November 30, 2004
Ancel Benjamin Keys, PhD., the inventor of the K-rations that kept Allied troops alive and reasonably well fed on the battlefield during WWII, died last week at the age of 101.
But the greater contribution of Dr. Keys is even more interesting. As Sandy Szwarc notes in this TCS op-ed, Dr. Keys' greatest scientific contributions are to our understanding of the human body and eating.
Inasmuch as the mainstream media in America is obsessed with dieting and a svelte figure, few Americans who read Dr. Keys' obituary know that, over half a century ago, he conducted the soundest clinical studies ever done on the adverse effects of dieting. His findings -- which have been confirmed many times since -- proved that dieting can actually cause severe physiological and psychological harm, often results in people becoming fatter, often leads to eating disorders, and even increases the risk for heart disease and life shortening illnesses.
As Ms. Szwarc notes:
The extreme physical and mental effects [of restricted diets that] Keys observed led to his famous quote:"Starved people cannot be taught democracy. To talk about the will of the people when you aren't feeding them is perfect hogwash."
Merck's board has approved golden parachutes from 230 of its top executives.
Dallas Mavericks owner Mark Cuban is fed up with the what he thinks is the roulette nature of the stock market. He has concluded that stock investing is not much different than gambling in Vegas, so for those who like to wager, he has come up with a better idea -- a hedge fund that bets on sporting events.
"The goal of the fund would be to make money and to prove that the current equity markets are more Ponzi scheme than efficient markets," Mr. Cuban said in his blog post announcing the hedge fund. "There is far more hypocrisy in equity markets than there is in non-traditional markets and that impacts those markets' ability to be fair."
"I've decided to start a new hedge fund. However, this hedge fund won't invest in stocks or bonds. It's going to be a fund that only places bets ? a gambling hedge fund."
Mr. Cuban reasons that stock investing is generally unfair and that most gamblers have better information about their local sports team than investors do about a company. Inasmuch as the media reports on every hangnail suffered by a member of a local sports teams, Mr. Cuban contends that the media releases much more and better information than publicly traded companies.
Mr. Cuban has not yet provided many details about the venture, such as when the fund will be up and running, which sports the fund will bet on or what it will be called. He does say he will not pick the bets and that professionals will run the fund.
While a hedge fund run by professional gamblers may sound a bit far-fetched, the hedge fund industry has a long history of engaging in rather unusual trading strategies. Until recently, hedge funds were lightly regulated on the theory that people participating in them were sophisticated investors and able to take care of themselves. But in recent years, there has been an substantial increase in the number of hedge funds and the SEC has adopted more stringent rules. Accordingly, if Mr. Cuban's fund raises more than $30 million in assets and has at least 15 investors, the advisers of the fund will have to register with the SEC by February 2006. This means that the advisers would have to disclose to the SEC their identities, the amount of money that they are managing, and the identiay of the fund's compliance officer. Mr. Cuban will probably set up his fund so that it is open only to accredited investors, which normally have at least $1 million in assets.
Mr. Cuban concludes his blog post with his real purpose in starting the fund:
"By showing that gambling in the traditional sense is less of a gamble than gambling in the stock market, traditional markets will hopefully have to change to the benefit of investors."
My sense is that this fund is going to be a bit more sophisticated -- although no more competitive -- than the traditional Kirkendall Family Bowl Game Pool that takes place each holiday season. ;^)
November 29, 2004
U.S. prosecutors charged five former natural gas traders for allegedly supplying fake trade data to publishers that produce indexes used to value natural gas contracts. This post and this post refer to earlier indictments of the same nature against other El Paso Corp. traders.
Prosecutors alleged that two of the traders - Donald E. Burwell and James P. Phillips - operated as part of a conspiracy at El Paso Merchant Energy run that the government alleges was run by the head of gas trading. The executive who allegedly ran the conspiracy was not identified in the indictments.
Messrs. Burwell and Phillips, along with former El Paso trader Greg Singleton and former Dynegy Inc trader Michelle Marie Valencia were all charged with conspiracy, wire fraud and false reporting. A fifth trader -- Jerry A. Futch Jr. -- formerly of Reliant Energy Corp, was charged with four counts of reporting false transaction data. All five defendants pleaded innocent at an arraignment Monday and were released on $50,000 bond.
In an interesting twist, all the defendants except Mr. Futch were allowed to turn themselves in to the U.S. Marshal's Office Monday morning, as is typical in white collar criminal cases. However, for some reason, Mr. Futch was not allowed to do so and was arrested at his home as he was getting ready to take his two children to school. No word yet on the reason for the government's heavy handed handling of Mr. Futch.
The indictments follow a lengthy investigation into alleged efforts to manipulate the trading indexes, which are used to value billions of dollars in gas contracts and derivatives. Industry publications, such as the Inside FERC Gas Market Report, use data from traders to calculate the index price of natural gas. Accordingly, movement in index prices often affects the level of profits traders can generate. In these particular trader cases, it remains unclear whether the publication actually used the false information provided, but the government needs only to prove that fake trades were reported and not not that they were actually published or affected the markets.
Moreover, in an earlier case involving Ms. Valencia in which she was charged with false reporting, a federal district judge threw out the charges after ruling that the part of the Commodity Exchange Act that deals with reporting of false and misleading information on on commodity trades is unconstitutionally broad and vague. That ruling is currently on appeal at the Fifth Circuit Court of Appeals in New Orleans, which has already conducted oral argument in the case and is currently preparing its decision.
The Pacers' brawl is not the first instance of a fan being leveled by a player-thrown haymaker. In one memorable incident in 1999, a fan raced onto the field at Milwaukee County Stadium and jumped on Billy Spiers in right field. Spiers' Astros teamates were quick on the scene to defend him. I recall Mike Hampton landing a series of blows to the head of that bozo. Billy Spiers (a former Tiger in addition to being an Astro) was one of my favorite players. Put me in Hampton's shoes and I'd have done the same thing, though not so effectively. Thanks for that, Mike.
Now, how different is Hampton's defense of his teammate from Jermaine O'Neal and Stephen Jackson's defense of Ron Artest? While there are differences, they are mostly a matter of degree. The common thread between the two incidents is the out of control fan.
Many issues are highlighted by the fight in Detroit. The NBA paid service to the media with swift and draconian punishment for the players involved. But to me, fan control is a more serious and more difficult problem than player control. Each time fans rush the court or the playing field after a game, they illustrate the raw power inherent in a crowd that no level of security short of an armored division can manage. The trick for sports management is to short-circuit the potential for a crowd to turn into a mob.
Definite clear thinking. Read the entire post.
This earlier post reported on an interview of Matt Simmons, the Houston-based investment banker who is an expert on forecasting oil supplies. Following that interview, this Barron's interview of Mr. Simmons warns that the Saudi oil supplies are not what they appear to be and that, because the Saudi oil industry is state-run, there is no independent auditor of national reserves who can verify just how large -- or small -- the Saudis' reserves are. As Mr. Simmons notes, that makes a big difference for the following reasons:
With global demand for oil on the rise, and prices hovering near $50 a barrel, the Saudis' production profile is more than academic. The No. 1 oil producer, Saudi Arabia pumps 13% of the world's oil and boasts 23% of its oil reserves. Moreover, the Saudis alone claim to have excess production capacity and the ability to increase output if demand continues to rise.
If the Saudis' numbers are correct, the kingdom could continue to produce at current levels of about 10 billion barrels a day for the next 50 years, or more. That would give the industrial world time to develop alternative energy sources and prepare for a graceful transition.
If Simmons is right, however, the world could face a dangerous imbalance between rising oil demand and diminishing supply, perhaps within the next 10 years. Oil prices could soar, economies could suffer, and oil-dependent nations, such as the U.S., China and Japan, would be forced to scramble for additional energy sources.
Matt Simmons' opinions are not to be taken lightly. Read the entire article.
November 28, 2004
Texans 31 Titans 21. My younger son and I went to the Texans game today with a couple of friends and we all enjoyed an entertaining game. The Texans began the game in a coma and found themselves trailing 21-3 midway through the second quarter as Titans' QB Steve McNair sliced and diced the Texans' secondary. The Texans then pieced together their only drive of the first half to narrow the score to 21-10, but still looked overmatched as they could not stop McNair's pinpoint passing. Then, seemingly without reason, the Texans offense woke up in the third quarter, David Carr began to look like a top level NFL QB, and the Texans' defense started getting pressure on McNair. Before you knew it, the Texans had scored two TD's to take the lead 24-21. The remainder of the game pretty much involved the Texans playing it close to the vest on offense while defending furiously against the Titans' fourth quarter thrusts. Finally, a McNair fumble and interception in the fourth quarter thwarted the Titans' final drives, and then the Texans' Domanick Davis ran in a late TD from 41 yards to seal the victory for the hometown crew. The bottomline on this one was that the Texans' offensive line did a much better job of establishing a running attack for Davis and in protecting Carr, and that's the primary reason that the Texans (now 5-6 on the season) were able to beat the former Oilers for the second time this season. Next week's game for the Texans is at the Meadowlands against the Jets.
Dallas 21 Chicago 7. After a horrid first half display from both teams that almost set back NFL offenses from several decades of development, the Pokes' Vinnie Testaverde made the first of what will likely in coming weeks be several appearances in relief of current Cowboys savior Drew Henson and engineered two second half drives to secure the win for the Cowboys on Thanksgiving Day. Henson -- who curiously has gotten rich off of unrealized potential in both professional baseball and professional football -- stunk in his first start for the Pokes, going 4 of 12 for 31 yards with 1 interception that was run back 45 yards for a Chicago TD. Thus, in his first outing, Henson passed for more yardage and touchdowns to the other team than his own. The 4-7 Cowboys go to Seattle for the Monday Night game next week against the Seahawks. The Texans have a real chance of finishing this season with a better record than the Cowboys, which would not go over well with Pokes' owner Mr. Jones at Valley Ranch.
Texas Longhorns 26 Texas Aggies 13. In a game that was not as close as the score indicates, the Horns calmed down after a first half near-disaster to pound the Aggies into submission in the second half and come away with their fifth straight win in the storied series between the two programs. The Horns were about ready to take a 13-7 lead at the end of the first half when Texas QB Vince Young had a brain fart and fumbled the ball while attempting to stretch his arm over the goal line. Aggie safety Jonte Buhl picked up the fumble and raced 98 yards for an Aggie TD and a stunning 13-7 Aggie lead at halftime, which did not go over well with the Horns. That incident appeared to make the Longhorns downright ornery as the Horns' defense suffocated Aggie QB Reggie McNeal in the second half, holding the Aggie offense to a total of about 60 yards total offense. In one series during the fourth quarter, Texas took complete control of the line of scrimmage and sacked the elusive McNeal on three straight plays before the exasperated Aggie QB threw an interception on the fourth play. Meanwhile, Young and Cedric Benson kept pounding on the overworked Aggie defense and methodically scored 19 second half points to put the game away. The 10-1 Horns now await the outcome of the league championship games, but it is looking more and more like the best Texas team of the Mack Brown era will again miss out on a Bowl Championship Series game on New Year's Day. That's a shame, became this Horns team -- particularly its fast and strong defense -- is pretty darn good. The Aggies look like they are headed for the Holiday Bowl in San Diego against Arizona State for the Ags' first bowl game in three seasons.
Louisiana Tech 51 Rice 14. Rice's disappointing season ended on Monday night in a 51-14 loss to Louisiana Tech before a "crowd" of friends and family members of 8,317 at Reliant Stadium. The Owls finished with a record of 3-8 on the season.
The 3-8 Houston Cougars' season finished last week (mercifully).
And finally, don't miss Kevin Whited's final Big 12 wrap-up.
The latest news from the wild world of Equatorial Guinea is not good for Mark Thatcher, the son of former English Prime Minister Margaret Thatcher. Here are the previous posts on this lurid affair. Movie rights to be sold soon.
Most of news over the past two years about the United Airlines chapter 11 case has focused on the legacy airlines operating losses, its unfunded pension obligations, and its need to overhaul or reject its collective bargaining agreements. Here is a series of posts on those various issues.
So, United has established that a legacy airline can lose money for a long time while floundering in chapter 11. However, can United continue meandering in chapter 11 without aircraft? Look at this seemingly innocuous press release that United issued late this past Friday:
A U.S. federal bankruptcy court judge has blocked a group of creditors from repossessing up to 14 airplanes from UAL Corp.'s United Airlines, saving the bankrupt carrier tens of millions of dollars.
Judge Eugene Wed off issued a temporary restraining order Friday barring the group, represented by the Chicago-based law firm Chapman & Cutler LLP, from seizing up to eight Boeing 767s and six 737s.
The group of financiers, which controls about one-third of United's fleet, had threatened to seize the planes as early as Dec. 1 because of an impasse over their leases.
United, the nation's No. 2 airline, is seeking to lower aircraft operating costs by renegotiating its leases with creditors. However, it argued that the Chapman group was violating antitrust laws by renegotiating as a bloc instead of as individual leaseholders, forcing United to accept higher lease rates.
Well, you say, what's so unusual about that? Secured creditors in chapter 11 cases are automatically stayed from repossessing their collateral until they petition the Bankruptcy Court to modify the automatic injunction under Bankruptcy Code section 362 to allow them to exercise their contractual rights. Isn't the Bankruptcy Judge simply enforcing the stay against United's aircraft lenders?
Not exactly. Aircraft collateral is treated differently under the Bankruptcy Code than other types of collateral (financial institutions that make aircraft loans lobby well in Congress). Under section 1110 of the Bankruptcy Code, the above-described TRO is on quite shaky grounds:
(a)(1) . . . , the right of a secured party with a security interest in [aircraft] equipment, . . . or of a lessor or conditional vendor of such equipment, to take possession of such equipment in compliance with a security agreement, lease, or conditional sale contract, and to enforce any of its other rights or remedies, under such security agreement, lease, or conditional sale contract, to sell, lease, or otherwise retain or dispose of such equipment, is not limited or otherwise affected by any other provision of this title or by any power of the court.
In plain English, that says "a bank that has aircraft collateral cannot be enjoined from repossessing and selling its collateral in a chapter 11 case." Section 1110 goes on to provide that the only limitation on an aircraft lender's collateral rights is during the first 60 days of the chapter 11 case and that the debtor must cure any defaults under its agreement with the aircraft lender if the debtor wants to continue using the aircraft that is collateral for the lender's loans to the debtor.
Consequently, it looks like the financial institutions that control a third of United's fleet have had enough. As United's management, unions, and other parties-in-interest continue to fiddle while Rome burns, I wonder whether they have examined pro formas on operating an airline without a substantial portion of its aircraft fleet? Inasmuch as the Bankruptcy Court's decision to approve a TRO in the face of section 1110 is almost certainly in error, United's dithering parties-in-interest better get ready to deal with a few less aircraft sooner rather than later.
November 27, 2004
The public relations contest that the Enron case has become continued today. In this Chronicle op-ed, Mike Ramsey -- former Enron chairman and CEO Kenneth Lay's criminal defense attorney -- levels a blast at the Chronicle for adhering to the government's witch hunt theme in regard to a recent Chronicle editorial critical of Linda Lay's involvement in the sale of a Lay Family charity's Enron stock days before the filing of Enron's bankruptcy case:
As the tabloids demonstrate, there is money to be made by jumping onto the popular side of a public frenzy. However, one can still hope that major newspapers will refuse to become mouthpieces for those who prefer strong-arm tactics to public trials.
Just maybe it is time to get to the truth by a public trial instead of in the backrooms of the Enron Task Force and Houston Chronicle. (One might even wonder if those backrooms have adjoining doors.)
Then, Mr. Ramsey gives the Lay side of the story regarding the stock sale:
Linda Lay sold Enron shares as president of the family's charitable foundation. They were shares that Ken and Linda had given to that foundation prior to the end of 2000 and every penny of the money from the sale went to such charities as United Way, YMCA, DePelchin Children's Center, Star of Hope, Holocaust Museum Houston, and Open Door Mission, among many others.
The sale was made on the day, Nov. 28, 2001, when the share price was in free-fall. Linda salvaged what she could, as was her duty as president of a charitable foundation. (The sale price was $2.37, off from a high near $85 earlier that year and a closing price the day before of $4.01.) More remarkable, during that market panic neither Ken nor Linda sold any of their personal shares.
Indeed, after Ken's return as CEO in August 2001 they held all their shares as the market plunged from near $40 per share to near $0.
The only shares that Ken and Linda ever sold during that tragic three and one-half months were sold to prevent margin calls from triggering a forced sale of all their shares. They never voluntarily sold a dime's worth after Ken's return. In fact, at bankruptcy they still held more than 1 million shares and more than 4 million vested stock options.
The dubious nature of the government's insider trading case against Mr. Lay has been examined in many previous posts here, including this one and this one. But Mr. Ramsey sees something far more sinister than a government investigation:
While it is true that Andrew Weissmann and his Enron Task Force have chosen not to comment publicly [on the investigation of Linda Lay's stock sale], I cannot accept that after nearly three years of investigation, the press and a secret grand jury happened, by coincidence, upon this particular event at the same time.
Perhaps I am cynical, but this is not exactly my first rodeo.
No, there was a calculated leak done to produce an unfavorable story in aid of a shamefully false accusation.
Mr. Ramsey is undoubtedly correct that the Linda Lay story was a calculated leak by the government, and I am sympathetic to the argument that the prosecution has no business engaging in this type of public relations. However, the fact remains that Linda Lay's sale of this stock days before Enron's bankruptcy was a stupid move. Here's hoping that no lawyer advised her to do it.
Marc Sageman was a CIA case officer in Afghanistan between 1987?89 and is now a forensic psychiatrist in Philadelphia. His book, Understanding Terror Networks, was published by the University of Pennsylvania Press earlier this year.
After the attacks on New York and Washington of September 11, 2002, Dr. Sageman noticed the lack of systematic data on the perpetrators, so he began to apply the principles of evidence-based medicine to terrorism research. He gathered terrorist biographies from various sources, relying most heavily on the records of various criminal trials. After matrixing approximately 400 biographies, Dr. Sageman began a social-network analysis of this group.
This Foreign Policy Research Institute article provides a summary of Dr. Sageman's findings and conclusions. Inasmuch as the entire article is fascinating, I had a difficult time deciding which excerpts to pass along, but here are a few.
First, Dr. Sageman notes that the key period of development for the current radical Islamic fascists was the time in the late 1980's and early 1990's when their leadership gathered in Khartoum, Sudan to hatch their dream of indepedent "Salafi" states:
The Khartoum period is critical, because what these violent Salafists basically want to do is to create a Salafi state in a core Arab country. Salafi (from Salaf, ?ancient ones? or ?predecessors? in Arabic) is an emulation, an imitation of the mythical Muslim community that existed at the time of Mohammed and his companion, which Salafists believe was the only fair and just society that ever existed. A very small subset of Salafis, the disciples of Qutb, believe they cannot create this state peacefully through the ballot-box but have to use violence. The utopia they strive for is similar to most utopias in European thought of the nineteenth to the twentieth centuries, such as the communist classless society.
Moreover, Dr. Sageman points out that the background of the radical Islamic fascist leadership is similar to that of the "best and the brightest" of the societies from which they have emerged:
Most people think that terrorism comes from poverty, broken families, ignorance, immaturity, lack of family or occupational responsibilities, weak minds susceptible to brainwashing - the sociopath, the criminals, the religious fanatic, or, in this country, some believe they?re just plain evil.
Taking these perceived root causes in turn, three quarters of my sample came from the upper or middle class. The vast majority?90 percent?came from caring, intact families. Sixty-three percent had gone to college, as compared with the 5-6 percent that?s usual for the third world. These are the best and brightest of their societies in many ways.
Al Qaeda?s members are not the Palestinian fourteen-year- olds we see on the news, but join the jihad at the average age of 26. Three-quarters were professionals or semi- professionals. They are engineers, architects, and civil engineers, mostly scientists. Very few humanities are represented, and quite surprisingly very few had any background in religion. The natural sciences predominate. Bin Laden himself is a civil engineer, Zawahiri is a physician, Mohammed Atta was, of course, an architect; and a few members are military, such as Mohammed Ibrahim Makawi, who is supposedly the head of the military committee.
Mr. Sageman notes that there really is not one profile for a radical Islamic fascist:
So what?s in common? There?s really no profile, just similar trajectories to joining the jihad and that most of these men were upwardly and geographically mobile. Because they were the best and brightest, they were sent abroad to study. They came from moderately religious, caring, middle-class families. They?re skilled in computer technology. They spoke three, four, five, six languages. Most Americans don?t know Arabic; these men know two or three Western languages: German, French, English.
When they became homesick, they did what anyone would and tried to congregate with people like themselves, whom they would find at mosques. So they drifted towards the mosque, not because they were religious, but because they were seeking friends. They moved in together in apartments, in order to share the rent and also to eat together - they were mostly halal, those who observed the Muslim dietary laws, similar in some respects to the kosher laws of Judaism. Some argue that such laws help to bind a group together since observing them is something very difficult and more easily done in a group. A micro-culture develops that strengthens and absorbs the participants as a unit. This is a halal theory of terrorism, if you like.
These cliques, often in the vicinity of mosques that had a militant script advocating violence to overthrow the corrupt regimes, transformed alienated young Muslims into terrorists. It?s all really group dynamics. You cannot understand the 9/11 type of terrorism from individual characteristics. The suicide bombers in Spain are another perfect example. Seven terrorists sharing an apartment and one saying ?Tonight we?re all going to go, guys.? You can?t betray your friends, and so you go along. Individually, they probably would not have done it.
In fact, the lack of these social networks is one of the reasons why Dr. Sageman believes that another 9/11-type attack has not occurred in the United States:
Indeed, there are not that many terrorists in America. There have never been any sleeper cells. All the terrorists are fairly obvious. The FBI cases we see in the press tend to unravel. The Detroit group has been exonerated, and the prosecutor is now being prosecuted for malfeasance on the planted evidence. He allegedly knew exculpatory facts that he did not present to the defense. The only sleeper America has ever had in a century was Soviet Col. Rudolf Abel, who was arrested in the late 1950s and exchanged for Gary Powers, the U2 pilot. Eastern European countries did send sleepers to this country, men fully trained who ?go to sleep??lead normal lives?and then are activated to become fully operational. But they all became Americans.
In order to really sustain your motivation to do terrorism, you need the reinforcement of group dynamics. You need reinforcement from your family, your friends. This social movement was dependent on volunteers, and there are huge gaps worldwide on those volunteers. One of the gaps is the United States. This is one of two reasons we have not had a major terrorist operation in the United States since 9/11. The other is that we are far more vigilant. We have actually made coming to the U.S. far more difficult for potential terrorists since 2001.
But Dr. Sageman warns that the radical Islamic fascists have adapted and changed the way in which they will plan future attacks:
We hear that Al Qaeda plans its attacks for years and years. It may have before 9-11, but not anymore. Operatives in caves simply cannot communicate with people in the field. The network has been fairly well broken by our intelligence services. The network is now self-organized from the bottom up, and is very decentralized. With local initiative and flexibility, it?s very robust. True, two-thirds to three- quarters of the old leaders have been taken out, but that doesn?t mean that we?re home free. The network grows organically, like the Internet. We couldn?t have identified the Madrid culprits, because we wouldn?t have known of them until the first bomb exploded.
So in 2004, Al Qaeda has new leadership. In a way today?s operatives are far more aggressive and senseless than the earlier leaders. The whole network is held together by the vision of creating the Salafi state. A fuzzy, idea-based network really requires an idea-based solution. The war of ideas is very important and this is one we haven?t really started to engage yet.
My younger son, who is a serious film buff, went to see Oliver Stone's Alexander the Great yesterday. He passes along that it is an unmitigated disaster, and predicts that it will be out of the theaters in less than a month, a prediction that is supported by the woeful early financial performance of the $210 million film (there were few people in the audience of the showing that he attended). The Washington Post's Stephen Hunter agrees in this hilarious review, and passes along this gem on the performance of Angelina Jolie as Alexander's mother, Olympias:
Then there's Angelina Jolie as Mom. Really, words fail me here. But let's try: Give this young woman the hands-down award for best impression of Bela Lugosi while hampered by a 38-inch bust line. Though everyone else in the picture speaks in some variation of a British accent, poor Jolie has been given the Transylvanian throat-sucker's throaty, sibilant vowels, as well as a wardrobe of snakes. She represents the spirit of kitsch that fills the movie, and with all her crazed posturing and slinking, it's more of a silent movie performance than one from the sound era. Theda Bara, call your agent.
