July 31, 2004
First, the Stros blew the suspended game from last night to the Reds in 13 excrutiating innings 3-2, but then they came back to salvage Saturday afternoon's game, 8-0.
The completion of the suspended game was pure agony. 13 innings, four hits, only one extra base hit (a double) against the worst pitching staff in the National League. Watching bowling or billiards would have been much more exciting than enduring that travesty.
And despite Darren Oliver's five inning, one hit, no walks, 6 K performance in replacing injured Andy Pettitte in Saturday's regular game, the Stros had scored only 2 runs through eight innings in that affair. There is no better indictment of the Stros' main problem this season -- hitting generally and hitting with power particularly -- than scoring just 4 runs in 21 innings against this Reds pitching staff. The last time I looked, the Reds' staff had a negative 63 RSAA, which means that they have given up 63 more runs this season than an average National League pitching staff has allowed.
Beltran cranked a three run yak and Lamb followed with a two run toaster to run the score up in the ninth inning of the Saturday afternoon game. But make no mistake about it: If the Stros cannot score more than 4 runs in 21 innings against this Reds pitching staff, then the wildcard playoff spot will likely be out of reach for the Stros in about another week.
Roy O goes against Cincy's most reliable starter this season -- Paul Wilson -- in Sunday's rubber game. The way the Stros are struggling at the plate, I recommend highly that you keep the clicker close so that you can check out the golf tournament at frequent intervals.
In this American Spectator piece, New York Sun columnist William Tucker relates to his past interview with famed Houston plaintiffs' attorney John O'Quinn in interpreting fellow trial lawyer and Democratic Party vice-presidential candidate John Edwards' world view:
When it came to defining his core vision, here's what Edwards said:"Tonight, as we celebrate in this hall, somewhere in America, a mother sits at the kitchen table. She can't sleep because she's worried she can't pay her bills. She's working hard trying to pay her rent, trying to feed her kids, but she just can't catch up.
It didn't use to be that way in her house. Her husband was called up in the Guard. Now he's been in Iraq for over a year. They thought he was going to come home last month, but now he's got to stay longer.
She thinks she's alone. But tonight in this hall and in your homes, you know what? She's got a lot of friends.
We want her to know that we hear her...
So, when you return home some night, you might pass a mother on her way to work the late shift, you tell her: Hope is on the way."
Let's look at what's going on here. First and foremost, we've got a lonely woman. There's a passing reference to Iraq and her husband, but that's basically to get him out of the house and out of the picture. (Remember, these are the same people who brought you the welfare system, also designed to get men out of the house and out of the picture.)
She has no friends, no relatives, no religion, no community, nothing to rely on. Her husband? Well, he doesn't even seem to write anymore. And so she sits by herself at the kitchen table, waiting for someone to come along.
What a beautiful vision of America -- a nation of lonely, isolated women, in dire need of help, abandoned by everyone, waiting for some handsome trial lawyer to come knocking on their door.
Hope is on the way.
Bags singled home the tying run during a deluge in the top of the sixth inning and a third rain delay forced the umpires finally to make dinner reservations and call a suspended game between the Stros and Reds on Friday night in Cincy.
The game will resume Saturday at 11:30 a.m. with the score tied at 2 and two Astros on base in the top of the sixth. The regularly scheduled game for Saturday will follow, with Andy Pettitte seeing how many pitches he can throw in that one. The bullpen better be ready today.
July 30, 2004
Ray C. Fair is a professor of economics at Yale University. In this Wall Street Journal ($) article, , Professor Fair's new book -- Predicting Presidential Elections and Other Things -- is reviewed and it sounds like a winner:
How can you guess who might be having an extramarital affair? This is an important question, and it deserves to be treated with scientific rigor.
Start with a theory. As a first approximation, it seems reasonable to suppose that the likelihood of having an affair depends on income, age, number of years married, marital satisfaction and religiousness. Next, find some data -- say, a sex survey published in a magazine like Psychology Today or Redbook. Now fit the data to the theory (which means having your computer run a line through a cloud of points -- a technique called linear regression) and do a statistical test to see whether the theory is any good. And what do you know? It is!
Now comes the fun part: prediction. Using the results, you can guess which of your friends and neighbors might be straying from the matrimonial paddock. Likely candidates for an affair are those who (1) have a high wage rate, (2) have been married a long time, (3) are relatively young given the length of their marriage, (4) aren't very happily married and (5) aren't particularly religious. Want something more quantitative? Well, all else being equal, an extra 10 years of marriage increases the predicted number of adulterous encounters per year by about six. (Warning: Blackmail based on these findings is strongly discouraged.)
Predicting adultery is only one of the interesting subjects that Professor Fair addressed. However, during this political season, the most interesting subject is his model for predicting Presidential elections:
By trial and error, Mr. Fair comes up with a list of eight: the growth rate of the economy, inflation, the number of economic "good news" quarters leading up to the election, whether an incumbent is running, how long the incumbent party has held the White House, whether there is a war on and, finally, a "party variable" in case the electorate has an innate preference for one party over the other. As data, he uses election results from 1996 (when President Clinton beat Bob Dole) back to 1916 (when President Wilson beat Charles Hughes).
After fitting the data to the theory, Mr. Fair finds that all eight variables affect voting at greater than chance levels.
And applying Professor Fair's model to the Presidential elections from 1916 through 1996 reflects that it is pretty darn accurate:
From 1916 to 1996, Mr. Fair's theory only calls two elections incorrectly. In 1960 Nixon received 49.9% of the vote, but according to the theory he should have received a 51.1% -- a relatively small discrepancy. More embarrassing to the author's analysis is the 1992 election, in which President Bush's predicted share of the major-party vote was a winning 50.9%, whereas his actual share was 46.5% -- a whopping 4.4 percentage-point error.
Moving to the 2000 election, which lies outside the data set used to construct the theory and is therefore a good test of its validity, Al Gore should have received (a losing) 49% share of the vote that went to the two major parties, but he actually got (a losing) 50.3% share. Not bad.
So, how does the Professor size up the 2004 election?:
Mr. Fair's analysis will be cheering to President Bush, who, as a Republican president running for re-election when the Republicans have been in power only one term, enjoys the best possible incumbency situation. The only way he can lose, the theory suggests, is if the economy suddenly tanks.
Looks like another book to add to my reading stack.
Ken Rice, the former head of Enron?s broadband Internet business, became the 11th person to plead guilty to an Enron-related crime when he admitted to a single count of securities fraud this morning before U.S. District Judge Vanessa Gilmore in Houston.
The plea agreement requires Mr. Rice, who is 45, to cooperate with the government in ongoing investigations and trials and forfeit $13.7 million in cash and property. Mr. Rice faces a maximum 10 years in prison and a $1 million fine.
Mr. Rice faced charges of conspiracy, securities fraud, wire fraud, money laundering and insider trading in this multi-count indictment. Attorneys close to the case have been expecting Mr. Rice to reach a deal with prosecutors for several weeks. As a division head, Mr. Rice reported directly to former Enron CEO and COO Jeffrey Skilling, and may have had regular contact with former Enron Chairman Kenneth Lay as well. Both Messrs. Skilling and Lay have pled not guilty to a variety of Enron-related charges in another pending criminal case.
Mr. Rice's plea deal centers on a Jan. 20, 2000 meeting with analysts where Rice and others at the company touted the current and future abilities of Enron?s broadband network. That same meeting was mentioned in the indictment against Mr. Skilling, which claims he made similarly false claims about the abilities of the network and the potential of the business. It?s certainly possible that Enron Task Force prosecutors will Rice as a witness in an attempt to corroborate the charges against Mr. Skilling.
According to the Enron Task Force, Mr. Rice sold 1.2 million shares of Enron stock for more than $76 million while he knew Enron Broadband Services was failing. The unit never generated a profit and was abandoned shortly after Enron's bankruptcy filing in early December 2001. Mr. Rice quit the company in 2001 after his stock sale and several months before Enron went bankrupt. He had served as CEO of Enron's trading unit -- Enron Capital and Trade -- from 1996 to 1999 before taking over the high profile broadband unit that Enron claimed was responsible for millions in profits. Enron's share price spiked to $90 in August 2000 as Enron promoted the venture, among other ventures. Mr. Rice was indicted on April 29, 2003 -- along with seven other former broadband employees -- in a 218-count indictment that claimed the men lied about the value and capabilities of Enron?s internet business.
The remaining defendants in the Enron broadband case are Joe Hirko, another former broadband CEO; Kevin Hannon, former chief operating officer; Scott Yeager and Rex Shelby, former senior vice presidents; and Kevin Howard and Michael Krautz, former executives. Each one has pled not guilty to all charges. The trial of the case is scheduled to begin to begin Oct. 4. The first criminal trial involving former Enron executives will take place in the "Nigerian Barge case," which is scheduled for trial beginning on August 16.
Royal Dutch/Shell Group, the world's third-biggest public oil company, reached preliminary settlements with U.S. and British authorities to pay penalties of about $150 million for overstating its energy reserves. Earlier posts are here about the Shell overstatement controversy.
Shell announced the hefty settlements after months of negotiations with regulators. Shell ousted top executives, turned over millions of pages of documents and shared with the regulators the findings of an internal Shell investigation of the company's overstatements of oil and natural-gas reserves. Shell essentially bet that cooperating with regulators would shorten the regulatory investigations and soften the blow from U.S. authorities, and the bet played out well.
Shell has agreed to pay a $120 million penalty to the Securities and Exchange Commission, which is one of the biggest penalties levied by the SEC on a foreign company in recent years. The agreement settles SEC findings that Shell violated the antifraud, reporting, record-keeping and internal-control procedures of U.S. securities laws and related SEC rules. Shell also said it agreed to pay £17 million ($30.9 million) to Britain's Financial Services Authority, which had already found that Shell had violated British market-abuse regulations. As is usual in such settlements, Shell did not admit or deny the conclusions.
Although the announcements are clearly progress, Shell is not out of the woods just yet. The SEC must formally approve its settlement, and it can still bring civil charges against individuals involved in the fiasco. Moreover, the U.S. Justice Department is continuing its own investigation into the overstatement of reserves. Finally, Shell and its executives still could face costly civil settlements.
Well-known bankruptcy litigation specialist Jeff Bohm of Austin has been appointed as the new bankruptcy judge for the the United States Bankruptcy Court for the Southern District of Texas, Houston Division. Jeff replaces William Greendyke, who resigned effective June 1 to join Houston-based Fulbright & Jaworski.
I have known Jeff for a long time and been involved in several cases with him over the years. He is an outstanding lawyer and will make a fine bankruptcy judge. Although Jeff has been practicing for 20 years and has been a partner at Austin-based McGinniss, Lochridge for 15 years, Jeff's background is interesting in that he did not go directly to law school after undergraduate school. Rather, he chose to work for several years for a large bank in Houston in a variety of positions. I believe that this background is a part of the reason why Jeff has an unusual depth of perspective regarding financial and insolvency-related disputes, and also why he developed a resolution-oriented style of lawyering in his practice (I have found that lawyers who were formerly clients tend to prefer this style). Although an effective litigator, Jeff has always had a refreshing knack for resolving legal disputes in the most efficient and reasonable manner possible under the circumstances.
Jeff joins what has become a powerhouse group of bankruptcy judges in the Southern District of Texas. As noted earlier here, outstanding Houston bankruptcy lawyer Marvin Isgur joined chief Bankruptcy Judge Karen Brown and Bankruptcy Judges Wesley Steen and Letitia Clark on the Houston bankruptcy bench earlier this year. With the additions of Judges Isgur and Bohm, the Houston bankruptcy judges are one of the strongest groups of bankruptcy judges in any one federal district in the country.
July 29, 2004
The Stros dropped two games at home to the National League's worst team as the Diamondbacks held on for a 6-4 win on Thursday afternoon at the Juice Box. The Stros go to Cincy 14½ games behind NL Central-leading Cards and 5½ games behind the Padres for the NL Wild Card playoff spot.
The crowd of nearly 40,000 booed the Stros lustily throughout the game, particularly starter Tim Redding, who again struggled with his control. Redding gave up six runs on nine hits in 5 2/3 innings, while walking two, both in the DBacks' 3 run first inning. After his rough start, Redding recovered to retire 12 of the next 13, but started to unravel in the fifth. After giving up a double, Adam Everett made a key throwing error on an infield hit by Gonzo, and then Hillenbrand followed with a two run dinger. Those three unearned runs pushed the DBacks' lead to 6-1.
All of that went over about like a turd in the punchbowl with the Juice Box crowd.
The Stros had nine hits -- including two doubles and a yak by Bidg -- but could never put together the big inning against the DBacks' rookie starter to pull even. Bidg's first double was the 544th double of his remarkable career, moving him past Tony Gwynn for 19th all-time in the majors. His double in the fifth allowed Bidg to pass Reggie Jackson for 70th on the career hits list. It was Bidg's 2,586th.
Pete Munro pitches for the Stros against the Reds in the first game of their weekend series on Friday in Cincy. Although the Reds can flat out bash the ball, their pitching is even worse than the DBacks. So, this series ought to be another good opportunity for the Stros to pad their hitting statistics. That means that they will probably score five runs total in the three games. That's the kind of season it's been.
Inasmuch as women of radical Islamic families risk severe punishment for speaking out, first person accounts of life in this culture are rare. As Ms. Crittendon notes, Ms. Bin Ladin is not a distant relative seeking to cash in on her the Bin Ladin family's notoriety. Rather, her story is arguably the most vivid account yet to appear in the West of the oppressive lives of Saudi women:
Carmen's life in Saudi Arabia began when her car pulled up to Yeslam's mother's compound outside Jeddah. In the mid-1970s, the town was still not much more than a donkey crossroads in the middle of the desert. If winds weren't whipping up the sand in blinding funnels, the sun was scorching down with unbearable heat. Shrouded in her unfamiliar and suffocating black robes, Carmen entered what sounds like a luridly decorated marble tomb. From then on, she was no longer free.
Each day, Yeslam vanished to work. Carmen and her young daughter passed the hours in the company of his mother and sister. Rarely could she leave the house--rarely, even, did she see sunlight. Courtyards had to be cleared of male servants before she could poke her head outside; she was not even permitted to cross the street alone to visit a relative. When she did venture out, she had to wear a choking abaya and thick socks to hide her ankles. "It was like carrying a jail on your back," she writes.
Nor was she much freer inside the house. She could not listen to music, pick up an uncensored book or newspaper, or watch anything on television but a dour man reading the Quran. Nor could she absorb herself in household tasks. These were left to foreign servants, including the care of children.
Carmen was horrified by the effects of this isolation and uselessness. "The Bin Laden women were like pets kept by their husbands;. . . .Occasionally they were patted on the head and given presents; sometimes they were taken out, mostly to each other's houses;. . . .I never once saw one of my sisters-in-law pick up a book. These women never met with men other than their husbands, and never talked about larger issues even with the men they had married. They had nothing to say."
Today Microsoft is struggling to figure out what attracts and motivates the most talented employees within capitalism's free-agent system. The company had no such problem figuring that out in the 1980s and '90s. Microsoft CEO Steve Ballmer liked to call the old motivational carrot "The Deal." That arrangement worked like this: Come and work for Microsoft. Make do with a so-so salary but partake lavishly of options. Sure, you might be forced to grind away on 80-hour weeks for six or seven years. But you'll change the world and get rich -- wildly rich.
Microsoft's stock has been flat since 1999. The Deal is broken. Not only that, but most of today's change-the-world projects in computing live outside of Microsoft. These include open-source software, search engines, Web services, Flash video, WiFi, iPods, etc. For reasons of pay and excitement, Microsoft is losing its grip on a new generation of IQ.
Then, Mr. Karlgaard notes that the fortunes of companies in the technology world can changes just as fast as the technologies that they sell:
Digital Equipment Corporation reached its peak market value in 1988 but four years later sold to Compaq for a tenth the price. IBM was a titan throughout the 1980s yet nearly went bankrupt in 1992, before Lou Gerstner stepped in. At both IBM and DEC, the stellar 1980s financial results were lagging indicators of future vitality. The leading indicator was the flow of talent. By the late 1980s, even as DEC and IBM were at the peak of their financial powers, they already had lost the war for young IQ. The bright and bold were flocking to the new personal computer industry.
It's hard to believe, but Microsoft, in 2004, has become a company run by gray hairs. Mr. Gates and Mr. Ballmer will turn 50 in the next 20 months. Older yet, with snowy white hair, is Jim Allchin, who directs the future of the company's crown jewel, the Windows operating system . . .
In this context, Mr. Karlgaard suggests that the true purpose of Microsoft's recent stock buyback program and dividend announcement is actually to reinvigorate "the Deal:"
My guess is that outside investors were not Microsoft's primary audience for last week's announcement of a one-time $32 billion dividend payment, a $30 billion stock buyback, and a doubling of the annual dividend payment. No, this move was done to rally employee shareholders and future employee shareholders. Microsoft needs a way to attract and keep future Bill Gateses and Steve Ballmers. It needs to revive The Deal.
A year ago, Microsoft announced it had removed the heart of The Deal -- stock options -- in favor of restricted grants. An army of Microsoftologists parsed the move for deeper meaning. One analysis had it that Microsoft was merely acknowledging what Mr. Gates's good friend Mr. Buffett had asserted -- that the early 2000s would produce lousy returns in the stock market. If that turned out to be true, stock options would only disappoint employees, lead to bad morale at Microsoft and make it harder to recruit.
In retrospect, maybe Microsoft should have been more optimistic about the stock market. It might have joined Intel, Cisco and others in the battle to keep stock options. But Microsoft didn't do that, and since there are no longer options for employees, only share reward -- paying a higher dividend -- is available as an incentive for high-IQ employees.
It's not The Deal, but it's a start.
July 28, 2004
The Rocket pitched seven innings of five hit ball as the Stros continued their domination of the hapless DBacks by winning 6-1 in the third game of their four game series on Wednesday night at the Juice Box.
As usual, Clemens was reliable, striking out eight while giving up only one run. JK and Bags whacked yaks again, while the Stros continued to improve their hitting statistics against the DBacks pitchers not named Johnson or Webb.
Tim Redding takes the hill tomorrow in the Businessman's Special against Lance Cormier, who has a 14+ ERA. The Stros then take off to Cincy for a weekend series before returning home next week to face the Braves and the Expos.
Daniel Arnold, a member of the Baylor College of Medicine board of trustees and the former chairman of that board, has sent the full board a July 14 letter calling for Baylor President Dr. Peter Traber to be fired for failed leadership. Mr. Arnold's letter states that Traber's management of Baylor is "deleterious" and "divisive," and that "his lack of realistic vision and fundamental errors in judgment" are not what Baylor needs in a leader. Here is the Houston Chronicle article on this latest Medical Center dustup. The letter is expected to be discussed today at a meeting of the 48-member board.
Corby Robertson, the current chairman of the Baylor board, told the Chronicle that he believes that Dr. Traber has the board's support
Mr. Arnold sent his letter amid the recent political fallout over the split of the long teaching relationship between Baylor and The Methodist Hospital (earlier posts here). The institutions have been in open conflict since deciding to sever their 50-year relationship in which Methodist served as the teaching hospital for Baylor students and residents. Last week, Baylor threatened legal action against Methodist if the hospital does not cease actions that Baylor alleges are interfering with Baylor's operations, including Methodist's "aggressive recruiting" of Baylor faculty members.
Mr. Arnold was the Baylor board chairman who butted heads with popular Baylor faculty member and president, Dr. Ralph Feigin. In that conflict, Mr. Arnold attempted to force Dr. Feigin to choose between the presidency and his other job as physician-in-chief at Texas Children's Hospital. Dr. Feigin subsequently announced he was stepping down, only to have the decision overturned a month later after key faculty and trustees objected. Dr. Traber replaced Dr. Feigin in March, 2003 when Dr. Feigin resigned at the age of 65.
Setting up a potential jurisdictional battle between two federal courts, Enron Corp. filed an objection in U.S. Bankruptcy Court in Manhattan yesterday seeking to block a settlement payment of the $85 million in insurance proceeds to approximately 20,000 current and former Enron employees that is emanating out of pending litigation in the U.S. District Court for the Southern District of Texas. Here is an earlier post on the proposed settlement.
Enron employees lost hundreds of millions of dollars when the Enron stock in their 401(k) plan became worthless as the company spiraled into bankruptcy in late 2001. After they sued Enron in 2002, U.S. District Judge Melinda Harmon in Houston approved the tentative settlement to the former Enron retirement-plan participants earlier this summer. The final hearing on the proposed settlement is scheduled for Aug. 19.
The settlement, which would be the largest to date for a case involving company stock in retirement plans, would be largely paid by Associated Electric & Gas Insurance Services Ltd. and Federal Insurance Co. Enron had $85 million in liability insurance to cover company employees who were acting as fiduciaries.
In pleadings filed with the Enron bankruptcy court in New York, Enron and its creditors argue the money is an asset of the bankruptcy estate and the bankruptcy court should decide who gets it. Enron and many of its creditors have previously filed pleadings in the bankruptcy case asserting that the employees' claims should be subordinate to all other creditors.
July 27, 2004
Oswalt was masterful as he struck out five while giving up only two hits and walk during his seven innings. The DBacks jumped on Kirk Bullinger for their three runs in the eighth, but Chad Harville finally pitched a decent inning in throwing a scoreless ninth.
The Stros' hitters had extended batting practice against the DBacks' Edgar Gonzalez and Steve Sparks as they pounded 12 hits, including Everetts' two yaks, JK's two run shot, and Bags' three run tater. Morgan Ensberg chipped in with a couple of doubles as he continues his long road to a respectable OPS.
Following this earlier post on the economic absurdity of light rail systems, Randal O'Toole, one of the economists over at The Commons, cites the Houston light rail system as one example why cities such as Denver and Austin should reject such systems:
Houston opened a 7.5-mile light-rail line in its downtown on January 1. It has so far caused more than 50 collisions with autos or pedestrians (including a few during testing before January 1). While the transit agency blames bad auto drivers, the accident rate is twenty times the national average for light-rail lines.
Mr. O'Toole notes other economic disasters involving rail systems in other cities, and then aptly summarizes as follows:
The push for rail transit comes from construction companies that seek to soak the taxpayers building it, downtown property owners who hope to enhance the value of their properties, anti-auto environmentalists who view congestion with schadenfreude, and collectivists who think we would be better off in collective transit than private autos. None of these reasons are very appealing so they cloak their goals behind specious claims that rails will reduce traffic congestion and air pollution, something that rail transit has never done.
Former heavyweight champion boxer Mike Tyson is currently a debtor-in-possession in a chapter 11 bankruptcy case. This NY Times article outlines Tyson's plan of reorganization, which is based on the income stream that Mr. Tyson supposedly will generate from fighting an unusually aggressive schedule on pay-for-view television:
The reorganization assumes that Tyson (50-4) will fight five times through November 2005 (with dispensation to stretch the fights out over two more years, when he'll be 41), an extraordinary amount of work for a boxer who has not fought in 17 months and has not beaten a great opponent since Ronald Reagan was in his second term.
The reorganization requires that after keeping $2 million from each fight, Tyson must pay into a reorganization trust fund 50 percent of the after-tax proceeds from his bouts, or $19 million, to pay his taxes and his former wife Monica Turner.
Tyson's first payment to the trust fund, $890,000, . . . is due next month. He must then pay the fund $4.9 million in each of the quarters ending Jan. 31 and April 30, 2005, followed by a payment of $3.7 million in the quarter ending October 31, 2005, and $4.6 million in the quarter ending January 31, 2006.
The plan does not state what will happen if he does not make the payments.
I can answer that one: Liquidation, which is where Tyson should probably be anyway.
It also turns out that Mr. Tyson has settled matters with his former promoter, Don King:
The best news for his finances is the $14 million that will come from the recent settlement of the $100 million federal lawsuit he filed in 1998 that alleged financial fraud against Don King, his former promoter.
King will pay Tyson $8 million soon after the reorganization plan goes into effect, $3 million plus interest in January 2005 and $3 million plus interest in January 2006.
For all the money that Tyson charged that King had siphoned off, he will get none of it; all of it will go for debts.
