September 30, 2004
Joe Sheehan of Baseball Prospetus ($) observed the following regarding the Stros' sweep of the Cardinals:
The Astros took advantage of the losses by the Cubs and Giants, completing a sweep of the Cardinals to tie those two at 70 defeats. If they run the table this weekend against the Rockies--and they've won 15 straight home games--they can do no worse than a tie for the wild-card slot.
What a waste of two-and-a-half years. Someone owes Larry Dierker an apology.
As expected, Houston-based El Paso Corp. disclosed a huge loss for 2003 and restated previous financial results in a delayed Form 10-K filing with the Securities and Exchange Commission.
El Paso posted a full-year 2003 loss of $1.93 billion, or $3.23 a share, on revenue of $6.7 billion. The loss from continuing operations was $616 million, or $1.03 a share. The company also restated its financial results for every year since 1999 as a result of an investigation into its reserve accounting and accounting for hedging transactions. The overall impact of the restatements was to cut shareholder equity by about $2.4 billion at Sept. 30, 2003. Of this amount, about $1.7 billion related to the restatement of El Paso's historical reserve estimates and about $700 million related to the restatement of its historical accounting for hedges. Here are the earlier posts on El Paso's mounting financial problems.
The 10-K also disclosed that one of El Paso's units has been subpoenaed by a grand jury from the U.S. District Court for the Southern District of New York to produce records regarding the United Nations' Oil for Food Program governing sales of Iraqi oil. The unit, El Paso CGP Company, was formerly Coastal Corp., which the company acquired in January 2001. The former chairman of Coastal -- Oscar Wyatt -- was an unabashed critic of Operation Desert Storm in the first Persian Gulf War and has been a vocal public critic of El Paso's management over the past several years.
El Paso also received a subpoena from the SEC earlier this year relating to its reserve revisions, which are also being investigated by the U.S. attorney. Moreover, the company's hedge accounting is also the subject of an investigation by the U.S. Attorney and may become the subject of a separate inquiry by the SEC.
Man, is El Paso a white collar criminal defense attorney's dream or what?
Finally, El Paso reported that it expects to meet its November 30 deadline for filing its delayed Form 10-Q's for the first two quarters of 2004. El Paso remains on my reorganization watch as a likely candidate for a chapter 11 case in the near future, so stay tuned.
After killing his neighbor three years ago and dumping the butchered body into Galveston Bay and then winning an acquittal in his subsequent 2003 murder trial, Robert Durst -- an heir to a New York family's real estate fortune -- pleaded guilty Wednesday to two counts of bail jumping and one of evidence tampering that will allow Durst to get out of prison in less than a year. Here are earlier posts on the Durst case.
The deal came just two hours after state appellate judge Judge Jackson B. Smith Jr. had removed removed Galveston State District Judge Susan Criss from the case. Judge Criss had refused the plea deal earlier in the week, which was yet another strange twist in a case. Judge Criss had been rebuked by the appellate court earlier this year for setting Durst's bail at $3 billion dollars on the three relatively minor charges after Durst had been acquitted in the murder trial (the appellate court reduced the bail to $450,000). With credit for time served both before and after his murder trial, Durst will likely be freed from prison early next year under state prison system rules.
The recusal came after sheriff's investigators testified before Judge Smith that Judge Criss had given them information in December that prompted an investigation into possible jury tampering during Durst's murder trial. Although the investigators found no evidence of criminal activity by jurors or anyone involved in the trial, they did secretly tape-record conversations between Durst and a juror who visited him in jail after the trial. Nevertheless, Durst did admit in the taped conversation that he skipped a court appearance after he posted a $300,000 bond in the murder case in September 2001.
As a result, Durst's defense attorneys Dick DeGuerin and Mike Ramsey maintained that Judge Criss' involvement in the jury tampering investigation that led to Durst's taped admission made her a potential witness in Durst's bail-jumping case, and that such involvement required her to be removed from adjudicating the case. When Judge Criss refused to recuse herself from the case earlier this week, Judge Smith did so in about 10 minutes on Wednesday.
September 29, 2004
Bags singled in the go ahead run and Berkman doubled in Bags with the insurance run in the seventh inning as the Stros beat the Cards 6-4 on Wednesday night at a rollicking Juice Box. The win completed an unlikely Stros sweep of the Cards, who sport the best record in Major League Baseball. The Stros have now won a record 15 straight at the Juice Box and are 33-10 over the past month and a half. What a ride it's been!
With the Cubs blowing another one on Wednesday afternoon to the Reds and the Giants losing to the Padres late Wednesday, the Stros have now moved into sole possession of the lead for the Wild Card playoff berth, a half game ahead of both the Cubs and the Giants. The Cubs play the Reds and the Giants play the Pads again on Thursday, which is an off day for the Stros, so the worst shape that the Stros will begin play on Friday is that they will be tied for the Wild Card lead.
The Rocket gave yet another remarkable performance, going six innings and giving up 4 runs on 4 hits while striking out 8 and walking only one. The big blow was Scott Rolen's two out, two run yak in the sixth after Clemens thought that he had struck out the hitter before Rolen (that hitter eventually walked). Clemens had some choice words for the home plate umpire as he walked off the field at the end of the sixth.
Qualls, Miceli, and Lidge were again money for the Stros in relief, although the entire Juice Box crowd audibly gasped when Mabry toyed with a game tying yak while flying out deep to right with one on to end the game. When Berkman caught Mabry's fly, I couldn't tell whether the resulting Juice Box roar was one of joy or relief. The Stros hitters also battled gamely against tought Cards starter Suppan and managed 9 hits, including a two run Ensberg yak and Kent's solo shot.
The Stros have a well deserved day off on Thursday before the Rockies come in for the final weekend series of the season. Pete Munro and the rest of the bullpen pitches in the Friday game, Roy O comes back for the Saturday game, and then I would not be surprised if Clemens comes back on three days rest to pitch on Sunday if the Stros still have a chance. The upcoming weekend is shaping up to be a wild one, something that I had discounted as recently as a few days ago. I am thoroughly enjoying being wrong on that one!
Three former Natwest Bank bankers appeared in a London court yesterday to fight extradition to the United States, where they are facing fraud charges in connection with a deal with Enron Corp.
Natwest bankers David Bermingham, Giles Darby and Gary Mulgrew, are accused of conspiring with Enron's former CFO, Andrew Fastow and his colleague Michael Kopper, to fleece their employer, Natwest Bank, of around 4 million pounds, which equates to about $7.3 million. The three face extradition to stand trial in Houston on seven counts of wire fraud and illegally gaining money via international banking systems. Messrs. Fastow and Kopper have already admitted involvement in the alleged scheme as part of a plea bargain.
Interestingly, none of the British bankers have have ever been charged with a criminal offense in England. In fact, Natwest Bank is still lending the defendants money to cover their legal defense costs. The defendants contend that they will not receive a fair trail in Texas in the aftermath of the Enron scandal, which is likely true given the adverse publicity regarding Enron that the Government has promoted throughout the Enron investigation.
The Government claims that the bankers conspired with Messrs. Fastow, Kopper and other senior Enron executives in 2000 to sell a stake in a Cayman Island company for $1 million when the true value was much higher. A month later, the company was re-sold and the trio each made a large profit while Messrs. Fastow and Kopper pocketed $12 million each.
Remarkably, if the three are extradited, they could face an extended period of time in a U.S. federal penitentiary before their case gets to court because, as foreign citizens, they could be held without bail until trial. The controversial three-day extradition hearing in London is the first under the new British Extradition Act, which was promoted by British politician David Blunkett to trap suspected terrorists.
Meanwhile, as the Government continues prosecution of its flimsy case in the Nigerian Barge case in Houston federal court, this Wall Street Journal ($) article reports that the Enron Task Force has elected not to pursue criminal charges against Citigroup executives in regard to an Enron-Citigroup transaction that was much larger and strikingly similar to the Nigerian Barge transaction that prompted the Government to indict four former Merrill Lynch executives and two mid-level former Enron executives.
The lack of any meaningful prosecutorial discretion of the Bush Administration's Justice Department in regard to the prosecution of alleged business crimes continues to be highly troubling. Is this what the Republican Party suggests is a "business-friendly" administration?
September 28, 2004
Jeff Bagwell drove in both of the Stros' runs, Brandon Backe and Chad Qualls set the table for Brad Lidge, and Lidge shut down the Cards in the ninth to lead the Stros to a 2-1 heart-pounding win over the Cardinals on Tuesday night at the Juice Box. The Stros have won five of its last six and tied a franchise record with their 14th straight home win, equaling a mark set in 1980.
The Stros moved within a half-game of the Cubs, who lost to the Reds 8-3 at Wrigley Field and the Giants, who beat the Padres 7-5 in San Diego, for the lead in the Wild Card playoff race.
Carlos Beltran and home plate umpire O'Nora prevented the Cardinals from taking the lead in the fifth when Beltran caught a no out line drive, then threw out Reggie Sanders at the plate for a double play. Home plate umpire O'Nora clearly blew the call, but the Stros are accepting charity from any quarter at this point.
In the most important game of this season, the Rocket takes the hill Wednesday night against the Cards to attempt to pull the Stros even in the Wild Card playoff race. The Juice Box will be one juiced place on Wednesday night.
How can anyone on the Harvard faculty or in the Harvard administration not view as a troubling trend this latest episode of, at best, academic sloppiness? To make matters even more dreadful, I'm not sure what's worse, Tribe's plagiarism or Dershowitz's disingenuous defense of it.
Meanwhile, the Harvard Plagiarism Archive has popped up to keep us abreast of these developments.
September 27, 2004
The Stros beat the Cards 10-3 at the Juice Box on Monday night behind Roy O's solid pitching and a 14 hit attack that included five doubles, a Beltran triple and a Jason Lane pinch hit yak.
Unfortunately, the Cubs won, too. Stros hold serve. Backe starts the Tuesday night game.
I had a hearing on Monday afternoon in federal court, so I went a bit early and sat in on the ongoing trial of the first Enron-related criminal case to go to trial -- the Nigerian Barge case. Today was a big day during the trial because one of Andy Fastow's most trusted lieutenants -- Michael Kopper -- took the stand as the Government's main witness.
The first four days of the trial that took place last week were remarkable only because the testimony of the initial Government witnesses confirmed that there is not all that much dispute between the prosecution and the defense about the salient facts of the case. The big difference is in the interpretation of the facts, and that's why Kopper is an important witness for the Government.
In effect, Kopper is standing in for Fastow, who the Enron Task Force prosecutors do not want to call in this trial of two low-level Enron executives and four Merrill Lynch executives over a relatively small deal. Kopper is testifying under a plea bargain deal in which the Government has agreed not to prosecute Kopper's gay lover for profiting off of Enron's off-balance sheet partnerships and to recommend a minimum prison sentence for Kopper if he testifies in accordance with the government's theory of the case in this trial and others.
Kopper makes a good impression as a witness -- young, handsome, courteous, articulate, bright, and soft-spoken. And apparently, he testified this morning in support of the government's theory of the case -- i.e., Enron induced Merrill Lynch to buy the barges at the end of 1999 by orally guaranteeing through Fastow that Enron would arrange a sale of the barges for Merrill by the end of June 2000 at a pre-arranged profit. If such an Enron guaranty existed, then the Government contends that Enron's booking of the profit from the deal was improper and the Defendants engaged in a fraud on Enron's investors.
But if the morning went according to the Government's form, the afternoon was a different story. Kopper was ravaged during cross-examination, first by Lawrence Zweifach, who represents Merrill Defendant James Brown, and then by David Spears, who represents Merrill Defendant William Fuhs.
Kopper readily admitted to Mr. Zweifach that the barge transaction was such a risky deal that he would not approve it originally as an asset purchase for one of Fastow's now infamous off balance sheet partnerships that Enron used liberally to buy assets from Enron. Inasmuch as the Government's theory of the case is based largely on the allegation that Merrill's purchase of the barges was not a risky deal because of Enron's guaranty, this line of cross-examination of the Government's primary witness did not go over well with the prosecution lawyers. They objected often and ineffectively throughout the cross-examination as U.S. District Judge Ewing Werlein overruled almost every Government objection.
Then, Mr. Spears took over and Kopper admitted the truth of a mid-2000 memo written by an Enron analyst that openly stated that Enron faced a dilemma with regard to the barges and Merrill -- either Enron needed to broker a sale of the barges to an investor to preserve Enron's client relationship with Merrill or Enron should simply buy the barges back and restate its financial statements to account for the deal as a loan rather than a sale. There was no mention whatsoever in the memo of any Enron "guaranty" to Merrill or that restatement of earnings was all that big of a deal for Enron. Again, you could almost hear the air leaking from the Government's balloon as Kopper's cross-examination proceeded.
However, no one really knows how all of this plays out with the jury, which is the only reason that this case is being prosecuted in the first place. The Government figures that it can get convictions on such a flimsy case because most jurors will be biased against anything having to do with the cultural pariah Enron.
Based on what I know about this case and what I witnessed today, if the Government gets convictions in as weak a case as this one, then the Government will have little disincentive to bring equally dubious cases against business executives. Accordingly, if you represent business clients, stay tuned to developments in this trial.
THis long NY Times article about end-of-life decision making provides an excellent overview of the issues that confront families and health care professionals in making those decisions. Check it out.
My sense is that the upcoming Presidential election is going to be a much closer race than many Bush Administration supporters currently think, so this NY Sunday Times article on John Kerry's management style is timely in that it provides some insight into how a President Kerry would go about making decisions.
Mr. Kerry, who is a former prosecutor, is a four term senator without any meaningful management experience in terms of running a business, so his management style is primarily reflected on how he runs his campaign:
Mr. Kerry is a meticulous, deliberative decision maker, always demanding more information, calling around for advice, reading another document ? acting, in short, as if he were still the Massachusetts prosecutor boning up for a case.
He stayed up late last Sunday night with aides at his home in Beacon Hill, rewriting ? and rearguing ? major passages of his latest Iraq speech, a ritual that aides say occurs even with routine remarks.
In interviews, associates repeatedly described Mr. Kerry as uncommonly bright, informed and curious.
But Mr. Kerry's curiousity brings with it an indecisiveness borne of a tendency to become deluged in what I refer to as "data dumps:"
But the downside to his deliberative executive style, they said, is a campaign that has often moved slowly against a swift opponent, and a candidate who has struggled to synthesize the information he sweeps up into a clear, concise case against Mr. Bush.
Even his aides concede that Mr. Kerry can be slow in taking action, bogged down in the very details he is so intent on collecting, as suggested by the fact that he never even used the Medicare information he sent his staff chasing.
His attention to detail can serve him well on big projects, as it did when he sent aides scurrying across the country to find long-lost fellow Vietnam veterans who could vouch for his war record. But sometimes, his aides say, it is a distraction, as it was in early 2003, when they say he spent four weeks mulling the design of his campaign logo, consulting associates about what font it should use and whether it should include an American flag. (It does.)
His habit of soliciting one more point of view prompted one close adviser to say he had learned to wait until the last minute before weighing in: Mr. Kerry, he said, is apt to be most influenced by the last person who has his ear.
And whereas President Bush rarely makes management changes in his top circle of advisors, Kerry often does:
Mr. Kerry has also, in this campaign and earlier ones, repeatedly upended his staff, edging longtime advisers aside or dismissing aides outright when things threatened to run off the tracks. As a result, while some stalwarts from Mr. Kerry's first campaign have stuck with him since 1972, the senior staff of his campaign includes few people who call themselves his friends or are personally loyal to him.
And there is a hint of the Jimmy Carter micromanager management style in Kerry's approach:
Mr. Kerry's circle is as wide and changing as Mr. Bush's is constricted and consistent. He is always calling one more friend, and the campaign lineup has shifted so often that rumors of staff changes have become part of the daily gallows humor at Kerry headquarters on McPherson Square in downtown Washington.
Instead of delegating authority to a single adviser, Mr. Kerry relies on different people for different advice. And, he made a point of saying in the interview, none of them have too much authority. "I am always in charge," he said.
And though he is constantly seeking out advice, Kerry does not always follow it:
For all his eagerness to seek advice, Mr. Kerry does not always take it.
After he delivered a 35-minute speech at the University of Pittsburgh last spring, Gov. Edward G. Rendell of Pennsylvania gently tried to reinforce a message Mr. Kerry's aides had been struggling to impart.
"I said I thought it was a little long for an outdoor speech," Mr. Rendell recalled. "My rule of thumb for an outdoor speech is 15 to 20 minutes."
That night at the Philadelphia Convention Center, Mr. Rendell prepped Mr. Kerry by saying the crowd was full of party veterans and urging him to keep his speech short. He talked for 32 minutes.
When Mr. Kerry arrived in Allentown early this month for a rally at the fairgrounds, Mr. Rendell did not even mention his 20-minute outdoor rule. "I've given up," Mr. Rendell said. "He listens sometimes, and he doesn't listen sometimes."
Mr. Kerry spoke for 38 minutes.
September 26, 2004
Texans 24 Chiefs 21. In the biggest upset of the young NFL season, the Texans took advantage of a Trent Green blunder that resulted in Marcus Coleman's 102 interception return for a touchdown to edge the Chiefs at Arrowhead on Kris Brown's 49 yard field goal with 2 seconds to play. The Chiefs really should have won this game, as they were about to go up 21-6 when Coleman picked off Green. But David Carr overcame another mediocre performance for three quarters and played well down the stretch along with receivers Johnson, Gaffney, and newcomer Derick Armstrong to pull out in impressive victory. The Texans have the Raiders and Vikings the next two weeks at home, and the Texans have a shot in both games if they can slow the offenses of the opposition as they did in the Chiefs game.
Texas 35 Rice 13. The Horns pounded the gritty Owls in what amounted to a scrimmage as Texas continues to prepare for their October 9th showdown in Dallas with OU. As of now, I don't think Texas can throw well enough to move the ball consistently on OU and the Horns do not seem strong enough defensively to keep OU's offense in a low scoring game. But Texas does have serious offensive talent in Young and Benson, so a surprise in Dallas is possible. However, at this point, I just don't see how the Horns win that game. OU plays their first tough game of the season this coming Saturday against Texas Tech, while the Horns tune up against Baylor. Rice goes to San Jose State this Saturday, which is a very winnable game for the Owls.
Miami 38 Houston 13. THe Coogs improbably made a game of it with the Hurricanes into the third quarter, but the Miami defense ultimately proved too strong for the Coogs to score enough points to really worry the Canes, although the Coogs beat the spread comfortably. As usual, Miami's defense is big-time good, but the Canes' offense is not National Championship caliber this season. The Coogs go to Memphis this Saturday, which is definitely no picnic. Expect the Coogs to be 1-4 after this Saturday.
Raul Chavez improbably drove in a career-high five runs, Jason Lane went 3-for-4 with and scored twice, and Morgan Ensberg went 4-for-5 with two runs scored as the Stros hung on to their slim playoff hopes with an 11-7 win over the Brewers on Sunday afternoon at Miller Park in Milwaukee. I also think that the fact that my nephew Richard -- a huge Stros fan -- attended the game gave the Stros some good karma that contributed to the victory.
Jeff Kent and Lance Berkman also homered for the Stros to keep the heat on the Cubs and the Giants, who both lost on Sunday. The Stros are 1 1/2 games behind the Cubs and one game behind the Giants with six games to go at the Juice Box against the Cards and the Rockies this week.
Tim Redding (5-7), the third of eight Stros pitchers, was credited with the win after throwing a scoreless fourth inning in relief of Carlos Hernandez, who lasted only 2 1/3rd innings and appears to be fading as the season closes. Brad Lidge once again slammed the door with a 1-2-3 ninth to secure the win.
It's been three weeks since my last periodic review of the Stros hitters' runs created against average ("RCAA") and the Stros pitchers' runs saved against average ("RSAA" and RCAA explained here), and the updated statistics reflect why the Stros have not been able to overtake the Cubs and the Giants in the NL Wild Card playoff race. Here were the Stros hitters' RCAA numbers, courtesy of Lee Sinins, through Saturday, September 25:
Lance Berkman 65
Carlos Beltran 26
Jeff Bagwell 13
Mike Lamb 11
Craig Biggio 4
Jeff Kent 1
Eric Bruntlett 0
Willy Taveras 0
Chris Tremie 0
Jason Alfaro -2
Jason Lane -2
Chris Burke -3
Orlando Palmeiro -3
Richard Hidalgo -9
Adam Everett -12
Morgan Ensberg -13
Jose Vizcaino -14
Raul Chavez -19
Brad Ausmus -26
Berkman and Beltran continue to be among the league leaders (Beltran's RCAA would be 41 if his Royals number is included), and Lamb has really had a remarkable season overall, but the rest of the Stros hitters are now lagging. After a brief surge that pumped his RCAA to 16 at one one point, Bags has cooled off to a 13, ensuring that this will be his sixth straight season of declining production and that he will officially become the most overpaid player in terms of current production in the National League.
Similarly, after being the club's third best hitter for much of the season, Bidg has faded badly down the stretch (he is in the midst of an 0-22 trough) as his RCAA has declined to 4. None of the other Stros regular hitters are even average National League hitters, and Ensberg, Viz, Chavez and Ausmus are among the worst hitters among regular National League hitters. The lack of run production during the just concluded road trip reflects this lack of punch in the Stros lineup.