There is also irony here. If we remember the embarrassing Troy, we are beginning to see, that all for all the protestations of artistic excellence and craftsmanship, Hollywood has become mostly a place of mediocrity, talentless actors and writers who spout off about politics in lieu of having any real accomplishment in their own field. I?ve heard so many inane things mouthed by Stone that I would like someone at last to address this question?why would supposedly smart insiders turn over $160 million to someone of such meager talent to make such an embarrassing film? Alexander the Great is third-rate Cecil B. Demille in drag.
The Chronicle's Ken Hoffman will like this -- The Jerry Seinfeld Dictionary of Terms and Phrases. An example:
Must-Lie Situation - when a person feels that they cannot tell the truth to someone else for fear of offending them (ex #1 calling one's baby "Breathtaking", ex #2 not being able to tell someone that their hairdo is pre-1960's or just plain hideous)
November 26, 2004
This NY Times article reports on the squabble that has arisen over the University of Texas at Austin's decision to honor famed Houston trial lawyer Joe Jamail with his second statute on the UT campus:
Of the more than a dozen statues peppering the University of Texas campus here, one glorifies the first native-born governor, two pay tribute to deceased American presidents, and others honor Confederate leaders.
Another statue is poised to join the cast on Friday, honoring a graduate who is a successful trial lawyer.
The subject, Joe Jamail, a Houston alumnus who has donated $21.7 million to the university and its athletic programs, already has one bronze likeness at the law school and his name is on several campus sites. The newest statue of Mr. Jamail, who won billions of dollars for Pennzoil in a landmark suit in the 1980's, is scheduled to be unveiled inside the football stadium before the annual game against archrival Texas A&M.
But not everyone looks forward to another likeness. The statue, . . makes Mr. Jamail the only person with two on the 350-acre campus, university officials say, and that distinction has rankled some faculty members.
"One is enough, with due respect to whoever," said a journalism professor, Gene Burd.
The 78 year old Jamail is most famous (notorious?) for persuading a Houston state court jury in 1985 to award a record $11 billion in damages against Texaco for tortiously interfering with Pennzoil's attempted acquisition of Getty Oil. The subsequent judgment prompted Texaco to file a chapter 11 case, which eventually resulted in a settlement of Pennzoil's claim for $3 billion in 1987. Already a wealthy plaintiff's lawyer, Mr. Jamail took the case on a contingency fee, so his piece of the settlement made him one of the wealthiest attorneys in the world.
Over the past 20 years, Mr. Jamail has become a philanthropist, and UT has been the main beneficiary of his philanthropy. Sites at the university named for Mr. Jamail include the swim center, the football field, the law school pavilion that contains the first statute of him, and the law school's legal research center. The newest statue of Mr. Jamail planned for a corner of the football stadium will be placed near a new statue of the former national champion football coach and UT legend Darrell Royal. By the way, Mr. Jamail paid for the statute of Coach Royal.
To this day, the Pennzoil-Texaco case is most remembered in Houston legal circles for the catastrophic trial decision that Texaco's general counsel made. Texaco's main defense was that it was justified in competing with Pennzoil for Getty Oil and, thus, could not have tortiously interfered with Pennzoil's takeover attempt. However, in support of an alternative defense, Texaco's trial counsel recommended that Texaco put on expert testimony that would contradict Pennzoil's evidence of alleged damages. Texaco's general counsel decided that putting on countervailing damages testimony would be a signal to the jury that Texaco did not confidence in its primary defense, so he directed Texaco's trial counsel not to put on any expert damages testimony.
Consequently, when the jury found in favor of Pennzoil on the liability issue, the only damages evidence in the trial record was Pennzoil's. Thus, the $11 billion jury verdict ensued, and the trial record contained inadequate evidence upon which an appellate court could base a decision to reduce the damages.
As they say in defense circles, "Ouch!"
This Floyd Norris' NY Times column does a nice job of explaining the developing debacle of Krispy Kreme, the share price of which peaked at $49.74 in the summer of 2003, but which has fallen as low as $9.35 recently. An earlier post on the company's developing troubles may be reviewed here.
What happened? Easy. Most Krispy Kreme franchises don't make money:
Krispy Kreme's company-owned stores report an operating profit, but not one large enough to cover corporate overhead. The real profits have come from the company's dealings with its franchise vendors. The franchises pay royalties of 4.5 percent to 6 percent of sales, plus 1 percent for advertising and public relations. And they must buy all their supplies from the parent - paying hefty markups that provide 20 percent profit margins for Krispy Kreme.
All that would be fine if the franchises were doing well. But many are not, and some are turning to Krispy Kreme as the lender of last resort. Some of these borrow from the parent and others sell their franchises back to it. One lucky operator had a deal that forced Krispy Kreme to buy at a price set in more optimistic times. In other cases, the parent bought for reasons the S.E.C. may be looking into, since its insiders held stakes in franchises the company purchased.
Until recently, it had been hard to tell how the franchises were doing. But the combination of additional investments in franchises and new accounting rules - imposed as a result of the Enron scandal - has forced the company to disclose more. In the quarter ended in October, the joint ventures lost $2.1 million after coming close to breaking even a year earlier.
The lesson of Krispy Kreme is simple, and it is the same one that the Boston Market bankruptcy of the 1990's should have taught us. If the people who actually sell the product are not doing well, then neither is the enterprise.
Put Krispy Kreme on your bankruptcy watch list for 2005.
Two years into its aimless chapter 11 case, UAL Corp. finally requested that the Bankruptcy Court allow it to reject its existing labor contracts with six unions if the company cannot reach consensual agreements on modifications to the contracts by January, 2005.
Better late than never, but geez United, let's get on with it.
In its motion, United disclosed that it needs an additional $725 million in annual savings from its 62,000 workers in order to maintain sufficient liquidity to avoid a default under its interim bankruptcy financing even though United employees provided wage cuts valued at $2.5 billion a year earlier in the case. United now needs to generate additional savings because the airline business has been hammered even further by a compbination of low ticket prices, competition from discount airlines, high fuel prices, and unfunded pension obligations.
Moreover, UAL used the filing to remind the Court that it must also reduce its pension liabilities in order to secure exit financing to fund a plan of reorganization in its chapter 11 case. Consequently, unless consensual modifications of those liabilities are obtained, United will request that the Court approve United's termination of its four pension plans, which would foist a substantial portion of the unfuned pension liabilities onto the federal Pension Benefit Guaranty Corp., which is not exactly in great shape itself.
United's proposals are meeting with angry opposition in its chapter 11 case from the various unions and the PBGC. As a result, it appears that United will probably be required to endure a prolonged court battle on its motion to reject the labor contracts. Under the Bankruptcy Code, United has to prove that the rejections are necessary to permit the company to reorganize, that they are fair, and that the company bargained in good faith with the unions.
Legacy airlines are doomed to failure in the current airline industry absent change that will allow them to compete with the discount airlines. Nevetheless, the glacial progress in United's chapter 11 case reflects the difficulties involved in changing a legacy airline's culture. Although perhaps not best for United and its various parties-in-interest, the best thing that could happen to the airline industry as a whole would be for the Bankruptcy Judge in United's case to issue an order requiring United's parties-in-interest to show cause why United should not be liquidated. Only that type of industry shattering event is likely to shake the intractable view of airline unions that the past largesse of the legacy airlines is sustainable in the future.
Meanwhile, in this Wall Street Journal ($) op-ed, three authors involved in airline industry/bankruptcy issues provide the following proposal for dealing with unfunded pension obligations of the various legacy airlines:
We believe that the airlines, airline unions and the administration should work together to propose to the Congress a new alternative to the "lose-lose-lose" Chapter 11 approach. This would present an airline and unions with the following new choice: First, management and a union would need to agree collectively to freeze an existing defined-benefit pension plan. Importantly for the PBGC, its liability as guarantor of the plan would be capped as of the freeze date and would decrease over time. Second, the unfunded liability of the frozen plan then would be amortized over a specified time period that would be longer than what current law allows. Here's where compromise is needed -- the PBGC will want a shorter period for the unfunded pension liability to be paid; the airlines will want longer. One thing is clear: The existing pension funding law, particularly the so-called deficit-reduction contribution provisions, so accelerate the funding of significantly underfunded pension plans as to make the freeze option unrealistic absent a longer time period to satisfy the unfunded liabilities. Finally, management and labor would negotiate and agree upon a new, replacement defined-contribution pension plan.
November 25, 2004
This NY Times article reports that CBS executives are smiling these days, and Dan Rather's recent resignation as CBS anchorman does not really have much to do with it.
This is further confirmation that the mainstream television networks are really just entertainment venues, and that their news divisions have turned into just another entertainment show that they feel compelled to run for public relations purposes. Thus, so long as the news divisions are marginally profitable or do not lose much money, the networks don't really care much about the quality of the product.
My sense is that this is not the way that Edward R. Murrow thought that television network news was going to develop.
Meanwhile, this editorial provides The Economist's view of Mr. Rather's resignation, including the following observation:
Mr Rather's retirement epitomises two broader shifts of power. First, the old media are losing power to the new. And, second, the liberal media establishment is losing power to a more diverse cacophony of new voices.
If you, like me, purchase a boatload of holiday gifts through Amazon.com, then you can help support this blog by clicking the "Holiday Shopping @ Amazon" link on the right side scroll bar. At no additional cost to the purchaser, Amazon's Associates program pays a small commission to this blog for any items purchased while accessing Amazon through that link. A number of other fine blogs are also in the program, (Virginia Postrel and Marginal Revolution to name just two), so I encourage you to use Amazon by clicking such a link and help support your favorite blogs during this Holiday Season. Thanks!
Bill Moyers will retire next month from full-time broadcasting at the age of 70. This Rocky Mount Telegram article explores the life and work of Mr. Moyers, who has been one of the most thoughtful journalists regarding public affairs during his long career in journalism. Raised in Marshall, Texas, Mr. Moyers met Lyndon Johnson during his 1954 Senate campaign and then served as deputy director of the Peace Corps under President Kennedy and as President Johnson's chief advocate for the Great Society and the War Against Poverty from 1963-67.
Although I have not always agreed with Mr. Moyers' views, I have always appreciated the thoughtful manner in which he has presented them. During these times of increasingly polarized views, such an advocate of reasoned debate will be missed.
November 24, 2004
Don't miss Professor Ribstein's post about the ongoing trial over the Walt Disney Co. board's decision to pay Michael Ovitz a rather generous severance package for essentially doing nothing during his short stay at Disney.
The trial is an interesting one because it combines Hollywood largesse with knotty issues of corporate law, such as the limits of judicial supervision over the business judgment rule. However, Professor Ribstein wonders whether something even more basic is unfolding:
But I wonder whether something more basic is at stake -- the future of the corporate enterprise as we know it. After all that we have seen in the last few years, can we really be optimistic that things are changing?
He goes on to point out that Disney could well be the product of an obsolescent business model:
Think about this in the Disney context. Why do we need this Disney behemoth? The brand? Synergy? Michael Powell recently wondered "if Walt Disney would be proud," speculating on the disastrous cross-promotion of Disney's Desperate Housewives on Disney's Monday night football. Does this sort of thing make people want to go into Disney's family-oriented amusement parks? Even the film business has gotten away from the Disney brand -- Pixar was providing the meat until Eisner chased it away.
Professor Ribstein points out that there is a better way:
I've argued in Why Corporations? for the dismantling of the corporate entity and the greater use of partnership-type forms for publicly held business. This could be spurred by a change in the tax laws that puts more emphasis on distribution rather than retention of earnings.
How about spinning the amusement parks into a real estate limited partnership, divesting the television properties, and focusing on the movie business? Aside from giving Eisner less to play with over his remaining two years, what would be lost?
In short, the Disney Board's foible of approving the Ovitz severance package pales in comparison to its failure to require Michael Eisner to adapt Disney's corporate strategy to maximize value for Disney's shareholders. This is true clear thinking, so check out the entire post.
This Washington Post article does a good job of describing the political landscape that confronts the Bush Administration in proposing and enacting tax reform legislation. The sponsors of the 1986 Tax Reform legislation -- Dan Rostenkowski and Robert Packwood -- are not particularly optimistic that the administration's approach to the issue will result in successful reform. Check it out.
This NY Times book review examines Holocaust historian David M. Crowe's authoritative new biography of Oskar Schindler, the German businessman who saved more than 1,000 Jews from the Nazis during World War II.
Interestingly, Mr. Crowe's book -- Oskar Schindler: The Untold Account of His Life, Wartime Activities and the True Story Behind the List (Westview Press 2004) -- differs sharply with the idealized portrayal of Schindler in the Oscar-winning 1993 Steven Spielberg movie Schindler's List and Thomas Keneally's 1982 historical novel that inspired the movie.
One of the particularly interesting differences between the book and the movie is how Schindler's Jewish workers are depicted as Schindler prepares to flee in the face of the Russian invaders. In the movie, the Jews are depicted as worn down and overwhelmed. Mr. Crowe contends that the Schindler had in fact prepared the Jews to be "an armed guerilla group. "They were armed to the teeth, ready to fight till the death."
Don't miss Holman Jenkins, Jr.'s Business World column this week in the Wall Street Journal ($) in which he reviews the rather remarkable effects of the Sarbanes-Oxley legislation, which was Congress' knee-jerk public relations reaction to the WorldCom and Enron scandals:
No wonder that the annual bill for Sarbox is going through the roof, with the latest estimates being about $6 billion for the Fortune 1000 alone. One investment banker estimates that a small company nowadays would have to generate $150,000 in free cash annually just to cover the additional paperwork before it can even consider going public. Then there's upwards of $100,000 each to insure all who sit on its board, if any can be found. Oh yes, and the fact that audit fees, for the average company, have risen about 50% in a single year.
No wonder, too, that the number of companies alerting the SEC that their latest financial reports will be late doubled last quarter, adding to a backlog of late filers that recently topped 600. One strategic-investor type who sits on the boards of a number of companies called a few weeks back to gripe in detail about what all this was costing the economy. Under the SOX regime, something as slight as an anonymous letter alleging accounting irregularities can effectively deliver a company entirely into the control of outside auditors. Directors, so fearful about their own liability that they stop thinking about what's good for the business and worry only about securing their own alibis, write a blank check with shareholders' money to do whatever the auditor dictates.
And though Sarbox compliance has become a gravy train for auditors, Mr. Jenkins points out that it has come with a "Faustian Caboose:"
But, ahem, Sarbanes-Oxley has at least fixed a lot of real problems, right? Let's recall that the Internet and telecom bubbles were occasioned by investors who weren't interested in published financial accounts -- they were interested in the speculative potential of new technologies and new business models.
Secondly, there was the problem of how company promoters and CEOs behaved in the presence of a stock market willing to throw money at such speculative endeavors. Neither of these issues is addressed by Sarbanes-Oxley. Nor does any legislative solution for the inherent risks and foibles of market capitalism suggest itself.
Sarbox, rather, is the last gasp of a corporate governance kludge in which auditors became, in the public's eye, something they've never been in their own eyes: namely proof against fraud. In the audit industry's eyes (or at least in its behavior), the mandatory audit is a welcome gravy train that has gradually revealed an unwelcome Faustian caboose. Whenever a company blows itself up in an accounting scandal, the accountants pay for their gravy train by serving as an additional set of deep pockets for trial lawyers to sue.
So rather than encouraging beneficial risk taking that spurs economic development and job creation, Congress gives us Sarbones-Oxley, which is nothing more than a regulatory straightjacket that could well chill markets in the long run. This is a common occurrence when our elected officials pass legislation to facilitate public relations for their re-election campaigns rather than to provide a real benefit for their constituents.
My wife has spent a fair amount of time in school car lines over the years, and she passes along the result of this serious breach of car line etiquette reported by the Chronicle:
A spat that started almost a year ago, in the line to pick up children after classes at the Village School, will move into a Houston municipal court today as a 40-year-old mother faces a misdemeanor assault charge.
Sandra Chiang denies reaching into Shannon Rechter's sport utility vehicle and slapping her in the face afterRechter cut in line while other parents were waiting and chatting outside the school. Chiang could be fined up to $500 if convicted.
The incident ignited a yearlong feud that has included the assault charge, a counterclaim of vandalism, allegations of harassment and the removal of Rechter's two children from the school.
The two stay-at-home mothers had never met before Dec. 13, 2003, when Chiang left her car idling as the carpool line moved forward, and Rechter, 38, wedged into the space ahead of her.
"She immediately began yelling at me for cutting in line, and the more I tried to explain the madder she became," Rech-ter said.
"At that point, she reached in, struck me across the face and quickly ran back to her car as if nothing happened."
Chiang contends that her SUV was "keyed" by Rechter several weeks later. The hood and a door were scraped, causing an estimated $1,600 in damage, she says.
For some reason, the case is not high on the radar screen of the Harris County District Attorney's Office:
Rechter says school officials and law enforcement authorities didn't take her seriously when she first reported the incident.
It took numerous calls to police and the city prosecutor's office to get the case scheduled for trial, she says.
My wife's question: If I was defending this case, would I try to strike for cause anyone on the jury panel who regularly has to sit in a car line?
My answer: Only if they don't cut in line. ;^)
November 23, 2004
Regular readers of this blog know of my skepticism that the costs attributable to America's reliance on third party payors in its health care finance system are commensurate with the benefits of paying for medical service in that fashion.
Following up on that thought, Alex Tabarrok over at Marginal Revolution notes in this post that one of the most popular types of medical procedure has declined in cost recently precisely because it is not generally covered under America's third party payor system:
Everywhere we look it seems that health care is more expensive: prescription drug prices are increasing, costs to visit the doctor are up, the price of health insurance is rising. But look closer, even closer, closer still. Don't see it yet? Perhaps you should have your eyes corrected at a Lasik vision center.
Laser eye surgery has the highest patient satisfaction ratings of any surgery, it has been performed more than 3 million times in the past decade, it is new, it is high-tech, it has gotten better over time and... laser eye surgery has fallen in price. In 1998 the average price of laser eye surgery was about $2200 per eye. Today the average price is $1350, that's a decline of 38 percent in nominal terms and slightly more than that after taking into account inflation.
Why the price decline in this market and not others? Could it have something to do with the fact that laser eye surgery is not covered by insurance, not covered by Medicaid or Medicare, and not heavily regulated? Laser eye surgery is one of the few health procedures sold in a free market with price advertising, competition and consumer driven purchases. I'm seeing things more clearly already.
Don't miss George Mason University law and economics whiz Henry G. Manne's brilliant Wall Street Journal ($) op-ed from yesterday in which he criticizes Eliot Spitzer's latest assault on business. Dean Manne cuts through the fog of Spitzer's public relations blitz to bear in on the true nature of Spitzer's campaign against the big insurers:
In an era of general acceptance of deregulation and privatization, Mr. Spitzer has introduced the world to yet a new form of regulation, the use of the criminal law as an in terrorem weapon to force acceptance of industry-wide regulations. These rules are not vetted through normal authoritative channels, are not reviewable by any administrative process, and are not subject to even the minimal due-process requirements our courts require for normal administrative rule making. The whole process bears no resemblance to a rule of law; it is a reign of force. And to make matters worse, the regulatory remedies are usually vastly more costly to the public than the alleged evils.
Professor Manne goes on to point out that Marsh's contingent commissions were as innocent as payola, which is widely misunderstood with regard to its market effect:
Nobel Laureate Ronald Coase once famously showed (Journal of Law and Economics 1979) how kickbacks in the so-called radio DJ payola scandal were really a legitimate, albeit superficially confusing, competitive device. Payola was essential, Coase explained, to preserving competition between record companies, and its demise was only sought by competitors who were injured by the practice -- not by consumers. There are eerie similarities between the two situations.
If the Coasian analysis is correct -- and no serious rebuttal has ever appeared -- we may witness the demise of specialized insurance-brokerage firms like Marsh & McLennan in favor of more integrated insurance companies who will do their own marketing. This is already rumored to have begun. Or we may see insurance brokerage firms beginning to acquire and operate insurance companies. In either case we would be witnessing a decrease in market specialization with a commensurate loss of economic efficiency. Mr. Spitzer would have succeeded in making the industry less competitive and less efficient, and insurance buyers will eventually pay higher not lower premiums.
The problem is that, whenever government interferes with the market, it can create more problems than it solves. When government banned payola . . , it blocked a practice that was, after all, getting more air time for new kinds of music. (In general, regulation hurts the newcomers more than it hurts the established players.) But it didn’t stop payola. . . .“[N]ew payola” (spot buys) arose in response to the banning of the old payola. The new payola, . . . creates a less informed market than the old payola.
Payola's effect in making the music market less transparent is analogous to the effect of insider trading regulation. Insider trading, like payola, helps disseminate information. Regulation forces the trading underground, making markets less informed.
The criminalization of business practices exemplified by Spitzer's tactics and most of the Enron-type prosecutions combines the worst elements of business regulation with overt miscarriages of justice. Although the prosecutions play well as superficial morality plays in the mainstream media, I fear that the damage being done to America's business and justice systems will ultimately exceed even the tragic destruction of individual lives that has, and will continue, to occur.
In this Asia Times op-ed from the Asia Times, Spengler explores the the theological challege that moderate Muslims face in siding with the West in its war against the radical Islamic fascists. The entire piece is a must read, but this excerpt gives you a taste of the dilemma that moderate Muslims face:
Smugness oozes from European politicians who demand that Muslims repudiate violence as a precondition for residence in the West. To repudiate the death sentence for blasphemy would be the same as abandoning the Islamic order in traditional society in favor of a Western-style religion of personal conscience. The West spent centuries of time and rivers of blood to make such a transition, and carried it off badly. Whether Islam can do so at all remains doubtful.
This New York Law Journal article reports on the wrongful death case against Benihana that grew out of a customer's reaction to a chef's playful toss of a shrimp:
A piece of grilled shrimp flung playfully by a Japanese hibachi chef toward a tableside diner is being blamed for causing the man's death.
Making a proximate-cause argument, the lawyer for the deceased man's estate has alleged that the man's reflexive response -- to duck away from the flying food -- caused a neck injury that required surgery.
Complications from that first operation necessitated a second procedure. Five months later, [the customer] was dead of an illness that his family claims was proximately caused by the injury.
What a way to go.
This Austin American-Stateman article reports on the latest undertakings of former University of Texas Heisman Trophy and NFL running back Ricky Williams. The quixotic Mr. Williams -- who retired from the NFL earlier this year at the relatively young age of 27 -- is now training to be a faith healer:
Williams has turned up about as far from professional football as you can get, as a student of the ancient Indian medical system known as Ayurveda. In the Sierra foothills, no less.
"I realized a while back that I have an innate ability to be compassionate," he said, "and I saw that the strength of compassion is something that healers have and healers use."
Williams is now a month into a 17-month course at the California College of Ayurveda (pronounced I-yur-vay-da) in Grass Valley, a city of 12,000 about 45 miles northeast of Sacramento. He's renting a one-bedroom cottage in nearby Nevada City.
Reluctant at first to talk, [Williams] soon started describing his old life in football and his new life in holistic healing.
"Ayurveda deals with using your environment to put yourself in balance," he said. "I've realized, both on a psychological and physical level, that the things we do in football don't bring more harmony to your life. They just bring more disharmony."
Is he happier now that he's removed from the game?
"I'm closer to being happy. I'm doing things that make me happy," Williams said. "In football I loved to practice and I loved to play, but I hated to be in meetings, hated to talk to the media, hated to have cameras in my face, hated to sign autographs. I hated to do all those things."
But then Ricky -- how do you explain this?
Earth to Ricky, over and out.
This earlier post noted that the brewing controversy in Dallas over the Wright Amendment provides a ripe field for politicians to reap financial windfalls so long as they are willing to make bad policy decisions that favor certain private business interests.
It appears that their is an inexhaustible supply of issues in which politicians can parley the sale of their political soul into a nice financial return for their campaign war chests. This Wall Street Journal ($) article reports that telecom companies are lobbying elected officials around the country to rationalize support for legislation that restricts free or inexpensive WiFi service for their constituents:
Dozens of cities and towns across the country are rushing to provide low- or no-cost wireless Internet access to their residents, but the large phone and cable companies, fearful of losing a lucrative market, are fighting back by pushing states to pass legislation that could make it illegal for municipalities to offer the service.