Meanwhile, those pesky chapter 11 operating reports provide some interesting information on Mr. Tyson's current life:
According to the monthly financial reports Tyson files with the bankruptcy court, his personal earnings in February, $26.54, were overwhelmed by $67,960 in personal expenses. In March, his income improved to $15,127, while his expenses fell to $25,389. And in April, his income soared to $125,055 and his expenses rose again, to $62,589.
Mike Tyson is not a particularly good fighter anymore. Nevertheless, just as many people watch NASCAR events to see the crashes, many folks will tune into a Tyson fight in order to see the inevitable meltdown of Tyson in living color. About when you think the fight game has gone as low as it can go, people leeching off of Tyson push it even lower. Only in America.
Count the Wall Street Journal's ($) George Melloan as skeptical that the 9/11 Commission's recommendation of a new cabinet department headed by a "National Intelligence Director" is a good idea:
The late William E. Simon, Treasury secretary in the Nixon and Ford administrations, once described to a small group of Journal editors the origin of what would later become the U.S. Department of Energy.
As deputy to Treasury Secretary George Shultz in 1973, he had been sitting in for his boss at a Nixon cabinet meeting and offered a report on the energy "crisis." Mr. Nixon chewed on his pencil for a moment and then, inspired by a thought, told Mr. Simon that he was putting him in charge of a White House energy policy office, a job that later earned him the title of "energy czar." In 1977, Congress and Jimmy Carter created a full-blown cabinet-level department to try to deal with the still-unsolved "energy crisis." Today, the DOE has wide-ranging powers and a budget of roughly $20 billion.
The interesting thing about this story is that it was a clumsy attempt to correct a problem the government itself had created. The "energy crisis" had been caused primarily by the price controls President Nixon adopted in 1971 as a response to inflation, also of the government's own making. That's one way government grows, or metastasizes if you will. It adds new functions to try to correct the problems of existing functions. This new cell growth is always popular inside the Beltway, because it creates jobs and opportunities.
Mr. Melloan notes that the Commission's recommendation of bringing all intelligence under one master and coordinating the exchange of information sounds like a good idea on the surface, but is it really?:
A new department, Homeland Security, was created under Secretary Tom Ridge only two years ago. It already has spent $70 billion and wants $40 billion more next fiscal year, notes Forbes magazine. The DHS is hard at work, organizing better security for nuclear plants, arranging point-of-origin certification of shipboard containers, asking banks to monitor transfers from places like Saudi Arabia. But Forbes still rates these risks at the "yellow" level and gives a high-risk "red" to the threat of computer network hacking.
Mr. Melloan then points out that more government bureaucracy may be the problem, not the solution:
It wasn't that the U.S. had no defenses [before the 9/11 attacks]. It has many thousands of law enforcement officers at all levels of government and as many as 20,000 people in the CIA alone. But all of these people, many of them very able, were trapped in a morass of government bureaucracy.
Some of the restrictions are mind-boggling. Most big cities in the U.S. have "sanctuary" ordinances, pressed on them by "civil rights" groups, which prohibit city employees, especially the police, from checking with the Immigration and Naturalization Service on the immigration status of anyone who runs afoul of the law. As a result, thousands of illegal aliens are at large in the U.S. and encounter no trouble with the INS even if they are picked up for theft or drunken driving. And of course, airport screeners, under the same "civil rights" pressures, are barred from "profiling" passengers and thus, in the words of one critic, must accost a "blue haired 70-year-old woman with an aluminum walker" and nine other average travelers for every able-bodied 30-year-old Mideast male.
The INS also has little coordination with the overseas consular offices of the State Department, which approve visas for visitors to the U.S. The State bureaucracy is responding to homeland security fears by tightening up on visa grants, but with no evident system for distinguishing between possible terrorists and innocent students, business travelers and the like. The CIA's failure to insert spies into al Qaeda was a major shortcoming. One wonders what it does with its estimated $40 billion budget.
Congress is itself fragmented, politically polarized and mired in the oversight methods of yesteryear, and so is not up to the requirements for legislating a more streamlined and efficient defense against terrorism. For example, Secretary Ridge has had to testify to 80 committees and subcommittees since taking office. What they do with all that duplicative information and how he finds time to do anything else is a mystery.
July 26, 2004
Brandon Webb handcuffed the Stros with his array of sinkers and dinkers as the Arizona Diamonbacks beat the Stros 4-1 Monday night in the first game of their four game series at the Juice Box.
Webb was masterful, giving up 6 singles and one run in 7 1/3rd innings. This game was essentially infield practice for the DBacks as Webb's sinkers had the Stros pounding the ball into the ground with futility the entire game.
Andy Pettitte only gave up three hits in five innings, but the problem was that two of them were back to back gopher balls in the first inning to Gonzo and Hairston. That was all Webb needed on this night. Pettitte left after the fifth game because of soreness in his left elbow, a problem that has bothered him all season. Given the club's disminishing playoff chances, the Stros will soon have to give serious consideration to shutting Pettitte down for the season.
The best news for the Stros on this day was the signing of Troy Patton, the Tomball High School lefty who was projected as a high draft choice until he announced that he would be attending the University of Texas on a baseball scholarship. Most major league clubs backed off on him as a result of that news, but the Stros took a flyer on him in the ninth round of the draft earlier this summer and the bet has paid off. Patton will report to the club?s affiliate in Greeneville of the Appalachian League.
Patton was 12-0 with an 0.91 ERA during his senior season at Tomball High. He struck out 142 hitters in 77.1 innings pitched, while walking only 24 and allowing 24 hits. Patton threw three no-hitters this spring, including one perfect game, and opponents hit only .122 against him in 2004.
Today, the always insightful Virginia Postrel weighs in with one possible reason for the intensity of the Bush-bashing:
When I was in New York a few weeks ago, a friend in the magazine business told me he thinks the ferocious Bush hating that he sees in New York is a way of calming the haters' fears of terrorism. It's not rational, but it's psychologically plausible--blame the cause you can control, at least indirectly through elections, rather than the threats you have no control over. I thought of that insight today when I glanced at Maureen Dowd's column and read this sentence, "Maybe it's because George Bush is relaxing at his ranch down there (again) while Osama is planning a big attack up here (again)."
That is the voice of a petulant child, angry that she has a tummy ache while Daddy is at work or Mommy is visiting a friend, or the voice of a grouchy wife angry that she has a migraine while her husband is out coaching the kids' baseball team. You're upset that you're in pain (we've all been there), so you get mad at someone whose presence wouldn't make the pain any better.
Professor Ribstein is not buying Ms. Postrel's speculation, and contends that an underlying condescending nature is the root of the Bush bashing.
Clinical psychologist Gerard Musante was the first person to adapt the principles of behavior modification to the eating habits of significantly overweight people. For the past 30 years, Dr. Musante has taught these principles at Structure House, the residential weight loss facility he founded in Durham, N.C.
In this Tech Central Station op-ed, Dr. Mustante addresses that the national debate over responsibility for our society's obesity overlooks the effect that the debate has on how individuals perceive their personal battles with being overweight or obese:
[O]ur national debate on obesity is evolving into two camps. One emphasizes that obesity results from such factors as genes, a disease state or physiology. The other focuses on the role personal responsibility plays and possibly defines obesity as a personal failing.
While the first camp paints the individual as a victim of forces beyond his control, the latter argues from a moral or social viewpoint. While I strongly support personal responsibility, even the discourse to this effect fails to address the most critical reason for espousing such a perspective. What is too often absent from both viewpoints is a direct consideration of the ramifications these arguments themselves can have on how individuals view their personal battles with overweight and obesity.
Dr. Mustante points out that the biggest problem is defining the issue as being out of an individual's control:
If one defines a problem as out of his control, then he remains powerless to influence it. However, nearly all experts acknowledge obesity ultimately results from violating a simple principle: calories consumed should equal calories expended. The idea that individuals are victimized by their own bodies or a toxic environment is problematic. For starters, it's untrue. But as importantly, it stymies their motivation and perceived ability to control their weight loss.
The key lies in a related psychological concept called self-efficacy, which was defined by Albert Bandura, a noted Stanford University psychologist, in 1977. He theorized that people's expectations of their ability to be effective influence whether and how they will act. It will affect how much effort they expend, and how long they will sustain their efforts in the face of challenges. If a person believes he lives in a "toxic food environment" or is suffering from a disease state, how can he have confidence in his ability to change his predicament?
Dr. Mastante then points out that "quick fix" diet plans are usually counterproductive to obesity because the personal sense of failure that an individual experiences triggers a false sense that the individual is powerless to overcome the problem. And that false sense of powerlessness is becoming more popular:
Worsening the problem, we now are seeing efforts to sue food establishments, to demonize various industries, and to rid schools of vending machines. By blaming industries and products, society only makes individuals feel increasingly powerless about their ability to lose weight, and that perceived lack of control makes them less likely to attempt or experience success. Frivolous lawsuits against the food industry and the classification of obesity as a disease only reinforce the idea that obesity is something people cannot control.
Read the entire article, and then take a look at this piece in which the authors point out that the obestiy epidemic is partly the unintended consequence on the anti-smoking campaign over the past generation.
John Lewis Gaddis is the Robert A. Lovett professor of history and political science Yale University and Paul Kennedy is the J. Richardson Dilworth professor of history at the same school. In this NY Times Book Review interview, the two debate their views on American foreign policy. The entire piece is well worth reading, and the following are a couple of tidbits of their insights:
How Did 9/11 Change America's Thinking About Foreign Policy?
GADDIS. The whole premise of our thinking had been that threats come from states. Then suddenly, overnight, levels of damage were done exceeding those at Pearl Harbor by a gang most of us had never heard of. That is a profound change in the national security environment. It exposes a level of vulnerability that Americans have not seen since they were living on the edge of a dangerous frontier 150 years ago.
KENNEDY. I'd agree, and then add another slant. The whole system of international law was predicated upon states. There's no thought given in the U.N. Charter to nonstate actors. There needs to be agreement on what states can do now with threats from nonstate actors.
Does the United States Have an Empire?
GADDIS. The really important question is to look at the uses to which imperial power is put. And in this regard, it seems to me on balance American imperial power in the 20th century has been a remarkable force for good, for democracy, for prosperity. What is striking is that great opposition has not arisen to the American empire. Most empires in history have given rise to their own resistance through their imperious behavior. For most of its history as an empire, the United States did manage to be imperial without being imperious. The great concern I have with the current administration is that it has slid over into imperious behavior.
KENNEDY. John has put his finger on something very interesting, which is this dominant position of the U.S. not yet causing the emergence of counterweights. And I say ''yet'' because I think there's quite a considerable danger that it will. We now have a Europe with a larger G.D.P., and we have a China growing so fast you can hardly keep your eyes on it. Our great power status is unchallenged at the orthodox military level. But it's beginning to look a little bit more fragmented in other dimensions.
July 25, 2004
Pete Munro pitched seven shutout innings and Mike Lamb drove in three runs with a pair of doubles to lead the Stros over the Brewers 9-1 on Sunday in the rubber game of their weekend series at the Juice Box. The Stros have now won four of their last five games.
After giving up a pair of singles to lead off the second inning, Munro (2-2/4.46 ERA/0 RSAA) settled down and retired 13 of his next 15 batters. He allowed six hits, struck out a season-high five and walked none.
The Stros took a 4-0 lead in the third on Lamb's bases-loaded double off the left-field scoreboard and Morgan Ensberg's two-run single. Lamb, who started at first in place of Bags, made it 5-0 in the fifth with an RBI double, and Adam Everett doubled in another run in the sixth.
In one of the more entertaining moments of the game, Jeff Kent was ejected by plate umpire Chris Guccione in the seventh after arguing a called strike two on a pitch Kent thought was low. Kent -- who, as baseball people say "has a little turd in him" and yelled at Guccione "with sincerity" -- kicked and threw dirt on home plate before he left the field with gusto. Jose Vizcaino replaced Kent with a 2-2 count and promptly nailed an RBI double on the next pitch. After a run-scoring wild pitch, Brad Ausmus cranked a rare yak to complete the Stros' scoring. The Stros ended up with 12 hits, five of them doubles.
Despite the Stros' power surge over the past week, their runs created against average ("RCAA," explained here) continues to lag near the bottom of the National League (11th out of the 16 teams). Here are the updated individual RCAA figures, courtesy of Lee Sinins:
Lance Berkman 35
Craig Biggio 13
Carlos Beltran 8
Jeff Bagwell 7
Mike Lamb 6
Eric Bruntlett 1
Chris Burke -1
Jeff Kent -1
Jason Lane -2
Jose Vizcaino -3
Orlando Palmeiro -4
Richard Hidalgo -10
Raul Chavez -11
Morgan Ensberg -12
Adam Everett -13
Brad Ausmus -23
Thus, the Stros have only five players who are hitting above what an average player would generate and four regular players (Ausmus, Chavez, Ensberg, and Everett) who are hitting well below what an average player would produce. Inasmuch as Ensberg is the only likely candidate of those four to improve much during the second half of the season, and Bagwell is unlikely to increase his relatively pedestrian production during the remainder of the season. Consequently, I do not expect the Stros' offense to improve enough in the second half to make them a viable playoff contender.
Meanwhile, the Stros pitchers' runs saved against average ("RSAA," explained here) remains in the upper half of the National League (sixth out of the 16 teams). The individual RSAA numbers are as follows:
Roger Clemens 23
Brad Lidge 13
Wade Miller 11
Roy Oswalt 9
Octavio Dotel 5
Dan Miceli 4
Andy Pettitte 3
Kirk Bullinger 1
Mike Gallo 1
Darren Oliver 1
Pete Munro 0
Chad Qualls -1
David Weathers -1
Brandon Backe -2
Jeremy Griffiths -3
Ricky Stone -3
Jared Fernandez -6
Chad Harville -6
Brandon Duckworth -8
Tim Redding -11
Although the pitching staff is performing above-average overall, the production is still a bit deceptive. Miller and Dotel, both of whom contributed above-average production, are no longer pitching for the club (Dotel has been traded and Miller's return this season is questionable at this point due to a shoulder injury). Moreover, Harville, Duckworth and Redding are time bombs every time they take the mound, as their well-below average RSAA numbers reflect. Oswalt is a definite candidate to improve his RSAA during the second half and Redding could if he returns to his form of last season, but some leveling off of Clemens' incredible performance is to be expected. Accordingly, even though I expect the Stros' pitching performance to remain above-average, I do not expect the performance to improve enough over the last part of the season to compensate for the Stros' below average hitting and allow the Stros to compete for the wildcard playoff spot.
And, just so you will not be misinformed by the Chronicle sportswriters' baseless criticism of Stros' management for trading Hidalgo, Wagner, and Dotel, each of those three players has had decidedly mediocre performance this season. Although Hidalgo has a +5 RCAA since joining the Mets, he is still a -5 for the season, which makes him the best paid below average rightfielder in the National League. Dotel has a barely above average RSAA when his numbers from Houston and Oakland are combined, and Wagner has battled injuries all season while posting a relatively mediocre +5 RSAA for the Phillies. Truth be known, Stros' management did a good job in trading each one of those players, particularly given the over-market contracts that both Hidalgo and Wagner enjoy.
The Stros send Andy Pettiitte to the hill on Monday in the first game of a four game set with the DBacks at the Juice Box. After that series, the Stros go to Cincy for a weekend series with the Reds before returning home in the first week of August for a six game homestand against the Braves and Expos.
Former University of Texas star running back and Heisman Trophy winner Ricky Williams has stunned the Miami Dolphins and the National Football League by announcing his retirement from professional football while in the prime of his career.
Following on this earlier Wall Street Journal ($) profile, Mary Flood, who has been covering the Enron case for the Houston Chronicle, interviews Mike Ramsey, lead criminal defense attorney for Kenneth Lay, in today's Chronicle. Not much of Mr. Ramsey's insight on the Enron case is provided in the interview, although Mr. Ramsey does comment on Mr. Lay's controversial strategy of vigorously defending himself in public statements, interviews, and press conferences from the criminal charges:
Q: Other lawyers have said you are taking risks in letting Lay speak publicly now and in demanding a speedy trial. Why have you chosen these strategies?
A: I think basically at the behest of Mr. Lay. I have been over the documents enough to know and trust that he is, in fact, innocent. But he has been silent for two and a half years, while he has suffered a lot in the press. I think it's about time that he speaks out.
Now, it is a high-risk strategy in some cases to have a defendant testify. But Ken Lay is smart, he's the master of the facts, he knows what happened, and I don't have to go hold hands with him when he talks.
Another interesting comment comes after Mr. Ramsey explains why he decided to go into the practice of criminal law:
. . . [I]f there is a danger to the Republic, it comes from concentration of power in the hands of a few in Washington, not from an outside force of any sort. We're impervious to that.
No one will topple America from the outside. But we may very well lose liberties internally. And if people are not willing to stand up and challenge the government, then the government continues to assume more and more power over us as individuals.
Until you see how vicious it becomes out on the point of a stick where it pierces flesh, you don't understand how powerful the government really is and needs to be held in check.
And if there is any redeeming social value to the defense practice, it is that we are the people to whom it is given the high duty, I believe, to stand up and tell the government to go to hell when they need to be told that.
And this is such a case.
Q: Do you see the Enron Task Force as part of this potential growing evil?
A: Yes. I think that the constitution of any special group of prosecutors who pick their target before they do their investigation is dangerous and an aberration that shouldn't be tolerated.
July 24, 2004
Tim Redding pitched three-hit ball over five innings in his return to Stros' starting rotation as the Stros beat the Brewers 6-3 on Saturday night at the Juice Box.
Redding (4-6/5.66 ERA/-14 RSAA) was demoted to the bullpen after his a poor start against Texas on June 26. He made four relief appearances for the Stros before making his 15th start of the season, in which he fanned six and walked three. Darren Oliver -- who the Stros picked up from Florida on Friday -- made his first appearance and struck out three in two scoreless innings of relief work. After Mike Gallo made things interesting by giving up a couple of yaks (the Brew Crew has 17 against the Stros this season) and 3 runs in 2/3rd's of an inning in the eighth, Brad Lidge gutted up after throwing over 40 pitches in last night's game and pitched a scoreless ninth to pick up the save.
Adam Everett and Jason Lane cranked yaks for the Stros, and Everett also had a double and Lane a sac fly to plate another run. The Stros continued their mild hitting surge, whacking 11 hits that generated 20 total bases.
This Washington Post article does a good job of analyzing the financial support for John Kerry's Presidential campaign. Mr. Kerry's supporters are made up of several disparate group, which WaPo summarizes as follows:
? Lawyers, especially trial lawyers, are the engine of the Kerry fundraising operation. Lawyers and law firms have given more money to Kerry, $12 million, than any other sector. One out of four of Kerry's big-dollar fundraisers is a lawyer, and one out of 10 is an attorney for plaintiffs in personal injury, medical malpractice or other lawsuits seeking damages.
? Much of the seed money for the Kerry presidential campaign was collected through donors to his Senate campaigns, including lobbyists with interests before two of the Senate committees on which Kerry serves: the Finance Committee and the Commerce, Science and Transportation Committee.
? Fueling Kerry's money surge havebeen credit card collections on the Internet, a technique pioneered by his onetime rival Howard Dean in 2003 but used with even greater success this year by the presumptive Democratic nominee. Kerry has been raising more than $10 million a month on the Internet, for a total of more than $65 million, compared with $8.7 million for Bush in the past year, according to officials with both campaigns.
? Kerry appears to have succeeded in creating a new class of donors for the Democratic Party. Dozens of his fundraisers are relative neophytes in big-money politics and have not been active in making their own contributions. A review of federal campaign contributions of the big Kerry fundraisers shows that one-third of them have not made more than $20,000 in campaign contributions since 1990.
? Kerry's donor base is overwhelmingly bicoastal. Almost half of the big-money fundraisers hail from either California or New York. Seventeen of the fundraisers are from Kerry's home of Massachusetts. Kerry has substantially outraised Bush in California and New York, $39.7 million to $28.5 million; Bush has crushed the Democrat in Florida and Texas, $36 million to $8 million.
WaPo also compares the fundraising base of Mr. Kerry with that of President Bush's:
Overall, Kerry's fundraising base is much different from Bush's. Kerry draws heavily on professionals with advanced degrees, academics, scientists and technology workers, in contrast to Bush's strong base in the business community. Bush has close to 100 major fundraisers -- Pioneers or Rangers, as the president's campaign calls them -- from the agribusiness, energy and power, construction, and transportation industries, compared with no more than half a dozen for Kerry.
According to PoliticalMoneyLine, five times as many corporate CEOs, presidents and chairmen gave to Bush as Kerry: 17,770 to 3,393. Conversely, the number of professors who gave to Kerry is 11 times the number of those who gave to Bush, 3,508 to 322. Actors split 212 for Kerry, 12 for Bush; authors, 110 to 3; librarians, 223 to 1; journalists, 93 to 1; and social workers, 415 to 32.
James Edward Maule is a professor of tax law at Villonova University School of Law who authors a blog in which he frequently opines on various issues relating to tax policy. Today, the issue is income tax simplification and he is not optimistic about the prospects for reform:
The Democrats are trying to make tax simplification a highlight of their campaign promises. This is an amusing thought, but it?s also frightening because there are people who will believe it.
The Democrats, after all, were the pioneers in modern tax hypercomplexity. Beginning with Kennedy?s investment tax credit and magnified by a huge array of other credits, deductions, and exclusions, the tax law was made even more complicated through the enactment of phaseouts, scalebacks, and other hidden tax increases.
Not to be outdone, it didn?t take the Republicans long to get on the special interest complexity tax train. Absurd capital gain rate structures, a new cluster of credits, and all other sorts of finely tailored specially-directed provisions were crammed into an already bloated code. To use an analog from an astrophysics lecture I attended yesterday, the tax universe is expanding at a constant rate and is moving toward increasing disorder. Just like the cosmos.
Professor Maule then evaluates the Kerry Campaign's proposals for tax simplification:
John Kerry?s tax proposals are inconsistent with the notion of tax simplification, so it will be interesting to see how the Democrats reconcile the party?s ?tax simplification? message and Kerry?s proposals. To be fair, Kerry cannot be blamed for all of the tax complexity in the Code or even all of the complexity bestowed on us by the Democrats in Congress. He isn?t even to blame for some of the stuff enacted while he was in the Congress.
Nonetheless, why is Kerry willing to make his proposals within the confines of a Republican tax design? The tax on dividends is a fine example. The Republicans create complexity by making most dividends (a selection process that is itself complex) subject to lower tax rates essentially the same as the bizarre rate structure applicable to capital gains. As readers of my blog and listserv posts know, this is an approach wholly inconsistent with fairness, implification, and common sense. Kerry proposes to eliminate this rate twist by restricting it to taxpayers with incomes under $200,000. This creates yet another layer of complexity onto the already complex dividend taxation structure.
I?d be far more impressed if Kerry took the following position: ?Look, folks, dividends are just one form of income. A person with a lot of income, no matter its source, ought to pay tax at a higher rate than someone with much less income. A person with interest income from certificates of deposit is no less entitled to a low rate than is a person with dividend income. In other words, the basic tax rate structures ought to reflect this principle, and favoritism of one sort of income over another is wrong, no matter the income level. To tax a retired person who has no pension and lives on social security and $30,000 of dividend income at a lower rate than her neighbor who has no pension income and lives on social security and $30,000 of interest income is flat out wrong and contrary to all principles of fairness.?
So, why doesn't the Kerry Campaign from addressing this issue in such a common sense manner?:
What stops Kerry (or his advisors) from tackling this head on? Surely it has something to do with trying to make everyone think he or she is better off under Kerry?s proposals (which in fact is not the case). In an election campaign directed pretty much at the 10% of the voters who are ?swing votes? where?s the advantage in Kerry?s existing proposals? It doesn?t make much sense politically. So I?m wondering if in fact the Kerry tax advisors don?t quite know how to cut the Gordian knot of taxation.
Which leads Professor Maule back to where we always seem to be after each election campaign (with the notable exception of the Reagan Administration). Both political parties initially talk about tax simplification, but then promptly ignore the issue while dividing pork to special interests through tax "policy":
So as far as I?m concerned, with the exception of a few individual members of Congress whose voices of common sense are drowned out in a sea of special interest tax pandering, both major parties and both major Presidential candidates don?t earn any points on the tax question.
