelter lawsuit

This NY Times article reports on the latest investor lawsuits that seek damages from German financial giant Deutsche Bank and several accounting, law and financial services firms -- including American Express -- for selling abusive tax shelters from 1999 to 2001. The investor plaintiffs in both cases, who collectively owe the federal government millions of dollars in back taxes as a result of the tax shelters being disallowed, are seeking to recover fees, interest and penalties.

Let's see if I understand the theory of the plaintiffs' case in these lawsuits. We rich people make speculative invesments in tax shelters to save big bucks from non-payment of taxes. We know that the deals are shady, but what the heck, we don't like paying taxes. Now that the tax shelters have been disallowed, we should not have to pay the taxes that we owed in the first place. Rather, these financial institutions should have to pay for indulging our greedy desire not to pay our share of taxes. How dare they take advantage of us like that?

Only in America.

Posted by Tom at 10:25 AM | Comments (0) |

June 21, 2004

Stros come back to beat Pirates

The Stros battled back from a four run deficit with a five spot in the fifth and rode fine relief pitching from Bullinger, Weathers, Miceli and Dotel to beat the Pirates, 7-4 on Monday night in the first game of their four game set at the Juice Box.

As usual, Barry Bonds, Jr was the hitting star, driving in four runs, three of which came on a key double in the fifth. Jason Lane pounded a solo yak, and the light-hitting Viz continues his recent rampage with three singles.

Two cautionary notes - JK left the game in the eighth with a sore wrist. Given that he missed considerable time with tendonitis in his left wrist last season, that is not good news. Chris Burke, are you ready? The other is that the Pirates pounded Tim Redding like a batting practice pitcher for eight hits and four runs in three and a third -- with an RSAA (explained here) approaching negative 10, it's time for the Stros to give the ball to someone other than Redding every five days.

The Stros send Roy O to the hill in the Tuesday night game to try to win their third in a row. Statistically, the Stros should be in third place (behind the Cards and Cubs, but in front of the Reds and Brewers), so there is a reasonable chance that the club will ascend to that position as the season wears on. However, overtaking either the Cards or the Cubs is increasingly appearing to be a pipe dream for the Stros.

Posted by Tom at 10:27 PM | Comments (0) |

Well, this is an interesting approach

Mike Ramsey, the Houston-based criminal defense attorney who is representing former Enron CEO and Chairman Ken Lay, has requested another meeting with the Enron Task Force to plead his case that Mr. Lay should not be indicted.

Ramsey's move in requesting the meeting with prosecutors is unusual, but the Enron case is such a hot button item culturally and politically that creative tactical decisions are necessary. Ex-Enron CEO Jeff Skilling asked for a similar meeting before he was indicted earlier this year, but it did not do much good -- Skilling was indicted on 35 felony counts a few days later.

Lawyers close to the case have said federal prosecutors plan to ask a grand jury any day to indict Lay on charges relating to the last few months he was at the helm of Enron as the company plummetted into bankruptcy in late 2001.

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

Sally Jenkins on Tiger Woods

Sally Jenkins is the daughter of Dan Jenkins, who is simply the best golf writer of all-time. However, Sally is currently writing on golf for the Washington Post, and she is fast joining her father as one of the best commentators on the golf scene. In this piece, Ms. Jenkins takes Tiger Woods down a notch or two over Woods' behavior during this past weekend's U.S. Open golf tournament. The following is a tidbit:

The Woods who played in the U.S. Open at Shinnecock Hills this week was not an especially great player, nor was he a very good guy. Among the things that Woods blamed for his final round of 76, his worst final round in an Open since turning pro, and 10-over-par finish: the weather, the United States Golf Association, modern photography, the press and his former coach, Butch Harmon.

My first suggestion for Woods's immediate and long-term recovery is that he spend four years in the Peace Corps. Planting crops in Ethiopia or Zaire while teaching children to read and write would have a salutary effect on his attitude, which at the moment resembles that of a spoiled Venetian princess.

Read the entire piece. Good stuff.

Posted by Tom at 8:42 AM | Comments (5) |

June 20, 2004

Stros take Angels series

The Stros took advantage of Wade Miller's gutty pitching performance and scored runs from unlikely sources as they beat the Angels 3-1 Sunday afternoon to take two out of the three game series at the Juice Box.

Miller gave up six hits and four walks in seven innings, but the only run the Angels could plate against him came when JK went brain dead and made an error when he double clutched an easy throw to first base on a two out, bases loaded grounder in the fifth. Lidge and Dotel had a couple of anxious moments in the eighth and ninth, but muddled through to secure the win.

Meanwhile, the Stros' fielded an incredibly weak lineup that included below average hitters Viz, Ausmus, and Eric Brumlett, but all three of those negative RCAA ("runs created against average," explained here) hitters contributed to the Stros' offense. Brumlett hit his second career yak in the fifth, and then Viz doubled and scored on Ensberg's broken bat single. Ausmus then plated the third run with a perfect suicide squeeze bunt in the sixth. Based on this veritable offensive explosion, Manager Jimy will probably play these guys for the next week.

The Stros are now 35-33 and trail the Cards (41-28) by 5.5 games in the NL Central. The Pirates (26-39) now visit the Juice Box for four games beginning on Monday night, and it would be a very opportune time for the Stros to get back in the NL Central race. Anything less than three wins over the next four games would not bode well for the Stros' chances for the remainder of the season. Redding, Roy O, Munro and the Rocket are the Stros' scheduled pitchers for the Pirates series.

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

That's one wild law firm

The Curmudgeonly Clerk sorts out a rather odd situation that developed in a husband and wife law firm in San Antonio.

An enterprising duo, to say the least.

Posted by Tom at 11:30 AM | Comments (0) |

Russian trial on capitalism

This NY Times article provides an excellent analysis of the trial of Mikhail B. Khodorkovsky, who, until his arrest eight months ago, was the chief executive of Russia's Yukos Oil, which he had transformed into one of Russia's biggest and most shrewdly operated companies. He also had amassed a personal fortune of at least $15 billion. Here is an earlier post on Yukos' financial problems.

The trial of Mr. Khodorkovsky is attracting widespread interest in Russia and around the world business community:

"This should be Russia's O. J. trial and should be the most public and most important bit of jurisprudence in modern Russian history," said Bernard Sucher, a Moscow investment banker, referring to the attention on the trial of O. J. Simpson in the United States. "Most people want to look deeply at what happened here in the 1990's, and this is a chance to come to terms with how the country ended up the way it did at the end of the Yeltsin years."

The charges against Mr. Khodorkovsky are essentially that he orchestrated Yukos' bilking of the Russian government to the tune of several billion dollars worth of taxes. Surprisingly, however, the market is not viewing the ominous tax debt as a death sentence for Yukos:

Yukos shares still soared on Thursday and Friday, suggesting that investors believe some sort of deal will be struck, possibly one in which the Russian government receives a stake in the company in exchange for settling the tax case.

Many of the early privatizations in the 1990's involved banks ostensibly lending money to industrial companies in exchange for controlling stakes, a widely derided program known as loans for shares. If the Russian government continues to assert itself with Yukos, then loans for shares may morph into shares for taxes, giving the Russian government a new foothold in the economy.

Some observors of the trial view it as a contest between competing visions for how Russia's economic power will be wielded in the post-Communist era:

Although the standoff between the men has been widely characterized as political, economic factors also forced Mr. Putin's hand. Last year, Mr. Khodorkovsky tried to sell a large stake in Yukos to an American company, Exxon Mobil, without consulting the Kremlin - at a time when oil was becoming a pivotal geopolitical and economic resource prized by Mr. Putin. Mr. Khodorkovsky had also tried to shop an oil pipeline deal with China, a move at odds with Kremlin policy. A senior Yukos official conceded in an interview in Moscow late last year that the confrontation between the two potentates was grounded in sharply differing visions of how to steer Russia's economic might.

For now, Mr. Putin's vision is winning out. He has made an example of Mr. Khodorkovsky, cracking down on him with all the remorseless determination of an old Soviet hand and winning the support of average Russians dismayed by the country's inequities.

And the models that Mr. Putin appears to favor are the managed economies of countries like Chile, China and Singapore, which blend market forces with a strong state role. Those economies were spared the free-market fluctuations that ravaged some developing nations beginning in the late 1990's - like Russia and Argentina, which were privatized hastily, before viable regulatory and legal structures were put in place as checks on hit-and-run profiteers.

"Khodorkovsky's personal fate in this is not the big picture," said Stephen M. Kotkin, director of the Russian studies program at Princeton. "The big picture is Russia's oil and gas holdings."

Dire predictions about financial fallout from Mr. Khodorkovsky's imprisonment last fall have not proved true so far. Foreign investors have not fled Russia in droves, as Mr. Khodorkovsky's Western advocates initially envisaged, and the country's economy is robust and thriving. The government is running a budget surplus, runaway inflation has been tamed, and the gross domestic product has risen at a brisk pace. From 1998, when the economy unraveled amid a financial collapse, to the end of 2003, Russian G.D.P. rose 38 percent, according to the World Bank - a stellar performance by any standard.

I particularly like Professor Kotkin's analogy for what's going on in Russian business these days:

Mr. Kotkin likens current Kremlin politics to a rugby scrum, with market reformers, hard-line security advisers and members of Mr. Putin's inner circle all wrestling for the upper hand in policy making. Mr. Kotkin suggests that if market reforms gain greater traction in Russia, then the rule of law, over time, will supersede the security apparatus - though he cautions that this is unlikely "in Putin's lifetime."

Russian business politics as a rugby scrum. Read the entire article.

Posted by Tom at 10:38 AM | Comments (0) |

It's definitely no resort

This NY Times article does a good job of describing what Lea Fastow, the wife of former Enron CFO Andrew Fastow, will face while serving her one year prison sentence at the Houston Federal Detention Center in downtown Houston.

Posted by Tom at 7:43 AM | Comments (0) |

June 19, 2004

Angels down Stros

The Angels jumped on the Rocket for nine hits and five runs in just over four innings on Saturday night as the Angels beat the Stros in the second game of their weekend series at the Juice Box, 6-4.

Bags with his second solo yak of the series and Bidg's two run double capped a four run Stros uprising in the seventh that made things interesting, but the rally waned as most Stros rallies do these days. David Weathers, just making it to town after the Hidalgo trade, made his Stros debut with two innings of scoreless relief.

By the way, Richard Hidalgo was 0 for 3 in the Mets' game tonight, and is now 0-7 as a Met. Those New York sportswriters will fillet Hidalgo before long.

Wade Miller takes the hill for the Sunday matinee at 1 p.m. against the Angels' Jared Washburn.

Posted by Tom at 10:39 PM | Comments (0) |

Analyzing the intractable economic problems of the Middle East

Marcus Noland is a senior fellow of the Institute of International Economics. Howard Pack is a professor of economics, business, public policy and management at the Wharton School. Messrs. Noland and Pack have collaborated on this interesting policy brief in which they examine the causes of the Middle East's seemingly intractable economic stagnation. The entire article is outstanding, and here are a few tidbits:

The Middle East is a demographic time bomb. According to the United Nations Development Program?s (UNDP) Arab Human Development Report 2002, the population of the Arab region is expected to increase by around 25 percent between 2000 and 2010 and by 50 to 60 percent by 2020?or by perhaps 150 million people, a figure equivalent to more than two Egypts. Even under the UNDP?s more conservative scenario, Bahrain, Kuwait, Qatar, and the United Arab Emirates will be the only Arab countries in 2020 with median ages above 30.

These figures suggest that the region as a whole will experience labor force growth of more than 3 percent for the next 15 years or so. On current trends, according to an Arab League report, unemployment in the region could rise from 15 million to 50 million over this period. Under plausible assumptions about the rate of productivity growth and required investment levels, the economies of the region will have to maintain investment rates on the order of 30 percent of GDP and income growth of 5 to 6 percent a year to absorb all this labor. This is a very tall order. And recent history is not reassuring.

The authors contend that pervasive negative attitudes toward foreigners is one of the primary barriers to investment of the foreign capital that the region desperately needs:

In the Zogby (2002) poll of Arab attitudes, Saudi males stand out as uniquely dissatisfied and pessimistic about their children?s future. Presumably these feelings are rooted in the reality of dwindling employment prospects, the 40 percent decline in per capita income from its peak in 1982, and the lack of political voice. Dissatisfaction and pessimism about the future are mildly correlated with age, education attainment, and internet access. The youngest, most advantaged sections of society have the bleakest appraisal of the future. It goes without saying that 15 of the 19 September 11 hijackers were Saudi males.
Less dramatic than terrorist attacks, though perhaps more important for economic development, are public attitudes toward foreigners and globalization. The 2003 Pew Global Attitudes survey revealed a significant level of discomfort with globalization in the Middle East. . . the percentage responding that globalization is good in three Middle Eastern countries is considerably less than in other regions of the world surveyed . . . The regional pattern of responses to three issues?the necessity of closing large, inefficient factories; the need to protect their way of life against foreign influence; and the desirability of societal acceptance of homosexuality . . . Relative to most respondents in the rest of the world, the Arabs were less willing to close inefficient factories, more committed to protecting the local way of life, and less tolerant of homosexuality.

The picture that emerges from the pattern of responses to the full set of Pew survey questions is of local populations that are relatively averse to change, instead favoring the maintenance of existing economic and social arrangements ? especially if the forces of change are regarded as emanating from foreign or nontraditional sources.

And interestingly, Messrs. Noland and Pack view Islam as only part of a much larger problem:

[C]oncerns manifested through Islam may simply be one symptom of more complex social processes. Islam may matter?not in the simple sense that belief in Allah dooms one to a low personal saving rate or that Islamic banking systems handicap financial efficiency?but rather in a more subtle way. Today there are Muslim communities in the Middle East that are relatively discomfited by aspects of ongoing social change. To the extent that adherence to Islam is a significant component of personal and communal identity, Islamic teachings will be one prism through which these developments are evaluated. This pattern of apprehension may be reinforced if Islam itself is regarded as being part of this contested terrain.

Yet the centrality of religious belief in this formative process should not be overstated. As revealed in the Zogby poll, religious orientation is generally only a secondary or tertiary source of personal identity in most Arab countries in the Middle East?rather Arab ethnicity is the primary identifier. It is almost surely the case that feelings toward foreigners or homosexuals are derived from some admixture of religious teachings and prevailing cultural norms. Religious beliefs are but one input in a complex reaction to globalization.

Again, read the entire brief. Hat tip to Professor Drezner for the link to this informative article.

Posted by Tom at 8:41 AM | Comments (1) |

Enron Task Force moving on Ken Lay

This Houston Chronicle story reports that the Enron Task Force plans to ask a grand jury to indict in the next two weeks Ken Lay on charges relating to the last few months he was CEO of Enron before the the company filed its December 2001 bankruptcy case.

The Houston-based grand jury has already heard five days of testimony this month, all focused on Lay. The witnesses have included Lay's former chief of staff Steven Kean and ex-Enron General Counsel Jim Derrick.

The Chronicle reports that that prosecutors are focusing on the following events in regard to Mr. Lay:

ĚLay's receipt of three memos or e-mails warning of financial trouble and fraud at the company within weeks of Jeff Skilling's abrupt August 2001 departure as CEO.

ĚHis public statements to investors and analysts.

ĚLay's attempt to find an alternative to having to substantially write down the "goodwill" or excess price paid for assets.

ĚHis trades of company stock for millions of dollars in company cash in those last months.

Lay is likely to be charged with some type of fraud, similar to the charges against pending against former Enron CEO Jeffrey Skilling and former Enron chief accountant Richard Causey. They are charged with insider trading, securities fraud, wire fraud, conspiracy and lying on Enron financial statements.

Posted by Tom at 5:25 AM | Comments (0) |

June 18, 2004

Stros end skid, beat Angels

The Stros had a relative slugfest on Friday night as JK drove in three runs with a double and triple and Pete Munro did his best imitation of the Rocket in leading the Stros to a 4-0 win over the Anaheim Angels.

Munro was outstanding, giving up only three hits and no runs over six and a third innings. Miceli, Lidge and Dotel cleaned up over the final three innings. Bags hit a mighty yak bottom of the eight for the Stros' final run and hopefully that will help him break out of a prolonged slump that has seen his slugging percentage drop well below Bidg's.

By the way, Richard Hidalgo was 0 for 4 in his first game with the Mets.

Things should be fun at the Juice Box on Saturday night as Clemens goes for his 10th win against the Angels' Ramon Ortiz (2-5;5.32 ERA).

In other Stros news, the Padres picked up Ricky Stone after the Stros had designated him for assignment when they acquired the two pitchers in the Hidalgo trade. Also, 25 year old AA Round Rock shortstop Tommy Whiteman, who has been having a tremendous season to date (.381 OBP; .473 SLG; 8 yaks), has been promoted to AAA New Orleans.

Posted by Tom at 10:07 PM | Comments (0) |

Jimy's penchant for the sacrifice bunt

The next time you hear the Stros' propaganda machine touting the brilliance of Jimy Williams' strategy of having Adam Everett's sacrifice at virtually every opportunity, please recall this Baseball Prospectus analysis:

Waste Not, Want Not: We'll use an example from the Astros game against St. Louis on June 4, but any Houston fan could name a half-dozen others. Craig Biggio led off the game with a double to left field, bringing up shortstop Adam Everett.

Nice start, right? On the way to a big inning, right? Wrong, if you're Jimy Williams, who's never met a pointless sacrifice bunt that didn't seem like a good strategic decision, especially with Everett at the plate. So far in 2004, Everett has 19 sacrifice bunts in 61 games, by far the most in the majors.

So, as ever, Williams asked Everett to lay down a bunt. He couldn't get the bunt down, and the Astros eventually stranded Biggio at second base.

In James Click's series on the sacrifice bunt, we learned that the threshold for a bunt in a runner on second, no out situation is .249/.305/.363--that is, if the batter's numbers are below that threshold, a bunt makes sense. Otherwise, the batter should hit away.

Everett is currently at .282/.316/.370 this year, which means that a bunt with a runner on second and no one out is a bad play with Everett at the plate (although, not as bad a play as you might think). And keep in mind, that situation is the best situation for a sacrifice bunt when you're trying to maximize the number of runs you score; any other situation early in a game is an even worse time to lay one down.