Philadelphia announced during the summer that it would hook up the entire city with Wi-Fi. Its current Wi-Fi service is free, but it hasn't decided whether that would continue with wider deployment; it may charge a small fee. "There are some very specific goals that the city has that are not met by the private sector: affordable, universal access and the digital divide," says Dianah Neff, the city's chief information officer. She says that less than 60% of the city's neighborhoods have broadband access.
However, last week, after intensive lobbying by Verizon Communications Inc., the Pennsylvania General Assembly passed a bill with a deeply buried provision that would make it illegal for any "political subdivision" to provide to the public "for any compensation any telecommunications services, including advanced and broadband services within the service territory of a local exchange telecommunications company operating under a network-modernization plan." Verizon is the local exchange telecommunications company for most of Pennsylvania, and it is planning to modernize the region using high-speed fiber-optic cable. The bill has 10 days for the governor to sign it or veto it.
The Pennsylvania bill follows similar legislative efforts earlier this year by telephone companies in Utah, Louisiana and Florida to prevent municipalities from offering telecommunications services, which could include fiber and Wi-Fi.
Rather than encouraging municipalities to provide free or inexpensive broadband internet access for its citizens, telecom companies argue that legislators should be more concerned with protecting the telecom companies from competing with local governments to provide WiFi service. Even such palpably superficial reasoning is resonating with Pennsylvania legislators, who apparently need to replenish their campaign war chests:
The Pennsylvania bill, first introduced in 2003, was passed by the state Senate late Thursday night and then passed for a second time by the state House of Representatives late Friday night by wide margins. Senate supporters agreed with Verizon's view of the legislation. Don Houser, a spokesman for Senator Jake Corman, the Senate sponsor of the bill, said "the thinking was the telephone companies didn't want to have local municipalities using tax dollars to compete with private dollars."
Well, citizens are perfectly capable of replacing their elected officials if they do not want their local municipalities competing with private business in providing WiFi service. Pennsylvania Gov. Edward G. Rendell has until November 30 to act on this legislation and has not yet declared which route he will choose. It's not a close cal that he should reject the legislation, but money talks in politics and the telecome companies are willing to throw it around. Keep an eye on this one.
By the way, have you noticed that elected officials do not seem to mind having government compete with private financiers in connection with providing governmental financing for a new stadium?
November 22, 2004
This NY Times article reports on the agreement of The world's leading industrial nations to cancel 80 percent of the nearly $40 billion of debt that Iraq owes them, which is a critical step in rebuilding the country's devastated economy and an important precedent for placing pressure on Saudi Arabia, Kuwait and Iraq's other Middle Eastern neighbors to forgive Iraq's obligations owed to them.
Longtime Houstonian and former Secretary of both the State and Treasury Departments, James Baker III, who President Bush appointed last year as a special envoy to press Iraq's creditors to write off money owed them, toured the world over the past year persuading various foreign governments to sign on to the debt forgiveness plan. Kudos to Mr. Baker for a job well done.
Packers 16 Texans 13. On ESPN Sunday Night Football, the Pack handed the increasingly hapless Texans their third straight loss on a last second field goal despite the fact that they were down to their third string running back and could do nothing but pass. As usual, the Texans could not mount a pass rush, so Brett Favre methodically drove the Packers to 13 fourth quarter points to overcome a 10 point Texans' lead. Meanwhile, the Texans' offense continues to struggle as David Carr was only 5-for-11 for 49 yards in the second half and the Texans were so bad on offense against a mediocre Packers' defense that the capacity Reliant Stadium crowd started booing. Although the Texans' offensive line has not provided consistent protection over the past three games, Carr continues to fail to live up to his stature as the number one pick in the 2002 NFL Draft. In looking at the other 15 AFC teams, only five of them -- Baltimore, Buffalo, Miami, Cleveland, and Oakland -- would clearly trade their starting QB right now for Carr. For the first pick in the draft, Carr should be a better player than that, and his slow development is becoming a big problem for the Texans.
Baltimore 30 Dallas 10. Dallas actually led 3-0 after the first half, which was so bad that it almost placed the development of NFL offensive systems back several decades. The Cowboys next hope (maybe prayer?) at quarterback, Drew Henson, got some mop up duty in the fourth quarter, so maybe he will get the start against the Bears on Turkey Day. The Cowboys are simply a very bad football team right now, even worse than the Texans.
Louisville 63 Houston 27. The Coogs actually pulled to within eight points in this one just after the start of the fourth quarter, but then the Cardinals turned on the afterburners and left them in the dust (mud?) at Robertson Stadium. The Cougars finish 3-8 and, after two seasons of the Art Briles' era, still show no signs of developing a decent defense. Add in the need to re-develop the offensive line and the Cougars have their work cut out for them in this upcoming off-season.
The Aggies and Longhorns were idle this past weekend as they prepare for Friday's big game, and the Rice Owls were also off as they prepare for their last game of the season against Louisiana Tech that I believe is now scheduled for the Monday (?) after Thanksgiving at Reliant Stadium.
And, as usual, check out Kevin Whited's always insightful Big 12 Wrapup over at PubliusTx.net.
November 21, 2004
This Dallas Morning News article catches up with former Dallas Cowboy quarterback and folk hero Clint Longley, who as a 22-year-old rookie out of Abilene Christian University replaced a woozy Roger Staubach early in the third quarter and led the Cowboys to a dramatic 24-23 comeback victory over George Allen's Redskins 30 years ago on Thanksgiving Day.
Longley was a live wire, so his remarkable performance generated more than the usual amount of interest throughout Texas and the NFL. One of the best comments on the game came from Cowboys offensive lineman, Blaine Nye, who described Longley's performance (11-20 for 203 yards and 2 TD's) as "the triumph of an uncluttered mind."
Longley's three year professional career was utterly undistinguished except for that one magic game and one other incident -- when he sucker-punched Staubach during training camp in 1976, prompting the Cowboys to trade Longley to San Diego. By the end of that season, the Chargers waived Longley and he never played for another NFL team.
Charlie Waters, a former Cowboy teammate, noted that Longley's unpredictable nature manifested itself in the Staubach sucker-punch:
Waters knew how unpredictable Longley could be. The season before, Waters had agreed to let Longley keep his new pony on three acres of land he'd purchased near the team's practice facility.
"He pulls up in a 1957 Cadillac," said Waters, "and the horse's head was sticking out one of the back windows and its ass was hanging out the other side."
Over the past 30 years, Longley has refused all interview requests and now lives quietly -- albeit idiosyncratically -- in Corpus Christi. He did not grant an interview for the story, but DMN reporter Matt Mosley did a good job in the article, anyway. Read the entire piece.
One of the more interesting articles stories in today's NY Sunday Times is this one regarding the travails of Ricardo B. Salinas Pliego, the chairman of TV Azteca, in trying to find an American law firm that would support his position that there is no duty to disclose to the market that he and a partner had turned a $218 million profit from discounting TV Azteca debt that they purchased from third parties and then selling it to the company at the full amount of the indebtedness:
The Securities and Exchange Commission is investigating whether Mr. Salinas Pliego or TV Azteca properly disclosed his personal financial interest in a deal involving the company, where he serves as chairman. . .
The investigation stemmed from reports about a dispute over the need to disclose that Mr. Salinas Pliego and a partner had turned a $218 million profit from buying company debt at a deep discount and reselling it to the company for full price. [A] lawyer from a prominent firm, Akin, Gump, Strauss, Hauer & Feld, took the unusual step of quitting as counsel to TV Azteca and reporting his dispute with management to the board of directors.
However, if one firm doesn't agree with you, Mr. Salinas Pliego's approach is "to try, try again":
As it turns out, Mr. Salinas Pliego and his management team rejected the advice of two other American law firms on the same matter, according to a nearly final draft report of an internal investigation. The draft, which was provided to The Times, was compiled by Munger, Tolles & Olson, a law firm in Los Angeles that was hired early this year by a committee of independent directors of TV Azteca . . . Munger Tolles's investigation found that the company's managers withheld important information from their board, failed to correct a false public statement by Mr. Salinas Pliego and gave explanations for their actions that the law firm concluded were not credible.
Apparently, the Munger Tolles reports provides an entertaining account of how Mr. Salinas Pliego traversed from law firm to law firm in trying to find someone who agreed with his position that his profit on the company's debt need not be disclosed:
[The report] traces TV Azteca's journey from corporate law firm to corporate law firm in a search for lawyers sympathetic to its position. After Akin Gump backed away, it says, TV Azteca sought a second opinion from lawyers at Cleary, Gottlieb, Steen & Hamilton, a big New York firm. When Cleary Gottlieb also recommended disclosing Mr. Salinas Pliego's financial interest in the transaction, the company turned to another firm, Hogan & Hartson. That firm advised disclosure, too.
But when lawyers from Munger Tolles, as part of their investigation, sought to speak to the lawyers from the three firms whose advice had been rejected, they were rebuffed.
(In a particularly absurd twist, the report said Akin Gump declined to make its lawyers available in part because TV Azteca had not yet paid its bills, but lawyers representing Akin Gump did tell the Munger Tolles investigators what the Akin Gump lawyers would have said if they had consented to interviews.)
And in a delicious twist, the Munger Tolles report has now required the company to hire yet another law firm to help it respond to the report:
After splitting with Akin Gump, TV Azteca hired yet another American law firm, Mayer, Brown, Rowe & Maw, to recommend responses to the Munger Tolles report. A recent company filing said the recommendations included the creation of nominating and audit committees and the adoption of a rigorous code of ethics. But it was left to the regulators to decide whether to punish Mr. Salinas Pliego and his team.
My sense is that TV Azteca's legal fees will continue to be a rather large budget item for the near future.
November 20, 2004
Professor Bainbridge continues to do a good job of criticizing the Republican Party for its rather shameless lack of leadership in its indulgence of House Minority Leader Tom DeLay that was the subject of this earlier post.
What is most curious about the GOP's witch hunt allegations regarding Travis County District Attorney Ronnie Earle -- whose office is prosecuting three former DeLay aides -- is that Mr. Earle is a well-regarded prosecutor in the legal community who has traditionally been quite even-handed. In fact, 12 of 15 elected officials who Mr. Earle has prosecuted over the years have been fellow Democrats, including former Attorney General Jim Mattox, former Speaker Gib Lewis, former Treasurer Warren G. Harding and former Lt. Gov. Bob Bullock.
As an aside, a funny anecdote arose after Mr. Earle's unsuccessful prosecution of the late Mr. Bullock, who became a somewhat beloved figure in his declining years and a confidant of GOP Governor George W. Bush. After Mr. Bullock's death, Mr. Earle -- who clearly enjoyed the colorful former Lieutenant Governor -- disclosed that Mr. Bullock had subsequently confided to him that he was "guilty as hell."
The typical reaction to the incident will be outrage and self-righteous indignation. However, I must admit that the riot made me somewhat nostalgic of the bygone days of the NBA when such fights were quite common.
Back in the 1970's, my late father and I would often go over to The Summit (my folks' house was nearby) at halftime of the Rockets' game of the night and get in free to watch the second half of the game (I was a poverty-sticken law student; my father was just, might we say, parsimonious). Even back then, the first halves of NBA games didn't make much difference.
On one particular evening, we went to the second half of a game between the Rockets of the Calvin Murphy, Rudy Tomjanovich, Mike Newlin era against the Celtics of the Sidney Wicks, Dave Cowens, and Charlie Scott era. It was a close game and by the 4th quarter, the players on both sides were getting a bit chippy. Finally, Wicks threw an elbow at Murphy, and all hell broke loose.
Unfortunately for Wicks, Murphy was a professional caliber fighter and never lost any of his half-dozen or so fights during his NBA career. Combining amazing quickness with a rapid fire delivery, Murphy was on top of Wicks within seconds, had him down on the floor, and was delivering a devastating series of punches to the bridge of Wicks' nose, opening up a broad cut in the process. It took four players -- each taking one of Murphy's limbs -- to extract Murphy from Wicks, who frankly didn't know what had hit him.
After order was restored and Wicks was carted off to the dressing room for stitches, the game continued in a rather heated fashion. A few minutes later, after a rough exchange under the Rockets' basket, a big, fat fan sitting in the courtside seats took offense to Cowens' actions, walked out on to the court, and pushed Cowens. Cowens proceeded to place his right hand on this idiot's neck and then started hammering him to the chops with a series of lefts that would have made Rocky Balboa proud. Just for good measure, Scott blazed in like a streak of light and did his best Murphy imitation, pummeling several adjacent fans with a deft series of combination blows.
About this time, Wicks returned to the court with a large bandage on the bridge of his nose. My father, a respected Professor of Medicine with a long career at both the University of Iowa and University of Texas Medical Schools, used all of his long years of medical research in analyzing the situation for me: "Murphy really kicked Wicks' ass, didn't he?"
After "order" (we're talking generally here) was restored for the second time, the Rockets went on to score a satisfying victory over the Celtics. None of the combatants in the various brawls were even thrown out of the game as I recall, and certainly no arrests were made and no civil lawsuits were filed.
Ah, those were the days. ;^)
One of many benefits of living in Houston is the extraordinary Texas Children's Hospital located in Houston's famed Texas Medical Center. Texas Children's -- as Houstonians call it -- is truly one of the most remarkable medical facilities for children in the world.
This Chronicle article reports on a reception that Texas Childrens held on Friday to celebrate the 50th year of service by the hospital's pediatric heart unit, which reflects Texas Childrens' overall excellence:
Texas Children's Hospital . . . opened in February 1954. Pediatric cardiology was the hospital's first subspecialty. Today, as many as 12,000 patients are treated and 700 surgeries performed annually at the heart center.
More than 35,000 children a year are born with congenital heart defects, a primary cause of first-year death of infants. Since the 1960s, . . . survival rates in such cases have increased to nearly 95 percent from 70 percent.
Dr. Ralph Feigin, the hospital's physician-in-chief, said the hospital's heart center has been a "cradle of innovations since its inception.""The center has pioneered numerous pediatric cardiology procedures and maintains one of the nation's highest success rates in treating patients with congenital heart abnormalities," he said.
Increasingly, the hospital has moved into high-tech medicine. About 550 fetal echocardiograms are performed each year to identify heart problems before birth. Such early detection can ensure that babies receive immediate care, including surgery, for their problems.
In another high-tech development, heart center surgeons have performed 158 pediatric heart transplants ? 17 of them this year ? since the program began 20 years ago.
Texas Children's Hospital is a treasure of the Houston community.
Meanwhile, in other Medical Center news, Methodist Hospital announced on Friday the Methodist Board's approval of an initial $30 million endowment to launch the creation of the Southwest's first neurological institute to advance the discovery of the origins of neurological disease and to provide comprehensive care for patients with disorders and injuries of the brain and spinal cord.
The creation of the institute is the latest step in Methodist's plan to become an academic institution in the aftermath of this year's acrimonious split with Baylor College of Medicine, its partner and supplier of physician-scientists and residents for the past 50 years.
The prosecution rested on Friday in the sexual assault trial of former Houston Rocket and Basketball Hall of Famer Calvin Murphy in which five of his daughters have testified that Murphy sexually molested them years ago. Here are earlier posts on the indictment and trial of Murphy in this matter.
Although I have not sat in on any of this trial and Murphy is ably represented by Houston criminal defense attorney Rusty Hardin, my sense is that the case has not gone particularly well for Murphy to date. Press accounts have described the jury members as being visibly affected by the searing testimony of Murphy's daughters, and the jury will almost certainly hold Murphy's prodigious promiscuity (14 children by nine different women) against him.
Nevertheless, Mr. Hardin has plugged away at creating reasonable doubt by highlighting the daughters' ulterior motives and inconsistencies in their stories. His defense strategy apparently will center around testimony from Murphy's other children and Murphy's testimony. This may be a case in which Murphy's performance on the stand will ultimately determine whether the jury decides to convict or acquit. I expect the trial to last another week or so.
One thing is for sure -- this trial has been bloody for Murphy, who is finished in his career as a media personality in Houston regardless of the outcome of the trial.
New York-based investment firm Apollo Management LP announced on Friday that it has agreed to acquire Houston-based Goodman Global Holdings Inc. for $1.43 billion. Goodman Global is a maker of air conditioners and heating equipment and one of Houston's largest privately-owned businesses.
Goodman Global manufactures brands such as Amana, Janitrol, GmC and QuietFlex, and it has factories in Houston, Fayetteville, Tennessee and Dayton, Tennessee. It employs about 4,000 employees, of which about 2,500 are in Houston.
Apollo has received debt commitments from J.P. Morgan Securities Inc., UBS Securities LLC and Credit Suisse First Boston to finance the deal, which will leave in place the senior management of Goodman Global. Moreover, the Goodman family will retain an unspecified "significant" investment in the company. Goodman Global President and Chief Executive Charles A. Carroll will retain his positions, and Goodman Global principal John B. Goodman will remain chairman.
The deal is expected to close the deal in the first quarter, subject to customary regulatory approvals.
November 19, 2004
2004 Democratic Presidential nominee John Kerry has been accused of having questionable judgment on certain matters. But if the following piece from The New York Post's Page Six of November 18 is true, this would take the cake in the bad judgment department:
LIBERAL loser John Kerry might be planning to strike back at John O'Neill, the "Unfit for Command" author who claims some of the credit for Kerry's defeat, sources say.
In the book, published by Regnery not long before the election, O'Neill ? who, like Kerry, commanded swift boats in Vietnam ? attacked Kerry's war record and branded him a traitor.
O'Neill sold over 800,000 copies and his group, Swift Boat Veterans for Truth, raised $25 million to battle the Kerry campaign and ran TV ads trashing the candidate. Former Sen. Bob Dole endorsed the group.
O'Neill says he wrote the book because Kerry called his fellow Vietnam vets monsters, terrorists and war criminals, for which he has never apologized. Kerry has called O'Neill's charges lies, though he made some of the comments in front of the Senate Foreign Relations Committee in 1971.
"I will leave it to the professionals to decide whether we played a crucial role in defeating Kerry, but I am very satisfied," O'Neill crowed to the London Sunday Telegraph days after George W. Bush's victory.
The paper reported Kerry was "furious" at staffers who advised him not to fight back against O'Neill and noted that the nominee was "enraged" over the book.
Now, "the Kerry camp is thinking about filing a libel lawsuit against Regnery and O'Neill," a source close to the candidate's inner circle tells PAGE SIX. "I don't know if they will actually go forward, but consideration is serious. If Kerry plans on running again in 2008 ? and I'm hearing he will ? it would make sense that he'd file the suit."
Kerry's rep, David Wade, said he hadn't heard about any proposed lawsuit, but promised to look into it.
"It would be a lot smarter of Kerry to just apologize," O'Neill told PAGE SIX. "No lawsuits are going to change the testimony he gave and the impact it had on POWs."
This defamation lawsuit idea was actually trotted out during the Presidential campaign. "Noted" legal scholar, John Dean -- the convicted felon who somehow crafted his legacy of testifying to Congress against his client (former President Richard M. Nixon) into a job as an expert legal commentator -- wrote this article opining that Senator Kerry would have a pretty good defamation claim against Mr. O'Neill, who is a longtime and well-regarded Houston attorney.
An unsolicited piece of advice for Senator Kerry -- if you thought that the Swift Boat Vets' accusations were bad and things could not get any worse, then go ahead and sue John O'Neill. That will likely generate a nightmare of Biblical proportions for you. Mr. O'Neill was reasonably effective as an advocate against you during the campaign even though he was out of his element on the public stage. However, Mr. O'Neill is quite comfortable and completely in his element inside a courtroom. Trust me on that one.
This Washington Post article confirms that former University of Florida and Washington Redskins football coach Steve Spurrier is headed to the University of South Carolina to replace Lou Holtz as football coach there. South Carolina apparently sealed the deal with Coach Spurrier -- who does not allow his coaching duties to get in the way of playing golf -- in the following manner:
Spurrier, 59, agreed to the deal Wednesday, after he and his agent, Jimmy Sexton, met with Holtz and South Carolina alumnus William "Hootie" Johnson at Augusta National Golf Club, where Johnson is chairman . . . Sources close to Spurrier have said Johnson's role at Augusta National and Spurrier's desire to be a member at the exclusive club approximately 70 miles from Columbia, S.C., were a factor in the coach's decision. Holtz is also a member at the club and Johnson is a former Gamecock fullback. Spurrier received a tour of the club's facilities Wednesday.
Houston-based Continental Airlines -- one of the city's largest employers -- announced Thursday that it is asking employees for reductions in pay and benefits effective Feb. 28 of next year as a part of a plan to reduce its annual costs by half a billion dollars.
Continental expects the savings to be generated from a combination of productivity enhancements, benefits changes and wage reductions with each employee group. The cuts would be in addition to $1.1 billion in annual cost savings and revenue enhancements that Continental announced previously this year.
However, even with the cuts, Continental does not expect to return to profitability unless there is a change in the current economic conditions that are depressing the airline industry. Continental has lost about $160 million through the first three quarters of this year and will likely lose more in the fourth quarter. All airlines have been coping with a glut of seats and high fuel prices over the past year, and traditional hub-and-spoke carriers such as Continental have been facing increased competition from discount airlines such as JetBlue Airways and Southwest Airlines. Although relatively healthy in comparison to the reeling legacy airlines, Continental is the last of the "big six" hub-and-spoke airlines to request such employee concessions after the terrorist attacks of 2001 on New York and Washington.
As a part of the plan, Continental President and Chief Operating Officer Larry Kellner agreed to cut both his base salary and annual and long-term performance compensation by 25% effective Feb. 28. Mr. Kellner will replace Gordon Bethune as chairman and CEO of Continental at the end of this year. Likewise, other top Continental management personnel will take similar reductions in compensation and benefits as a part of the plan.
November 18, 2004
This Washington Post article follows up on this earlier post regarding Congressional hearings over Washington lobbyist Jack Abramoff and public relations consultant Michael Scanlon's shenanigans in 2002 involving the Tigua Indian Tribe's casino in El Paso.
Playing both sides off against the middle, Messrs. Abramoff and Scanlon originally worked with conservative religious activist Ralph Reed to help the State of Texas shut down the Indian tribe's casino, and then Messrs. Abramoff and Scanlon's turned around and persuaded the the tribe to pay them $4.2 million to try to get Congress to reopen it. Messrs. Abramoff and Scanlon are now embroiled in Congressional and grand jury investigations over an incredible $82 million in lobbying and public relations fees they collected from six tribes that operate gambling casinos.
By the way, Mr. Scanlon, 34 is a former aide to House Majority Leader Tom DeLay, whose name seems to be bandied about in just about every Congressional scandal in Washington or Austin these days.
Charles Kuffner has been all over this story, so check out his blog for more analysis of the situation.
This NY Times article interviews Jerome Schneider, who for the past 20 years or so made a fortune setting up offshore banks and phony investments in tax havens such as the Cayman Islands, Grenada, Montserratt, Vanuatu, the Cook Islands, and the Pacific Island of Nauru to assist wealthy U.S. citizens in avoiding income taxes.
His handbook, "The Complete Guide to Offshore Money Havens," became quite popular among wealthy folks who are willing to take such risks. The 2000 edition of the book even carried an endorsement from Louisiana Republican Representative Billy Tauzin, who also spoke at a conferences in which Mr. Schneider promoted his tax evasion schemes.
In at least the understatement of the month, a spokesman for Mr. Tauzin conceded that Mr. Tauzin's involvement with Mr. Schneider was "a stupid mistake."
Well, the gig is up for Mr. Schneider, who pled guilty in February to conspiring to help his clients evade the tax laws. And those who invested with Mr. Schneider just might receive an invitation of sorts soon:
Mr. Schneider, who pleaded guilty in February to conspiring to help his clients evade the tax laws, said that he expected "every single one" of his clients to be prosecuted or sued for the taxes they evaded. He said clients sought to evade taxes on incomes ranging from $100,000 to $40 million, though most were from a third to half a million dollars.
Some of those who benefitted from Mr. Schneider's schemes could prove to be fairly interesting:
[Mr. Schnieder] said that all his clients had two things in common - they were rich and they wanted to escape taxes.