So no matter who wins, the tax law will become even more disordered. Will it end as the astrophysicists predict the cosmos will ?end?? Will the system collapse of its own weight, becoming a black hole that swallows all? Does anyone other than a few ?tax mavens? even understand the seriousness of the problem?
Right now, I?m going to go back to looking in 360 degrees at two shades of blue. I?ll let my brain process tax stuff later.
As an independent voter, one of my greatest disappointments with the Bush Administration and the Republican-controlled Congress is their failure to address and propose enactment of meaningful tax simplification reform. As with reform of America's broken health care finance system, the Republicans talk a good game, but then generally buckle to pressure from special interests that lobby to maintain the status quo. Professor Maule makes a good point that a Kerry Administration likely would not be any better in regard to tax simplification reform. Nevertheless, my sense is that the Republican Party badly underestimates the frustration of independent voters with their inaction on the issues of tax simplification and health care finance reform.
Given this Administration's inaction on these issues, I think it is fair to ask the following question: Are we at a point where only a Democratic Administration initiative on these issues -- modified through responsible Republican Congressional opposition -- is the only (albeit messy) route to meaningful reform legislation?
Six of the pioneers of legal blogs (i.e., "blawgs") -- Tom Migdell, Dennis Kennedy, Ernest Svenson, Marty Schwimmer, Denise Howell, and Rick Klau -- are collaborating on a new blawg called The Blawg Channel. Ernie described the purpose of the new blawg in the following manner:
[to promote] some positive changes in the legal world, and, more particularly, in the newly-minted realm of lawyer blogs. Somehow the Internet seems to have injected steroids into the concept of self-publication, and we believe that we can use this blog in a way that is beneficial to lawyers (especially those that who aren't themselves blogging but who, nevertheless, want to tap into blogs as a source of useful legal information). And, since I mentioned steroids, I should mention, for what it's worth, that a couple of us are even willing to submit to drug tests.
Dennis kicked it off with a post "What five things can lawyers do to better serve entrepreneurs and their businesses?" Given the contributors' knowledge and insight, this new blawg has great potential as a resource for lawyers. I recommend that you check it out regularly.
Not to be outdone, the Enron Task Force pumped its PR machine into action by leaking to the Houston Chronicle this allegedly secret memo between former Enron CFO Andrew Fastow and former Enron chief accountant Richard Causey.
The gist of the Chronicle article is that, according to the Task Force, the memo proves that Fastow and Causey had secret side deals in which Enron guaranteed a great rate of return for the off-balance sheet partnerships that Fastow ran and in which Enron allegedly parked poorly-performing assets and hid enormous amounts of debt. The Task Force contends that the secret memo agreement between Fastow and Causey proves that the off-balance sheet partnerships were not entities at risk and, thus, should have been reported as a part of Enron's consolidated financial statements. If that had been done, then Enron would have been revealed to the marketplace as a highly-leveraged company that would not have generated anything close to the investor interest that pushed the stock price to $80 a share in early 2001.
The Chronicle goes on to speculate that the revelation of the memo puts pressure on Mr. Causey to plea bargain with the Task Force:
A handwritten memo detailing secret side deals between ex-Enron Chief Accounting Officer Rick Causey and ex-Chief Financial Officer Andrew Fastow has defense lawyers predicting that Causey is under greater pressure to seek a deal with the government.
The document, which prosecutors have called the "global galactic" agreement, seemed a part of Enron folklore until it was cited as an actual written agreement in the indictment of ex-Chairman Ken Lay earlier this month.
Since Fastow has already pleaded guilty to two felony charges and is cooperating with the government, the written document can't hurt him in the criminal arena. Most lawyers contacted this week suspect prosecutors received the written agreement from Fastow.
"It's a very difficult document for team Causey. It's as tough a document to refute as I've seen in the Enron case," said a lawyer for one of the Enron criminal defendants who asked that his name not be used.
He and other defense lawyers in Enron cases, who spoke off the record, said there is growing expectation, largely because of this document, that Causey could be pressured to cooperate with the government.
As if facing what amounts to be a life sentence if convicted of the criminal charges against him is not enough incentive for Mr. Causey to entertain a plea bargain.
Despite the representations in the Chronicle article, most attorneys close to the Enron case have known for some time about the Fastow-Causey memo. And, although not a good piece of evidence for Mr. Causey, it is a decidedly double-edged sword for the Task Force in regard to the other Enron-related defendants. Unless the Task Force can prove that other Enron defendants such as Mr. Lay or former CEO Jeffrey Skilling knew of the Fastow-Causey memo, then the memo may be used as exculpatory evidence for other Enron defendants who could reasonably claim that the Fastow-Causey agreement was secret, that they would have never approved of it, and that the memo proves that Mr. Fastow truly was the loose cannon who manipulated Enron's finances for personal gain to the extent that he ultimately triggered its collapse.
July 23, 2004
Clemens uncharacteristically gave up three gopher balls, including a killer 3 run shot by Ben Grieve that landed in the first row of the Crawford Boxes. The Stros battled back gamely after being down 5-0, but Lidge lived dangerously in two innings of work and the Brewers were eventually able to push a run on a sac fly across in the top of the ninth for the game winner.
United Airlines announced today it would not contribute to employee pension plans while it remains in Chapter 11. This is the first in a number of bold moves that Chicago-based United must take in order to save the struggling airline billions in cash and make it more attractive to the private investors it needs to emerge from bankruptcy protection now that its request for federal subsidies has been rejected.
The action came a week after United skipped a $72.4 million pension payment that it owed to three of its four pension plans, and only a month or so before United faces baking hundreds of millions more in pension payments in September and October. Until that missed payment, United had met all of its pension obligations since filing for bankruptcy in December 2002.
Although difficult, United should go ahead and simply terminate the plans. The plans have enough assets to keep paying benefits to retirees in the short term, but none of the four plans has enough to assure that employees will receive future benefits they have already earned. If the airline abandons the plans, billions of dollars in liabilities for those future benefits will fall on the Pension Benefit Guaranty Corporation, a government-sponsored agency whose finances have already been heavily tapped by the collapse of pension plans at other bankrupt companies in the airline, steel and other industries.
As one would expect, leaders of United's unions reacted with outrage over United's decision but, as usual, offered no alternative to the probable liquidation that United faces if it kept making the pension payments. Greg Davidowitch, president of the flight attendants' union local at United, demanded the following explanation: "Current management should explain to us why the flight attendants should continue to support their restructuring, if this is the best they could do."
I can answer that one: "So that United can stay in business and provide you and the other flight attendants a job."
In all likelihood, United's action was probably a condition of the renewal of its bankruptcy financing (called "DIP financing"), which United advised its Chicago bankruptcy court yesterday that it had arranged. Private lenders and investors will not be willing to invest in United unless the pension obligation was either terminated or dramatically modified. United currently owes its pension plans an estimated $4.1 billion over the next five years.
United is big and many financial institutions have an interest in seeing that it continue as a going concern. However, United is in dire financial trouble, and at substantial risk of liquidation. Even with this latest move, it is not at all certain that United can -- or should -- make it.
The U.S. Supreme Court's recent decision in Blakely v. Washington (prior posts here) -- which has called into question the Constitutionality of both state and federal sentencing guidelines -- has prompted Enron Task Force prosecutors to re-indict defendants in the two Enron criminal cases that are scheduled for trial in the near future.
The Enron grand jury this week reindicted the six people accused in what is known as the "Nigerian barge case" scheduled for trial in August before U.S. District Judge Ewing Werlein and the seven ex-Enron executives charged in the Internet broadband division case scheduled for trial in Houston federal court this October.
Included in both new indictments are allegations that each scheme caused the loss of more than $80 million, an allegation that can add years to a sentence under existing federal guidelines. The new indictments were spurred by the Blakely decision, which held that the state of Washington's sentencing laws were unconstitutional because they only allowed judges, not juries, to consider factors that increased sentences. Some legal experts have speculated that the decision calls the Constitutionality of federal sentencing guidelines into question for the same reason.
Not explained by the Task Force in the new indictment is how the Nigerian Barge deal -- which was a relatively small transaction involving about $12 million in allegedly illegal profit for Merrill Lynch -- could have caused $80 million in damages to Enron.
Longtime Houston oilman and real estate developer George Mitchell and his wife Cynthia have donated $2.5 million to the University of Texas Medical Branch at Galveston to fund the creation of the George P. and Cynthia Woods Mitchell Center for Alzheimer's Disease Research, which will coordinate UTMB's expanded research into Alzheimer's disease. Mrs. Mitchell has suffered from Alzheimer's over the past several years.
The new UTMB center will focus on Alzheimer's but also will conduct research on similar degenerative neurological disorders such as Parkinson's disease. The Mitchell donation will be combined with other donations and grants to intensify UTMB's overall neurological research.
Although Mr. Mitchell has long been a major player in Houston independent oil and gas circles, he is best known as the developer and visionary of The Woodlands, the planned suburban community 30 miles north of downtown Houston that Mr. Mitchell started 30 years ago and which now is home to almost 100,000 residents.
The stakes in the ugly divorce between Baylor College of Medicine and The Methodist Hospital (earlier posts here) that has had medical officials in Houston's famed Texas Medical Center chattering for months just zoomed through the roof.
As predicted here earlier, Baylor Board of Trustees Chairman Corbin Robertson Jr. sent Methodist's board a letter on July 20 threatening legal action against the hospital if it doesn't stop alleged illegal interference with Baylor's medical business, putting its accreditation at risk by recruiting faculty under contract, evicting it from space, and refusing to negotiate a contract that would allot some faculty and residents to the hospital.
"Baylor and its longstanding programs at all affiliated hospitals will be damaged as a result of Methodist's actions," Robertson wrote in the July 20 letter. "It is our fervent desire to maintain or repair our relationship rather than engage in legal debates or worse, but you will, of course, understand the fiduciary obligation of the Baylor board to assure Baylor's compliance with law and to safeguard our assets."
Methodist officials reacted to the letter by calling its claims "highly offensive" and "not in the spirit of the Texas Medical Center," and by saying they have no intention of altering their actions. The now open free-for-all between the two former institutional partners is a remarkable development within the Medical Center community, which has always prided itself on harmonious relations between its various member institutions.
The conflict between Methodist and Baylor has been escalating since the two institutions decided earlier this year to end their 50-year relationship in which Methodist served as Baylor's primary teaching hospital for medical students and residents. St. Luke's Episcopal Hospital is Baylor's new primary teaching hospital, and Baylor is now building its own outpatient clinic. Methodist in turn recently entered into a relationship with Cornell University's Weill Medical School, which is in New York.
In the wake of their split, conflicts have developed between Baylor and Methodist over a new affiliation agreement, Baylor's use of space at Methodist, and over retention of staff and faculty physicians. After a Methodist official earlier this year stated publicly that Methodist hospital division chiefs ? most of whom also are Baylor department chairmen ? needed to choose between the two institutions, Methodist's chief of surgery resigned from the hospital and Baylor's chairman of pathology resigned from the college. More doctor fallout from the two institutions is expected.
Mr. Robertson's letter focuses on rank-and-file Baylor faculty, most of whom are under contract. The letter contends that Methodist's "aggressive recruiting" of those faculty members amounts to tortious interference with Baylor's contractual relations.
Stay tuned on this front folks. As we say in the legal community: "Let's get ready to rumble!"
July 22, 2004
Carlos Beltran went nuclear on the DBacks and Roy O pitched seven solid innings as the Stros won over the DBacks for the second game in a row, 10-3. The loss gave the DBacks their second 11 game losing streak this season. Geez, and we thought the Stros were having a tough stretch.
Beltran drove in three runs with his two yaks and Adam Everett tied his career high with four RBI. Beltran now has 10 homers in 23 games with the Stros, and 25 overall. This game was his third multi-homer game of the season, and he now has 11 in his young career. Man, I wish there was some way that Drayton could figure out a way to keep him around past this season.
Everett had a two-run tater and a two-run single before getting spiked in the eighth inning, which required him to leave the game (the injury did not appear serious). Mike Lamb replaced Everett and promptly hammered a two run yak in the ninth. Must have been something in the air around shortstop today.
Incredibly, the DBacks are now winless since the All-Star break and have lost eight straight at home. They have now lost 16 of their last 18 games. The 2001 World Series Championship is a distant memory.
Roy O picked up his fifth win in his past seven starts with a five-hit, seven K, seven-inning effort. He was dusted up by only a two-run yak that he gave up to Shea Hillenbrand in the sixth.
Finally, in personnel news, the Stros picked up Darren Oliver today from the Marlins' scrapheap to add another limp arm (at least he's a lefty) to the bullpen. After 4.66 ERA/-2 RSAA and 5.04 ERA/-5 RSAA seasons (RSAA explained here), Oliver is off to a 6.44 ERA/-15 RSAA start in his first 18 games (8 starts). This essentially means that the Stros are adding a lefthanded Tim Redding or Brandon Duckworth to the pitching staff. Oliver is one of those guys who has made a career out of being a mediocre lefthander. Good work if you can get it, but not exactly the shot in the arm that this Stros club needs.
Arnold Kling is thinking about health care finance again, and that's a good thing. The entire article is well worth reviewing, as Mr. Kling does a particluarly good job of summarizing the defects in the America's health care finance system:
* Many people lack health insurance. This includes Do-Nots as well as have-nots.
* Poor people, although covered by government programs, are not able to access health care providers in a timely fashion. They obtain too little preventive care and consequently make too much use of hospitalization. In order to improve on certain key health care indicators, such as infant mortality, the United States has to find a way to bring poor people under the umbrella of our health care system.
* The system of employer-provided health insurance distorts choices. It makes it costly for people to change jobs, especially to become "free agents." It puts ordinary firms in the health insurance business, penalizing small firms, for which this is more of a burden. It injects ordinary corporations into the decision-making process of consumers with regard to choice of insurance and even (through "preferred-provider" systems) with regard to choice of doctor.
* Our system tends to subsidize "first-dollar" coverage rather than catastrophic coverage. Catastrophic coverage is like auto insurance that pays in the case of an accident. First-dollar coverage is like auto insurance that pays for gas and tolls. First-dollar coverage results in more paperwork and reduced incentives to control costs.
* People with break-the-bank illnesses, such as diabetes or cancer, cannot switch insurance companies.
* Consumers have little incentive to take responsibility for their health. Smoking and obesity make little or no difference to insurance premiums.
* Consumers have little incentive to take financial responsibility for health insurance. Instead of encouraging consumers to save to pay for the high cost of insurance when they are older, we tell them that they can count on Medicare.
Mr. Kling does not view increasing government's role in health care finance as a viable option. Rather, he views government's best role as that of a facilitator of consumer choice:
However, the solution is not to enlarge government's role. What I would like to see is a role for government in health care that is streamlined, rationalized, and bounded. I call this approach "limited paternalism."
My belief is that most consumers are capable of making the best decisions about health care most of the time. The buzzword for this is consumer-driven health care.
Mr. Kling's consumer-driven health care finance system would have the following components:
* Direct provision of health care services to the poor. For example, government-subsidized clinics in poor neighborhoods with nominal charges (say, $10 per visit).
* Aim to switch from a system of employer-provided health insurance to consumer-purchased health insurance, by ending the tax deductibility of insurance for corporations and eliminating requirements that companies provide health insurance.
* Mandatory catastrophic health insurance for all families not eligible for Medicaid. Rather than expand Medicaid and other government programs upward to the middle class, as some Democrats propose, tighten eligibility for these programs and require co-payments for all but the poorest participants. Eventually, phase out Medicaid and replace it with health care vouchers.
* Phase Out Medicare, and instead mandate health care savings accounts (explained in this earlier post). This would change the medical portion of retirement security from a defined-benefit plan, which Congress will tend to pack with benefits that it cannot pay for, to a defined-contribution plan, which is much sounder financially and much fairer generationally.
* Institute government-provided "catastrophic reinsurance" for very high medical expenses. The Kerry campaign has proposed this for expenses of over $50,000 per year. The purpose of catastrophic re-insurance is to enable private insurance companies to compete for business without having to screen out high-cost individuals. Of all the mechanisms for spreading the cost of break-the-bank illnesses among the general public, catastrophic reinsurance would involve the government in the least number of individuals and the least number of medical decisions. While the rest of the Kerry health care plan tends to be the opposite of what I would like to see, this proposal strikes me as a good plank in any health care reform platform.
Read the entire piece as well as Mr. Kling's follow up blog post on the article. I believe that the Bush Administration and the Republican-controlled Congress' failure to address health care finance reform in a meaningful fashion is one of the big reasons undermining independent voters' confidence in the Administration during this political season.
Professor Ribstein has been noting the increasingly polarized nature of political debate in America, best reflected by the tendency of many critics of President Bush to eschew fair criticism for ad hominem attacks.
Although Professor Ribstein is correct that Bush-bashing is prevalent, I'm not certain that this is all that unusual. American Presidential campaigns have often been ribald affairs in which strident supporters of one candidate have characterized the opposing candidate as evil, immoral, moronic, or worse.
For example, the campaigns immediately after George Washington's terms in office were no picnic, and later, Andrew Jackson's opponents used many of the same tactics that the Bush-bashers use now. Even Abe Lincoln endured a good deal of these types of attacks in the 1864 election, and more recently, Barry Goldwater in 1964 and Richard Nixon in 1972 were often characterized as the epitome of evil by their opponents. Particularly during the 1980 election, opponents of Ronald Reagan often portrayed him as an idiot mouthpiece controlled by others.
However, the WSJ's ($) Alan Murray in his Political Capital column this week may point to the reason that the Bush-bashers are using this particular technique during this Presidential campaign:
To an unprecedented degree, Americans already have decided how they are going to vote in November. Polls differ, but all suggest that between 43% and 45% of voters plan to vote for George W. Bush and won't give any consideration to John Kerry, and an equal percentage plan to vote for Sen. Kerry, and won't give any consideration to President Bush.
That leaves just 10% to 15% of voters who say they remain uncertain about how they will vote. And Republican pollster Bill McInturff says his research shows even most of the undecided voters are less malleable than the label indicates. "The polarization is exceptional," says Democratic pollster Peter Hart. "Even the independents break down into pro-Bush and anti-Bush groups." Kerry strategist Mark Mellman goes further: "All the evidence suggests we are fighting over less than 10% of the electorate, and probably less than 6%." Says Mr. McInturff: "I've never seen anything like this in my 25-year career."
Could it be that the Bush-bashers have concluded that their approach is the most effective means by which to persuade a majority of this 10% undecided group? Or is it simply a means by which to maintain the passion of the base of Bush opponents to ensure that base turns out on election day? Or both?
Update: Professor Ribstein notes the difference in the nature of the current Bush bashing with previous President bashing.
A group of four of the largest private-equity funds teamed up to win the hotly-contested auction for Texas Genco Holdings Inc., a merchant generating company spun off from CenterPoint Energy Inc., in a deal valued at $3.65 billion. CenterPoint stands to realize $2.9 billion in cash when the deal is closed, likely in the first quarter of 2005. The deal is subject to regulatory approval.
Among the losing bidders was a group of hedge funds advised by Lazard Freres & Co., which reflects the growing influence of such funds in captial markets. Hedge funds generally invest in stocks, bonds and other financial assets because it is easier to trade in and out of such investments. However, as hedge funds accumulate big pools of capital, they are starting to lend to companies and make longer-term investments in certain companies.
The CenterPoint auction has been widely watched in the power industry because it includes more than 14,000 megawatts of Texas generating plants, which will likely be the largest sale of power assets by a U.S. company this year. The sale comes amid a debate over whether CenterPoint can charge customers to recover so-called stranded costs in plant investments. Under regulatory rate rules, CenterPoint is currently arguing to state regulators that the generating plants it is selling are actually worth much less than what the winning bidders have agreed to pay. If it succeeds in its argument, then CenterPoint would be able to charge its Houston area utility customers higher rates.
Andy Pettitte pitched a season-high eight innings as the Stros extended the D-Backs losing streak to 10 in a 5-2 victory on Wednesday night at the BOB in Phoenix.
Pettitte (6-3), who was 1-2 in his previous six starts, pitched in Phoenix for the first time since losing Games 2 and 6 of the 2001 World Series for the New York Yankees. He took a five-hit shutout into the eighth in this game before allowing Scott Hairston's double and Steve Finley's tater, which pulled the D-Backs to 3-2. Brad Lidge made things interesting by walking two in the ninth, but finally secured the save.
Roy O goes for the Stros tonight as they attempt to put a winning streak together at the expense of the hapless D-Backs. The Stros return to the Juice Box for a weekend series with the Brew Crew after their quick trip to Phoenix.
July 21, 2004
Stephen Sestanovich is a senior fellow at the Council on Foreign Relations and a professor of international diplomacy at Columbia University. From 1997 to 2001 he was United States ambassador at large for the former Soviet Union.
In this intelligent NY Times Op-ed, Professor Sestanovich points out that key foreign policy decisions are often the product of imperfect intelligence and government officials' reaction to it. Sensitive intelligence is often too weak to guide important decisions, and if the information fits what the governmental officials already believe -- or what they want to do -- it often gets too little scrutiny. He then relates a humorous story:
Most anyone who's worked in government has a story - probably re-told often these days, given the Iraq debate - about facing a big decision on the basis of information that then turned out to be wrong. My favorite is from August 1998 when, with Bill Clinton just three days away from a trip to Moscow, the Central Intelligence Agency reported that President Boris Yeltsin of Russia was dead.
In 1998 the news that Mr. Yeltsin had died was, of course, no more surprising than the news, in 2003, that Iraq had weapons of mass destruction. It matched what we knew of his health and habits, and the secretive handling of his earlier illnesses. Nor was anyone puzzled by the lack of an announcement. Russia's financial crash 10 days earlier had set off a political crisis, and we assumed a fierce Kremlin succession struggle was raging behind the scenes.
In the agonizing conference calls that ensued, all government agencies played their usual parts. The C.I.A. stood by its sources but was uncomfortable making any recommendation. National Security Council officials, knowing Mr. Clinton wasn't eager for the trip, wanted to pull the plug immediately. The State Department (in this case, me) insisted we'd look pretty ridiculous canceling the meeting because Mr. Yeltsin was dead - only to discover that he wasn't.
Eventually we decided that the Russians had to let the deputy secretary of state, Strobe Talbott, who was in Moscow for pre-summit meetings, see Mr. Yeltsin within 24 hours or the trip was off. Nothing else would convince us: no phone call, no television appearance, no doctor's testimony. The next day Mr. Yeltsin, hale and hearty, greeted Mr. Talbott in his office, and two days later Bill Clinton got on the plane to Moscow.
When the trip was over, I phoned the C.I.A. analyst who had relayed the false report. He was apologetic - sort of. "You have to understand," he said. "We missed the Indian and Pakistani nuclear tests last spring. We're under a lot of pressure not to miss anything else."
So, what do governmental officials do with such imperfect information?:
When policymakers have imperfect information about a serious problem (which is almost always), what should they do? The answer, then as now, is to shift the burden of proof to the other guy. If we had been denied that meeting with Mr. Yeltsin, it would hardly have proved that he was dead. But we would have canceled the trip all the same. Russian uncooperativeness - not our poor intelligence - would have left us no choice.
And how does that relate to the current debate over the Bush Administration's decision to go to war in Iraq on the basis of imperfect intelligence?:
Going to war and canceling a trip are vastly different matters, but what the Bush administration did with Saddam Hussein in the run-up to war followed the same rule: it challenged him to prove that American intelligence was wrong, so that the responsibility for war was his, not ours.
Clearly, President Bush and his advisers did not expect Saddam Hussein to cooperate in this test, and might still have wanted war if he had. But even if the administration had handled other aspects of the issue differently, it would still have been necessary to subject Iraq to a test. In our debate about the war, we need to acknowledge that the administration set the right test for Saddam Hussein - and that he did not pass it.
When America demanded that Iraq follow the example of countries like Ukraine and South Africa, which sought international help in dismantling their weapons of mass destruction, it set the bar extremely high, but not unreasonably so. The right test had to reflect Saddam Hussein's long record of acquiring, using and concealing such weapons. Just as important, it had to yield a clear enough result to satisfy doubters on both sides, either breaking the momentum for war or showing that it was justified.