After topping out at 6th during their late August-early September surge, the Stros have fallen back to 9th in RCAA among the 16 National League teams. The Stros (17) are comparable to the Cubs (18) in RCAA, but are way behind the Giants (85), who are riding the crest of another incredible season by Bonds (a remarkable 152 RCAA!).
However, the Stros fading hitting has been picked up by the Stros' pitching staff, which has improved its RSAA signficantly over the past three weeks. The following are the pitchers individual RSAA:
Roger Clemens 35
Brad Lidge 23
Roy Oswalt 20
Wade Miller 10
Dan Miceli 6
Octavio Dotel 5
Andy Pettitte 5
Dan Wheeler 4
Chad Qualls 2
Darren Oliver 1
Russ Springer 1
Brandon Backe -1
David Weathers -1
Mike Gallo -3
Jeremy Griffiths -3
Chad Harville -3
Ricky Stone -3
Kirk Bullinger -6
Jared Fernandez -6
Carlos Hernandez -7
Pete Munro -9
Brandon Duckworth -10
Tim Redding -15
Clemens, Lidge and Oswalt all continue to be among the top pitchers in the National League, and Miceli has had a nice bump up since returning from the his bout with pink eye. Wheeler and Qualls have been unexpectedly solid contributors, and even Backe's -1 is remarkable given that he had never started a MLB game until a few weeks ago. Hernandez and Munro have faded, but that's to be expected of two pitchers that the Stros were really not counting on this season.
The Stros (45) remain in fourth among the 16 National League teams in RSAA,
but the Cubs (117) remain far ahead of the Stros in runs saved against average. Given the difference between the Stros and the Giants in RCAA, and between the Stros and the Cubs in RSAA, it really is remarkable and a testament to the Stros' resilience that they have remained in the Wild Card race all the way to the final week of the season. Based on the numbers, both the Cubs and the Giants should be well ahead of the Stros in the race.
Oh, and by the way, before you think about criticizing Gerry Hunsicker or Drayton McLane for the trades of Hidalgo and Dotel earlier this season. Please note that Hidalgo is currently sporting a negative 20 RCAA. That's worse than Chavez for goodness sakes and puts him among the ten worst hitters among regular players in the National League. I liked Hidalgo as much as the next fellow, but he's on the brink of playing himself out the league at this level of production.
And Dotel? His RSAA for the season is 7, which is about as good as Miceli, nowhere near Lidge's RSAA, and a significant drop in Dotel's production from the past three seasons. Inasmuch as it is always better to trade a pitcher before they bottom out so that you can get some real value for him (in this case, Beltran), Hunsicker and Drayton should be applauded for this move, too.
Roy O opens the Cardinal series on Monday night and Brandon Backe is scheduled to pitch the Tuesday game before the Rocket steps up on Wednesday. If the Stros can win the first two against the Cards, then this week could get interesting.
This Washington Post story reports on Washington lobbyist Jack Abramoff and public relations consultant Michael Scanlon's efforts in 2002 working with conservative religious activist Ralph Reed to help the state of Texas shut down an Indian tribe's El Paso casino, and then Messrs. Abramoff and Scanlon's incredible activities in persuading the tribe to pay $4.2 million to try to get Congress to reopen it once it had been closed. In the end, Messrs. Abramoff and Scanlon failed to get the casino reopened. Here is an earlier post from Charles Kuffner on the early stages of the investigation into the matter.
H'mm, let's see now. Work the political process to get a casino closed so that you can then work the political process to get the casino reopened. Not bad work if you can get it.
September 25, 2004
The Brewers' Wes Obermueller pitched a six-hitter for his first career shutout and the Brewers for all practical purposes finished the Stros' fragile playoff chances with an 8-0 victory over the Stros on Saturday at Miller Park in Milwaukee. The Stros are now 2.5 games behind the Cubs and 1.5 games behind the Giants in the Wild Card playoff race with seven games to go. Folks, it's over.
It is fitting that this type of game was the one that sealed the Stros' fate. Except for the first month of the season and then the late August-mid September streak that got the Stros back in the playoff race, the Stros -- with the exception of Berkman and Beltran -- have struggled hitting generally and with power in particular. Five singles and a double off of Wes Obermueller is simply not going to win many games during a race for a playoff spot.
Carlos Hernandez gets the start in the Stros' last road game of the season on Sunday afternoon against the Brewers. Then the Stros return to the Juice Box for three games series against the Cards and then the Rockies to finish the season that could have been.
In a surprise move, Plano, Texas-based Perot Systems Corp. announced Friday that Ross Perot Jr. had dropped CEO from his title at the Plano, Texas computer services firm and given up the founding family's operational control of the company.
Peter Altabef, 45, the company's general counsel, succeeds Mr. Perot as president and chief executive. Mr. Altabef has been a Perot Systems executive for 11 years, since joining the company from the Dallas office of law firm Hughes & Luce LLP, which has long been the Perot family's law firm. Del Williams, a longtime Perot family friend, succeeds Mr. Altabef as general counsel.
Mr. Perot, 45, will become chairman of the company, succeeding his father, Ross Perot, Sr., 74, who becomes chairman emeritus. The changes in top management allow the Perots to maintain input into the strategic direction of the company while leaving day-to-day management decisions to others.
Mr. Perot Sr. founded Perot Systems in 1988 after leaving his first company, Plano-based Electronic Data Systems Corp, which he sold to General Motors in 1984 in a $2.5 billion deal. Mr. Perot is generally credited with inventing the computer services industry.
Mr. Perot, Jr. is also chairman of the real estate investment company he founded, Hillwood Development Corp. He took the Perot Systems reins from his father in 2000 and earned generally positive performance reviews from on Wall Street.
This Chronicle article reports that a man wearing hospital scrubs and a white lab coat sexually assaulted three female patients at Methodist Hospital in Houston's Texas Medical Center over the past two weeks.
Disguised as a medical professional wearing blue scrubs and a stethoscope, the man entered the rooms of female patients on Sept. 15, 19 and 20 and asked them several questions before saying he wanted to perform pelvic examinations on them. The women were sexually assaulted under the guise of the false exams, and each episode lasted about ten minutes.
September 24, 2004
Roger Clemens pitched 7 plus innings of five hit, shutout ball and the Stros finally scratched out a run in the top of the 10th to beat the Brew Crew 1-0 on Friday night at Miller Park in Milwaukee.
The win allowed the Stros to keep pace with the Wild Card playoff race leading Cubs, who beat the Mets. Things are looking increasingly bleak for the Stros as they remain 2 1/2 games behind the Cubs with 8 games to go. The Stros would have to win at least 7 of those final 8 games to win a playoff berth if either the Giants or the Cubs just split their final 8 games. Although the Stros have won 7 of their last 10 games, the 8-2 Cubs have gained ground on them and the 7-3 Giants have also kept pace with them.
Nevertheless, Clemens was magnificent again as he dominated the Brewers for the second time in a week. The Rocket struck out 12 while walking three before giving way to Lidge and Miceli, who closed the game without giving up a hit. The Stros finally broke through with the winning run in the 10th as pinch-runner Willie Taveras went from first to third on Carlos Beltran's bloop single and then scored on Bidg's sac fly.
After a lull of over a week now, the Stros need to start hitting the ball and scoring runs quickly as Pete Munro takes the mound in the Saturday afternoon game against the Brewers' Wes Obermueller(5-8/6.35). The Stros have penciled in Carlos Hernandez to start the Sunday afternoon game.
Max Boot is a Senior Fellow of National Security Studies at the Council of Foreign Relations, and an award-winning author and former editorial features editor of The Wall Street Journal. Mr. Boot is an expert on national security policy and U.S. military history and technology.
In this LA Times op-ed, Mr. Boot gives an interesting historical perspective to the criticism levied against the Bush Administration recently for its tactical decisions in the war against the Islamic fascists:
Reading the depressing headlines, one is tempted to ask: Has any president in U.S. history ever botched a war or its aftermath so badly?
Actually, yes. Most wartime presidents have made catastrophic blunders, from James Madison losing his capital to the British in 1814 to Harry Truman getting embroiled with China in 1950. Errors tend to shrink in retrospect if committed in a winning cause (Korea); they get magnified in a losing one (Vietnam).
Despite all that's gone wrong so far, Iraq could still go either way. (In one recent poll, 51% of Iraqis said their country was headed in "the right direction"; only 31% felt it was going the wrong way.)
Mr. Boot then reviews the blunders that two of our most revered Presidents -- Lincoln and FDR -- made in connection with their wars:
Lincoln is remembered, of course, for winning the Civil War and freeing the slaves. We tend to forget that along the way he lost more battles than any other president: First and Second Bull Run, Fredericksburg, Chancellorsville, Chickamauga?. The list of federal defeats was long and dispiriting. So was the list of federal victories (e.g., Antietam, Gettysburg) that could have been exploited to shorten the conflict, but weren't.
As the Union's fortunes fell, opponents tarred Lincoln with invective that might make even Michael Moore blush. Harper's magazine called him a "despot, liar, thief, braggart, buffoon, usurper, monster, ignoramus." As late as the summer of 1864, Lincoln appeared likely to lose his bid for reelection. Only the fall of Atlanta on Sept. 2 saved his presidency.
Most of the Union's failures were because of inept generalship, but it was Lincoln who chose the generals, including many political appointees with scant military experience. He ultimately won the war only by backing Ulysses Grant's brutal attritional tactics that have often been criticized as sheer butchery.
FDR had some doozies, too:
Roosevelt had more than his share of mistakes too, the most notorious being his failure to prevent the attack on Pearl Harbor, even though U.S. code breakers had given him better intelligence than Bush had before Sept. 11. FDR also did not do enough to prepare the armed forces for war, and then pushed them into early offensives at Guadalcanal and North Africa that took a heavy toll on inexperienced troops. At Kasserine Pass, Tunisia, in 1943, the U.S. Army was mauled by veteran German units, losing more than 6,000 soldiers.
The Allies went on to win the war but still suffered many snafus, such as Operation Market Garden, a failed airborne assault on Holland in September 1944, and the Battle of the Bulge three months later, when a massive German onslaught in the Ardennes caught U.S. troops napping.
Though FDR bore only indirect responsibility for most of these screw-ups, he was more directly culpable for other bad calls, such as the decision to detain 120,000 Japanese Americans without any proof of their disloyalty. Like Lincoln, who jailed suspected Southern sympathizers without trial, Roosevelt was guilty of civil liberties restrictions that were light-years beyond the Patriot Act. And, like Bush, Roosevelt didn't do enough to prepare for the postwar period. His failure to occupy more of Eastern Europe before the Red Army arrived consigned millions to tyranny; his failure to plan for the future of Korea and Vietnam after the Japanese left helped lead to two wars that killed 100,000 Americans.
Mr. Boot closes by placing the current criticism of the Bush Administation's tactical decisions in Iraq into historical perspective:
None of this is meant in any way to denigrate the inspired leadership of two great presidents. Both Lincoln and Roosevelt were brilliant wartime leaders precisely because they were able to overcome adversity and inspire the country toward ultimate victory with their unflagging will to win. That's what Bush is trying to do today.
And, no, I'm not suggesting Bush is another Lincoln or Roosevelt. But even if Bush hasn't reached their lofty heights, neither has he experienced their depths of despair. We are losing one or two soldiers a day in Iraq. Lincoln lost an average of 250 daily for four years, Roosevelt 300 daily for more than 3 1/2 years. If they could overcome such numbing losses to prevail against far more formidable foes than we face now, it's ludicrous to give in to today's fashionable funk.
"Colossal failures of judgment" are to be expected in wartime; I daresay even John Kerry (whose judgment on Iraq changes every 30 minutes) might commit a few. They do not have to spell defeat now any more than they did in 1865 or 1945.
After scoring five runs in the first 26 innings of their key series with the Giants, the Stros imporbably rallied for five runs in the ninth around Lance Berkman's three run yak to pull out a dramatic 7-3 win over the Giants in a wild one on Thursday night in San Francisco.
With the win, the Stros are 2½ games behind the Cubs, who took a half-game lead over the Giants in the National League Wild Card race by winning on Thursday. The Giants also dropped 1½ games behind Dodgers in the National League West Division race, which is about to get very interesting as the Giants play the Dodgers in six of their final nine games.
The home run was sweet for Berkman, who had several adventures while pursuing balls hit by Barry Bonds during the game. He badly misplayed Bonds' triple to right in the fifth and then fell on his backside while catching Bonds' drive in the seventh. Although Berkman's natural position is first base, he actually is an above-average outfielder. But man, he sure does look funny sometimes going after balls in the outfield.
Even Berkman's tater was unusual, as he lifted it high in the air and it barely reached the first row of seats in the elevated arcade on the right-field wall. Jason Lane then followed with an RBI pinch hit single and Raul Chavez's sacrifice bunt also plated a run. Carlos Beltran also busted out of a mini-slump with three hits for the Stros, who ended up with 10 hits despite only having five through eight innings against Giants starter Jason Schmidt.
The game got a bit chippy after Berkman's yak in the ninth when Giants reliever Dustin Hermanson and manager Felipe Alou were ejected after Hermanson hit Jeff Kent with the first pitch after Berkman's tater. Both clubs had been warned after a bench-clearing incident in the third, when Stros' starter Brandon Backe dusted off Bonds with a low pitch. Though there were no punches or ejections in that incident, Bonds went nuclear over the low throw, gesturing and yelling at Backe and nearly sticking his fingers in the mask of the home plate umpire.
Dan Miceli got the win by getting one out in the eighth, and Brad Lidge secured the win by striking out three in the ninth as a parade of six Stros relievers bailed starter Backe out after he could last just 2 1/3rd innings.
The Stros now go to Milwaukee for a weekender with the Brew Crew as the Rocket opens the series in going for this 19th victory. Pete Munro and then "who knows" follow in the next two games of the Brewers series before the Stros return to the Juice Box to close out the season with six games against the Cards and the Rockies.
September 23, 2004
The Wall Street Journal ($) is reporting today that brokerage house Lehman Brothers Holdings Inc. is close to a $220 million settlement to resolve a class-action lawsuit alleging that it and other big brokerage firms participated in a scheme with Enron Corp. executives to mislead shareholders. Lehman's propoed settlement follows a similar settlement in July in which Bank of America Corp. agreed to pay $69 million to settle similar allegations.
Bank of America and Lehman were underwriters in just a handful of Enron-related deals, so attorneys involved in the case believe their roles (and thus their settlement payments) are small in comparison to firms like Citigroup Inc. and J.P. Morgan Chase & Co. who did more Enron-related deals. Citigroup and J.P. Morgan are among the firms that have reserved billions of dollars to cover Enron-related exposure.
Kicking off a capital campaign, Baylor College of Medicine announced Wednesday it has received a $35 million gift from Baylor trustee and longtime Houstonian Dan Duncan to kick off the building of a new Baylor-operated clinic in the Texas Medical Center.
Mr. Duncan's donation will be paid over 10 years and represents about a third of the clinic's estimated cost. The clinic will be between 250,000 to 350,000 square feet and finished by late 2007 at a cost of about $90 million. The clinic will offer a full range of medical services from cardiology to ophthalmology, checkups, lab tests, and day surgery. The clinic will also allow patients to receive diagnosis and treatment in one place for conditions that cross specialties.
The University of Texas Health Science Center at Houston earlier this month announced the purchase the Hermann Professional Building to use as its outpatient clinic and Methodist Hospital has plans to build such a clinic, a plan that was part of the reason that Baylor and Methodist ended their 50 year relationship earlier this year.
With the construction of the Juice Box and Reliant Stadium, one of the local political footballs that is lobbed around Houston from time to time is the following issue: What should we do with the Astrodome?
The local sports and convention corporation spends about $1.5 million annually to host a small number of events at the Astrodome and, even if the facility were to be mothballed, the corporation would spend $500,000 annually in maintaining it. Even razing it would be expensive, probably costing $10 million to $20 million. Moreover, Harris County still owes more than $50 million on bonds issued to pay for renovations at the Astrodome during the 1980s (remember Bud Adams?), and that debt will mature in 2012.
Consequently, The Astrodome is a knotty problem. It's expensive to maintain and, quite frankly, the County is not spending the money to maintain it properly. As a result, it is a dump at this point, and it looks haggard next to gleaming Reliant Stadium and the new Reliant Convention Center that are next door neighbors to the Dome in Reliant Park. Unless something can be done to make some other use of the grand ol' dame of Houston sports facilities, most Houstonians would rather see it blown up so that the space it uses could be transformed into more parking at Reliant Park.
However, this Chronicle article reports that the company looking to redevelop the Astrodome is planning on converting it into a 1,000 room convention hotel. The Astrodome hotel would be the second largest hotel in town, second to the 1,200 room Hilton Americas Convention Hotel next to the George R. Brown Convention Center in downtown Houston.
Although the Gaylord Texan Hotel in Grapevine near DFW Airport in the Dallas-Ft. Worth area is an existing prototype of what a retrofitted Dome could be, my sense is that this proposal for the Astrodome is not likely to occur without a substantial subsidy from Harris County. Consequently, let's see if the Chronicle or any other Houston news media discloses the true taxpayer cost of retrofitting and maintaining the Dome in comparison to alternative uses of the property. Given the Chronicle's abysmal performance in providing accurate information regarding the cost of the Streetcar Named Disaster, my expectations are not high.
John Keegan is England's foremost military historian and, for many years, was the Senior Lecturer at the Royal Military Academy at Sandhurst. His book -- The Second World War -- is arguably the best single volume book on World War II and his book The Face of Battle is essential reading for anyone seeking an understanding of the history of warfare. His newest book -- The Iraq War -- was published earlier this year, and here is a post from June on one of Mr. Keegan's earlier op-ed's on the Iraq War.
In this London Telegraph op-ed, Mr. Keegan weighs in on the current situation in Iraq, which has been the subject of these Victor Davis Hanson and James Fallows posts from over the past several days. Essentially, Mr. Keegan notes that mistakes have been made, but points out that the situation could be far worse than it is.
Inasmuch as England's Prime Minister Tony Blair is currently bearing the same criticism over the Iraq War that President Bush is enduring from similar forces in the U.S., Mr. Keegan first addresses the motives behind such criticism:
It is difficult to understand the motives of those who are making life difficult for the Prime Minister. Some are legalists who continue to insist that the war was launched without justification in international law and wish to punish those responsible for their transgressions.
T hey belong to that tiresome but increasingly numerous tribe who seem to think that men are made for laws and not laws for men. In any case, their arguments are contested, since many (including the Attorney General) hold that UN Resolutions 678, 687 and 1441 do in fact provide justification for the taking of military action against Saddam.
Some of Tony Blair's castigators are old-fashioned anti-militarists, usually with a strong anti-imperialist tinge, who deprecate the use of force as an instrument of foreign policy in almost any circumstances. They ignore the fact that Saddam was in breach of at least nine UN resolutions and flaunted his defiance. They also failed to explain why they in effect would support Saddam's continuance in power and the maintenance of his cruel and dictatorial rule over the Iraqi people.
Some anti-Blairites are, of course, simply playing internal Labour Party politics. They dislike the Prime Minister's unwritten contract with the middle classes, his refusal to institute progressive taxation and his disinclination to take back into public ownership any of the denationalised industries. They are usually anti-American as well, and take pleasure at the spectacle of President Bush's failure to translate the victory of 2003 into a successful transition to stable government.
Mr. Keegan then goes on to point out one of the big mistakes that the American military made during the occupation of Iraq:
It was a serious mistake to dissolve the Iraqi police force and to disband the Iraqi army. The reasons for doing so seem to have been based on distant memories of the occupation of Nazi Germany in 1945. The Ba'ath party was identified as the Iraqi version of the Nazi party and the view taken that no supporters of the old regime should be allowed to exercise power under a new regime.
That policy may also have drawn on an idealistic but naive American belief in the existence of a potential democratic majority inside any repressed population, ready to elect an enlightened government if given the chance to vote. The effect in practice was to throw into unemployment hundreds of thousands of young Iraqi males, instantly discontented but skilled in the use of weapons. As almost every Iraqi male has access to weapons, the result was to make for disorder.
However, the disorder in Iraq is isolated to the Sunni Triangle, and Mr. Keegan notes that there is precedent in the Islamic world for this type of disorder:
The trouble that persists is centred on the so-called Sunni triangle, west of Baghdad, and is fomented by ex-Ba'athists who fear that properly conducted elections will exclude them from the position of dominance they were accustomed to enjoy in the Saddam years. Such elections are scheduled for January and that timetable is the spur to the current spate of bombings and shootings, which take as their principal targets those Iraqis who are brave enough to seek enlistment in the new police force and the new army.
Other dissidents are Shia militants, many followers of the cleric Moqtada al-Sadr, who fear a revival of Sunni dominance through American-sponsored governmental means and who, in any case, regard Western forms of democratic government as un-Islamic. Their aims, if not their beliefs, are supported by the foreign infiltrators, particularly from Syria but also from Iran and the anti-royalist regions of Saudi Arabia, who want nothing less than the restoration of the seventh-century caliphate and a return to the rule of God on earth.
Britain has been here before. In the 1920s, at the beginning of its exercise of the League of Nations Mandate over Iraq, it had to pacify a disturbed ex-Turkish Ottoman territory in which, as the first British governor complained, every man had a rifle. Then, as now, Shia and Sunni were at loggerheads and the whole Muslim world was disturbed by the fall of the caliphate, brought about by Kemal Ataturk's dissolution of Islamic rule in Turkey.