Most of the nation's major accounting firms worked with one or another of his clients, he said, and he named two law firms that he said were central to his business.
He said one prominent actress sent money to the United International Bank in Nauru, which he said he created. He said the actress paid $50,000 for a legal opinion asserting that the arrangement was legal.
Mr. Schneider also said that in 1988 he arranged for a prominent motivation coach to place $250,000 in an offshore bank without reporting the money to the I.R.S.
In addition, Mr. Schneider said that a billionaire media businessman, one of several clients who he said were on the Forbes 400 list of the wealthiest Americans, sent $40 million to a sham bank in Nauru to pay for a nut-processing company in 1994.
What is perhaps most amazing about Mr. Schneider's scheme is how long it took federal authorities to investigate Mr. Schneider, even after he plopped the basis for such an investigation in their lap:
The Senate Permanent Investigations subcommittee called Mr. Schneider as a witness in 1983 hearings on offshore tax evasion, and two years later the Comptroller of the Currency warned American banks about dealing with some of the offshore banks Mr. Schneider created.
Mr. Schneider said his undoing began the day more than a decade ago when he asked Jack Blum, a former United States Senate investigator, to speak at one of his offshore seminars. Mr. Blum, who specializes in exposing international financial crimes, wrote a letter to the Justice Department that prompted the investigation that led to Mr. Schneider's guilty plea.
Mr. Blum said, "That Schneider could operate openly for years, buying ads in the Wall Street Journal and the American Airlines flight magazine, shows the utter failure of tax law enforcement." He said law enforcement had known about Mr. Schneider for years, but failed to act.
The I.R.S., in court papers, said it began investigating Mr. Schneider in 1997, 14 years after his Senate testimony, because of the letter from Mr. Blum. It took five more years to obtain an indictment.
Oh well, better late than never. Read the entire article.
You can review them here.
November 17, 2004
Enron Corp.'s liquidating chapter 11 plan accelerated on Wednesday when the company closed the $2 billion sale of its prized remaining assets -- its interest in three natural gas pipelines.
Enron's Bankruptcy Court approved the sale in September of Enron's interest in the three natural gas pipelines to CCE Holdings LLC, a joint venture of Southern Union Co. and a unit of GE Commercial Finance. CCE Holdings will assume $430 million in debt as a part of the deal.
A $1.25 billion sale of Portland General Electric, which is Enron's Pacific Northwest utility, is still up in the air pending regulatory approval. If approved, a Texas Pacific Group-backed holding company will acquire the utility and assume $1.1 billion in debt.
Once the Portland General deal closes, the scraps of Enron will become Prisma Energy International Inc., which will own Enron's remaining pipeline and power assets. When that happens and sufficient claims objections have been resolved (probably sometime in mid to late 2005), Enron will begin distributing dividends to its unsecured creditors. The total amount to be distributed is expected to be approximately $12 billion comprised of 92% in cash and 8% in Prisma stock. That computes to about a 20% dividend on unsecured claims against Enron.
Meanwhile, the Enron name will live on primarily for the benefit of lawyers, who will continue to pursue litigation claims on behalf of the Enron estate for years to come.
TigerHawk and other business travelers, next time that you need to stay in that area of Houston, I recommend either The Omni Hotel off of Woodway (which has high speed internet access in all of its rooms) or The Houstonian, but note that the Houstonian has high speed internet access in only their third and fourth floor rooms. Both are better bets than the St. Regis.
This Atlanta Constitution-Journal (free registration required) article takes the first stab at an issue that deserves more scrutiny -- the nearly $1 billion legal fee tab that the attorneys involved in the Enron chapter 11 case are charging the estate in that case:
The lead law firm, Weil, Gotshal & Manges of New York, is seeking $158 million in fees and expenses. Some New York lawyers are charging $15 a minute ? $900 an hour ? for their work. And other law firms have billed hundreds of dollars an hour for time their lawyers spent reading newspapers to keep up with the case.
One of [Atlanta's] most venerable law firms, Alston & Bird, has billed Enron nearly $90 million for its 18-month examination of the company's bankruptcy.
If that number seems staggering, consider this: Just preparing its bills in the case took Alston & Bird employees nearly 1,700 hours, for which the firm billed $496,000, according to documents filed with the bankruptcy court.
All told, more than 200 Alston & Bird lawyers, many billing at least $500 an hour, worked on the Enron examination, according to documents the law firm filed with the court. Nineteen of the firm's attorneys submitted bills for more than $1 million apiece in legal fees.
Eighty-nine of the firm's paralegals, librarians, analysts and clerks worked on the Enron case. The firm's lawyers and support staff calculated they spent 264,332 hours on the examination, . . .
The professionals interviewed in the story fall over themselves defending the amount of fees incurred in the Enron case, and the reporter does not try to challenge their assertions much. Certainly the Enron case justified some premium over the normal legal cost of a typical large chapter 11 case because of the size and emergency nature of the case. Moreover, the fact that the Enron Bankruptcy Judge in New York declined early in the case to transfer venue of the case to Houston also contributed to the high cost attributable to attorneys' fees. Those $900 per hour fees that were routinely approved in New York likely would not have passed muster in Houston.
Nevertheless, the $1 billion legal tab to date is scandalous, and is particularly galling because that tab does not include the additional legal cost that lawyers will incur in the future pursuing claims on behalf of the Enron estate. Moreover, apart from the attorneys' fees charged to the Enron estate, there are hundreds of millions of additional charges attributable to other professionals (such as accountants and management and investment banking experts) that are being charged to the Enron estate. It would not surprise me to see the ultimate legal tab attributable to lawyers feeding from the Enron trough to climb another 25% before the case is closed.
Here's hoping that an enterprising investigative reporter or law professor takes on this subject. My sense is that an objective cost-benefit analysis would reflect that the value of benefits truly derived for the Enron estate from the high legal cost incurred is far less than the attorneys involved in the case would lead us to believe.
Following on these earlier posts here and here, this Washington Post article reports on yesterday's test of the unmanned X-43A "scramjet" that broke the aircraft speed record for the second time this year. The X-43A flew at nearly 10 times the speed of sound as scientists continue their quest for "hypersonic" flight.
If this is the Republican Party's idea of wise leadership, then we are in for a long four years. Professor Bainbridge provides his usual insightful thoughts.
Schlotzsky's, the Austin-based sandwich franchisor that filed a chapter 11 case earlier this year, has proposed in its bankruptcy case that its assets be sold at an auction next week.
This proposal comes on the heels of a $88 million quarterly loss, large operating deficits as a debtor-in-possession, and tepid interest from reorganization investors. The auction sale will essentially liquidate the company, and almost certainly means that neither unsecured creditors or shareholders in the company will receive any dividend on their claims or equity interests.
Absent a "white knight" investor, restaurant reorganizations almost always fail. The margins are just too thin, and the competition so robust, for management to make enough headway from an operations standpoint in chapter 11 to persuade creditors to take a stake in a reorganized company that comes out of chapter 11 without substantial new capital.
Paul A. Frame, Jr., the former CEO of Houston-based geophysical seismic provider Seitel, Inc., has been indicted of defrauding the company of $750,000 to settle a lawsuit by his former fiancee. The criminal case against Mr. Frame is pending in U.S. District Court in Houston.
Seitel emerged earlier this year from a chapter 11 case that was commenced in 2003 several months after Mr. Frame had been terminated as CEO amidst revelations of Mr. Frame's use of corporate assets for personal purposes and accounting issues regarding the value of Seitel's primary asset, which is its library of geophysical seismic data. The indictment against Mr. Frame consists of two counts of mail fraud, two counts of wire fraud, money laundering and making a false statement to the Securities and Exchange Commission.
Mr. Frame is accused of using $750,000 from Seitel without Board of Directors' authorization to settle a lawsuit that his former fiancee brought against him. The colorful allegations in that lawsuit asserted that Mr. Frame took back $1 million in gifts that he had given his former fiancee, including sable, lynx and chinchilla jackets, expensive jewelry and two wedding dresses, and that Seitel was responsible for Mr. Frame's alleged wrongdoing as well. In addition to the settlement with his former fiancee, the SEC has also alleged in a civil complaint that Mr. Frame used Seitel funds without Board approval to race a Ferrari and to install an expensive security system in his tony River Oaks home.
Enron Task Force prosecutors are investigating whether Linda Lay, the wife of Enron's former Chairman and CEO, Kenneth L. Lay, engaged in illegal insider trading by selling Enron stock days before Enron filed its chapter 11 case on December 2, 2001.
The particular sale in question involved 500,000 shares of Enron stock that was sold through a Lay family foundation. The foundation proceeded to distribute the $1.2 million in sales proceeds to various charitable organizations.
The investigation of Mrs. Lay is a part of the Task Force's scrutiny of the Lays' actions during the weeks immediately preceding the filing of Enron's bankruptcy case. Sources close to the case indicate that other transactions that have not yet been publicly disclosed are also a focus of that investigation.
Mr. Lay's lawyer, Michael Ramsey of Houston, responded to the embarrassing disclosure by publicly criticizing the Task Force's motives and alleging that the disclosure is simply the latest ploy by the government to to bring pressure against Mr. Lay to plead guilty. "This is the last gasp of a dying prosecution,'' Mr. Ramsey said. "This is an attempt at extortion. If I tried something like this, I would be indicted."
Don't give this bunch of prosecutors any ideas, Mike.
The investigation of Mrs. Lay is focusing on a sale that she placed on behalf of the foundation on the morning of Nov. 28, 2001. That morning, Mrs. Lay apparently placed an order for the foundation to sell its Enron shares sometime between 10 and 10:20 a.m. At 10:30 a.m. that morning, Dynegy and Enron issued press releases informing the public that Dynegy was calling off its proposed purchase and merger with Enron. The news hammered the value of Enron shares as they sunk by more than $1.50 a share almost immediately after the press releases and closed at $.60 per share by the end of the day. The foundation sold its shares at a price of $2.38, which generated proceeds of about $1.2 million. Had the sale occurred the next day, it would have generated about $300,000.
As noted above, this transaction is only one of several others in which the Lays engaged that the Task Force is currently examining that could result in an indictment of Mrs. Lay and additional counts against Mr. Lay. Public disclosure of the other transactions being investigated would be just as embarrassing for the Lays as this one. The Task Force is putting the pressure on Mr. Lay to turn on his co-defendants in his pending criminal case -- former Enron CEO and COO Jeffrey Skilling and former Enron chief accountant Richard Causey -- and the level of that pressure will continue to increase over the next several months.
November 16, 2004
Lest anyone think that the Big Tuna is in any hot water with Dallas Cowboys' owner Jerry Jones over the rather pathetic turn in the Cowboys' season, Reid Slaughter of the Frontburner makes a persuasive case to the contrary:
THE $300 MILLION FOOTBALL GAME
This morning, as Cowboys fans reach for the Prozac to stave off another post-game grief hangover, you have to wonder: just how HUGE was that thrilling October 31 win over the Detroit Lions at Texas Stadium? It put the 'Boys at 3-4 on the season, and you had the feeling that somehow the home team might pull out a decent season. So, let's go to the polls Nov. 2 and give our gridiron warriors a nice new stadium to play in.
Then come the next two games. Absolute, total butt-kickings. Humiliation. On TV, many shots of Jerry Jones up in the owner's booth, arms folded, stroking his chin with that "What the hell is wrong with us?" look on his face. I don't know about you, but such scenes do not inspire me to ante up half of $600 million to make that man richer.
During last night's 49-21 loss to the Eagles, John Madden said of a disconsolate Bill Parcells, "Sometimes you just need a win." At no time was the more true than Oct. 31. And The Tuna delivered a whopper for his boss.
I regularly read an interesting blog called The Diplomad, which is authored by several Republican U.S. Foreign Service officers who describe themselves as being "in an institution (State Department)in which being a Republican can be bad for your career -- even with a Republican President!"
In this recent post, the Diplomad passes along an analysis of Colin Powell's tenure at the State Department from a former Foreign Service Officer. It's an interesting and balanced piece, and I recommend that you give it a look, along with this interesting blog.
Eric Clapton has astounded the music world by finally agreeing to reform Cream, rock's first supergroup, 36 years after they split up at the height of their worldwide fame.
John Mayall, the veteran leader of the Bluesbreakers, the British band from which Clapton defected to create Cream in 1966, said yesterday: "I'm amazed. But Eric is always doing something unexpected. He moves in so many directions, always out front with his music."
Sources close to the musicians said that reunion plans were under way, with Clapton, 59, Jack Bruce, 61, and Ginger Baker, 65, talking of "probably two gigs, or maybe more" at the Royal Albert Hall in May, although that venue, where Clapton staged his traditional blues stint this spring, has yet to be booked.
"A reunion of Cream would be a classic show," Mayall went on to say. "The band was so influential. They helped pave the way for me in America. The Beatles were first. The Rolling Stones were next. Then there was Cream. I had my first US tour in 1968, and moved there a year later."
Cream members are staying silent at the moment about their plans. A spokesman for Clapton said that he had no comment. Bruce was on holiday, and there was no reply from Baker's farm in South Africa, where he raises polo ponies.
Following on this earlier post regarding Judge Richard Posner's criticism of law review articles, Judge Posner and Randy Kozel debate the issue over at Legal Affairs this week. Hat tip to The Volokh Conspiracy for the link to this interesting disussion.
Judge Jones is widely recognized as an outstanding jurist and one of the nation?s leading experts on bankruptcy law. A 1974 graduate of the University of Texas Law School, Judge Jones served as an editor of the Texas Law Review and, upon graduation, she joined the law firm of Andrews, Kurth, Campbell & Jones, L.L.P. (now Andrews & Kurth, L.L.P.), where she was the first woman to make partner in the history of the firm. While at Andrews & Kurth, Judge Jones became involved in the small but emerging Texas Republican Party and, in so doing, created her strong political ties with the Bush Family.
Judge Jones was nominated by President Reagan to become a judge on the Fifth Circuit, and she was confirmed by the U.S. Senate on April 3, 1985. During her almost 20 years on the bench, Judge Jones has written nearly six hundred opinions and she has served as a member of the Advisory Committee on Bankruptcy Rules for the Judicial Conference of the United States and the National Bankruptcy Review Commission. Judge Jones has also authored or coauthored more than 15 publications on the topics of bankruptcy law, mass tort litigation, arbitration, religion and the law, judicial workloads, and the judicial selection process. When Justice William J. Brennan, Jr. resigned from the Supreme Court in 1990, President George H.W. Bush considered Judge Jones for the Supreme Court before he ultimately nominated Justice David H. Souter to replace Justice Brennan.
If Judge Jones is nominated, then there is little question that opposition to her candidacy will coalesce arround her recent concurring opinion in McCorvey v. Hill, No. 03-10711 (5th Cir. Sept. 17, 2004). In that opinion, Judge Jones wrote both a panel opinion turning aside a new challenge to abortion rights by the original "Jane Roe" -- Norma McCorvey -- and a passionate concurring opinion in which she recommends that the Supreme Court reconsider its controversial decision in Roe v. Wade.
Although she was the original plaintiff in Roe, Norma McCorvey has since become an anti-abortion activist. In that role, she began a new challenge to Roe in U.S. District Court in June 2003. McCorvey filed a Rule 60(b) motion, which allows a federal court to relieve a party from an earlier judgment under certain limited circumstances.
In the District Court case, McCorvey's lawyers offered more than 5,000 pages of affidavits and other written evidence in seeking to undermine the foundation of the decision in Roe v. Wade. Included among the materials were 1,000 affidavits from women who had had abortions expressing regret over their choice. The District Court summarily denied the motion on the grounds that it was simply too late to revisit the original judgment.
The appeal of that decision went to the Fifth Circuit and oral argument on the appeal was scheduled for this past February. However, oral argument was cancelled and the Fifth Circuit panel promptly issued its decision, which was written by Judge Jones. The panel decision upheld the District Court's denial of McCorvey's motion, but not on the finding that she was pursuing her case too late. Rather, the panel held that the controversy had become moot -- inasmuch as Texas no longer seeks to criminalize abortion after Roe, the panel reasoned that there is no current controversy giving a court power to decide McCorvey's motion.
However, attached to the panel's rather straightforward opinion is Judge Jones' separate concurring opinion (it is somewhat unusual that the author of the panel's opinion also writes a concurring opinion, but not unheard of). In her concurring opinion, Judge Jones points out that the evidence supporting McCorvey's motion "goes to the heart of the balance Roe struck between the choice of a mother and the life of her unborn child." Judge Jones also notes that the evidence suggests that women may suffer for years after an abortion, that several other Supreme Court assumptions in Roe are probably wrong, and that new medical science suggests how much pain a fetus suffers:
"In sum, if courts were to delve into the facts underlying Roe's balancing scheme with present-day knowledge, they might conclude that the woman's 'choice' is far more risky and less beneficial, and the child's sentience far more advanced, than the Roe Court knew."
Nevertheless, Judge Jones goes on to point out that the Supreme Court's decision in Roe to constitutionalize abortion policy has had the consequence of creating a situation in which the Supreme Court likely will not be able to re-examine the factual assumptions of Roe in the context of a court record because no 'live' controversy can arise over the issues involved. As Judge Jones notes, "the Court's constitutional decisionmaking leaves our nation in a position of willful blindness to evolving knowledge. . ."
Opinions such as this may make Judge Jones politically untenable for the Supreme Court confirmation process. But change does not come easily, and here's hoping that the Bush Administration has the political courage to nominate this independent thinker to our country's highest court.
This Der Spiegel article notes the signs.
Before Mr. Puzo died in 1999, he signed off on the hiring of someone to continue the Godfather saga. So, in 2002, Random House ran a contest to pick the successor to Mr. Puzo, and the winner was Mark Winegardner, who is chairman of the creative writing program at Florida State University.
The review basically says that the book is decent, but lacks the originality of the original book and the first two Godfather films. Stated another way, the book is not as good a story as the first Godfather novel, or the Godfather and Godfather II films, but is better than Francis Ford Coppolla's abomination, Godfather III. Thank goodness for that.
November 15, 2004
The Supreme Court declined on Monday to consider whether retailer Kmart Corp. should have been allowed to pay more than $300 million to about 2,500 "key vendors" immediately after filing its chapter 11 case in January, 2002.
The Kmart case stemmed from Kmart's decision immediately after the filing of its chapter 11 case to request that the Bankruptcy Court approve emergency payments to its key vendors (including over 1,000 newspapers) on the grounds that such payments were essential to preserving Kmart's going concern value for the ultimate benefit of all of its creditors.
Absent such payments, key vendors of bankrupt companies often refuse to do business and provide trade credit with a debtor even though their post-bankruptcy claims receive a higher priority of payment than pre-petition unsecured claims. Bankruptcy Courts often authorize such payments to key vendors, and the Bankruptcy Court in Kmart's case elected to do so.
However, the District Court and the the 7th U.S. Circuit Court of Appeals reversed the Bankruptcy Court's key vendor ruling and held that Kmart had failed to establish that business from its designated key vendors was any more necessary to the survival of Kmart than business from certain companies that were excluded from key vendor status.
The effect of the Supreme Court's refusal to review the 7th Circuit's decision is that the lower courts remain split on the issue of key vendor payments. Some courts deny such payments on the grounds that the Bankruptcy Code contemplates that any such payments to the debtor's creditors should only be made under a confirmed plan of reorganization. However, the better view is that, under appropriate circumstances, a debtor should be allowed to pay key vendors at the outset of a case to hedge the risk that the debtor would otherwise meltdown into liquidation to the detriment of creditors before a reorganization plan can even be proposed.
Kmart's "key vendor" motion was unusally aggressive and neither the 7th Circuit's decision nor the Supreme Court's refusal to review that decision prevents a Bankruptcy Court from approving key vendor payments under appropriate circumstances. But it is clear that from these rulings that debtors will be required to tailor such key vendor programs more carefully than Kmart did.
This earlier post referenced Kansas Coach Mark Mangino's comments after Saturday's controversial ending to the Texas-Kansas game in which Coach Mangino alleged that the officials were favoring UT to preserve the Horns' stature for a lucrative Bowl Championship Series Bowl game.
Well, it turns out that Lawrence, Kansas was not the only place where passions were bubbling out of control in Big 12 country this past Saturday. This article from Husker.com indicates that Darren DeLeone, a 6'4", 315 lbs. offensive tackle hauled off and whacked a member of of the Oklahoma spirit before Saturday's Nebraska-OU game in Norman:
During pregame warmups, an incident allegedly occurred involving Nebraska offensive lineman Darren DeLone and a member of the Ruf/Neks, an Oklahoma sideline spirit group.
According to Sunday's editions of The Oklahoman, Adam Merritt, a Ruf/Nek, was transported from Owen Field on a medical cart and taken to Norman (Okla.) Regional Hospital after having several teeth knocked out and suffering facial lacerations in what witnesses described as an assault by the 6-foot-4, 315-pound DeLone.
Merritt was treated and released before the game ended.
DeLone was not arrested and was allowed to leave the stadium with the team, according to The Oklahoman.
The Nebraska athletic department Sunday released a prepared statement saying it was "aware of a collision that occurred on the field of play during the official pregame warmup period."
The one-paragraph statement ? which doesn't identify DeLone or any other Husker player ? said several members of the Nebraska football team, including two coaches, "witnessed the collision and immediately summoned a member of Nebraska's medical staff to assist. Players and coaches spoke with officials immediately following the game."
The Nebraska athletic department and football team "are sorry the accident happened and wish the young man a quick and full recovery," the statement said.
However, there might just be more to the story than the Nebraska officials are letting on:
According to The Oklahoman, witnesses in the Sooner student section at Owen Field and on the sideline said DeLone head-butted Merritt in the face with his helmet and shoved him into the 3-foot brick wall.
Well, I guess that could be construed as a "collision."
But that was only the "before game" incident. After the game, Nebraska coach Bill Callahan came unhinged as he was leaving the field and began yelling obscenities at several boistrous OU fans. The AP wire story on the incident relates the following:
While acknowledging he used a poor choice of words in a profane outburst directed at Oklahoma fans Saturday, Nebraska coach Bill Callahan said he was upset because a group of hecklers were allowed so close to his players during warmups and oranges were thrown onto the field late in the game.Welcome to the Big 12, Coach Callahan.
As he walked toward the Nebraska locker room after a 30-3 loss, Callahan looked into the stands and called OU fans "[expletive] hillbillies."
"I'm an emotional guy, and I'm a competitive coach, and on the field I stick up for my players," Callahan said Monday on the Big 12 coaches teleconference. "I don't think any team should be subjected to the type of treatment we were subjected to in that particular contest."
Callahan also said he could not comment on what Nebraska called a
"collision" between a player and an Oklahoma student fan incident because the coach did not see it.
One of the stories from the just completed Presidential campaign that historians will debate for many years is the effect that the Swift Boat Veterans had on the just completed Presidential campaign. Here are earlier posts on the Swift Boat Veterans.
This John Fund article on OpinonJournal.com is a useful review of the story of these Vietnam veterans groups that raised doubts during the campaign about John Kerry's fitness to serve as commander in chief. The setting for the story is the Restoration Weekend, an annual gathering of political activists that David Horowitz organizes. Mr. Horowitz is a former left-wing radical who opposed the Vietnam War effort as an editor of Ramparts magazine, but who is now conservative writer and political activist.
The article does a good job of summarizing the Swift Boat Veterans' activities during the campaign, and includes the following insightful observation:
As the evening proceeded and one Vietnam veteran after another shared the story of how veterans felt compelled to attack Mr. Kerry for his 1971 testimony branding fellow veterans as war criminals, former CBS News correspondent Bernard Goldberg leaned back in his chair in amazement.
"I think some of them are too intense," he told me. "But screwing with these guys by accusing them of atrocities was one of the biggest mistakes John Kerry ever made. Thirty years later he woke a sleeping giant."
November 14, 2004
After years of remaining neutral on the Wright Amendment -- that law that restricts flights from Dallas's Love Field Airport -- Southwest Airlines is now calling the rule "anticompetitive" and "outdated".
It's about time.
The Wright Amendment was enacted in 1979 to facilitate the success of the then new Dallas-Fort Worth International Airport, which was built in a rural area in the northern part of the Metroplex between Dallas and Ft. Worth. Dallas' other airport -- Love Field -- enjoys a near-downtown location. In order to funnel air traffic to DFW, the Wright Amendment banned interstate service from Love Field on jets with more than 56 seats to all but seven states near Texas.