This is old news to most of you out there, but apparently Williams hasn't gotten the memo on this. In a lineup that features four players with a VORP in double digits, Williams' penchant for throwing away outs and runs early in games is especially baffling, and if Houston comes up short in the NL Central, he'll deserve a great deal of the blame.

Posted by Tom at 8:52 AM | Comments (0) |

United goes back to the drawing board

The federal Air Transportation Stabilization Board announced on Thursday that it has rejected Chicago-based United Airlines' application for a $1.6 billion federal loan guarantee, which is the foundation of the second largest U.S. airline's current reorganization plan to emerge from its pending chapter 11 bankruptcy case. The ATSB concluded that "the likelihood of United succeeding without a loan guarantee is sufficiently high so as to make a loan guarantee unnecessary." The ATSB represents the Treasury Department, the Department of Transportation, and the Federal Reserve.

Nevertheless, the political pressure is already mounting to undermine the ATSB's decision. House Speaker Dennis Hastert, R-Ill., said he favors reconsideration of United's application. Moreover, United said in a statement that it will bring important modifications to its application and request reconsideration. Finally, United's union members have been hammered with deep pay cuts during the reorganization, so Union leadership reacted angrily to the ATSB's announcement.

In that connection, a reconsideration appears at least reasonably possible because the ATSB decision was a split vote. Treasury Undersecretary Brian Roseboro and Fed Governor Edward Gramlich voted no, while Transportation Undersecretary Jeff Shane voted to defer a decision to give the airline more time.

By all accounts, United's new business plan was far superior to its previous ones. During its chapter 11 case, the company has cut its annual expenses by about $5 billion. However, the airline industry has continued to change rapidly during United's chapter 11 case as a group of successful discount carriers now controls 25% of the domestic market. With their much higher costs, big airlines such as United have been losing billions of dollars a year by matching the discounters' fares. Meanwhile, fuel prices have skyrocketed, making matters worse for the big boys.

The ATSB's decision continues an admirable Bush Administration policy of being relunctant to bail out airlines. The ATSB was set up by Congress three years ago to handle the doling out $5 billion in direct grants to the industry and administering up to $10 billion in loan guarantees. At that time, the then-secretary of the Treasury and Federal Reserve Chairman Alan Greenspan criticized the idea of loan guarantees. The loan board received 16 applications for guarantees before the June 2002 deadline, and was tight-fisted in doling out aid. Eight applications were denied. The six that were issued amounted to about $1.5 billion.

The decision has no immediate effect on United's operations in its pending chapter 11 case, which is a year and a half old now. Despite the political knashing of teeth over the ATSB's decision, the decision is the correct one. Hopefully, the decision will stand and simply force the creditors with stakes in United's survival to share the full economic risk of reorganizing United. As Professor Ribstein has articulated eloquently, risk of loss and threat of failure are powerful inducements to reorganize a big company the right way.

Posted by Tom at 5:58 AM | Comments (0) |

June 17, 2004

Cubs sweep Stros

The Stros once promising season sank to the bottom on Thursday night as the Cubs completed a four game sweep of the Stros at the Juice Box, 5-4.

The Stros are now 33-32 and in fifth place in the NL Central. Since peaking at a season-high 10 games over .500 at 21-11 and leading the NL Central by three games on May 11, the fifth-place Astros have gone 12-21 and are now four and a half games behind the Cards. They have lost four in a row, six of their last seven, and 17 of their last 26 games.

For the first part of this hideous past month, the Stros hitting was decent and the pitching generally -- with the exception of Clemens -- was below average. The pitching has turned around over the past two weeks, but the hitting has gone south as the Stros scored a total of eight runs in the four games with the Cubs.

Roy O battled gamely tonight, giving up 4 runs on 11 hits through seven tough innings. However, journeyman Glendon Rusch handcuffed the Stros, and a mini-uprising in the ninth spiced by Jason Lane's first homer of the season petered out.

The Angels come to town tomorrow for a weekend series at the Juice Box as the Stros search for that elusive winning formula. Pete Munro will likely start for the Stros, so expect some hard-hitting in this one, at least from the Angels.

Posted by Tom at 9:45 PM | Comments (2) |

More on Hidalgo trade

The Chronicle reports today that the other player in the Stros' probable trade of Richard Hidalgo is Mets' right-handed relief pitcher, David Weathers. Here is what Baseball Prospectus says about Weathers:

Weathers can be a cheap, serviceable back-end piece of almost every team's bullpen, fill 70 something innings, and not embarrass himself. There's some value in that, but he'd be well-served to try and sneak onto a team with a bullpen in flux, steal 15-20 saves and then get someone to bite on him as a closer. Billy Beane would probably be willing to sign on for a cut of the proceeds from the subsequent free agent deal.

Weathers, who is 35 and a 14 year veteran, is earning $3,93 million this season. Hidalgo has been on the trading block for two years since he took a nosedive from a production standpoint after signing an absurdly overpriced contract on the heels of an outstanding 2000 season. Hidalgo is currently "earning" $12 million this season, and will be owed a $2 million buyout after the season because no team in their right mind would pick up his $15 million option for next season.

So, this proposed trade is a salary dump for the Stros for their mistake of grossly overpaying for Hidalgo. I think it is a mistake for the Stros to give up on Hidalgo, but there is no question that they badly overpaid him over the term of his current contract. Sometimes it's easier for team management to trade a player rather than face their own mistakes.

UPDATE: The Stros and Mets pulled the string, as Hidalgo goes to the Mets for Weathers and minor leaguer Jeremy Griffiths, a 26 year old righthander who will begin in the Stros' organization at AAA New Orleans. Griffiths is 5-2 with a 3.47 ERA in 13 starts for AAA Norfolk this season, allowing 63 hits while walking 29 and striking out 31. Here is Baseball Prospectus' analysis of him coming into this season:

Griffiths managed to drop his walk and home runs allowed rate some last year, but NL hitters lit him up with a .328 batting average against. A pedestrian pitcher with a fastball that's neither fast nor big on movement, the Mets' 2004 season's in big trouble if Griffiths gets those projected 15 starts.

Well, certainly not a great trade for the Stros by any stretch. However, a good trade for Hidalgo was a dream once the Stros overpaid for him after his great 2000 season.

Posted by Tom at 8:58 AM | Comments (0) |

A tax lawyer's view on tax simplification

From the incomparable Stu's Views:

tax simple.gif

Posted by Tom at 5:55 AM | Comments (1) |

Not so fast, Jenkens & Gilchrist

This NY Times article reports on a scrape that Dallas-based law firm Jenkens & Gilchrist got into with a New York judge over an unauthorized letter that the firm recently sent to clients who bought tax shelters that the firm promoted. Here are earlier posts on Jenkens & Gilchrist's tax shelter-related problems.

Jenkens & Gilchrist agreed in March to pay $75 million in settlement of a class-action lawsuit that had been brought on behalf of over 1,100 clients of the firm who had bought the disputed tax shelters. The settlement included some provisions for protecting the clients' identities in court records that would be available to the general public.

However, in a letter that Jenkens & Gilchrist sent to its clients on May 28, the law firm offered the opportunity to stay completely out of the public record of the case by accepting just $100 from the firm rather than each client's share in the $75 million settlement.

That offer went over about as well as a fart in church with the judge in the class action case. U.S. District Judge Shira A. Scheindlin sent a rather unusual letter of her own yesterday to the 1,100 Jenkens & Gilchrest clients instructing them that they should ignore the Jenkens & Gilchrest letter because she had not approved it as part of the settlement.

A lawyer representing Jenkens & Gilchrist said yesterday that the firm had withdrawn the offer to its clients contained in the letter and that the whole affair had been a big misunderstanding.

I guess so.

However, none of these machinations over the proposed class settlement will hide the Jenkens & Gilchrist clients' identities from the Internal Revenue Service. In May, U.S. District Judge James Moran ordered the firm to turn over the names of all its tax shelter clients to the I.R.S.

Posted by Tom at 5:49 AM | Comments (0) |

June 16, 2004

Scruffin' Stros lose again

The Stros lost their third straight game to the Cubs on Wednesday night, 4-1.

The Stros wasted a good pitching performance be Tim Redding, who gave up two runs on eight hits over seven innings. But the Stros continue to scruff at the plate, scattering a bunch of singles off of Greg Maddux around one extra base hit (a game opening double by Bidg). Nothing is looking good for the Stros right now, as Everett has a hitch in his giddyup, Hidalgo is on the trading block and not playing much, and Berkman has cooled off after being the only consistently good hitter over the past month.

Roy O tries to avoid the sweep tomorrow night. The Stros are in free fall, and it's getting ugly at the Juice Box, folks.

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

Andersen loses appeal of its criminal conviction related to Enron

This Chronicle story reports that the Fifth Circuit Court of Appeals in New Orleans announced earlier this afternoon that it has affirmed the 2002 criminal conviction of Enron Corp's former accounting firm, Arthur Andersen for obstruction of justice.
Here is the Fifth Circuit's opinion.

Posted by Tom at 3:57 PM | Comments (0) |

Hidalgo deal almost done?

Reports out of New York are that the Mets and the Stros are close to a trade that would send the Stros' Richard Hidalgo to the Mets.

The following is recently exiled Brandon Duckworth's pitching line from last night's game at AAA New Orleans:

Player Name IP H R ER BB K HR ERA

B.Duckworth 2.2 7 6 6 1 1 0 20.25


Posted by Tom at 11:58 AM | Comments (0) |

Holman Jenkins on Reagan's legacy to business

Holman Jenkins, Jr.'s Wall Street Journal ($) Business World column today is a nice tribute to the late President Reagan's legacy toward the business community. Here is a tidbit:

The late president came into his political maturity as a traveling spokesman for General Electric, a company that each age seems to rediscover as an icon of American industry. Mr. Reagan traversed the land and heard GE executives complain about taxes and regulation, and, lo, somehow he understood that this was a bad thing, which was an achievement for his time.

Mr. Reagan's GE years are shrouded in mystery, or at least shrouded in the discarded newspaper morgues of a hundred defunct small-town newspapers in places he visited and spoke on GE's behalf. He received a treatment not unlike the rigorous apprenticeship afflicted on future CEOs of GE, shipped from place to place, meeting the company's far-flung employees, seeing its various businesses up close. His GE minder, Ed Langley, was fond of saying that Mr. Reagan was "marinated in the middle class" in a way no politician could match, an experience that would have "turned Jane Fonda into Margaret Thatcher."

Mr. Reagan drew a novel lesson from this experience: that corporations were full of hardworking, inventive people creating things of practical use to their fellow Americans. He failed to notice the befouling of any wetlands or the extinction of any owls. To many critics who even now are starting to pipe up, Mr. Reagan was an enemy of the poor -- because to be supportive of business was, ipso facto, to be an enemy of the poor. He would have understood; he was once a business basher himself. In 1948, Mr. Reagan stumped right along with Harry Truman, giving speeches that blamed the excessive profits of greedy businessmen for inflation.

Here resides the single most overlooked achievement of Mr. Reagan's legacy, what Bear Stearns economist David Malpass calls his "reminding us that the private sector is OK."

Read the whole piece.

Posted by Tom at 7:03 AM | Comments (0) |

KPMG tax shelter snags some big fish

A KPMG tax shelter that the Internal Revenue Service last year declared abusive snared a group of prominent American companies, reflecting the popularity of efforts to reduce corporate taxes has become. Here are earlier posts on KPMG's mounting problems relating to promotion of such tax shelters. The highly aggressive shelter that KPMG promoted was called the "contested liability acceleration strategy," or CLAS, and it has been estimated that the promotion of the shelter generated $20 million in fees for the firm..

This Wall Street Journal ($) article reports that the IRS contends tht the KPMG promoted shelter generated at least $1.7 billion in tax savings for more than 25 companies. Delta Air Lines, Whirlpool Corp., Clear Channel Communications Inc., WorldCom Inc., Tenet Healthcare Corp. and the U.S. units of AstraZeneca PLC and Fresenius Medical Care AG all bought the shelter. Apparently, several other prominent companies signed agreements to buy the shelter, but it was unclear whether those companies actually implemented it.

A federal grand jury in Manhattan is currently investigating KPMG's past tax-shelter activities. At this point, it's not known what penalties the IRS will seek from KPMG in connection with CLAS or other past shelter sales.

Posted by Tom at 4:54 AM | Comments (0) |

More Baylor-Methodist split fallout

Following on this post of earlier this week regarding the brewing divisions in the Texas Medical Center resulting from the decision of Baylor College of Medicine to terminate its 50 year relationship with the Methodist Hospital, this Chronicle story reports on Dr. Charles Brunicardi's resignation as the Methodist Hospital's chief of surgery, which is the first key defection from Methodist in the battle between Methodist and Baylor to retain staff members.
Dr. Brunicardi did not resign from Methodist's medical staff and will continue treating patients and performing surgical procedures at Methodist.

Dr. Brunicardi is a heavyweight in the Medical Center, and his defection is a blow to Methodist. Stay tuned as the battle for doctors between Baylor and Methodist heats up.

Posted by Tom at 4:32 AM | Comments (0) |

June 15, 2004

Going, going, almost gone

The Cubs scored three runs in the top of the ninth on Lance Berkman's two base error and Octavio Dotel's dubious pitching as the Cubs downed the fading Stros for the second straight night on Tuesday, 4-2.

The Stros wasted the second straight solid pitching performance by Wade Miller, who gave up only a run on four hits, one walk and struck out six in six and a third innings. The Cubs' Carlos Zambrano was just as good, cuffing the Stros to two runs on six hits over six frames. Ensberg plated a couple of runs in the sixth to give the Stros a 2-1 lead, which they held to the fateful ninth when things quickly spiraled out of control.

Berkman's two base error led off the frame, and then Dotel proceeded to give up three more hits and three runs (none earned because of the Berkman error) before the carnage was over.

Tim Redding, who is quickly fading from mediocrity to awful, takes the hill for the Stros in the Wednesday night game against Greg Maddux. The Stros are now 32-30 and in fifth place in the NL Central. A promising season is quickly fading away.

Posted by Tom at 10:17 PM | Comments (0) |

John C. Nabors, RIP

Long-time Houston and more recently Dallas-based business litigation attorney John C. Nabors died on Monday. Mr. Nabors was recently diagnosed with cancer.

Mr. Nabors was well-known in both Houston and Dallas business law circles, and was perhaps best known for his long representation and friendship with the mercurial Jack Stanley, who is a legendary Texas promoter of highly-leveraged oil and gas deals and an aggressive utilizer of chapter 11 to restructure debt that he raised in those deals.

Update: Here is the Dallas Morning News obituary on Mr. Nabors:

Nabors, JOHN C., passed away on June 14 in Dallas, Texas after a brief illness.

John graduated with a B.B.A. from the University of Texas at Austin in 1965. He then received a J.D. from the University of Texas School of Law with honors in 1967, where he was an associate editor of the Texas Law Review, a member of Chancellors, and a member of the Order of the Coif.

John Nabors was a Senior Partner at the law firm of Gardere Wynne Sewell LLP in Dallas, where he had practiced since 1989. He was a member of numerous committees and areas of service during his tenure there, including most recently being a Trial Team Leader in the firm's Trial Section. Before joining the law firm of Gardere Wynne Sewell LLP, he was a partner at the law firm of Liddell Sapp Zivley Hill & Laboon in Houston where he began practicing in 1967. He maintained significant client and personal relationships in Houston after moving to Dallas in 1989.

John was admitted to practice before the US Supreme Court, Texas Supreme Court, US Court of Appeals for the Fifth and Eleventh Circuits, US Court of Claims, US District Courts for the Southern, Northern, Western and Eastern Districts of Texas, as well as the US District Court for the District of Nevada and the Superior Court for the State of California, County of Los Angeles. His professional memberships include the following: American Bar Association, American Bar Foundation (Life Member), Texas Bar Association, Dallas Bar Association, the Dallas Bar Foundation (Fellow), Houston Bar Association, and Texas Bar Foundation. Among his many other accomplishments, he was voted a Texas Super Lawyer in 2003 and 2004 by his peers, was featured in an article in the American Lawyer Magazine in 2002, and was a member of the Outstanding Lawyers of America.

He is survived by his wife of 22 years, Kathleen, and daughters Kathleen Nabors, Sarah Nabors, Carol Spiars and son-in-law Kevin Spiars, son John David Nabors, and grandchildren, John Nabors, Nicholas and Elijah Spiars, and sisters-in law Maureen Englishbey, Colleen McGlocklin, MaryEllen Raymond, Eileen Jacobson, and Tracy Sudan, and 10 nieces and nephews.

John was an avid outdoorsman who loved spending time on his operating cattle ranch in Hamilton, Texas. In 1978 John set a Guiness Book record by winning the longest canoe race in the world (419 miles). John was a member of The Houston Club, The Petroleum Club and the Brookhollow Golf Club. He will be dearly missed by his many friends and relatives. A private family burial service will be held on Wednesday in Hamilton, Tx. A memorial service will be held at 10:00 a.m. Friday, June 18 at Sparkman-Hillcrest Chapel, Northwest Highway, Dallas, Texas. Memorials may be made to Leukemia and Lymphoma Society. Dignity Memorial Sparkman Hillcrest 7405 W. Northwest Hwy. Dallas (214) 363-5401

Posted by Tom at 9:17 AM | Comments (0) |

Onion nails it again

The Onion is on a hot streak.

Posted by Tom at 7:57 AM | Comments (0) |

New trendy graduation present for girls

I have a daughter graduating from high school next year. She will not be receiving this graduation present.

Posted by Tom at 7:55 AM | Comments (2) |

Saving Medicare

Laurence Kotlikoff writes this rather ominous Tech Central Station piece regarding the financing debacle related to Medicare, in which he observes the following:

Buried deep in the bowels of the recently released Medicare Trustees' Report is the first-ever official estimate of Medicare's true long-run costs. Previous reports have considered only short- and medium-term costs. The new "infinite horizon" estimate adds up all future costs, telling us the amount of money we'd need today to cover Medicare's commitments. This present value bill is unimaginably large -- $73.6 trillion to be precise! It's almost seven times GDP, twice the size of private net wealth, and 14 times official federal debt.

