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December 31, 2004
The criminalization of investment banking
NY Times business columnist Floyd Norris hits the nail on the head in his column today in which he observes that the rebound in the investment banking industry this year must be tempered with the plight of Daniel Bayly, the former head of global investment banking at Merrill Lynch. Mr. Bayly was one of five defendants convicted in the Justice Department's questionable Enron-related prosecution known as the Nigerian Barge case. As Mr. Norris notes:
[T]he real man of the year on Wall Street - or at least the man whose plight is emblematic of the new Wall Street reality - will not be sharing in those bonuses. Instead, Daniel Bayly is awaiting sentencing in federal court in Houston, where he is likely to be ordered to spend a few years in prison for doing something that few on Wall Street would have seen as a crime.Mr. Bayly, the former head of global investment banking at Merrill Lynch, was caught up in the Enron scandal. He signed off on a deal that Merrill did with Enron, in which Merrill "bought" the now-infamous Nigerian barges from Enron at the end of 1999, thereby allowing Enron to report phony profits. The government viewed the transaction as a disguised loan.
Mr. Bayly's role in all this was not a large one. His approval was needed for Merrill to go ahead, and he seems to have been principally concerned that there were safeguards to ensure Merrill would get its money back.
The amount of money involved inflated Enron's profits by only $12 million, just over 1 percent of the $893 million in profits Enron reported for the year. But it allowed the company to meet investor expectations.
The government persuaded the jury that Merrill officials understood the purpose of the transaction was to inflate Enron's profits and that the accounting was phony. Mr. Bayly's lawyers said he believed it was proper.
The result, notes Mr. Norris, is that prosecutors are now treating investment bankers as if they were bartenders:
To many on Wall Street, however, whether or not the client's accounting was proper was a question of little importance, just as a Porsche dealer has no reason to worry that he will get in trouble if a customer chooses to drive faster than the speed limit.The risk that bankers now confront is that they will be treated the same way bartenders are in some states, where the man who sold the drunk driver his final drink can be held liable for the damages that result.
It used to be that when a company went bankrupt as a result of fraud, the only deep pocket available belonged to the auditor. The collapse of Arthur Andersen after the Enron fraud served as a warning that that pocket might not be so deep, a fact that has been reinforced by the limited insurance now available to auditors.
The current reality is that investment and commercial bankers are the new deep pockets. They used to get high fees for devising transactions whose primary purpose was to mislead investors. Now they will be sued by the Securities and Exchange Commission and by private lawyers if there is any evidence the bankers knew the company's accounting was suspicious. The Justice Department may even deem such an act to be a felony, and there is no assurance that it will not bring criminal charges against an investment bank as well as against its officials.
How does this new risk reality affect the market? Mr. Norris has a suggestion:
As the profits pour in from the rebound in investment banking fees, investors might hesitate in bidding up the industry's shares. As Mr. Bayly's conviction demonstrates, the risks of the investment banking business are much greater than they used to be.
Read the entire piece. And as you ponder the policy implications of the Justice Department's prosecution of businessmen such as Mr. Bayly over merely questionable business transactions, take note of the fact that Mr. Bayly is currently facing a prison sentence that could be longer than that of true business criminal Martin Frankel.
Posted by Tom at 7:25 AM | Comments (0) | TrackBack (0)
Judge Gilmore to instruct jury on Justice Dept. refusal to disclose death penalty analysis
Following on the matters addressed in this earlier post, U.S. District Judge Vanessa Gilmore ruled on Thursday that she will instruct the jury regarding the government's failure to comply with her prior order to disclose the basis of its decision to seek the death penalty against one of the defendants in the criminal case in Houston against against the two remaining defendants accused in the deaths of 19 illegal immigrants who were being smuggled into this country in the back of a blistering hot trailer.