But, some protest, does not this approach treat Saddam Hussein as guilty until proven innocent?:
They're right. But the Bush administration did not invent this logic. When Saddam Hussein forced out United Nations inspectors in 1998, President Clinton responded with days of bombings - not because he knew what weapons Iraq had, but because Iraq's actions kept us from finding out.
A decision on war is almost never based simply on what we know, or think we know. Intelligence is always disputed. Instead, we respond to what the other guy does. This is how we went to war in Iraq. The next time we face such a choice, whether our intelligence has improved or not, we'll almost surely decide in the very same way.
The Bush Administration deserves much criticism on a variety of issues. However, its decision to go to war with Iraq -- and its overall prosecution of tha war -- are not issues that deserve the criticism that some politicos are heaping upon the Administration during this political season.
Hat tip to Bill Hesson for the link to this fine op-ed.
In announcing its second quarter results today, J.P. Morgan Chase & Co. announced that it has increased its total litigation reserve to $4.7 billion before taxes. The reserve covers Morgan's contingent liability in the ongoing Enron civil litigation and other securities cases, including the company's dispute with WorldCom investors.
Excluding the litigation reserve charge, J.P. Morgan Chief Executive William B. Harrison Jr. described the second-quarter results as "comparable to the prior year." That's a bit like saying that, except for the elephant in the middle of the room, the rest of the room remains quite neat and tidy.
July 20, 2004
The Stros might as well be in "Groundhog Day." The story goes like this:
Stros take lead.
Stros blow lead.
Munro pitched well and deserved to win. However, Weathers and Harville stunk in relief and gave up a 4-1 lead. Bags and Ensberg had solo yaks and a couple of hits each, but the rest of the Stros hitters beyond Berkman remain tepid. Even Beltran is being affected, as his OBP fell to a pathetic .318. Bad hitting is contagious.
Andy Pettitte opens the Diamondback series on Wednesday in Phoenix. At least the Stros will be playing someone their speed in the D-Backs (31-63). The Stros are now only a game out of last place in the NL Central.
Houston-based Continental Airlines annonced that it posted a net loss of $17 million for the second quarter, citing weak domestic fare prices, high fuel costs and expenses associated with retiring aircraft.
Continental, which is the No. 5 U.S. carrier, reported net income for the year-earlier period of $79 million, or $1.10 a share, which was primarily due to war-related government subsidies. The latest quarter's loss included a charge of $19 million for the retirement of leased MD-80 jets. Excluding that charge, Continental would have eked out a profit of $2 million during the quarter. Continental's total revenue improved 13%, to $2.51 billion from $2.22 billion a year earlier, as passenger revenue improved 15.1% to $2.3 billion. The company's consolidated load factor increased to 77.6% from 75.9%.
Continental has generally competed well against the rising tide of low-cost carriers as the company's chapter 22 (i.e., two prior chapter 11 cases) case tends to focus management on lean operations. Nevetheless, management reported that the company will have to cut costs beyond its original projection of $900 million annually to offset lower than expected ticket prices and high fuel costs.
A day earlier, Delta Air Lines reported a higher-than-expected loss of $1.96 billion for the second quarter, with weak fares undercutting a surge in passengers that pushed traffic to its highest level since the summer of 2000. Delta is the prime prospect to be the next American carrier to land in chapter 11.
According to this Houston Chronicle article, Ken Lay's criminal defense attorney, Mike Ramsey, is apparenly not happy that Enron Task Force lawyers had sent letters to U.S. District Judge Sim Lake in late May and mid-June indicating that they were going to indict Mr. Lay in the pending criminal case against former Enron CEO Jeffrey Skilling and former Enron chief accountant Richard Causey.
Mr. Ramsey is not happy because the Task Force lawyers, at the same time they were sending these letters to Judge Lake, were advising Mr. Ramsey that they had not decided whether they were going to indict Mr. Lay. Mr. Ramsey says that he would never have met with the prosecutors to attempt to persuade them not to indict Mr. Lay if he had known that they had already decided to indict Mr. Lay.
Mr. Ramsey presumably gave this information to the Chronicle with a straight face.
July 19, 2004
Dan Miceli gave up the back-to-back homers in the eighth inning to allow the Dodgers to edge the Stros 7-6 in a wild game on Monday night at the Juice Box. The win was the Dodgers' seventh straight win, 13th out of their last 14, and dropped new Stros manager Phil Garner's record to 1-3 since taking over from Jimy Williams during the All-Star break.
After the Stros took an early lead, the Dodgers scored four runs in the sixth inning, with three unearned because of two Stros errors, including another adventure in left field by Bidg, who is proving just how underrated Berkman was as a leftfielder. Ensberg cranked a dramatic three-run yak in the sixth to give Stros a 6-5 lead, leading to Miceli's gopher balls in the eighth that put it away for the Dodgers.
Starter Brandon Duckworth had an amazing performance, somehow allowing only one run in 4 2/3rd's while allowing six hits, one K, and four walks (hint: the Stros turned three DP's behind him). After Duckworth's latest tightrope performance, GM Gerry Hunsicker must have taken great pleasure in Carlos Hernandez's 7 inning, 10 K, no-hit performance on Wednesday night at AAA New Orleans.
Pete Munro takes the hill in game two of the Dodger series on Tuesday night at the Juice Box. Any bets on whether Hernandez takes the next non-Oswalt-Clemens-Pettitte start in the rotation?
Edward Lotterman is a Twin Cities-based economist who writes a column for the Twin Cities Pioneer. In this column, Mr. Lotterman points out that the original good intentions of governmental subsidies have, over the decades, generated obsolescence:
News about subsidies for airlines and the U.S. cotton industry illustrate how addictive unsustainable or indefensible flows of money turn out to be.
Once a company, group or economic sector becomes used to above-market income of some type, stopping the flow is traumatic. This is particularly true when such income is incorporated into the price of some fixed resource.
First, Mr. Lotterman addresses U.S. government subsidies for cotton farmers:
The U.S. government subsidizes cotton production to the tune of some $3 billion per year. Virtually all the subsidy flows to fewer than 30,000 cotton farmers. At some $100,000 per producer, cotton is the most heavily subsidized of the major U.S. agricultural commodities.
[C]otton farmers have become used to streams of income that apparently are unsustainable over the longer term. Ending the flow is financially and politically troublesome . . .
The goal of [cotton subsidies] was to improve incomes for small farmers. Cotton subsidies did little to accomplish this. In fact, they contributed to the concentration of cotton production into fewer and fewer hands. As Ricardo would have predicted, most of the subsidies flowed into higher prices for that farmland especially suited for growing cotton. After paying the high prevailing rental or purchase price for good land, a new cotton farmer would enjoy only moderate income even with the subsidy.
Our country should do away with cotton subsidies, not as a favor to producers on other continents, but because they are economically wasteful and unjust.
And, as Professor Ribstein has previously pointed out, Mr. Lotterman observes that governmental subsidies of airlines has had much the same effect:
Established airlines got quasi-monopolies when the government regulated routes and fares. Increases in costs such as fuel or salaries eventually got passed along to consumers in the form of higher ticket prices. Significantly fewer people flew then than now and those who did were either business and government travelers or higher income people. As economists would say, demand was inelastic. Higher fares did not reduce ticket sales greatly.
In this environment, pilot salaries grew inexorably compared to the levels that would have prevailed in a free-market situation. At the end of World War II, pilots did not earn substantially more than bus drivers or locomotive engineers. Twenty-five years later, many earned two to five times as much.
All this began to collapse when former President Jimmy Carter initiated deregulation of the airline industry by appointing economist Alfred Kahn to head the Civil Aeronautics Board. In the intervening quarter-century, the real cost of air travel has plummeted and the proportion of the population flying has grown tremendously. Many of the once-famous carriers ? Pan Am, Braniff, Eastern, TWA ? have bitten the dust while Northwest, United, Delta and others struggle financially.
Some analysts predict that eventually all of the "legacy" carriers that existed before 1978 will go under. Corporate names may survive, but all the shareholder equity and employee pension claims will turn to dust.
Mr. Lotterman concludes by predicting that the subsidies will eventually end and that the industries will eventually shake out, but then makes the following insightful observation:
Adjustment will come and it will be painful for pilots and for cotton farmers, especially those who purchased land in recent decades. The net effect will be to make our society more efficient and fair.
The whole process would be less traumatic, however, if we had not let cotton subsidies and airline salaries grow to the inordinate levels in the century just ended.
To which Arnold Kling (hat tip for the link) asks the following question:
Can you think of examples of industries that once were subsidized that now are thriving subsidy-free?
Kirk Bohls provides this Austin American-Statesman (free online registration required) article profiling the two men who are providing bodyguard services for Lance Armstrong during his current Tour de France expedition. The entire column is interesting, spiced by the following two comments:
Asked if it's a grueling assignment since Lance is somewhat of a rock star, [one of the bodyguards] corrected, "Lance is a rock star."
[A]lthough he does get paid for this work. And how much does he make, trying to keep half of France off Lance's back?
"Not enough," he said with a wide grin. "Not enough."
I mentioned this article to one of my teenage daughters, and she responded regarding Armstrong:
"Oh, you mean the guy who is Sheryl Crow's boyfriend?"
Robert Shapiro, the L.A.-based criminal defense attorney who put together O.J. Simpson's criminal defense team, writes this Wall Street Journal ($) op-ed today in which he takes issue with a number of tactics that Martha Stewart and her defense team took in defending Martha. Mr. Shapiro is particularly critical of Martha's belief that she could personally persuade prosecutors that she had not lied about the stock sale and, in so doing, makes this salient point about litigating with the government:
While everyone entertains the fantasy of being publicly and dramatically vindicated by a "not guilty" verdict, the fact is that as a defendant the odds are stacked against you at trial. In white-collar cases, particularly federal ones, prosecutors tend to be very experienced, highly skilled, and extremely able. What's more, they are backed up by almost unlimited investigative resources, as well as by laws that give them ready access to financial records. In short, the playing field is hardly level.
July 18, 2004
The Rocket won his first game in three weeks and the Stros jacked three solo yaks in a 5-3 win over the Padres at the Juice Box on Sunday, stopping a four-game losing streak and giving Phil Garner his first win as the Stros' skipper.
Clemens was his usual reliable self, retiring 16 consecutive batters starting with the final out of the first. The win was his 321st career victory, moving three behind Nolan Ryan and Don Sutton, who share 12th place on the all-time win list. Clemens allowed two runs and four hits in seven innings, striking out five and walking just one.
Pete Munro and Brandon "Gopherball" Duckworth start the first two games of the upcoming Dodger series at the Juice Box, so a winning streak does not look promising. This Stros team simply does not hit well enough to get by with below average pitching, which is what the Stros will generally receive from Munro and Duckworth.
July 17, 2004
The Stros losing campaign continued Saturday afternoon as the Padres beat them at the Juice Box for the second game in a row, 7-4.
The Stros are now 44-46 and have dropped four straight and eight of 10, falling two games below .500 for the first time since they were 0-2 on April 6. They remained a season-high 12 games behind the NL Central-leading Cards.
Roy O, who beat the Pads on July 7 for the fourth straight time, gave up seven runs and eight hits in 4 2/3 innings. It was only the second time in his career that he's allowed seven or more earned runs. Jason Lane hit an RBI grounder in the bottom of the fifth, Lance Berkman hit a two-run homer in the sixth and Jeff Bagwell homered in the eighth, his 12th of the season but first in 81 at-bats. Ouch.
The Rocket tries to pick up this moribund group of Stros in the Sunday matinee, as the Dodgers arrive on Monday for a three game set.
Baseball writer Peter Gammons passes along this tidbit on a recent radio interview for which John Kerry's staff did not prepare him particularly well:
Thing called love
We have been led to cynically believe that many politicians are disingenuous and generally phony, but few will ever beat Massachusetts Senator John Kerry. This man, who changed his middle initial to be JFK and at an anti-Vietnam rally threw someone else's medals into the water, made a self-promotion appearance with Boston talk-show maven Eddie Andelman and claimed he was a big Red Sox fan from his days growing up in Groton, Mass. And at the promotion he said Eddie Yost was his favorite player.
The problem with that is just the simple fact that Eddie Yost never played for the Red Sox.
/Victor Davis Hanson's latest NRO column is another outstanding history lesson the inevitable mistakes of conducting warfare. Good stuff.
One of the most interesting aspects of the government's indictment against former Enron Chairman and CEO Kenneth Lay is that it does not includes any insider trading charges. On the other hand, the SEC's civil complaint against Mr. Lay includes insider trading charges. Why the difference?
This Business Week article does a good job of summarizing why the government elected not to bring the insider trading charges and why the SEC believes that it can make its insider trader case against Mr. Lay:
In 2001, Enron Corp. was quietly lurching from crisis to crisis. Whatever he did or didn't know about Enron's woes at the time, Kenneth L. Lay rarely missed an opportunity to talk up the oil-and-gas trading concern with analysts and Enron employees. The ex-chairman and CEO even urged workers to follow his lead and buy stock. From August through October, 2001, Lay bought $4 million worth of Enron shares -- which he cites as proof that he had faith in the company.
But there's a hitch. Privately, Lay was dumping far more stock than he publicly acquired, according to criminal and civil charges filed against him on July 8. In the same three months, he sold $26 million of Enron shares. Altogether in 2001 he unloaded Enron stock for $90 million. But because those shares were sold back to Enron, Lay did not have to disclose the sales until 2002, thanks to a loophole -- since closed -- in Securities & Exchange Commission rules.
The difference between Lay's public statements and private actions is the foundation of the SEC's civil charges -- one of the more aggressive interpretations of insider-trading law in decades. Opening a new chapter in the SEC's pursuit of alleged corporate crooks, the agency, in effect, is putting all CEOs on warning: They now face the risk of violating insider-trading laws when they trade company stock or borrow against it.
The article then goes on to explain how Mr. Lay cashed out of Enron stock while publicly appearing to support the company:
In 2001, according to the suit, he borrowed a total of $77.5 million from Enron, spread out over 20 transactions, and repaid the loans entirely with Enron shares. The repayments often came within a few days. Such stock sales vastly outweighed purchases. In seven transactions from August, 2001 -- when he resumed the CEO job after Jeffrey K. Skilling's surprise resignation -- through October, 2001, he converted more than 918,000 shares into $26 million. "He was selling all the time," says Duke University law professor James D. Cox. "And the number of shares he sold is staggering."
Lay doesn't see it that way. In public he has said that he sold because he needed the funds. He had pledged his shares as collateral for some $100 million in personal loans from three commercial banks. When the value of his Enron stock declined, his bankers made margin calls or demands that he increase his collateral. In his trial, Lay is expected to claim that, with few other assets he could easily sell to satisfy those demands, he was forced to borrow from Enron, repay the Enron loans with stock, and use the proceeds to pay off the banks.
And the foregoing is the crux of why the Justice Department passed on indicting Mr. Lay for illegal insider trading, while the SEC decided to take its shot on those causes of action in its civil complaint:
Justice would have had to show beyond a reasonable doubt that Lay possessed important information the market lacked and that he intentionally traded to take advantage of that information. The SEC's burden of proof is lower. It need only show that the preponderance of evidence points to insider trading. The SEC complaint argues that Lay's trades reveal an effort to pump up the shares, dump his stock, and skirt disclosure rules that might tip off investors.
Under then-SEC rules, sales of stock back to the company did not have to be reported until 45 days after the close of the calendar year in which the trades occurred. So when Lay urged Enron employees to buy on Sept. 26, 2001, he knew there would be no record of his sales. SEC filings showed only that he had bought that $4 million worth of stock.
The SEC case, however, is equally significant for the new liabilities it could create for other execs. Agency officials believe it's relatively common for managers to try to have their cash and keep their shares, too, by borrowing against their stock. Doing so allows them to avoid sending bearish signals to investors while still monetizing their shares. The Lay case seems to show that the SEC views the practice as deceptive. "I think the SEC clearly is saying that you're going to have to disclose if you're borrowing against your stock because, in effect, that's a sale," says UCLA law professor Stephen M. Bainbridge.
The agency also is warning that execs may be setting themselves a trap if they use shares as collateral. Monetizing shares via loans could create a motive to pump up the stock and, as with Lay, subject execs to insider-trading charges if they later sell because of margin calls, . . .
UCLA law professor Stephen Bainbridge -- who provides the consistently best analysis in the blogosphyere on issues pertaining to corporate law -- notes in this post that the SEC is charting a new course in the Lay case that should give all corporate officers pause as they consider borrowing money with their company stock pleadged as collateral.
Ryan Lizza of the New Republic reviews three books from three former Democratic candidates for President -- George McGovern, Gary Hart, and Mario Cuomo -- in which the three provide their views on how the Democratic Party should regain control of the American government. Particularly interesting are Mr. Hart's views toward redirecting American foreign policy, which Mr. Lizza summarizes in the following manner:
Few Americans have more right to say ''I told you so'' than Gary Hart. During the 1990's, when the foreign policy establishment was obsessed with Star Wars and other issues left over from the cold war, Hart headed a commission on national security with another former senator, Warren Rudman. Its report, issued early in 2001, warned of catastrophic terrorist attacks in which ''Americans will likely die on American soil, possibly in large numbers.'' Incredibly, the work of the Hart-Rudman commission was widely ignored by the press and the Bush administration.
''The Fourth Power'' builds on the many ideas of the commission, offering sweeping recommendations for how America should orient its foreign policy in the 21st century. Hart's timely central argument -- an alternative to both the neoimperialist impulses of the Bush administration and the creeping Kissingerian realism of the Kerry campaign -- is that the traditional military, political and economic powers of American foreign policy should be constrained by and imbued with a fourth power, America's unique principles. To those who advocate a crusading foreign policy of preemption to ''rid the world of evil'' and spread democracy -- even at the point of a gun -- Hart argues that the first casualty would often be America's moral authority: ''There is a vast difference between advocating, as I do, that America live up to its own principles and advocating, as the Bush administration does, that the rest of the world live up to America's principles.'' At the same time, Hart counters Kerry's retreat to a Kissinger-style foreign policy, based largely on America's interests, with a humble but still idealistic internationalism, with the spread of liberal democracy at its core. It's a call for nation building without Abu Ghraib.
In 1993, Hart sent President Clinton a memo arguing that the end of the cold war was the ideal occasion to reorient the military ''for new missions relating to hostage rescue, counterterrorism, low intensity conflict, guerrilla warfare and stabilization of new democracies.'' Much of this prescient document is reprinted as an appendix. We were told.
July 16, 2004
The Phil Garner era began as the Jimy Williams era ended as the Stros lost meekly to the Padres on Friday night at the Juice Box, 5-1.
Andy Pettitte gave up 4 runs on 7 hits in five innings, which is a death sentence for this punchless Stros team. The Stros had their usual six hits against five Padre pitchers, and only one of those was an extra base hit, a triple by Beltran. With the loss, the Stros fell below .500 at 44-45 and the GM's office is fielding more trade proposals by the minute.
On the heels of my earlier post today on Richard Chesnoff's NY Daily News op-ed, I clicked on the television to watch Martha Stewart's statement after her sentencing. Much to my surprise, my old friend David Chesnoff -- one of Las Vegas' best attorneys and Richard's younger brother -- was standing there next to Martha. Looks like Martha is strengthening her legal team.
Chez and I struck up our long friendship while toiling together for the same Houston law firm in our first job of out of law school in 1979-80. After practicing civil trial law for a year, Chez decided that he wanted to practice criminal defense law, so he took a job in Vegas. He and I loaded everything he owned into and on top of his late model Fiat and we embarked on a legendary road trip down I-10 from Houston to Vegas. Chez quickly established himself in the Vegas criminal defense bar, and has risen to the top of his profession over the past 24 years.
Adding Chessie to your legal team is a good move, Martha.
If you read nothing else today, read this harrowing account of a family's experience in a recent domestic flight.
Please pass this along the next time you hear someone complain that there is no reason to sacrifice any civil liberties in order to fight the war against the radical Islamic fascists.
Michelle Malkin is running posts on her blog attempting to verify the accuracy of the events described in the account. The skeptics speculate that, if the events happened at all, that the men were either praying or members of a musical group. Which, in my mind, is no justification for allowing such behavior to occur on a commercial airline flight.
Hat tip to Instapundit for the link to this article.
Arnold Kling provides this excellent TCS article in which he forcefully reminds us that the standard of living for the vast majority of Americans is far better now than it was 30 years ago. The entire article is a must read, and Mr. Kling concludes as follows:
The reality is that neither the rise in health care expenditures nor the standard of living of working Americans represents a problem. The false portrayal of these issues by the Left is more likely to provoke a crisis than to solve one.
In this NY Daily News op-ed, Mr. Chesnoff comments on the new ideas that are springing from Israel and Jordan regarding a resolution to the Palestinian problem. Although not yet the subject of widespread political support, the ideas are are notable in that they do not include relying on Yassir Arafat for support, as Mr. Chesnoff notes:
[The] extreme ideas are not welcome among Palestinians, Jordanians or most Israelis. But in between there may be a meeting of the minds. Why not offer financial compensation to West Bankers willing to to move to unsettled parts of Jordan? Why not a border secured in part by Jordan? Why not a Palestinian West Bank and Gaza (minus border areas Israel needs for security) linked to Jordan with an economic union bonding both to Israel's burgeoning economy?
Anything would be better than the options Arafat & Co. offer: more blood, more corruption, more hatred, more suffering for all sides.
Amen. Read the whole piece.
Mark Belnick, the former Paul, Weiss, Rifkind, Wharton & Garrison partner who was Tyco's general counsel during the Dennis Kozlowski scandals, was acquitted yesterday of corporate fraud charges that involved an allegedly unapproved $15 million bonus and $14 million in personal real estate loans.
The article on the acquittal provides the normal exaggerations regarding the impact of the acquittal on prosecutors and defense attorneys, suggesting that it will make the former more cautious in future white collar prosecutions and that it will make the latter bolder in defending hte cases. In reality, the acquittal has very little effect in that regard.
However, the article does provide the following important information about the trial:
Mr. Belnick relied on the advice of the chief financial officer, Mr. Swartz, on the propriety and the disclosure of the relocation loans, Mr. Weingarten [Belnick's defense attorney] told the jury. "There was nothing unusual, extraordinary or improper about seeking advice from that source," he said.
Over nearly a week of testimony, Mr. Belnick essentially stuck to that argument, saying that he had done nothing wrong, had not intended to do anything wrong and had relied on advice from people he had no reason to distrust.
Although the temptation is great not to have a white collar criminal defendant testify during a trial and the decision can always be defended on technical grounds, the bottom line is that jurors want to hear what the white collar defendant has to say regarding the criminal charges. The decision not to testify is not the only reason that Ms. Stewart and Mr. Olis were convicted, but my experience is that the risk of conviction in white collar criminal prosecutions increases substantially if the jurors do not hear directly from the defendant.
July 15, 2004
U.S. Bankruptcy Judge Arthur Gonzalez approved Enron Corp.'s Chapter 11 reorganization plan today in New York, under which $63 billion of claims will share about $12 billion in cash and the value of stock in newly formed companies that will hold and probably sell Enron assets.
Enron now employs 9,300 people, about a third as many as before its bankruptcy filing. Inasmuch as the Enron plan essentially calls for a going concern liquidation of Enron's assets, most of the employees who are left will become employees of other companies that will hold and then sell Enron's assets.
Enron's domestic pipelines are being transferred to CrossCountry Energy Corp., which Enron is currently selling at a rather lively auction. Enron is awaiting regulatory approval on a sale of Portland General Electric, its Oregon utility, to a group headed by Texas Pacific Group, a Fort Worth, Texas, investment concern. A substantial portion of Enron's remaining foreign assets are being transferred to a new entity, Prisma Energy International Inc., which may be sold or spun off to creditors.
However, the main legacy of Enron's plan is the litigation that Enron's bankruptcy has generated. Literally hundreds of lawsuits have been filed against former employees, trading partners, and many financial institutions that furnished money to partnerships that Enron used to mask its highly-leveraged financial condition. Those cases will continue to drain attorneys' fees from Enron's bankruptcy estate for years.