Nevertheless, Mr. Keegan notes that Iraq is a secular state and that its population is one of the best educated in the Middle East, and concludes by pointing out an essential truth regarding the calculated use of force:
When not silenced by the threat of violence from extremists and criminals, [most Iraqis] are also ready to say that they continue to regard the Western troops in their midst as liberators. Western so-called progressives who denounce the war of 2003 as a mistake are in fact illiberal and reactionary. They should be ashamed of themselves. Denunciation of war-making is much more fun than the recognition of the truth that the calculated use of force can achieve good. The United States and Britain must not be deterred.
The win allowed the Giants to remain a half game in front of the Cubs in the NL Wild Card playoff race and to pull within a half game of the Dodgers in the NL West Division. With the loss, The Stros fell three games behind the Giants and two and a half games behind the Cubs in the Wild Card race. For all practical purposes, the Stros late season surge to make the playoffs is over.
Roy Oswalt -- pitching despite a rib cage injury -- had won his last five decisions, but never got into a rhythm Wednesday night. He allowed 10 hits, five earned runs, struck out three and walked four in 5 2-3 innings.
Meanwhile, the Stros biggest bugaboo for most of this season -- lackluster hitting -- has reappeared with a vengeance during this series. Three runs on nine hits in two games is simply not going to get it done against the Giants.
The Stros take a flyer on Brandon Backe this afternoon against the Giants' Jason Schmidt, which looks like the mismatch of the week. Schmidt has not been as dominant over the past month as he has for most of the season, but the way the Stros are hitting, they are a convenient cure for Schmidt's problems. The Stros go to Milwaukee for a weekender with the Brew Crew after the game. When does OktoberFest begin?
September 22, 2004
This is one resilient storm.
A Travis County, Texas grand jury indicted three people closely linked to Houston-based U.S. House Majority Leader Tom DeLay Tuesday along on charges of illegally using corporate money to help Republican Texas House candidates during the 2002.
The indictments focused on the DeLay-founded Texans for a Republican Majority Political Action Committee, which raised corporate money to help Republicans take control of the Texas House for the first time since Reconstruction. TRMPAC chief John Colyandro, fund-raiser Warren RoBold and DeLay political director Jim Ellis were the DeLay aides that were indicted. Travis County District Attorney Ronnie Earle, who is a Democrat, said the investigation continues into possible campaign-finance violations by TRMPAC, the Texas Association of Business and the election of GOP Texas Speaker Tom Craddick of Midland. This was the third grand jury to hear the investigation and Earle disclosed the investigation will continue when a new grand jury is impaneled in October. He would not say whether DeLay is a target of the investigation.
TRMPAC raised almost $600,000 from corporations, which usually contributed at fund-raisers in which DeLay was the featured guest. The money was used to pay for additional fund-raising and political activity to help Republican candidates win about 20 House seats. Texas Ethics Commission opinions have said corporate money can be used only to pay a political committee's basic expenses, such as rent and utilities. However, TRMPAC supporters contend that the state law is trumped by the First Amendment of the U.S. Constitution and applicable federal law at the time.
The Stros' chances for the Wild Card playoff spot were pushed to the brink of extinction Tuesday night as the Giants pounded the Stros decisively 9-2 in City by the Bay.
The loss puts the Stros two games behind the Giants in the Wild Card race, and 1.5 games behind the second place Cubs in that race. The loss stopped the Stros' four-game winning streak and also allowed the Giants to to close within 1½ games of the NL West-leading Dodgers, who lost 9-4 to the Padres. The Giants are now 23-8 against the Astros since the 2000 season.
After Bags and Berkman nailed back-to-back yaks in the Stros' first inning, Brett Tomko (11-6) dominated the Stros as he pitched 8 2/3rds innnings of four hit ball and struck out five and walked three.
The Giants responded to the Stros mini-uprising in the first with three runs in the bottom half on three hits. Incredibly, Stros manager Phil Garner elected to have Carlos Hernandez pitch to Bonds with runners on second and third, and Bonds' hard roller got past shifted shortstop Jose Vizcaino for an error and two runs. The Giants then batted around in their four-run fourth to put the game away.
Hernandez, who has not won in his last four starts, lasted only only 2 1/3 innings, which is his shortest outing of the season. Brandon Duckworth came in to pitch a couple of innings just to make sure that the Giants would put this game out of reach.
Sore-ribbed Roy O takes the mount tonight in a must win game for the Stros if they are to stay in the Wild Card race. If they can pull this one out, then they can try and figure out how Brandon Backe can outpitch Jason Schmidt in the Thursday afternoon game.
September 21, 2004
James Fallows is the National Correspondent for The Atlantic Monthly, where he has worked for more than twenty years. He is one of the most important and gifted investigative reporters of our time. During his long and storied career, Mr. Fallows has written extensively on such diverse topics as defense policy, economics, computer technology, politics, and immigration.
Over the past two years, Mr. Fallows has written a series of investigative articles in The Atlantic in which Mr. Fallows argues that the Bush Administration has squandered valuable resources and opportunities as a result of its drive to war against Iraq. In this Atlantic Monthly ($) interview, Mr. Fallows elaborates on his views regarding the mistakes that he believes that the Bush Administration has made in pursuing the Iraqi front in the war on Islamic fascism. It is a valuable and thought provoking piece from a serious reporter and thinker, and the following are several tidbits of the interview to arouse your curiosity.
On why Mr. Fallows contends that 2002 was the Bush Adminitration's "lost year:"
I was trying to get at what happened in one surprisingly short period, a little over a year. This was the time between America's immediate reaction to being attacked on 9/11, and its situation barely a year later, when so much of the treasure of the countryï¿½its military manpower, its government, its international influenceï¿½was concentrated on the single goal of removing Saddam Hussein.
At the beginning of 2002, the U.S. had a vast range of resources and opportunities at its disposal. But over the course of that year, we lost or traded away a number of those, including: the ability to conceive of the terrorist threat in the broadest possible terms; the ability to draw upon deep reserves of international support; the ability to rely upon national unity; the ability to field a strong and agile military; and the ability to put government financial resources to effective use. It's the loss of all those opportunities that amounted to a lost year.
On dissent within the Bush Administration regarding the Iraq policy, and the failure of such dissent to be passed up to the President:
My own personal judgment is that for decades into the future, political scientists and historians will study the decision-making process that led to the Iraq war as a case study in failure. Or at least deliberative disfunction.
You have a president who has made a point of neither inviting challenge on points of detail nor himself seeking out significant facts. John Kennedy was famous for picking up the phone and calling a third-level person in the State Department to ask, "What's really going on in Laos?" Bush has never shown an inclination to do that kind of thing and, in fact, has prided himself on not being bogged down by the details.
The result of all this is a kind of path of folly where the people who could say, "Wait a minute, is this a good idea?" were systematically excluded from the decisions, and a smaller and smaller group of people reassured each other on the basis of hope rather than evidence. As a procedural matter, it started with the president's own personality and intellectual traits and radiated out from there.
On the failures relating to the post-war occupation of Iraq:
Historically, a tremendous strength of the United States was that it would start thinking about what would happen after a war while the war was still going on. I mentioned in my previous article that by 1942, when the U.S. had barely gotten into the European war and was still on the losing side of the Pacific war, it set up a school of military government for postwar Japan and Germany. Within the military this same tradition was very much honored in the Iraq war. There were very, very careful efforts to plan for a postwar occupation. Through a combination of arrogance and failure of imagination, none of those plans was put to use until now, when they're suddenly being looked at. One of many things I still find puzzling is why the people who were most determined that the war succeed and that Iraq become a successful example were so totally uninterested in those efforts to make the occupation work. Of course I'm thinking of people like Paul Wolfowitz, Dick Cheney, Condoleeza Rice, and President Bush.
On whether America is a safer place as a result of the war in Iraq:
The most impressive thing to me in reporting this article is that there is virtually no dissent among national security professionals on the idea that invading Iraq has made America much less secure. I think that's an underappreciated point in the general publicï¿½to put it mildly. Except for those who have an occupational obligation to support the Administration's policy, everybody in the national security business says, "Of course, this has made the U.S. more vulnerable than it was before." Our army is more overextended and weaker; our allies are much less on our side; the source of opposition is much, much, much more intense than it was before. And we've lost time in dealing with Iran and North Korea.
Mr. Fallows is lengendary in media circles for the Pentagon sources that he developed during the weapons system battles of the early 1980's that challenged many of the Pentagon's conventional theories of how the American military should fight wars, and he continues to cull similar networks regarding his research on the Iraq war:
Two of the long pieces I've done in the last two years ("The Fifty-first State" and "Blind Into Baghdad") and one short one ("The Hollow Army") have brought a lot of people out of the woodwork. A lot of people have written to me after those articles appeared, saying, "Oh, you don't know the half of it." Email really is wonderful! There has also been a nucleus of people I've known for a long time as they've risen through various ranks of the military and the national security community. There has been a kind of ongoing conversation among these people about the way America responds to different foreign policy threats. The fact that these people proved to be right early on about Iraq has made their view increasingly interesting to me, so I've kept in close touch with them. There are networks of people who, as they gain confidence, know they can talk to you without having their views distorted or, in certain cases, their cover blown. You're able to have more sustained talks with them.
Mr. Fallows comments on criticism of Donald Rumsfeld's "light and fast" military, a theory that Mr. Fallows has reported on extensively for much of his reporting career:
What is behind Rumsfeld's "light and fast" military ethos? It seems like there's a lot of evidence that it doesn't seem to be able to stabilize a country in the long term. I'm just wondering, why are we still seeing troop reassignments in that same model?
The "light and fast" approach in general is a good one, and I think that part of Rumsfeld's reform doctrine has been a valuable part of the fight he's been trying to lead. The difficulty is that he has apparently cared more about winning that symbolic battle than thinking carefully about this particular war in this particular countryï¿½Iraq. It's certainly the case that these light, fast units are wonderful for destabilizing regimes or for lighting strikes. But the job in Iraq, as it was conceived by the administration, was a different one. It wasn't just about getting rid of Saddam Hussein and then leaving. It was about transforming the country altogether. That's a very different undertaking. Rumsfeld apparently has a longstanding disagreement with the Army establishment. He thought they were too slow in changing their ways. He let that spill over into ignoring, disregarding, and overruling their very prescient warnings about what it would take to actually run Iraq. In his past life, he would have ridiculed pointy-headed theorists, but his regime within the Pentagon has meant the triumph of the pointy-headed theorist over the people who actually have to occupy territory and pacify neighborhoods.
Mr. Fallows comments on the festering problem of Iran:
Iran is in a very, very unstable area. It's a major power in that area, and it's acquiring weapons while it's surrounded by also very well-armed powers. So there are a number of dangers: will Israel feel it needs to take preemptive action against Iran? Will the Saudis feel they need to get nuclear weapons if Iran has them? It's just an inherently unstable area compared even to Asia.
And on allegations that Mr. Fallows' series of articles on Iraq have been a partisan attack against the Bush Administration?:
What I've been doing over the last two years is looking at America's military and diplomatic response to the pressures it's come under since September 11. This article is a logical continuation of the other work I've been doing about how Iraq happened, how things could have gone better, how they could have gotten worse. Part of The Atlantic's historic role has been to explain, as best we can understand, the big issues of our time. During the Vietnam War, The Atlantic was not a partisan magazine, but it published an increasing number of articles saying, "How could this war have happened? How could it have unfolded in just this way? How is it likely to end?" The magazine's coverage of that war was not partisan, even if the governments then in powerï¿½first Democrats, then Republicansï¿½were unhappy about some of its implications.
As I said a while ago, I think the road to Iraq will be studied as a specimen of a failure of decision-making. And while that is a hostile judgment about the nature of the current administration, I'm not intending it as a partisan judgment. If Democrats had done the same thing I would be just as critical. What I'm saying is that in carrying out the public trust and committing the nation to war, the current Administration did not perform well. They ignored crucial information, they fooled themselves on certain important points, and they did not, based on the available evidence, consider the broadest possible view of America's strengths and weaknesses and how to defend them.
Read the entire interview. Regardless of your position on the Bush Administration's handling of the war against the Islamic fascists (and mine is more sympathetic than Mr. Fallows'), Mr. Fallows' views are well-reasoned and worthy of serious consideration. Interestingly, the flawed decision-making process that Mr. Fallows contends took place in regard to the Iraq war is similar to the lack of policy analysis in developing and finalizing domestic policy that former Bush Administration Treasury Secretary Paul O'Neill described in his earlier book, "The Price of Loyalty."
Charles A. ("Charlie") Beckham Jr., a partner with Haynes and Boone LLP in Houston, has been elected as chair of the bankruptcy law section for the State Bar of Texas for a term running through June 2006.
Deborah D. Williamson, a shareholder with law firm Cox Smith Matthews in San Antonio, will serve as vice-chair and will take over the chair position after Mr. Beckham's term expires.
Mr. Beckham has worked for over 20 years in bankruptcy law in both El Paso and Houston, and has represented primarily lenders and other parties in many Chapter 11 bankruptcy cases, particularly in the oil and gas industry. He currently represents the co-chair of the Creditors Committee in the Enron Corp. chapter 11 case in New York.
The bankruptcy law section of the State Bar of Texas is an 800-member organization and is one of the most active sections of the State Bar of Texas in terms of providing education programs for the legal profession and the public.
Victor Davis Hanson's latest NRO op-ed reminds us that the fog of war often makes it difficult to evaluate progress during war. However, Professor Hanson points out that the difficulties of battle should not deter us from focusing on finishing the Iraqi stage of the war against Islamic fascism:
It is always difficult for those involved to determine the pulse of any ongoing war. The last 90 days in the Pacific theater were among the most costly of World War II, as we incurred 50,000 casualties on Okinawa just weeks before the Japanese collapse. December 1944 and January 1945 were the worst months for the American army in Europe, bled white repelling Hitler's last gasp in the Battle of the Bulge. Contemporaries shuddered, after observing those killing fields, that the war would go on for years more. The summer of 1864 convinced many that Grant and Lincoln were losers, and that McClellan alone could end the conflict by what would amount to a negotiated surrender of Northern war aims.
It is true that parts of Iraq are unsafe and that terrorists are flowing into the country; but there is no doubt that the removal of Saddam Hussein is bringing matters to a head. Islamic fascists are now fighting openly and losing battles, and are increasingly desperate as they realize the democratization process slowly grinds ahead leaving them and what they have to offer by the wayside. Iran, Syria, Lebanon, and others must send aid to the terrorists and stealthy warriors into Iraq, for the battle is not just for Baghdad but for their futures as well. The world's attention is turning to Syria's occupation of Lebanon and Iran's nukes, a new scrutiny predicated on American initiatives and persistence, and easily evaporated by a withdrawal from Iraq. So by taking the fight to the heart of darkness in Saddam's realm, we have opened the climactic phase of the war, and thereupon can either win or lose far more than Iraq.
The world grasps this, and thus slowly is waking up and starting to see that if it walks and sounds like an Islamic fascist ? whether in Russia, Spain, Istanbul, Israel, Iraq, or India ? it really is an Islamic fascist, with the now-familiar odious signature of car bombings, suicide belts, and incoherent communiqués mixed with self-pity and passive-aggressive bluster.
For all these reasons and more, something like "See ya, wouldn't want to be ya" is the absolute worst prescription for Iraq ? both for America and those Iraqis who are counting on us in their historic efforts to reclaim their country from barbarism. Amid the daily car bombings in Iraq, murder in Russia, and slaughter in the Middle East, we cannot see much hope ? but it is there, and we are winning on a variety of fronts as the world continues to shrink for the Islamic fascist and those who would abet him.
While the Stros are enjoying a banner year at the gate, the Texas Rangers -- despite their best season on the field in years -- continue to struggle at the gate. This Dallas Morning News article explores why.
September 20, 2004
In an interesting special section on the business of football in today's Wall Street Journal ($), one of the section's articles addresses the controversy generated earlier this year when a McKinsey & Company report bolstered longtime Rice University faculty advocacy for downgrading Rice's expensive NCAA Division I athletic program to Division III (i.e., no athletic scholarships). As the WSJ article notes, Rice's legacy in intercollegiate athletics is formidable:
Rice has a long football tradition. It began playing other schools in 1912, and it helped form the Southwest Conference in 1914. In several ways, its standards serve as a model for other schools. It has had no major violations cited by the National Collegiate Athletic Association, and its athlete graduation rate of 81% in 2003 was one of the highest in Division I-A. Its baseball team won the College World Series last year.
But the development in the big-time college and professional football over the past 40 years has not been kind to Rice:
But questions about the high costs of big-time sports and the admissions trade-offs necessary to bring in star athletes have gained momentum since the 1960s. Around that time, rivals such as the University of Texas and Texas A&M University exploded in size, gaining huge recruiting advantages, according to the McKinsey report. The birth of the Houston Oilers professional team in 1960 drew fans away from Rice games. In the 1960s and '70s, faculty members voiced concerns about athletes' academic caliber.
More recently, schools in the conferences that participate in the college Bowl Championship Series -- the Rose, Sugar, Orange and Fiesta Bowls -- have received a much larger share of the football revenue from bowl-ticket sales and TV-broadcasting rights than schools such as Rice, gaining further advantages.
Rice's small size exacerbates the burden of competing with much larger schools in Division I athletics:
To understand just how large Rice University's 70,000-seat football stadium is, consider this: It could seat all the school's undergraduate alumni, living and dead -- and it wouldn't even be half full.
And to understand the financial burden that football places on the private Houston university, consider this: Largely because of the football team, the school's athletic department runs annual deficits in the millions of dollars.
While the dilemmas at Rice are magnified because of its size -- with about 2,850 undergraduates, it is the smallest school in Division I-A after the University of Tulsa in Oklahoma -- and high academic standards, they illustrate problems other colleges and universities face as they grapple with the admissions pressures and skyrocketing budgets of big-time athletics.
The McKinsey & Co. report's conclusion is bleak regarding Rice's future in Division I:
Without improved gate receipts, better support from a group of alumni who are already contributing more than ever, or membership in a [Bowl Championship Series] conference with its much larger annual payouts, the economic outlook is bleak.
And the report is not optimistic regarding the prospects for change in the financing or purpose of Division I athletics:
The large and growing financial incentives among NCAA teams (whether formally controlled by the NCAA or not), combined with multimillion dollar coaching salaries, make Division I athletics look increasingly like a business instead of an extracurricular activity.
The report calculates that, including the increased financial aid an athlete receives compared with an average Rice student, the deficit between revenue and expenses in the athletic department has ballooned to more than $10 million a year. Football takes the largest share of the blame: While it produces about $2 million in annual revenue, it was responsible for nearly $4 million of that deficit in 2002, McKinsey calculates.
Rice is not alone. The McKinsey report notes that fewer than a dozen schools, regardless of their division, profit from their sports programs. And on average, a football team costs more than three times as much to support as a basketball team, and more than nine times as much as a baseball team.
William C. Friday, chairman of the Knight Foundation Commission on Intercollegiate Athletics, a sports-reform group, cited a NCAA study showing that overall Division I-A schools have seen athletic department expenses exceed revenues in each year from 1993 to 2002, according to his testimony in May before the U.S. House Subcommittee on Commerce, Trade and Consumer Protection.
The commission's last comprehensive report, in June 2001, said that at more than half of Division I-A schools in 1999, athletic department expenses exceeded revenue by an average of $3.3 million, a margin that widened by 18% from 1997.
Read the entire article. The Rice Board of Trustees ultimately decided to continue making a go of it in Division I. But the problem will not go away. As the University of Chicago (a former Big 10 member) and several other great private institutions have proven, Division I athletics is unnecessary to maintain financial support and public relations benefits for top flight universities. Although Rice's Board of Trustees is dominated by many older Houstonians who remember the bygone days of Rice's Division I football glory, those members need to realize that those days are gone and that the marginal benefits of running large deficits in the athletic department are not commensurate with the benefits of maintaining a Division I program. Division III is the answer for Rice, and the sooner, the better.
September 19, 2004
With the Stros knowing that the Giants and the Cubs had already won their games on Sunday afternoon, Roger Clemens threw eight innings of two hit ball in leading the Stros to a 1-0 win over the Brew Crew on Sunday night at the Juice Box.
In sweeping the Brewers in the three game weekend series, the Stros kept pace in the National League Wild Card playoff race in which they trail the Giants by a game and the Cubs by a half game. The Stros are off on Monday as they travel to San Francisco for their big three game series with the Giants beginning on Tuesday.
Clemens was magnificent in winning his 18th game of the season, tying teammate Roy O for the most wins in the National League, striking out 10, and walking two. Brad Lidge struck out the three Brewer batters in the ninth in gaining his 25th save in 29 attempts.
Carlos Hernandez will pitch the first game for the Stros in the Giants series, and then it's anyone's guess who the Stros will pitch in the next two. Keep your fingers crossed that Roy O's rib cage feels good enough for him to pitch one of those final two games of the Giants series.