When DFW was built, Southwest did not want to move to DFW and has never had any service at the bigger airport. DFW is the dominant hub of AMR Corp.'s American Airlines, which has enjoyed the respite from competitive pressures that the Wright Amendment provides. That anti-competitive effect has been part of the reason why American has been slow to adapt to the rapidly changing airline industry, in which discount carriers such as Southwest have brought an era of lower fares and additional seats. The "legacy airlines" such as American, Delta, and United are reeling as a result.
The Wright Amendment -- which was questionable policy at best at the time it was enacted -- is clearly obsolescent. The area around DFW is no longer rural and the airport is now literally in the center of the northern part of the Metroplex. Moreover, Southwest is now a national airline, and it is inhibited from servicing that national network of flights from its hub at Love Field.
At DFW, Delta Air Lines recently announced that it is abandoning its unprofitable hub, which is cutting 250-plus daily flights to about 45. Although that move will increase American's dominance at DFW in the short run, industry observers expect some of the discount carriers to make a play for some or all of Delta's old gates at DFW.
Nevertheless, Southwest contends that it is going to remain at Love Field despite the galling Wright Amendment restriction on long haul flights from that airport. But Southwest is using Delta's exit as proof that DFW does not need the Wright Amendment's protection anymore. Southwest notes that many cities -- including New York, Chicago, Houston, and Los Angeles -- enjoy the benefits of two airports without any need of the "protections" afforded to DFW by the Wright Amendment.
As you would expect, American Airlines disagrees. In a statement issued Friday, American stated that the Wright Amendment is just as relevant today as it was when it first passed and helps preserve DFW's position as the principle aviation gateway for North Texas.
Folks, that type of thinking is a big part of the reason why American Airlines is in the poor financial shape that it currently finds itself, particulary in comparison to that of Southwest. It will be interesting to watch the politicians line up in regard to this particular issue. The issue will be a good barometer for determining whether a particular politician is attempting to protect the public's best interests or simply interested in keeping the money flowing into a campaign chest from legacy airlines such as American. Stay tuned.
Colts 49 Texans 14. In a game that was not as close as the score indicates ;^), the Texans reinforced the fact that last week's debacle at Denver was no aberration. Peyton Manning toyed with the Texans secondary as he threw five TD passes in the first three quarters. He would have had a couple more had the Colts not called off the dogs. On the other hand, David Carr continued his up and down season with a horrid performance (22-41/215 yd./3 picks) behind an offensive line that looked like a sieve against one of the weakest defenses in the NFL. Carr spiced his poor performance by giving up a fumble and an interception that were returned for TD's. Meanwhile, the Texans' defense would have had a hard time stopping a hard charging marching band as Manning sliced and diced them for 320 yards on just 18 completions. Things do not get any easier for the 4-5 Texans as the red-hot Packers come to town next week for the ESPN Sunday night game at Reliant Stadium. That could be very ugly.
Eagles 49 Cowboys 21. In another game not as close as the final score indicates, the Eagles overwhelmed the hapless Cowboys at Texas Stadium, again increasing the chances that the Big Tuna will explode at any time. The Eagles' 35 first-half points were more than they had scored in any game this season as Eagles' QB Donovan McNabb was 15-of-28 for 345 yards with four TD passes and no interceptions. It was the Cowboys' fifth loss in six games, and they have lost the last three by 21, 23 and 28 points. The Pokes now get the pleasure of going to Baltimore next Sunday to have Ray Lewis and the Ravens defense hand their hat to them.
Texas Longhorns 27 Kansas 23. For the second straight week, the Horns flirted with a disastrous upset loss, but pulled it out with a last minute TD drive spiced by QB Vince Young's incredible 22 yard run for a first down on 4th and 18. The game was spiced with controversy as the Horns benefitted from an offensive pass interference call that forced the final Kansas punt and allowed the Horns one more chance at pulling it out. Based on the following post-game comments, Kansas Coach Mangino did not think much of the offensive pass interference call:
"You know what this is all about, don't you? The BCS. That's right. That's what made the difference today in the game. That's what made the difference on the call in front of their bench ? dollar signs."
After conferring with the Kansas Athletic Director and his investment banker over the probable amount of the fine from the Big 12 Conference stemming from those comments, Coach Mangino issued the following "public statement" later on Saturday afternoon:
"After an emotional loss, in our seniors' last home game, I made remarks that I regret. Any implications that BCS standings played a role in Saturday afternoon's game was inappropriate. I have always supported the BCS system and will continue to do so."
At any rate, the 9-1 Horns are now off until their annual rivalry game with the Aggies on the day after Thanksgiving. I do not expect the Horns to play as soft against the Ags as they did in parts of their last two games. If they do, then the Aggies have enough firepower this year to beat the Horns.
Texas Aggies 32 Texas Tech 25 OT. In a hugely entertaining game, the Aggies played their third overtime game in their last four in finally beating the Red Raiders, who have tormented the Ags in recent seasons. Everybody was betting the over before this game (it was 66), but these two high-powered offenses combined for 13 points in the first half, and only 19 through three quarters, so the under bet looked golden. Then, almost as if each team turned on a switch, both offenses started scoring almost at will in the fourth quarter and, as the overtime commenced, the over bet looked within reach. Alas, Tech's offense sputtered in overtime, handing the Ags the win before a delirious crowd of over 82,000 in College Station. The 7-3 Aggies (5-2 in the Big 12) are now off until their annual showdown with the Horns in Austin on the day after Thanksgiving. The Aggies have lost four straight games to the Longhorns and seven of the last nine, but this one is shaping up to be a serious battle. I give the Horns the edge because of their superior defense and running game, but the Ags will likely make a game of it.
UAB 20 Houston 7. You can stick a fork in the Coogs. Even though they must endure one more beating at the hands of high-powered Louisville at Robertson Stadium next Saturday, the Coogs have packed it in. The probable 3-8 mark in Coach Art Briles' second season is highly disappointing, and will be the subject of much soul searching over at UH.
UTEP 35 Rice 28 OT. The Owls almost pulled off the upset of their season against the Mike Price-rejuvenated Miners, but a fumble near the goal line in the second OT doomed the Owls' hopes. The game was played in a cold drizzle and the finish was a madhouse. After UTEP grabbed a 35-28 lead on the first play of the second overtime, the Owls appeared to have tied the game again when the Owls' Ed Bailey was tackled at the goal line by his facemask. However, the official closet to the play ruled Bailey was down inches from the end zone even though Bailey clearly hit the pylon following the infraction on the UTEP defender. On first and goal, the Owls handed the ball to Bailey again and he appeared to cross the goal line, but he fumbled on the play and UTEP recovered. The refs ruled it a fumble and that was the game. The 3-7 Owls now have a week off before finishing their season on the Saturday after Thanksgiving at Rice Stadium against Louisiana Tech.
And Kevin Whited has his weekly Big 12 wrap-up over at PubliusTx.net
November 13, 2004
If you are looking for a fun evening in the next week or so, I highly recommend checking out the Tony Award-winning Broadway musical Hairspray, the latest event in Houston's Broadway Series at the Hobby Center. Even the Chronicle's notoriously tough theatre critic Everett Evans gave the performance a hearty thumbs up.
My wife, daughters and I attended Friday night's show, and we all thoroughly enjoyed ourselves. Although the entire cast and production is magnificent, Keala Settle's peformance in the lead role is absolutely incredible -- she sings and dances with a dynamic combination of clarity, agility, and spunk that is truly infectious. Don't miss it.
When I moved to Houston over 33 years ago as a young college student, 101.1 KLOL-FM was the rock station to listen to "heavy" rock music as opposed to the "bubblegum" rock music that my little sisters enjoyed. KLOL was the rebel station -- it played Jimi Hendrix while other rock stations were playing the Bee Gees. Cameron Crowe captured this rebel nature of rock and roll wonderfully in his 2000 film, Almost Famous.
My first exposure to an obscure rocker from New Jersey named Bruce Springsteen came from KLOL. Back in the early 1970's, KLOL played some bootleg tapes of Springsteen performing his song "The Fever" at the old downtown bar, Liberty Hall, which was located on Chevenert near where Minute Maid Park stands now.
Over the years, as Baby Boom rockers aged, KLOL became more mainstream, but still retained its heavy metal and "reasonable rebel" format. Thus, as my sons reached their rebellious teenage years, they would switch the car radio to KLOL whenever they wanted to make the point that they were now listening to heavy rock music rather than say, Huey Lewis and the News. It's fair to say that longtime Houston residents who listen to rock music considered KLOL a local institution.
Well, that all changed yesterday, as this Chronicle article reports:
In a clear signal of the growing media clout of Houston-area Hispanics, radio behemoth Clear Channel Communications has yanked legendary rock station KLOL-FM (101.1) off the air and replaced it with a format that radio insiders call "Spanglish Top 40."
The switch took place Friday morning when the new station ? now called Mega 101 FM (with the tag line "Latino and Proud") ? began playing 10,101 songs in a row.
The new format is a mixture of Spanish hip-hop, reggaeton and pop/dance music aimed at listeners between 18 and 34 years old. Music in Spanish by artists ranging from the rapper Pitbull to pop star Shakira will be accompanied by DJs using a combination of English and Spanish.
Shakira rather than Johnny Winter? Longtime KLOL listeners are not taking the change well:
The move caught longtime KLOL listeners by surprise.
"There was no warning at all," said Chris Beck, a 32-year-old cook.
"I'm 35 and it's been on the air as long as I can remember," said a real estate salesman who did not want to be identified. "It's quite a shocker."
He called Clear Channel headquarters in San Antonio to complain and is encouraging his friends to do the same.
When I informed my 16 year old son of the change this morning, his response probably reflects that of thousands of other KLOL listeners from around the Houston area:
"Spanglish? -- I don't think that means we'll be hearing Led Zeppelin in Spanish on KLOL."
As one of KLOL's most played singers would say -- "These times are a'changin."
November 12, 2004
This prior post reviewed one of the books by the CIA counterterrorism agent who authored two books under the alias "Anonymous" that were highly critical of the Bush Administration's approach to battling the radical Islamic fascists.
Now, Michael Scheuer, who turns out to be Anonymous, has decided to resign from the CIA and violate the trench-coat oath by going public with his criticism of the government?s war against the radical Islamic fascists. His views are interesting, but made less credible by his decision to cash in on them at the expense of the trench-coat oath.
Commuters could soon be taking flying taxis to work instead of waiting in line for a street cab, experts suggest. British developers Avcen say Jetpods would enable quick, quiet and cheap travel to and from major cities. The futuristic machines will undergo proof-of-concept flight tests in 2006 and could be ready for action by 2010.
As well as taxis, which would use a network of specially-built mini runways, there are military, medical and personal jet versions as well.
London-based Avcen say Jetpods would be able to travel the 24 miles from Woking, Surrey, to central London in just four minutes.
And because it could make so many trips, fares for a journey from Heathrow to central London could cost about £40 or £50.
Meanwhile, this Washington Post article reviews ongoing research into scramjet technology, which is already achieving incredible speed levels:
Next week, NASA plans to break the aircraft speed record for the second time in 7 1/2 months by flying its rocket-assisted X-43A scramjet craft 110,000 feet above the Pacific Ocean at speeds close to Mach 10 -- about 7,200 mph, or 10 times the speed of sound.
The flight will last perhaps 10 seconds and end with the pilotless aircraft plunging to a watery grave 850 miles off the California coast. But even if the X-43A doesn't set the record, it has already proved that the 40-year-old dream of "hypersonic" flight -- using air-breathing engines to reach speeds above Mach 5 (3,800 mph) -- has become reality.
Under NASA's $250 million Hyper-X program, engineers at Langley Research Center here and the Dryden Flight Research Center in Edwards, Calif., designed and built three aluminum scramjet aircraft, each one 12 feet long and weighing about 2,800 pounds. . .
[The second scamjet flight] on March 24, reached Mach 6.83 (5,200 mph), shattering the world speed record for air-breathing, non-rocket aircraft, previously held by a jet-powered missile. The highest speeds by manned aircraft were achieved by SR-71, the U.S. spy plane known as the "Blackbird," capable of flying in excess of Mach 3 (2,300 mph).
If corporations are so big and powerful, then why are there so many corporate crime laws? Doesn't it make more sense that corporations would lobby to restrict enactment of such laws?
Maybe not, according to University of Michigan law professor Vikramaditya S. Khanna. In this interesting paper (download required), Professor Khanna argues that corporate executives may reasonably believe that consenting to enactment of corporate crime laws is the least risky course:
One of the fundamental puzzles of corporate crime legislation is how does so much of it get enacted given that it targets corporations that are considered some of the most powerful and effective (if not the most powerful and effective) lobbyists in the country. My analysis suggests that corporate crime legislation may grow because it is a preferred response for corporate interests when some congressional action is inevitable. Corporate criminal liability?s growth could then be explained by the following: Some degree of ?punishment? is necessary, as a political matter, to satisfy public desires during recessions when revelations of corporate wrongdoing are numerous, and corporate crime legislation achieves that while imposing lower costs on business interests relative to other measures that could be undertaken (e.g., increasing corporate civil liability or managerial criminal sanctions).
The normative implications depend on one?s priors about the world and on which political account(s) one finds persuasive. However, one thing appears clear regardless of the preferred political account(s): If we start with the notion that corporate wrongdoing is under-deterred, then we would want to argue for curtailing corporate criminal liability and increasing the focus on corporate civil liability and managerial liability. That raises serious questions about how we regulate this area.
November 11, 2004
Jimmy Carter's laudatory remarks today about the dubious leadership qualities of Yasser Arafat reminded me of this pithy book review that the Weekly Standard's Noemie Emery wrote earlier this year regarding Steven F. Hayward's book about Mr. Carter, The Real Jimmy Carter: How Our Worst Ex-President Undermines American Foreign Policy, Coddles Dictators and Created the Party of Clinton and Kerry. The gist of Ms. Emery's review and Mr. Hayward's book is that, as bad as the Carter Presidency was for America generally, it was absolutely devastating to the Democratic Party.
First, Ms. Emery stands in awe of Mr. Carter's incredible ability to take either the wrong position on a political issue or alienate those on his side even when he was on the right side of an issue:
Carter is surely one of the worst failures in the history of the American presidency, but he is a failure of a special sort: He did not overreach, as did Lyndon Johnson, or seek to deceive, as did Richard Nixon. Rather, like Herbert Hoover, he seems a well-meaning sort overcome by reality. But while Hoover was blindsided by the depression, Carter failed on a broad range of matters and faced few crises he didn't first bring on himself. Most presidents, even the good ones (sometimes especially even the good ones) leave behind a mixed record of big wins and big errors, but with Carter, the darkness seems everywhere: He is all Bay of Pigs and no Missile Crisis, all Iran-contra and no "Mr. Gorbachev, tear down this wall."
PBS, whose American Experience series on the presidents has done some fascinating things with such novelistic lives as those of Reagan, Kennedy, Nixon, Johnson, and both the Roosevelts, seemed (in a two-part series first aired two years ago and now reappearing) at a loss for how to handle this long dirge-like story, and, to its credit, the program did not flinch from portraying his actual presidency as the total disaster it was.
Ms. Emery notes that Mr. Carter's domestic policies were an utter mess:
As a domestic manager, his crowning achievement was to take the old liberal creed of big government and hitch it to the new liberal creed of "limits to growth" and create incoherence. "We have learned that 'more' is not necessarily 'better,' and that even our great nation has its recognized limits," he scolded, taking on two hundred years of the American temperament. Thus he tried to damp down the consumption machine that drives the economy, while balking at the tax cuts that might have spurred on investment. The result was stagflation, a condition economists had once thought impossible, of soaring inflation and no growth in jobs. Interest rates soared, and Carter's approval ratings sank into the thirties. For this he blamed the American people, for being too immature to realize the good times were over for good.
And even though Mr. Carter's domestic policies were bad, his foreign policy was even worse:
In an address at Notre Dame on May 22, 1977, [Carter] denounced the "inordinate fear of communism" that had produced the containment theory that had kept the peace for three decades. In his first month in office he announced his intention to withdraw nuclear weapons and ground troops from South Korea, cut six billion dollars from the defense budget, cancel development of the Trident nuclear submarine, and defer construction of the neutron bomb.
All of these proposals were made unilaterally, with no effort to induce concessions by the other side. Cyrus Vance, Carter's first secretary of state, was described by Democrat Morris Abram as the closest thing to a pure pacifist since William Jennings Bryan, and by Defense Secretary Harold Brown as a man who believed the use of force was always mistaken. Paul Warnke, Carter's chief arms-control negotiator, held views described by George Will as "engagingly childlike"--believing that if we disarmed, the Soviet Union would follow us. . .
Even Carter's much vaunted human-rights effort, which gave some people hope he would use it as a moral weapon against the Soviet Union, quickly lost much of its power and luster when it became evident that he intended to use it less against Communists than against the more marginal despots in the non-Communist orbit. Thus he embraced Soviet leader Leonid Brezhnev at the 1979 arms-control summit and assured an assemblage of East Europeans that "the old ideological labels have lost their meaning," even as they remained under the Soviet boot. In Carter's State Department, the Sandinistas were thought to be moderates and the Ayatollah Khomeini a saintlike figure surrounded by "moderate, progressive individuals" with a notable "concern for human rights."
Ms. Emery goes on to mention many of the other debacles of the Carter Presidency that Mr. Hayward's book addresses, but then points out that Mr. Carter has perhaps exceeded the incompetence of his presidency by being arguably the worst former president in American history:
Carter the ex-president has been more destructive than Carter the president, and, if possible, still more annoying, undermining later presidents with the ruthless ambition that marked his career.
Herbert Hoover accepted the verdict of history when he lost in 1932 to Franklin Roosevelt, keeping a profile so low he was all but invisible. Carter instead reacted as if he had retired by choice with the thanks of the nation. He did some good work for general charities, and he was useful at least twice in his international forays: in Panama in 1986 when he faced Noriega, and unexpectedly in 2002 in Cuba when he went against type to tell Castro off. He also acquired a lengthy record of criticizing, weakening, and undercutting a series of American presidents.
He publicly attacked Reagan's morals and competence. In 1990 and 1991, as George Bush was assembling the Gulf War coalition, Carter wrote secretly to Margaret Thatcher, Francois Mitterrand, Mikhail Gorbachev, and a dozen others, asking the U.N. Security Council not to back Bush. (Bush only found out what had happened when a stunned Brian Mulroney called Dick Cheney up to complain.) Bill Clinton soured on the ex-president after Carter's trip in 1994 to North Korea, in which he publicly embraced the dictator Kim Il Sung and negotiated a wholly worthless treaty banning production of nuclear weapons, which that country proceeded to break.
Carter of course made the same vehement objections to George W. Bush's war on terror as he had made to his father's war in the Gulf ten years earlier, going so far as to happily accept an award from the Nobel Prize committee that was given to him solely for the purpose of giving a black eye to America. "It should be interpreted as a criticism of the line that the current administration has taken," the Nobel committee chairman said helpfully, "a kick in the leg to all those that follow the same line as the U.S." Carter's "Lone Ranger work has taken him dangerously close to the neighborhood of what we used to call treason," Lance Morrow wrote in Time. As Hayward notes, Carter's successors have done far more than he did for human rights and for the nation's security. Iran and Nicaragua, the twin targets of his attention as president, turned on his watch into hell holes. And we can safely say that had he been reelected, or had his way afterward, the Soviet Union might still be in existence, and the oil fields of Kuwait and possibly Saudi Arabia might be in the hands of Iraq.
Finally, Ms. Emery notes that the Democratic Party has ultimately borne the brunt of the consequences of Mr. Carter's monumental lack of judgment:
No man has done more than he to create and empower the modern Republican party, which, when he became president, seemed down for the count. If he had been the man he seemed when he was running for president--an integrationist but a social conservative, a small businessman and ex-naval officer, a Rickover protege with a keen sense of power--he might have recreated the party of Truman and Kennedy. As it was, his incompetence and his blundering, coming after McGovern's extremism and the implosions of Humphrey and Johnson, was the last straw for a great many Democrats, who decided the chances they were willing to give to their party had more or less run their course. Under his goading, millions who had never believed they could vote for a Republican president crossed over to vote for an ex-movie actor.
The end of the Democrats as the national majority begins with Carter--as does the end of liberalism as the national creed. A lot has been written about the maturation of the conservative movement from Goldwater to the present day, but this of course is only one half of the story. It was not enough for the Republicans to become more poised and accessible. The Democrats had to collapse, freeing millions of voters to look at an alternative. No one symbolized this collapse more than did Jimmy Carter, victim of rabbits and America's muse of malaise.
Read the entire review. Ms. Emery and Mr. Hayward may be too harsh on Mr. Carter, who at least had the good sense to promote Paul Volker for the Federal Reserve chairmanship late in his term in office. But there is no question that his presidency was an unmitigated disaster for the Democratic Party in this country, and one from which the party is still attempting to recover to this day.
By the way, in case you have not been following the Wall Street Journal Econoblog discussion this week between Marginal Revolutions Tyler Cowen and Argmax.com's John Irons, do not miss today's edition on tax reform. In my view, Mr. Cowen runs rings around Mr. Irons, but decide for yourself.
This NY Times article profiles Scott Boras, the agent who the Stros must deal with if they are going to sign free agent Carlos Beltran. Although the Yankees can easily outbid the Stros for Beltran, the article at least suggests that some things not associated with playing baseball in New York may be more important to Beltran than the premium that the Yankees would pay for him:
Does Beltran really want Boras to put him in pinstripes or does he need Boras to create that illusion? This winter, the Yankees may come to find out that they are not the ultimate destination for players anymore, not when a World Series is no longer a guarantee, not when free agents like Jason Giambi fizzle in New York, not when Steinbrenner is the resident curmudgeon. This year, the Yankees may be artfully used as decoys by Boras - particularly in Beltran's case.
In June, Beltran was craving anonymity, not the New York market.
"I pray to God I can be a great player, but I want to keep my life," Beltran told Sports Illustrated. "I don't want to be hiding from people. It would be difficult to be recognized everywhere, so that I couldn't do things ordinary people can do. I love to go to the grocery store or the movies or go to the mall and be just an ordinary person. In Kansas City they don't know who I am. Same thing when I'm home in Puerto Rico. I like that."
By the playoffs, Boras seemed to be a ventriloquist for a bolder Beltran.
"When I see an owner who cares about winning, I like it," Beltran said in an obvious reference to George Steinbrenner.
Is Beltran bluffing? Is Boras? Everyone will know in April how sentiment and comfort are rated by Boras's clients when the Yankees and the Red Sox line up for opening day at Fenway. Will Varitek be there? Will Beltran?
My sense is that Beltran will end up in New York or Anaheim, but we Stros fans can dream, can't we?
2004 Nobel Prize in Economics recipient Edward C. Prescott writes this outstanding Wall Street Journal op-ed in which he makes a persuasive case that the time for transition of the current Social Security system to one based on mandatory individual retirement accounts is now:
The time is right to act, and we don't need a special commission to analyze the problem and recommend solutions because we already had one, and it submitted its report three years ago next month -- The President's Commission to Strengthen Social Security. The trouble is that little has happened since. It's time to dust off that report, sharpen our policy pencils and get to work on reforming our Social Security system before it's too late.
The main contribution of that 2001 bipartisan commission was to propose the establishment of a system of voluntary personal accounts, which would increase national savings as well as increase labor-force participation -- more on that later. But this contribution is also the commission's main flaw, for the proposal does not go far enough. We need to establish a system of mandatory savings accounts for retirement, not voluntary. Without mandatory savings accounts we will not solve the time-inconsistency problem of people under-saving and becoming a welfare burden on their families and on the taxpayers. That's exactly where we are now.
Professor Prescott debunks the notion that individual retirement acccounts are somehow riskier than the current Social Security system:
Some politicians have vilified the idea of giving investment freedom to citizens, arguing that those citizens will be exposed to risks inherent in the market. But this is political scaremongering. U.S. citizens already utilize IRAs, 401Ks, PCOs, Keoghs, SEPs and other investment options just fine, thank you. If some people are conservative investors or managing for the short term, they direct their funds accordingly; if others are more inclined to take risks or looking at the long run, they make appropriate decisions. Consumers already know how to invest their money -- why does the government feel the need to patronize them when it comes to Social Security?