The Enron bankruptcy estate has already paid Enron's attorneys, various other committee attorneys, and two examiners' attorneys in the hundreds of millions in attorneys fees. When the final professional fees tab is calculated, the Enron case almost certainly will be the most expensive chapter 11 case in the history of reorganization law in the United States.
James F. Parker, Dallas-based Southwest Airlines' CEO, unexpectedly resigned yesterday after just three years. The publicly stated reason for the resignation was the ubiquitous "personal reasons," such as the "draining" nature of the job. Airline CEO's are becoming as disposable as football coaches. Mr. Parker becomes the sixth major airline CEO to step down since the 9/11 attacks.
However, the resignation coincidentally came just hours after Southwest reported that its second-quarter earnings had fallen 54%, although that dip was attributable mainly to labor-related charges in the current quarter and a onetime gain a year earlier. Nevertheless, as with the entire airline industry, Southwest has been troubled by labor troubles, higher operating costs and terrorism concerns since the 9/11 attacks. Moreover, although it pioneered the no-frills, low-cost approach, Southwest faces increased competition from new low-cost upstarts who have chased its business and kept fares under pressure.
Mr. Parker's undoing probably was due to the acrimonious labor contract talks with the flight attendants union that the CEO complained became "personal" and "off track." They were were settled only with the involvement of an outside mediator and the company's hard-charging co-founder and chairman, Herbert D. Kelleher, whom Mr. Parker had to bring in as lead negotiator in the labor negotiations.
Mr. Parker had been seen as a transitional CEO, who definitely had a tough act to follow in Mr. Kelleher. The charismatic Mr. Kelleher had worked hard to build personal rapport with employees and won popularity on Wall Street with his pioneering low-cost approach. The two men were longtime associates who began working together 30 years ago at a San Antonio law firm and Mr. Parker was for years known as Southwest's coordinator of big projects such as leading Southwest's successful opposition to a high-speed rail project in Texas. But Mr. Parker had also been largely in the background while Mr. Kelleher became the company's public face.
Chief Financial Officer Gary Kelly, who is 49, was named to replace Mr. Parker as CEO. Mr. Kelly was responsible for negotiating protective price hedges against higher fuel prices that saved Southwest hundreds of millions of dollars as other carriers suffered higher fuel costs.
The scuttlebutt within the industry is that the Southwest board and Mr. Kelleher had become frustrated by the tenor of labor relations at the airline over the past few years. If true, it's understandable that Mr. Kelleher would have a hard time comprehending why it took two years of negotiations to settle an agreement that he and the union were able to settle in two months once Mr. Kellerher got involved.
This Nicholas Kristof NY Times op-ed is a must regarding the U.S. Attorney General's attempt to halt Oregon's "Death With Dignity" experiment. The A.G. is threatening legal action against any physician who participates in assisted suicide by writing a prescription for a drug that appears on the federal government's list of controlled substances. Hat tip to Professor Mayo and his HealthLawBlog for the link to this op-ed.
July 14, 2004
The worst kept secret in Houston this week was exposed today as the Stros fired Jimy Williams this afternoon, ending his 2 1/2 season stint with the club. The Stros named former Stro player and coach, Phil "Scrap Iron" Garner to replace Williams for the rest of this season.
Stros hitting coach Harry Spilman and pitching coach Burt Hooton were also fired and replaced by AAA hitting coach Gary Gaetti and Jim Hickey, respectively. Spilman was the club's minor league field coordinator when he was named the Stros' hitting coach in June 2000 after the club fired Tom McGraw. Hooton was the AA Round Rock pitching coach when he was named pitching coach during the middle of the 2000 season after Vern Ruhle was canned.
I always thought Williams was a rather odd choice as the manager for the Stros, and his record with the club justified my skepticism. Williams was 215-197 as the Stros manager. The 2002 club (84-78) was second in the NL Central, but finished 13 games behind the Cardinals and 11 games behind the Giants for the wild card playoff spot. The 2003 club (87-75) finished second by a game to the Cubs in the NL Central and four games behind the Marlins for the wild card spot. As we all know, this year's club is 44-44 at the All-Star Break, 10.5 games behind the Cards in the NL Central and 4 games behind in the race for the wild card spot.
The Pythagorean winning percentage is an interesting statistic that estimates a team's winning percentage given their runs scored and runs allowed. Developed by Bill James, it can tell you when teams were a bit lucky or unlucky, but it can also let you know whether a team managed by a particular manager consistently overachieves or underachieves.
Jimy Williams-managed teams have consistently underachieved. Williams has a career Pythagorean Differential of -24 (i.e., his teams have lost 24 more games than the statistics suggest they should have), with just one season in which his team exceeded expectations. Consequently, Williams just may prove Branch Rickey's adage: "Sometimes luck is the residue of design."
Although he appears to be a good coach of baseball skills, Williams just seems to make enough boneheaded managerial moves to make sure that his teams underachieve. Here are but a few examples:
His batting Berkman in the fifth and sixth hole for much of this season while he has been one of the best hitters in baseball;
His insistence on batting one of the worst hitters in baseball -- Adam Everett -- in the two hole and have him waste outs by laying down sacrifice bunts at every opportunity;
His decision to platoon poor hitting Geoff Blum with the hot-hitting Ensberg for much of the 2003 season, which may have in itself been enough to cost the Stros the game that they finished behind the Cubs in the NL Central; and
His strained relationship with Hidalgo, which may have ultimately cost the Stros a productive slugger over the next several seasons.
So, I cannot say that I am sorry to see Williams go. My sense is that he is overmatched as a big league manager.
On the other hand, although hiring Garner is a "feel good" P.R. move, it's a dubious one from the standpoint of managerial competence. Although he managed teams for eleven seasons with generally bad players at both Milwaukee and Detroit, Garner only produced a won-loss record three times that was better than those clubs' Pythagorean winning percentage. Moreover, Garner was a marginal hitter as a player, who rarely walked and thus, did not have as high an on-base percentage as he should have to compensate for his mediocre power. So, if Garner favors players like himself, we should expect a steady dose of Viz and Everett, which will only excerbate the Stros' run scoring deficiencies.
The bottom line: It was time for Williams to go, but it's not at all clear that Garner is an improvement other than he gets along with the media better than the irascible Williams. It's becoming clearer by the day that the Stros' plan of making a playoff run this season has failed, and that it's time to clean house and begin bringing in younger players to surround Berkman and Oswalt.
This Wall Street Journal ($) article profiles Houston criminal defense attorney, Mike Ramsey, who is heading up the criminal defense team that is defending former Enron Chairman and CEO, Kenneth Lay. The article captures Mr. Ramsey's homespun wit in the following passage:
Even if he doesn't succeed in gaining a separate trial, the effort gives Mr. Ramsey the opportunity to showcase is readiness to quickly rebut the charges. He seems to particularly enjoy attacking the bank-fraud charges brought against Mr. Lay in connection with loans he took out between 1999 and 2001. Part of the loan-related criminal charges involves a federal banking rule known as Regulation U.
Mr. Ramsey asserts that the government is unfairly going after his client for an alleged violation of some obscure rule. Until the indictment, says Mr. Ramsey, "I thought Reg U was a tomato sauce."
As noted on this blog before, Mr. Ramsey is a member of Houston's remarkably talented criminal defense bar, which in many respects is the legacy of legendary Houston-based criminal defense lawyers, Racehorse Haynes and the late Percy Foreman. A couple of other members of this prominent group of Houston criminal defense lawyers -- Dan Cogdell and Tom Hagemann -- will be defending clients in the upcoming mid-August trial of the Enron-related case known as the Nigerian Barge case.
Other prominent members of Houston's criminal defense bar include Dick DeGuerin, who along with Mr. Ramsey, obtained the remarkable acquittal of murder charges for Robert Durst, Dick's brother, Mike DeGeurin (yes, the brothers spell their last name differently), Jack Zimmerman, Rusty Hardin, David Berg, Joel Androphy, Robert Scardino, Mike Hinton, and Robert Sussman. The expertise and talent of Houston's criminal defense bar compares favorably with that of any criminal defense bar of any city in the country.
This NY Times article reports that the recent uptick in oil and gas prices has not translated into an economic boom for the local Houston economy. The article does a reasonably good job of explaining that Houston's economy is less dependent on the oil and gas industry that in prior eras, and thus less prone to the boom and bust cycles that resulted from past run-ups in energy prices. Accordingly, while Houston's economy used to be largely countercyclical to the national economy (i.e., Houston would do well during times of high energy prices that would drive the national economy down), Houston's more diversified economy now tends to be more in step with the national economy.
Curiously, the Times reporter neglected to interview the foremost authority on the Houston economy, Dr. Barton Smith, University of Houston professor of economics and director of the UH Institute for Regional Forecasting. Twice a year or so, Dr. Smith gives an oral presentation over lunch to Houston businesspeople regarding the state of the Houston economy and his predictions for the economy's future. These meetings provide valuable nuts and bolts information and analysis regarding Houston's economy, and are extremely popular among Houston businesspeople. Not mentioned in the Times article is that Dr. Smith's model of the Houston economy currently predicts an annualized rate of job growth of 2.6 % that, if sustained for the next six months, would translate into about 50,000 jobs. That would be the best job growth rate in Houston since 2000.
The Wall Street Journal's ($) Holman Jenkins' weekly column today addresses the different troubles facing former Enron Chairman and CEO Kenneth Lay and Pfizer's CEO Hank McKinnell.
First, Mr. Jenkins examines the indictment against Mr. Lay and observes that it essentially charges him with the crime of making false public statements in carrying out his duty to save Enron. That duty to Enron's shareholders, investors and creditors conflicted with Mr. Lay's other duty to tell the truth to those same folks:
Much will depend on what he was told by Enron employees in the weeks between his return to the CEO's job and Enron's collapse a few weeks later. The famous Sherron Watkins memo and follow-up meeting may have put Mr. Lay in the proverbial double bind. He could have told employees and investors that Enron had many sound businesses but, alas, the accounting mess would likely provoke a crisis of confidence among lenders and trade partners, driving the company out of business for lack of credit to continue its day-to-day operations.
Saying as much, of course, would have precipitated the very implosion that it was Mr. Lay's mission to prevent for the benefit of employees, creditors and investors. "Oh well," he might have said, "I saw my duty and did it. I disclosed all the material facts that investors deserve to know, even if it means the stock will go to zero before they can act on it."
Failing to do so is what he's being prosecuted for now, in good part. The indictment dwells most heavily on his public statements of confidence in the company after he reclaimed the helm of a sinking ship. No, we wouldn't even try to guess at a solution for this problem. In theory investors deserve the truth, even when it hurts. Please, can't somebody in the economics department figure out a way to measure how many companies lied their way back to solvency, saving their shareholders a total loss?
The other trial that Mr. Jenkins addresses is a financial and political one, which Pfizer and other drug companies face in a marketplace that increasingly limits the ability of U.S. drug companies to generate profits and fund research and development on new drugs:
By decade's end, the last major market where prescription drugs aren't currently subjected to price controls -- the giant U.S. market -- will feel the touch of the visible hand. Perversely, the industry can thank George W. Bush. Whatever he intended with his Medicare reform, the government sooner or later will try to limit its pharmaceutical spending on seniors by dictating prices.
History is replete with industries with high fixed costs and low marginal costs that embraced government regulation, believing they could capture the regulatory process and assure themselves an acceptable rate of return. Some say the drug companies will manage the politics of price regulation too, making up on volume what they lose in dictated prices. Don't bet the cat on it. That approach ended badly for the railroad and electric power industries, and both could at least demonstrate clearly for regulators the relation between capital going into the pipeline and services to the public coming out the other end. Drug investment, by contrast, is a speculative shot in the dark, unfit for any kind of regulatory review that we can think of.
Mr. McKinnell at least sounds like a man who believes this future can be avoided, pressing for the U.S. to challenge price controls in other countries so Americans aren't stuck bearing the whole cost themselves of the industry's massive R&D budgets.
Inasmuch as the Bush Adminstration lacks a coherent approach to reforming America's health care finance system, count me as skeptical that this administration can develop a sensible plan to require other countries to fund a fair share of drug R&D costs.
July 13, 2004
As readers of this blog know, I am not an admirer of Martha Stewart, but I believe that the recent prosecution and conviction of her is an injustice.
The result of that injustice is equally disturbing. As American Enterprise Institute scholar John R. Lott notes in this article, Ms. Stewart's sentencing reflects a system that is so badly out of whack that it penalizes wealthy people far more than poorer people who commit the same offense:
Before the 1987 [sentencing] guideline, judges could sentence two criminals who'd committed the same crime to vastly different sentences: Ms. Stewart could have been let off with simple probation or given more than 10 years. But judges were rarely that arbitrary. In fact, denying judges discretion has made penalties less, not more, equal.
The reason is simple: the justice system imposes many types of penalties on criminals, but the sentencing guidelines only make sure that the prison sentences are equal. Beyond prison, criminals face financial penalties that largely depend on the criminal's wealth. In addition to fines and restitution, white-collar criminals face the loss of business or professional licenses and the ability to serve as an executive or director for a publicly traded company.
Using Ms. Stewart's case as an example, Mr. Lott notes that those extra penalties for the wealthy are substantial, such as Ms. Stewart's responsibility for the losses that investors in her company suffered as a result of her conviction:
Her conviction changed the company's value by over $320 million just between that day's high and low. As Ms. Stewart owns 63 percent of the company, she personally suffered a loss of $203 million on that day. The other shareholders bore the rest of this loss; but soon after the criminal case is concluded, they will file civil suits against Ms. Stewart, forcing her to cover their losses.
Compare the penalties Ms. Stewart faces to those of, say, a drug dealer convicted of the same crimes of giving false information to investigators. Both would face the same prison sentence. But without any discernible assets, the dealer would escape the other financial penalties Ms. Stewart faces. If the dealer had a public defender, he'd even avoid paying a lawyer.
How can these two vastly different penalties for lying to federal investigators be considered comparable? Surely defendants such as Ms. Stewart can hope to offset these much higher penalties with highly skilled lawyers, but this by no means levels the field. Ms. Stewart's total financial penalty could easily amount to over $300 million dollars, while the drug dealer faces a negligible additional penalty on top of imprisonment.
I cannot say it better than Mr. Lott's conclusion:
It is hardly ever fashionable to defend the wealthy--let alone wealthy criminals. Yet the gap in punishment is so enormous it is impossible to ignore. If fairness means that two people who commit the same crime should expect the same penalty, the current system is not merely unfair, it is unconscionable.
Enron's excesses and the unprecedented media firestorm over the company's collapse have muddled the reasoning of even normally clear thinking business columnists.
The latest to be afflicted is the Wall Street Journal's ($) Alan Murray, who comes up with this doozy in his column today:
Mr. Lay spent more time schmoozing with politicians and picking fabric swatches for his Gulfstream V corporate jet than studying special-purpose enterprises. As a result, his footprints inside the energy company are shallow, and his fingerprints few. Conviction will be difficult.
In the case of Enron, we already know a giant financial fraud lay at the heart of the enterprise. The convictions of former Chief Financial Officer Andrew Fastow and former Treasurer Ben Glisan established that. At stake in the Lay case isn't whether fraud was committed but whether the chief executive should be held [criminally] responsible.
For the sake of American capitalism, he should.
Mr. Murray then goes on to base this rather startling expansion of criminal liability on the anecdotal experience of Federal Reserve Chairman, Alan Greenspan:
In unusually clear testimony in July 2002, Chairman Greenspan railed against the "infectious greed" that had invaded American business, arguing that the best antidote was strong and ethical CEOs. "It has been my experience on numerous corporate boards that CEOs who insist that their auditors render objective accounts get them," Mr. Greenspan said, "and CEOs who discourage corner-cutting by subordinates are rarely exposed to it."
"Although we may not be able to change the character of corporate officers," he concluded, "we can change behavior through incentives and penalties." That is what is at stake in the Lay case.
So, let's see here. Mr. Murray reasons that, in the "special" case of a business executive, we should treat them like bank robbers in the criminal justice system even though the business executive did not intentionally commit a crime. If the CEO is simply lazy and negligent, then Mr. Murray reasons that she is intentionally neligent and lazy and, therefore, should have the same degree of criminal liability as the bank robber.
As one of my former professors used to say whenever confronted with such muddled reasoning: "Pooh-pah."
First, using the criminal justice system to remedy the problem that Mr. Murray addresses is akin to using an ax where a scalpel is needed and available. Extending criminal laws that penalize intentional crimes to penalize lazy and negligent businesspeople has the primary effect of confusing and ultimately undermining society's confidence in the rule of law. Indeed, such application of criminal laws may deter a few folks from becoming CEO's in the first place (although there is no empirical data supporting such a proposition), but it will not deter laziness or negligence.
However, even more important is the slippery slope. If Mr. Lay should be convicted for being lazy and negligent, then why should Enron's directors not also be convicted of the same crime? Or should they not be held criminally responsible for their laziness and negligence because they only flew commercial while Mr. Lay flew in the company's Gulfstream V? Or because their stock options were considerably less than Mr. Lay's? Or is it because they could not have reasonably known that Mr. Fastow was a crook while Mr. Lay should have?
Similarly, what does the system do with the CEO who is not lazy or negligent, but is truly undermined by crafty underlings who figure out a way to defraud the company despite the CEO's diligence? Convict the CEO anyway? Or carve out an exception to the crime if the jury finds that the CEO is not lazy or negligent? And if that exception is crafted, can you imagine the procedures and systems that CEO's would establish so that they would appear not to be lazy and negligent, particularly if they really were lazy and negligent? What webs Mr. Murray would have us weave!
Part of the cost of a free and productive economy is the risk of Enron-type failure. Misapplying criminal law neither will nor should deter such failures, and is much more likely to promote societal cynicism than responsible business practices. As Professor Ribstein notes in his post on Mr. Murray's column, "we have the tools within our current system. Responding to Ken Lay's irresponsibility with equivalent excesses in criminal prosecutions is not the answer."
This Wall Street Journal ($) article provides an excellent analysis of what Pitney Bowes -- the mailing service and equipment company -- learned regarding the question of why health costs keep rising relentlessly in America: A dysfunctional market creates few incentives for any of its participants to deliver efficient care. In fact, competition among insurers, health-care providers and producers of drugs and equipment often led to higher, rather than lower, prices.
Although the Bush Administration continues to ignore the problem, the struggle by American businesses to rein in health-care costs is nearing crisis levels. American employers still pay the majority of health-care costs for more than 130 million Americans and have borne the brunt of double-digit annual increases in benefit costs. Companies as large as General Motors Corp. reports that it spends "significantly" more on health care than steel, and recent data suggests that health care costs to employers could rise as much as 10% next year. Even a big company with an entire team dedicated to rooting out the source of rising health-care costs has little power to change these dynamics.
Pitney-Bowes has an internal team that aggressively pursues ways to contain ballooning health costs. But such a solution is easier wished for then achieved:
Last year, [the Pitney-Bowes team] scored a small victory. Employees who went to a hospital in 2003 stayed for an average of 3.7 days, unchanged from a year earlier. The overall number of admissions didn't rise, either.
So Pitney Bowes was startled to nonetheless discover that the average cost of each hospital visit jumped 9% to $10,600. The average cost per day jumped 17%. One of the biggest culprits? Increasingly powerful hospital groups in California, whose price increases pushed the company's average cost of a hospital admission in that state to $20,500, twice what it paid elsewhere.
By combing through claims data from its 46,000 U.S. employees and their dependents, Pitney Bowes can pinpoint some of the big contributors to the nation's surging health-care bill: Local hospital mergers; entrepreneurial doctors prescribing costly MRIs and CT-scans at their own private clinics; marketing for expensive drugs such as the heartburn medicine Nexium, which became Pitney Bowes's third-highest drug expenditure last year after an advertising blitz by maker AstraZeneca PLC.
Indeed, despite the Pitney-Bowes team's efforts, health care costs at the company continue to skyrocket:
. . . the total cost of claims Pitney Bowes paid directly -- covering about 80% of its employees -- rose 11.5%, more than it expected. About 20% of Pitney Bowes's employees are covered by health-maintenance organizations, for which the company pays a simple premium. That brings the average increase in prices for the entire company down to 7.5%. Pitney Bowes also managed to reduce its overall costs by increasing employee contributions and winning discounts on certain drugs and services.
The Pitney Bowes team . . . has helped moderate the expansion in Pitney Bowes's $135 million health-care budget. But despite its most vigilant efforts, Pitney Bowes's health-care costs continue to climb faster than the rate of inflation and faster than increases in most other business expenses.
Read the entire article because it provides an excellent overview of the economic pressures that will continue to drive health care prices higher in America's health care finance system that is predominated by private third party payors. As noted on this blog before, unless or until the payment of health costs are placed back in the hands of the consumer, these market anamolies that continually drive up costs and limit competition in certain sectors of health care administration will continue to proliferate. The failure of the Bush Adminstration and the Republican-controlled Congress to address this key issue in a meaningful fashion remains a glaring weakness that the Democrats can exploit in the upcoming Presidential election.
Deep divisions in the Texas Medical Center resulted from the decision of Baylor College of Medicine to terminate its 50 year relationship with the Methodist Hospital earlier this year. One by-product of the split is that Baylor and Methodist began to compete with each other for medical talent (earlier posts here) that previously served both institutions.
This Chronicle story reports on Dr. Michael Lieberman's resignation yesterday as chairman of Baylor's pathology department to become director of Methodist's new research instititue. This move follows the earlier resignation of Methodist's chief of surgery to remain with Baylor.
Dr. Lieberman is the first key defection from Baylor to Methodist in the battle between Methodist and Baylor to retain staff members. Before the Baylor-Methodist breakup, 19 of Methodist's division chiefs were Baylor department chairs; now that number is down to 17 and almost certain to reduce further.
Dr. Lieberman was one of the doctors who co-signed a letter to Baylor trustees in April opposing the breakup because it could cause "a crisis of major proportions" and predicting that many faculty would "undoubtedly" stay at Methodist.
Expect more defections between these two fine institutions as the dust settles after this unfortunate divorce in a long-standing Medical Center relationship.
July 12, 2004
The decisions are coming down fast and furious from the various Circuits Courts of Appeal in regard to the recent Supreme Court Blakely decision, which was noted in these earlier posts. Professor Berman over at Sentencing Law and Policy is keeping up with it all. Check out the developments.
And, as usual, Professor Ribstein is insightful regarding the meaning of these developments on the sad case of Jamie Olis, in particular, and on politically-motivated Congressional initiatives to increase criminal penalties on business criminals, in general.
This NY Times article reports on the recent chapter 11 bankruptcy filing of the Archdiocese of Portland, which is the first archdiocese in the nation to file for bankruptcy protection because of the large sums that it owes as a result of sexual-abuse claims.
The bankruptcy filing raises an interesting legal issue: For purposes of federal bankruptcy law, are the assets of a Roman Catholic parish assets of the diocese or of the individual parishes? If all parish assets are counted as assets of the diocese, then the diocese's assets would be valued at about half a billion, more than enough to pay the $25 million or so in pending sexual abuse claims. On the other hand, if the diocese's assets do not include those of the individual parishes, then the diocese's bankrupcy estate would be valued at a much more modest $50 million, which would make full payment of sexual abuse claims more problematic. The argument that the assets belong to parishes is based on church law that is much older than United States law. However, the only actual corporate entity is the diocese, which the bishop manages and represents.
University of San Diego Law Professor Thomas Smith -- who runs a very good blawg called The Right Coast -- observes that the diocese's bankruptcy filing is the result of the "political economy of child abuse:"
This all relates to what you might call the political economy of child abuse. A principal reason why the Catholic Church is singled out as a hotbed of child abuse, when there is no good reason to think priests abuse children any more frequently than Protestant pastors, Mormon bishops or Communist summer camp commisars, is that the organization of the Church makes it a much more desirable target for plaintiffs' lawyers. If each parish were a separate corporation, the course of this scandal would have run very differently. Mysteriously, shallow pockets are must less prone to the evils policed by lawyers.
My sense is that the bankruptcy courts will look for guidance from prior non-bankruptcy liquidations of parishes in addressing the legal issue that Professor Smith raises.
This LA Times article is the best analysis that I have seen to date regarding what occurred in the sad case of former mid-level Dynegy accountant Jamie Olis that resulted in the absurd 24 year sentence for Mr. Olis.