Can we pay this colossal sum? Medicare's trust fund is a paltry $256 billion. And the present value of its future payroll taxes is only $12.0 trillion. Historically, we've used general revenues to cover the gap between Medicare's expenditures and receipts. But continuing to do so will require a 50 percent immediate and permanent hike in federal income taxes! Alternatively, we can wait and raise taxes by an even larger percentage in the future.

Professor Kotlikoff's solution is to limit benefit growth, and here is how he proposes to do it:

All Medicare participants would receive individual-specific vouchers on October 1st of each year to purchase insurance coverage for the following calendar year. The size of the voucher would be based on the participant's current medical condition (an idea first suggested by Peter Ferrara of the Institute for Policy Innovation and John Goodman of the National Center for Policy Analysis). A healthy 67 year-old might get a voucher for $7,500, whereas an 85 year old with pancreatic cancer might get a voucher for $85,000. The vouchers would take account of the participant's age, region, sex, and other factors that affect health costs. Because those in the worst medical shape would get the largest vouchers, insurance carriers would be happy to sign them up.

All insurance carriers would have to cover a basic set of medical services and prescription drugs. But Medicare participants would be free to pay out of pocket for additional coverage. The government would keep up-to-date records about each participant's health status, release this information to insurance companies at the participant's request, and assign insurers for those who don't sign up on their own.

The government would cap total MSS voucher expenditures so that expenditures per beneficiary grow no faster than wages. Medicare participants would see their real medical benefits rise, just not as fast as in the past. And they'd realize that no matter how sick they got, they'd always receive a voucher large enough to purchase insurance coverage for the following year.

Compare Professor Kotlikoff's plan with the one that John Kerry is proposing. And then compare it to the one that the Bush Administration is proposing . . . er, except that the Bush Administration is not proposing any reform for this mess. Rather, the current administration's idea of reform is its dubious Medicare prescription drug legislation of last year.

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

VDH on America's odd relationship with the radical Islamic fascists

Victor Davis Hanson's latest is up at NRO and, as usual, his historical perspective is right on the money:

As long as the mythical Athenians were willing to send, every nine years, seven maidens and seven young men down to King Minos's monster in the labyrinth, Athens was left alone by the Cretan fleet. The king rightly figured that harvesting just enough Athenians would remind them of their subservience without leading to open rebellion ? as long as somebody impetuous like a Theseus didn't show up to wreck the arrangement.

Ever since the storming of the Tehran embassy in November 1979 we Americans have been paying the same sort of human tribute to grotesque Islamofascists. Over the last 25 years a few hundred of our own were cut down in Lebanon, East Africa, Saudi Arabia, Somalia, Yemen, and New York on a semi-annual basis, even as the rules of the tribute to be paid ? never spoken, but always understood ? were rigorously followed.

In exchange for our not retaliating in any meaningful way against the killers ? addressing their sanctuaries in Afghanistan, Iran, Iraq, Lebanon, Libya, or Syria, or severing their financial links in Pakistan and Saudi Arabia ? Hezbollah, al Qaeda, and their various state-sanctioned kindred operatives agreed to keep the number killed to reasonable levels. They were to reap their lethal harvests abroad and confine them mostly to professional diplomats, soldiers, or bumbling tourists, whose disappearance we distracted Americans would predictably chalk up to the perils of foreign service and exotic travel.

Despite the occasional fiery rhetoric, both sides found the informal Minoan arrangement mutually beneficial. The terrorists believed that they were ever so incrementally, ever so insidiously eroding America's commitment to a pro-Western Middle East. We offered our annual tribute so that over the decades we could go from Dallas to Extreme Makeover and Madonna to Britney without too much distraction or inconvenience.

But then a greedy, over-reaching bin Laden wrecked the agreement on September 11. Or did he?

Read the entire piece.

Posted by Tom at 7:19 AM | Comments (0) |

How not to run a golf telecast

ABC's coverage of golf tournaments is the worst of any television network, primarily because of commentator Steve Melnyk's compulsion to say something regardless of whether it makes any sense. However, on Sunday, ABC really outdid themselves in providing bad coverage when they switched from a three man playoff for the Buick Open Tournament to that television classic that simply cannot be delayed, "America's Funniest Videos." Absolutely incredible bad judgment.

I do hope that ABC on course commentator Billy Ray Brown can find a job with a real golf television crew, such as the CBS crew. Billy Ray is quite good.

Posted by Tom at 5:31 AM | Comments (0) |

June 14, 2004

Skilling gets some scratch

U.S. District Judge Sim Lake approved an agreed order that allows ex-Enron CEO Jeff Skilling to receive what could be approximately $1 million in annual interest earnings off a portion of the $66 million in assets that Judge Lake froze earlier pursuant to the Enron Task Force's request. Here is Judge Lake's freeze order in the Skilling case.

As part of the deal that led to the agreed order, Skilling will abandon his appeal of Judge Lake's earlier freeze order that granted the Task Force's motion to freeze about $55 million of Skilling's liquid assets, his River Oaks home in Houston, and a Dallas condo.

The judge's new order allows $3.7 million from the frozen assets to be applied to a margin debt balance and also states that, if Skilling is convicted, the government could seek forfeiture of what remains of the $23 million funds in trust that one of Skillings' law firm holds to defend Skilling in criminal and various civil lawsuits.

Skilling has pleaded not guilty to 35 charges in a 57 page indictment that accuses him and former Enron chief accountant Richard Causey of a wide range of securities fraud, false statements, insider trading and conspiracy charges. The Task Force alleges they lied and schemed to pump up Enron's stock price to enrich themselves at the expense of the company and its shareholders. Defense lawyers for Skilling and Causey are expected to defend the cases primarily on the grounds that all of the deals that Skilling and Causey approved at Enron were were reviewed by numerous outside lawyers, consultants, and accountants who approved the deals.

Posted by Tom at 10:24 PM | Comments (0) |

Cubs down Stros

Mark Prior -- the best young pitcher in baseball today -- beat the one of the best pitchers of all-time on Monday night as the Cubs easily beat the Stros at the Juice Box, 7-2.

Still rehabbing from an injury, Prior dominated the Stros over five innings, giving up five hits, no runs and striking out eight. The Stros were able to eke out of couple of meaningless runs in the bottom of the ninth after Prior was long gone.

Meanwhile, the Cubs knocked the Rocket around pretty hard, pounding out 10 hits and five runs in Clemens' five frames. Todd Walker was a one man wrecking crew for the Cubbies, cranking out two homers and a triple among his four hits. Alas, the loss was Clemens' first of his magical season.

The biggest news of the rather listless evening for the Stros was Jimy Williams' move of the second best hitter in baseball -- Lance Berkman -- from fifth to third in the batting order (Bags was moved to fifth in the order). Although this should have been done weeks ago, the fact that the notoriously stubborn Williams did it at all is tantamount to a breakthrough in diplomatic relations between the Israelis and the Palestinians.

The Stros really need Wade Miller to step up in the Tuesday night game against Carlos Zambrano, who is one of the best pitchers in the league this season. Tim Redding takes on Greg Maddux in the Wednesday game, and Roy O goes against Glendon Rusch on Thursday.

Posted by Tom at 10:01 PM | Comments (0) |

The Saudi paradox

Michael Scott Doran is Assistant Professor of Near Eastern Studies at Princeton University and Adjunct Senior Fellow at the Council on Foreign Relations. In this Foreign Affairs article, Professor Doran analyzes the political paradox that confronts the leaders of Saudi Arabia:

Saudi Arabia is in the throes of a crisis, but its elite is bitterly divided on how to escape it. Crown Prince Abdullah leads a camp of liberal reformers seeking rapprochement with the West, while Prince Nayef, the interior minister, sides with an anti-American Wahhabi religious establishment that has much in common with al Qaeda. Abdullah cuts a higher profile abroad -- but at home Nayef casts a longer and darker shadow.

In this Washington Post op-ed, Thomas Lippman, a former Washington Post correspondent in the Middle East, is an adjunct scholar at the Middle East Institute, frames the conflict in the following fashion:

Saudi forces will win their gun battles with the terrorists. The greater challenge before the House of Saud is to satisfy the aspirations of the majority -- and maintain their security and economic ties with the United States -- without further inciting the religious extremists whose rhetoric gives cover to the terrorists. The task is especially difficult because the royal family's sole claim to legitimacy is its role as the upholder of Islam. To the extent that the regime embraces social progress that can be depicted as un-Islamic, and especially if it appears to do so at the behest of the United States, the backlash could elevate the violence of the past year into a full-scale insurrection.

Hat tip to Craig Newmark for the links to these insightful pieces.

Posted by Tom at 8:12 AM | Comments (0) |

The intersection of intelligence and politics

Herbert E. Meyer served during the Reagan administration as special assistant to the director of Central Intelligence and vice chairman of the CIA's National Intelligence Council. In this Wall Street Journal op-ed, Mr. Meyer points out that intelligence is a nation's radar in time of war. America's radar is currently broken and Mr. Meyer observes that President Bush's prospects for re-election may depend on how fast he moves to repair it. In noting President Bush's failure to replace George Tenet and infuse fresh blood into the CIA during the first four years of his administration, Mr. Meyer quotes former Reagan Administration CIA chief, William Casey:

"When you get elected president, you must move fast to put your own people at Justice and CIA. In different ways, these are the two bureaucracies that can destroy a presidency."

Mr. Meyer then summarizes well the intelligence failures of the CIA during the Bush Administration:

The 9/11 attacks were themselves the worst intelligence failure in our country's history, caused largely by the CIA's inability to penetrate al Qaeda, to track the 9/11 terrorists themselves as they traveled the world to plan their deadly mission, and then to share whatever information the agency did collect with the FBI. And whatever may turn out to be the truth about Iraq's weapons of mass destruction -- whether they were destroyed or moved to Syria or Iran before Saddam Hussein's overthrow -- it's obvious that the CIA failed to provide an accurate assessment of what U.S. forces would find in Iraq when they got there.

In addition, the CIA failed to project Saddam Hussein's war strategy -- to melt into the population and then launch guerilla attacks rather than fight our army head-on in the field -- failed to project the sorry state of Iraq's physical infrastructure including its oil pipelines and electric grids, and failed to accurately project the edgy, not-very-grateful attitude of Iraq's political factions. And whatever may be going on with Ahmed Chalabi, the CIA's clumsy efforts to discredit him through leaks to selected news organizations have made the president himself collateral damage.

One other intelligence failure, which has received less attention than these but which may turn out to be the most serious of all, has been the CIA's failure to draw an accurate picture of the prewar links between Iraq and al Qaeda. While the CIA claims that Saddam Hussein and Osama bin Laden had no more than an arms-length relationship, journalists including Stephen Hayes and Laurie Mylroie have uncovered an overwhelming volume of information which, when you pull the pieces together into a pattern, make a persuasive case that Iraq and al Qaeda worked closely together in the months and years leading up to 9/11. And as the information confirming this linkage has piled up, the CIA has obstinately refused to reconsider its judgment, preferring instead to trash the journalists who have so obviously run circles around its own collectors and analysts.

Mr. Meyer notes that this institutional CIA obstinancy is reminiscent of an earlier episode during the early stages of the Reagan Administration:

This is an eerie replay of what happened in the early 1980s, when the CIA bureaucracy insisted -- in the face of all experience and common sense -- that the Soviet Union had nothing to do with the attempted assassination of the Pope. When journalists including Claire Sterling and Paul Henze uncovered powerful evidence of Soviet involvement, the CIA tried to discredit the journalists rather than consider their information and its horrifying implication. It took a special ad hoc team of agency officials pulled together by Casey over the "intelligence professionals" objections -- a word that doesn't begin to describe the Operations Directorate's behavior; this was the nastiest, most vicious episode of CIA infighting I've ever seen -- to finally figure out what really happened.

What exactly is the CIA's problem? Mr. Meyer provides this insight:

During the Clinton administration, both parts of the CIA (collecting information and interpreting that information into patterns) were allowed to degrade. George Tenet has worked hard to improve the agency's collection capabilities; if our espionage service is in good shape a decade from now (it takes a long time to rebuild a spy service) he will deserve much of the credit.

The big failure -- and the real source of all the failures in these last few years -- lies in the agency's abysmal analytic skills. What's happened, very simply, is this: The dot-connectors got shoved aside and were replaced by bureaucrats, such as Mr. Tenet himself and his key deputies. Think for a moment of our country's great scientific research labs, such as the Salk Institute, Cold Springs Harbor Labs or Rockefeller University. Each one, and others like them, are headed by world-class scientists with proven track records of success (often with Nobel prizes to prove it) and who have now reached that stage in their careers when they can put aside their own research to manage teams of scientists who will make the next breakthroughs. Because these leaders have themselves succeeded so brilliantly, they have superb judgment on whom to hire, which projects to back and which to set aside -- that priceless, unquantifiable gut feel for where the big payoff lies -- what equipment to purchase and how to structure the organization itself.

It's the same with intelligence. You cannot have a first-class intelligence service unless you put at the very top of it men and women with proven records of success at spotting patterns, at seeing where the world is going and what the next threats are likely to be long before they become visible. Intelligence isn't org charts; it's people. Get the right ones in place and all the organizational problems somehow get resolved. Indeed, the one quality all our great CIA directors have shared -- Allen Dulles, John McCone, Bill Casey among others -- is this remarkable talent for spotting patterns and connecting the dots.

Mr. Meyer's recommendation for Mr. Bush?:

In light of today's terrorist threat, President Bush might want to take a page from President Reagan's playbook. When he named Bill Casey to head the CIA, his orders were to get control of the agency -- fast -- and to turn it from a lumbering bureaucracy whose judgments and predictions often were flawed into a razor-sharp operation that was playing offense.

Read the entire op-ed. Regardless of the outcome of the upcoming Presidential election, a long-term bipartisan plan to improve America's intelligence gathering and analysis needs to be devised and implemented.

Posted by Tom at 7:51 AM | Comments (0) |

Methodist: "Docs, time to choose"

This earlier post reported on the controversial decision of Baylor College of Medicine earlier this year to sever its long ties with The Methodist Hospital and switch its teaching hospital relationship to St. Luke's Episcopal Hospital. That news rocked the medical community in and around Houston's famed Texas Medical Center.

Well, it looks like Methodist is upping the ante on Baylor. This Chronicle story reports on Methodist's move to create a special corporation that will employ doctors effective July 1. The corporation may force Medical Center doctors to decide between Baylor and Methodist, which -- as noted earlier here -- has been a major issue since Baylor ended their historic relationship.

Apparently, that difficult choice has already been put to Baylor doctors who are Methodist division chiefs. The physicians have been asked to stay and told they cannot maintain practices at St. Luke's or a new clinic that Baylor plans to build.

In creating the new physicians' organization along with a previously announced research institute, Methodist will allow be able to hire physicians and scientists on the condition that they do not work for Baylor. Texas hospitals typically create such physician organizations because of the state law that forbids hospitals from employing doctors in order to lessen the pressure that a hospital's financial conditoin would impair doctors' medical decisions.

Methodist's new organizations turn up the heat on the festering issue that has loomed since the breakup of the historic partnership -- that is, whether Baylor faculty members will elect to remain at Methodist rather than relocate to St. Luke's. As noted here, a group of Baylor faculty publicly opposed Baylor's decision to split from Methodist on those grounds. More than 1,000 doctors currently practice at Methodist and approximately 300 of them are currently Baylor faculty members.

H'mm. Any bets as to when the first "tortious interference with contractual relations-type" lawsuit will emerge from this brewing controversy?

Posted by Tom at 5:53 AM | Comments (0) |

June 13, 2004

You just never know

In their most improbable win of the season, the Stros scored a run in five different innings to beat the Brew Crew in the final game of the Stros marathon two week, 12 game road trip, 5-4.

Playing without Lance Berkman (at his grandfather's funeral) and Richard Hidalgo (stiff neck) and facing traditional Astro-killer Ben Sheets, the Stros used solo yaks from JK and Viz and clutch pitching performances from Pete Munro, Miceli, Lidge, and Dotel to secure the win. To make things particularly interesting, Lidge and Dotel each loaded the bases in the seventh and eighth before retiring the side in each inning (Lidge struck out four in the seventh!).

The weekly analysis of the Stros' hitting and pitching performance reflects that the Stros' hitting has gone south -- the Stros fell from first to fourth in National League RCAA (runs created against average,explained here) during this past week -- while the pitching has actually improve considerably -- the Stros went from ninth to a tie for fourth in National League RSAA (runs saved against average, explained here).

Here are the Stros' RCAA numbers, courtesy of Lee Sinins:

Lance Berkman 39
Jeff Bagwell 10
Craig Biggio 7
Jeff Kent 7
Mike Lamb 7
Eric Bruntlett 1
Jason Lane -2
Orlando Palmeiro -2
Raul Chavez -4
Morgan Ensberg -4
Adam Everett -6
Richard Hidalgo -6
Jose Vizcaino -7
Brad Ausmus -10

Even though he cooled off over the past week, Berkman still remains the second best hitter in the National League behind Bonds. After that, the Stros hitters are continuing to struggle, as Bags is trending downward (his RCAA is about ninth among NL first basemen) and Kent is cooling off, too. Of the remaining players, Lane is showing signs of being a productive hitter (he had two more doubles today that are not included in these stats), but Ensberg and Hidalgo are still probably going to have to heat up if the Stros are going to have a chance for the post-season. Note that Everett has regressed to a negative 6 RCAA reflecting that he has no business batting second in the batting order, despite Jimy Williams' absurd compulsion with having Everett sacrifice at every opportunity.