Houston defense attorney Craig Washington accused the government of singling out one of the defendants for the death penalty because he is black. During a prior hearing in the case, Washington presented evidence that this case was the only one in which the government had sought the death penalty out of almost 70 illegal smuggling cases. Prosecutors denied that race was a factor, pointing out that they did not seek the death penalty for the other black defendant in the case and that the basis of the government's decision to seek the death penalty is subject to executive privilege.
I have not researched either the merits of Judge Gilmore's ruling or the government's claim of executive privilege in this matter. Nevertheless, Judge Gilmore's order appears to be nothing more than a mechanism to ensure a full and fair trial of all issues in a death penalty case. Her refusal to acquiesce quietly to the Justice Department's refusal to comply with her order is refreshing. Judges in the Enron-related criminal cases -- please take note.
Posted by Tom at 6:28 AM | Comments (0) | TrackBack (0)
Tech humbles Cal in Holiday Bowl
Before the fourth ranked Cal Bears football team complain too loudly again about being passed over by Texas for the Bowl Championship Series Rose Bowl game, they need to compare this game with this game.
Indeed, the Pac-10 Conference is fortunate that USC was left out of the BCS Championship Game last season. In my view, that's the only justification for choosing the undefeated Trojans for this season's championship game over Auburn, which is also undefeated and played a far tougher schedule than USC.
Posted by Tom at 6:15 AM | Comments (1) | TrackBack (0)
9th Circuit reverses big judgment in favor of Anna Nicole
Get ready for another round of jokes on the late night talk shows as the U.S. Court of Appeals for the Ninth Circuit overturned an $88 million bankruptcy court judgment in favor of former stripper, zaftig model, reality show star and current Trimspa spokeswoman Anna Nicole Smith against the estate of her late husband, Houston oilman J. Howard Marshall, II. Here is the Ninth Circuit opinion and the Chronicle story on the case is here.
E. Pierce Marshall of Dallas, the son of J. Howard Marshall, is the main beneficiary of the late Mr. Marshall's estate. Forbes estimates E. Pierce Marshall's net worth at $1.6 billion. Most of the late Mr. Marshall's fortune was generated through his stake in privately held Koch Industries.
Posted by Tom at 5:57 AM | Comments (0) | TrackBack (0)
December 30, 2004
Updating the Yukos case -- Gazprom will not get Yugansk after all
In a surprise move, the Russian government announced Thursday that Yuganskneftegaz ("Yugansk") -- the main oil production unit of bankrupt Russian oil giant OAO Yukos -- will not be conveyed to to Russian gas giant OAO Gazprom as widely anticipated. Rather, the Russian government announced that Yugansk will be used to create a new government-owned oil company and that a minority stake of up to 20% in that company will be offered to China's state energy company.
Here are the earlier posts on the Yukos chapter 11 case and related matters.
The new plan for Yugansk will be a major shot in the arm for China's efforts to obtain access to new fuel reserves for its burgeoning economy. China's economy has been the largest factor in the surging world oil demand of recent years, but the Russian government has heretofore always declined Chinese efforts to invest in the Russian oil and gas industry. The plan also confirm that the Russian government's campaign against Yukos will result in the re-nationalization (is that a word?) of a large part of what had been Russia's largest oil unit and one of the relatively few Russian companies that was able to attract foreign investors.
Gazprom is controlled by the Russian government but also has private shareholders. After a Houston Bankruptycy Court enjoined Gazprom and Western Banks two weeks ago from participating in the Russian government's controversial auction of Yugansk to pay for Yukos' alleged $28 billion tax debt, Gazprom appeared to have found a way around the TRO by using the Russian oil company OAO Rosneft to acquire Yugansk. Gazprom and Rosneft are in the process of merging.
Posted by Tom at 2:37 PM | Comments (1) | TrackBack (1)
Pros versus Amateurs?
In this Opinion Journal piece, Edward Jay Epstein reviews former KGB Col. Victor Cherkashin's new book, Spy Handler: Memoir of a KGB Officer (Basic Books, January 1, 2005). Although there is no assurance that the ongoing reform movement in the Central Intelligence Organization is going to remedy the longstanding problems that have evolved in that agency over the past generation, Col. Cherkashin's book makes clear that the U.S. has little to lose by seeking to correct the CIA's deficiencies. In short, the KGB played the CIA like a fiddle during the Cold War.