In November, 2003, a Houston jury found Mr. Olis guilty of helping cook the books at Dynegy, a Houston-based pipeline company that tracked Enron's course into online power trading before that entire industry went bust as a result of Enron's collapse. Mr. Olis was convicted of a battery of charges -- conspiracy, securities fraud, mail fraud and wire fraud -- related to an accounting scheme called Project Alpha, which attempted to mask $300 million of debt as revenue.
U.S. District Judge Sim Lake -- who is presently handling the criminal case against former Enron chief honchos Kenneth Lay, Jeffrey Skilling and Richard Causey -- handled Mr. Olis' sentencing. Under the sentencing guidelines, several factors -- including the skills required to perpetrate an accounting sleight-of-hand, the number of victims and a defendant's criminal history -- contribute to the length of a prison term for a white-collar criminal. However, the most significant factor in determining a sentence in a corporate fraud case is the monetary loss and -- as all business litigators know -- proving financial loss is far from an exact science.
Indeed, even the government expert on financial loss upon whom Judge Lake primarily relied acknowledges that he did not testify that Project Alpha caused the amount of monetary loss that Judge Lake used in sentencing Mr. Olis:
At Olis' sentencing, Lake put the loss at a minimum of $105 million. He based that finding on his view of losses suffered by the University of California, a major Dynegy shareholder and lead plaintiff in a class-action lawsuit against the company.
During the trial, Jeffrey Heil, a former university investment official, testified that the UC system had lost a little more than $100 million on its Dynegy investment.
But in a recent interview, Heil made clear that he was not sure the punishment meted out to Olis was fair, considering the much lighter sentences given to senior corporate officers who have cut plea agreements in other cases.
"This doesn't make a lot of sense," said Heil, who served as UC's co-head of investments until January 2003.
Yet Heil, who now works for the Doris Duke Charitable Foundation in New York, acknowledged in the interview that he couldn't place a dollar value on the UC losses tied specifically to Project Alpha.
It was not a number he was asked to single out at trial.
"To be truthful," he said, "I wouldn't have known the figure."
Notably, Heil never testified that Project Alpha cost the university system more than $100 million. Rather, he told the court that UC lost that amount during its overall period of owning Dynegy stock in 2001 and 2002, a time when the shares dropped for any number of reasons: the market-rocking Sept. 11, 2001, terrorist attacks; Enron's spectacular collapse, which dragged down the whole energy sector; Dynegy's ill-fated attempt to acquire Enron; and the California energy crisis, which raised fears of a broad regulatory clampdown.
Consistent with the Justice Department's current penchant for criminalizing business, the Olis prosecutors actually attempted to prove that public disclosure of Project Alpha caused a much greater loss:
The government urged Lake to figure investors' losses at more than $500 million -- and perhaps twice that amount -- based on the hit taken by all shareholders, not just the university. Prosecutors submitted a consultant study that considered the entire decline in Dynegy's market value and attempted to screen out factors unrelated to Project Alpha.
The defense countered that it was impossible to accurately separate the losses tied to the fraud, given the array of pressures bearing down on Dynegy.
In the end, Lake sought to simplify the matter by focusing on UC's investment alone.
Meanwhile, in the wake of the Supreme Court's recent Blakely decision, Houston-based criminal defense lawyer David Gerger has filed a motion asking for his client to be released pending appeal because, lacking the jury's endorsement of the $100-million-plus loss that the Blakely decision appears to require, Olis' sentence should be no longer than six months.
July 11, 2004
The Stros officially hit oblivion on Sunday afternoon as they they hacked away with futility at Jose Lima's change up and lost the third of their four game series with the Dodgers, 7-4.
Roy O started on three days rest and battled gamely, giving up 3 runs on 8 hits and 3 walks over 6 innings. But then Weathers gave up a grand salami to Lo Duca in the eighth and the Dodgers cruised to the win. The Stros got their usual six hits, with Beltran and Everett cranking two run yaks to account for the Stros four runs.
The Stros are 44-44 at the All-Star break, 11 games behind the Cards in the NL Central, and 4 1/2 games behind the Giants for the NL Wild Card spot. Since winning 10 of 12 games for a 21-11 record as of May 11, the Stros are an atrocious 23-33. That's a lousy two months, and the Stros' hitting statistics reflect it.
Lance Berkman 33
Craig Biggio 10
Jeff Bagwell 6
Mike Lamb 5
Carlos Beltran 4
Eric Bruntlett 1
Jeff Kent 1
Chris Burke -1
Jose Vizcaino -1
Jason Lane -3
Orlando Palmeiro -3
Raul Chavez -8
Richard Hidalgo -9
Morgan Ensberg -11
Adam Everett -17
Brad Ausmus -20
The Stros' team RCAA has now plummeted to -13. During their feeble West Coast swing, the Stros have fallen from 7th to 12th out of the 16 National League teams (only the Brewers, Rockies, DBacks, and Expos are worse).
Berkman continues to have a solid overall season, but he has fallen to ninth and eighth in RCAA and OPS (on base average + slugging percentage) respectively after challenging Bonds for first place earlier in the season. Berkman's RCAA now is the same as it was on May 30, so Berkman has been precisely an average player in the National League over the past month and a half.
But things get even worse. The Stros now have two players (Everett and Ausmus) among the worst ten hitters in the National League, and Ausmus is bearing down on Neifi Perez for the lead in that dubious category. Moreover, Ensberg -- who followed up last weekend's promising performance against the Rangers with a horrid West Coast trip -- is not far from breaking into the ten worst hitters in the NL. That means that four out of the Stros' nine hitters in most games (Everett, Ausmus, Ensberg, and the pitcher) are are producing far fewer runs than an average National League hitter would be generating.
And they aren't the only ones not performing. Bags has had a -4 RCAA and is 43rd in OPS among regular players in the National League, the lowest position for Bagwell in those categories in his career. Similarly, Kent a -3 RCAA since May 30 and beyond Bidg, Lamb, and Viz, no other Stro player has had a positive RCAA since May 30. Indeed, Beltran leads the Stros in RCAA since joining the club in June.
Remarkably, the Stros' pitchers' runs saved against average ("RSAA," explained here) is actually improving:
Roger Clemens 23
Brad Lidge 12
Wade Miller 11
Roy Oswalt 11
Octavio Dotel 5
Dan Miceli 4
Andy Pettitte 2
David Weathers 2
Kirk Bullinger 1
Mike Gallo 1
Pete Munro 0
Brandon Backe -2
Jeremy Griffiths -3
Ricky Stone -3
Jared Fernandez -6
Chad Harville -7
Brandon Duckworth -10
Tim Redding -14
The Stros team RSAA is fourth in the National League behind only the Cards, Mets, and Cubs. Clemens remains one of the best pitchers in the league, and Lidge and Roy O's RSAA are improving steadily. Miller remains a big loss for the club, and Harville, Duckworth and Redding are disasters, but perhaps Carlos Hernandez will be called up from AAA New Orleans and provide some spark to the bullpen during the second half of the season.
The Cards have emerged as the clear power in the NL Central over the past two weeks and should win the division easily if current trends hold. The Cubs remain a solid wild card contender and the Stros should eventually overtake the Reds and the Brewers for third in the division, although the Brew Crew is gaining on the Stros statistically and could maintain their position over a discouraged Stros ballclub. The Reds' lack of pitching should continue to grease their skid during the second half of the season.
The bottom line: The Stros pitching is good enough to contend for a wild card spot. However, unless Bags, Kent, and Ensberg heat up considerably, the Stros' lack of hitting will prevent them from contending for a playoff spot. Inasmuch as Bags and Kent are in age-related declines, and Ensberg still is not a proven big league hitter, my bet is that the Stros' hitting will not improve enough in the second half of the season to contend for the wild card spot.
This Houston Chronicle article reports on a survey that defense attorneys commissioned in connection with one of the upcoming Enron-related criminal trials. The survey concludes that over 80% of potential jurors in Houston believe that believe that the indicted Enron executives are guilty.
The survey claims 81.4% of potential jurors said they thought the former Enron executives accused of misleading the public and profiting off the sale of their own Enron stock were guilty, 7.8% said they were not guilty, and 8.7% said they did not know. The survey also polled potential jurors in Austin, Corpus Christi and Albuquerque, N.M., and the percentages of those who said the Enron executives were guilty in those cities were 71.9%, 67.9% and 71.1%, respectively.
In discussing the change of venue issue with one of the defense attorneys for a prominent former Enron executive, I asked him where he would prefer to try the case. His reply:
"How about Rio?"
July 10, 2004
Victor Davis Hanson's latest NRO piece addresses that portion of American society that belittles President Bush and the administration's policy toward Iraq and the Middle East without providing any meaningful alternative other than the continuation of the disastrous policies that culminated in the 9/11 attacks. The entire article is well worth reading, and the following will give you a taste for it:
Do the trivialists want Saddam and the Taliban back in power? Does a Mr. Allawi repulse them? Do they wish 10,000 American troops back in Saudi Arabia? Perhaps they want Libya to resume its work on nukes? Do they care whether Dr. Khan returns to his lab? Or do they think it is child's play to hike back through the Dark Ages into the Pakistani borderlands looking for bin Laden? And is it all that easy to have prevented another 9/11 attack for almost three years now of constant vigilance? Perhaps they would like to deal with the corrupt, duplicitous, and tottering Saudi Royal family, which just happens to sit on 25 percent of the world's oil reserves ? without whose daily production the economies of Japan, Korea, and China would almost immediately grind to a halt.
Only belatedly has John Kerry grasped that his shrill supporters are often not just trivial but stark-raving mad. If he doesn't quickly jump into some Levis, shoot off a shotgun, and start hanging out in Ohio, he will lose this election and do so badly.
The war that Mr. Kerry and Mr. Edwards once caricatured as a fiasco and amoral is now, for all its tragedies, emerging in some sort of historical perspective as a long-overdue liberation.
. . . For over a year now, we have witnessed a level of invective not seen since the summer of 1964 ? much of it the result of a dying 60's generation's last gasps of lost self-importance. Instead of the "innocent" Rosenbergs and "framed" Alger Hiss we now get the whisk-the-bin-Laden-family-out-of-the-country conspiracy. Michael Moore is a poor substitute for the upfront buffoonery of Abbie Hoffman.
. . . It was politically unwise and idealistic ? not smart and cynical ? for Mr. Bush to gamble his presidency on getting rid of fascists in Iraq. There really was a tie between al Qaeda and Saddam Hussein ? just as Mr. Gore and Mr. Clinton once believed and Mr. Putin and Mr. Allawi now remind us. The United States really did plan to put Iraqi oil under Iraqi democratic supervision for the first time in the country's history. And it did.
This war ? like all wars ? is a terrible thing; but far, far worse are the mass murder of 3,000 innocents and the explosion of a city block in Manhattan, a ghoulish Islamic fascism and unfettered global terrorism, and 30 years of unchecked Baathist mass murder. So for myself, I prefer to be on the side of people like the Kurds, Elie Wiesel, Hamid Karzai, and Iyad Allawi rather than the idiotocrats like Jacques Chirac, Ralph (the Israelis are "puppeteers") Nader, Michael Moore, and Billy Crystal.
Sometimes life's choices really are that simple.
The Stros wasted another strong pitching performance from the Rocket as the Dodgers used a three run yak from Paul Lo Duca to fuel a 3-1 victory before another crowd of over 45,000 at Dodger Stadium Saturday afternoon.
Clemens was magnificent, as he gave up only 4 hits and 3 runs over seven innings while fanning 8 and walking 2. However, the Stros other than Berkman had one hit (a Jeff Kent single) as they made journeyman Dodger starter Wilson Alvarez look like Fernando Valenzuela in his prime. Typical of the Stros' hitting this season, they loaded the bases with one out in the seventh, but were only able to score the one run (on Mike Lamb's sac fly). "That was the ol' ball game."
In an interesting matchup tomorrow afternoon, ex-Stro fan favorite Jose Lima pitches for the Dodgers against the Stros' Roy O, who will be pitching on only three days' rest with the All-Star Game break coming up. Inasmuch as the playoff propects for the Stros now appear to be remote at best, these types of matchups are the only games that we will be able to look forward to for the remainder of this season.
Highly-regarded Circuit Judges Richard Posner and Frank Easterbrook of the Seventh Circuit Court of Appeals wrote the majority and dissenting opinions in this recent decision (U.S. v. Booker) interpreting the U.S. Supreme Court's recent decision in U.S. v. Blakely.
In Blakely, the Supreme Court held that judges cannot increase a defendant's sentence under the state of Washington's sentencing guidelines based on facts and behavior that were not presented to a jury. Some sentencing guideline specialists believe that Blakely could affect the guidelines under the federal system.
In the Seventh Circuit decision, Judge Posner leans toward the position that the entire federal sentencing scheme is history because Blakely eviscerates the sentencing enhancements under the scheme. Judge Easterbrook is more cautious in interpreting the effect of Blakely. Hat tip to Southern Appeal for the link to this decision on a legal issue that is affecting many white collar criminal prosecutions, such as the sad case of Jamie Olis.
By the way, a relatively new blawg -- Sentencing Law and Policy by Professor Douglas A. Berman of the Ohio State University Law School -- is providing excellent commentary and insight on Blakely, Booker and other decisions that are affecting this important area of the law, particularly given the sledgehammer approach that the Justice Department is increasingly taking in white collar criminal prosecutions.
My wife, one of my daughters and I went to Friday night's show, and it was outstanding. The tour that opened this past Tuesday at the Hobby Center is a generally faithful re-creation of the Royal National Theatre's acclaimed 1998 London revival, seen on Broadway in 2002. This excellent revival is a great afternoon or evening of entertainment, and if you want to combine a fine meal with the play, make a reservation at the Hobby Center's Artista, which is one Houston's finest new restaurants.
Oklahoma! is at 8 p.m. on Tuesdays-Fridays; 2 and 8 p.m. on Saturdays; and 2 and 7:30 p.m. on Sundays through July 18. Tickets range from $23-$64 and can be obtained either online or through the Hobby Center ticket office at 713-629-3700.
On the heels of his indictment and earlier extraordinary NY Times interview, the Houston Chronicle reporter Mary Flood interviewed former Enron Chairman and CEO Ken Lay on Friday on a wide range of topics relating to the indictment, his initial court appearance, and his post-Enron life.
On the indictment, Lay made the following observations:
He said he didn't lie to Arthur Andersen accountants in an October 2001 meeting about how big a financial writedown hit the company might have to take for overpaying for a water company. He said the accountants gave him the numbers and told him what was going on.
Lay said he can't be accused of misrepresenting the health of Enron's retail business because he thought it was fine. He said there were legitimate business reasons for taking a wildly unprofitable section of the retail business and merging it into the profitable wholesale section, and it wasn't meant to hide losses.
And he said he did not feel he deceived employees when he told them to buy Enron stock in September 2001 and said he'd recently purchased some himself, while never saying he'd sold six times as much stock as he'd bought.
"I don't suppose I even thought about it," Lay said of mentioning the $24 million in cash he'd taken out of the company in trade for Enron stock, but telling employees about the $4 million in stock he bought. "I don't think it's deceptive ... but the (government) tries to spin sinister thoughts and motives around things," he said.
And how did Mr. Lay pass the time in the holding cell between arriving at the federal courthouse on Thursday and his initial court appearance?:
. . .Lay started chatting with a couple of other men in his holding cell.
The two, in green prison garb and leg irons, were charged in the smuggling ring deaths of 19 undocumented workers in Victoria.
"One young man said: `I think I saw you on TV last night,' " recalled Lay, who had surrendered that day and was awaiting a court hearing so he could be freed on bond.
So for the next three hours, the former CEO and two alleged human smugglers talked. Defendants from other holding cells soon chimed in.
"A couple even asked me for investment advice," Lay said with a laugh.
His response: "Well, I've not really thought much about that recently," said Lay, who lost hundreds of millions of dollars after Enron's collapse.
As noted before, Mr. Lay's campaign to defend himself publicly is highly unusual in a criminal case of this nature. However, the public perception of anybody associated with Enron is so negative that Mr. Lay and his attorneys have apparently concluded that Mr. Lay has little to lose by attempting to persuade at least one potential juror that his management failures at Enron were not criminal in nature. All attorneys representing Enron-related defendants will be watching the upcoming trial in the Nigerian Barge criminal case closely to evaluate whether it is possible for a defendant tainted with the Enron association to receive a fair trial in this highly anti-Enron environment.
Meanwhile, The Economist -- which has been providing some of the most insightful coverage of the Enron affair -- notes that Mr. Lay's defense theory of being an avuncular grandfather who was betrayed by underlings may be hard to prove:
In truth, though, Mr Lay was never the simpleton he now makes himself out to have been. Four years ago, in an interview with The Economist, he revealed an aggressive and somewhat dark management streak. In reply to a question about Enron?s perceived arrogance and disdain for the law, he pointed to what he considered another great firm unfairly maligned by ignorant critics as arrogant: Drexel Burnham Lambert, an investment bank that?like Enron?rose quickly from obscurity to market dominance during the junk-bond boom of the 1980s, only to implode amid charges of wrongdoing. Mr Lay gushed about the brilliance of Michael Milken, Drexel?s star trader, who ended up in jail. Mr Milken (a ?dear friend?) was accused of being arrogant, he said, but was just being ?very innovative and very aggressive?. Prosecutors will no doubt argue that the fraud at Enron was a direct result of Mr Lay?s push to make the company just as ?innovative? and ?aggressive? as the defunct Drexel.
Brad Lidge induced Shawn Green to hit into a nifty game-ending 3-6-1 double play with the bases loaded in the bottom of the ninth to spur the Stros to a 3-2 over the Dodgers on Friday night before almost 53,000 at Dodger Stadium in L.A.
Andy Pettitte rebounded from last Sunday's awful outing against the Rangers and allowed just two runs on four hits, striking out four with no walks over seven innings. Lidge pitched the last two innings, and really had an adventure in the ninth as he almost walked in the tying run.
The long dormant Stros' bats generated only seven hits, including Carlos Beltran's solo yak. Light hitting Viz drove in the winning run in the eighth after Palmeiro blooped a pinch double and Bidg sacrificed him to third. Both Beltran and Viz left the game with bruise injuries, but neither appeared to be serious.
By the way, inasmuch as Viz has had a good week of hitting, his slugging percentage is now approaching that of Bags, a clear sign that Bags' decline this season is not a temporary slump. We are seeing the inevitable decline of a Hall of Fame quality player. I am now just hopeful that Bags and the Stros can work out an arrangement that will allow Bags to retire with dignity and not sully his Hall of Fame quality career.
The Rocket takes the hill for the Stros on Saturday afternoon against the Dodgers' Wilson Alvarez (2-3, 3.77) as the Stros struggle to stay in the playoff hunt. The Stros enter Saturday's game 9.5 games behind the Cards in the NL Central race, but only 2.5 games behind the second place Cubbies.
July 9, 2004
I have lived in Texas for 32 years, but I was born and raised through high school in the wonderful midwestern university community of Iowa City, Iowa. This NY Times Travel section article reports on Iowa City, and even includes a mention of the Kirkendall Family's old house, 430 Brown Street (now a bed & breakfast). For a student's tour of Iowa City, be sure to check out my nephew Richard's picture tour here.
Check out Professor Ribstein's insightful observations regarding Hollywood's molding of public perceptions toward trial lawyers and businessmen.
This NY Times Book Review reports on the controversial new book, Imperial Hubris by a current Central Intelligence Agency officer who was able to publish the book on the condition that his real name not be revealed. This is the second book by "Anonymous" (his first was Through Our Enemies' Eyes: Osama Bin Laden, Radical Islam and the Future of America) and his latest book is certain to generate controversy among both hardliners on Iraq and critics of the administration's policy.
As Gerald Posner noted in his earlier Why America Slept : The Failure to Prevent 9/11, Imperial Hubris excoriates America's political, military and intelligence establishment (going back to the mid-70's, with the qualified exception of President Reagan and his C.I.A. director, William J. Casey). Moreover, the book also calls for a complete re-evaluation of the nation's foreign policy toward Muslims and the Middle East:
If the country's foreign policy remains status quo, Anonymous warns, "America's military confrontation with Islam" will broaden "with escalating human and economic expense." He predicts that Al Qaeda "will attack the continental United States again, that its next strike will be more damaging than that of 11 September 2001, and could include use of weapons of mass destruction."
In addition, Anonymous accuses United States leaders, elites and media of being in denial about the nature of the Qaeda threat and the balance sheet on the war on terror: he argues that America must stop using the terrorist paradigm for Al Qaeda and accept "the fact" that the group is "leading a popular, worldwide, and increasingly powerful Islamic insurgency," and he asserts that United States victories against Al Qaeda have thus far been tactical ones that have failed to slow "the shift in strategic advantage toward al Qaeda."
And even though he advocates a harsher approach to fighting radical Islamic fascists, Anonymous is not a supporter of the Bush Administration's decision to invade Iraq:
[Anonymous] sees the American invasion of Iraq as "an avaricious, premeditated, unprovoked war against a foe who posed no immediate threat but whose defeat did offer economic advantages." For Osama bin Laden, Anonymous argues, the American invasion and occupation of Iraq were like "a Christmas present you long for but never expected to receive" ? a gift from Washington that "will haunt, hurt, and hound Americans for years to come." He sees Iraq becoming another breeding ground for Al Qaeda, and the postwar insurgencies in Iraq and Afghanistan as magnets for anti-American fighters.
"U.S. forces and policies are completing the radicalization of the Islamic world, something Osama bin Laden has been trying to do with substantial but incomplete success since the early 1990's," he writes. "As a result, I think it fair to conclude that the United States of America remains bin Laden's only indispensable ally."
Anonymous even disputes the Bush Administration's assessment of Al Qaeda's goals for its war against the United States:
Anonymous contests the argument put out by members of the Bush administration that Mr. bin Laden wants to destroy America because he hates our values, freedoms and ideas. In Anonymous's view, the Qaeda leader hates us "because of our policies and actions in the Muslim world" and Al Qaeda's attacks are meant to advance a set of clear, focused and limited foreign policy goals: namely, an end to American aid to Israel: the removal of American forces from the Arabian Peninsula; an end to the American occupation of Afghanistan and Iraq; an end to American support for repressive, apostate Muslim regimes like Saudi Arabia; an end to Amerian support for Russia, India and China against their Muslim militants; and an end to American pressure on Arab energy producers to keep oil prices low.
But make no mistake about it, Anonymous definitely does not propose dealing with Al Qaeda with kid gloves:
If current American policies toward the Muslim world are not changed, Anonymous writes near the end of this harrowing and often deliberately provocative volume, America will be left with only a military option for defending itself ? an option he says that should be used not "daintily," as it has been in recent years, but with the sort of bloody-minded ferocity used "in France and on Pacific islands, and from skies over Tokyo and Dresden" during World War II.
The Stros' listless offense once again doomed the club to a loss as the Dodgers crusied to victory in the first game of their four game pre-All-Star game series on Thursday night, 7-2.
After their relative offensive explosion of scoring five runs on Wednesday, the Stros were back to their normal performance levels on Thursday with a total of five hits. The only extra base hit was Bidg's 13th yak in the third. The Stros' overall display of offensive incompetence was punctuated by the eighth inning when the Dodgers' Darren Dreifort walked the bases loaded with one out and Berkman coming to bat. Berkman promptly imitated Ausmus and grounded into a DP.
Brandon Duckworth started the game for the Stros after a month-long demotion to AAA New Orleans and served up his usual dose of mediocrity, allowing three runs and seven hits in 3 2/3 innings. Although he did not give up a yak, Duckworth has now given up 16 earned runs and 24 hits over 16 innings in five starts this season. Given Duckworth's dismal performance this season, it is yet another example of the Stros' futility that they keep trotting him out there to pitch this season.
July 8, 2004
It looked like a video campsite outside the Federal Courthouse in Houston on Thursday as the media gathered to observe the spectacle of former Enron Chairman and CEO Kenneth Lay being led into the courthouse in handcuffs. Mr. Lay pled not guilty to an 11 count indictment that was included in a superceding indictment against Mr. Lay's co-defendants, former Enron CEO Jeffrey Skilling and former Enron chief accountant, Richard Causey. The case is pending before U.S. District Judge Sim Lake, an able and fair judge who oversaw the sad case of Jamie Olis earlier this year.