It would be one thing if the government's Social Security system paid a decent return, but as the President's Commission reported, for a single male worker born in 2000 with average earnings, the real annual return on his currently-scheduled contributions to Social Security will be just 0.86%. And for a worker who earns the maximum amount taxed (then $80,400), the real annual return is a negative 0.72%. A bank would have to offer a pretty fancy toaster to get depositors at those rates of return.
Indeed, as Professor Prescott points out, the trend internationally is to such individual retirement accounts:
Further, about two dozen countries have reformed their state-run retirement programs, including Chile, Sweden, Australia, Peru, the U.K., Kazakhstan, China, Croatia and Poland. If citizens in these countries can handle individual savings accounts, especially citizens in countries without a history of financial freedom, then U.S. citizens should be equally adept. At a time when the rest of the world is dropping the vestiges of state control, the United States should be leading the way and not lagging behind.
In fact, Professor Prescott notes that the economic benefits of such accounts are substantial:
The benefits of such reform extend beyond the individual retirement accounts of U.S. citizens (although that would be reason enough for reform) -- they also accrue to the economy. As noted above, national savings will increase, as will participation in the labor force, both to the benefit of society. On the first point, more private assets means there will be more capital, which will have a positive impact on wages, which benefits the working people, especially the young. More capital also means that the economy will have more productive assets, which also contributes to more production.
Regarding labor supply, any system that taxes people when they are young and gives it back when they are old will have a negative impact on labor supply. People will simply work less. Put another way: If people are in control of their own savings, and if their retirement is funded by savings rather than transfers, they will work more. And everyone is better off. These are the type of win-win situations that politicians and policy makers should be falling over themselves to accomplish.
And what about the horrendous "transition costs" that we hear would undermine the transition from the current Social Security system to one based on mandatory individual retirement accounts? Professor Prescott keenly dispenses with that objection:
Some analysts have suggested that we can't move from a transfer system to a saving system because current retirees will be left in the lurch. Who will pay for them if workers' money is suddenly shifted to individual savings accounts? There will indeed be a period of time, likely no more than 10 years, when narrowly defined government debt relative to gross national income would increase before decreasing. But government debt is small relative to the present value of the Social Security promises that currently exist. Further, the sum of the value of government debt and the value of these promises will start declining immediately.
Under a reformed system there will always be some individuals who, owing to disabilities or other reasons that prevent them from working, will not have sufficient savings in their old age. The solution is to include a means-tested supplement to ensure that those citizens receive a required payment -- just like they receive today. Nobody gets left behind under this new system, and most will move ahead. U.S. citizens deserve more than a minimum payment, and the U.S. economy deserves more than to have its savings, capital and labor weighed down by an increasingly costly tax-and-transfer system.
And how would such a system work? Professor Prescott touts one:
Have three-quarters of employer and employee Social Security contributions (currently 12.4% of wages, salaries and proprietors' income up to $87,900) put into an individual savings account. This would be deferred income with taxes paid when people receive their retirement benefits. The other one-quarter of Social Security contributions would finance welfare and increase the labor supply, resulting in higher output and an increase in tax revenues.
Read the entire piece. Ed Prescott is definitely a clear thinker.
Update: Tyler Cowen at Marginal Revolution makes the case against forced savings accounts and for turning Social Security into a welfare program for the elderly.
Former Houston attorney (former partner at Vinson & Elkins) and current White House counsel Alberto Gonzales was nominated by President Bush Wednesday to succeed Attorney General John Ashcroft, who announced Tuesday that he is stepping down after serving as attorney general during the first Bush Administration.
Mr. Gonzales is a close, longtime adviser to President Bush. The 49-year-old Mr. Gonzales has been frequently mentioned as a possible nominee to the U.S. Supreme Court, but my sense is that there are numerous more qualified jurists for that position. The AG post is a much better fit for Mr. Gonzales. Mr. Gonzales would be the nation's 80th attorney general and the first Hispanic to hold the job.
Mr. Gonzales has a remarkable background. The son of Mexican immigrant parents, Mr. Gonzales was born in San Antonio and grew up sharing a two-bedroom house in Houston with his migrant-worker parents and seven siblings. From there, he went on to graduate from Houston's Rice University and Harvard Law School, and then to become a prominent Houston attorney who was involved in many community and state affairs. Mr. Gonzales has been with President Bush virtually from the start of his political career, as he served with then-Gov. Bush in Texas as general counsel, secretary of state and then as a Texas Supreme Court justice before becoming White House counsel.
Inasmuch as the Texas Supreme Court handles only civil cases, Mr. Gonzales had little experience in international law, national security law, or in criminal law when he came to Washington. But boy, did that change after the Sept. 11, 2001 attacks on New York and Washington. As White House counsel, Gonzales transformed that office from one that concentrated on domestic issues to one increasingly focused on fighting the war against the radical Islamic fascists. Under Mr. Gonzales's leadership, administration lawyers in the National Security Council, the Pentagon and the Justice Department elaborated on views that the war against the radical Islamic fascists was a new arena not covered by domestic laws or the Geneva Conventions and other treaties.
In particular, one potential blip in the confirmation process could be the Jan. 25, 2002 legal memo to the President in which Mr. Gonzales described the Geneva Convention on humane treatment of prisoners of war as "quaint" and "obsolete" in the war on terror. That legal opinion was intended to advise the President on the handling of al Qaeda and Taliban prisoners captured in the war in Afghanistan. The Bush administration views those combatants as not covered by the Geneva protections and other treaties.
Nevertheless, most political pundits believe that Mr. Gonzales will be confirmed with little trouble, probably early in 2005.
November 10, 2004
As noted in these previous posts, Richard Chesnoff is one of America's foremost commentators on Middle East affairs. He is also one of the relatively few American journalists to have interviewed and spent time with Palestinian leader, Yasser Arafat.
With Arafat near death, Mr. Chesnoff writes this NY Daily News op-ed in which he notes what could have been:
If anyone had the ability to forge a Palestinian state then, it was Arafat. He had the political power, the money and the military force.
Tragically, like other Palestinian leaders before him, he wasted his chance. He used his political power to gain more power and the money to corrupt and control. Worst of all, instead of using his military force to squelch terrorism, he financed it, bringing more destruction to his people as well as to Israelis.
Then, Mr. Chesnoff zeros in on Arafat's fatal leadership flaw:
Why did a man who had both the opportunity and the intellect to deliver his people a state of their own fail to do so?
He lacked the realism, the vision and, most important, the courage to make the shift from terrorist to statesman. He spoke (in Arabic) not of peace with Israel but of a truce, something he could always break. And he refused to tell his people that Israel never would commit demographic suicide by letting millions of Palestinians return.
He also feared that if he ever told his people to accept a state that was less than what he had promised, he would lose stature, popularity and the place he believed he deserved in Arab history.
False pride is often a fatal error in the Arab world - a character flaw born not of heroism but of cowardice.
Read the entire piece. Would not it be ironic if Arafat's legacy is a new generation of Palestinian leadership that understands the destructive futility of Arafat's strategy towards Israel and embarks on a new, realistic path toward a Palestinian state?
There has been no more successful terrorist in the modern age. Yet his biggest victims were not Israelis. It was his own people who suffered the most. If Arafat had displayed the wisdom of a Gandhi or Mandela, he would long ago have presided over the establishment of a fully independent Palestine comprising all of the Gaza Strip, part of Jerusalem and at least 95% of the West Bank. In fact, he seemed well on his way toward this goal when I met him in 1998 as part of a delegation of American scholars and journalists.
The place was his Ramallah compound, the time after midnight (Arafat was a night owl). He was wearing his trademark fatigues, and his hands and lips were shaking uncontrollably. Much of the session was conducted via translator, but Arafat broke into English when asked a question about Palestinian violations of the Oslo accords. It was the kind of query a democratic statesman would have batted away without a second thought.
Arafat, however, grew visibly agitated and stammered: "Be careful when you are speaking to me! Be careful, you are speaking to Arafat!" The threat of violence hung in the air as we left. Clearly Arafat had not quite mastered the art of being a politician or, rather, he was a politician in the mold of Mugabe or Mao.
An interesting fight is brewing in Austin over investment policy for public funds in Texas.
Venture capitalists are opposing Greg Abbott, the Texas Attorney General, in regard to his opinion that they must publicly disclose information about their investments on behalf of public institutions.
Austin Ventures, a prominent Texas venture firm, has threatened to end its relationship with two limited partners -- the Teacher Retirement System of Texas and University of Texas Management Corp. (Utimco) -- if they do not join a lawsuit that is contesting the attorney general's opinion that would require release of fund-performance data and other information about venture-backed companies.
The dispute stems from requests filed under state open-records laws by several newspapers seeking information about private-equity investments by the teacher-retirement fund and the Texas Growth Fund, which is a state-run investment trust. The funds denied the requests, and asked Attorney General Abbott to back them up. The funds argued that the information was confidential under the terms of their partnership agreements and that releasing the proprietary information could put venture-backed companies and their investors at a competitive disadvantage.
Nevertheless, in a June, 2004 opinion, Mr. Abbott said the funds had failed to show how releasing the information "would bring about specific harm to their marketplace interests." In a subsequent letter to Utimco and the teachers' fund, Austin Ventures said that the disclosures could "sabotage under-performing companies" and force start-ups to raise additional capital on unattractive terms. Moreover, Austin Ventures claimed that entrepreneurs would spurn investments from Austin Ventures or any other VC fund that could not maintain the privacy of their confidential information.
Sequoia Capital, one of Silicon Valley's top venture-capital firms, last year terminated two longstanding investors -- the universities of Michigan and California -- from its latest fund because it did not want information about the performance of its closely held investments to be disclosed under those states open-records laws. The Texas case potentially has bigger stakes because the information that would be disclosed includes data about the performance of individual portfolio companies and the value that venture backers place on them.
Texas Growth Fund filed the Texas case in state court and requests that the court overturn the attorney general's opinion. The teachers' retirement fund joined the suit after receiving the August letter from Austin Ventures. Utimco, which already releases performance data for the fund but not for its underlying investments, wrote to the attorney general objecting to his ruling, but has not decided whether to join the suit.
As of May 31, Utimco had $76 million committed to Austin Ventures, less than 1% of its $16.2 billion portfolio. On the other hand, Austin Ventures has $2.4 billion under management, so the Utimco investment is a larger percentage of that portfolio, but still not a substantial portion of it. TRS currently has committed $55.3 million of its $84.4 billion endowment to Austin Ventures. Consequently, we are talking about very small parts of the public funds' portfolios here.
Quare: Should trustees and investment management of Texas public and quasi-public funds be restricted from diversifying the investment portfolio of such funds by legislation that effectively denies such funds from investing in potentially profitable venture capital funds that limit information about their investments? If so, why should public funds be restricted from investing an appropriate amount of their portfolios in potentially the most profitable investments?
These prior posts have been following Jerry Jones' efforts throughout this year to obtain lucrative public financing for a new stadium in the Dallas area, which resulted in Arlington voters approving a financing deal for Jones and the Cowboys this past eletion day.
Economist Craig Depken has done a good job of criticizing the dubious economic arguments in favor of the stadium deal, and has compiled a good list of articles regarding the pros and cons of the transaction. Professor Sauer over at the Sports Economist has also chimed in often on the questionable basis of claimed economic benefits derived from public financing of such stadium deals.
Nevertheless, despite the evidence of relatively nominal economic value, publicly-financed stadium deals continue to be popular. Noting this, economists Jerry Carlino and Ed Coulson claim in this recent paper that opponents of such stadium deals have tended to underestimate the intangible value that people derive from their sports teams:
We found that once quality of life benefits are included in the calculus, the seemingly large public expenditure on new stadiums appears to be a good investment for cities and their residents.
The authors go on to compare an NFL team to an old-growth forest for a city, which is another way of saying that the stadium is something that people enjoy even if they never visit it. In addition, citizens enjoy a certain amount of civic comraderie that results from supporting and discussing the team.
I will leave a review of the authors' methodology to those more qualified than I in such matters, but my sense is that reasoned opponents of publicly-financed stadium deals will not really quibble much with the conclusions contained in this paper. Rather, most economists who oppose publicly-financed stadium deals do so because of the way such deals are pitched, not because they are necessarily critical of the public's love of their professional sports team.
If proponents of a stadium deal admitted in campaigning for the deal that the economic benefits of the deal were questionable, but that the intangible benefits to the community overrode the financial risk of the deal, then most reasoned opponents of such deals would be satisfied. They might not be persuaded to support the deal on that basis, but at least they would have the comfort that voter assessment of the deal would be based upon an honest presentation of the issues. As it stands now, the presentation of the economic issues in most stadium campaigns is muddled by well-financed and highly questionable assertions of direct economic benefits derived from such deals.
In short, let's just have truth in advertising in regard to such deals.
Meanwhile, Daniel Akst over at Marginal Revolution also makes an interesting observation about the intangible value of a sports team in relation to the size of a city:
. . . my guess is that the intangible value of an NFL team would be inversely proportionate to the importance of a city. You can't take the Packers out of Green Bay, but Los Angeles doesn't seem to mind having no team at all. Then again, maybe it's just the weather.
Update: Professor Sauer's typically insightful post is here on the Carlino and Coulson piece, with cites to other resources on the issues relating to public financing of stadiums.
Holman W. Jenkins' WSJ ($) Business World column this week explores how the miplaced incentives of America's health care finance system contributed to Merck over-marketing -- and doctors over-prescribing -- Vioxx despite its well known side-effects:
[Vioxx was never supposed to be] a better pain reliever. Its unique selling proposition was simply a lower incidence of stomach bleeding, a real benefit but one mainly relevant to the 15% of arthritis sufferers who can't safely take conventional pain relievers.
Merck pulled the drug two weeks ago based on a study showing that, after 18 months of daily use, Vioxx subjects began experiencing heart attacks and strokes at twice the rate of a placebo group. Yet, on balance, this might have seemed mildly less alarming than the 2000 study that kicked off the Vioxx controversy. Also done by Merck, it showed that Vioxx users, from day one, suffered two or three times as many cardiovascular "events" as a control group using naproxen (the ingredient in Aleve).
. . . [But] Merck is in hot water now not because Vioxx was excessively risky but because the wrong people were taking it -- a problem for which doctors and the insurance system are also to blame.
. . . Marketing alone doesn't cause patients to shell out $2 for a pill that doesn't work any better than a five-cent aspirin. Bruce Stuart of the University of Maryland has showed that the biggest determinant of whether a patient takes a Cox-2 or a cheaper drug is whether an insurance company is paying.
Likewise, we've heard two schools of complaint from patients since Vioxx was yanked. Some patients are irate at Merck for depriving them of a drug they found genuinely useful, but others are mainly irate at their doctors for never mentioning that Advil or Tylenol work just as well.
The Vioxx debacle is symptomatic of a system that shields consumers from price signals and sometimes actually discourages them from making the right health-care choices. Forget pain relievers. In certain common breast cancers, women opt for expensive, risky, miserable chemotherapy even though it doesn't significantly improve an already high survival rate. They have a hard time waving it off, though, precisely because an insurer is picking up the tab.
In any case, Big Pharma is well along in being corrupted by third-party payership, just like the rest of the health-care industry. Drug makers increasingly aim their development efforts at the aches, pains, insecurities, heartburn and erectile dysfunction of price-insensitive, over-insured baby boomers because that's where the money is.
November 9, 2004
The jury in the Enron-related criminal trial known as the Nigerian Barge case concluded the market loss hearing by determining today that the sham barge sale that was at the center of the trial cost Enron shareholders $13.7 million.
In a case that was largely dubious from the beginning, the jury's conclusion on the market effect of the transaction was just as questionable as many other aspects of the case. In reality, there was no market loss resulting from the sham barge transaction. The fact that Enron did not account for the Nigerian Barge transaction properly actually made Enron's earnings look better than they really were. Thus, that accounting helped to increase Enron's share value for the benefit of investors who were buying and selling the stock at the time. Moreover, there is no evidence that the decline in Enron's share value during its demise into bankruptcy in 2001 had anything to do with revelations regarding the barge transaction. Indeed, the alleged faulty accounting on the barge deal was not even discovered until well over a year after Enron went into bankruptcy and its equity value had become essentially worthless.
Nevertheless, the prosecution trotted an expert on to the stand who testified -- apparently with a straight face -- that the market loss from the sham barge transaction was $43 million. The defense countered with its own expert who testifed that, at most, the market loss attributable to the barge transaction was $120,000. In all likelihood, the jury was hopelessly confused by the entire matter and, as juries commonly do in such situations, split the baby and arrived at the utterly baseless number of $13.7 million. At least that number bears some resemblance to the $12 million profit that Merrill made on the deal, which of course has no bearing on the market loss. Oh well.
U.S. District Judge Ewing Werlein also asked the 6-women, 6-man jury in the Enron barge case to make findings on seven aggravating factors involved in the alleged offense that the Judge can use under current federal sentencing rules to increase or decrease the range of prison time an individual might receive. Two of the defendants -- ex-Enron finance executive Dan Boyle and former Merrill Lynch banker William Fuhs -- waived any right to have the jury advise the judge on their sentencing and were excused from the proceedings late last week. So, the jury's findings only apply to the three other Merrill bankers who the jury found guily earlier, Daniel Bayly, James A. Brown and Robert Furst. Based on the jury's findings, those three Merrill defendants could be facing considerable jail time depending on how Judge Werlein interprets the sentencing guidelines. All of the defendants are scheduled to be sentenced by Judge Werlein in March 2005.
Yale professor Ray Fair's model for predicting Presidential elections were the subject of these prior posts here and here. In this new piece, Professor Fair tries to explain why his model predicted that President Bush would win 57.4% of the two-party popular vote when he actually got only 51.5% (he speculates that the war hurt Bush more than projected), and provides this early prediction regarding the 2008 race:
It is possible to use the current vote equation to make a prediction for 2008. There will be no incumbent running again (PERSON = 0), and the Republicans will have a negative duration effect (DURATION = 1). If, say, GROWTH is 3.0, INFLATION is 3.0, and GOODNEWS is 2, which is a moderately good economy, the vote prediction for the Republicans is 50.1 percent, a dead heat. So the main message for 2008 is that the election will be close if the economy is moderately good. It would take a quite strong economy for the equation to predict a comfortable Republican win, and it would take a quite weak economy for the equation to predict a comfortable Democratic win. The Democrats clearly have a much better shot in 2008 than they had in 2004 according to the equation.
My late father -- Dr. Walter M. Kirkendall -- was a master internist who was a legend among his students for his diagnostic skills and conservative views toward use of many medicines. For one of the reasons supporting his skepticism regarding the use of clinically untested medicines, take a look at Alex Tabarrok's post over at Marginal Revolutions on Jerry Avorn's new book, Powerful Medicines.
A JPMorgan Chase & Co. subsidiary is paying almost a billion dollars to buy a piece of some of the state's biggest buildings, including three in Dallas and two in Houston.
Ft. Worth-based Crescent Real Estate Equities Co. announced Monday that it is selling a stake to JPMorgan Investment Management in the Trammell Crow Center, Fountain Place and Crescent buildings in Dallas, and the Houston Center and Post Oak Central projects in Houston. Together, the properties have 7.9 million square feet of office space.
JPMorgan will buy a 60 percent stake in the Crescent in Dallas and the Houston Center and Post Oak Central projects in Houston. Those buildings are valued at almost $900 million. JPMorgan is also buying a 76 percent share of the Trammell Crow Center and Fountain Place skyscrapers in downtown Dallas, which are valued at about $320 million. Crescent said it will generate about $316 million in cash from the sales, and disclosed that it is negotiating with another buyer to reduce its ownership in the Crescent and the two Houston properties further to 24 percent. Upon completion of the sales, Crescent will be the general partner in the ventures and will continue to manage and lease the buildings.
Crescent endeared itself to many in Houston real estate business circles several years ago for managing to put itself in the position of prosecuting a highly publicized and unpopular lawsuit against Houston-based Lakewood Church. As the owner of Greenway Plaza, Crescent objected to the church's leasing from the City of Houston of the Houston Rockets' former home, The Summit a/k/a Compaq Center in Greenway Plaza, which the church is turning into a mega-church facility. Crescent and the City eventually worked out a settlement, and Crescent dropped the lawsuit against Lakewood, exiting the litigation with its tail squarely between its legs.
In an expected move, former Enron Corp. CEO and COO Jeffrey Skilling, former Enron Chairman Kenneth Lay and former Chief Accounting Officer Richard Causey filed a motion Monday stating that Phoenix, Denver or Atlanta would be fairer places in which to try their criminal case than Houston.
Because of the intense negative publicity and public feelings in Houston surrounding Enron, the defendants contend that they cannot receive a fair trial in Houston. The three men have been charged with leading a wide-ranging conspiracy to hide extensive financial problems at Enron.
The first criminal trial involving Enron's business operations recently was concluded in Houston in what is commonly known as the Nigerian Barge case, where the jury found four former Merrill Lynch & Co. executives and a former Enron vice president guilty of participating in a scheme to manipulate Enron's earnings. A sixth defendant -- Sheila Kahanek, a former Enron accountant -- was acquitted.
In the motion to change venue, the Skilling legal team supplied results from surveys they had commissioned of public attitudes in Houston toward the former Enron president. According to the surveys, nearly 32% of the people surveyed in Houston used negative statements to describe Skilling, which was roughly three times the number in Phoenix or Denver. The survey revealed that Houston residents used such terms as "despicable," "deceitful," "thief," "weasel," "the devil" and "guilty as sin" to describe Mr. Skilling, in particular.
A request to change venue is not uncommon in high-profile cases such as this one. However, there is substantial risk in requesting one. U.S. District Judge Sim Lake will decide the issue and, if he is inclined to grant the motion, he will choose the new location for the trial. So, for example, if Judge Lake decides to move the venue of the trial from Houston to another location within the Southern Federal District of Texas, the case could be transferred to an even more unfriendly venue for the defendants, such as the Rio Grande Valley of Texas along the U.S.-Mexico border. In the Valley, a predominantly Hispanic jury pool will likely not take kindly to a group of wealthy white executives on trial for defrauding investors. Accordingly, like almost everything associated with the case, the motion to change venue is high risk, a lesson that Mr. Lay learned recently in regard to another motion that he had filed.
On the other hand, if there was ever a case for a change of venue, it's an Enron defendant in Houston. Inasmuch as the prosecution batted .833 on a flimsy case in the recently concluded Nigerian Barge trial, the government would be justified in concluding that they are shooting fish in a barrel by prosecuting Enron defendants in Houston.
The National Football League has demonstrated again that it is the most valuable reality-based programming in the television industry today.
The NFL announced on Monday that Viacom Inc.'s CBS, News Corp.'s Fox, and satellite broadcaster DirecTV Group Inc. agreed to pay the incredible total of $11.5 billion to retain television rights to NFL games for the remainder of this decade. The deals represent an overall 40% increase compared with current contracts and reflect that professional football remains America's most popular sports league despite the overall decline of broadcast-TV viewership.
The two broadcast networks will pay $8 billion combined over six years, through the 2011 season. Fox's payments under its $4.3 billion pact will average $712.5 million annually, a 30% increase over the current deal's $550 million average. CBS's $3.7 billion deal averages out to $622.5 million a year, up 25% over its current $500 million average. Each network will air two Super Bowls under the new contract.
Moreover, the satellite-TV deal was a key to the renewals. DirecTV, which News Corp. controls, will pay the NFL $3.5 billion over five years through 2010 ($700 million a year), which is a substantial increase from the $400 million a year it pays now. The "NFL Sunday Ticket" package gives subscribers access to as many as 14 games a week.
The NFL's current deals with Fox, CBS and Walt Disney Co.'s ABC and ESPN expire after the 2005 season. The league hasn't announced extensions with ABC, which airs "Monday Night Football," or ESPN, which shows a game on Sunday nights. ABC and ESPN have declined to negotiate new contracts until after the season ends.
The increase for the Sunday afternoon games on CBS and Fox is less than the the 72% increase that the NFL received under the most recent renewal of the contracts in 1998. However, in the current television market, the increase is considered remarkable. Although ratings for regular-season NFL games declined 10% overall from 1999 through 2003, this decline occurred against much sharper ratings declines for other television programming. And despite that decline, the Super Bowl remains the most-watched TV show of almost any year.