Lions 28 Texans 16. "Uh-oh" is the barely audible sound that you will hear emanating from Reliant Park this week. Not only did the Texans lose their second straight, but they once again showed the inconsistency that could really make this a long season. The offense -- particularly QB David Carr -- was horrible in an excruciating first half that mercifully (for the fans, anyway) ended with the Lions ahead 7-3. Then, in the second half, Carr played reasonably well and threw his first two TD passes of the season only to have the Texans' defense go into the tank and the kickoff return team give up a 99 yard kickoff return for a Lions' TD. Given that the Texans play the Chiefs, Raiders, Vikings and Titans in the next four games, a 1-5 or 0-6 start is looking quite likely. My sense is that the Texans' honeymoon with Houston is quickly coming to an end.
Cowboys 19 Browns 12. Incredibly, the Cowboys turn it over four times and still win, primarily because the Browns' QB Jeff Garcia was 8-28 for 78 yards passing. I'm glad I resisted the urge to take him as my reserve QB in my Fantasy Football League draft.
Texas Aggies 27 Clemson 6. The Ags finally won a game under Coach Franchione against a reasonably tough opponent, although Clemson does not appear to be comparable to top Big 12 caliber opposition. However, the Ags rolled up over 500 yards total offense, committed no turnovers, and held Clemson QB Charlie Whitehurst to under 200 yards passing. Certainly progress for a program that has been in steady decline -- much to the consternation of its rabid fan base -- for the past four seasons. The Aggies have an off week before taking on Big 12 North rival Kansas State on October 2 in College Station.
Houston 35 Army 21. Coogs finally get their offense cranked up and pull out the win after the Cadets tied it at 21 at the beginning of the fourth quarter. UH should be about a 60 point underdog in this Thursday evening's ESPN game at Reliant Stadium against Miami.
Rice 41 Hawaii 29. I don't know why, but I always enjoy it when a triple option team such as Rice beats a Run 'n Shoot team such as Hawaii. The Owls now try to beat a spread that will be around 35 next week in Austin against the Longhorns.
September 18, 2004
Jeff Bagwell cranked a two run yak and drove in three runs as the Stros gained ground in the National League Wild Card playoff race by beating the Brew Crew 4-3 on Saturday nigth at the Juice Box. The win was the Stros' 11th straight at the Juice Box.
Both the Giants and the Cubs lost on Saturday, so the Stros' win moves them within a game of the Giants for the lead in the NL Wild Card race and within a half game of the Cubs, who remain between the Giants and the Stros at this point. The Marlins lost again, which pretty well makes them toast in the NL Wild Card playoff race.
With his yak tonight, Bags became only the 29th player in major league history to both score and drive in 1,500 runs. As has been their custom over the past 30 games whenever Roy O and the Rocket are not pitching, the Stros cobbled together pitching performances from four pitchers before Brad Lidge secured the win by pitching the ninth. It was Lidge's 24th save in 28 chances.
The Rocket takes the pill in a rare Sunday evening game (it is the ESPN Sunday night telecast) against the Brewers' Doug Davis, and then it's a travel day on Monday as the Stros go to San Francisco for their big showdown series with the Giants beginning next Tuesday.
September 17, 2004
Roy O aggravated his sore ribcage but pitched seven strong innings, Mike Lamb hit a seventh inning go-ahead yak off of Stros-killer Ben Sheets, and Brad Lidge pitched two innings of brilliant relief to lead the Stros to a dramatic 2-1 victory over the Brew Crew at the Juice Box on Friday night.
The game ended on an incredible play. The Brewers' Chad Magruder led off the ninth with a pinch hit single off of Lidge and was on second with two outs when Scott Podesednik lined a single to right on a 3-2 count. With the near capacity Juice Box going nuts, Bags cut off Lance Berkman's throw from right field as Magruder stopped at third. On an absolutely magnificent play, Bags flipped the ball to Jeff Kent, who had snuck behind Podesednik, who had rounded too far at first base. Kent got Podesednik in a run down toward second base, but alertly stopped and started crossing the infield toward Magruder when Magruder started toward home plate while Kent was running at Podesednik. When Magruder took off for home, Kent threw to catcher Chavez, who ran Magruder back toward Lamb, who finally made the the tag on Magruder for the third out and the win. The Juice Box crowd was going bonkers.
The win was the Stros fourth in the past eight games following their 12-game winning streak. The Stros ended their night one and a half games behind the Giants in the NL wild-card race, who are playing the Padres in a late game. The Cubs also won on Friday night to remain in between the Giants and the Stros in that race, and the Marlins lost on Friday night to fall 4.5 games behind the Giants in the wild card playoff race.
Oswalt (18-9) now who leads the National League in wins and improved to 9-1 in 13 starts since July 17. He allowed one run and eight hits in seven innings, but his ribcage ribcage injury -- which has been bothering him for most of the season -- flared up again in the eighth. Lidge replaced Oswalt with a man on second and no outs, and worked out of the jam, and then participated in the wonderful chaos described above in the ninth. It was Lidge's 23rd save in 27 chances.
Sheets (11-12) was brilliant in the loss, striking out nine and not walking a batter as he hurled his fourth complete game of the season. Other than Lamb's yak, Berkman's run scoring double in the fourth was the only other major hit that Sheets allowed.
Pete Munro (4-6) takes the hill for the Stros on Saturday night against the Brewers' journeyman Gary Glover (1-0) as the Stros try to keep pace with the Giants and Cubs.
On Saturday, one of my assignments for the day is to accompany one of my daughters to the appointment with a photographer in which her high school senior pictures will be taken.
This post from earlier this year pointed out the similarity between the federal government's accounting and financing of Medicare and Social Security benefits with Enron's accounting and financing of its infamous off-balance sheet partnerships.
This NY Times article reports that San Diego's municipal government is now facing a municipal reorganization under chapter 9 of the Bankruptcy Code because of its dubious accounting and financing of public pension fund earnings.
Consistent with the government's prosecution of former Enron executives involved in such questionable accounting and financing schemes, can we now expect criminal prosecutions of San Diego public officials who condoned the same type of accounting and financing practices that have caused San Diego's current dance with municipal insolvency?
After three years from Enron Corp.'s demise into bankruptcy, dozens of indictments and plea bargains, and an unprecendented government and media campaign to demonize former Enron executives, the first criminal trial against former Enron executives will begin Monday in Houston before U.S. District Judge Ewing Werlein in the case that has been dubbed "the Nigerian Barge case." Here are earlier posts about this case.
The trial is about a relatively small Enron deal with Merrill Lynch & Co. involving three electricity-producing barges off Nigeria's coast. But the outcome of the trial is likely to have much larger implications on the government's other Enron-related criminal prosecutions and future prosecutions of investment bankers and corporate executives generally.
Two former midlevel Enron executives and four former Merrill executives face conspiracy and fraud charges. One of those charged is Merrill's former head of investment banking, Daniel Bayly, the highest-ranking securities industry figure to be criminally charged in the corporate scandals that emerged after the stock market bubble burst earlier this decade.
The government contends that Enron's 1999 sale to Merrill Lynch of an interest in the barges was a sham that and that the energy company improperly booked about $12 million in pretax profit as a result of the deal.
Merrill Lynch got into the barge deal because it was trying accomodate Enron, with which it wanted to do more business. As 1999 came to a close, Enron wanted to sell an interest quickly in the barges and book the profit in the fourth quarter. Such end-of-the-quarter deals are routine at big companies. So, Enron turned to Merrill, which concedes that it invested $7 million in the deal as a favor to Enron. As an inducement to make an investment that it would not make but for accomodating a valued corporate custormer, former Enron CFO Andrew Fastow orally represented to the Merrill executives that Enron would either buy or broker a sale of the barge interest the following year for a nice profit to Merrill.
Mr. Fastow's oral inducement is the key fact in the case. If that promise was truly a part of the deal, then Merrill's investment was never truly at risk, the transaction was not a "true sale," and Enron's booking of the $12 million in profit from the transaction was illegal. On the other hand, if Mr. Fastow's oral representation was simply encouragement to a relunctant investor to do the deal and Enron had no legally enforceable obligation to repurchase or broker a deal for the interest in the barges the following year, then Enron's booking of the transaction was entirely proper and no crime occurred.
So, Merrill decided to buy the interest in the barges and the deal closed in the fourth quarter of 1999. The parties entered into typical deal documents for such a transaction that specifically provide that neither party relied on any prior oral representations in entering into the transaction, that any such prior oral representations are void, and that the parties are relying solely on the written representations contained in the deal documents in entering into the deal. Mr. Fastow's oral inducement to Merrill during the prior negotiations was not included in the deal documents, which were approved by both Merrill and Enron's lawyers.
Nevertheless, in mid-2000, Mr. Fastow followed through on his oral promise by arranging for Merrill to sell its barge interest at a profit to one of the off-balance partnerships that Mr. Fastow operated and partly owned. As a result, the government contends that the Merrill purchase was never a legitimate transaction because of Mr. Fastow's oral guarantee that Merrill would not lose any money. With Merrill never at risk, the government argues that no true sale actually occurred and, thus, Enron's booking of the earnings from the deal was fraudulent.
After Mr. Fastow pleaded guilty to committing crimes at Enron and agreed to cooperate with prosecutors earlier this year, you would expect that the government would make him their star witness in the barge trial. However, the government has indicated that it does not even plan to call Mr. Fastow to testify in the upcoming trial. Rather, the government's primary evidence of the alleged sham nature of the deal appears to be the "nervousness" that Merrill executives openly expressed about the deal in emails both before and after the transaction was consummated. The government interprets that nervousness as evidence that the Merrill executives knew that the deal was a sham and that they could be caught participating in a fraud with Enron.
However, there is a much more reasonable interpretation of Merrill's nervousness regarding the deal -- that is, that they really were nervous about the business risk of the deal, not because they thought it was a sham and a fraud, but because they knew that they could not rely on Mr. Fastow's unenforceable oral assurance that Enron would broker a sale of the barges the following year. Accordingly, they were understandably concerned they might be making a bad investment that would result in Merrill having to hold the barges for a long time rather than the short term they preferred.
Stated another way, the Merrill executives were nervous because they knew that this was a real deal in which the deal documents controlled the rights of the parties, and that Mr. Fastow's oral assurances to get them out of the investment could not be enforced if Enron failed to live up to them.
Under normal circumstances, it is highly unlikely that the government would have even pursued an indictment in a case of such marginal criminal liability. Inasmuch as the written deal documents would have dispostively undermined any attempt by Merrill Lynch to enforce through the civil justice system Mr. Fastow's oral promise for Enron to repurchase or broker a deal for the barges, how does the government expect to prove beyond a reasonable doubt that such an unenforceable promise was really a part of the deal?
But Enron has become such a corporate pariah in American culture that nothing is normal that has anything to do with Enron. The barge trial will test the extent to which the pool of potential jurors in Houston has been tainted by Enron's collapse. Given the extraordinary media coverage -- much of which has been fueled by governmental officials' public statements -- private polls that the barge defendants' defense attorneys have conducted reflect that over 75% of the jury pool would not be impartial in deciding a criminal case against a former Enron executive.
Thus, rather than using prosecutorial discretion to pass on prosecuting a case of dubious merit, the government in the barge case continues to pursue convictions because it knows that the public bias against Enron -- partly stoked by the governmental officials' derogatory public statements about Enron -- gives it a good chance of obtaining convictions, anyway.
Moreover, the barge case took another twist recently after the U.S. Supreme Court's recent decision in Blakely v. Washington (prior posts here), 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.
As a result of the Blakely decision, Enron prosecutors re-indicted the barge defendants to include new allegations that the barge deal caused market loss of more than $80 million, an allegation that can add years to a sentence under existing federal guidelines.
Not explained 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 market loss. In fact, neither Enron nor Merrill Lynch lost a dime on the transaction, and the allegedly questionable accounting on the deal was not even discovered until well after Enron had filed bankruptcy and its equity value had already become worthless. During his distinguished legal career as a defense attorney before becoming a federal judge, Judge Werlein often defended corporate clients against dubious damage claims. It will be interesting to watch how he deals with the government's equally questionable market loss allegations in this case.
Thus, watch this trial closely. If the criminal justice system works properly and the trial results in either a judge-directed or jury acquittal, then hopefully such a result will prompt the government to concentrate on its clearer cases of fraudulent conduct against former Enron officials and wrap up the investigation in reasonably short order. But if the government obtains convictions in this remarkably weak case, then the government will understandably believe that it can obtain a conviction against virtually any person having anything to do with Enron, and many others will come into the government's sights for indictment.
Although it's hard to emphathize with former Enron executives, Martha Stewart or Frank Quattrone, we should all be concerned about the increasingly common abuse of the criminal justice system that is disguised in popular prosecutions of unpopular corporate executives. For if we allow the government to abuse its power against unpopular defendants, it is a small step for the government to use that same power against you and me.
Meanwhile, here are the Houston Chronicleand NY Times stories on the barge trial and this Washington Post article speculates that recent plea bargains of former Enron executives have improved the government's chances of obtaining convictions agaisnt former Enron chairman and CEO Kenneth Lay and former COO and CEO Jeffrey Skilling.
This Chronicle story reports that a Harris County jury assessed the maximum 10 year sentence to Mr. Zaratti after convicting him yesterday of downloading and maintaining child pornography on his home computer in violation of child predator laws. Mr. Zaratti's legal team was not able to mount much of a defense, as the jury deliberated for less than an hour before convicting Zaratti and less than two hours before agreeing on the sentence.
September 16, 2004
After blowing one on Wednesday night, the Stros took advantage of four Redbird errors and two JK doubles to beat the Cards junior varsity (no Rolen, Renteria, or Walker) 8-3 on Thursday night in St. Louis.
The win allowed the the Stros to remain two games behind the Wild Card playoff-leading Giants, who beat the Brew Crew again. The other two primary competitors in the Wild Card race -- the Cubs and the Marlins -- also won, so the contenders are all bearing down as the race hits the home stretch.
In this game, the Stros threw their AAA pitching staff at the Cards and it was good enough to secure the win. Stros starter Backe was mediocre over four innings, but at least did not allow matters to get out of hand while the Stros built their lead. Reliever Harville was phenomenal in bailing Backe out of a jam, and Qualls, Wheeler, and Miceli all did workmanlike jobs in keeping the Redbirds under wraps for the final five frames. Given the Cards' errors, the Stros needed only 8 hits to generate their 8 runs, four of which came home on Kent's doubles and another on Mike Lamb's solo yak.
The Stros return to the Juice Box for a weekender with the Brew Crew as Roy O and the Brewers' ace Ben Sheets match up for first game on Friday night. After three with the Brewers, the Stros then take off to San Francisco on Sunday evening for the key series of the stretch run with the Giants.
Sandy Szwarc is an editor and a prolific writer on food, health and science issues for various print and internet media. She is also a registered nurse with a science degree from the University of Texas at Austin, and over twenty years in critical-care nursing, emergency triage, and medical outreach education with a focus on nutrition, weight and eating issues, and preventative health. Ms. Szwarc is a leading advocate in debunking junk science as it pertains to food and health, and she is currently completing an upcoming book entitled "The Truth About Obesity and Dieting-Dangers and Good News We're Never Told."
In this Tech Central Station op-ed, Ms. Szwarc takes dead aim at the junk science industry and the mainstream media for providing muddled information to the public regading the health risks of obesity:
Consumers were left more confused than ever when the media reported on two obesity-related studies from the Journal of the American Medical Association last week. One seemed to find it was more important to be fit than thin for your heart health; the other that it was more important to be thin than fit to prevent diabetes . . .
But in fact, the controversy has already been repeatedly answered in the scientific literature. The trouble is, it's not what a lot of people want to hear...and others without science backgrounds don't realize.
These side-by-side JAMA studies provided an invaluable opportunity for the media to help consumers sort through medical information and come away with a very important message: not all studies are created equal.
Ms Szwarc goes on to explain how some medical researchers are misleading the public with spurious conclusions drawn from "dredge data research," and that the conclusions of such studies are of dubious merit:
Sadly data dredge studies are increasingly being misused and misinterpreted. Most noteworthy is that [the Weinstein study correlating obesity with diabetes] findings contradict many stronger clinical and epidemiological studies that have found that exercise reduces type 2 diabetes and improves insulin resistance, unrelated to weight.
For example, researchers at the Cooper Institute in Dallas, Texas led by Timothy S. Church, MD, PhD, followed over 2,000 diabetics for 25 years, using a range of health assessments, including treadmill tests to gauge their fitness levels. They found that premature deaths from all causes were significantly lower among the fit. Weight was irrelevant. Researchers at the Veterans Affairs, Palo Alto Health Care System, Stanford University studied over 6,000 men for six years and found exercise capacity was more important in risks of dying than "known" risk factors including obesity, cholesterol, hypertension, smoking and even diabetes. Even a small clinical study at Queen's University, Kingston, Ontario, Canada following 54 obese women found daily exercise, without dieting or weight loss, substantially reduced insulin resistance in just 14 weeks.
In the mainstream media's rush to embrace the American delusion that a svelte physique equates with good health, Ms. Szwarc points out that the media ignores scientifically proven reality:
Most significant, [another recent study] is just one of dozens of clinical studies over decades which have found the exact same thing in men and women: when fitness is considered, weight is irrelevant to long-term health, heart disease, diabetes or premature death from all causes.
The list is too extensive to cite here, but clinical studies concluding 'fitness not weight is what counts' include the Harvard Alumni Health Study of 12,516 men followed for 16 years; the St. James Women Take Heart Project of 5,721 women studied for 8 years; and the Aerobics Center Longitudinal Study, an ongoing study that includes 25,389 patients examined at the Cooper Clinic in Dallas from 1970 to 1989. Even the Women's Health Study published findings in 2001 that found merely light to moderate activity was dramatically associated with lowered heart disease in women, including those who were overweight, had high cholesterol or smoked.
Ms. Swzarc concludes by pointing to a recent op-ed by two researchers at the Dallas-based Cooper Institute, which has an outstanding record of performing landmark research on fitness and preventative health:
[Drs. Blair and Church, the Cooper researchers] chastised today's obesity researchers, saying that "failure to adequately quantify physical activity when examining the risks of obesity is similar to exploring risk factors for cancer and misclassifying tobacco use."
Drs. Blair and Church emphasized that death rates and heart disease among obese people, with just moderate fitness, are half that of "normal" weight people who aren't fit. The amount of exercise to attain this health-giving level of moderate fitness isn't much, either, and has been proven in 24 clinical studies: it's merely 150 minutes of moderate-intensity activity a week. They say that's equivalent to 30 minutes, 5 times a week of: walking, gardening, housework, bicycling, swimming or other activities enjoyed in daily life.
From the always insightful Stu's Views:
The Houston World Affairs Council was formed about 15 years ago to provide a forum for all sides of current global issues, to promote better understanding of international relations and to contribute to national and international policy debates. The Houston World Affairs Council is an affiliate of the World Affairs Councils of America and is the now fifth largest such organization with over 4,000 citizen, corporation and foundation memberships.
Ted Barlow over at Crooked Timber reports on a recent HWFC forum in which Marty Peterson, deputy executive director of the Central Intelligence Agency, was the guest speaker. Mr. Barlow's entire post is a must read, and the following are a few of the observations that Mr. Peterson made at the forum, beginning with the CIA's record regarding the situation in Iraq leading up to the U.S.-led invasion:
He was also defensive about the CIA record regarding missing WMDs in Iraq (Note: Mr. Barlow notes in his post that the word ?defensive? has a negative connotation that he did not mean to convey here). In his recounting, the CIA underestimated Saddam?s missile programs, which were more advanced than anyone realized; they overestimated his biological and chemical weapons programs, which he described as ?more capabilities than functioning programs?; and they were approximately right regarding his nuclear weapons programs, which hadn?t restarted. In response to a question, he said that he doubted that Saddam had smuggled out WMDs to other countries before the war.
He made the point that the CIA wasn?t involved in the policy decision to invade Iraq, without expressing an opinion about whether it was the right decison. In general, I felt that he was making a good-faith effort to be non-partisan.
And do not expect quick returns on greater governmental investment in intelligence gathering:
He felt that excessive peace dividend cuts in the 90s had starved the CIA of resources. (Interestingly, he said that the underfunding reversed in 1998.) He also said that it takes him a year to hire an agent, and six or seven years to train and season him or her to the point that they can be trusted to try to recruit a foreign intelligence source. So the hiring boom that?s currently underway won?t pay off for years to come.
And what about the CIA's being held responsible for its misinterpretations of intelligence data:
He resented being asked to answer for policies that the CIA didn?t create, and being judged for past actions based on the standards of the day. At one point, he said that he only asked for two things- sufficient resources to do his job, and a clear set of rules that he could expect to be judged by. ?In thirty years, I?ve never had either of those.?
As with Judge Posner, Mr. Peterson is not a supporter of the proposed election year reforms being bandied about regarding intelligence gathering and analysis:
He?s not a fan of the proposed reorganization of the nation?s intelligence services. He mentioned a point when another higher-up at the CIA (I don?t remember who) was discussing the issue with Congress. The CIA guy asked, if there was another catastrophe, who would be held accountable? None of the Congressmen could answer the question. (A cynic might ask who was being held accountable for September 11th, but I suppose that that?s why the reorganization is necessary.)
A detailed discussion of his preferences in intelligence reform was probably not in the cards, as he wasn?t even allowed to say how many employees the CIA has. As general principles, he favored (a) short lines of communication and (b) taking our time to think about things. He clearly was concerned that intelligence reform was being rushed to fit an election-year schedule.