In an unusual response in case that seems to generate unconventional moves, Mr. Lay conducted a press conference soon after his initial court appearance in which he asserted that he was not responsible for the company's accounting problems and that former Enron CFO Andrew Fastow was to blame for most of Enron's problems. During the press conference, Mr. Lay acknowledged that there had been wrongdoing at Enron, but claimed he did not know about it and that Mr. Fastow had betrayed his position of trust at Enron.
Defendants in high-profile criminal cases usually do not make public comments on their case out of fear that the statements could provide new ammunition to prosecutors. But Mr. Lay's attorneys almost certainly feel that the public climate related to anything having to do with Enron is so polluted that they have little to lose by attempting to have Mr. Lay proclaim his side of the story publicly, just as he did in this earlier extraordinary interview in the NY Times.
The indictment alleges that Mr. Lay played a criminally culpable but surprisingly limited role in a massive conspiracy to deceive and defraud investors of Enron. The 11 criminal counts accuse Mr. Lay of helping to manipulate Enron's financial statements and giving a false picture of the company's financial health in the months before it filed its chapter 11 case in early December 2001.
One of the most interesting aspects of the indictment is that it acknowledges that Mr. Lay was not the most important player in the alleged criminal enterprise. The indictment paints Mr. Lay more as a protector of the alleged manipulative scheme by keeping it secret from the public. Indeed, all of the misdeeds attributed to Mr. Lay occurred after Mr. Skilling's August, 2001 departure.
The indictment alleges that, until his resignation, Mr. Skilling "spearheaded" the alleged scheme and only afterward did Mr. Lay take "over leadership of the conspiracy." The indictment against Mr. Lay focuses on the period after Mr. Skilling's resignation, which was the period in which elaborate financial structures used to mask Enron's true debt load became unstable and began straining the company financially.
The indictment describes several times in which Mr. Lay represented to equities analysts, credit-rating agencies and employees that the company was financially sound when, the indictment alleges, Mr. Lay knew that the company was not. The indictment alleges that Mr. Lay was being apprised on a daily basis by other Enron managers regarding the company's financial condition, and that Mr. Lay helped devise strategies for attempting to hide even larger losses than those reported in the third quarter of 2001.
According to the indictment, a crucial period involving Mr. Lay began with a September 26, 2001 online forum he had with Enron employees. In that forum, Mr. Lay informed employees the "third quarter is looking great" even though he knew that the company would soon be reporting a giant loss for the period because of a write-down of assets, that Enron's balance sheet contained billions of dollars of "embedded losses" and "overvalued investments," and that the company "had been exploring such drastic solutions to Enron's financial problems as a merger with another company (what turned out to be the ill-fated Dynegy merger). The indictment contended that Mr. Lay followed up this conference with a series of similarly misleading presentations to securities analysts and others in October and November, 2001.
The indictment includes a number of sentencing allegations that address last month's U.S. Supreme Court ruling in the Blakely case that is being construed as limiting federal judges' ability to boost convicts' sentences beyond the lower end of the Federal Sentencing Guidelines range. Among these allegations are that the losses related to Enron exceeded $100 million and involved more than 50 victims, levels that put a white-collar offender at the top of the federal fraud guidelines range for sentencing purposes. Consequently, if convicted on all counts, Mr. Lay could face what amounts to a life sentence in prison and millions of dollars in financial penalties.
After Mr. Lay's initial appearance, veteran Houston criminal defense lawyer Mike Ramsey stated that he would file a motion to sever Mr. Lay's case from that of Messrs. Skilling and Causey and hoped to be in trial by September of this year, which is highly unlikely in a case of this magnitude. Mr. Ramsey acknowledged that Enron had problems when Mr. Lay retook control in August 2001, but observed that all major corporations have problems and that Mr. Lay strongly believed that, despite the problems, Enron was doing well overall and had a bright future.
In a related action, the Securities and Exchange Commission piled on Mr. Lay by filing civil charges of fraud and insider trading against him in Houston federal court. Those civil charges allege that Mr. Lay lied to investors about Enron's financial health and falsely inflated the company's share price so he could profit from a series of stock transactions. Unlike the criminal cases against Messrs. Skilling and Causey, Mr. Lay was not criminally charged with insider trading of Enron stock, but the SEC's civil action included such a charge.
Meanwhile, other than the criminal prosecution that put Arthur Andersen out of business, the Enron Task Force still has not prosecuted a single trial of a former Enron executive, primarily because the Task Force's sledgehammer approach to indicting executives has elicited guilty pleas from the executives charged to date in order to take advantage of prison sentences that are a fraction of the length that the executives would face if they took their cases to trial.
The first trial of a former Enron executive is currently scheduled to begin in mid-August in the so-called "Nigerian Barge case" before U.S. District Judge Ewing Werlein. Under normal circumstances, that case would not be a strong case for the prosecution. However, normal circumstances simply do not exist in regard to Enron, so all parties and counsel involved in the Enron-related cases will be watching that case closely to determine whether it is possible for an Enron defendant to receive a fair trial in today's negatively charged atmosphere for anything related to Enron.
Bill Clinton's autobiography may be hot, and the Harry Potter series continues to set records, but this National Endowment for the Arts survey indicates that such books are becoming an aberration. The study describes a precipitous downward trend in Americans' book consumption and a particular decline in the reading of fiction, poetry and drama.
Among its findings are that fewer than half of Americans over 18 now read novels, short stories, plays or poetry; that the consumer pool for books of all kinds has diminished; and that the pace at which the nation is losing readers is accelerating; and that the downward trend is occurring in virtually all demographic areas.
The survey also makes an interesting correlation between readers of literature and those who are socially engaged, noting that readers are far more likely than nonreaders to do volunteer and charity work and go to art museums, performing arts events and ballgames. Of literary readers, 43 percent perform charity work while only 17 percent of nonreaders do.
The Census Bureau study upon which the survey was based measured the number of adult Americans who attended live performances of theater, music, dance and other arts; visited museums; watched broadcasts of arts programs; or read literature in the past year. The survey sample ? 17,135 people ? is one of the largest studies ever conducted on the subject of arts participation, and the data was compared with similar studies from 1982 and 1992.
In the literature segment of the study, respondents were asked whether they had, during the previous 12 months, without the impetus of a school or work assignment, read any novels, short stories, poems or plays in their leisure time. Their answers show that just over half ? 56.6 percent ? read a book of any kind in the previous year, down from 60.9 percent a decade earlier. Readers of literature fell even more dramatically, to 46.7 percent of the adult population, down from 54 percent in 1992 and 56.9 percent in 1982. Although the number of readers of literature is about the same now as it was in 1982 ? about 96 million people ? the American population has increased by almost 40 million.
Last month the Association of American Publishers released worldwide sales figures for 2003, indicating that total sales of consumer book products increased 6 percent for the year. Much of the increase can be accounted for by sales of audio books, juvenile titles and nonpaper e-books that are sold online. Adult hardbound books, adult paperbacks and mass-market paperbacks all showed relatively flat revenues in spite of price increases. Interestingly, the one category of book to rise markedly was that of religious texts, with total sales of $337.9 million, 36.8 percent over the previous year.
In what can only be described as bizarre governmental intervention, this Wall Street Journal ($) article describes a politically-motivated Federal Trade Commission investigation that has been launched into the planned closing of an unprofitable Royal Dutch/Shell Group refinery in California and the FTC's reinstatement of an antitrust complaint against Unocal Corp.
Shell announced plans last year to close its Bakersfield, California refinery Oct. 1 because a nearby oil field will run out of crude in coming decades and because the refinery is too expensive to repair and profitably operate. Given that relatively few refineries in the United States produce the type of environmentally-favored gasoline that California requires, the closure will likely crimp gasoline supply further in the West, where supplies are already tight and prices the highest in the nation. The small refinery handles 70,000 barrels of oil a day, providing 20,000 barrels of gasoline that amounts to 2 percent of California's needs. It provides a larger percentage of diesel fuel, 15,000 barrels a day, which is the equivalent of 6 percent.
Shell lost more than $50 million over the past three years on the Bakersfield refinery and is facing between $30 million and $50 million in turnaround and environmental costs on the facility, which is old (the original portion of the facility was built in 1932).
So, let's see here. Rather than encouraging companies to invest and build new refineries that would address the economic problem of tight supplies in the Western part of the United States, our federal government is taking expensive legal actions against one of the relatively few companies in the refining business to minimize its losses in the business. My sense is that forcing companies to operate refineries at a loss is not a sound policy for addressing the problem of tight gasoline supplies in the West.
Separately, the FTC overruled an administrative-law judge and reinstated an antitrust complaint against Unocal for pursuing patents for a special low-emissions gasoline at the same time that the company was helping California regulators mandate that gasoline as a state standard. The complaint originally was filed in March 2003, but was overruled by the judge in November.
Roy O had his game face on and Jose Vizcaino did his best imitation of Lance Berkman as the Stros salvaged the final game of their series against the Padres, 5-1.
Oswalt was steady and unyielding, giving up six hits, three walks and a run in seven and a third quickly paced innings. After he uncharacteristically walked two straight with one out in the eighth, Jimy Williams pulled Oswalt in favor of Brad Lidge who secured the win by fanning four of the six batters he faced.
Viz had a two run yak in the first and three more hits (including two doubles) later in the game, which is an anecdotal performance that has the bad side effect of prompting Williams to overplay the normally light-hitting Viz (.319 OBP and .345 SLG. in 15 MLB seasons) for the forseeable future. The Stros had twelve hits -- a veritable offensive explosion for them -- but left 14 runners on base and failed to score after loading the bases in the first, second, and sixth.
The sixth inning situation was particularly egregious as the Stros loaded the sacks with no outs, and then Bags and Lamb whiffed, and Everett popped out weakly to second.
It is becoming increasingly difficult to watch Bags struggle at the plate. He has had a Hall of Fame quality career, but is now a tremendous burden to the Stros -- a singles hitting first baseman who whiffs often and is owed an incredible $39 million over the next three seasons (at least Bags has an All-Star quality agent). Bags' contract is the last big one the Stros have stemming from the overheated players' market from several years ago, and it is my sense that the Stros simply need to bite the bullet and arrange the best deal possible either to pay a large portion of Bags' contract in connection with a trade or simply buy out Bags' contract. The Stros will lose between $10-13 million over each of the next three seasons on any such deal, but the first loss is always the best loss in this type of situation.
Bags is still the fifth most productive hitter on the team (behind Berkman, Beltran, Bidg, and Lamb), but he is now a relatively unproductive first basemen (currently ninth in hitting among first basemen in the National League) and it is much more likely that his decline will continue (his hitting statistics have been declining for over five straight seasons now) than turn around. Moreover, his continued presence prevents the Stros from retooling their club, including the move of Berkman to first, trying to ink Beltran to a deal, and playing younger players such as Jason Lane in the OF spot that opens by moving Berkman to 1B. Finally, by moving or releasing Bags, perhaps that would have the fringe benefit of prompting the Stros to release Bags' buddy Brad Ausmus (-18 RCAA, explained here), who is now competing neck and neck with Neifi Perez in the race to become the most unproductive hitter among regular National League ballplayers this season.
The Stros now bus up the West Coast to Dodger Stadium for a four game weekend series with the Dodgers leading up to the All-Star break. The Stros' starting pitching for the series is a bit up in the air, as the Stros recalled Brandon "Launching Pad" Duckworth (he has given up an incredible 10 yaks in only 25 innings this season) from AAA New Orleans to start one of the games. Andy Pettitte will start the Friday night game.
July 7, 2004
A Houston federal grand jury has charged former Enron Chairman and CEO Kenneth Lay with an unknown number of crimes today under a sealed indictment. The indictment will be unsealed in a hearing tomorrow morning, at which time Mr. Lay is expected to make his initial appearance in the criminal case. At the same time, the Securities and Exchange Commission is expected to charge Mr. Lay with an assortment of civil securities fraud charges.
Mr. Lay served as Enron's chief executive for 15 years and was running the company when it collapsed into bankruptcy in December 2001. The indictment is expected to charge Mr. Lay for his alleged role in a broad scheme to manipulate Enron's financial statements, similar to the charges that are pending against former Enron CEO and COO, Jeffrey Skilling and former chief Enron accountant, Richard Causey. Assuming that the indictment is as broad as the one against Messrs. Skilling and Causey, Mr. Lay will be facing what amounts to a life sentence in prison.
Meanwhile, this NY Times piece provides a good overview of the going concern liquidation of Enron's assets that has been taking place in the company's chapter 11 case.
Inquiry finds that chief Medicare actuary threatened over disclosure of true cost of prescription drug plan
This NY Times article reports on the finding of an internal Department of Health and Human Services investigation that Thomas A. Scully, the former top Medicare administrator, threatened to fire Richard S. Foster, the program's chief actuary, if Mr. Foster told Congress the true probable cost of the drug benefits to be provided under the Bush Administration's Medicare prescription drug benefit legislation passed last year. Here is an earlier post on this flap.
Interestingly, the report concluded that neither the threat nor the withholding of information violated any criminal law. The report accepted the Justice Department's view that Mr. Scully had the final authority to determine the flow of information to Congress and that the actuary had no independent authority to disclose information to Congress. Mr. Scully, who resigned in December, 2003, denied threatening Mr. Foster but acknowledged having told him to withhold the information from Congress.
The punchless Stros continued their quest to become an afterthought in the race for a playoff spot as they lost their second straight game to the Padres at Petco Park on Tuesday night, 5-3. The hapless Stros are now 42-41 on the season and nine games behind the Cards in the NL Central.
This game was fairly typical for this Stros team as they cranked out their usual 8 total bases, 4 of which came on Ausmus' solo yak in the fifth. With that crank, Ausmus finally achieved double figures in extra base hits this season -- it took him "only" 67 games to do so. Alas, he still has hit into more double plays than extra base hits. Bags -- the highest paid singles hitters in baseball -- had a 2 run single, which completed the Stros' offensive outburst. Starting pitcher Pete Munro was equally mediocre, giving up four runs and seven hits in four innings.
Roy O at least gives the Stros a chance on Wednesday night against the Pads' Jake Peavy, who has one of the best ERA's in the league. Just what the Stros' hitters need at this point. After this game, the Stros travel to L.A. to face the Dodgers over the weekend in a four game set.
July 6, 2004
Guy S. Parcel, Ph.D has been appointed to a three-year term as dean of The University of Texas School of Public Health at Houston in the Texas Medical Center.
Dr. Parcel, who is currently executive dean, will take over the deanship when Dr. R. Palmer Beasley retires in December. Beasley has served as UT School of Public Health dean for more than 17 years and is now completing a two-year term as chairman of the Association of Schools of Public Health. The appointment makes Parcel only the third dean in the 35-year history of what is the oldest school of public health in Texas. Dr. Parcel, a John P. McGovern Professor in Health Promotion at UT School of Public Health, was appointed executive dean in February 2003 and had previously served as acting dean of the school on several occasions.
The UT School of Public Health is ranked as the fifth-largest in student enrollment and seventh in research funding. About 50 percent of the school's more than 3,000 graduates work in Texas.
Molly D. Castelazo is a research associate and Thomas A. Garrett is a senior economist at the Federal Reserve Bank of St. Louis. They authored this article that analyzes the bad economics of the St. Louis light rail system and includes a devastating chart reflecting how it would have been much more economically prudent to buy a new Toyota Prius for all the light rail riders than to build and maintain the light rail system. The entire article is well worth reading, particularly for Houstonians who have funded a similar boondoggle, and the authors make the following concluding observation:
If light rail is not cost-efficient, nor an effective way to reduce pollution and traffic congestion, nor the least costly means of providing transportation to the poor, why do voters continue to approve new taxes for the construction and expansion of light-rail systems?
One economic reason is that the benefits of light rail are highly concentrated, while the costs are widely dispersed. The direct benefits of a light-rail project can be quite large for a relatively small group of people, such as elected officials, environmental groups, labor organizations, engineering and architectural firms, developers and regional businesses, which often campaign vigorously for the passage of light-rail funding. These groups would benefit from light rail, not from the subsidization of cars and money to all potential riders of light rail.
The costs of light rail, while large in aggregate, are often small when spread over the tax-paying population. (The cost of light rail in St. Louis totals about $6 per taxpayer annually). A large group of taxpayers facing relatively minimal costs can be persuaded to vote for light rail based on benefits shaped by the interested minority, such as helping the poor, reducing congestion and pollution, and fostering development. Even if these benefits are exaggerated and the taxpayer realizes the cost-ineffectiveness of light rail, it is probably not worth the $6 for that person to spend significant time lobbying against light rail.
Proponents of light rail argue that it will create jobs, foster economic development and boost property values. While there is some academic evidence of these benefits, it is important to realize that they are not free to society?light rail is kept afloat by taxpayer-funded subsidies that amount to hundreds of millions of dollars each year.
Concentrated benefits and dispersed costs are one economic reason for the existence of inefficient public projects. The many who stand to lose will lose only a little, whereas the few who stand to gain will gain a lot. Of course, if other public projects exist where overall costs outweigh benefits, then $6 a year per project could add up to quite a hefty boondoggler?s bill.
Dr. Barton Smith, University of Houston professor of economics and director of the UH Institute for Regional Forecasting, is the leading expert on the regional economics of the Houston metropolitan area and has prepared a similar analysis regarding the Houston Metro light rail system.
Alas, I do not expect the Houston Chronicle to address this issue anytime soon. Hat tip to Professor Gordon for the link to this study.
This NY Times article reports on Repsol, YPF's (Spain's largest oil comany) hiring of a Norwegian drilling platform at a cost around $200,000 a day to search for oil in a narrow sector of the Gulf of Mexico off the northwestern coast of Cuba. The venture, which was established with the Cuban government-owned oil company Cubapetróleo, is being watched closely in Houston's oil and gas community.
If Repsol is successful in making a major find, that would be a boon for Cuba, which imports most of its fuel from Venezuela and struggles economically. It would also shake up the dynamics of oil and gas production in the Gulf of Mexico, which has been dominated for decades by United States companies.
If there is a big oil find in Cuban waters, then that will also be an interesting test of the Bush Administration's Cuba policy, which has been to maintain and even strengthen sanctions in hopes of isolating and weakening the Communist country's economy. However, such sanctions might be rethought if Mr. Bush's supporters in the oil and gas industry are faced with the prospect of sitting on the sidelines while foreign companies develop good oil and gas prospects in Cuban waters.
Stay tuned on this one.
This Wall Street Journal ($) article reports on how the consumer credit industry is generating huge profits by charging exorbitant interest rates and penalties on credit cards that the industry provides to the riskiest consumer borrowers:
For consumers who pay off their credit-card balances each month, shop aggressively for interest rates as low as 0%, and take advantage of generous credit-card rewards programs, consumer credit has never been cheaper. But for others . . ., the trend is in the other direction.
Card users, consumer advocates and some industry experts complain that banks are attempting to squeeze more and more revenue from consumers struggling to make ends meet. Instead of cutting these people off as bad credit risks, banks are letting them spend -- and then hitting them with larger and larger penalties for running up their credit, going over their credit limits, paying late and getting cash advances from their credit cards. The fees are also piling up for bounced checks and overdrawn accounts.
Many folks are surprised to learn that bad check fees are a lucrative profit center for many banks. Similarly, banks make a nice return on late payment fees to their consumer credit card holders:
. . . credit-card fees, including those from retailers, rose to 33.4% of total credit-card revenue in 2003. That was up from 27.9% in 2000 and just 16.1% in 1996. The average monthly late fee hit $32.01 in May, up from $30.29 a year earlier and $13.30 in May 1996, the company said. In 2003, the credit-card industry reaped $11.7 billion from penalty fees, up 9% from $10.7 billion a year earlier, according to Robert Hammer, an industry consultant.
Banks say that penalties and fees are a necessary component of new models for pricing financial services. Gone are the days when banks collected hefty annual fees on all credit cards and charged fat interest rates to all customers. Now, the banks say, they must rely on risk-based pricing models under which customers with the shakiest finances pay higher rates and more fees.
Oddly, the approach of gouging the riskiest customers is the result of competing for the best ones:
Until the early 1990s, most banks offered one main credit-card product. It typically carried an annual interest rate of about 18% and an annual fee of $25. Cardholders who paid late or strayed over their credit limit were charged modest fees. Profits from good customers covered losses from those who defaulted.
Then card issuers, in an effort to grab market share, began scrapping annual fees and vying to offer the lowest annual interest rates. They junked simple pricing models in favor of complex ones they say were tailored to cardholders' risk and behavior. Eager to sustain growth in a market approaching saturation, they began offering more cards to consumers with spotty credit.
By the late 1990s, banks were attracting consumers with low introductory rates, then subjecting some of them to a myriad of "risk-related fees," such as late fees and over-limit fees. A 2001 survey by the Federal Reserve showed that 30% of general-purpose credit-card holders had paid a late fee in the prior year.
In a survey of 140 credit cards this year, the advocacy group Consumer Action said 85% of the banks make it a practice to raise interest rates for customers who pay late -- often after a single late payment. Nearly half raise rates if they find out that a customer is in arrears with another creditor.
Meanwhile, the Bush Administration's response to the foregoing travesty is to support the ill-advised and consumer credit industry backed Bankruptcy "Reform" Act, which attempts to make it more difficult for consumers to discharge their personal liability for such consumer credit.
As with health care finance, income tax simplification, and overall government spending, this is another issue on which the Bush Administration has sadly dropped the ball.
The listless Stros' hitters and Miceli blew another fine performance from the Rocket as the Pads scored the winning run in the bottom of the eighth to win Monday's first game of the clubs' three game series, 2-1.
Clemens was magnificent as usual, giving up only a run on three hits with four walks over seven innings. Miceli couldn't match that brilliance in the eighth, as he gave up the game winning hit to Klesko (who is having an Ensberg-like bad year) and giving Astro-killer Trevor Hoffman the opportunity to close out the win in the ninth.
Meanwhile, the Stros' hitters made Brian Lawrence look like the Rocket as they could manage only five hits, including Bidg's leadoff yak. Of course, Stros' manager Jimy Williams inexplicably continues to bench Mike Lamb, Jason Lane, and Chris Burke while playing such futile hitters as Viz and Bags, whose slugging percentage has dropped to an embarrassing .442, fifth points below Biggio's. Not an auspicious beginning for their first game in the Pads' new Petco Field.
The Stros are now eight games behind the Cards in the NL Central as a division title has become a pipe dream. Absent an unforseen turnaround on the remainder of this West Coast swing, the Stros may not even be in contention for the wild card playoff spot by the All-Star break.
July 5, 2004
This NY Times article by Linda Greenhouse is a fine summary of the key decisions of the United States Supreme Court during its 2003-04 term in the following areas: Detainees, Politics, Criminal Law, Privacy, Discrimination, Federalism and Regulation, Speech and Religion, and Jurisdiction.
Many Houston business litigation attorneys know Ken Klee as a Los Angeles-based corporate reorganization and bankruptcy law expert, as well as a UCLA Law School professor. However, this LA Times article reports that Ken is also up to something completely different from representing parties in reorganizations or teaching students the intricacies of bankruptcy law:
Brentwood real estate broker Joan Gardner was suffering such excruciating pain with a swollen knee, months after a fall, that she was homebound, depressed and unable to work. Her doctor and orthopedic physical therapist encouraged her to have surgery, but Gardner declined because, "I'm stubborn and vain." Instead, she decided to try something different.
Digging up a number her grocery clerk had given her, Gardner dialed Ken Klee, a UCLA law professor and prominent corporate bankruptcy lawyer who practices energy healing on the side. A seven-year student of more than half a dozen healing methods including reiki's radiance technique, pranic healing and Theta Healing, Klee practices eight hours a week out of his Brentwood home office, stacked high with stones and crystals, massage table at the center.
Without touching her body or charging her a fee, Klee waved his hands over Gardner for three hours last December, channeling divine healing energy and helping her clear out anger and other blocks. The next day the swelling in Gardner's knee was gone.
"I was in shock. It sounds probably crazy, but it's the truth," she said. "I feel like a million dollars, and I have since that day."