In fact, the two networks are paying more money for a potentially less desirable game inventory. CBS and Fox agreed to let the NFL sell a package or packages of as many as eight games a season for Thursday and Saturday nights and to cherry-pick late-season games to showcase on "Monday Night Football."
CBS and Fox renewed their deals despite what most analysts describe as enormous losses on current contracts. ABC's "Monday Night Football" has been estimated to post losses of as much as $250 million a year, and Fox wrote off $397 million from its current $4.4 billion deal in 2002. Viacom executives contend that CBS has not lost money on their deal with the NFL.
Houston's business community lost another of its longtime oil and gas entreprenuers on Sunday when Geneos P. "Pete" Cokinos of Beaumont died at the age of 88. Mr. Cokinos died a day after another famous Houston wildcatter, Michel T. Halbouty, who was a friend and contemporary of Mr Cokinos. Mr. Cokinos' obituary is here.
Mr. Cokinos was the oldest of five children of the P.D. Cokinos family, which included a sister and four brothers. Mr. Cokinos and his three brothers were all veterans of the U.S. Army in World War II and graduates of Texas A&M University, and Mr. Cokinos was the first of an incredible seventeen members of that family to attend and graduate from Texas A&M. Mr. Cokinos and his brothers subsequently funded an academic Presidential Scholarship at A&M in memory of their parents.
Mr. Cokinos was the uncle of well-known Houston attorney, Greg Cokinos. Funeral services are scheduled for this evening and Wednesday in Beaumont.
Former former Harris County state district court judge David Medina is expected to be named today to the Texas Supreme Court by Governor Rick Perry during a ceremony at 10:30 a.m. at the South Texas College of Law in Houston. Mr. Medina is currently serving as the Governor's general counsel.
The appointment will fill the second of two vacancies on the nine-member court. Mr. Medina will replace Michael Schneider, who was confirmed as a U.S. District Judge in Tyler in September. The other vacancy was filled by Wallace Jefferson, a Supreme Court justice who Governor Perry recently promoted to chief justice. Chief Justice Jefferson replaced former Supreme Court Chief Justice Tom Phillips, who retired to enter private practice.
Mr. Medina, who is 46, was born in Galveston and grew up just to the north in Hitchcock. He graduated in 1980 from Southwest Texas State University (now Texas State University-San Marcos), where he was a member of the baseball team and the state-championship karate team. He subsequently received his law degree from South Texas, where he was on the dean's list and was a member of the American Bar Association Regional Moot Court National Championship Team.
From 1996 to 2000, Mr. Medina served as judge of the 157th District Court in Harris County, during which time the Houston Bar Association members consistently cited him as one of the top jurists in Harris County. Before and after his tenure on the bench, Mr. Medina worked for Cooper Industries, a worldwide manufacturer of electrical products, tools and hardware. He has served as Governor Perry's general counsel since January of this year.
Before becoming Governor Perry's general counsel, Mr. Medina was involved in a controversy when he was arrested in June 2002 and charged with driving while intoxicated. His trial ended in a hung jury, and then Medina pleaded guilty to making an improper lane change, paid a fine, and the original DUI charge was dismissed.
Upon appointment to the Supreme Court, Mr. Medina will have to through the Texas Senate's confirmation process next year. To remain on the bench, Mr. Medina would have to run for election in 2006.
November 8, 2004
This week, Tyler Cowen of the Marginal Revolutions blog and Jon Irons of the Argmax.com blog will be debating various economics issues over at the Economics page of the on-line Wall Street Journal, WSJ.com. The Journal page is usually gated for use of paying customers only, but for this week it is open to all visitors.
The first discussion concerns social security privatization. On Tuesday comes outsourcing and trade, followed by the future of Europe and China. Tyler is far more persuasive in the first installment on Social Security, in which Mr. Irons largely ignores the costs of the current Social Security system while waxing eloquent about its hard to value benefits.
Check it the debate this week as it should be interesting.
Professor Ribstein of Ideoblog -- whose broad expertise in business law includes extensive knowledge on how business is portrayed in cinema -- continues development here of a sure-fire winning screenplay on how President Bush won the 2004 election. Enjoy.
From the complaining contained in this London Telegraph op-ed, it sounds as if the PGA of America may have finally chosen the right captain in Tom Lehman to revive America's flagging Ryder Cup fortunes:
Lehman's record in the Ryder Cup is statistically good - won five, lost three, halved two - but behaviourally bad.
In 1995, at Oak Hill, Lehman was a rookie and he was first out in the singles against Seve Ballesteros. On the 12th hole Seve asked Lehman to mark his ball, but instead the American tapped in his short putt. This, of course, was pounced on by Ballesteros, who said: "What are you doing? You play out of turn. Where is the referee?" The crowd then began booing and Lehman became unjustifiably angry. He was in the wrong. . .
[F]our years later at Brookline, Lehman was involved in a series of inexcusable incidents. On the second afternoon he holed a putt and indulged in all manner of vertical fist-pumping while Darren Clarke still had to hole out. Later on in the match, he looked on while his playing partner drove off before Clarke and Lee Westwood had arrived on the tee.
But Lehman saved the worst for the final afternoon. Before his singles against Westwood he began conducting the crowd in a reprise of God Bless America. He literally ran off the 13th green after holing a putt and began high-fiving the spectators. And then he led the infamous charge across the 17th green when Jose Maria Olazabal still had his putt to keep the match alive.
Perhaps most unforgiveable of all, Lehman has never properly apologised for any of this. It only required a letter saying he had become caught up in the exuberance of the moment, but that was no excuse and he apologised unreservedly for his conduct. Lehman couldn't bring himself to write such a letter and so he will always be haunted by Sam Torrance's charge of, "calls himself a man of God. That was the most disgraceful thing I have ever seen". . .
. . . Lehman should never have been appointed captain. His behaviour at Brookline and subsequent unwillingness to apologise should have disqualified him for eternity. The PGA's refusal to recognise these facts shows either they are out of touch with the rest of the world or too desperate and arrogant to care.
Come on, Brits. No American Ryder Cup captain has ever come close to the absurdly bad behavior of European captain Ballesteros during the 1997 Ryder Cup competition. Lighten up.
This NY Times article reviews the growing consensus within the Bush Administration that something needs to be done with the federal government's absurdly complex and special interest-riddled income tax system. There is no real economic analysis of the alternatives here, just a review of the political implications of such a movement. The most hopeful quote in the article comes from a Democrat:
"It strikes me that there's consensus in the country, and hopefully in Washington, that the tax system is too complex, that it's full of loopholes that are exploited by special interests and that we need to simplify them," said Senator-elect Barack Obama of Illinois, a Democrat who won easy election to an open seat.
Mr. Obama, speaking on "This Week" on ABC, said, "If we can arrive at a tax simplification agenda that is not resulting in a shift toward a more regressive tax system, but is instead genuinely making it simpler for ordinary Americans to file their tax returns without a lot of paperwork and gobbledygook, then I think that's something we could work together on."
This is the bore of the gun pointed right between the eyes of the baby boomers. With the low interest rates of today and tomorrow, with the lavish way we have come to expect to live, with a stock market that is sluggish, let us say, what on earth are we going to do about retirement?
Unfortunately, this is not just a paranoid fantasy about my own life. This is going to be the reality of millions, maybe tens of millions of baby boomers unless they get their backsides into gear and make some serious changes in their lives.
You can look at it anecdotally, or you can look at it statistically. Anecdotally: If you are a woman in your mid-50's living on a salary of $150,000 a year, and if you wish to maintain your living standard when you retire at age 65, you will need about $200,000 a year to live on, assuming inflation raises prices by 3 percent a year. If you assume you will get about $15,000 a year from Social Security, you will need about another $185,000 a year. To have that much income with today's interest rates, you will probably need about $4.6 million in the bank. Do you have it?
Or, we can look at it statistically. About 77 million baby boomers are racing toward retirement. That's people roughly between 40 and 60 years old. More than 34 percent of the ones over 55 report having financial savings (not counting their home equity) of less than $50,000. Only 21 percent have more than $100,000. The average Social Security benefit as of 2003 was only $895 a month. Only roughly one in eight workers as of 2001 had a pension with a defined benefit (as opposed to a defined contribution).
We can look at it another way. If you had to retire in 10 years with (now let's be really generous here) twice the savings you now have, and would receive interest of 4 percent on it, how close would you be to having a living income, i.e. an income you could live on at your present style of life? Be honest.
You can look at it still another way. The average family in the New York area earns roughly (and I mean really roughly) $50,000 a year. You would need to have at least $1.25 million in principal to yield that income at 4 percent. Do you have it?
And the solution?
Major league retirement planning right here and now. Right this second. Make a plan with an adviser you trust and for whom you have gotten superb references. Make it a plan with a lot of diversification of stocks, bonds, mutual funds, foreign, domestic, emerging, variable annuities (but study them carefully - there are immense variations among them), real estate and even cash.
The plan has to allow for expensive, long-term medical care. It has to provide for the possibility of losing your job at some point before you reach retirement age. The plan cannot count on miracle cures from the federal government. The federal government is just a means of transferring money from wage earners to retirees - and the wage earners are not going to want to bankrupt themselves for the baby boomers (who got all of the good music anyway).
November 7, 2004
Broncos 33 Texans 13. After a month of strong performances, the Texans looked absolutely awful against the Broncos. The offensive line play was horrible, and David Carr -- who does not throw particularly well under pressure -- was mediocre (22/41 for 245 yds, no turnovers) as he was sacked four times. Meanwhile, the offense's incompetence left the Texans' shaky defense over-exposed, and Broncos' QB Jake Plummer took advantage, flinging four TD passes on the day. Just to give you an idea of how bad it was, the Texans' best player -- receiver Andre Johnson -- had three catches for 28 yards. Things don't get any easier for the 4-4 Texans as they travel to Indianapolis next week to be lit up by Peyton Manning and Co., and then return to Reliant Stadium for games against Green Bay and Tennessee the following two weeks.
Bengals 26 Cowboys 3. Not to be outdone, the Cowboys looked even worse than the Texans as the Bengals pummeled them in Cincy. Making things worse was that the Bengals were wearing possibly the worst looking uniforms in NFL history while administering this whipping on the Pokes. Cowboys QB Vinnie Testaverde looked all of his 41 years, spraying three interceptions to go along with a fumble in the pocket. The 3-6 Cowboys are a horrible football team right now. An over-the-hill QB, no top flight running back, and a questionable defensive secondary. This could end up being the Big Tuna's worst professional football team since his first Giants team in 1983, which finished 3-12-1. The Pokes get Philly at home and Baltimore on the road in their next two games before hosting the Bears in what is stacking up to be a forgettable Turkey Day game.
Oklahoma 42 Texas Aggies 35. Like a champion heavyweight fighter, the Sooners got off the mat before a wild crowd in College Station after the Aggies had taken 14 point leads on three occasions in the first half. OU systematically took the lead in the third quarter, and then hung on for dear life as a final Hail Mary pass fell just short of an Aggie receiver at the buzzer. OU's Jason White showed again that he is a marvelous college QB, as he shredded the Aggie secondary for five TD passes. This was simply a whale of a college football game in which the Aggies threw the kitchen sink at the Sooners, scoring TD's on a fake punt and a fake field goal. Meanwhile, both teams' secondaries looked a bit shell-shocked as both teams combined for almost 700 yards of passing yardage. OU has two relatively easy games (Nebraska and Baylor) before the Big 12 Championship game against one of the Big 12 weak sisters, so it is looking like OU and USC will meet in the BCS National Championship game. The Sooners are a top flight team, but my sense is that Coach Stoops will really have to coach around their defensive limitations to beat USC. Meanwhile, The 6-3 Aggies have no time to feel sorry for themselves, as they face tough Texas Tech in College Station next Saturday before their finale in Austin against the Longhorns on the day after Thanksgiving.
Texas Longhorns 56 Oklahoma State 35. A tale of two halves. As my wife and I went into a charity gala dinner on Saturday night, I turned off my car radio with the score Oklahoma State 35 Texas 7 with just a minute left in the first half. After the salad at dinner, a friend with a son text messaging him from the game told me it was 35-21. Then, midway through the entree, it was tied, and just as we were getting dessert, Texas was leading 49-35. You gotta love college football. The 8-1 Horns play at Kansas next Saturday before entertaining the Aggies in their finale on the day after Thanksgiving. The Horns are finally looking like a BCS bowl team to me.
Houston 34 East Carolina 24. The Coogs continued their mini-recovery after a 1-6 start by beating mediocre East Carolina at Robertson Stadium in Houston. The Coogs were behind 17-14 at halftime, but put this one away by scoring 20 straight points in a 10 minute span at the end of the third quarter and beginning of the fourth. The 3-6 Cougars have two tough games remaining, next Saturday at 5-3 Alabama-Birmingham and then the following week at home against nationally-ranked and Louisville (6-1), so a 3-8 finish for the Coogs is still a distinct possibility.
Fresno State 52 Rice 21. The bottom has fallen out of the season for the Owls, who are now 3-6 and bleeding badly. Fresno just manhandled the Owls at Rice Stadium in Houston, as the Owls trailed 28-7 at the half and 52-7 after three quarters. Rice (3-6) should get ready for more of the same next week as they must go to El Paso to take on the Mike Price-revived UTEP(6-2)squad before finishing at home the following week against 4-5 La Tech.
By the way, in a reflection of the continued polarization of college football, the Longhorn and Aggie games on Saturday drew a combined total of about 165,000 fans. UH and Rice's games drew a combined total of barely 30,000.
And, as usual, Kevin Whited has his excellent review of Big 12 games over at PubliusTx.net.
One of the characters the local business community that make Houston a special place -- Michel T. Halbouty -- died on Saturday in Houston after a long battle with cancer. He was 95 at the time of his death. His obituary is here.
As founder, president and chairman of Michel T. Halbouty Energy Co. in Houston, Mr. Halbouty was one of Houston's famed wildcatters who made and lost millions in the wild and wooly Texas oil and gas business over the past 70 years.
With his trademark bushy mustache, Mr. Halbouty cut quite a swath in business circles. An expert in Gulf Coast salt dome prospecting, Mr. Halbouty was inducted into the Texas Science Hall of Fame in 2002 for his contributions to geoscience. He authored four books and more than 300 articles on geology and petroleum engineering, and among the well-known oil and gas fields that Mr. Halbouty either discovered or developed were the South Boling Field in Wharton County, the South Liberty Field in Liberty County, the West Saratoga Field in Hardin County, the Pheasant Field in Matagorda County, and the Fostoria Field in Montgomery County.
Mr. Halbouty was also an important figure in the development of Texas A&M University over the past two generations. After graduating from A&M in 1930 with a degree in petroleum engineering, Mr. Halbouty earned masters' degrees in geology and petroleum engineering the following year, and, in 1956, was the first recipient of Texas A&M?s professional degree in geological engineering. Mr. Halbouty was also a recipient of distinguished alumni awards from the A&M Association of Former Students and A&M?s Dwight Look College of Engineering. He was a an A&M Visiting Centennial Professor and a founding member of the President?s Endowed Scholars Program. For his service and contributions to the university, the building that houses the A&M's department of geology and geophysics is named for him.
Mr. Halbouty was also widely involved in civic affairs in the Houston area. Mr. Halbouty also served on the boards of the Houston Symphony Society, Houston Grand Opera, Greater Houston Council of Camp Fire Girls, Texas Children's Hospital, and Houston's Museum of Fine Arts.
Funeral services for Mr. Halbouty are pending.
November 6, 2004
Cuban is a live wire, and he undoubtedly leads the NBA in the past few seasons in the amount of fines that the NBA front office has levied against an owner for criticism of various aspects of the league, particularly in the area of referee evaluation.
For several months, Mark has been running an interesting blog called Blog Maverick. In another first, Mark notes in this blog post that the NBA front office has fined him again, this time for criticizing the league in a blog post.
No astute political analyst am I, this Economist article reflects my amateur political analysis towards John Edwards' political future:
Mr Edwards is well on the way to becoming a man with a brilliant future behind him. What did he add to the Democratic ticket other than a boyish smile and a well-honed stump speech? He failed to deliver either of the Carolinas to the party (even though he was born in the southern one and represented the northern one in the Senate). He has no clear ideological constituency.
In addition to the foregoing, Edwards' Senate seat was won by a Republican, he was surprisingly poor in his debate performance against Dick Cheney, and he made an incredibly inept gaffe late in the campaign after the death of Christopher Reeve. In view of all of this, my sense is that a decent case can be made that Edwards cost Kerry the election in a reasonably close race. That's not much of a foundation upon which to build a political future.
Colleen Carroll Campbell, a fellow at the Ethics and Public Policy Center, is the author of The New Faithful: Why Young Adults Are Embracing Christian Orthodoxy (Loyola, 2002). She is working on a book based on her father's experience of Alzheimer's disease, and this New Atlantis article provides an outstanding overview of her research into the subject. There is no question that Alzheimer's is becoming an increasingly important health care issue:
. . . [E]very once in awhile, we face a situation that forces us to collectively consider what it means to be human persons who grow old, suffer, and die.
The looming Alzheimer's epidemic is just such a situation. This disease embodies everything we fear most about aging -- weakness and dependence, humiliation and oblivion. Its insidious onset and relentless progression have penetrated our collective consciousness, and nearly half of Americans over the age of 35 know someone personally whose brain has been ravaged by it. As Americans are living longer and more physicians are recognizing dementia as a disease to be diagnosed, Alzheimer's is claiming more victims. Some 4.5 million Americans suffer from Alzheimer's today, more than double the number who had the disease in 1980. Alzheimer's has become the eighth-leading cause of death in America, and its impact is expected to mushroom as 77 million Baby Boomers head into retirement. By 2050, if no cure is found, 16 million Americans could have Alzheimer's. As they bid their long goodbye -- Alzheimer's can take up to 20 years to run its devastating course -- we will no longer be able to ignore the human questions raised by this disease. Such questions, about the basis of our human dignity and our identity as persons, cannot be answered by science or technology. We must grapple with them the old-fashioned way, drawing on both reflection and lived experience to find the meaning in this way of dying.
For anyone dealing with the onset of dementia in a loved one, this piece is essential reading. Read the entire article.
Jamie Malanowski, a New York-based writer, pens this Washington Monthly op-ed on Houston congressman Tom DeLay and provides the following overview to a discussion of the various ethics complaints and criminal investigations that are currently dogging Mr. DeLay:
Tom DeLay is the most odious character in American politics today. He does not lack for competition, of course, but what sets him apart is that all of his perversions have been accomplished under the radar screen. Apart from his colorful name ?the Hammer,? DeLay has no public identity, and even that nickname will more likely inspire people outside the Beltway to think of old jocks like Fred Williamson or Dave Schultz than the beady-eyed former exterminator who terrifies Capitol Hill. . . Tom DeLay is a cancer cell, silently metastasizing.
Statesmanship is not a word that comes to mind when thinking about Tom DeLay.
This Economist article addresses the second political murder in the Netherlands in the space of two years. The murder of outspoken and provocative film director, Theo van Gogh, by a Muslim radical has shocked Dutch society, which has long been the European epitome of tolerant and liberal values. Dutch people fear that they may now live in a place where violence has become a way of settling differences of opinion, especially over rocky relations with a growing Muslim minority. The article is an insightful account of the difficulties that even the most liberal Western culture faces in assimiliating intolerant Muslim fascism.
November 5, 2004
Lance Berkman -- the Stros' best hitter over the past four seasons -- has torn the anterior cruciate ligament in his right knee and will undergo surgery at Methodist Hospital in Houston within the next ten days. Although the Stros' initial announcement this afternoon did not disclose how Berkman suffered the injury, it was disclosed later that Berkman suffered the injury playing flag football.
Normal recovery time from this type of injury is at least six months, so it is unlikely that Berkman will be ready for the start of the 2005 regular season. May or June is probably more realistic.
Just to give you an idea of how just how good a player Berkman is, Over the past 4 years, Berkman ranks 6th in the majors in runs created against average ("RCAA", explained here):
1 Barry Bonds 597
2 Todd Helton 284
3 Albert Pujols 281
4 Jim Thome 250
5 Manny Ramirez 240
6 Lance Berkman 236
7 Jason Giambi 225
8 Alex Rodriguez 218
9 Jim Edmonds 216
10 Gary Sheffield 210
That's pretty heady company.
William J. Stuntz is a smart professor at Harvard Law School, and in this Tech Central Station article, provides an excellent and non-biased analysis of the voting patterns from Tuesday's Presidential election, including the following observation:
The best way to see how the two sides stack up is to look at one of those red-and-blue maps that seem to breed these days. Divide the country into three parts: Kerry's base, Bush's base, and the Midwest. Kerry's base is the Northeast -- everything North of the Potomac River and East of Ohio -- together with the Pacific Coast and Hawaii. (They don't call it the "left coast" for nothing.) Kerry swept his base 194-0. Bush's base is the South and the rest of the West. Bush swept his base too, by an electoral score of 237-0, assuming the New Mexico vote holds up. But Bush's base is bigger. Which means Kerry needed to nearly sweep the Midwest to catch up. He did carry the Midwest, but not by much: 58-49 in the electoral college. Bush carried Ohio, Indiana, Missouri, and Iowa -- and he could have lost any of the last three without changing the result.
In this New York Times review, Michiko Kakutani reviews Perilous Times, the new book about American restrictions on civil liberties and free speech by Geoffrey R. Stone, the Harry Kalven Jr. distinguished service professor of law at the University of Chicago. As the review notes, the restrictions of civil liberties under the recent Patriot Act are not unusual in time of war in the United States, regardless of whether the President is a Republican or a Democrat:
Impassioned yet methodical, [Professor Stone] lays out the vital role that free speech plays in a healthy system of self-governance, using lots of case studies to illustrate his arguments while creating a devastating portrait of those public figures whose commitment to free speech has been weak or hypocritical. Woodrow Wilson, who tried to squelch any disharmony that might impede his mission of making "the world safe for democracy," comes off especially poorly, and Franklin D. Roosevelt emerges as a president who would support civil liberties in the abstract, "but not when they got in his way."
However, Professor Stone is reassuring that America's commitment to civil liberties is strong, and that each period of restriction has been followed by a period of stronger restoration:
After each period in which the nation went too far in restricting civil liberties, Mr. Stone argues, "the nation's commitment to free speech rebounded, usually rather quickly, sometimes more robustly than before." A Congressional report declared that the Sedition Act of 1798 had been passed under a "mistaken exercise" of power and was "null and void." The Sedition Act of 1918, which was repealed two years later, helped give birth to the modern civil liberties movement. And in 1976, President Ford formally prohibited the C.I.A. from using electronic or physical surveillance to collect information on domestic activities of Americans, and the new F.B.I. director, Clarence Kelly, publicly apologized for F.B.I. abuses under J. Edgar Hoover.
Such developments buttress Mr. Stone's argument that "the major restrictions of civil liberties of the past would be less thinkable today than they were in 1798, 1861, 1917, 1942, 1950 or 1969," and that "in terms of both the evolution of constitutional doctrine and the development of a national culture more attuned to civil liberties, the United States has made substantial progress." Mr. Stone writes that in its 1971 Pentagon Papers decision (which held that the government had not met its "heavy burden of showing justification" for a prior restraint on the press), "the Supreme Court, for the first time in American history, stood tall - in wartime - for the First Amendment." That case was only one in a series of Vietnam-era decisions in which the court suggested its understanding, in Mr. Stone's words, "that dissent is easily chilled, that government often acts out of intolerance when it suppresses dissent, and that it is essential to protect speech at the margin."
This New York Times article reports on a San Diego federal judge's order on Thursday that froze almost $600 million in investment accounts as the Justice Department probes charges of illegal tax avoidance involving California-based xélan, a company that markets tax-savings plans to doctors. The company's Web site says it was founded 32 years ago by doctors to help other physicians with financial matters, ranging from pension plans to disability and long-term care insurance. It calls itself "the Economic Association of Health Professionals."