Mr. Cherkashin had a distinguished 40 year career in the KGB that began in 1952 under Stalin, included a hitch as deputy KGB chief at the Soviet Embassy in Washington from 1979 to 1985, and ended when the Soviet Union disintegrated in 1991. During that period, Col. Cherkashin primary mission was to organize KGB operations aimed at undermining the CIA's integrity, confidence and morale, and he was pretty darn good at his job:
Mr. Cherkashin describes in detail how he helped convert two American counterintelligence officers--one well-placed in the CIA's Soviet Russia Division, the other in the FBI--into moles. Their names are notorious now, but over the course of a decade Aldrich Ames and Robert Hanssen operated with anonymous stealth, compromising most of the CIA's and FBI's espionage efforts in the Soviet Union.
But Mr. Cherkashin does not attribute his success solely to his personal cleverness:
Mr. Cherkashin skillfully torments his former adversary, the CIA, by attributing a large part of the KGB's success to the incompetence of the CIA leadership, or its madness. He asserts, in particular, that the CIA had been "all but paralyzed" by the "paranoia" of James Jesus Angleton, the CIA's longtime counterintelligence chief, who suspected that the KGB had planted a mole in the CIA's Soviet Russia division.
Mr. Cherkashin is right that Mr. Angleton's concern retarded, if not "paralyzed," CIA operations in Russia. After all, if the CIA was indeed vulnerable to KGB penetration, as Mr. Angleton believed, it had to assume that its agents in Russia would be compromised and used for disinformation. This suspicion would recommend a certain caution or tentativeness, to say the least. Mr. Cherkashin's taunt about Mr. Angleton's "paranoia" echoed what was said by Mr. Angleton's critics in the CIA, who resented his influence, believing that polygraph tests and other security measures immunized the CIA against such long-term penetration.
But of course Mr. Angleton was right, too. On Feb. 21, 1994, Mr. Ames, the CIA officer who had served in the Soviet Russia division, was arrested by the FBI. He confessed that he had been a KGB mole for almost a decade and had provided the KGB with secrets that compromised more than 100 CIA operations in Russia. Mr. Hanssen was caught seven years later.
Since Mr. Cherkashin had managed the recruitment of Mr. Ames and helped with that of Mr. Hanssen, his accusation that Mr. Angleton was paranoid for suspecting the possibility of a mole has the exquisite irony of a stalker following his victim in order to tell him that he is not being followed. Mr. Cherkashin adds a further twist by suggesting that Mr. Angleton's "paranoia" made it easier for the KGB to recruit demoralized CIA officers as moles. According to this tortured logic, if the CIA -- and its counterintelligence staff -- had acted more ostrich-like, by denying the existence of moles in its ranks, the KGB would never have found Aldrich Ames or penetrated the agency in other ways.
Posted by Tom at 7:29 AM | Comments (0) | TrackBack (0)
Mack Brown's rich new deal
The University of Texas announced Wednesday that the UT System Board of Regents has approved a deal in which UT football coach Mack Brown's current contract -- which pays him $2.017 million annually -- will be replaced with the 10-year deal that will pay him $2.159 million in 2005 and $100,000 more than that amount each year through the 10 year term of the contract.
The new contract is the fourth most lucrative one for a college football coach. Only Bob Stoops at Oklahoma ($2.3 million), the departing Nick Saban at LSU ($2.3 million) and Tommy Tuberville at Auburn ($2.28 million) make more than Brown. Due to one-time $1.6 million bonus he received on his 53rd birthday this past August, Brown was the highest paid college coach in 2004 with earnings $3.6 million.