Stories like Gardner's raise eyebrows among those in the medical establishment and Klee's academic colleagues. Once the provenance of faith healers, shamans, ancient and New Age mystics, however, energy healing is increasingly going mainstream.
And what on earth is energy healing?
Methods vary, but principles generally stem from ancient concepts of a life force ? called chi or qi in traditional Chinese medicine (prana in Indian medicine) ? that moves through pathways called meridians. Acupuncture, qigong, tai chi, yoga and shiatsu massage are all based on the idea that free-flowing energy throughout the body leads to optimal health.
Energy healers contend that people have an etheric, or energy, body, often called an aura, surrounding and penetrating the physical body, and energy fuel centers inside the body called chakras.
Because bodies are made up of subatomic particles in constant motion, many physical ailments manifest first in this energy body, like a blueprint, healers say. Stress and painful emotions, for instance, can cause energy to get stuck or depleted, inhibiting the body's natural healing processes.
Healers claim to be able to detect and repair these problems with or without touching the body, sometimes from great distances. "All we are at our essence is vibration, and all disease is dissonance in vibration," Klee says. "If we alter the vibration through crystals, color, sound, prayer or bringing energy through the hands, it all has to do with vibration."
By harnessing the power of the mind-body connection, many energy healers say they are simply promoting the innate ability to heal oneself, meaning receptivity can affect whether it works, as can the intent and state of mind of the healer.
The line between energy healing and faith healing can get blurry. Some practitioners invoke a higher power, while others align cosmic healing symbols or gather and project healing energy from nature. Some tout extraordinary gifts; others say they are simply conduits, and anyone can learn to heal themselves and others with a little practice.
Altough the article notes that some clinical research into energy hearling is underway, the medical community retains a healthy dose of skepticism regarding the benefits of energy healing:
Stephen Barrett, a retired psychiatrist and founder of the health fraud guide Quackwatch, holds the "sheer quackery" point of view. He dismisses such research, saying, "There is nothing there."
Barrett is coauthor of an article published in the Journal of the American Medical Assn. in 1998 debunking the effectiveness of Therapeutic Touch, an energy healing method often used by nurses.
"They claim they can, by concentrating, feel a person's energy field and go through certain maneuvers to modify it and create a healing force," he said. "We feel that's preposterous. It's a figment of their imagination."
Barrett's JAMA article publicized the results of a science fair project of a 9-year-old girl named Emily who tested Therapeutic Touch practitioners' ability to detect her energy field. The experiment was similar to Schwartz's, but the practitioners correctly guessed which of their hands the girl's hand was hovering over only 44% of the time, less than chance would suggest.
Barrett, one of the nation's most outspoken critics of alternative medicine, says energy healers and those who bolster them through studies are delusional or dishonest.
But Mr. Klee remains a true believer:
"If I can do it, anybody can do it. I'm a conservative guy, a lawyer, a skeptic. I believe in verifying things. Seven years ago, I would have thought this was completely nuts. Now I'm convinced science is going to validate this. It's going to happen in my lifetime."
Hat tip to Professor Bainbridge for the link to this story.
Since leaving the Stros, Richard Hidalgo is doing his best Carlos Beltran imitation in New York.
July 4, 2004
The best thing that can be said about Sunday afternoon's Stros-Rangers game is that I decided to go to Saturday night's game instead. The Rangers used Sunday's game for extra batting practice and pounded the Stros, 18-3.
The Stros tried five different pitchers on Sunday, and the Rangers pounded four of them into oblivion. Tim Redding was particularly atrocious, giving up six runs in one inning as he continues to make a strong case for banishment to New Orleans. Wade Miller's injury is probably the only reason Redding is still with the club. Starter Andy Pettitte was not much better, giving up six runs and eight hits over five innings.
As they leave for their pre-All Star game West Coast swing, the Stros are 42-39, tied with the Brew Crew for fourth in the NL Central, and seven games behind the NL Central leading Cards. Ensberg showed signs of life by hitting three yaks in the weekend series with the Rangers, but the remainder of the club apart from Berkman and Beltran continue to show little pop in their bats.
Lance Berkman 37
Craig Biggio 12
Jeff Bagwell 9
Mike Lamb 9
Carlos Beltran 5
Jeff Kent 3
Eric Bruntlett 1
Jason Lane -2
Orlando Palmeiro -2
Jose Vizcaino -4
Morgan Ensberg -5
Raul Chavez -6
Richard Hidalgo -8
Adam Everett -11
Brad Ausmus -18
Berkman continues to be one of the best hitters in baseball despite the fact that, at least before the acquisition of Beltran, no pitcher in the National League was throwing him a strike (Berkman was second to Bonds during the month of June in walks). Beltran's RCAA would be an excellent 24 if his RCAA with Kansas City is added to his Stros figure.
Bidg's solid season at the plate continues, although he is having his adventures in left field these days. Ensberg's number should improve when his big weekend numbers are added, and Lamb clearly should be playing more.
Bags' seemingly bottomless power decline continues and he is now among the lower tier of first basemen in the National League. Ausmus is now closing in on being the worst hitter among regular players in the National League and should be benched in favor of Chavez, who is merely less bad.
Somewhat surprisingly, the Stros rank seventh in the National League in team RCAA, but every team in the NL Central except for the Brewers have a better team RCAA.
Here are the Stros' pitchers' runs saved against average ("RSAA," explained here):
Roger Clemens 19
Brad Lidge 9
Wade Miller 9
Roy Oswalt 7
Octavio Dotel 5
Mike Gallo 3
Dan Miceli 3
Andy Pettitte 3
Pete Munro 2
Kirk Bullinger 1
David Weathers 0
Brandon Backe -2
Jeremy Griffiths -3
Chad Harville -3
Ricky Stone -3
Jared Fernandez -6
Brandon Duckworth -9
Tim Redding -10
Clemens and Lidge are solid, and Oswalt is improving after working through his abdominal injury. However, a replacement for Miller's above average performance is no where in sight, and one can only guess who will start in Miller's place next time (Griffiths was already sent back to New Orleans after last night's unimpressive performance). Despite these troubles, the Stros team RSAA continues to rank fifth in the National League, although the Cards, Cubs and Brewers are division rivals that all have better team RSAA totals than the Stros.
The Cubs and Cards are still the class of the NL Central and it appears that they will have a close race for the title. The Stros should gradually overtake the Brewers and the Reds for third place in the division if performance levels of those three teams remain relatively stable with present levels. However, that's probably as good as it will get for this Stros club unless several players get hot in the second half of the season. That's possible, but not likely.
Berkman, Clemens and Jeff Kent all made the National League All-Star team announced today. All three deserve the honor, although Kent's performance level is well below Berkman and Clemens. Kent is an All-Star only because of the paucity of good second basemen in the National League.
The Rocket opens the San Diego series tomorrow night, followed by Pete Munro and Roy O. The Stros then go up to L.A. for next weekend's series with the Dodgers before taking off for the All-Star break.
July 3, 2004
My son Cody, my buddy Sage and I are at the Juice Box reporting live on the Stros-Rangers Saturday evening game using the Stros new WiFi internet service. So far, so good.
The top of the first was uneventful as newly-acquired Jeremy Griffiths got three ground outs without throwing ten pitches. In the bottom of the first, Bidg led off with an infield hit and Viz had a single to right before the first instance of managerial malpractice occurred. Jimy Williams had Carlos Beltran -- arguably the hottest hitter in baseball -- attempt to lay down a sacrifice bunt on the first pitch. Beltran fortunately fouled it off, then laced a stinger foul down the first base lane before being called out on strikes. Berkman then drew a walk to load the bases before Bags dutifully hit into a 5-4-3 double play to end the inning.
That's a capsule of the Stros' season so far.
Griffiths returned to form in the top of the second by walking the lead off batter. Mench generously went after a bad pitch and popped to second, but the Rangers are clearly measuring Griffiths. Delucci flied to center on a bad pitch and then Ardoin struck out. So, Griffiths is doing his best Clemens and Roy O imitation, but my sense is that next time through the lineup for Griffiths is not going to be as pleasant.
Stros coming to bat.
Arnie the Peanut Dude, who has been a fixture throwing and selling tickets at Stros' games for about 15 years, came by in between innings and chatted with Sage and me. Arnie is a great guy and a fine golfer, and he just returned from a golfing trip to Scottsdale where he played several of the great courses out there. After playing well out there, he returned to rain-drenched Houston and could only shoot 90 at Houston Country Club yesterday where the unmowed rough is still at U.S. Open heighth.
In the meantime, Ensberg walked and Everett had an infield single to lead off the Stros' second, which brings up Raul Chavez, who is starting his second straight game at catcher for I believe the first time this season. However, the Stros' catcher position is a black hole, as Chavez grounds into an easy DP, moving Ensberg to third. Griffiths is up, and promptly scared Ricardo Rodriguez, the Rangers journeyman pitcher, into a balk, scoring Ensberg with the Stros first run. After Rodriguez walked Griffiths in disgust, Bidg flied tepidly to left.
As Sage noted, with two outs, the Stros called for the "balk play" and scored a run. Stros lead 1-0, but not for long.
Griffiths mowed down Matthews and Rodriguez to start the third, making it ten straight Rangers down to start the game. But this mixture of 86 mph fastballs and nickel curves will not hold the Rangers down for long. Young promptly singled to center to start Griffiths second time through the Rangers lineup, and now Blalock is looking like a hungry tiger over his prey at the plate. Incredibly, Griffiths freezes him with 89 mph heat. How long can this last?
While Cody cruised the Web for awhile, Viz grounded out and Beltran struck out again before Berkman laced a gapper for a double. Berkman came over to third on a wild pitch as Bags walked, and Ensberg has worked a 3-1 count and should get a good pitch to hit. He did, and whiffed, now a 3-2 count. Ensberg then grounded out to short to end the inning. Stros still lead 1-0.
Sage and I went up to the club level in the top of the fourth to check out the Mahi Mahi at the club buffet, but the Rangers continue to scruff against Griffiths. Three up and three down. The Stros continue not to do much better against Rodriguez, as both Everett and Chavez ground out meekly and Griffiths fans in the bottom of the frame.
This game ought to be extended batting practice for both teams and its only 1-0 through four. As they say, "that's baseball."
While waiting for our Mahi Mahi, Sage and I saw John Sorrentino and chatted with him awhile. John is the Stros' Vice-President of ticket services and is a longtime Stros' executive. We complimented him on how good the bunting looks inside the Juice Box as the Stros are getting ready for the All-Star game on July 13th. John is a good guy, and the Stros' strong gate this season (averaging about 35,000 a game) could not happen to a nicer guy.
Meanwhile, Griffiths is starting to struggle in the top of the fifth. Delucci walked, Ardoun got on, and light hitting Gary Mathews hit a three run dinger. Batting practice is beginning. Rangers lead 3-1.
Things are going from bad to worse. Young got on, and Blalock singled him around to third. Jimy's hook is quick tonight as Griffiths is already history. Bullinger is warming up.
Ouch. Soriano greets Bullinger with a long three run dinger. It's now 6-1 Rangers. However, the Mahi Mahi is quite good.
After what seems like an eternity, Bullinger finally coaxes the last two outs and the Stros wander into their side of the fifth down 6-1.
Bidg starts the rally with a strike out in the bottom of the fifth. Viz gets on, then Beltran gives one a ride to deep center, but Matthews makes a nice nab. Berkman takes his obligatory walk, and now Bags is up with a chance to get the Stros back in it. Bags hits an easy grounder to short, which Young boots, so now Ensberg has a chance to do some real damage with the bases loaded.
And he did! Ensberg blasts a grand salami to deep left center. Incredible. He wins the game for the Stros last night with a two run yak and now he gets the Stros back in this one with a grand slam. It's now 6-5 Rangers.
And the Stros may not be finished. The Rangers bring in ex-Stro Doug Brocail, and Everett and Chavez greet him with singles. Lamb pinch hits for Bullinger, and Brocail uncorks a wild pitch to move the runners to second and third. Lamb promptly singles to right and scores both Everett and Chavez, and Chavez looked like a locomotive coming home and beat the throw. It's now 7-6 Stros!
And the Stros may not be finished yet. Young boots Bidg's grounder to short for another error, and Brocail promptly balks Lamb to third and Bidg to second. Viz then brings Lamb home on an infield hit, bringing up Beltran. It's 8-6 Stros. Beltran then absolutely schorches a liner at Brocail, who protects himself by batting the ball down with his glove and then remarkably recovers to throw Beltran out.
The fifth inning is finally over. It took over an hour, there were 13 runs, 10 hits, two errors, and I don't know how many walks. In the end, it's 8-6 Stros. Whew! Gotta eat Mahi Mahi whenever the Stros get down big.
Chad Harville is now pitching for the Stros in the top of the sixth, and he is clearly juiced by the Stros big fifth. He's throwing smoke consistently in the mid 90's. And wouldn't you know it -- the second off speed pitch that Harville throws Young jacks a two run yak into the Crawford Boxes. It's 8-8 and time for more Mahi Mahi.
Brocail is back out on the hill for the Rangers in the bottom of the sixth. Berkman whiffs, Bags walks, and the Hero of the Fifth Ensberg is now up again. Brocail is careful with the red hot Ensberg and walks him to get to Everett. One positive note: at least Jimy doesn't have Everett sacrificing. Brocail walks Everett to load the bases for Chavez with still just one out. This is getting interesting. Pinch hitter Lane on deck to hit for Harville. Chavez is battling, fouling off five pitches. He works the count to 2-2.
Uh, oh. Chavez hits a grounder to deep short. Young to Soriano at second for the first out, relay to first -- Chavez head first slide -- he's safe!! Bags scores. Ball gets away at first. Ensberg tries to score. It's a close play. He's safe! Stros lead 10-8! Unbelievable. The Juice Box is going nuts.
Lane then absolutely smokes one to just in front of the 436 sign in deep center. The sixth is over, it's 10-8 Stros! Gotta love that Mahi Mahi.
David Weathers is now pitching for the Stros in the top of the seventh, and Soriano greets him with a single. The dangerous Teixeira lines out to Berkman, and Mench flies out to Berkman, bringing up Herbert Perry to pinch hit for Brocail. Perry is one of those guys who either cranks a yak or strikes out, so Weathers needs to be careful. Weathers strikes him out on three pitches. Go figure. Stros still lead 10-8.
Brian Shouse, a left-handed submarine guy, is now pitching for the Rangers and walks Bidg on four pitches. The Stros need to be greedy here because a two run lead does not feel safe in this free for all, particularly with Lidge having pitched the three prior games and probably not available to close this one. Viz sacrifices Bidg to second, Beltran to the plate. Beltran's buzzard's luck continues as he lines to third on a nice play by Blalock. Berkman grounds out, so Bidg is left on. Stros still lead 10-8.
Weathers is still pitching for the Stros in the top of eighth, against catcher Ardoin, who promptly pops out to Berkman in right as the Juice Box's retractable roof is opening. Matthews comes back down to earth after his three run yak earlier in the game and whiffs for the second out. But then, Bidg misplays a fly ball by LF Conti for a three base error, so the Rangers have a man on third and the top of their order coming up. Young walks and now Astro-killer Blalock is coming up. Jimy's not going to risk having Weathers pitch to Blalock, so he brings in Miceli. The capacity crowd at the Juice Box is in deep prayer.
Deep gulp. Blalock fouls out to Ensberg. Stros maintain their 10-8 lead.
A hyperactive Juice Box crowd is now doing the wave. Gotta work off that excess energy before the fireworks show.
Frank Francisco is now pitching for the Rangers and he faces the punchless Bags, who either gets a single, grounds out, walks, or strikes out these days. He strikes out this time. Francisco then fans Hero Ensberg on three smokin' fastballs, the slowest of which was 96 mph. Everett fouls out to first. Stros take their 10-8 lead into the top of the ninth. Hold on to your seats.
Miceli still pitching for the Stros as Soriano leads off the ninth. 3-2 count. Foul ball. Soriano bloops out to Berkman. Teixeria is up, and he laces the first pitch to right for a single. Mench is up with one out and a man on first. Mench flies out to Berkman. Two outs, Miceli vs. Young. The Juice Box crowd is up. Young singles hard to left. Rod Barajas bats for Ardoin with runners on first and second. The Juice Box crowd is still up. Miceli gets up 1-2, the Juice Box crowd is howling. Foul ball.
Whiff! Stros win 10-8! It's time for fireworks. That's it from the Juice Box. Over and out.
This NY Times article reports on yesterday's announcement that Bank of America Corp. is the first bank defendant to settle claims against it in the Enron Corp. class-action lawsuit alleging that some of the country's top banks and securities firms and two law firms participated in a scheme with Enron's top executives to deceive shareholders.
B of A tentatively agreed to pay $69 million to investors who suffered billions of dollars in losses as a result of Enron's collapse during late 2001. The lead plaintiff in the lawsuit -- the Regents of the University of California -- lost nearly $150 million alone in regard to its investment in Enron.
According to a prepared statement, B of A denied that it "violated any law," in connection with Enron and stated that it was making the settlement payment "solely to eliminate the uncertainties, expense and distraction of further protracted litigation."
Inasmuch as B of A was a relatively small-scale player in Enron's financial dealings and was not accused of fraud in the lawsuit, the settlement agreement indicates that other banks and securities firms that were more involved with Enron will have to dole out much more to settle the litigation claims against them. Financial firms still involved in the lawsuit include Merrill Lynch & Co.; Credit Suisse First Boston; Deutsche Bank AG; Canadian Imperial Bank of Commerce; Barclays PLC; Toronto-Dominion Bank; and Royal Bank of Scotland PLC. So far, the only other firm to settle in the lawsuit is Andersen Worldwide SC, the Swiss organization that oversees Andersen Worldwide's independent partnerships, which settled in 2002 for $40 million.
A wise old class action plaintiffs' lawyer once observed the following to me:
"Accrual accounting is a particularly valuable annuity for the legal profession."
A new study validates my friend's observation. This Wall Street Journal ($) article reports on a Criterion Research Group LLC study that suggests that the companies that are most aggressive in using accrual accounting -- i.e, booking noncash earnings -- are much more likely to be the subject of a shareholders' lawsuit than companies that use the cash accounting method.
Under the accrual accounting method, companies book revenue when they earn it and expenses when they incur them rather than when they actually receive the cash or pay the expenses. Accrual accounting is common and accepted, but problems arise when companies fail to estimate properly the revenue that they have earned in a given period or the expenses that it cost to generate that revenue. Although intentionally cooking the books is a violation of generally accepted accounting principles, merely miscalculating the numbers is not.
Criterion's study concludes that companies that are most aggressive when using accrual accounting are four times more likely to be sued by shareholders as less-aggressive peers. The new study builds on earlier research that showed companies that use more accruals generally underperform companies with fewer accruals. In that earlier report, Criterion screened 3,500 nonfinancial companies over 40 years and found that those using the most accruals had poorer forward earnings and stock returns. and also had more earnings restatements and SEC enforcement actions.
Several well-known companies are in the two highest accrual categories in the report. Among those, Rite Aid Corp., Waste Management Inc., MicroStrategy Inc. and Gateway Inc. recently settled shareholder litigation involving accounting issues. Other companies in Criterion's highest-accrual category that are not the subject of pending litigation include Chiron Corp., eBay Inc., General Motors Corp., Yahoo Inc and the ubiquitous Halliburton, Inc.
July 2, 2004
Morgan Ensberg threw the monkey off his back by ripping a mighty two run yak in the bottom of the eighth to give the Stros a 7-5 win over the Rangers at the Juice Box on Friday night.
Ensberg's blast bailed out Roy O, who pitched reasonably well (8 inn., 9 hits, 5 runs, 11 K's, no walks), but gave up a couple of two run homers, the second of which tied the game at 5 in the top of the eighth to set up Ensberg's crank in the bottom of the inning. Before the Rangers tied it up, the Stros had taken the lead with a four spot in the sixth, highlighted by four straight singles by the middle of the Stros' lineup. It was nice also to see Lidge secure the save after giving up Sosa's walkoff crank in yesterday's loss at Wrigley.
Amid the good news, though, there was bad. Starter Wade Miller is out at least a month with a rotater cuff injury. This is the type of injury that can be season ending.
U.S. News & World Report's annual survey of hospitals ranks several hospitals in Houston's famed Texas Medical Center as among the best in their respective fields in the United States.
The annual survey ranks The University of Texas M.D. Anderson Cancer Center for the third year in a row as the nation's top cancer hospital. Besides being named the best cancer hospital for the fourth time in the last five years, M.D. Anderson was also named the fifth best in gynecology, and the 10th best in both the specialties of ear, nose and throat, and urology.
The Institute for Rehabilitation and Research was recognized as the third best rehabilitation hospital in the country. Texas Children's Hospital ranked fourth in pediatrics in the magazine's survey. The Menninger Clinic was named the sixth best psychiatric hospital in the country.
The Texas Heart Institute at St. Luke's Episcopal Hospital was named the ninth best heart center. Moreover, The Methodist Hospital ranked in nine of the survey's categories, including 10th best in the area of neurology and neurosurgery.
The magazine's rankings are based on a nationwide survey of doctors, on hospital reputations in 17 medical specialties, and an analysis of indicators such as death rates, technology and nurse staffing. Of the more than 6,000 U.S. hospitals, only 177 ranked in even a single specialty in this year's survey.
The Texas Medical Center is one amazing collection of medical talent.
The NY Times provides the list. How many have you seen?
This NY Times article reports that Russian governmental officials ordered court bailiffs to take the extraordinary step of freezing Russian energy giant Yukos Oil's bank accounts and demanding payment of a $3.4 billion tax debt within five days. Here are earlier posts about Yukos' problems with the Russian government.
Yukos is one of the world's largest oil companies. It produces around 1.7 million barrels a day, which is about 2 percent of the world's total output. It is the leading exporter in Russia, which is heavily dependent on oil revenue and, along with Saudi Arabia, is one of the world's top oil-producing countries.
Founded by Russian financier Mikhail B. Khodorkovsky, Yukos has been fighting with the Kremlin for the past year over taxes and related issues. Mr. Khodorkovsky has been in jail since November, 2003 on charges of fraud, embezzlement and tax evasion related to his creation of Yukos during the wild privatizations of Russian state assets in the 1990's. The trial was commenced and adjourned last month, and is scheduled to resume on July 12.
July 1, 2004
A Harris County grand jury indicted former Houston Rockets basketball star and Hall of Famer Calvin Murphy today on six counts of sexual abuse centering on allegations that he molested his five daughters when they were under the age of 14. Previous posts on this rather knarly matter may be reviewed here.
Inasmuch as Murphy has already pleaded not guilty to the charges that were filed in March. The grand jury indictment is a formality. However, it does signal that this case will likely not be settled and will be tried. The prolific Murphy has fathered 14 children by nine women.
Murphy remains free on $20,000 bail. If convicted, he could receive five years to life in prison for the aggravated offenses and two to 20 years for the indecency violations. Because he has no criminal history, Murphy would also be eligible for probation.
Sammy Sosa cranked a walk off yak on the first pitch from Brad Lidge in the bottom of the tenth Thursday afternoon to give the Cubs a 5-4 win over the Stros in the rubber game of their three game series at Wrigley.
Lidge was the superficial goat in this one, but Jimy Williams is the true goat. In saving Wednesday's game for the Stros, Lidge threw 35 pitches under stressful circumstances and, thus, had no business even warming up 24 hours later, much less closing the game.
Moreover, even with Carlos Beltran being the only Stro regular hitting the ball well (two yaks, four RBI's in today's game), Williams continues inexplicably to keep Mike Lamb and Jason Lane on the bench while Bags and Viz continue to scruff. The Stros officially were the worst hitting team in Major League Baseball during June as they scored a total of 91 runs in 27 games. Meanwhile, Williams continues to have Adam Everett lay down sacrifice bunts and play Brad Ausmus rather than than make meaningful changes to juice up the lineup. It is truly amazing that Stros management tolerates such incompetence.
Roy O takes the hill in the first game on Friday in the weekend series against the Rangers. With a West Coast trip to San Diego and L.A. looming after this weekend, the Stros had better start helping Beltran or else their playoff chances will be over by the All-Star break.