Finally, Mr. Peterson's views on the current "hottest spots:"
He?s very concerned about China and Taiwan. He says that China is investing heavily in their military, and that we can tell that they?re doing drills that show that they?re learning how to use their new hardware. He thinks that the end result of this activity is likely to be a crisis over Taiwan.
North Korea (he says that he believes that they have at least one nuclear weapon), Pakistan (he praised Musharraf?s participation in the war on terror, but is concerned that he might be assassinated) and Saudi Arabia (he?s concerned about a coup there, too.)
TXU Energy Co. LLC, Dallas-based TXU Corp.'s subsidiary and the largest electric utility company in Texas, has postponed implementation of its controversial pricing plan that would set electric rates for customers who live outside of North Texas based on their past credit scores.
September 15, 2004
The Stros wasted a fine pitching performance by Carlos Hernandez as Russ Springer was absolutely awful in relief as the Cards took the second game of this key three game series on Wednesday night at Busch Stadium in St. Louis, 4-2.
With the loss, the Stros fell two games behind the Giants in the Wild Card race and a 1 1/2 games behind the Cubs. At least the Marlins lost twice to the Expos.
Hernandez gave his best performance of the season, giving up only four hits and two runs in six innings. Simply a gutty performance from a pitcher who is still rehabbing from serious shoulder surgery. Springer, on the other hand, was awful in blowing the game in the eighth, giving up three hits, two runs, and throwing a two base wild pitch to boot. Not a great move by Manager Garner in pitching Springer for the second straight night.
After JK's two run yak in the second, the Stros offense was ineffectual. After the Pirates series last weekend, it's not comforting watching the Stros struggle at the plate. Too much like most of the season and not enough like the great streak that got them back in the Wild Card race.
Brandon Backe goes for the Stros in the rubber game on Thursday night before the Stros return to the Juice Box for a quick weekender against the Brew Crew. The big Giants series at San Francisco looms next week.
The Wall Street Journal's Holman Jenkins, Jr.'s Business World ($) column today addresses the mess that is the American airline industry, and notes that this is not a problem that has just arisen recently:
Today's crisis is not materially different from the airline crisis of the early 1990s, or the crisis of the early 1980s with the onset of deregulation.
Airlines have shown an ability to mint short-term profits in an economic bounceback when demand grows faster than they can lay on more jets and gates. But that's not the same thing as being able to make profits consistently enough to pay back the capital invested in the industry. The airlines have never been able to do this, at least not since deregulation.
Kenneth Button, a professor at George Mason University and head of its transportation center, finds the same feature present in Europe's increasingly deregulated market, an inability to price above cost. But before giving up on capitalism, airlines or both, perhaps we should look more closely at the problem.
Airlines are selling a highly perishable product, thus tempted to fill seats for any fare that will cover a bag of peanuts, several gallons of fuel and the cost of processing a booking. That means, when their competitive dander is up, airlines sell seats for a price far below their long-term costs. And competition is never in short supply -- barriers to entry are low. Anyone can lease a couple of jets with no money down, sell tickets over the Internet and join the fray. Even if an airline fails, its lenders repossess the planes and find someone else to put them to work.
Airports, meanwhile, are local monopolies and, ahem, seldom leave money on the table for their airline customers. Ground services and catering also enjoy sufficient local market leverage to make money off the airlines even as the airlines can't make money off their own customers. And the industry's biggest suppliers of all, its own employees, demonstrably have the upper hand when it comes to divvying up the revenues of the business. Notice that workers at United and US Airways (both in bankruptcy) as well as at American, Northwest, Delta and Continental (each losing money and flirting with Chapter 11) still manage to hang on to wages substantially higher than those paid by the industry's few profitmakers, such as JetBlue and Southwest.
If the cut-throat competition between carriers results in low fares, should we care? Mr. Jenkins suggests that we should:
Instability in the airline industry produces an irresistible urge for activity in politicians, who've already dumped $7 billion in taxpayer money on the airlines since 9/11.
Mr. Jenkins then goes on to suggest that consolidation of the industry would likely be helpful to consumers:
Airlines are not incompatible with capitalism so much as incompatible with modern antitrust policy, which assumes that "more competitors" is the same thing as "more efficiency." That's why, whenever the industry's parlous finances start making news, carriers plop another "code-sharing" deal in front of regulators. These instruments of cooperation between competitors have the potential to blunt the industry's urge to bleed itself to death during travel downturns. The latest embraces Delta, Northwestern and Continental and this week added foreign partners Air France, Alitalia, Aeromexico and Czech Airlines.
Don't expect airlines to advertise their alliances thusly, but neither should passengers fret unduly. Fewer crazy fares might turn up on the Internet, but average fares would likely continue their long-run decline even if antitrusters wisely looked away for a while and let these experiments flower. The most notable outcome would be less financial chaos and less pressure on politicians to "fix" the airline problem in ways that make it worse.
Meanwhile, in the latest example of the law of unintended consequences, this NY Times article reports on how the Air Transportation Stabilization Board -- which Congress created to "save" the airlines after the 9/11 attacks -- may decide to pull the plug on US Airways.
Roger Clemens shut down the Cardinals' potent hitters and then Brad Lidge came in to get the final out of the game after Darren Oliver and Dan Miceli almost screwed the pooch in the bottom the ninth as the Stros took the first game of their three gamer with the Cards in St. Louis on Tuesday night, 7-5.
Clemens won his 327th game with seven strong innings of five hit, one run pitching while improving to 3-0 with a 1.64 ERA in four starts against the Cardinals this year. He's now tied with Roy O and the Marlins' Carl Pavano for the National League lead in wins and is tied for the major league lead in winning percentage with the As' Mark Mulder, who is also 17-4.
Lance Berkman had four hits, including a three-run double that highlighted the Stros' five-run fourth. The Astros have won 15 of 18 and remained a game behind in the Wild Card race to the Giants, who beat the Brew Crew, and a half-game back of the Cubs, who beat the Pirates 3-2 in 12 innings. The Marlins also won to remain a game and a half back in the race.
Although Clemens was dominant through seven innings and Russ Springer pitched a scoreless eighth without any problem, Manager Phil Garner's effort to give the previously injured Oliver some game time experience for the first time in over a month almost blew up in his face in the ninth as Oliver gave up three hits and a walk before being relieved by Dan Miceli with two outs.
The Cards' Cody McKay then greeted Miceli with a two-run double to make the score 7-4. Miceli induced a popup from the next hitter, but then shortstop Eric Bruntlett and third baseman Mike Lamb collided, letting the ball drop for an error and allowing McKay to score to make the score 7-5. Lidge entered with a runner on second and intentionally walked Pujols after falling behind in the count. The runners advanced to second and third on a wild pitch before Lidge struck out the final Card hitter to secure his 23rd save in 26 chances.
Whew! After that adventure, I don't think Oliver is going to be seeing too many key relief roles down the stretch.
Carlos Hernandez pitches on Wednesday night as the Stros go for two in a row over the Cards. The Stros' hitters better keep their crank hats on because seven runs will probably not be enough to win this one.
September 14, 2004
UCLA School of Public Policy professor Amy Zegart is the author of "Flawed by Design" that examines the flawed national security process in the United States government. This earlier post on the 9/11 Commission hearings provided her astute insights into the problems that arise from failing to establish clear priorities in the intelligence gathering process.
In this Newsday op-ed, Professor Zegart -- who had Condi Rice as her thesis adviser -- examines how far we have come in terms fo homeland security since September 11, 2001, and she does not find the results encouraging:
Homeland security funds are flowing, but not to the right places. Since 9/11, Congress has distributed $13 billion to state governments with a formula only Washington could concoct: 40 percent was split evenly, regardless of a state's population, targets or vulnerability to terrorist attack. The result: Safe places got safer. Rural states with fewer potential targets and low populations, such as Alaska and Wyoming, received more than $55 per resident. Target-rich and densely populated states like New York and California received $25 and $14 per person respectively. Osama bin Laden, beware: Wyoming is well fortified.
It gets worse. Over the past three years, the federal government has spent 20 times more on aviation security than on protecting America's seaports, even though more than 90 percent of U.S. foreign trade moves by ship, but less than 5 percent of all shipping containers entering the country are inspected. One recent study showed the odds of detecting a nuclear bomb inside a heavy machinery container were close to zero. As the 9/11 Commission concluded, such a lopsided transportation strategy makes sense only if you intend to fight the last war.
And on the intelligence front -- which is Professor Zegart's area of expertise -- the lack of progress is equally appalling:
Then there is our intelligence system, a dysfunctional family of agencies that have proven uniquely adept at resisting reform, getting the wrong information into the right hands and the right information into the wrong hands. The past three years have witnessed the two greatest intelligence failures since Pearl Harbor. Yet Bush has held no one accountable for these results, and has avoided leading the charge for reform.
The president grudgingly embraced one of the 9/11 Commission's key recommendations - creating a national intelligence director with "full budgetary authority" - only under strong pressure and finally, last Wednesday, after opposing the idea for weeks. There is urgency and boldness for you.
Not only has Bush shown tepid support for the 9/11 Commission's ideas, he seems to have none of his own. For instance: How can we fix the cultural pathologies that cripple our intelligence system? Bush has said nothing about this and the Commission identified the problem but left it to the national intelligence director to solve.
While Bush has placed the biggest burden on his own record in the campaign, it's important to note that Kerry has offered only a lackluster alternative that can be summed up as, "I'm for whatever the 9/11 Commission says." This is like a diner who orders the entire menu because there's nothing he really wants except to avoid making a choice. The commission's recommendations are good, but far from perfect.
And Ms. Zegart is not one to criticize without providing constructive proposals on how to improve intelligence gathering in the federal government:
Building new organizational arrangements with more people and more power will not make us safer if intelligence officials still view the world through the same old lenses and hoard information in the same old stovepipes.
The FBI, for example, faces a daunting cultural challenge: transforming a crime-fighting culture that prizes slow and careful evidence gathering after-the-fact into an intelligence culture that takes fast action to prevent future tragedies. Training programs are crucial to this effort. Today, however, counter-terrorism training constitutes only two weeks out of the 17-week required course for all new agents. That's less time than agents get for vacation.
Then there is the unspoken 11th Commandment operating inside the CIA, FBI and the other 13 intelligence agencies: Thou Shalt Not Share. Here, too, the core problem is cultural - the reluctance to pass information across agency lines is deeply engrained, based more on habit and values than policy or organization charts. And here, too, training is key.
Creating a "one-team" approach to intelligence requires developing trust and building informal networks between officials in different agencies. This is best done by requiring cross-agency training programs early in officials' careers. By current policies, however, most intelligence professionals can spend 20 years or more without a single community-wide training experience. Dots will always be hard to connect when intelligence agencies do not trust or understand each other.
Justice Wallace B. Jefferson of San Antonio, the first African American to serve on the Texas Supreme Court, will be named chief justice of the Court today by Governor Rick Perry.
Governor Perry appointed Justice Jefferson to the court in 2001, and he won election to the Court the next year. Justice Jefferson will replace former Chief Justice Tom Phillips, who resigned earlier this summer after serving on the court since 1987.
Justice Jefferson will lead the all-Republican Supreme Court during a tumultuous time. A coalition of school districts has challenged the constitutionality of the state's school finance system, and a decision in that case is expected shortly from the state District Court in Travis County. No matter how that decision turns out, the decision will be appealed and the Supreme Court is expected to review it.
Governor Perry created somewhat of a stir earlier this year when he predicted to a crowd of supporters in Dallas that the Supreme Court would not force the Legislature to change the school finance system. At the time, Justice Jefferson publicly defended the Supreme Court as vigorously independent and stated that no justices spoke to Governor Perry about the case. Governor Perry later backed off his prediction and confirmed that he had not lobbied any Supreme Court justices on the matter.
Justice Jefferson grew up in San Antonio, the son of a hard-working military family that stressed education. He won a scholarship to an honors program at Michigan State University before attending the University of Texas Law School. After earning his law degree, he went into private practice in San Antonio, where he opened his own law firm in 1991.
September 13, 2004
Given the over-analysis of football that takes place in Texas, I am going to institute a brief review of each local team's game from the past weekend with links to more thorough analysis:
Chargers 27 Texans 20. In their first game as a betting favorite, the Texans lay an egg as four turnovers (2 fumbles, 2 David Carr interceptions) undermine the Texans' chances to pull out the win. The Chargers' fourth year QB -- Drew Brees from Austin -- who the Chargers have been trying to get rid of since the end of last season, threw two TD passes to none for the third year QB Carr, who was the first pick in the 2001 draft. As noted earlier here, Carr has shown very little to date to indicate that he is a talent worthy of taking with the first pick of the NFL Draft. That he was outplayed by Brees in the first game of the season is telling.
Minnesota 35 Dallas 17. Vikes culpepper Pokes. Big Tuna will not be pleased.
Horns 22 Arkansas 20. A quality road win for the Horns, who received productive games from both QB Vincent Young and RB Ced Benson. UT's defense looked improved over last season's unit, as new defensive coaches Dick Tomey and Gregg Robinson appear to be making an impact. One major problem for the defense against Arkansas was a poor pass rush and containment, which better be fixed before the Horns tee it up in three weeks with OU in the Red River shootout. Offensively, it is still unclear to me whether UT can throw the ball well enough to force OU's safeties to play safety rather than linebacker, which is essential if a team wants to beat the Sooners. Unfortunately, neither Rice nor Baylor -- the Horns' next two opponents before the OU game -- will provide quality competition in which UT can develop that part of their offense.
Oklahoma 63 Houston 13. In a game that was not as close as the score indicates, the Cougars were in it all the way through the coin flip. In glancing at the Coogs' schedule, it appears reasonably likely that UH will be 1-6 (Army appears to be the only likely win) by the end of October unless dramatic improvement occurs. Quite a comedown from Art Briles' first season magic.
A&M 31 Wyoming 0. The Aggies take care of business against a patsy at home, which is an accomplishment for A&M the way they have been playing for the past couple of seasons. The Ags get a better test this Saturday night a home against a decent Clemson team, which is coming off a close loss to Georgia Tech.
Rice was idle this past Saturday. The Owls play the Run N' Shoot Hawaii Warriors this Saturday at Rice Stadium. If Rice plays defense as well as they did against Houston's junk offense a week ago, then the Owls could be 2-0 before becoming sacrificial lambs to Texas in Austin the following week.
For more information on Texas Tech, Baylor, and other Big 12 teams, Kevin Whited does a good weekly analysis of Big 12 games over at PubliusTx.Net.
This Forbes article addresses a trend noted in these earlier posts -- public pension funds becoming the lead plaintiffs in securities fraud litigation. And the public policy implications are not pretty:
And so it goes in the cozy confines of the class action racket. Plaintiff lawyers give handily to the politicians who hire them. They hire ex-insiders to woo pension funds, fete clients at cushy conferences and pay referral fees to powerbrokers who hook them up with new pension plaintiffs. None of this is illegal per se; nor does it violate existing rules of legal ethics. But even some lawyers have problems with it.
"This is corruption on a grand scale," says class action lawyer Howard Sirota of New York, who says payola by his rivals may force him out of the game. Contributing cash to the officials who oversee your business "is illegal in municipal finance. The American Bar Association [discourages] it. A grand jury is investigating it (see Forbes, Feb. 16). And absolutely nothing happens," Sirota says.
Last year plaintiff shareholders won $3 billion in class actions against the companies they had invested in, says Institutional Shareholder Services. (Let's ignore, for now, that often they drain money from companies in which they still hold a stake; see box on this page.) The take was distributed in small chunks to thousands upon thousands of recipients. But $800 million of it will go to a small circle of very lucky people: securities plaintiff lawyers.
The plaintiff lawyers had help in amassing their $800 million take-from pension fund trustees who are oblivious, defense attorneys who won't challenge the fees because it might prompt the other side to push for an even bigger settlement and insurers who are happy to charge higher premiums to cover the rising costs of litigation.
How did this happen? As usual, the law of unintended consequences of regulatory "reform" had a lot to do with it:
The Republican-controlled Congress hoped to smash this lawsuit cabal when it passed the Private Securities Litigation Reform Act in 1995.
The reform law hands control to big institutional investors. Nicknamed the "Anti-Milberg Weiss Act," it requires that lead plaintiff status must go to the investor who suffered the greatest loss. Big investors, Congress hoped, would shun frivolous suits and push to cut legal fees.
But the act has morphed into an industrial-strength shakedown. Trial lawyers reached out to new partners: the boards of public and union pension funds. They often include union veterans unabashed about suing corporations. These boards, rather than cutting back on lawsuits and pressing lawyers for lower fees, have jumped into bed with them.
And the results of the reform legislation? Take note:
All told, public and union pension funds were lead plaintiffs in 28% of investor class actions last year; in 1996 they led just 3% of cases, says PricewaterhouseCoopers. Yet they have done nothing to improve shareholder recoveries or reduce significantly the lawyers' cut."We have a system where the courts consistently allow law firms to file cases on behalf of figureheads," complains University of Arizona law professor Elliott Weiss. Translation: The lawyers still run the show. It is a pointed criticism, for Weiss did the research on class action settlements that helped shape the reform act.
Krispy Kreme Doughnuts Inc. announced that its auditor, PricewaterhouseCoopers LLP, refused to complete a review of the company's financial statements for the latest quarter until an outside law firm hired by the company's board is finished performing, ahem -- "certain additional procedures" -- that the auditors have "requested."
This is not looking good for the mercurial Winston-Salem, North Carolina-based doughnut chain. Given its high profile since going public in 2000 and the current anti-business climate in the U.S. Justice Department, it would not be surprising to see a criminal inquiry emerge from Krispy Kreme's current financial problems. I wonder if the grand jurors can bring a box of Krispy Kremes into the grand jury deliberations?
Krispy Kreme's latest regulatory filings indicate that it had $19.3 million in cash as of Aug. 1, which is less than a third of what it raised in its 2000 initial public offering.
The company's latest disclosure sparked new questions about Krispy Kreme's accounting and a series of acquisitions that included the repurchase of several franchises, including two owned that Krispy Kreme insiders owned. The company recently reported a sharp falloff in growth and declining earnings, and already faces an informal SEC inquiry focused on its franchise repurchases and a profit warning it gave in May.
As expected, US Airways Group Inc. filed its chapter 22 case (i.e., chapter 11 for the second time) in the U.S. Bankruptcy Court in Alexandria, Virginia. US Air's previous case concluded a little over two years ago.
Like its larger competitors, US Air continues to be hammered by high fuel prices, competition from discount carriers, anemic revenue and a heavy burden of debt and operating-lease commitments. With the filing, two of the nation's six "legacy" carriers -- those whose costs and cultures are rooted in the pre-deregulation era -- now wallow in bankruptcy, although a number of other legacies could end up in the same court. The other legacy already in bankruptcy is UAL Corp.'s United Airlines, and Delta Air Lines is struggling to avoid the similar fate.
US Airways will maintain normal operations and honor all customer-service agreements and marketing arrangements with other carriers. US Airways' current schedule consists of nearly 3,300 daily flights in about 180 airports in the U.S., Europe and the Caribbean.
The company's theory of the case in its reorganization is to propose a reorganization plan by year-end that will transform the legacy carrier into a discount airline. Traditional labor and regulatory agencies will undoubtedly oppose the old-line, hub-and-spoke carrier attempting to shed its rigid work rules, inefficient work practices and richer benefits to make the transformation to a discount airline. If that occurs, then US Air may be forced into a liquidation under the weight of its massive debt obligations and lack of profitable operations, although previous legacy airline reorganizations indicate that such a liquidation will not come without creditors enduring even more losses during the reorganization case.
Another big complication in US Air's reorganization is financing. Unlike the usual big reorganization, US Air did not file an emergency debtor-in-possession financing motion on Sunday to bolster its cash position. Because all of its assets are already pledged, the company did not even try to arrange such interim financing. However, US Air did disclose that it had reached an agreement with its lenders to give the airline access to an undisclosed portion of $750 million of cash it has on hand to use as working capital in lieu of a debtor-in-possession financing. The company said it currently has $1.45 billion in cash, cash equivalents and short-term investments.
The US Air filing gave Democratic Presidential nominee John Kerry an opportunity to comment intelligently on a business policy issue, and his campaign screwed the pooch on that opportunity. Check out the following gibberish:
"It is a tragedy that the employees of US Airways, who have already made great sacrifices to help the company stay afloat, will now suffer more harm. And it's unforgivable that the Bush administration has sat on the sidelines rather than act to address this crisis."
The Kerry Campaign failed to mention that the Bush administration authorized the dubious post-September 11, 2001 federal loan-guarantee program that was supposed to help the ailing airline industry, but really just delayed the inevitable in regard to such carriers as US Air. As for the real reason behind the Kerry Campaign's above statement -- US Air employs thousands in the key battleground state of Pennsylvania.
September 12, 2004
Jason Lane's pinch-hit double drove in the go-ahead run in the 10th inning and Chad Qualls came in with two on in the bottom of the 10th and induced a dramatic game-ending double play for his first career save as the Stros, held hitless by the Pirates Dave Williams for six innings, rallied in the late innings to beat the Pirates 5-4 Sunday night at PNC Park in Pittsburgh.
How's that for an opening sentence? Whew!
By winning this "must" game following three losses in four games in Pittsburgh, the Stros stayed a game behind the Giants in the NL wild-card race. The Giants beat the Diamondbacks 5-2. Even after losing three of five games over the weekend to the Pirates, the Stros have won 22 of 28 and 15 of 20 overall, and still finished 12-5 against the Bucs this season.