Meanwhile, the Stros pitching appears to be coming around despite the first two games of the just concluded Milwaukee series. Here are the Stros' RSAA numbers:

Roger Clemens 19
Brad Lidge 6
Octavio Dotel 5
Roy Oswalt 4
Andy Pettitte 4
Mike Gallo 3
Dan Miceli 3
Wade Miller 2
Pete Munro 1
Kirk Bullinger 0
Chad Harville -1
Brandon Backe -3
Ricky Stone -3
Jared Fernandez -6
Tim Redding -7
Brandon Duckworth -9

With Miller's strong performance in Seattle, all of the Stros' starters are now above-average RSAA except for Redding, who is increasingly looking hopeless in terms of achieving any degree of reasonable consistency this season. The Stros smartly exiled Duckworth to New Orleans and added Bullinger, who at least might be worthwhile for an inning or two once in awhile. Other than Gallo (who appears to be coming back to earth) Redding, and Clemens (how could he improve?), all of the Stros pitchers appear to be reasonable prospects for improving their RSAA over the remainder of the season.

In looking at the NL Central, the statistics continue to indicate that the Reds' slide of the past week will continue because of their lack of pitching. The Cubs are currently the best balanced team, with the Stros and the Cards trailing in that order. All three of those teams are reasonably well-balanced on an aggregate basis.

The Stros finished the road trip with a decent 6-6 slate and return home with a 33-28 record, good for third in the NL Central behind the Cards and Reds.The Stros open up an 11 game homestand in the Juice Box on Monday night as the Rocket takes on the Cubs' Mark Prior in what should be a classic pitching duel. The Cubs are followed into the Juice Box by the Angels and the Bucs.

Posted by Tom at 5:21 PM | Comments (0) |

Revisiting the Son of Sam

David Berkowitz is one of the most notorious serial killers in New York City history. The postal clerk terrorized the city for thirteen months in 1976-77 as he stalked young women in lovers' lanes with a .44-caliber handgun and mocked the police probe in notes sent to then-Daily News columnist Jimmy Breslin. Berkowitz's rampage ultimately became the subject of a popular Spike Lee movie.

After his arrest and trial in 1977, Berkowitz was sentenced to serve 25 years to life in prison for the ambush killings of six people. In connection with the trial, Berkowitz exhibited many symptoms of paranoid schizophrenia, including his statements that he was acting on orders of a dog owned by a neighbor named Sam.

Last week, Berkowitz was rejected for parole. Under New York law, it is mandatory that Berkowitz be considered for parole again in 2006.

Interestingly, Berkowitz has been a model prisoner and became a born-again Christian in 1987. He maintains a website that has some blog characteristics (a daily journal). He accepts full responsibility for his actions, makes no excuses, and appears to have true remorse for the surviving victims and survivors of the victims of his crimes.

Regardless of (or perhaps because of) the depravity of his crimes, Berkowitz's case raises fascinating criminal justice, medical, and societal questions. Hat tip to Charles Kuffner over at Off the Kuff for the link to the Berkowitz story.

Posted by Tom at 12:10 PM | Comments (0) |

Bush Administration's record on cutting the bureaucracy

Tyler Cowen posts this analysis over at Marginal Revolutions reflecting that the Bush Administration compares poorly with other administrations of the past 40 years in terms of reducing the amount of major governmental agency or department budgets. As Mr. Cowen notes:

George W. comes in tied for last with Clinton II. This is a highly imperfect proxy, but when you are 0 for 15 it is hard to blame measurement error alone.

As noted in here just the other day in regard to the issue of tax simplification, the Bush Administration's inaction on these types of issues is, in my view, more likely to cause a loss in the upcoming election than anything that is likely to occur in the Middle East.

Posted by Tom at 11:06 AM | Comments (0) |

United Airlines - should the federal government save it?

This NY Times article gives a good overview on the state of United Airlines, which continue to flounder in a chapter 11 case filed in December 2002. As the story relates, United's emergence from chapter 11 is based upon the Air Transportation Stabilization Board's expected approval of United's application for $1.6 billion in federal loan guarantees that will allow United to raise the capital necessary to fund its reorganization plan and post-bankruptcy operations.

Quare: Why is the federal government in the business of providing credit enhancements for an industry that, as Warren Buffett pointed out several years ago, if one tabulates all of the airline industry's finances since the day the Wright Brothers in 1903, one would discover that, cumulatively, there has not been a single penny of profit? (Mr. Buffett has also suggested famously that, in hindsight, shooting down the Wright Brothers on that beach would have been a reasonable financial, if not moral, move).

I know what Professor Ribstein's answer would be. Update: I was right!

Posted by Tom at 10:46 AM | Comments (0) |

An American business success story

One of the most interesting CEO's around these days is Brad Anderson of Best Buy (my teenage sons' favorite store). In this NY Times article, Mr. Anderson, 55, tells his story of working his way up the ladder as Best Buy grew. It is a quintessentially American business story. The entire piece is well worth reading, and here are a few tidbits to give you a flavor for Mr. Anderson's story:

I was a C-plus student in high school. My guidance counselor told me, "Some of us, son, are just not meant for college."
I became a clerk in a stereo store called Sound of Music, a forerunner of Best Buy, in West St. Paul, where I bought my stereo in college. I loved music and was looking for a job where I could listen to music and get paid at the same time.

I didn't know how to sell anything. You were paid on commission and I made $69 for two weeks' worth of work. I wanted to quit, but then I figured out how to do it: do anything for the customer. The first stereo I ever sold I delivered personally, 70 miles away, and installed it myself. Then I actually started being good as a salesman, and somehow, after 31 years, I managed to work my way up to C.E.O.

We did some things right and a lot wrong. We reduced our operating expenses so Sound of Music could survive. I would literally drive the product to the stores when I went out to do the training.

But we did lots of stupid things, like when we went for a month without advertising. It was a good way to learn how valuable advertising was.

I've had a lot of mentors, especially my father, Marbury Anderson, and the founder of the company, Dick Schultz. I remember spending time with Dick when I was just starting out, and he was talking about the $50 million company he was building. By the time we built the $50 million company, he was on to building the $500 million company. That inspiration was so essential.

My sons used to have to drag me into Best Buy, but, over time, I have come to appreciate the store. Knowing that Brad Anderson is running Best Buy makes it even easier to enjoy.

Posted by Tom at 10:26 AM | Comments (0) |

June 12, 2004

Stros sinking fast

Roy O chose a bad time to have his worst outing in two years as the Brewers jumped on him for six hits and five runs in the fifth inning in coming back to beat the Stros on Saturday night at Miller Park, 7-4.

Oswalt allowed six earned runs -- the most in an appearance since July 16, 2002 against Pittsburgh -- and couldn't make it out of the fifth inning for the first time in 2004. In 4 2/3 innings, the right-hander surrendered nine hits, one walk, two hit batsmen and struck out four. It was only the third time Oswalt had permitted six earned runs in his career.

Meanwhile, the Stros eked out only six hits, the only one of consequence being Jason Lane's three run double. They were the seldom-used Lane's first RBI's of the season.

To make matters worse (if that is possible), Lance Berkman flew back to Houston on Saturday afternoon to attend the funeral of his grandfather, did not play in Saturday night's game, and will not play in Sunday afternoon's game. Berkman is expected to rejoin the team in Houston on Monday. Richard Hidalgo also sat out Saturday's game with a sore neck, which it probably the product of having his head snap back around looking at all the pitches that he is missing while batting over the past month and a half.

The Stros might as well mail it in on Sunday as journeyman Pete Munro makes the start in place of Andy Pettitte as the sacrificial lamb for Astro-killer Ben Sheets. Expect the Stros to limp back to the Juice Box in fourth place in the NL Central to begin their 11 game homestand on Monday against the Cubbies.

Posted by Tom at 10:51 PM | Comments (2) |

Reagan funeral eulogies

The four eulogies that Margaret Thatcher, Brian Mulroney, George H.W. Bush, and George W. Bush gave at Ronald Reagan's funeral service were very good. Here is the text of Lady Thatcher's, Mr. Mulroney's, Mr. Bush41's, and Mr. Bush43's.

Also, Ron Reagan's eulogy for his father at the graveside service was quite good. The text is here.

Finally, this Heritage Foundation mulitmedia tribute to President Reagan is very well done.

Posted by Tom at 10:39 AM | Comments (0) |

June 11, 2004

Brew Crew pounds Stros

The Brewers broke open a close game with 3 spots in the sixth and seventh innings and rolled to a 9-3 plastering of the Stros in the first game of their weekend series at Miller Park in Milwaukee. Redding, Gallo, Harville, and Stone all pitched rather ineffectively as inconsistency continues to plague the Stros pitchers not named Clemens or Oswalt.

Roy O goes for the Stros in the Saturday game, and Pete Munro will pitch the Sunday game. The Stros return to the Juice Box for a three gamer with the Cubbies on Monday that begins an 11 game homestand.

Posted by Tom at 10:12 PM | Comments (0) |

Virgina Postrel on the 1960's and 70's

Virgina Postrel in this post looks back at the 1960's and 70's, and relates those times to Ronald Reagan's election as president. Read it. Virginia hits the nail on the head on this one.

Posted by Tom at 8:27 PM | Comments (0) |

This year's lousy tax bill

As noted in a post here several days ago, the 1986 Tax Bill was one of President Reagan's enduring accomplishments, not as much for the tax rate reduction as for the bill's bold move toward tax simplification. Using that bill as a standard, Steve Pearlstein in this Washington Post article analyzes this year's tax legislation. The result is not promising:

One of Reagan's greatest achievements was passage, with bipartisan support, of the 1986 Tax Reform Act. The goal of the landmark bill was to make the tax code simpler and fairer while boosting economic efficiency. Loopholes were closed, tax rates were reduced, and all sorts of distinctions were eliminated so that individuals and companies with the same income or profits were required to pay roughly the same tax.

Those principles, however, are violated on nearly every one of the 930 pages in the recently passed Senate tax bill and the 398-page draft released last week by the chairman of the House Ways and Means Committee, Bill Thomas (R-Calif.).

With a few exceptions, both bills are grab bags of special-interest provisions designed to reward the well-connected at everyone else's expense. They reward companies that have played cynical tax games and open up new vistas for the tax shelter industry.

Mr. Pearlstein notes that tax legislation has again become the favorite tool for providing political favors:

Let's begin with those provisions designed to favor particular companies or industries. In the Senate bill, these include cruise-ship operators, foreign gamblers, NASCAR track owners, insurers, timber companies, cattle ranchers, movie theater owners, and manufacturers of small planes, bow-and-arrow sets and fishing tackle boxes. And notwithstanding the fact that skyrocketing oil prices should provide all the incentive anyone would need to develop new energy sources, there's a couple of billion dollars a year in new tax breaks for energy companies already well-endowed with them. In a final, gratuitous insult to the taxpayer, there's even a provision for a blue-ribbon commission to study "comprehensive tax reform."

The House would leave out the energy provisions but add tax breaks for bourbon distillers and wealthy taxpayers in places like Texas that, poor things, have no state income tax to deduct on their federal 1040. High-tech industry tucked in a provision that would ensure its employees pay no payroll taxes on all those stock options. And in a shameless vote-buying effort, Thomas's draft would have the government pay $2 billion a year to tobacco farmers for the right NOT to pay them annual crop subsidies in the future, as if the quotas were some sort of property right.

Mr. Pearlstein closes by observing that this awful piece of legislation could be used by an able politician for the better good:

This may well be the worst piece of tax legislation to come along since 1986. If Sen. John F. Kerry (D-Mass.) wanted to steal the Reagan mantle, he would make plans now to return to Washington from the campaign trail and, Jimmy Stewart-like, lead a protracted Senate filibuster of the final bill. From his final resting place, the Gipper would be cheering him on.

Tax simplification is one of the many domestic issues on which the Bush Adminstration has abdicated its leadership position. Curiously, if President Bush loses in November, my sense is that it will be more a result of this type of political lethargy than anything that occurs in the Middle East.

Hat tip to Professor Sauer for the link to the WaPo article.

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

Chronicle revises Landry's story

After embarrassingly missing the point in its earlier article on the recent firing of Landry's CFO, the Chronicle finally makes the connection between that event and the firing of Landry's auditor a month ago.

By the way, I do not buy Landry's explanation that these two events were "coincidental."

Posted by Tom at 10:58 AM | Comments (0) |

The Onion has the scoop on Kerry's VP choice

Read about it here.

Posted by Tom at 8:22 AM | Comments (0) |

2004 Presidential Election Trackers

The LA Times (free online registration requried) has this cool 2004 Presidential Election Map Tracker.

Also, the Wall Street Journal Online Edition ($) continues to provide an excellent overview of the battleground states in the election. Just scroll down to the "Interactive Features" section and click on the "Battleground States" hyperlink.

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

June 10, 2004

Plaintiffs counsel in Enron civil litigation involved in merger

Lerach Coughlin Stoia & Robbins LLP -- lead plaintiffs' counsel in the multi-district civil litigation against Enron Corp. -- announced today that it is merging effective August 1 with Boca Raton-based Geller Rudman PLLC. Both firms specialize in class action and individual cases on behalf of shareholders and institutional investors.

As reported in this previous post, Lerach Coughlin is a spin off of the former class action firm, Milberg Weiss Bershad Hynes & Lerach.

Posted by Tom at 9:19 PM | Comments (0) |

Mr. Spitzer: Get ready to rumble!

In this refreshing Wall Street Journal ($) op-ed, Home Depot co-founder Ken Langone, who chaired the New York Stock Exchange compensation committee that approved Richard Grasso's $140 million pay package, throws down the gauntlet regarding New York Attorney General Eliot Spitzer's lawsuit against Grasso and Langone to recover alleged overcompensation to Grasso. In essence, Langone says "bring it on."

First some background. When the Grasso pay package first came to light, both men sat on compensation committees that determined pay for the other -- Grasso on Home Depot's and Langone on the NYSE's. Grasso decided to leave Home Depot's board and Langone stepped down as head of the NYSE committee.

Moreover, according to a research firm report issued last year, Langone has been active on compensation committees with a history of granting large executive compensation despite poor share performance. As recently as late last year, Langone served on the compensation committees of each of the five public companies of which he is a director: ChoicePoint, General Electric, Home Depot, Unifi, and Yum! Brands.

Research firm Glass Lewis rates the executive compensation practices of many public companies, comparing the amount executives receive with the company's financial and stock performance. Of the companies on which Langone served as a director, ChoicePoint received the highest rating, a "C." The other companies received a "D" or an "F." "For some reason [Langone] seems be a compensation committee favorite," one sage observer noted. "We think we know why: He tends to overpay people."

So, I think it's fair to say that Mr. Langone is, as we put it in business circles, "a player."

And is Mr. Lagone quaking in his boots over Mr. Spitzer's lawsuit? Not a chance:

At a showy, televised news conference recently, New York Attorney General Eliot Spitzer announced a lawsuit that attacked my business integrity and my character. Accustomed to bullying settlements, mistaking bluster for substance, Mr. Spitzer apparently expects I will capitulate, to the tune of $18 million. But his claims were false and his suit will fail.

At any point I could have caved. Settled. Paid whatever money was claimed I owe. Avoided a trial. Walked away and licked my wounds. Most people think that simply cutting a check would be the easy way out. Expedient? Sure. Resolute? Hardly.

Here's why. It was baseless that I, as chairman of the New York Stock Exchange compensation committee from 1999 to June, 2003 had somehow failed to inform the NYSE board of a benefit they themselves had approved. Having been there, I know the records will prove it was all above-board, well-vetted and fair. It is absurd to suggest that the brightest minds and keenest thinkers on Wall Street were befuddled by the complexity of Richard Grasso's compensation package -- especially one composed just like their own. Might as well say NASA couldn't launch a Goodyear blimp.

And it was thick-sliced baloney how this case came to be defined by some: Wall Street cop takes on greed. I gained not one nickel. Mr. Grasso earned his pay, over the course of years, as the members themselves affirmed, time and again.

Mr. Langone then goes on to compare Mr. Grasso to A-Rod and Nicole Kidman:

The value that Richard Grasso brought to the NYSE was remarkable and helped generate value out of all proportion to what he himself earned. He did a stellar job. Under his leadership, the value of seats on the exchange increased several-fold, new companies joined the exchange in droves and healthy revenue stayed consistent even through rough economic waters. That was the studied opinion of the board and, yes, even Mr. Spitzer himself.

Good thing, too, since members belong to the NYSE for one reason -- the opportunity to maximize wealth. Such high performance was the hope when, nearly 10 years ago, board member Stanley Gault was tasked with defining the organization's leadership qualities. He urged that, "If the organization is to remain successful, we will need to staff the Exchange with what the compensation committee has come to call 'world class talent.' To attract and retain this talent, we will be competing directly for people with world class organizations -- particularly at senior management levels."

Yankee infielder Alex Rodriguez is paid a nine-figure salary not for his winning smile but for his value to the franchise. Actress Nicole Kidman reaps tens of millions per film not for her fashion sense but for her ability to sell movie tickets. Executive Paul Tagliabue, head of the NFL (yes, a nonprofit, and yes, funded by the members) reportedly also makes around $10 million a year and is clearly worth every penny.

And Mr. Lagone then turns to Mr. Spitzer's alleged selective prosecution:

Reasonable observers are far more likely to see through the political cynicism of Mr. Spitzer and his cheerleaders. This is a man, after all, who sent out photos of himself wielding a flaming baseball bat, asking people to pony up $100,000 apiece for his political bank account. Is it coincidence, everyone is asking, that Mr. Spitzer's Democratic Party colleague, Carl McCall, who chaired the compensation committee after me and signed Mr. Grasso's contract, was shielded from the lawsuit?

Read the entire WSJ piece because it is delicious stuff. This lawsuit is going to be the legal equivalent of of a free-for-all, and it's going to be fun to follow. The New York courts could sell tickets to this trial. Stay tuned.

Posted by Tom at 8:46 AM | Comments (0) |

Anadarko plans big asset sale

The Woodlands-based Anardarko Petroleum Corp. is one the largest energy producers in North America. Yesterday, the company announced that says it plans to sell oil and natural-gas properties valued at about $2.5 billion and redirect its focus to overseas efforts.

Anadarko will be selling interests in producing oil and gas fields in Oklahoma, Texas and Canada, and then plans on managing its remaining North American assets as a source of capital for high-risk, high-reward exploration projects in Qatar, Algeria and the deepwater Gulf of Mexico. In addition, the company will use proceeds of the asset sales to pay down debt by $1.4 billion and fund at least a $1.1 billion stock repurchase plan.