The Internal Revenue Service estimates that some 4,000 doctors are involved in what it alleges is a fraudulent tax-reduction scheme, and they could owe as much as $420 million in taxes, interest and penalties. The Justice Department alleged that "persons and entities affiliated with xélan" have advised thousands of doctors and other medical professions to invest in "various fraudulent tax avoidance schemes," including purported supplemental-insurance products and improper charitable-deduction schemes involving a xélan-related foundation. The government's complaint said more than $500 million is held in investment accounts controlled by xélan-related and Barbados-based Doctors Benefit Insurance Co.
I don't know whether the government's charges against xélan have any validity, but it has been my experience that doctors are generally easy prey for promoters of investment scams and tax avoidance schemes. With a lot of money and not much time to analyze such matters, doctors are tailor-made for making bad investment decisions. As a result, I have represented many doctors over the years in extracting them from poor investment decisions that they have made.
My first experience with this phenomena is instructive. Over 25 years ago, while still in law school, my late father -- noted Professor of Medicine Walter M. Kirkendall -- called me one day to ask me to accompany him to a breakfast meeting at Houston's old Shamrock Hilton to advise him regarding an investment "opportunity" that was going to be pitched to him and a number of other Texas Medical Center doctors at the meeting.
So, my father and I attended the meeting, along with about 50 other Medical Center doctors. During the meeting, a group of slick promoters from Dallas promoted limited partnership interests (at $75,000 a pop) in an entity that would own the rights to a movie. The movie was being filmed at the time and was called "Coming Back," a preposterous tale about the adjustments that several Dallas Cowboy football stars had to make in playing professional football after returning home as Vietnam veterans. The promoters even played a few film clips from the movie, which were absurdly bad.
"We expect this to be hit throughout the country, particularly among professional football fans," commented the promoters. But the real money to be made, the promoters assured in hushed tones, was in the overseas markets. "The Dallas Cowboys are simply huge in Japan," they exclaimed breathlessly.
Through the presentation, my father and I were actually having a wonderful time, enjoying the free breakfast while rolling our eyes at each other and chortling about the absurdity of it all. At the conclusion of the meeting, the promoters asked that any doctor interested in investing to come up to the front of the conference room and they would make arrangements for giving them a discount on their investment in the film. That pitch brought a final chortle from my father and me, as we simply could not believe that anyone would be so gullible to invest any money in such a surefire scam as this movie. So, as the meeting concluded, we stood up and proceeded to leave.
As my father and I made our way out of the conference room, we were almost stampeded by the dozens of doctors literally sprinting to the front of the conference room to make their investment in the film.
About a year and a half later, the promoters of the film were convicted of securities fraud in federal court in Dallas.
To this day, no word on how "Coming Back" ever did in the Japanese market. ;^)
Longtime Houston sportswriter Mickey Herskowitz, who I have mentioned frequently in these earlier posts, is my favorite sportswriter. Mickey's blend of insight, humor and historical perspective is sadly lacking in much of the sportswriting that we must endure these days.
Earlier this week, fellow Chronicle sportswriter Richard Justice blasted Stros' owner Drayton McLane for Gerry Hunsicker's recent resignation as the Stros' general manager. Although most everyone agrees that Hunsicker was the Stros' best GM in history, I believe that McLane had reasonable reasons for not providing him a long term deal (noted in this earlier post). So, I thought that Justice's piece disparaging McLane as the "boss from hell" was way out of line, particularly given the fact that McLane is also the best owner that the Stros have ever had.
In this column, Herskowitz -- without mentioning Justice's blast at McLane -- places the decision to let Hunsicker go in historical perspective and reminds us that McLane's support of Hunsicker was the best that any Stros owner has ever provided for any Stros GM. In so doing, Herskowitz gives us this entertaining and brief "GM tree" of Stros general managers over the past 43 years:
The Astros have an interesting history with general managers. Does anyone remember Gabe Paul? He was their first, coming and going the year before the team took the field. Gabe had held the same position in Cincinnati, but left Houston when he did not want Judge Roy Hofheinz breathing on his neck.
But Gabe left a legacy -- two bright, young staffers named Tal Smith and Bill Giles. The latter would one day become the owner of the Phillies.
Paul Richards drafted and molded the team that finished ahead of the Cubs and Mets in its first season, 1962. Richards signed the first wave of prospects, including Rusty Staub, Larry Dierker and Joe Morgan.
The torch was passed to Spec Richardson, who had paid his dues with the Houston Buffs but did not have a big imagination. Smith returned from New York, after getting a graduate degree at the Steinbrenner Institute for Pain.
Tal hired Bill Virdon as his manager and raised the Astros out of the primeval muck, 43 games out of first place (in 1975) to within three outs of the World Series in 1980. The Sporting News would name Smith as the executive of the year for '80, but John McMullen, the new owner, fired him anyway.
McMullen lived in New Jersey, but he knew how to use a phone. He wanted a general manager who would not make moves or express an opinion without consulting him.
Into the breach came Al Rosen, who had set home run records as a third baseman in Cleveland. Rosen was good-natured and considerate. He lasted until 1985 and received the news of his dismissal not with anger but puzzlement.
"I don't understand why I was fired," he said to a friend.
The friend did not offer him sympathy.
"If you don't know," he said, "imagine how Tal Smith must have felt."
Replied Rosen: "I don't know why he fired Tal, either."
At that point, there seemed to be something in the air that created turmoil among Houston's sports teams, possibly spillage from the chemical plants in Pasadena.
But turmoil appeared to be our destiny. In this context, the new GM was Dick Wagner, the man who dismantled the Big Red Machine and fired Sparky Anderson in Cincinnati.
The Astros did not leave the plantation for Bill Wood, an intense, studious type whose life was baseball. Wood gave way to Bob Watson, a slugging first baseman and fan favorite in the 1970s.
Feeling he had not suffered enough here, Watson went to New York, guided the Yankees to a world championship and resigned. He is now with the commissioner's office.
Hunsicker filled the opening in Houston, . . .
And with the depth of having seen many Stros GM's and owners come and go, Herskowitz notes the bottom line of Hunsicker's resignation:
After nine years, Gerry Hunsicker leaves on a high note, and by his choice -- which is the best way.
After winning the only acquittal for any of the defendants in the Enron-related Nigerian Barge trial, Houston-based defense attorney Dan Cogdell is profiled in this Houston Chronicle article. Cogdell did a magnificent job in the trial and clearly was the one lawyer in the crowded courtroom who won over the jury. As noted in this earlier post, Cogdell is one of a group of local criminal defense attorneys that gives Houston as formidable a Criminal Defense Bar as any city in the United States.
November 4, 2004
After convicting four former Merrill Lynch executives and a former Enron executive of wire fraud and conspiracy charges yesterday, the jurors in the Enron-related trial known as the Nigerian Barge case heard from opposing expert witnesses today regarding the market effect that the Nigerian Barge transaction had on Enron.
Today's hearing was held to allow the jury to consider the evidence of market loss that is used in determining sentences under the federal sentencing guidelines. As noted earlier in these posts, the U.S. Supreme Court's recent decision in Blakely v. Washington has called the Constitutionality of the federal sentencing guidelines into question, particularly if the jury is not allowed to consider the issue of market loss.
Anthony Saunders, chairman of the finance department at New York University testified on behalf of the prosecution and estimated -- with a straight face -- that Enron's sham sale of three power-generating barges to Merrill Lynch led to damages suffered by Enron shareholders of about $43.8 million. Professor Saunders came up with this damage assessment despite the fact that Merrill Lynch booked only a $12 million profit on the deal, Enron lost no money on the transaction, and the alleged sham nature of the transaction was not even discovered until a year and a half after Enron's equity value had become worthless upon the company filing bankruptcy.
At any rate, Professor Saunders speculated that the 1 cent per share that the barge deal contributed to Enron's 1999 earnings translated to about 47 cents per share of the company's stock price of $53.50 at the time the company's financial result were announced in January 2000. Take that 47 cent figure times the number of outstanding Enron shares at the time and wallah -- you get a $43.8 million figure. Whether that number bears any reasonable resemblance to the value that the barge deal contributed to Enron's stock price is another issue entirely.
The prosecution's market effect reasoning here is so flawed that it borders on the preposterous. In reality, the fact that Enron did not account for the Nigerian Barge transaction properly made Enron's earnings look better than they really were. Thus, that accounting increased Enron's share value for the benefit of investors who were buying and selling the stock. Moreover, the prosecution has presented no evidence -- because there is none -- that he decline in Enron's share value during its demise into bankruptcy in 2001 had anything to do with revelations regarding the accounting on the barge transaction. This is because the alleged improper accounting for the barge deal was not even discovered until well over a year after Enron went into bankruptcy and its equity value had become essentially worthless.
At any rate, Dan Fischel, a law professor at the University of Chicago who testified for the defense, countered with a more realistic market loss evaluation and concluded that the loss was closer to $120,000. He also noted that Professor Saunders' methods were "inconsistent with the real world," and that Professor Saunders' methodology relied too heavily on academic models that are not generally used in evaluating a company's value in the business community. That is a charitable understatement, to say the least.
The market loss hearing will conclude on Friday, and the jury is expected to present its findings to U.S. District Judge Ewing Werlein shortly thereafter. If the jury buys Professor Saunders' absurd market loss calculation, the defendants could be facing the equivalent of life sentences under the applicable federal sentencing guidelines. If that occurs, then this prosecution will officially cross the line from being a "mere" injustice to becoming a modern day witch hunt.
This Washington Post editorial examines the scandal that is the self-perpetuating nature of the House of Representatives:
Out of 435 House races, incumbents lost only seven -- an even more impressive survival rate than that of two years ago, when eight incumbents were defeated. In nearly all House races, moreover, there was no serious doubt about the outcome: 95 percent of races were decided by a margin of more than 10 percent, according to the Center for Voting and Democracy, and an astonishing 83 percent were decided in 20-point-plus landslides.
How has this happened? Just take a look at the way in which we allow our Congressional districts to be established:
The main cause of the incumbents' success is the country's scandalous system for designing voter districts. Instead of entrusting the design to nonpartisan technocrats, the U.S. system entrusts it to state legislatures, allowing the majority party to promote partisan ends. The partisans feed demographic and polling data into their computers and come up with district boundaries that give their sides as many safe seats as possible. Because this process involves crowding opposition voters into a handful of opposition districts, it creates safe seats for both parties and an incentive for incumbents on both sides not to rock the boat.
And who has been at the forefront of this wrangling of Congressional districts? Of course, Tom DeLay and his friends:
The darkest wizardry occurred in Texas. There, the state Republican Party redrew the districts of five white Democrats, hoping to unseat all of them so that the Democrats would become identified as the party of minorities. The plan succeeded in four cases (outside Texas, a grand total of three incumbents were defeated anywhere). Rep. Charles W. Stenholm, a long-serving conservative Democrat who had been forced to run in a Republican-leaning district against a Republican incumbent, went down in defeat, as did three others who had pulled the Democratic caucus toward the center.
The Texas redistricting faces a court challenge. But whatever the legal outcome, it's clear that these schemes are an inversion of democracy: Politicians get to choose their voters, rather than the other way around. Incumbent members of Congress face little threat of being unseated and so have little reason to be responsive to voters; their chief vulnerability lies in the threat of a primary, which encourages them to play to party activists.
The upshot of all of this is increased polarization in the political process:
[I]ndependent moderates are a shrinking force in the House of Representatives. In the 1970s, on the partisan roll calls, the average member backed the party position 65 percent of the time. In the 1980s, the average degree of partisan loyalty rose to 73 percent; in the 1990s, 81 percent; and in 2001-02 the partisanship index hit a remarkable 87 percent.
Quare: Is it time for judicial intervention over the legislative gerrymandering of Congressional districts?
Former Houston Rockets star and Basketball Hall of Famer Calvin Murphy trial on sexual assault charges stemming from claims he molested five of his daughters when they were children cranks up today in Judge Mike McSpadden's criminal state district court in Houston. Here are the earlier posts on the case.
The trial is expected to last about two weeks. Murphy, 55, is charged with three counts of indecency with a child and three counts of aggravated sexual assault. Each charge is punishable by up to life in prison, so Murphy's freedom for the remainder of his life is literally at stake.
This trial is going to be ugly and very sad.
November 3, 2004
The federal jury in the Enron-related criminal case known as the Nigerian Barge case acquitted a former Enron accountant today and found her five co-defendants guilty of wire fraud and conspiracy charges.
The jury cleared former Enron accountant Sheila Kahanek of all charges, but returned guilty verdicts on all charges against former Enron Vice President Dan Boyle and four former Merrill Lynch bankers, William Fuhs, Robert Furst, James A. Brown and Daniel Bayly. Messrs. Brown and Boyle were also convicted of lying to investigators.
Ms. Kahanek's acquittal is not surprising. The prosecution's case against her was extremely weak and relied almost entirely on testimony regarding an alleged argument that Ms. Kahanek had with another Enron employee regarding the Nigerian Barge transaction. Moreover, Ms. Kahanek testified during the trial, something that three of her co-defendants chose not to do. Finally, Ms. Kahanek's attorney -- Houston-based criminal defense lawyer Dan Cogdell -- performed brilliantly during the trial and clearly connected with the jury better than any other criminal defense attorney involved in the trial.
The conviction of Mr. Fuhs is somewhat surprising. By all accounts, he did a good job of testifying during the trial and the prosecution's case against him was not much stronger than its case against Ms. Kahanek. However, Mr. Fuhs was undoubtedly prejudiced by the failure of the three higher-ranking Merrill executives -- Messrs. Bayly, Furst, and Brown -- to testify during the trial. Juries in white collar criminal cases want to hear what defendants have to say and the failure to address that jury desire is a huge risk.
Finally, the conviction of Mr. Boyle was not particularly surprising. His defense was a curious mix of appealing for jury sympathy (a questionable tactic given the public animus toward Enron) and relying on his seemingly poorly-prepared testimony during the trial. At one point during his testimony, Boyle said he knew the deal was wrong even as he continued working on it. If a white collar criminal defendant is going to testify during trial, then it helps to do so effectively. Mr. Boyle did not.
Now, the trial moves on to its second phase, in which the government will attempt to prove the effect on the market of the fraudulent transaction in which the defendants participated. Included in the indictment against the Nigerian Barge defendants is an allegation that the transaction caused the loss of more than $80 million, which is an allegation that can add years to a sentence under existing federal guidelines. This allegation was recently included in a superceding indictment of the Nigerian Barge defendants as a result of the U.S. Supreme Court's Blakely decision (prior posts here), which held that the state of Washington's sentencing laws were unconstitutional because they allowed only judges (and 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.
The Enron Task Force has not yet explained how the Nigerian Barge deal -- which was a relatively small transaction involving about $12 million in allegedly illegal profit for Merrill Lynch -- could have possibly caused $80 million in market loss to investors in Enron. 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. Where does the prosecution come up with $80 million in market effect from that?
During his distinguished legal career as a defense attorney before becoming a federal judge, Nigerian Barge Judge Ewing Werlein often defended corporate clients against dubious damage claims in civil cases. It will be interesting to watch how he deals with the government's equally questionable market loss allegations in this trial. Stay tuned.
I asked Yao to compare his life in China with the one he leads in the U.S. He observed: "In China everything was taken care of for me, and every day was planned out. Here I am more on my own." Though he does not warm to the task of talking about his inner life, Yao acknowledges that his two years in the NBA "have made me more open about my emotions both on and off of the court." The language difficulties notwithstanding, Yao has gelled well with his American teammates; nevertheless, the basketball version of the Great Wall of China has a shy streak that cannot make it easy for him to be one of the most famous people on the planet. According to his revealing memoir, Yao has often found succor in the invisible world of cyberspace. And true to his book's word, Yao ended our conversation with a polite handshake and a fast break for the computer.
Under extraordinary pressures ever since he arrived in Houston to begin his NBA career, Yao has acted in an exemplary and classy manner. His parents have done a wonderful job in raising him and should be extremely proud of the way in which Yao has handled the adjustment to the American and NBA lifestyle.
The Dallas Cowboys won easily their biggest victory of the season Tuesday as Arlington voters approved a $325 million proposition to help build the team a new stadium.
The proposition authorizes tax increases to pay for half of a $650 million stadium for the Cowboys. The proposition will raise the city sales tax by a half-cent, its hotel occupancy tax by 2 percentage points and its car rental tax by 5 percentage points. A tax of up to 10 percent on tickets and up to $3 on stadium parking will also likely be levied, but proceeds from those taxes are earmarked for retiring a portion of the Cowboys' debt on the project.
Opponents of municipal funding for the stadium kept the race reasonably close despite being widely outspent by stadium proponents. The Cowboys funded a political action committee funded that spent $4.6 million on the campaign through the end of October. Opponents raised only about $120,000.
The site of the stadium, which is scheduled to open in 2009, will be in the area adjacent to the Six Flags of Texas Amusement Park and Texas Rangers' Ameriquest Field. A couple of weeks ago, the Cowboys and the Rangers announced that they were working on a joint master planned development, similar to Southlake Town Square, for the area near the football and baseball stadiums.
Stadium supporters estimated that the 75,000-seat retractable-roof stadium would provide the city an additional $5 million in rent and sales tax revenue from spending at the facility, plus other economic activity throughout the city. Stadium backers pointed to a city-commissioned study by Economics Research Associates projecting that the venue would pump $238 million into Arlington's economy each year.
Opponents of the stadium contend that the project would cost far more than it injects into city coffers and would hamstring efforts to attract other businesses. They also said that other economists have criticized the city-commissioned report for being unreasonably optimistic. Virtually all academic research -- summarized nicely by Craig Depken here -- has concluded that major sports facilities typically do little to boost local economies.
One of the civic motivations for the stadium project is Dallas' desire to attract a future Super Bowl game, which was not possible so long as Dallas area relied on Texas Stadium as its professional football venue. Although Dallas stadium and convention facilities are not as well coordinated as Houston's, the new stadium will undoubtedly attract a Super Bowl for Dallas, probably between 2010-12.
November 2, 2004
Houston-based Dynegy Inc. has entered into an agreement to purchase from Exelon Corp. all of the outstanding shares of ExRes SHC Inc. Through the acquisition, Dynegy will acquire a 1,042-megawatt, 7,211-Btu heat rate, combined-cycle independence power generation facility near Scriba, N.Y., four natural gas-fired merchant facilities in New York, and four hydroelectric generation facilities in Pennsylvania.
As a part of the deal, Dynegy will also acquire controlling interest in a 750-megawatt firm capacity sales agreement with Con Edison, a subsidiary of Consolidated Edison Inc. The sales agreement, which runs through 2014, provides annual cash receipts to Dynegy of about $100 million. The financial terms of the agreement include the payment by Dynegy of $135 million and the consolidation of $919 million in project debt, and Dynegy projects that the principal and interest payments related to the consolidated debt will be substantially funded through 2014 by the proceeds from the long-term capacity sales contract with Con Edison.
The deal is the first major purchase that Dynegy has made since it underwent a massive restructuring in 2002. That restructuring was prompted by the crisis in the energy trading industry that followed industry leader Enron's spiral into bankruptcy in late 2001.
November 1, 2004
Gerry Hunsicker -- the most successful general manager in the history of the Houston Astros -- resigned Monday after nine years as the club's general manager.
Hunsicker's tenure as Stros GM coincided with the most successful decade in Stros' history. During the past nine years, the Stros won four National League Central titles and finished second three times, including this past season in which the Stros won their first post-season playoff series in club history. Over that span, the Stros had a won/loss record of 701-595 for a sixth-best winning percentage of .541 in Major League Baseball. Only three MLB GMs have served in their current job for more seasons than Hunsicker.
Hunsicker will be replaced by his long-time assistant, Tim Purpura.
The Stros hired Hunsicker as GM in 1995 from the New York Mets organization, where he worked for seven seasons, first as director of minor-league operations and then as assistant GM. Hunsicker and Purpura are credited in baseball circles with revamping the Stros' farm system over the past decade to produce such star players as Lance Berkman, Richard Hidalgo, Bobby Abreu, Roy Oswalt, Brad Lidge, and Wade Miller. In addition to building the Stros' farm system, Hunsicker also traded for or signed such talents as Randy Johnson, Jeff Kent, Octavio Dotel, Moises Alou, Carl Everett, Jose Lima, Carlos Beltran and Roger Clemens.
Consequently, by any reasonable measure, Hunsicker's tenure with the Stros has been a successful one. However, the margin for error is razor thin with a mid-market club such as the Stros, and Hunsicker's two major failures contributed to the Stros' inability to break into the elite level of MLB clubs.
Hunsicker's first mistake was the decision to sign Jeff Bagwell and Hidalgo to high dollar, long-term contracts after the 2000 season. That error in judgment reverberates through the Stros organization to this day. Although those signings were popular from a public relations standpoint, Bagwell had already begun his decline in production and Hidalgo had shown only streaks of high production at the time of those contracts.
Now, almost five years later, the Stros are obligated to pay Bags a total of $39 million over the next three seasons, which is about $25 million greater than his market value. Similarly, the club remains responsible for a multi-million portion of Hidalgo's contract, all at a time when the Stros are trying to sign free agents Beltran and Clemens, and arbitration eligible stars Berkman and Oswalt. Moreover, because the overpaid Bags remains tethered to first base, the Stros have been unable to move the more productive Berkman to his natural position of first base and open up an outfield spot for MLB-ready Jason Lane. It was Hunsicker's job to forsee the problems that the Bags and Hidalgo contracts would have on the Stros and point owner Drayton McLane in another direction. He did not and that failure has -- and will continue for the next several years -- to affect the Stros negatively.
Hunsicker's other big mistake was in failing to secure a quality catcher for the club. Actually, the Stros had developed a potential star catcher in their minor league system -- Mitch Melusky -- but a combination of emotional and physical problems undermined his Major League career after only one promising season. When Melusky flamed out, Hunsicker seemed to give up on the position as he overpaid the consistently unproductive Brad Ausmus to an absurdly overmarket contract in 2001 while waiting for the farm system to produce another MLB-quality catcher. Alas, the system did not produce such a player, leaving the Stros with Ausmus and Raul Chavez as their catchers this season. That duo was the weakest catching unit of any team in Major League Baseball this past season.
Despite these failures, Hunsicker has been unquestionably the most successful GM in the 43 year history of the Stros franchise. Which begs the question: Why did he decide to quit?
Based completely on speculation, I think the reason is that McLane is quietly trying to sell the club. As a result, McLane does not want to be forced to eat a large portion of an extended Hunsicker contract if he finds a someone in the next year or two who is willing to buy the club, but who is not interested in retaining Hunsicker as GM. With McLane unwilling to provide him with long term security, Hunsicker elected to take a year off, review his alternatives, and then, on the first day after the remaining year on his Stros contract expires, accept the best GM job available at that time.
One thing is for sure -- Hunsicker will not remain unemployed very long after the remaining year on his Stros contract expires. He was a big part of a very good past decade for the Houston Astros, and this talented man will land on his feet in another GM position in Major League Baseball.
Best of luck, Gerry Hunsicker.
This NY Sunday Times article profiles Kaiser Permanente, the huge health maintenance organization. The article suggests that those who are reviewing ways to revamp the American health care finance system should follow Kaiser's lead in attempting to increase the quality of care and to spend health dollars more wisely by using technology and incentives tailored to those goals. The entire article is well worth reading, but I was particularly drawn to the following summary of the American system of health care finance, which is spot on:
Health care systems in most industrialized countries are in crises of one form or another. But the American system is characterized by both feast and famine: it leads the world in delivering high-tech medical miracles but leaves 45 million people uninsured. The United States spends more on health care than any other country - $6,167 a person a year - yet it is a laggard among wealthy nations under basic health measures like life expectancy. In a nutshell, America's health care system, according to many experts, is a nonsystem. "It's like the worst market system you could devise, just a mess," said Neelam Sekhri, a health policy specialist at the World Health Organization in Geneva.
This earlier post from several months ago passed along an article about Yale Economics Professor Ray Fair's interesting model for predicting the results of Presidential elections. Here is Professor Fair's updated prediction, which forecasts President Bush winning 57.50% of the two-party vote.
On the other hand, Professor Bainbridge points out a less complicated indicator that favors Senator Kerry.
It's not everyday that a Texas high school football team makes the Washington Post. Read about the inspiring tale of the Santa Maria Cougars here.
I'm in the process of upgrading the site to Movable Type 3.121, so please excuse a few blips as I finalize matters. Thanks.