Roy Oswalt left with a 4-2 lead after seven innings and was in position to become the NL's first 18-game winner, but the Pirates rallied for two runs against Brad Lidge, who had previously converted 21 of 24 save opportunities. The Stros trailed 2-0 and had only a walk through six innings against the left-handed Williams until breaking through for two runs in both the seventh and eighth.
After a well-deserved day off on Monday, the Stros gear up for a key three game series with the Cards on Tuesday in St. Louis. The Rocket starts the first game of the series, and then its almost anyone's guess who Manager Garner will trot out for the next two games. The Stros return to the Juice Box this Friday for a weekend series against the Brew Crew before taking off for San Francisco for the season's biggest series to date next Tuesday-Thursday against the Giants.
Chuck Cook is one of Texas' many fine golf teachers, and he runs the Chuck Cook Golf Academy at the Barton Creek Resort in Austin. Mr. Cook has trained under several notable teaching professionals, including Bob Toski, Jim Flick, Peter Kostis, Davis Love Jr., Paul Runyan and Jack Lumpkin, has authored two books, "Perfectly Balanced Golf" and "Tips from the Tour", as well as the video "How to Stop your Slice and your Hook." Mr. Cook's students have included three U.S. Open champions, the late Payne Stewart, Tom Kite and Corey Pavin.
In this NY Sunday Times article, Mr. Cook provides an insightful account of how the golf swing needs to be adapted to each player's attributes, and how this process sometimes breaks down based on the respective natures of the teacher and the student. First, Mr. Cook notes the two different types of golf instructors:
In golf, as in all sports, there are two styles of teachers, method and matchup.
A method instructor teaches a particular style of swing or play and tries to mold all of his players into that style. A matchup teacher takes his players' natural tendencies and matches up a set of compatible fundamentals to best use those tendencies.
Two basketball coaches illustrate this difference. Bob Knight, the controversial but competent coach who won three N.C.A.A. championships at Indiana, is a method coach. He made every team play the same style of tenacious man-to-man defense and motion offense. Consequently, Knight would recruit players who fit that style of play.
Dean Smith, Knight's counterpart at North Carolina, was more of a matchup coach. He would recruit the best players available and adjust his style to suit them. He used a formula based on points scored per possession. If he had a good offensive team, he would play a more up-tempo style, and if he had a good defensive team, he would use a more deliberate style of play.
Then, Mr. Cook points out the peculiar nature of golf--the students pick the coaches rather than the process in most sports in which the coaches pick the students:
In golf, however, teachers don't recruit players; players recruit teachers. This is where it gets dicey. No method fits all players. Swing styles must fit a player physically and psychologically. To name two of many examples, tall players must swing differently than short players, and aggressive players have different needs than conservative players.
Thus, Mr. Cook points out that not all golfers pick the right teacher for them:
Certain types of players succeed with teachers whose method is compatible. The problem is that most method teachers think their approach is superior for all players. To compound the problem, most top players think they can adapt to any method.
Bad things happen when a headstrong player tries to adapt to an incompatible style.
The style of swing [Woods] had when he came on tour was good for producing distance but not accuracy. The adjustments he made working with Butch Harmon - to his great benefit - were meant to improve accuracy and enhance control of distance rather than producing distance.
Woods is without question the most talented person to play the game, and at his peak no one has played at a higher level. Once a golfer reaches this level, there is little room to improve. One or two things may help, but hundreds of things can hurt.
Woods is the most aggressive player in pursuit of perfection. He continually tinkers with his game. But he has adopted a style of swing that is not compatible to his tendencies. His new teachers are convinced that this style is superior, and Woods is convinced he can adapt to it. It is a conundrum of considerable proportions.
With his new swing, Woods rotates his arms so much on the backswing that it requires a corresponding "rerolling" on the downswing. But his strength is the speed of his body. To accommodate this rolling and rerolling of the arms, the body must be very quiet, which is not instinctive for Woods.
In addition, golf requires that you swing on a plane that is a blend of uprightness and flatness. Most top players (including Woods when he was coached by Harmon) swing their arms up and turn their body, creating this blend. Woods, though, has gone the other way. The rolling of his arms go around; consequently, his shoulders have to tilt to get the needed "up" in his swing. This tilting, instead of turning, requires Woods to pull up through impact, causing his arms to swing to the right of the target and creating wild shots to the right.
Mr. Cook concludes by observing that sometimes swing adjustments help a player and sometimes they hurt:
There are many players who improved thanks to compatible instruction. Nick Faldo, Curtis Strange, Nick Price, Mark O'Meara, Jack Nicklaus, Tom Kite, Payne Stewart, David Toms, Mickelson, Woods and others won major championships after making fundamental adjustments.
On the other hand, Chip Beck, Bill Rogers, Seve Ballesteros, Ian Baker-Finch, David Duval and Woods have struggled in trying to adapt to swing techniques that don't fit.
Mr. Cook has hit the nail on the head with regard to Mr. Woods' swing problems. Mr. Woods should not be faulted for firing Mr. Harmon, who was teaching Mr. Woods' competitors without Mr. Woods' approval. But he has replaced Mr. Harmon with method instructors (such as his neighborhood buddy Mark O'Meara) who have prompted Mr. Woods to adopt a flatter swing that is a poor fit for Tiger's lanky physique. Whereas Mr. Woods was hitting a controlled, long fade when he was under Mr. Harmon's tutelage, Tiger is now hitting an even longer draw, but he has not been able to control it consistently. My sense is that, unless he returns to hitting a fade, Mr. Woods will continue to struggle in comparison to his brilliance over the first five years of his pro career.
As Lee Trevino observed some years ago:
"I can talk to a fade, but a hook doesn't listen."
Geez, I have enough problems just deciding on my Fantasy Football team's lineup each week without having to worry about this.
September 11, 2004
The Stros hitters continued to scruff this afternoon in Pittsburgh against someone named Ryan Vogelsong as he limited the Stros to one run over six innings in the Pirates' 5-2 victory at PNC Park. It was the Stros' third loss in four games following their 12-game winning streak that got them back in the race for the Wild Card playoff spot.
Bidg homered on the second pitch of the game and drove in both Houston runs. but the rest of the Stros' hitters managed only two doubles and five singles. Biggio's homer was his 22nd, which tied his season high and extended his National League record to 40 homers leading off games.
Roy O needs to play stopper on Sunday night in the final game of this disappointing series. The Stros get an off day in St. Louie on Monday before beginning their three game series with the Cards on Tuesday with the Rocket pitching the first game.
Kevin Whited has this interesting post over at PubliusTX.net about the demise of the old and beloved (at least in Texas) Southwest Conference, and how former University of Houston Athletic Director Bill Carr flubbed the chance to shoehorn UH into the Big 12 Conference.
I was quite close to the Jack Pardee-John Jenkins coaching staffs at UH, and I ended up representing Jenks in the settlement of his contract with UH (but that's the subject of an entirely longer post!). The info in Kevin's post is pretty much the way I remember it and his point about Baylor's acceptance into the Big 12 as being a booby prize is right on the mark.
For most of their existence, UH's athletic programs have generally competed very well despite fewer resources than most of their competitors. For years, several of the old Southwest Conference schools refused to agree to admitting UH until Darrell Royal and the few other statesmen in the SWC lobbied for UH's admission. I'm sure that UH will continue to face similar obstacles in attempting to join one of the BCS Conferences (the Southeastern Conference probably makes the most sense). But it would be great for Houston to have UH's athletic programs back in a major conference.
The Woodlands, Texas-based Anadarko Petroleum Corp. announced that it is selling a large number of its smaller oil and natural-gas properties in Texas and Oklahoma in return for $850 million and a stake in two Wyoming producing fields. Merit Energy Co., a Dallas-based privately held company, is buying the majority of the properties.
With the sale, Anadarko is nearing its previously announced goal of selling off $2.5 billion in North American assets. It plans to use the proceeds to lower debt and refocus on a plan to develop overseas and deepwater Gulf of Mexico exploration.
The properties Anadarko is selling represent 30% of its fields world-wide, but only 4% of proven reserves and 7% of current production. The deal is scheduled to close by the beginning of December.
Merit owns and operates oil and natural-gas fields with $2.1 billion in oil and natural-gas reserves. The company had raised $2.5 billion for additional purchases of oil and gas properties.
It's too early to say whether Anadarko's ambitious plan to restructure the company is going to work. However, I am pulling for them. It's always refreshing to see management of a company address a daunting problem -- i.e., the uninviting future of an independent E&P company treading water while living off of declining reserves -- and come up with a creative plan to redirect the company toward a potentially more profitable goal. The plan is not without substantial risk, but given Anadarko's alternatives, it makes a lot of sense to me.
September 10, 2004
The Stros are starting to scruff in Pittsburgh as Pirates rookie John Van Benschoten won his first major league game in allowing only five hits in eight innings as the Bucs beat the Stros 6-1 Friday night at PNC Park.
Stros starter Pete Munro (4-6), who beat Van Benschoten at the Juice Box last Sunday, allowed four runs and nine hits in five innings. The only positive out of this rather dreary Stros performance was Brandon Duckworth, who pitched two innings of scoreless relief while giving up only one hit and no walks. Given the way that Duckworth pitched earlier in the season, that is a major accomplishment.
It appears that the Stros' bats are cooling off a bit. After averaging almost 10 runs a game during their recent winning streak, the Stros have now scored just 11 runs and had just 19 hits in their last three games. While not as bad as some earlier droughts during this season, the Stros' hitters will probably have to get back to producing at a considerably above-average level for the remainder of the season for the Stros to have a reasonable shot at the Wild Card playoff spot. The backend of the Stros' pitching rotation requires a rather large run buffer to have a reasonable chance of winning games in which any member of that group is pitching.
Here is the Journal ($) article on Mr. Eisner decision, which is also an excellent overview of his tenure at Disney. My sense is that Mr. Eisner is similar to a good football coach who builds a solid program from one that was floundering, but who holds on to his job for too long, creating disunity among supporters of the program, some of whom remain loyal to him for his past successes and others who recognize that he does not know when to quit and want to fire him.
September 9, 2004
The Stros magic winning streak ran into the buzzsaw of the Pirates' Oliver Perez, but the Stros rebounded to win the second game as they split their doubleheader with the Pirates this evening at PNC Park in Pittsburgh, 3-1 and 9-2.
Perez is one of the best young pitchers in baseball, so the Stros loss was not particularly surprising. The Stros could manage only three hits off of him and they whiffed 14 times. I'm not sure that the Padres made such a good move in giving up Perez for what appears to be a fading Brian Giles. Carlos Hernandez was only marginally effective again in taking the loss as he continues to rebuild arm strength from his shoulder surgery of last year.
The Stros cranked it back up in the second game, peppering various Pirate pitchers for 10 hits, including five doubles and a triple. That was good enough to gain the win even though Tim Redding pitched ineffectively again after his exile to AAA New Orleans. Having to pitch Redding at the backend of the rotation is a big impediment to the Stros winning the National League Wild Card playoff spot.
Pete Munro takes the hill in the Friday game in Pittsburgh as the Stros attempt to start another streak to keep pace in what is going to be a tight Wild Card race with the Giants, Cubs, and Marlins.
One of the favorite resorts of Texas families is the Hyatt Hill Country Resort in San Antonio.
Now it appears that another Hyatt resort project between Austin and Bastrop will become a reality. Dallas-based Woodbine Development Corp. has closed a $74.3 million construction and permanent loan with Prudential Mortgage Capital for the construction of the $135 million Hyatt project.
The resort will be located on 656 acres of Bastrop County land that Woodbine bought from the Lower Colorado River Authority in March. The resort site, which adjoins LCRA's 1,110-acre McKinney Roughs Nature Park, will utilize 405 acres of this land, including one mile of Colorado River frontage. The remaining 251 acres are being reserved for future development.
The Hyatt site is 13 miles from Austin-Bergstrom International Airport. It will include a 500-room hotel, an 18-hole golf course, a manmade river pool, and hiking and equestrian trails.
Former CSFB Silicon Valley investment banker Frank Quattrone was sentenced to 18 months in prison for obstructing a probe of how IPO stocks were doled out. The sentencing follows his obstruction conviction in May, which was largely based on an e-mail he sent underlings that encouraged them to obey document-management procedures that prosecutors alleged would have destroyed evidence sought by investigators.
The punishment was well above federal guidelines, which called for no more than 16 months, and from a probation department recommendation of 10 months, half on supervised release.
Mr. Quattrone, who is 48, is the highest-profile Wall Street figure to face prison since junk-bond king Michael Milken was given a 10-year sentence (later reduced) for alleged securities-fraud violations nearly a decade ago.
In handing down the sentence, U.S. District Judge Richard Owen granted a prosecution request to lengthen Mr. Quattrone's sentence to between 15 and 21 months on the grounds that he had committed perjury when he testified at his trial. The judge based his decision on Mr. Quattrone's denial before the jury that he intended to obstruct investigations by the Securities and Exchange Commission and a federal grand jury. Mr. Quattrone's attorneys argued that the alleged perjury was not proved before a jury. But Judge Owen ruled that it was clear to him that Mr. Quattrone's denial that he intended to obstruct justice was not true and commented that Mr. Quattrone could have avoided the perjury issue by not taking the witness stand.
H'mm. A criminal defendant should not take the stand to defend himself from a criminal charges because he might commit another criminal offense that the judge will convict him of during sentencing without a trial? Let's see how that proposition plays out on appeal.
At any rate, at least Judge Owen agreed to allow Mr. Quattrone to serve his time at the federal minimum-security prison camp in Lompoc, Calif. However, Judge Owen denied Mr. Quattrone's request to remain free pending appeal and ordered him to surrender on October 28.
A jury convicted Mr. Quattrone in May of obstructing a government investigation into how CSFB allocated shares of hot IPO stocks. Prosecutors charged that Mr. Quattrone obstructed the investigation when he forwarded a single e-mail to his subordinates advising them to clean-up files per the bank's document-management policies soon after he learned about the federal grand-jury investigation. A first trial last October ended in a hung jury.
Mr. Quattrone still faces a possible lifetime ban from the securities industry under charges pending against him by the National Association of Securities Dealers and the SEC. His former firm CSFB paid $100 million in 2002, without admitting wrongdoing, to settle charges that the SEC and NASD had brought against the firm.
TXU Energy, the unregulated arm of Dallas-based TXU Corp., last month notified 185,000 of its Texas electricity customers that increases in natural-gas prices would require the company to adjust rates. But in a new rate-setting tactic for the electric-utilities industry, TXU Energy also plans to impose a bigger rate increase for its customers with the lowest credit scores based on numeric rankings of credit-worthiness that take into account a customer's history of paying electricity, telephone and cable bills.
Predictably, consumer advocates are not pleased. "If they get away with this, others will follow," said Randy Chapman, executive director of the Texas Legal Services Center, a legal-aid program that helped uncover TXU's credit-scoring practice, which was reported by the Dallas Morning News. Another state-funded consumer advocate in Texas is reportedly preparing to file a formal complaint with the Texas Public Utility Commission asking it to issue an emergency order preventing TXU, which is both the biggest utility and biggest competitive supplier in the state, from implementing the rate changes.
Imagine the audacity of a company trying to take away the right of people who do not pay their bills timely to have people who do subsidize the cost of their tardiness.
The Texas electricity market was deregulated in 2002, allowing customers to jump from one provider to another where available. The new TXU pricing arrangement doesn't affect customers that get service from TXU Corp. in its traditional territory in the Dallas-Fort Worth area. Rates there continue to be regulated by the state during the transition from a fully regulated to a deregulated market.
Instead, the credit scoring has been applied to TXU Energy customers in portions of the state where TXU is seeking new customers. TXU Energy lured many of those customers away from utilities with the inducement of discounts.
The insurance industry has for years used credit scores as a tool to predict losses and help set premiums. A study prepared last year for the state of Texas by the Bureau of Business Research at the University of Texas in Austin found a correlation between insurance claims and low credit scores. Credit tools have been used by the electric industry to set deposits but haven't been used to set actual rates. Traditionally, rates were based on the cost of furnishing service to broad customer classes, such as residential ratepayers.
However, under the federal Fair Credit Reporting Act, companies that use credit information as a basis of adverse decisions often are required to disclose that fact to consumers. It does not appear that TXU has complied with the Act, at least yet.
Many states that have deregulated their retail electricity markets still require incumbent utilities to offer rates that serve as a benchmark for prices offered by competing suppliers. But those government-mandated rates expire in Texas in 2007 for residential customers.
Under the TXU program, electricity rates will be raised for 185,000 customers, based on higher gas prices. But they will be raised most sharply for roughly 55,000 residential and small-business customers with poor credit scores. That's about 30% of the accounts that TXU Energy now serves in competition with incumbent utilities.
Stay tuned as this football begins to be tossed around the political playing field.
September 8, 2004
Roger Clemens won his 326th career win as the Stros cranked four first-inning yaks to beat the Cincinnati Reds 5-2 Wednesday afternoon and tie a club record with their 12th straight win.
The Stros have now won 13 of their last 14 games, 20 of their last 23, and have, with the Cubs' loss to the Expos, taken at least a share of the lead for the National League Wild Card playoff spot. The Stros have also won eight straight against the Reds while outscoring them 68-25 in those games.
Clemens (16-4) won his fourth straight start, allowing only four hits in seven innings. He gave up his only run in the first on a sacrifice fly, and the Reds could manage only three singles over Clemens' next six innings. The Rocket finished with six strikeouts and two walks.
After three of the Stros AAA relief corps pitched in the eighth, Brad Lidge pitched the ninth to gain his 21st save in 24 chances. With runners at the corners and two outs, Lidge struck out Juan Castro to end the game as the Juice Box crowd went nuts.
After the Reds scored their only run off of Clemens in the top of the first, Bidg led off the bottom of the frame with his yak, then Bags and Berkman hammered back-to-back taters, JK walked, and Mike Lamb hit a two run round tripper for his third home run in the past three games. Although the Stros did not score again, they cranked out 11 hits against seven Reds' pitchers.
So now its off to Pittsburgh for a twinbill tomorrow and then three more over the weekend before the club moves on to St. Louis for a three game series with the Cards early next week. Looks like Carlos Hernandez and either Tim Redding or Brandon Duckworth will get the starts in the doubleheader tomorrow. Bullpen, get ready.
Inasmuch as its labor negotiations with the pilots' union are not going well, the Washington Post reports that US Airways Group Inc. confirmed yesterday that it has retained the restructuring advisors Seabury Group and the Washington, D.C.-based law firm of Arnold & Porter LLP to provide restructuring advice for its upcoming chapter 22 filing (US Air filed its first chapter 11 case two years ago; thus, its second case is dubbed a chapter "22" in legal circles).
With few exceptions, the management of U.S. airlines has a desultory record in creating value for shareholders. Given that poor track record, you would think that management and creditors in these companies could at least reorganize the companies in a manner that gives the reorganized company a competitive advantage after coming out of chapter 11. However, as these chapter 22 and 33 reorganizations of airlines reflect, the parties involved in these airline reorganizations often cannot even reorganize the airline companies effectively.
Makes one wonder when some Bankruptcy Judge, in exasperation with it all, will decide that Professor Ribstein's solution, at least in the most intractable cases, is the correct one?
In his weekly Business World column today, the Wall Street Journal's ($) Holman Jenkins, Jr. lays out the case that a second Bush Administration may be the one time that realistic reform of Social Security could actually take place:
People become inordinate risktakers to protect something they have. Once voters figure out the true extent of the entitlement morass, even those summering Nantucket editors might be expected to rush to the barricades and, whatever their cultural affinity, cast their vote for Mr. Bush for the simple reason that entitlement reform is inescapably a second-term activity.
. . . President John Kerry would be sure to lay back too while re-election sugarplums still danced in his head, and who'd want to bet on him to beat the Democratic curse and win a second term? If not, nine years would be the soonest reform could start, by which time another $18 trillion in unfunded retirement obligations would have piled up.
Nope, it's Mr. Bush or bust. Congress is no help. Wonder why, in the dog days of August, GOP House Speaker Denny Hastert became a sudden convert to a flat tax? He was hoping to divert the Bush White House's attention from Social Security reform. His members, facing re-election every two years, still believe that Social Security is an untouchable "third rail," notwithstanding a few GOP thrillseekers who've lately done handsprings on the third rail and lived to tell the tale.
Democrats, of course, can be expected to resist ferociously, and for reasons going beyond mere sentimental attachment to the FDR/LBJ welfare state. Anything that turns the adult population into wealth holders would change voting behavior forever, and not to Terry McAuliffe's advantage.
All this makes Mr. Bush's apparent willingness to tackle entitlements a once-in-a-generation planetary alignment, not to be passed up by a society that cares about its future.
Mr. Jenkins goes on to explain the "creative" accounting that the federal government engages in to mask the true cost of its Social Security obligations:
[A]dvocates need to get busy helping the public master a peculiarity of federal accounting. To wit, promises made to bondholders show up in the national debt. Promises made to future retirees don't.
Thus the officially recognized national debt is about $3.9 trillion, while the unfunded Social Security obligation alone represents an IOU of $10 trillion in present value. Throw Medicare onto the bonfire and that's another $62 trillion.