Although the sales when completed will cut Anadarko's production by 25% and proved reserves by 15%, the theory behind the plan is for the company to imporve its growth rate. Anadarko's new CEO, James T. Hackett, said the plan is similar to "pruning the tree to make it healthier."

Anadarko's plan is a fairly typical response of energy companies that rely heavily on declining North American oil and natural-gas production. Such large independent producers eventually are forced to make a choice between riskier international and deepwater exploration or boosting profits on their declining reserves by hacking costs and improving efficiency. Anadarko's plan is announcing to the market that the company prefers to play rather than clip coupons.

This plan comes after a period of upheaval at Anardarko, with management changes and a failed sale bid. The above-described plan is new CEO Mr. Hackett's first step in charting the company's future course.

Posted by Tom at 7:49 AM | Comments (2) |

Stros shut out M's again

Wade Miller followed the Rocket's fine performance the previous evening and threw six innings of shut out ball as the Stros shut out the rather hapless Mariners for the second straight night, 3-0. Miceli, Lidge and Dotel again mowed down the M's in the last three innings to preserve the zip out.

You just never know what you are going to get from the inconsistent Miller. In his three previous starts, Miller had given up over a run an inning, which is not the way to establish a stellar earned run average. On the other hand, he is capable of being dominant as he was on Wednesday night when he gave up only four singles and a double and struck out four. A big key for Miller is walks -- he is one of the National League leaders in that category and when he controls them (he had only two on Wednesday), he has a much better chance of success.

Ex-Stros farmhand Freddy Garcia (he came over to Seattle in the Randy Johnson trade five years ago -- has it really been that long?) cuffed the Stros for most of the night, but Bags, Berkman and Hidalgo led an uprising in the third that generated all of the Stros' runs.

Despite his contribution in this game, Hidalgo -- who has been scruffing ever since the beginning of May and has not hit a yak since April 13th -- continues to have buzzard's luck. In this game, he whacked a shot over the fence in deep center only to have the M's Randy Winn make one of the best catches of the season by extending his arm well over the fence and snagging the ball. Hidalgo couldn't believe it.

Meanwhile, the Reds have started their inevitable descent from first place (their pitching generally stinks) as they lost three straight in Oakland this week. The Cards, whose pitching has been the best in the division so far this season, now share first place with the Reds and the Stros are a game and a half back.

The Stros try to get in a golf game today in Milwaukee before beginning a weekend series on Friday with the Brew Crew, who are uncharacteristically playing reasonbly well so far this season. Tim Redding, Roy O, and whoever is replacing Andy Pettitte in the rotation this time around (probably Pete Munro) will hurl this series. The Stros finally return to the Juice Box on Monday for an 11 game homestand against the Cubbies, the Angels, and the Pirates.

Finally, it turns out that the Stros still hold at least one option under Brandon Duckworth's contract, as he was mercifully optioned to AAA New Orleans yesterday. Journeyman reliever Kirk Bullinger replaces Duckworth on the 25 man roster.

Posted by Tom at 5:42 AM | Comments (0) |

June 9, 2004

Judge Hittner goes nuclear on Mike DeGeurin

U.S. District Judge David Hittner today took the unusual step of issuing a ten page order admonishing prominent Houston criminal defense attorney, Dick Degeurin, for sending a background report about DeGeurin's client, Lea Fastow, to the Bureau of Prisons.

Mrs. Fastow, wife of ex-Enron Chief Financial Officer Andrew Fastow, was ordered this week to serve her term for a tax misdemeanor in the cell block-like downtown Houston Federal Detention facility starting in July. DeGeurin had been trying to arrange for her to serve the year in a more comfortable federal minimum security unit in Bryan. DeGeurin's letter to the Bureau indicated he was sending the report so that the Bureau had all the possible information on Mrs. Fastow before assigning her to a facility to serve her one-year sentence.

Presentencing background reports are routinely sent to the Bureau and both the prosecution and the defense requested that one be sent in this case. However, Judge Hittner refused to send the report in this case, reasoning that the report was based on the felony charges that the government dropped when Mrs. Fastow pled to a misdemeanor tax evasion charge. Judge Hittner contended that the lawyers waived a new report, but DeGeurin and the prosecution apparently did so only because a report already existed and they thought it was fine to send to the Bureau.

Judge Hittner took the unusual step of distributing his order regarding DeGeurin to all the district judges in the Southern District of Texas saying DeGeurin "circumvent(ed) the rulings of the court, as well as the procedures of the United States Probation Office and Federal Bureau of Prisons."

Judge Hittner previously refused to accept a 5-month prison plea bargain for Mrs. Fastow. Although this is speculation, I suspect that Judge Hittner has not been pleased with the way in which the Enron Task Force handled the case against Mrs. Fastow -- i.e., prosecuting her until her husband cut a plea bargain and then agreeing to a minimum level plea with Mrs. Fastow that indicated that they really were not serious about the prosecution in the first place. However, I have no idea why the judge has gone off on DeGeurin, who appears to have done nothing other than vigorously represent his client.

One thing looks certain -- I suspect that all parties in any future Enron criminal prosecutions that land in Judge Hittner's court will file joint motions to recuse him from the case. It was somewhat surprising that Judge Hittner handled the case against Mrs. Fastow because he was a former Enron Corp. shareholder. Neither the prosecution nor the defense in Mrs. Fastow's case raised that fact as grounds for the judge's recusal.

Posted by Tom at 7:30 PM | Comments (0) |

Professor Porter tackles health care finance

Michael E. Porter is one of 15 current University Professors at Harvard and one of America's foremost business theorists. This Boston Globe article reports on Professor Porter's latest research project -- America's dysfunctional health care finance system.

In a long essay in the June edition of Harvard Business Review, the 57-year-old Porter argues for redefining healthcare competition on the level of specific diseases and treatments, rather than on the level of health plans, networks, or hospital groups. ''The wrong kinds of competition have made a mess of the American healthcare system," contend Porter and his coauthor, Elizabeth Olmsted Teisberg of the University of Virginia. ''The right kind of competition can straighten it out."

The article notes that the health care finance problem is the type of particularly knarly issue that Professor Porter enjoys taking on:

What attracted Porter to the healthcare sector, in fact, was its standing as a competitive industry that seemed to defy the laws of competition. In properly functioning businesses, from personal computers to mobile phones, product and process improvements drive down prices and costs, quality rises, markets expand, and uncompetitive players go out of business. In healthcare, costs are forever climbing, services are restricted or rationed, many patients receive poor care, preventable medical errors persist, and there are wide discrepancies in costs and quality among providers and across geographic areas.

Professor Porter and his collegue, Elizabeth Olmsted Teisberg of the University of Virginia, note that the antidote to what ails the health care finance industry is simple:

Porter and Teisberg have a deceptively simple diagnosis: Healthcare competition today works on the wrong level. The players -- health plans, payers, providers, and doctors -- engage in what the authors call ''zero-sum competition," dividing value rather than creating it. They seek to transfer costs onto one another, limit access to care, hoard information, and stifle innovation, all to the detriment of patients.
The right kind of competition should occur at the level of preventing, identifying, and treating patients' conditions and diseases, Porter and Teisberg assert. They call for collecting and disseminating information about the outcome of medical procedures, so patients can make intelligent choices about physicians and hospitals. They also recommend transparency in billing and pricing to reduce cost shifting, discrimination, and other inefficiencies. And they propose increased specialization by healthcare providers, resulting in more centers of excellence in conditions and treatments that compete for patients.
''There's only one kind of competition that's directly connected to healthcare value," Porter maintained in an interview. ''And that's the competition about who can do the best job of your prostate surgery, with the least complications and the best recovery records. That's where the competition needs to be. Yet that kind of competition has been all but eliminated in the system, in a misguided effort to save costs."

Although the Porter-Teisberg model reduces the government's role in the health care finance system, the government would nevertheless have an important policing role:

Government would have a role, not as a ''single payer" or an insurer of last resort, but by blocking network restrictions, hospital consolidation, and multiple hospitalization bills, and helping to set a framework for reform through its Medicare program. The role of health plans, meanwhile, would be more akin to that of coaches and advisers, helping their members navigate the system and find the best care.

And what does Professor Porter think about the current level of debate over health care finance reform in the Presidential campaign?:

''The debate now is totally about cost shifting and not value creation" in healthcare. Could his proposal influence that debate?

''I hope so," Porter said. ''I would love to challenge both candidates to see what they're going to do to engage these issues."

The type of innovative approach that the Porter-Treisberg model advocates --along with such concepts as the Health Savings Accounts described in this earlier post -- is what is necessary to overhaul the increasingly obsolescent American health care finance system. Inasmuch as that system already accounts for almost 20% of federal expenditures and those expenditures are increasing rapidly, my sense is that we all would be better advised to require our Presidential candidates to address these tough issues rather than the relatively unimportant but trendier business issues such as "outsourcing" and "energy independence."

Hat tip to Tom Mayo's HealthLawBlog for the link to the article on the Porter-Teisberg study.

Posted by Tom at 9:04 AM | Comments (3) |

William Buckley interviewed about Ronald Reagan

In this interview, William Buckley reminisces about his old friend, Ronald Reagan. The entire interview is well worth reading, and includes the following anecdotes:

Q: How was it when there was disagreement?

A: It was sometimes vigorous, but never sundering. For instance, he was opposed to ratifying the Panama Canal treaty, and we debated the subject for two hours on television, each of us with illustrious assistants. We punched each other pretty hard. A couple of months later I was scheduled for dinner at his home in Bel Air. He got me on the telephone: "Drive slowly up the drive, real slow." I did -- and came upon, every 20 yards, huge hand-drawn signs: "WE BUILT IT." "WE PAID FOR IT." "IT'S OURS!"

Q: Did he offer you a job when he became president?

A: Yes/No. I had written him during the campaign that I didn't want a job. He answered back that he was disappointed: "I've had it in mind to appoint you ambassador to Afghanistan." Big joke, the Soviet Union having just taken over there. But in correspondence thereafter he always referred to me as "Mr. Ambassador," and the week before leaving the White House he wrote to commend me on the Soviet withdrawal -- "and you did it," he wrote, "without leaving Kabul for a minute." Good-humored fantasies played long with Ronald Reagan.

Posted by Tom at 7:35 AM | Comments (0) |

Reaganomics in context

In this Tech Central Station op-ed, Arnold Kling places Ronald Reagan's economic policies into the context of his presidency, and corrects several misconceptions regarding those policies. First, Mr. Kling puts the economic problems that confronted Reagen into the context from which they arose:

Richard Nixon, like Ronald Reagan, inherited an economy that needed a dose of tight money in order to bring inflation under control. However, Nixon took office at a time when liberal economists had been arguing for more than a decade that inflation could be contained without a recession by using "incomes policies," a euphemism for government interference in wage and price setting. In the fall of 1971, over the objections of his conservative economic advisers, Nixon decided to give "incomes policies" a try. The result, over the next several years, was that the cure was worse than the disease: "incomes policies" made inflation and unemployment higher, not lower.

In addition, as part of his 1972 re-election campaign, President Nixon undertook a large expansion of Social Security. Along with wage-price controls, this enlargement of the welfare state makes Nixon's economic policies worse than those of any subsequent President, . . .

Mr. Kling then points out the vagaries of attributing relative economic progress to a particular President when that success is primarily attibutable to policies that his predecessor implemented:

When Ronald Reagan defeated Carter's re-election bid, "incomes policies" were a proven failure. . . . [B]y 1980 it took a lot less courage to stand by a monetary approach to disinflation than it did a decade earlier. I believe that Carter would also have stuck with Volcker through the recession, and if that is the case, then the behavior of the economy in the 1980s would have been about the same regardless of who had been President. Of course, I generally believe that the business cycle follows its own course, and that giving credit or blame to a President is an attribution error. Thus, Presidents who enjoy strong economic performance, like Clinton, are over-rated . . . , while Carter, who suffered from the policy errors of previous Administrations and had began to undo those errors, is under-rated on economics. (I have plenty of issues with Carter on foreign policy, but that is another subject.)

I believe that President Reagan made a positive difference for the economy. However, unlike most analysts, I do not focus on his tax cuts. Instead, I think that Reagan's main contributions were on energy policy, tax reform, and resisting government expansion.

Mr. Kling concludes with an ominous observation regarding the Bush Administration's economic policies:

Finally, the government's size ultimately will depend not on the tax rates that we set today but on the role that we choose for government long term in education, health care, and retirement security. If we continue to give government a large role in these fast-growing sectors, then spending and taxes as a share of GDP will inevitably increase. I call this "The Great Race," and so far under President Bush it is a race that we are losing.

Posted by Tom at 7:27 AM | Comments (0) |

Stros edge M's

The Rocket won his ninth game without a loss this season as the Stros made a Morgan Ensberg sac fly in the seventh hold up for a 1-0 win over the Mariners.

As usual, Clemens was brilliant and battled like a classic gamer. He did not have his best control as he walked five in six and two thirds innings, but he gave up only three hits and struck out seven. For the second straight night, the Stros languid hitters made another pedestrian Seattle pitcher -- this time Joel Pineiro -- look like a stopper as they scratched out only three hits. Astros manager Jimy Williams contributed to that offensive inefficiency by playing ineffectual Jose Vizcaino for the third straight game.

By the way, Lidge and Dotel made things interesting in the last two innings before nailing this one down. In the eighth, Lidge gave up a lead off triple when Bidg misplayed a fly ball (he was not given an error, but he really botched the play). Lidge proceeded to bail his teammate out by getting the next three batters on a pop up and two whiffs. Then, in the ninth, Dotel appeared to be dominant and got two quick outs before giving up back to back singles to put runners at first and second. Certainly fearing the prospect of having to face Clemens in the clubhouse after blowing another save, Dotel struck out the next batter to secure the victory.

Underachieving Wade Miller pitches for the Stros in the Wednesday night game against Mariner and former Astro farm hand, Freddy Garcia. The Stros get an off day on Thursday as they move on to Milwaukee for a weekend series with the Brew Crew on the last leg of this marathon two week, 12 game roadie.

Posted by Tom at 5:27 AM | Comments (0) |

June 8, 2004

Telegraph Reagan obituary

The London Telegraph's thorough obituary on Ronald Reagan is here.

Also, Lou Cannon, Mr. Reagan's biographer, wrote this measured Washington Post obituary.

Posted by Tom at 9:15 AM | Comments (0) |

Milton Friedman interview

This Fox News interview with Milton Friedman provides the usual dose of Professor Friedman's provocative thoughts about economic freedom and the costs of governmental interference in markets, but also provides the following common sense analysis on why shifting health care and education finance from markets to the government is intrinsically inefficient:

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you're doing, and you try to get the most for your money.

Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I'm not so careful about the content of the present, but I'm very careful about the cost.

Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm sure going to have a good lunch!

Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it is, and I'm not concerned about what I get. And that's government. And that's close to 40% of our national income.

By the way, Professor Friedman is 92 years old and still as sharp as a tack! Hat tip to Arnold Kling for the link to this interesting interview.

Posted by Tom at 8:45 AM | Comments (0) |

Ronald Reagan's economic legacy

Jane Galt over at Asymmetrical Information has an intriguing post regarding Ronald Reagan's economic legacy. First, Ms. Galt dispels the myth that Reagan's policies were solely responsible for improving America's economic malaise of the late 1970's:

I think it was Grover Norquist, saying that Reagan was great because when he took office, unemployment was 10% and interest rates were sky-high, and when he left office everything was boom-a-riffic.

This is every bit as fine a bit of data mining as Democrats who make similar claims for Clinton -- the economy sucked when he took office, and was booming when he left. When Clinton took office, the economy was already recovering from a recession; when he left, it was sliding into another one. That's luck, not talent. (Rubinomics buffs, peace out. I'll deal with you later.)

Similarly, high unemployment and interest rates under Reagan were not because Democrats Had Been Driving the Economy Into the Ground Until the Grownups Took Over. High inflation was the result of a dozen years of bad fiscal and monetary policy under two Republicans -- Nixon and Ford -- and two Democrats -- Johnson and Carter -- that was brought under control only when Paul Volcker, the Carter-appointed head of the Federal Reserve, jammed interest rates up to national-heart-attack levels and left them there until inflationary expectations were well and truly tamed. Reagan had nothing to do with unemployment and interest rates falling; that was the inevitable result of a drastic monetary tightening finally working its way through the economy.

Ms. Galt also debunks the supply-side economics myth that budget deficits have no effect on interest rates:

While we're here, can we put to bed the oft-quoted supply side factoid that you can tell budget deficits have no effect on interest rates because interest rates fell under Reagan, even though the budget deficit expanded? Interest rates fell because once inflationary expectations were overcome, the natural interest rate for the US was well below the 20% it reached at the start of Reagan's presidency. But they might have fallen even farther without the budget deficits.

Then again, they might not. As far as I can tell, there's no evidence that budget deficits have a significant effect on interest rates. One can theorize that it should, and indeed the theories make a great deal of sense. It's just that you can't find any actual good data to support them in the Real World. This is one of the major sources of my skepticism about Rubinomics.

Ms. Galt goes on to opine that the single greatest economic achievement of Reagan's presidency was tax reform, and not so much marginal rate reduction as the simplification of the tax code that was enacted in the Tax Reform Act of 1986. Then, Ms. Galt views Reagan's overall legacy:

Oh, it was not a perfect legacy. It wasn't as sweeping as some people, like, say, me, would have liked; there were a lot of silly deductions left in, like the home mortgage interest deduction. And the Clinton administration and their accomplices in congress did their best to undo his good work, by introducing thousands of new loopholes. Though, recognizing that loopholes are damaging to the economy and the cohesion of civil society, they did at least try to mitigate the damage: they stopped calling them "loopholes" and instead referred to them as "targeted tax cuts".

By forcing a showdown with the air traffic controllers union, Reagan helped forestall the sorts of public employee quiet riots common in Europe whenever the government suggests that maybe eight weeks vacation and retirement at 55 are quite generous enough already.

He advanced the deregulation begun under Carter, which wasn't always good for the regulated companies, but was great for those of us who remember the rotary telephones and extortionate long distance rates of Ma Bell.

He helped bring down the Soviet Union. Oh, I agree with liberals that he didn't do it singlehandedly, but hey, Communism and Soviet imperialism really sucked, so isn't advancing its demise by fifteen years a pretty damn worthy accomplishment? Plus he had the guts to tell Gorbachev to tear down the Berlin wall, which was more than any of his predecessors had done.

And he pulled us out of the doldrums of the 1970's. He got the country to stop taking Europe's word for it that we were a bunch of rubes and know-nothings, fit for nothing except Continental security guard.

Plus, he made a bunch of movies. All in all, I think it likely that he'll be remembered alongside Roosevelt as one of the two greatest president's in the twentieth century. And they'll be remembered that way not because of the events they presided over, but because they recognized an evil empire when they saw it, and they led the country into battle against it.

We should all be able to claim so much.


Posted by Tom at 8:29 AM | Comments (0) |

Ronald Reagan's leadership

Franklin L. Lavin is the U.S. ambassador to Singapore and previously served on President Reagan's White House and National Security Council staff. In this Wall Street Journal ($) Manager's Journal column, Ambassador Lavin provides an interesting insight about President Reagan's leadership skills and tells an even better story about Reagan. First, Mr. Lavin outlines the basis of Reagan's leadership skills:

Don't be afraid of friction. Friction, or even unpopularity, can be the price for trying to change the status quo. If elected leaders view their job as simply finding the center of gravity on every issue, they might retain their popularity -- but all they will have done is encapsulate public opinion, not lead it. On the other hand, if political leaders want to shape a new consensus, they have to risk alienating those who support the current status quo. Reagan knew that his job was not to make everybody like him, but to help move America in the right direction.

Focus on a few key goals. For Reagan, his goals were to confront Soviet expansionism, reduce the tax burden and place limits on the size of government. He proved to be highly successful on the first two goals, and only abstractly successful on the latter. The federal government expanded substantially during Reagan's presidency, even if we allow for military growth. But let's not confuse an inability to implement goals with the desirability of the goals. Reagan did change the debate about the nature of government and the open-ended expansion of the welfare state.

Don't confuse expertise with leadership. As a political leader, Reagan was masterful. He combined a clear sense of purpose with natural stagecraft and the charming occasional idiosyncrasy. He also understood that as president, you didn't need to be an expert, you could hire experts, and he did.

Be upbeat. People want to believe in their leadership, believe in their country, and believe in themselves. A president has to paint a picture of a better country and come up with the program to help get us there. There is an old saying in politics. "People don't care what you know until they know that you care."

And then Ambassador Lavin passes along a story that provides a glimpse of Reagan's humanity that helped make him a great leader:

Reagan was in Alabama once and visited a special school for handicapped kids. He offered a few minutes of remarks and took questions from the kids. It was a terrific -- dare I say Reaganesque -- moment, because simply by spending time with these kids he was endowing their experience with a bit more worth.

Then came a moment of terror. One of the kids had a severe speech impediment. He asked his question, and no one in the room could understand it. The president asked him if he could repeat it and again no one could understand what was said. The staff froze. The teachers froze. What was to have been an upbeat day was turning into a disaster. Instead of allowing these wonderful kids to forget about their handicap, this kid was going to be reminded of it.

Reagan to the rescue:

"I'm sorry," he said with a smile, "but you know I've got this hearing aid in my ear. Every once in a while the darn thing just conks out on me. And it's just gone dead. Sorry to put you through this again, but I'm going to ask one of my staff people to go over to you so you can tell him directly what your question is. Then he can pass the question back to me."

Rather than make the kid feel small, Reagan brought his own handicap to the forefront.

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

Market reacts to Landry's management shakeup

Shares of Houston-based Landry's Restaurants fell about 7% during Monday trading after the company announced on this past Friday that Chief Financial Officer Paul S. West had resigned "to pursue other interests." Shares of Landry's stock closed Monday at $27.66 per share, down $2.04.

Mr. West's departure follows by a month Landry's dismissal of Ernst & Young LLP as its outside auditors, for undisclosed reasons. Landry's named Grant Thornton LLP to succeed Ernst & Young.

The Houston Chronicle story on Mr. West's resignation is here. Incredibly, the Chronicle article neglects to mention that Landry's had replaced its auditor last month.

Needless to say, keep a wary eye on Landry's.

Posted by Tom at 7:27 AM | Comments (0) |

Stros continue their big fade

The Stros opened their first interleague series of the season in particularly unimpressive style as they made Seattle Mariner rookie Clint Nageotte look like the Rocket in losing to the Mariners on Monday evening, 5-0.

Brandon Duckworth was the worst he has been in an awful season for him, exiting after giving up three runs and getting only one out in the first inning. Given Duckworth's incompetence, one can only imagine what it takes to get released from the Stros' generally underperforming pitching staff this season. Probably the only thing that has saved Duckworth is that the Stros' AAA club does not really have a good replacement for him at this stage of the season. Newly-acquired Pete Munro relieved Duckworth and at least battled over the next five innings, giving up the other two runs.

Meanwhile, the Stros' hitters took a powder against Nageotte and his reliever, Julio Mateo, slapping out seven impotent singles and a double. At least the Stros' Propoganda Department will be happy as Jeff Kent's single extended his hitting streak to 22.

Even Jimy Williams continued his dubious managerial moves. Playing in Seattle allows Williams to use the designated hitter in the Stros' lineup. So, does he use one of the team's best hitters to date, Mike Lamb? Or underutilized potential slugger, Jason Lane? No, Jimy uses one of "his guys," Jose Vizcaino, who continues to be -- along with another one of Jimy's "guys", Brad Ausmus -- one of the most unproductive hitters in baseball.

Finally, consistent with the sense of doom around the Stros right now, Andy Pettitte will miss at least another start and probably more as a result of his recent "forearm" (psst - it's really his elbow) injury.

The Stros are now 10-15 in their last 25 games, three and a half games behind the Reds in the NL Central, and sinking slowly into oblivion. This team needs a serious jolt, and perhaps Clemens can give it to them this evening as he takes the hill against the Mariners' forgettable Joel Pineiro (negative 14 RSAA).

Posted by Tom at 5:07 AM | Comments (0) |

June 7, 2004

Enron Nigerian Barge criminal trial postponed

Following on the earlier post from today, U.S. District Judge Ewing Werlein has postponed the trial of the Enron Nigerian Barge case. The trial will now begin on August 16.

Posted by Tom at 11:38 AM | Comments (0) |

What happened to Smarty in the Belmont?

Professor Sauer breaks that question down well in this post.

Posted by Tom at 8:49 AM | Comments (0) |

Thoughtful piece on criminalization of business

Professor Ribstein -- who is the blogosphere's foremost commentator on the troubling trend in the government's criminalization of business -- points us to this interesting this New York Times Magazine article in which novelist Mark Costello (most recently ''Big If'') and formerly a prosecutor for nine years addresses the problems involved in attempting to punish all types of crime in a uniform manner. In particular, Mr. Costello notes the sad case of Jamie Olis:

Dynegy's slogan was ''We believe in people.'' Many people working there idolized Chuck Watson and his downright dynegistic saga. One fellow in particular, a pudgy middle manager, had an especially inspiring biography. Born in Korea to a Korean mother and a G.I. father who abandoned the family, the young man came to Texas as a child. He lived in a shack in the wash of an often-flooded gully. At school, the other children beat him and made fun of him. But the lad was bright and resolute, and this is America, where every dream is possible. He went to college on full scholarship. He became a lawyer and a C.P.A. He married, had a child, and at the age of 36 enjoyed the corporate plumage of a throat-clearing title: senior director, Tax Planning and International.

His name is Jamie Olis. Two months ago, he was sentenced to 292 months (let's call it 25 years), one of the longest prison terms for fraud conspiracy in U.S. history.

Mr. Costello then decries the attempt to take prosecutorial and judicial discretion out of the sentencing process in criminal cases:

If an arraignment is one place to see the truth about a prosecution, a second place would be the other end of the great and ceremonial intestine of the courts -- namely, sentencing. Sentencing is where the state can make a statement. We like to think the statement is about right and wrong, the certain bedrock of our values. This would be resonant and satisfying, a good end to the movie. But sentencing, in fact and practice, is a thing of fault lines, feeling versus theory, science against sympathy. We don't often get what we want from the drama of a sentencing, because we don't always know what it is that we want. More pain in punishment, like the record whack received by Jamie Olis, and those who'll follow Olis, will only put more pressure on these fault lines.

Mr. Costello closes with the salient thought that sentencing in criminal cases -- as with most issues in life -- is not usually black and white:

But in truth, sentencing is more often about wrong and wrong, relative crimes and comparative punishments, the sins of Jamie Olis (who got 25 years) versus those of his co-workers (who could get 5 years), the sins of Mr. Embezzler versus those of the kids from Newark. Everyone is equal and should be treated equally, yet everyone's unique, or so we think.

As Dickens once said, 'tis a muddle. As we prepare to ratchet up the ''war'' on corporate fraud with new shock-and-awe-type sentences, perhaps we should pause, or go slowly at least. Perhaps we should respect the muddle, the humane confusion underneath the act of punishing all criminals -- the violent and nonviolent alike. Nine years as a prosecutor taught me this: when we use force (here, a jail cell) without the calm of a theory, the result is rarely something we are proud of.

Professor Ribstein has more thoughts here on the inhumanity of the federal guidelines that constrict federal judges' discretion in sentencing matters.

Posted by Tom at 8:13 AM | Comments (0) |

Enron Nigerian Barge case cranks up

The first Enron-related criminal prosecution to go to trial since the 2002 case against Arthur Andersen begins today in U.S. District Judge Ewing Werlein's court in Houston. This Houston Chronicle story reports on the difficulty of finding unbiased jurors in regard to any trial relating to the demonized Enron. Earlier posts on this particular case may be reviewed here, here, and here.

One of the first issues that Judge Werlein will deal with today is various defense motions to dismiss the case based on the Enron Task Force's inexplicably late revelation last Thursday that it possessed potentially exculpatory evidence for the defense in statements that former Enron CFO Andrew Fastow made to the Task Force.

In court pleadings, the Task Force has rationalized the late disclosure on the grounds that Fastow's statements are not really exculpatory. However, that position is highly dubious in that the Task Force admits that Fastow stated that he never used the word "guarantee" in a key phone conversation in which the defendants participated. In that phone call, the Task Force claims a secret side deal was arranged in which Fastow committed Enron to buy back or broker a deal within six months for an interest in the Nigerian Barges that Enron was selling to Merrill Lynch. Such an agreement would have rendered the sale of the interest in the barges not a "true sale" and, thus, made Enron's financial reporting of such sale fraudulent.

The Task Force is also attempting to minimize its delay in notifying the defense of Fastow's potentially exculpatory statements by taking the position that it is not going to call him as a witness in its case in chief, but that Fastow is available to testify if the defense chooses to call him. Inasmuch as the Task Force's case is based largely on Fastow's alleged agreement to buy the barge interest back from Merrill, even the most credulous of the Task Force's allegations will have to strain to accept the Task Force's reasoning here. Stay tuned to learn how Judge Werlein deals with this issue.

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

June 6, 2004

Stros salvage one in St. Louis; updated statistical analysis of season to date

Roy O pitched six strong innings and Miceli, Lidge and Dotel shut the Cards down in the final three innings as the Stros escaped St. Louis with a 3-2 victory. The Stros are now off to Seattle for a three game interleague series with the Mariners, who are a surprisingly horrendous 20-34 this season. Brandon Gopherballworth takes the hill in what may be his last start for the Stros if he does not show any improvement over his recent stints.

The Stros continue to muddle along at 30-25, three and a half games behind the Reds in the NL Central race. The most recent runs created and runs saved against average statistics are out, and they continue to reflect that the Stros have potential, but are underperforming generally. Here are the Stros runs created against average (RCAA) numbers through Saturday's games (RCAA is explained in this earlier post):

Lance Berkman 39
Jeff Bagwell 13
Jeff Kent 9
Craig Biggio 8
Mike Lamb 8
Eric Bruntlett 1
Adam Everett -1
Jason Lane -1
Orlando Palmeiro -2
Raul Chavez -3
Richard Hidalgo -3
Morgan Ensberg -4
Jose Vizcaino -6
Brad Ausmus -9

The Stros' net 49 RCAA leads the National League, but, as noted in last week's post, that number is somewhat deceptive -- Berkman, Bags, Kent, Bidg and Lamb have an aggregate 77 RCAA while the rest of the squad is hitting an atrocious -29 RCAA. And despite Vizcaino's three hits in today's game, Jimy Williams' liberal use of Viz and Ausmus is hurting the Stros -- he should be minimizing their play rather than using them to the extent he does. Ensberg and Hidalgo are the best bets to increase their RCAA dramatically, and Williams continues to yank both of them in and out of the lineup like a couple of yo-yo's. The following sets forth the Stros' starters OPS (on base average plus slugging percentage) and their rank among other National League teams' starting players. Also inlcuded are the top ten National League players in OPS):

1 Barry Bonds 1.466
2 Lance Berkman 1.170
3 Albert Pujols 1.088
4 Mike Lowell 1.063
5 Craig Wilson 1.062
6 Sean Casey 1.056
7 Scott Rolen 1.045
8 Adam Dunn 1.035
9 Jim Thome 1.019
10 J.D. Drew 1.010
24 Jeff Kent .907
30 Jeff Bagwell .881
38 Craig Biggio .846
56 Richard Hidalgo .753
66 Adam Everett .724
83 Brad Ausmus .660

Meanwhile, the Stros pitching is performing far below expectations. The following are the most recent runs saved against average (RSAA) through Saturday's games (RSAA is explained in this earlier post):

Roger Clemens 14
Roy Oswalt 5
Mike Gallo 4
Octavio Dotel 3
Brad Lidge 3
Andy Pettitte 3
Dan Miceli 2
Pete Munro 0
Chad Harville -1
Brandon Backe -3
Wade Miller -3
Ricky Stone -4
Jared Fernandez -6
Brandon Duckworth -7
Tim Redding -8

Clemens' RSAA remains one of the NL leaders, Roy O's is decent and likely to go up, and the key relievers' RSAA are above average and also likely to increase. However, starters Miller and Redding's RSAA stink, Duckworth is a gopher ball waiting to happen, and the staff's meager 2 total RSAA is barely above average. Consequently, the Stros pitching staff -- thought to be the team's strength coming into the season -- is a mediocre ninth in total RSAA in the National League and is far behind the staffs of their NL Central rivals Cards (34) and Cubs (21).

So, it looks like the Stros' success or failure this season is going to revolve around whether Hidalgo, Ensberg, Miller, and Redding can improve their generally desultory performances to date. None of the other underperforming Stros' players appear likely to improve their performance over the remainder of the season. Inasmuch as Bidg and Lamb will likely regress as the season wears on, improvement from these players is essential if the Stros are going to remain in contention in a tough NL Central race against the Reds, Cards, and the Cubs.

When the Reds' hitting cools off even slightly, look for them to fall out of first place in the NL Central quickly -- the Reds' hot hitting is covering up a poor pitching staff. The Cards and Cubs are currently the most likely candidates to takeover first place when the Reds fall, but the Stros could climb back into contender status if they get better contributions from the players named above.

Posted by Tom at 9:54 PM | Comments (0) |

Ronald Reagan, R.I.P.

National Review Online has the best group of articles on the late former President.

The Wall Street Journal ($) also has an excellent overview of President Reagan's life and career, and op-eds by former Reagan speechwriters Peggy Noonan and Peter Robinson that provide excellent insights into this American hero.

Brian Leiter has a good summary of contrary views on the Reagan Presidency.

And Jack Balkin has this balanced piece on President Reagan's legacy.

Posted by Tom at 1:16 PM | Comments (0) |

Clouds on Microsoft's horizon?

This Seattle Weekly article provides an instructive overview of the problems that Microsoft confronts in maintaining its position in the constantly changing world of computing. The article notes the fundamental problem:

The Web?s phenomenal growth has driven a number of fundamental changes. . . Microsoft seems to have overlooked the most important of those trends. It made a series of missteps, and it?s not clear if it has learned from them. In protecting Windows and Office revenues, Microsoft has innovated less quickly than it could have. The company relies on the same strategy that helped it years ago come to dominate the personal-computer market with the Windows operating system, despite mounting evidence that its customers are looking for a new approach. Competitors such as Linux and Google are gaining, and Microsoft seems unprepared for the road ahead.

Read the entire article, and then consider whether the constant deluge of viruses, adware, hijackers, bots and related plagues are really worth being tied to Microsoft products. Personally, I have just bought my first Mac and my sense is that it will not be my last.

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

Disassembling Dowd

Maureen Dowd is a New York Times columnist who consistently writes below her considerable talent level. In this article, Catherine Seipp, a Los Angeles-based writer, dissects Ms. Dowd's columns from the month of May, and it is not a pretty. I hope someone passes it along to Ms. Dowd's editor. Hat tip to Pejmanesque for the link to this clever piece.

Posted by Tom at 10:38 AM | Comments (0) |

Where did all of this come from?

This NY Times article reports on the investigations into how hundreds of millions of dollars in new U.S. bills found their way into the Iraqi central bank during a period of extreme economic sanctions? As the story relates, there are no final answers at this stage, but the search for those answers is proving to be quite interesting.

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

June 5, 2004

Cards rake Stros

The Redbirds teed off on Tim Redding, Mike Gallo, Chad Harville, and Ricky Stone as they rolled to a 10-4 victory at Busch Stadium on Saturday night.

Lance Berkman -- whose Bondsian hitting over the past month has been largely wasted because the rest of the Stros' hitters have slid into mediocrity -- was the Stros' lone bright spot as he rebounded from his hitless Friday night game to drive in all four Stros runs.

The season is only a third old and things can change over the course of a long season, but -- at this point -- the Stros don't look particularly competitive against this Cardinal team. Since May 12, the Stros are a rather pathetic 8-14 and beyond Berkman, Clemens, and Oswalt, no player has performed at a consistently above-average level over those 22 games.

Roy O is the Stros' last hope to salvage a game in St. Louis on Sunday afternoon. Jeff Suppan starts for the Cards.

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

Why did Tenet resign?