Keep in mind these figures represent only the "unfunded" portion, not the part covered by monies already credited to notional federal trust funds or to be collected in payroll taxes from now till eternity. It would take $3.9 trillion today to retire the visible national debt, and $72 trillion today to pay off unfunded promises to retirees. Yet only the first debt is reported to voters. That's the kind of accounting "oversight" that, in the private sector, leads straight to a cellblock.
That makes Enron's shifting of a mere $40 billion of debt into off balance sheet transactions look rather trivial, doesn't it? And why are these huge hidden costs important to understand? Mr. Jenkins answers:
Because suddenly the $1 trillion in "transition costs" to finance the creation of the Bush-touted private retirement accounts for younger workers doesn't seem so outlandish compared to the real federal debt, visible and invisible.
Interestingly, Mr. Jenkins then focuses on the main impediment to true Social Security reform -- risk aversion:
Unreasoning risk aversion is a hallmark of the human mind, and Democrats and their pet economists are already doing all they can to encourage the stand-pattism of certain voting blocs, especially single women and oldsters. John Kerry never tires of frightening these voters with the Satans of Wall Street and Ken Lay. He says instead a "tweak here, tweak there" will tide Social Security over without any "risky" reforms.
Here we must summon the heavy guns of "behavioral economics," whose adherents have been winning Nobel Prizes lately. Their most firmly established insight is that real people, as opposed to the rational maximizers of the economic texts, suffer from an excess of caution. "Prospect theory," pioneered by Daniel Kahneman and Amos Tversky, shows that people overvalue their fear of loss and undervalue the prospect of gain, leaving themselves worse off than they would be if they were willing to entertain reasonable risks.
I agree with Mr. Jenkins that real Social Security reform is more likely in a second Bush Administration than in a Kerry Administration. But given the Bush Administration's aversion to balanced policy analysis, I question whether there is really much of a prospect for reform even in a second Bush Administration. I guess we can dream, can't we?
Affiliated mutual-fund companies Invesco Funds Group Inc. and Houston-based AIM Investments reached a tentative $450 million settlement with federal and state regulators of allegations that they allowed favored investors to trade rapidly in their funds at the expense of long-term shareholders. The firms are both units of Amvescap PLC of London.
Under the deal, Invesco and AIM agreed to pay a combined $375 million in penalties and restitution to settle with the Securities and Exchange Commission and New York Attorney General Eliot Spitzer. They also agreed to reduce mutual-fund fees charged to investors by $75 million over the next five years. In a separate deal with Colorado regulators, Invesco will pay an additional $1.5 million to cover attorneys fees and "investor education," whateever that means. As usual in such settlements, neither firm admitted the civil fraud charges.
The Invesco-AIM settlement is one of the largest in the fund-trading scandal that has descended upon the huge mutual-fund industry over the past year. Only Bank of America Corp. agreed to pay more in fines and restitution, though Alliance Capital Management Holding LP agreed to a larger settlement if reduced fees are included in the settlement calculation.
The settlement pact also marks the first time regulators have linked AIM Investments to allegations of improper trading. The Houston firm was not charged late last year when regulators sued Denver-based Invesco and its former chief executive. But during the investigation, regulators discovered that AIM had at least 10 arrangements with select investors that allowed them to trade AIM funds rapidly (or "on market time," as they say in the industry). Invesco and AIM, which merged to form Amvescap in 1997, merged their operations last year.
Market-timing isn't illegal, but Invesco and other funds said in their prospectuses that they limited investors' transactions. Market timing is designed to take advantage of discrepancies between a fund's share price and the value of its underlying securities. The practice can raise expenses and reduce the profits of long-term fund investors.
Invesco's tech-stock-heavy funds did well in the bustling 1990s, but fell hard during the resulting bear market. Investors in the Invesco and AIM funds have withdraw more money than they invested in each of the past three years. Through the first seven months of this year, net redemptions from the firms' stock and bond funds totaled more than $8.3 billion.
September 7, 2004
Carlos Beltran cranked a triple and a mighty upper deck yak, Mike Lamb chipped in with another two run tater, and new Daddy Roy O hurled 7 2/3rd's strong innings as the Stros continued their utterly incredible late season surge by pounding the Reds again at the Juice Box on Tuesday night, 9-7.
The Stros have now won 11 straight games, 13 of their last 14, 19 of their last 22, and now trail the Cubs by a half game in the National League Wild Card playoff race. The Stros have also won seven straight against the Reds while outscoring them 63-23 in those games.
The Stros again took extra batting practice on the pathetic Reds' pitching staff, cranking out 11 hits for 23 total bases and enjoying 8 walks in between. Meanwhile, Roy O did his usual number on the Reds, controlling the game efficiently until he left with two outs and two on in the eighth. Springer's three run gopher ball after relieving Oswalt and Lidge's uncharacteristic two run gophie in the ninth made the score of the game closer than it really was.
The Rocket goes for the Stros 12th straight and his 16th win of the season in Wednesday afternoon's Businessman's Special before the Stros take off for a six game swing through Pittsburgh and St. Louis. Right now, this club will not even need an aircraft to fly into those cities.
Matthew Simmons is the chief executive officer of Simmons & Co. International, which is a Houston-based investment bank that specializes in investment in oilfield service and related companies. Mr. Simmons is one of Houston's most knowledgeable experts on the oil and gas industry, and in this Chronicle interview, challenges the conventional wisdom that the recent spike in oil and gas prices is temporary:
Q: What do the fundamentals [of oil production and consumption] look like? Are supply and demand out of whack?
A: The fundamentals, to me, look scarier than hell. Demand ... is having the smell of a runaway train, downhill on a one-way track. The consensus forecast for 2004 fourth-quarter demand is 83.6 million barrels a day, an increase of over 2 million from where we are this summer. And if you look at the consensus for the fourth quarter of 2005, demand is 85.6 million barrels a day, another 2 million increase from the fourth quarter.
Q: What about supplies?
A: There are very few companies that are showing any ability to grow their global oil supplies by more than 1 or 2 percent a year. If you take all the announced projects of any significance, and if they all come on and peak in the first year, they account for ? at best ? 6 to 8 million a day of fresh supply by 2009. And we just talked about needing 4 of that over the next 14 months.
The missing piece of data in this tight equation is the rate of decline of the existing base. Over 70 percent of the current output is coming from fields that were discovered, at their most recent, 30 years ago. If the global decline rate is only 3 percent per annum, then we lose 11 million barrels by 2009 and add 6 to 8. I don't see how we balance this market, unless we have a stunning depression.
And Mr. Simmons has always been skeptical about Saudi Arabia's claims that it owns a quarter of the world's reserves and can simply increase production to meet rising world demand:
Q: Most analysts accept Saudi Arabia's claims that it holds about a quarter of the world's oil reserves. You have challenged the Saudis over their reserve estimates?
A: The grim fact about Saudi Arabia today is that, at the Saudis' own admission, the Ghawar Field, the king of all kings, is still producing about 5 million of their 8 to 9 million barrels a day of oil. That's all you need to know to be scared.
Here is a more extensive interview with Mr. Simmons. These are well-supported views of a formidable expert in the oil and gas industry. Take note.
Meanwhile, this Wall Street Journal ($) article reports that the prominent energy-stock analysts John S. Herold Inc. has issued a report contending that Exxon Mobil is overvalued when compared with a group of smaller energy companies that collectively mirrors the capitalization of the energy giant. The Herold report lumped the group of smaller energy companies into a single theoretical stock called "Synthetic Exxon Mobil," or "SXOM." Designed to resemble Exxon Mobil both in market capitalization and operational scope, SXOM includes six companies that, during the past three years, would have have generated a 31% return on investment. In comparison, an investment in Exxon Mobil would have yielded just 12%. The report tends to support the notion that the recent spike in energy prices is making the less-expensive stocks of more-aggressive energy companies look better than the more established giants.
September 6, 2004
A few notable developments from the wonderful world of golf:
Vijay Singh finished his long climb to overtake Tiger Woods as the world's top golfer as he beat Woods in a head-to-head matchup on Monday to win the Deutsche Bank Championship by three strokes and become the new the top-ranked player in the world. The victory was Singh's sixth victory of the year and was enough finally to vault Singh over Woods as the number one golfer in the World Golf computer ratings.
Woods had been No. 1 for more than five years -- a record 264 consecutive weeks -- in the rankings that consider performance over the past two years and factor in the strength of the field in each tournament. The new numbers released later Monday had Singh at 12.72 points to Woods' 12.27, making Singh the first player other than Woods to hold the No. 1 ranking since Aug. 8, 1999, when David Duval was number one.
And what of Mr. Duval? Well, after a slide from the top of professional golf the likes of which had not been seen since the demise of Ian Baker Finch, Duval made the cut for the first time in 15 months in the Deutsche Bank Championship and finished tied for 13th for a payday of $93,750 -- more than he has made in 24 events that he has entered in the past two years.
Duval is an interesting man. He lost his only brother to leukemia in his early teens after a bone marrow transplant with Duval as the donor failed, and the loss affected Duval and his family dramatically. Duval's parents seperated and divorced, and Duval went into a shell in which he found his only outlet in the isolation of golf. He developed an idiosyncratic swing in which he offset a strong grip and a closed club face at the top of the backswing with an incredibly well timed blocking action through his downswing that allowed him to hit a long and accurate fade. He also developed an introverted personality that struck many as conceited.
A stellar player as a collegian, Duval quickly rose to the highest levels of professional golf after winning the 2001 British Open. However, Duval hurt his back, and the blocking action that Duval used in his downswing to offset his strong grip and closed clubface aggravated the injury. When Duval attempted to swing without the blocking action, he started duck hooking everything, which was the natural result of his strong grip and closed clubface. When he started attempting to correct the duck hook, he started blocking everything to the right.
From the pinnacle of his profession after the British Open victory in 2001, Duval fell to 80th on the PGA Tour money list in 2002 and things only got worse from there. Duval made only four cuts in 20 tournaments last year and finished 211th on the money list. As Duval's golf world collapsed around him, many of his fellow Tour pros who had once considered him to be a conceited jerk saw that Duval was actually living a life of quiet desperation.
Earlier this year, Duval started to attempt to put his golf game back together again by retaining well-known golf teacher David Leadbetter. Duval's finish this week in the Deutsche Bank Championship is an indication that Leadbetter's instruction may be helping Duval. Most people who follow golf closely are hopeful that Duval can make it back to the top echelon of professional golf.
Tour pros everywhere marveled at Norman's unusual yet effective swing. He assumed a wide, stiff-kneed stance far from the ball and took the club back with barely any body rotation, and then swung through the ball, finishing with his hands high and in front of him. Norman's method was the basis of the Natural Golf style, which has achieved a moderate following among amateur golfers over the past decade or so. However, no golfer other than Norman has won a professional tournament using the Natural Golf method.
Brandon Backe hit his first Major League yak and allowed only one run in seven innings to keep the Stros in the thick of the National League wild-card chase with an 11-5 rout of the Reds at the Juice Box on Monday afternoon.
The Stros have now won 10 straight games, 12 of their last 13, 18 of their last 21, and now are only 1 1/2 games behind the Cubs and Giants for the National League Wild Card playoff spot. The Stros have also won six straight against the Reds while outscoring them 54-16 in those games.
Making only his fourth career start, Backe (3-2) virtually shut down the Reds after giving up three hits and a run-scoring single in the first inning. He gave up only four singles and a walk from that point on, and finished with a career-high eight strikeouts. Backe's unlikely two-run yak prompted a stancing ovation from the Juice Box crowd of 40,581 that did not cease until Backe re-emerged from the dugout to take a bow.
If Roy O can get take a break from a new baby watch, then he will pitch the Tuesday night game against the Reds with the Rocket following in Wednesday afternoon's Businessman's Special. After the Reds close the homestand, the Stros travel to Pittsburgh and St. Louis for a key six game road trip as the Wild Card race approaches the home stretch.
September 5, 2004
The Stros have now won 11 of their last 12 games, 17 of their last 20, and now are only 1 1/2 games behind the hurricane idled Cubs for the National League Wild Card playoff spot. The Stros have also won 10 of their last 11 games against the Pirates and 19 of 21.
Lamb went 4-for-5 with a yak and four RBIs. Carlos Beltran added three hits as the Stros are now on their longest winning streak since the club won a franchise-record 12 straight from September 3-14, 1999. Pete Munro (4-5) allowed five runs and four hits in five innings to gain the win, as the suddenly steady Stros relief corps of Chad Qualls, Mike Gallo and Dan Wheeler finished up with four scoreless innings of relief.
What a difference twos weeks can make! Our periodic review of the Stros hitters' runs created against average ("RCAA") and the Stros pitchers' runs saved against average ("RSAA" and RCAA explained here) reflects the Stros' incredible surge over the past two weeks into a legitimate contender for the the National League Wild Card playoff spot. Here were the Stros hitters' RCAA numbers, courtesy of Lee Sinins, as of Sunday, August 22:
Lance Berkman 45
Carlos Beltran 12
Mike Lamb 6
Jeff Bagwell 5
Craig Biggio 5
Eric Bruntlett 2
Chris Burke -1
Jeff Kent -1
Jason Lane -2
Orlando Palmeiro -3
Richard Hidalgo -9
Jose Vizcaino -9
Morgan Ensberg -12
Adam Everett -12
Raul Chavez -14
Brad Ausmus -23
As of August 21, the Stros were 10th out of the 16 National League teams in RCAA and had generated 11 fewer runs than an average National League team would have generated up to that date in the season. Compare that with the following, which are the updated RCAA of the Stros hitters as of September 4:
Lance Berkman 58
Carlos Beltran 23
Jeff Bagwell 15
Craig Biggio 11
Mike Lamb 9
Jeff Kent 3
Eric Bruntlett 2
Chris Burke -1
Jason Lane -3
Orlando Palmeiro -3
Jose Vizcaino -5
Morgan Ensberg -9
Richard Hidalgo -9
Adam Everett -11
Raul Chavez -16
Brad Ausmus -21
In just two weeks, the Stros have jumped from 10th to 6th out of the 16 National League teams in RCAA and have now generated 43 more runs than an average National League team would have generated through September 4 this season.
I'm sure it has happened before, but frankly, I cannot recall a club going from a negative 11 RCAA to a positive 43 RCAA in a two week period. This is truly a streak for the ages.
The individual players' improvement has been equally incredible. Bags has tripled his RCAA over the past two weeks and now is within shouting distance of equaling his performance from last season. Beltran and Bidg have doubled their RCAA, and Beltran's combined RCAA from the Royals and the Stros would be a lofty 40. Moreover, Kent, Viz and Ensberg all have chipped in with substantial improvement in their respective RCAA figure, and even the woeful Ausmus has chipped in with a 10% improvement. Finally, Berkman continues to have one of the best seasons of any National League hitter as his 58 RCAA currently places him fifth among NL hitters, behind only Bonds, Edmonds, Pujols, and Helton.
As I noted several times throughout the season, it was going to take the type of improvement in RCAA that we have seen from the Stros over the past two weeks for the Stros to get back in the playoff hunt. I did not think they could do it, but the Stros have proven me wrong. You have to respect the heart of this club.
Meanwhile, the RSAA of the Stros' pitchers has held reasonably steady during the Stros hitters' streak, and that has been good enough. After topping out about a month ago in 3rd among the 16 National League pitching staffs in RSAA, the Stros' pitching staff remains in fifth place now, but still have given up 28 fewer runs than an average NL pitching staff. Here are the individual RSAA of each Stros pitcher:
Roger Clemens 22
Brad Lidge 21
Roy Oswalt 18
Wade Miller 10
Octavio Dotel 5
Darren Oliver 5
Andy Pettitte 4
Dan Miceli 2
Russ Springer 2
Dan Wheeler 2
Brandon Backe -2
Chad Qualls -2
David Weathers -2
Mike Gallo -3
Jeremy Griffiths -3
Ricky Stone -3
Kirk Bullinger -4
Chad Harville -4
Pete Munro -5
Jared Fernandez -6
Carlos Hernandez -6
Brandon Duckworth -9
Tim Redding -14
Clemens, Oswalt and Lidge continue to have outstanding seasons, and the rest of the Stros bullpen meanders between slightly above and slightly below average. The negative 6 RSAA of Hernandez is a concern, but Backe's strong performances in three of his first four starts have been a pleasant surprise. The bottom line is that the Stros staff continues to be a well above average staff this season.
So, what do the Stros need to win the National League Wild Card playoff spot? Well, it is highly unlikely that they are going to continue hitting at the pace that they have over the past two weeks, although the upcoming series with the Reds' abdominable pitching staff should help the hitters prolong their streak for awhile further. But I think its reasonable to expect Berkman and Beltran to continue their outstanding hitting, and that Bags and Lamb can continue to improve slightly throughout the remainder of the season. So long as Bidg and and the remainder of the hitters remain steady or improve slightly, and the pitchers hold steady or increase their RSAA just slightly, the Stros actually have a decent shot -- although not great -- at overtaking the Cubs for the National League Wild Card playoff spot. The Cubs pitching staff continues to be much stronger than the Stros, but the Cubs hitters have declined dramatically over the past month and that downturn could undermine them as the race comes down to the final weeks.
But the fact that the Stros are in the race at all, after being virtually out of the race a little over two weeks ago, is one of the more remarkable stories of this Major League Baseball season.
Brandon Backe takes the hill for the Stros in the Labor Day afternoon game at the Juice Box against the Reds, whose woeful pitching staff comes in to this series having given up 160 more runs than an average National League pitching staff would have surrendered up to this date in the season. That's some seriously bad pitching, folks.
Lest you think that the only baseball and the Stros are the only sports subjects addressed on this blog, we bring you a review of the first weekend of college football. I generally ignore football until the National Football League pre-season games are concluded because they combine all the tedium and meaningless nature of baseball's spring training games without the charm.
The Texas Longhorns pounded North Texas in their first game, but the Chronicle provides Oklahoma some little needed bulletin board material as columnist Richard Justice predicts a UT victory already in the annual Texas-OU game. Given UT's futility with Oklahoma over the past several seasons, can't everyone just shut up about Texas-OU until the game is played?
Meanwhile, things are not going well with the transition from the R.C. Slocum era to the Dennis Franchione era at football-obsessed Texas A&M. After putting up a 4-8 mark in his first season last year, Coach Fran's crew allowed Utah to cream them this past Thursday night on ESPN's nationally televised game. That went over like the proverbial turd in the punch bowl in College Station, and Texas' best sportswriter -- the Chronicle's Mickey Herskowitz -- is not impressed with some of the contrived efforts of Coach Fran:
If you had played as poorly as the Texas A&M Aggies did against Utah, wouldn't you be glad not to have the names on the back of your uniforms?
This was one of the many questions that emerged from the ashes of A&M's 41-21 loss in its opener on national television.
Coach Dennis Franchione removed the names to make a point about playing as a team.
Sadly, the Aggies missed the point, along with a boatload of passes, tackles and blocks.
So the ploy did not work. In the best interest of Aggie survival, we implore coach Fran: please, please, give them back their names.
This isn't the 1970s, when a few teams still thought that identifying the players might cut into their program sales.
The blank space on the back of the A&M jerseys seemed to merely reinforce the feeling that the Aggies didn't know who they were or what they were doing in Salt Lake City.
They appeared not to know where the football was, which can cost a team dearly and did. The Aggies had the Utes backed up to their own 10, and you saw at the start they had no intention of trying to blitz or put pressure on the quarterback, Alex Smith.
So right there, Smith hit a pass for 12 yards. Going without a huddle, he connected with Steve Savoy on a short pass that the receiver turned into a 78-yard touchdown.
Just like that, the Aggies were doomed.
Moving on to the Houston Texans, the local media, which generally fawns over the Texans, has its usual puff pieces as the team prepares for the opening of its third National Football League season. As a grizzled veteran of observing football at all levels, I am skeptical that the media's optimism is justified.
The Texans have a great owner in Bob McNair, but after that, all I see are question marks. The defense -- which is the foundation upon which solid NFL teams are built -- was awful last season and the Texans still do not have the potentially dominant defensive front that is essential to a top flight NFL defense.
Moreover, on the offensive side, the left side of the offensive line is inexperienced and quarterback David Carr, coming into his third season, has shown little (admittedly, on undermanned teams) to indicate that he is a top tier NFL quarterback. Finally, Coach Dom Capers is a capable NFL coach, but my sense is that he is defensive coordinator masquerading as a head coach. Accordingly, I do not believe that the Texans will break out into a playoff caliber NFL team under him.
But Mr. McNair is a great guy and deserves a winner, so I hope I'm wrong on my forecast for the team.
Finally, the best game of the first weekend will take place this afternoon in Houston at Reliant Stadium, where the University of Houston and Rice tangle in their annual game for the Bayou Bucket Trophy. The Cougars hung a 48-14 pounding on the Owls last season, so the Owls will be primed to make this one a more competitive affair. The Coogs are a 3 1/2 point favorite in the 4 p.m. kickoff at Reliant.
Mike Lamb hit the go-ahead RBI double in the seventh inning and strong relief pitching propelled the Stros to extend their season-high winning streak to eight games with a 6-5 victory over the Pirates on Saturday night at the Juice Box. The Stros have now won 10 of their last 11 gaves and 16 out of their last 19 to pull within two games of the Cubs in the race for the National League Wild Card playooff spot.
Houston starter Carlos Hernandez struggled through three innings, giving up four earned runs on four hits, including Jason Bay's three run yak. However, Kirk Bullinger, Chad Harville, Chad Qualls, Russ Springer, and Brad Lidge gave up just one more run the rest of the way to secure the win. Lidge pitched the ninth for his 20th save in 23 opportunities.
The Stros' Pete Munro tries to keep the momentum going in Sunday's matinee against Baylor-ex Kip Wells. The Reds come to the Juice Box on Monday to provide more batting practice for the Stros' hitters during a three game set.
September 4, 2004
Arnold Kling has this excellent analysis of President Bush's acceptance speech at the Republican National Convention.
And Professor Maule has some insightful comments on the President's proposals regarding income tax simplification.
New York-based bond trading firm Cantor Fitzgerald Securities, which lost two-thirds of its workers in the World Trade Center attack of September 11, 2001, has sued Saudi Arabia and dozens of other defendants -- including numerous banks and Islamic charities -- in U.S. District Court in New York for a mere $7 billion for allegedly supporting al Qaeda before the attack through financing, safe houses, weapons and money laundering.
Saudi Arabia is the birthplace of al Qaeda leader Osama bin Laden and 15 of the 19 Sept. 11 hijackers.
The lawsuit involves many of the same defendants, transactions, events and questions of law as an earlier $300 billion lawsuit that various insurance companies have brought against Saudi Arabia, terrorist groups, companies and other countries supporting terrorism. That lawsuit is still pending.
The Cantor Fitzgerald lawsuit takes dead aim at Saudi Arabia, saying the kingdom "knew and intended that these Saudi-based charity and relief organization defendants would provide financial and material support and substantial assistance to al Qaeda." The lawsuit alleges that Saudi Arabia engaged in a pattern of racketeering as it participated directly and indirectly in al Qaeda's work through funding and controllings its "alter-ego" charities and relief organizations. In addition, Cantor Fitzgerald alleges that Saudi Arabia materially supported al Qaeda by helping to raise money for it, by intentionally employing al Qaeda operatives, by laundering its money and by providing al Qaeda with safe houses, false documents and ways to obtain weapons and military equipment.
Interestingly, the U.S. federal government has generally opposed this type of lawsuit on the grounds that it interferes with the government's exclusive power to conduct foreign policy. No word yet on the government's stance toward the Cantor Fitzgerald lawsuit.
Jeff Bagwell, Carlos Beltran, Craig Biggio and Jose Vizcaino homered and the Rocket won his 325th career win as the Stros beat the Pirates in the first game of their weekend series at the Juice Box, 8-6.
The Stros are in the midst of a major winning trend. They have now won seven straight, 15 of their last 18 games, and 10 of their last 11. They have closed to within 2½ games of the Hurricane Frances-idled Cubs, who are the leader in the race for the NL wild-card playoff spot.
Clemens (15-4) won his third straight start, and moved into sole possession of 12th place on the career wins list. He took a 7-0 lead into the seventh inning but tired and wound up allowing four runs and six hits in 6 2/3 innings. The Rocket even added an run-scoring single in the sixth for his seventh RBI of the season. Dan Wheeler pitched a perfect eighth and Brad Lidge worked the ninth for his 19th save in 22 chances.
By the way, General Richard Myers, chairman of the Joint Chiefs of Staff, threw out the ceremonial first pitch as part of the Astros' Military Appreciation Night. Turns out that General Myers is a former high school classmate Alan Hendricks, who represents Clemens along with his brother, Randy.
September 3, 2004
This article attempts to make progress on both the problems of sexually transmitted disease and acquaintance rape by proposing a new crime of reckless sexual conduct. A defendant would be guilty of reckless sexual conduct if, in a first sexual encounter with another particular person, the defendant had sexual intercourse without using a condom. Consent to unprotected intercourse would be an affirmative defense, to be established by the defendant with a preponderance of the evidence. As an empirical matter, first-encounter unprotected sex greatly increases the epidemiological force of sexually transmitted disease and a substantial proportion of acquaintance rape occurs in unprotected first encounters.
The new law, by increasing condom use and the quality of communication in first sexual encounters, can reduce the spread of sexually transmitted disease and decrease the incidence of acquaintance rape.
This NY Times article reports that Merrill Lynch & Co. jumped back into the energy-trading business with an agreement to buy Entergy-Koch, LP -- the Houston-based joint-venture trading unit of Entergy Corp. and closely held Koch Industries -- for an undisclosed sum.
Merrill is acquiring a trading staff of about 300 people in Houston and London who primarily buy and sell contracts for electricity, natural gas and weather products. Entergy-Koch valued the business unit at approximately $2 billion.
Merrill's move back into energy trading highlights the emerging role of Wall Street firms with strong credit ratings in the energy trading industry, which was devastated following the demise of Enron Corp.'s dominant online trading business in late 2001. Merrill joins several Wall Street firms that have recently bought substantial trading operations, including Goldman Sachs Group Inc and Morgan Stanley. Generally, the firms are betting on opportunities that recent volatility in energy prices present, such as big energy users hedging their risk on energy prices. Moreover, the energy books often allow the owners to pick up distressed energy-related assets -- such as power plants and pipelines -- at bargain prices. Those assets can form the basis of hard assets around which energy traders can sell products.
The Wall Street Journal ($) is reporting that Stephen F. Cooper, the independent chief executive officer of Enron Corp. during its chapter 11 case, is preparing to request approval of a $25 million bonus for his and his firm's (Kroll Zolfo Cooper, a unit of Marsh & McLennan Cos.) work in connection with Enron's nearly three year old reorganization. The request is in addition to $63.4 million in fees that Mr. Cooper and his firm have already collected from Enron during the chapter 11 case.
Not bad work if you can get it.
Enron's Chapter 11 disclosure statement estimates that fees to all of the bankruptcy professionals involved in the Enron chapter 11 case will eventually reach nearly $1 billion. Although arguably outrageous, the amount needs to be kept in perspective. Enron's reorganization plan is a "going concern" liquidation plan that the company believes will generate about $12 billion for distribution to creditors. That translates to a recovery of about 17 cents on the dollar for the largest group of creditors holding unsecured claims. If Enron had simply liquidated immediately after filing bankruptcy, the company estimates that the amount available for distribution to creditors would have likely have been only about $6 billion. So, the reorganization professionals have been at least partly responsible for preserving value for creditors.
But that's still some serious scratch.
September 2, 2004
This Chronicle article reports on the the latest dustup between longtime partners Baylor College of Medicine and the Methodist Hospital -- Baylor has started moving residents to St. Luke's Episcopal Hospital, which is generating even more acrimoney in the already chippy split with between Baylor and Methodist. Here are earlier posts on the Baylor-Methodist divorce.
Executives at Methodist claim to be "dumbfounded" at th e move and claim that the transfer reneges on a previous agreement between the two institutions regarding involving the allotment of residents.
This latest dispute is only the latest in a series of disputes that have arise after Baylor and Methodist's decision to part ways in April ended an historic 50-year Texas Medical Center relationship during which the hospital was Baylor's primary teaching hospital for its medical students and residents. St. Luke's is Baylor's new teaching hospital and Methodist's new primary partner is Cornell University's medical school, which is located in New York.
In other Medical Center news, this Chronicle article reports that Memorial Hermann Hospital System and The University of Texas Health Science Center at Houston renewed their agreement in which Memorial Hermann serves as the school's primary teaching hospital. UT-Houston and Hermann -- which have been partners since 1968 -- agreed to continue their partnership for 15 more years.
Under the renewal, UT-Houston purchased the Hermann Professional Building and adjacent garage for $31 million and renamed the building the University of Texas Health Science Center Professional Building. It will be UT-Houston's first outpatient clinic, and its location (across the street from UT-Houston) will be convenient for UT-Houston faculty and students.
Continental Airlines -- one of Houston's largest employers -- announced plans to cut 425 jobs today in a move that the company says will save it $125 million before taxes in 2005 and $200 million a year before taxes by 2007.
In its news release, Continental said that the move, along with other recent efforts to boost revenue and cut costs, should generate a total of about $1.1 billion in pretax benefits. Continental posted a second-quarter loss of $17 million on revenue of $2.51 billion, which the company said was primarily the result of high fuel prices, weak domestic fares, and costs attributable to the early retirement of leased aircraft. The company also warned that existing employees would be asked to take wage and benefit reductions "unless the revenue environment improves dramatically."
Most of 425 job cuts would be in management and clerical staff, although the exact number of layoffs was not disclosed. Some of the positions that Continental plans to eliminate are already empty and some of the other job cuts will come from normal attrition. The latest round of cuts, most of which are effective immediately, are in addition to the previously announced reduction of 253 reservation positions. After the latest reductions, Continental will have cut its management and clerical work force by almost 25% from levels before the attacks of Sept. 11, 2001 on New York and Washington, D.C.
Remarkably, almost three years after Enron's descent into bankruptcy amid wide-ranging allegations of corporate fraud, the Enron Task Force still has not taken a criminal indictment against a former Enron executive to trial.
And one of the first Enron-related criminal cases scheduled to go to trial this fall -- the indictment against five former officers of Enron's telecommunications unit, Enron Broadband -- has been pushed back to March of next year. Yesterday, U.S. District Judge Vanessa D. Gilmore in Houston postponed the trial of the Enron Broadband criminal case to March 1, 2005.
The first trial involving former Enron executives is scheduled to begin on September 20 in U.S. District Judge Ewing Werlein's court in Houston in the case that is known as the Nigerian Barge case. Now that the Enron Broadband case has been pushed back to March of next year, there is a decent chance that Ken Lay's request for a speedy trial may result in his case being the second trial to occur of a former Enron executive.
Under normal circumstances, the Government's cases in both the Nigerian Barge case and the Lay case appear to be weak. However, anything related to Enron is atypical. Given the public bias against Enron, the Government has a decent shot at convictions in even their weak Enron-related cases.
Enron Corp. agreed to sell its CrossCountry Energy business to a venture of Southern UnionCo. and a General Electric Co. unit in a deal the companies valued at $2.45 billion. CrossCountry Energy holds Enron's interests in three domestic natural-gas pipelines that were one of the company?s most valuable assets when it filed its Chapter 11 bankruptcy case in early December 2001. Earlier posts on the spirited competition for these assets can be reviewed here and here.
The sale ? which is at a price that is $100 million more than the auction winner's initial offer ? remains subject to approval by the Enron Bankruptcy Court in New York on Sept. 9. The deal is expected to close by mid-December.
NuCoastal LLC, a company run by Texas billionaire and Coastal Corp. founder Oscar Wyatt Jr. offered $2.2 billion in May. In June, Southern Union and joint-venture partner GE Commercial Finance Energy Financial Services put forward a rival offer of $2.35 billion. Both offers included the assumption of about $430 million in debt.
The CrossCountry sale is a key part of Enron's ?going concern liquidation? reorganization plan, which also proposes to sell Enron?s interest in Portland General Electric, its Pacific Northwest utility, to an investment group backed by Texas Pacific Group. That deal is for $1.25 billion in cash and $1.1 billion in assumed debt.
September 1, 2004
JK hit a grand salami today as the Stros won their 14th game of the last 17 in obliterating the Reds for the third straight time at the Great American Ballpark in Cincy, 9-3. In sweeping the three-game series against the Reds, the Stros cranked 10 yaks and scored 28 runs.
Roy O (16-9) improved to 10-0 in 14 career games against the Reds by allowing three runs and six hits in six innings, walking three and striking out four. However, he left after the sixth with discomfort in the same area of his abdomen that gave him problems earlier in the year.
Even with this recent surge, the Stros chances of winning the Wild Card playoff spot are not great. They become virtually non-existent if Oswalt is injured and cannot pitch down the stretch effectively.
The Stros pounded Reds pitching again for 12 hits. Lance Berkman led the way with three hits, including a solo tater. The Stros hitters enjoyed their batting practice with the Reds' pitchers over the past several days.
After a well-deserved off day on Thursday, the Stros send the Rocket to the hill to start a weekend series with the Pirates at the Juice Box on Friday night. The Reds follow the Pirates for a series early next week.
At my request, my lawyers have filed motions in federal court asking for an immediate and speedy trial on the charges I face. To facilitate this, I offered to forgo discovery and to waive a jury trial, leaving it to a judge to determine my guilt or innocence.
Why, then, is the Department of Justice not willing to agree to an immediate and speedy trial?
And as one who should know, Mr. Lay thinks he knows the reason -- politics:
My July 8 indictment was announced at a news conference in Washington. The acting attorney general, James Comey, referred to what had previously been known as the Enron Task Force as "The President's Corporate Fraud Task Force." Never mind that the phones are still answered "Enron Task Force" and that's what the letterhead on the stationery reads.
Comey described the Enron investigation as the most prominent among those being overseen by this presidential task force. He said: "Our joint mission is to bring corporate criminals, corporate crooks [i.e., Ken Lay] to justice in this country."
Well, if my indictment is "the most prominent" in this effort, why can't we get on to trial? Perhaps, as my lawyers said in a court filing, it's because the acting attorney general was "unable to determine whether he was announcing an indictment or holding a political rally" and finally decided on the latter. Some other statements at that rally:
? Linda C. Thomsen, deputy director of enforcement for the Securities and Exchange Commission: "[T]he president's corporate task force, which celebrates its second anniversary tomorrow . . . [has demonstrated that] just the mention of the name Enron evokes images of duplicity and greed."
? Internal Revenue Service Commissioner Mark W. Everson: "[T]he corporate culture of Enron guided by Mr. Lay is now synonymous with corporate fraud and greed at its worst. And Enron's crooked 'E' logo depicts the corporate management team at Enron -- crooked."
Are these signs of a dispassionate prosecution of crime? To me they look more like part of a political campaign.
Mr. Lay has a point and he makes it well:
Now, I know about politics. I have been active for years and I ask neither sympathy nor special treatment. But justice is a different issue. The tragic circumstances surrounding the collapse of Enron and the harm it caused to so many victims is something I will take to my grave. My inability to save Enron is one of my greatest regrets. But I am guilty of no crime and eager to prove my innocence. Our Constitution guarantees justice and a speedy trial. Yet, without the agreement of the president's task force, as hard as I may try, I may not be granted either.
I would ask James Comey and Andrew Weissmann: With justice in the balance, do you have a real case, based on the law and not on politics? Subject to the judge's schedule, meet me in court before November, and agree to a stand-alone trial, with or without a jury -- your option. If you agree to a non-jury trial, the trial can begin and end before the election. It will determine not only whether the charges against me are "significant" but also whether they are "real."
Overall, I agree with Mr. Lay, although his fixation on a trial before the November elections seems somewhat contrived. My sense is that Mr. Lay will get his speedy trial -- severed from that of his co-defendants, Messrs. Skilling and Causey -- and that the trial will likely begin some time early next year. Given the normal progression of these types of cases, that's not unreasonable.
But Mr. Lay's larger point is valid -- the way in which the Government has handled the Enron criminal cases has elevated politics far beyond justice, and that is not a good thing.
Almost three years now after Enron spiraled into bankruptcy, the Enron Task Force has not prosecuted a single trial involving a former Enron executive (the first is scheduled to begin on September 20 in the Nigerian Barge case). Rather, the Task Force has take the approach of sledgehammering former Enron executives with multi-count indictments so that each of the executives is faced with the prospect of what amounts to a life prison sentence if they risk attempting to defend themselves against the charges. In the meantime, just to make sure that the public perception remains biased against anything having to do with Enron, the Task Force makes public statements and disclosures about its indictments that strongly imply guilt and wrongdoing.
And where the Government does not have the grounds in a case to justify the prospect of a life sentence, the prosecutors have no problem making them up. They did just that recently in the Nigerian Barge case in a superceding indictment prompted by the Supreme Court's recent Blakely decision that placed the federal sentencing guidelines into question. On a $25 million deal in which neither Enron nor Merrill Lynch lost a dime, and in which the basis for the Government's allegation that a "true sale" did not occur was not even discovered until well after Enron had gone into bankruptcy and its stock had become worthless, the Government now claims that the "damage to the market" resulting from the Nigerian Barge transaction was $80 million.
There is no factual basis for that allegation. The only reason that it has been made is to justify a sentence at the harshest levels of the federal sentencing guidelines. And this in a case that is so weak that it likely would not have been prosecuted but for the fact that the Task Force currently believes that it can play on the extraordinary public bias against Enron to obtain a conviction against anyone who was associated with the company.
So, why should we care? Wasn't Enron just a house of cards run by some bad folks at the top? Aren't they just getting what they deserve? Who cares if the Government simply makes things a bit more efficient by obtaining plea bargains rather than convictions after protracted trials?
Well, Professor Ribstein has one very good reason that the fair adminstration of justice is important to anyone who is interested in the promotion of business and risk taking:
[Mr. Lay] is entitled to fairness whether he's a businessman or not. But it's important because he is a businessman to send the right signals to future entrepreneurs about how risk-taking behavior is going to be treated.
But there is also another even more important reason that the Government should dispense with the political wrangling and get on with the fair administration of justice against the former Enron executives -- that is, because that process protects you and me.
In this insightful scene, one of Sir Thomas More's apprentices -- Richard Rich -- confronts Sir Thomas while Sir Thomas is conversing with his wife, daughter, and his daughter's fiancee, Will Roper (an aspiring lawyer). Rich begs Sir Thomas for a political appointment, which Sir Thomas proceeds to refuse because Sir Thomas knows that Rich is prone toward corruption and would never be able to resist the bribes that he would be tempted to take in such an appointment (Sir Thomas thought Rich should be a teacher). After an embittered Rich leaves Sir Thomas and his family, it is obvious to Sir Thomas' wife, daughter, and Roper that Rich is resentful and will ultimately betray Sir Thomas, which indeed Rich does later in the movie. That leads to the following dialogue:
Wife: "Arrest him!"
Sir Thomas: "For what?"
Wife: "He's dangerous!"
Roper: "For all we know he's a spy!"
Daughter: "Father, that man is bad!"
Sir Thomas: "There's no law against that!"
Roper: "But there is, God's law!"
Sir Thomas: "Then let God arrest him!"
Wife: "While you talk he's gone!"
Sir Thomas: "And go he should, if he were the Devil himself, until he broke the law!"
Roper: "So, now you give the Devil the benefit of law!"
Sir Thomas: "Yes! What would you do? Cut a great road through the law to get after the Devil?"
Roper: "Why, yes! I'd cut down every law in England to do that!"
Sir Thomas: "Oh? And when the last law was down, and the Devil turned 'round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man's laws, not God's! And if you cut them down--and you're just the man to do it, Roper!--do you really think you could stand upright in the winds that would blow then?"
"Yes," Sir Thomas concludes. "I'd give the Devil the benefit of law, for my own safety's sake!"
Ken Lay is entitled to the speedy and fair administration of justice. I am hopeful that he receives it, not so much for his sake, but for ours.
This is surprising only to those who never understood why the tax code was the problem in the first place. Notice that the typical family policy doled out by companies to their employees represents a total price-tag of about $9,086 a year. If you're in the top tax bracket, the effective after-tax cost to you is about $5,500. If you're in the working-poor bracket (i.e. pay no federal income tax), it's $9,086.
In fact, it's doubtful that such an insurance product would even exist in the marketplace in the absence of a massive tax subsidy, given the built-in incentives that naturally drive costs out of sight. Certainly you wouldn't buy gold-plated, first-dollar health insurance if you faced the full tab alone.
Then, Mr. Jenkins cuts to the heart of the main problem with America's health care finance system -- overreliance on the third party (i.e., insurer) payor system:
No serious person doubts that our overreliance on third-party payment is the problem that will be solved -- or will lead to a government-run, single-payer system that controls costs by denying care. In our information-rich economy, the medical industry doesn't even publish price lists. Is this not downright weird and a sign change is desperately needed? (The exception is cosmetic surgery, where, as health economist John Goodman points out, consumers pay out-of-pocket and competition has meant prices are flat or falling).
Alas, a bold proposal for health care finance reform is subject to the shifting winds of the current political campaign:
Some in the Bush camp were prepared to go deeper than even the HSA [explained here] kludge, totally revamping the tax system. The idea was to help Americans shift their expectations: No longer will they send their tax money to government and hope government will take care of them in old age. Now they will have ownership of the assets that will take care of them in old age.
Hope for such boldness on Thursday night probably vanished the moment it became clear John Kerry was going backward in the polls. It may be just as well. The HSA revolution suggests that simply offering taxpayers a better choice may be the stealthy way to reform entitlements (and let's admit that the tax deductibility of employer health care is a giant middle-class entitlement) without frightening swing voters with any Big Bang-like proposals.
Al Hunt is executive Washington editor for The Wall Street Journal ($). His WSJ responsibilities include writing the weekly editorial page column, "Politics and People," and directing the paper's political polls.
This week, Mr. Hunt is writing his column from the Republican Party Convention in New York, but his subject in today's column is the coming shakeup in the John Kerry's campaign staff resulting from President Bush's recent run-up in the polls. Mr. Hunt describes what Mr. Kerry's supporters are saying about his management style:
The Kerry campaign, like most, ultimately reflects the candidate. The cautious indecisiveness and occasional vacillations have become Kerry trademarks.
Leading Democrats describe a command structure often frozen -- or at least tempered -- by too many chefs, a too-heavy reliance on polls or focus groups and an aversion to risks. As a result, the message often is muddled and the reaction to hard-hitting attacks from Republicans often is slow and unconvincing.
With friends like these . . .