The always entertaining Gordon Prather has a theory.

Posted by Tom at 2:29 PM | Comments (0) |

John Keegan's perspective on Iraq

John Keegan is England's foremost military historian and, for many years, was the Senior Lecturer at the Royal Military Academy at Sandhurst. His book -- The Second World War -- is arguably the best single volume book on World War II.

Professor Keegan recently wrote this op-ed in the London Telegraph in which he places current events regarding the war in Iraq in historical perspective:

The Second World War, which has largely formed Western attitudes to war termination, ended neatly for simple reasons: both the Germans and Japanese had had the stuffing knocked out of them. Their cities had been burnt out or bombed flat, millions of their young men had been killed in battle, so had hundreds of thousands of their women and children by strategic bombing. The Japanese were actually starving, while the Germans looked to their Western occupiers both to feed them and to save them from the spectre of Soviet rule. Two highly disciplined and law-abiding populations meekly submitted to defeat.

Because we in the Atlantic region remember 1945 as the year of victory over our deadliest enemies, we usually forget that the Second World War did not end neatly in other parts of the world. In Greece, the guerrilla war against the Germans became a civil war which lasted until 1949 and killed 150,000 people. Peace never really came to Japanese-occupied Asia. In China, Vietnam, Indonesia and Burma, the Second World War became several wars of national liberation, lasting years and killing hundreds of thousands. In Burma, the civil war persists.

The aftermath of the First World War was worse. On Armistice night, Lloyd George, leaving the House of Commons with Winston Churchill, remarked: "The war of the giants is over. The war of the pygmies is about to begin." The pygmies, in civil wars in Germany, Hungary, Poland, the Baltic states, Finland and above all Russia, went on fighting for years, killing or starving to death millions. A full-blown war of conquest by Greece against Turkey ended in a Greek humiliation but also 300,000 deaths.

And there was, of course, a war in Iraq, caused by Britain's attempt to enforce the mandate to rule granted by the League of Nations. Britain eventually prevailed, but at the cost of 6,000 Iraqi deaths and 500 in its own forces. British casualties in this war scarcely exceed 100. Then, as now, the occupiers complained that "every Iraqi has a rifle".

Then, Professor Keegan puts the current troubles in Iraq in the context of previous 20th Century wars:

History boys can explain easily - and convincingly - why some wars, as that against Germany in 1945, end in unopposed occupation of enemy territory and why others, as in Iraq in 1920 and 2004, do not. In the first case, the defeated nation has exhausted itself in the struggle and is dependent on the victor both for necessities and for protection against further disaster - social revolution or aggression by another enemy. In the second case, the war has not done much harm but has broken the power of the state and encouraged the dispossessed and the irresponsible to grab what they can before order is fully restored.

What monopolises the headlines and prime time television at the moment is news from Iraq on the activity of small, localised minorities struggling to entrench themselves before full peace is imposed and an effective state structure is restored.

While noting those troubles, Professor Keegan closes by focusing on the bottom line:

It is a regrettable but not wholly to be unexpected outcome of a campaign to overthrow a dangerous Third World dictator. If those who show themselves so eager to denounce the American President and the British Prime Minister feel strongly enough on the issue, please will they explain their reasons for wishing that Saddam Hussein should still be in power in Baghdad.

Posted by Tom at 2:19 PM | Comments (0) |

Another decision on group fraud allegations in a securities fraud case

In this earlier post, the recent Fifth Circuit decision in (Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., No. 02-1055 (5th Cir. March 31, 2004)) was noted for holding that the group pleading doctrine for alleging 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.

However, other federal courts have not been as demanding as the Fifth Circuit in requiring specific allegations of fraud against defendants. In the recent decision of In re NUI Sec. Litig., 2004 WL 895846 (D.N.J. April 23, 2004, the court found that the plaintiffs had adequately pled a sufficiently strong inference of scienter to sustain Rule 10b-5 claims against the corporate defendant (NUI) based on allegations that a stock-for-stock acquisition of another company gave NUI a motive to inflate the price of its stock and that NUI's associate general counsel (who is not a defendant in the case) knew of NUI's fraudulent conduct. As to NUI's CEO and CFO (both of whom are defendants in the case), the court concluded that the plaintiffs' allegations regarding their motive to commit fraud and knowledge of the fraudulent conduct were insufficient to sustain the Rule 10b-5 claims against them.

But wait. The CEO and CFO are not off the hook. Inasmuch as they controlled NUI and the court found that a Rule 10b-5 claim was adequately pled against NUI, the Section 20(a) claims against the CEO and CFO based on control person liability can continue. Ouch!

This decision -- as with last year's decision in In re Interpublic Securities Litigation, 2003 WL 21250682, (S.D.N.Y. May 29, 2003) -- are eroding the PSLRA's requirement that plaintiffs specifically plead scienter as to each defendant in the lawsuit. Normally, courts reject "collective scienter" theories -- that is, in determining whether a corporate defendant acted with scienter, courts examine the specific state of mind of the individual corporate official who made or approved the corporate statement rather than the collective knowledge of all the corporation's officers and employees. However, in the In re NUI Sec. Litig. decision, the court clearly imputed the knowledge of the associate general counsel to the corporate defendant for scienter purposes despite the fact that the associate general counsel was not alleged to have made or issued the false statements.

This is a trend worth keeping an eye on. Hat tip to the 10b-5 Daily for the link to the NUI decision.

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

June 4, 2004

Stros lose to Cards

The Stros looked listless after a golf day in St. Louis as the Cards parlayed a four run fifth inning into a 5-3 win at Busch Stadium.

Wade Miller continued to look unimpressive as he walks far too many batters to be effective over the long term. Kent and Lamb had solo yaks, but Berkman's 33 game on base streak came to an end. To make matters worse for Berkman, his alma mater was upset 4-3 by Texas Southern in the NCAA Regional Baseball Tournament.

Tim Redding attempts to get the Stros back on track on Saturday night against the Cards' Jason Marquis.

Posted by Tom at 10:20 PM | Comments (0) |

Excellent overview of the current spike in energy prices

James D. Hamilton is an economics professor at Cal-San Diego who specializes in the economics of energy. In this excellent piece, Professor Sullivan summarizes the recent spike in energy prices and compares it to similar spikes of the past. The entire short piece is worth reading, and here is a tidbit to pique your interest:

The current behavior of oil prices is unlike the spike that preceded earlier recessions in two key respects. First, oil prices have gone up not because of a shortfall of supply but rather because of an increase in demand. The world is producing 3 million more barrels of oil each day relative to last year, nearly a 4% increase. But demand is up even more dramatically. . .

This is quite a different situation from other historical oil shocks that were caused by military conflicts that physically disrupted the production or delivery of petroleum, forcing consumers and firms to make less use of this vital input. The current situation is simply that we have to share the increased supply with other consuming nations. There should be no quarrel with the proposition that a booming world economy overall is good economic news, not bad.

The second way that the current oil price spike differs from those that preceded earlier U.S. recessions is that a good part of the recent increase is merely a correction to an earlier dramatic drop in oil prices. The current oil price of $41 a barrel is 45% higher than the $28 price we saw last September. However, it is important to remember that before those September lows, oil had been selling for $36 back in February of 2003, so that the current price is only 15% above what we saw just a little over a year ago. There were similar corrections (an oil price spike following an earlier downturn) in 1987 and 1994 with no apparently adverse economic effects.

For more a detailed analysis of price spikes in energy markets, review Professor Hamilton's paper "What is an Oil Shock" that he published originally in 1999 and updated in 2001.

Hat tip to Professor Sauer for the link to Professor Hamilton's work.

Posted by Tom at 9:58 AM | Comments (0) |

VDH on the New Defeatism

One of the most insightful social commentators of our time, Victor Davis Hanson, posts his weekly article on NRO in which he opines on the real problem in the prosecution of the war against the radical Islamic fascists:

Our Real Dilemma. We do have a grave problem in this country, but it is not the plan for Iraq, the neoconservatives, or targeting Saddam. Face it: This present generation of leaders at home would never have made it to Normandy Beach. They would instead have called off the advance to hold hearings on Pearl Harbor, cast around blame for the Japanese internment, sued over the light armor and guns of Sherman tanks, apologized for bombing German civilians, and recalled General Eisenhower to Washington to explain the rough treatment of Axis prisoners.

We are becoming a crazed culture of cheap criticism and pious moralizing, and in our self-absorption may well lose what we inherited from a better generation. Our groaning and hissing elite indulges itself, while better but forgotten folks risk their lives on our behalf in pretty horrible places.

As usual, Professor Hanson closes by placing the current troubles in Iraq into perspective:

Historic forces of the ages are in play. If we can just keep our sanity a while longer, accept our undeniable mistakes, learn from them, and press on, Iraq really will emerge as the constitutional antithesis of Saddam Hussein, and that will be a good and noble thing ? impossible without America and its most amazing military.

Read the entire article.

Posted by Tom at 9:26 AM | Comments (0) |

Brad DeLong on the Kerry health care finance plan

In this post, Cal-Berkeley economics professor Brad DeLong examines an interesting aspect of John Kerry's health care finance plan:

[T]he Kerry campaign has dusted off and brought forward a very clever idea from Brandeis's Stuart Altman to not eliminate but at least diminish the magnitude of these two ways that market-based health-care reforms self-destruct. The idea? Have the government take its task of social insurance seriously, and reinsure private insurers and HMOs: construct a 'premium rebate' pool to pay annual health-care bills over $50,000. This greatly diminishes the cost to insurers and HMOs of covering the really sick. The cost of treating the really sick will then be on the taxpayer rather than on the insurance-purchasing consumer. Insurance rates will fall. And the incentive for the young without many assets to go naked and uninsured will diminish as well.

Thus two of the big problems with our health care system become smaller problems. If this plan is enacted, we will no longer have to worry as much (i) adverse selection--the enormous financial incentives HMOs and insurance companies have to figure out some way not to cover the sick people--and (ii) cost shifting--the fact that those who buy insurance have to pay not only their own routine costs and their own catastrophic costs but the catastropic costs of others and the uninsured as well. The first means that--often--those who need health care the most have a hard time getting it. The second means that--often--those who could afford or would buy insurance if it were priced at its fair actuarial value don't because of this cost shifting.

This is an interesting proposal. In short, the government would offer reinsurance for catastrophic health care costs. In so doing, this would reduce the incentive for health insurance companies to avoid providing insurance for high-risk applicants. At least in theory, the cost of health insurance should decline, which would make it more attractive to consumers. In effect, the Kerry proposal would make the government's role in health insurance similar to its role in automobile insurance, where the government subsidizes coverage for the highest-risk applicants.

Indeed, as Professor DeLong points out, the Kerry proposal is consistent with the interests of the Bush Administration's approach to health care finance. Why then has not the Administration adopted such a proposal? Simply another example of the void of creative policy development that is currently taking place under this Administration.

Posted by Tom at 8:57 AM | Comments (0) |

Paul Johnson reflects on D-Day and Iraq

British historian Paul Johnson (author of "Modern Times," "History of the Jews," "History of Christianity," "A History of the American People," and his more recent "Art, A New History," among others) is one of my favorites. In this Wall Street Journal op-ed from several days ago, Mr. Johnson makes the following poignant point about the planning and implementation of the D-Day invasion during World War II, and relates it to the Allies' current situation in Iraq:

The history of D-Day, and the fortnight that followed, showed the value of meticulous preparations, rehearsals, elaborate testing of every kind of equipment, and the study of logistics. Having secured the bridgehead, the Allied buildup was so rapid that, within a month, the Germans had palpably lost the battle in the West and with it the war. But that did not mean an early Nazi capitulation. Granted the Allied war aim of unconditional surrender, Hitler would clearly fight on to the end, and that meant we had to destroy his large-scale fighting capacity by breaking up all major units and occupying territory. But how, exactly? Montgomery was all for the rapid thrust by armored divisions deep into Germany, backed by overwhelming air-power. "Berlin by Christmas" was one phrase used. This was a fighting soldier's strategy and one which the Germans, in a similar situation, would certainly have used. Indeed, to some extent it was used by Gen. Patton and his armor. But it was risky. The faster the spearhead moved, the more extended its lines of communication became and the more likely it was that the Germans would be able to mount a devastating lateral attack which might sever the advanced armored units from their tail.

In the end, Eisenhower decided it was too risky and overruled Montgomery's enthusiasm. Instead, a "broad front" strategy was adopted, the Allies advancing slowly, steady and always as a continuous mass, forward units never out of touch with their companions to left or right. This virtually ruled out the possibility of German counterattack breaking right through the front and nipping off a spearhead. It was the safe approach, and typical of Eisenhower's minimum-risk attitude to warfare.

But of course such an approach involved penalties. It allowed the Germans to keep their line, to regroup and reinforce, and to maintain morale. Not until the very last weeks of the war did their front collapse, and individual units begin to surrender freely. Moreover, the political consequences were enormous. Instead of the war ending in autumn or early winter 1944, it lasted until the end of April 1945. Instead of the U.S. and Britain occupying Berlin and most of central Europe, it left these spoils to the Russians. The broad-front policy set the stage for 40 years of Cold War. Indeed, had it not been for the firmness of President Truman in reversing Roosevelt's policy of appeasing Stalin, it is quite possible that Western Europe too might have fallen victim to communism, and that the frontiers of Stalin's empire would only have ended at the English Channel.

These reflections of D-Day and its aftermath remind us that military decisions can never be entirely separated from their political consequences. Geopolitics is like a game of chess: You have to think a dozen moves ahead. This is as true today as in 1944-45. When President Bush and British Prime Minister Tony Blair decided to destroy Saddam Hussein's military power, they took a risk that was abundantly justified both geopolitically and morally. But they paid insufficient attention to the possible political consequences.

Unlike Montgomery in 1944, who never underestimated the German genius for counterattack, and made provision against it, the allies this time did not study and prepare for the peculiar Arab genius for counterattack, which is to carry out prolonged and vicious guerilla warfare, completely disregarding human life, including their own. Moreover they did not study and prepare for the difficulties of meeting this form of counterattack against the political background of a free society at home, reacting nightly to what it sees on TV, and reading highly critical reports from the front written by journalists who have their own opinions and agendas and feel under no obligation to pursue the war (and peace) aims of the allied commanders. Both Mr. Bush and Mr. Blair are currently suffering from their lack of provision and foresight.

Given patience and determination, all will be well in time: Democracy and the rule of law will grow in the Middle East, and the roots of terrorism will be destroyed. But we are learning, once again, that the lessons history has to teach are inexhaustible and that statesmen should never plunge into the future, as we did in Iraq, without first examining what guidance the past could supply.

Posted by Tom at 8:29 AM | Comments (1) |

The new definition of "cooperation"

This timely Wall Street Journal ($) article reports on the government's new pressure tactic in investigating and prosecuting business crimes -- pressuring businesses to condition the business' support of its employees who are under investigation on the employee's cooperation with the government, which can of course use the employee's statements against him in prosecuting him for a crime. The WSJ article uses the example of the government's ongoing investigation into Big Four accounting firm KPMG's tax shelter promotion (earlier posts on that matter are here). As the WSJ article notes:

Jeffrey Eischeid, a onetime star at accounting giant KPMG LLP, is bracing for possible criminal charges that could land him in federal prison for more than two decades. His offense? Marketing tax shelters that KPMG said were legal.

While the U.S. Attorney in Manhattan is the immediate source of his legal jeopardy, he has another one to worry about: KPMG.

Until recently, the accounting firm staunchly supported both its tax shelters and Mr. Eischeid, whom it sent to Congress to defend the shelters. But this year the firm, which like Mr. Eischeid is at risk of a fraud or conspiracy indictment over the tax shelters, switched strategies. It placed Mr. Eischeid, a 46-year-old partner, on leave, then asked him to resign. And it refused to pay his legal costs unless he agreed to cooperate with the prosecutors, where anything he said could be used against him.

Why the about-face? The answer involves federal sentencing guidelines for businesses, prescribing stiff mandatory penalties for white-collar crimes such as fraud. The sentencing guidelines also tell how companies can lower their odds of being charged with a crime in the first place: by cooperating fully with the federal investigators. And the government has been refining and tightening its definition of cooperation -- with broad implications for how U.S. companies interact with employees.

Recent changes, contend critics who include attorneys for some KPMG staffers, encourage companies to break faith with their own employees, making it harder for them to avoid self-incrimination. The critics say that companies, to avoid facing charges themselves, now sometimes feel obliged to fire people, snitch on them, refuse to pay their legal fees and withhold documents they need.

And the price of not cooperating with the government? Based on recent cases, the price is extremely high:

Companies can ill afford to ignore the guidelines because criminal charges, even without a conviction, take a severe toll. This is especially true for financial-services companies. The damage is evident in the fate of such once-mighty firms as Drexel Burnham Lambert and Arthur Andersen LLP, which later faced criminal charges. Drexel folded and Andersen all but disappeared, with a remnant today of only 215 employees.

For a partner like Mr. Eischeid in a firm such as KPMG, the choices and stakes in such a criminal investigation are also extremely high:

After Mr. Eischeid learned prosecutors were interested in him, KPMG gave him a choice. He could cooperate with the investigators, and the firm would pay his legal fees. Or he could go it alone, in which case he would have to foot his own legal bills and would risk being fired.
Mr. Eischeid decided it was too risky to meet KPMG's conditions for paying his bill. He retained Mr. Arkin. The lawyer recently refused prosecutors' requests to speak with his client unless Mr. Eischeid is assured "he would not be viewed with the specter of certain indictment or forced guilty plea."

Mr. Eischeid has a lot to lose. Since graduating from the University of Georgia, he has never held any other job than the one at KPMG and a predecessor firm, and his chances of finding other employment in his field now appear slim.

[Mr. Eischeid] could face more than 20 years in prison if he is indicted and later convicted at a trial. Mr. Eischeid knows that cooperating with the prosecutors prior to charges could mean a smaller penalty. But prosecutors have indicated he would have to plead guilty to at least three felonies, his lawyer says, even though "everything Jeff Eischeid said and did with the tax products he's now being investigated for selling was scripted by KPMG and approved by KPMG's professional-responsibility committee."

Finally, the sad case of Jamie Olis looms large over Mr. Eischeid's case:

Looming large in Mr. Eischeid's thinking is the case of Jamie Olis, a midlevel executive at Dynegy Inc. Maintaining his innocence, Mr. Olis went to trial in Houston, was convicted -- and drew a 24-year prison term dictated by federal sentencing guidelines. Says Mr. Eischeid, whose last day at KPMG was last Friday, "That could be me some day."

Let's assume for a moment that Mr. Eischeid's tax shelter work was on the margin of tax avoidance legitimacy. Apart from the issue of whether our Tax Code should be written in a manner that encourages such tax avoidance schemes, is not the public interest protected sufficiently by the financial risk that Mr. Eischeid's clients take in attempting to avoid taxes in this manner? Additional tax, penalties, defense costs and even more accounting fees -- clearly, the potential cost of such avoidance schemes is high. Does criminalization of such behavior -- particularly where the government's approach makes it difficult for the persons involved to mount a defense -- serve any useful public purpose?

Posted by Tom at 8:07 AM | Comments (3) |

June 3, 2004

Nigerian Barge defendants go on the offensive

This NY Times article reports on a potentially important development in the Enron-related criminal case against two former Enron executives and four Merrill Lynch executives dubbed the "Nigerian Barge case." The Houston Chronicle story on these latest developments is here.

A day after the Enron Task Force had elected not to list former Enron CFO Andrew Fastow as a witness in the case, the Task Force advised the defendants that the government has in its possession potential exculpatory evidence for the defense relating to Mr. Fastow. Defendants immediately asked U.S. District Judge Ewing Werlein Thursday to conduct an evidentiary hearing to find out why prosecutors have withheld until the last minute evidence from Fastow that could help the defense.

According to the defense motion, in one FBI interview, Fastow said he did not even recall one of the defendants -- former Enron finance executive Dan Boyle -- being involved in Enron's 1999 sale to Merrill Lynch of an interest in electricity-generating barges in Nigeria.

As noted in this earlier post, the government's theory of the case is that Enron's sale of an interest in the barges to Merrill was a sham and not a "true sale" for accounting purposes because Fastow orally promised Merrill in a secret side deal that Enron would either buy back the barges or broker a deal for them the following year. However, none of the deal documents contained that promise, and the the parties contirmed in the written documents that they were relying only on the representations and agreements contained in the written agreements between the parties. Fastow's statements to the FBI and Justice that no such oral agreement existed could be strong evidence for the defense that the alleged side deal did not exist.

In a pre-trial conference last Thursday, Judge Werlein was openly skeptical about several of the prosecutors' statements regarding why they had not turned over potentially exculpatory evidence in their possession to the defense. It will be interesting to see how this eminently fair Judge reacts to these latest developments.

Posted by Tom at 9:41 PM | Comments (0) |

Growth of "Micropolis" communities

This Wall Street Journal ($) article reports on the growth of a certain type of community that is known as a "micropolis" -- growing population centers of at least one town of 10,000 to 50,000 people removed by as much as 100 miles from the nearest large city that are drawing refugees both from rural America and suburbia. These communities offer some of the cultural attractions and conveniences of cities without the liabilities and headaches of urban sprawl. Not only has telecommuting and internet mail-ordering made it easier for folks in such communities to remain connected to trade and commerce from outlying areas, employers find it easier to open a factory or an office park because of lower real estate and labor costs.

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

UT regents elect James Huffines chairman

This Austin American-Statesman article reports on the University of Texas System Board of Regents selection of James Huffines, an Austin banker and behind-the-scenes Republican powerbroker, as chairman of the UT Board of Regents on Wednesday. Mr. Huffines succeeds Charles Miller, a retired Houston money manager, who resigned the chairmanship but will continue to serve as a regent until Governor Perry appoints his replacement.

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

Robert Durst bond amount struck down as unreasonable

The incredible murder case involving Robert Durst finally took an expected turn on Wednesday as the 14th Court of Appeals struck down state district Judge Susan Criss' absurdly high $3 billion bond as a condition for Durst's release pending his trial on evidence tampering and bail-jumping charges. The appellate court directed Judge Criss to conduct another hearing soon to reconsider the amount of the bond and provided guidelines for what it considered to be a reasonable amount of the bond.

Based on the outcome of Durst's murder trial, if Durst's attorney Dick DeGeurin could only get a jury trial on the issue of the amount of the bond, he might get Durst released on personal recognizance.

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

June 2, 2004

Stros beat Cubs again

The Rocket dominated the Cubs for seven innings in running his record to 8-0 as the Stros beat the Cubs on Wednesday afternoon at Wrigley Field, 5-1.

Clemens struck out five and gave up only five hits, a run, and two walks in his seven innings of work. His effort was was highlighted by his running discussion with home plate umpire Mike Fichter, which Clemens carried on in a relatively diplomatic manner throughout the game. But after the seventh inning, Clemens walked to the dugout yelling in anger while never looking at Fichter, and Fichter stared at the Rocket during his entire walk to the dugout. As they say in the bigs, Clemens "has a little turd in him."

As usual, Lance Berkman drove in the lead run and reached base for the 33rd game in a row. Jeff Kent also had a triple and scored three runs, while Lidge and Dotel were dominating in the eighth and ninth innings for the second game in a row.

The Stros get a day to play golf in St. Louis on Thursday before opening a weekend series with the Redbirds on Friday night. Wade Miller, Tim Redding, and Roy O will pitch the series against the Cards.

In other news, the Stros announced the signing of Pete Munro, who has been with the Stros off and on over the past three seasons. Munro had been pitching with the Twins' AAA club this season, but could opt out of that contract if he received an offer from an MLB club.

The odd man out is Brandon Backe -- one of the two Brandons who stunk on Tuesday night in Chicago -- who was optioned to AAA New Orleans. Backe has actually pitched better than the other Brandon (Duckworth), but the Stros still have options under Backe's contract to send him to the minors. I suspect that the Stros do not have any options under Duckworth's contract. Nevertheless, my sense is that the Stros will do something soon with Duckworth, probably either working out a deal to allow him to attempt to improve at AAA or simply grant him his unconditional release.

Posted by Tom at 8:51 PM | Comments (3) |

Holman Jenkins on the charade of "energy independence"

This Wall Street Journal ($) Holman Jenkins, Jr. piece lays the wood to John Kerry's "energy independence" blather that he has been using recently in various campaign speeches and working papers. The entire column is a brilliant expose of the demagogury that commonly revolves around the issue of energy policy and the alleged need for "energy independence" from Mideast, and here are a few choice tidbits:

[Kerry] puts himself in excellent company here, since the same shibboleth has been paid lip service by every president since Nixon. It's also a favorite of prominent newspaper columnists who, throwing up their hands about the Middle East and finding Americans more tractable targets for castigation, cite the urgent need for a "Manhattan Project on energy." The idea never fails to elicit applause from audiences of ordinary voters and focus groups too, in about the same way that Mom, apple pie and stopping foreigners from "stealing our jobs" are reliable applause lines.

That is to say, as a goal, energy independence is neither desirable nor practical and, were it otherwise, would still not solve any real problem. But it provides a useful service as a vehicle of escapism and an emblem of personal virtue.

In fact, Mr. Jenkins postulates that Kerry's plan to reduce dependence on Mideast oil would likely have unexpected consequences:

Oil is oil: We'd still be bound by prices in the international marketplace with all their unsettling volatility. Mr. Kerry proposes nothing more than a symbolic slap at the Arabs, his target accounting for less than 10% of total consumption. In fact, were his plan to have any effect at all, the U.S. would likely become more dependent on imports as high-cost U.S. producers were squeezed out; and more dependent on Mideast oil, as high-cost foreign producers were squeezed out.

Then Mr. Jenkins deals with several of the unspoken assumptions that underlie the escapist fallacy of energy dependence on Mideast oil:

We'd be able to wash our hands of military and security entanglements in the Mideast. No, we wouldn't. Oil would remain a commodity in global markets, so we'd still be exposed to the international price of oil, including all gyrations caused by Mideast politics. Even in the improbable and bizarre circumstance that the U.S. swore off oil consumption altogether, we'd still have to live in this world. Notice that we invest heavily in the security of Japan, South Korea, Israel and Western Europe, though none has oil.

Our dependence makes us beholden to Arab oil states. This is similar to the argument put to President Truman by the State Department when it vehemently opposed his recognition of Israel. Yet it's hard to imagine how we could make ourselves more irritating to Arab states than by supporting Israel, which we've done for 50 years. Somehow we still manage to keep buying all the oil we want.

We'd be freer to press for democracy and human rights in the Mideast. Huh? The U.S. is going to engage in campaigns of destabilization against unattractive regimes in which we no longer have an interest? On the contrary, their co-optation by petrodollars and consequent integration in the world economy is the main inducement to the Arab oil states to eschew antisocial behavior.

The Saudis spend our oil money on religious schools preaching hate against the West. The Saudis would continue to receive billions for their oil even if the U.S. weren't buying. In any case, their support for radical Islamists has nothing to do with oil and everything to do with the Saudi regime's domestic insecurities. We can't fix this problem with energy policy; let's hope we're not so feckless as to evade the real fight against terrorism in favor of a fantasy that all will be well if Congress is allowed to spend billions on a pork-barrel scheme to wean industrial society off hydrocarbons.

Mr. Jenkins concludes by noting that the problem of high energy prices is a different problem than reliance on Mideast oil:

None of the above means we don't have a real, workaday concern for "energy security -- more accurately stated as a concern about price, price, price, and even more importantly, volatility of price.

But this problem is steadily fixing itself as oil consumption becomes a smaller part of total consumption, leaving the economy better able to withstand price gyrations. Per unit of economic output, we burn 55% fewer petroleum Btus than we did 30 years ago. As is the case with most historical dilemmas, we will overcome our reliance on Mideast oil by surviving long enough for history to give the U.S. new and different problems.

As readers of this blog have heard before, your demagouge antenna should go up every time you hear a politician advocate a policy that means that we should pay more for a product such as oil.

Posted by Tom at 8:03 PM | Comments (0) |

Nigerian Barge case update: Justice won't call Fastow

As noted in this earlier post, the Enron Task Force's first trial in a case stemming from its over two year investigation into the collapse of Enron Corp. will begin next Monday in U.S. District Judge Ewing Werlein's court in Houston.

The case has been dubbed the "Nigerian Barge case" because it involves the actions of two former Enron executives and four Merrill Lynch executives in arranging Merrill's purchase of an interest in a barge off the coast of Nigeria at the end of 1999. The Task Force alleges that the deal was a sham that was done merely to improve Enron's financial condition artificially at the end of its fiscal year. The Task Force's proof of the alleged sham is that former Enron CFO Andrew Fastow allegedly promised that Enron would broker a sale of the interest in the barges for Merrill the following year and that Merrill would not have done the deal but for Fastow's promise. Thus, argues the government, the sale was not a "true sale" of the interest, and Enron's accounting of the deal as a true sale was false.

An apparent weakness in the government's theory is that, even if the government could prove that Fastow made the promise and that Merrill would not have done the deal but for that promise, Fastow's promise was made before the parties entered into the final deal documents, which contain the typical provision that essentially provide that the parties are relying only on the written representations in the documents and that any oral promise made prior to the written agreements between the parties is not being relied upon. Thus, even if Fastow had made the promise to broker a deal for the interest in the barges to induce Merrill to buy it, that promise was not contained in the written agreements and, by signing them, Merrill confirmed that it was not relying on them. Stated simply, Merrill would not have been able to enforce Fastow's oral promise to broker a deal for the barges.

In view of the foregoing and Fastow's plea bargain with the government, it would seem that Fastow's testimony that the deal was a sham would be of great importance to the government. However, this Chronicle article reports that the Task Force has decided not to call Fastow as a witness in presenting its case in chief during the trial.

Given the importance of Fastow's allegedly fraudulent deal-making to the government's case, this is good news for the defense. Moreover, in light of the written agreements between Enron and Merrill, is there really any way that the Task Force can sustain its burden that an oral side deal to broker a deal for the barges was an enforceable part of the deal? Stay tuned.

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

Two informative articles on radical Islamic fascists

I'm on the road for a couple of days, so I don't have much time for blogging. But I wanted to pass along two articles on radical Islamic fascists that are particularly insightful.

First, Daniel Pipes has this article that summarizes the evolution of the strange political climate that currently exists in Saudi Arabia. Mr. Pipes notes Bernard Lewis' analogy that helps understand the Saudi position among Muslims in general:

"Imagine that the Ku Klux Klan gets total control of the state of Texas. And the Ku Klux Klan has at its disposal all the oil rigs in Texas. And they use this money to set up a well-endowed network of colleges and schools throughout Christendom, peddling their peculiar brand of Christianity. You would then have an approximate equivalent of what has happened in the modern Muslim world."

H'mm. In other words, Dr. Lewis, sort of like what happened with the Mormons, Utah and the United States? ;^)

The other article of note is this one from Richard Chesnoff, who has been reporting on the wars of the Middle East for over 30 years. I particularly like Richard because he is a real war reporter and does not mince words. An example:

Al Qaeda also has apparently infiltrated a number of nongovernmental agencies. Among them, the Yemen Women's Rights Organization. My source explains: "Because of Islamic society's strict taboo on body searches for women, Al Qaeda finds women ideal couriers."

The situation in Saudi Arabia seems worse. Though Saudi officials frequently cloud or completely deny the facts, intelligence shows that two Saudi Air Force pilots, Lt. Safr al-Shahrani and Major Sayyaf al-Bishi, were arrested last year on suspicion of having Al Qaeda ties and of planting missiles in the Al Qawiza area south of Jeddah Port. Their reported plan: attack U.S. military vessels.

There are also reports that the Al Qaeda terrorists whose suicide bomb killed 35 people in Riyadh last year were secretly helped by members of the Saudi National Guard, the same force that supposedly protects the Saudi Royal Family. In Khobar this weekend, the terrorists reportedly wore Saudi Army fatigue uniforms. Did they steal them? Or were they supplied to them by somebody within the national guard?

There are similar reports of internal infiltration coming from Sudan and Pakistan.

The Islamic fascists remain a formidable threat to United States and world security, and this threat is far too serious to be just another political football during the upcoming Presidential campaign.

Posted by Tom at 12:09 AM | Comments (1) |

June 1, 2004

Stros battle back to beat Cubs

The Stros showed some heart tonight as they held on behind some outstanding relief pitching by Mike Gallo and Dan Miceli to beat the Cubbies, 5-3.

After Bags and Jeff Kent yaks staked the Stros to an early lead, the Cubs tied it at 3-3 behind three solo shots off of Stros' starter Brandon Gopherworth, er. or make that Duckworth (Duckworth has now given up a rather startling nine home runs in 24 innings this seasons). After the third shot in the fourth, the Cubs loaded the bases with no outs against Duckworth, when manager Jimy Williams made good use of his quick hook. Gallo came in and and struck out Corey Patterson on four pitches and then induced Ramon Martinez to bounce into a 1-2-3 double play. Gallo won player of the game for that effort.

The Cubs loaded the bases again in the sixth off of Brandon Backe (the only ineffective Astros reliever in this game; guess it wasn't a good night for pitchers named Brandon) when Miceli came on to get Lee to pop out and fan Patterson and Martinez. Mike Lamb came through with a clutch pinch hit two run double in the eighth, and then Lidge and Dotel mowed down the Cubs with relative ease in the final two frames. Between them, Patterson, Martinez, and Derreck Lee left an incredible 15 Cub teammates stranded on base, much to the vocal disdain of the Cubs' fans.

The only downer of the game was the continued futility of Duckworth, who was one of the three pitchers that the Stros received from the Phillies in the Billy Wagner deal. My sense is that Duckworth needs some tuning at AAA to determine whether he can pitch at this level consistently, but I don't know whether the Stros have any options left under his contract.

The Rocket revs up for his first ever game at Wrigley on Wednesday afternoon against the Cubs' testy Matt Clement, who likes to throw high and tight just as much as Clemens. Should be interesting.

Posted by Tom at 11:45 PM | Comments (0) |

Bankruptcy Judge William Greendyke steps down to enter private practice

Long-time Houston Bankruptcy Judge William Greendyke resigned effective June 1st to become a member of the Bankruptcy, Reorganization and Creditors' Rights section of Houston-based Fulbright & Jaworski.

Judge Greendyke was appointed to one of the five Houston bankruptcy judgeships in the early 1990's, and quickly became one of the best and most-admired judges on the federal bench. Hard-working, smart, organized, courteous, and good-humored, Judge Greendyke consistently rated as one of the top judges in Houston in the annual Houston Bar Association judicical evaluation poll. Although he will be sorely missed on the bankruptcy bench, the Houston bankruptcy bar is gaining an esteemed new member.

Former Dallas Bankruptcy Judge Robert C. McGuire will replace Judge Greendyke on a temporary basis for the first few months until a permanent replacement can be named. It is also rumored that Bankruptcy Judge Gerald Schiff from the Western District of Louisiana will be taking on some of Judge Greendyke's docket until a replacement judge is appointed.

Posted by Tom at 11:37 AM | Comments (0) |

Judge Phil Peden dies

Alexander Phillips ("Phil") Peden (prounounced "Pay-don") died on Sunday at the age of 87. The Chronicle obituary is here.

Judge Peden -- a life-long Houstonian -- was a well-known and respected judge for over 33 years in various courts in Harris County. He first served as Judge of the county court at law, then as a state District Judge, and then as a Justice on the First Court of Appeals for 14 years. After retiring from the state bench, Judge Peden served as a Federal Bankruptcy Judge for 3 years during the mid-1980's when a depression in the Houston business community created a huge spike in the number of business and personal bankruptcies. After retiring from the bankruptcy bench, Judge Peden served as a mediator in numerous private litigation matters.

Visitation will be Tuesday, June 1, from 6:00 p.m. until 8:00 p.m. at Geo. H. Lewis & Sons, 1010 Bering Drive in Houston, and a memorial service for Judge Peden will be held Wednesday, June 2, at 4:00 p.m. at St. Martin's Episcopal Church, 717 Sage Road in Houston.

Here is an updated Chronicle story on Judge Peden.

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

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