Geez, just think what Brown could make at UT if he could ever manage to beat Oklahoma -- to whom his teams have lost five straight times -- or win a conference championship, something that none of his teams has ever accomplished during Brown's 17 years of being a head coach on the major college level. Not to have won a conference championship at a school with the resources and talent of Texas is a major blemish on Brown's resume.
Moreover, Brown's Texas teams have had a history of playing poorly in big games. They have lost five consecutive losses to Oklahoma and Brown is clearly overmatched by his nemesis, OU Coach Stoops. Brown's Texas teams have lost both Big 12 championship games in which they have played, including the galling upset by Colorado in 2001 that prevented that Texas team from getting a BCS bowl berth.
The bowl record of Brown's Texas teams (3-3) is similarly tarnished. Last year's 28-20 loss to Washington State in the Holiday Bowl was particularly awful, as Texas made WSU's zone blitzs appear to be a new invention in football.
So, one certainly has to admire UT for keeping up with the compensation levels of the elite group of teams in college football, which is where UT aspires to be. However, a valid question remains as to whether Mack Brown deserves it.
In more troubling news for UT, assistant coach Dick Tomey, who is largely responsible for the development of the UT defense this season into an elite unit, will be departing the UT staff next season to take the head coaching job at San Jose State. Perhaps even more troubling from an emotional standpoint, Tomey is attempting to persuade UT graduate assistant coach and former QB great Major Applewhite to join him as an assistant on his San Jose staff.
Posted by Tom at 6:08 AM | Comments (3) | TrackBack (0)
Continental inks big deal for Boeing 7E7s
Houston-based Continental Airlines announced Wednesday that it will order Boeing Co.'s new high-efficiency 7E7 aircraft and accelerate the delivery of other Boeing aircraft that it previously ordered. Continental's 7E7 aircraft order is the first by a U.S. airline and is a shot in the arm for Boeing's marketing of the new aircraft.
Continental is buying 10 7E7s from Boeing with the first of the planes scheduled for delivery in 2009. The list purchase price on the aircraft is approximately $1.3 billion, although Continental will probably pay less than list.
The 7E7 deal illustrates that airlines are banking on reducing operating costs in an attempt to gain an advantage in the brutally competitive airline industry. The 7E7 is made of carbon-fiber composite materials instead of metals such as aluminum that are used on other aircraft, so Boeing is promoting the aircraft as being at least 20% cheaper to operate than older aircraft. Moreover, Boeing believes that the aircraft will be cheaper to manufacture.
Continental will use the 7E7s on international flights, and the purchase is part of a deal between Continental and Boeing under which Continental is attempting to increase the efficiency of its international flights, which are already more profitable than its domestic flights. Continental also will take delivery in 2006 of six Boeing 737-800 aircraft that were previously scheduled for delivery in 2008, and it will lease eight Boeing 757-300 aircraft next year. Continental will use those 737s and 757s on its domestic routes and deploy its 757s and 767s on its international routes.
Posted by Tom at 5:00 AM | Comments (0) | TrackBack (0)
December 29, 2004
Tsunami Relief Donation
I have added a hyperlink on the right side of the blog for Amazon's Red Cross Tsunami Relief Donation page.
The power of the Internet allows us to make a donation quickly and easily to help subsidize relief efforts for this disaster. If you are financially able to do so, please take advantage of this wonderful resource. As of this post, the Amazon page has generated $1.9 million in donations for the relief effort.
If you prefer to make your donation through another organization, The Command Post has provided this extensive listing of hyperlinks to various relief organizations.
Posted by Tom at 12:10 PM | Comments (0) | TrackBack (0)
Updating the Yukos case -- Yukos defaults on huge loans
OAO Yukos, the Russian oil company wallowing in a chapter 11 case in Houston, had its credit-rating slashed to default status yesterday after it failed to make the interest payments on a $1 billion loan from a syndicate of western banks and a $1.6 billion loan to Menatep, which is also its largest shareholder. Security for the loans was Yukos' interest in Yuganskneftegaz ("Yugansk"), the oil unit that the Russian government auctioned off earlier this month to defray Yukos' alleged $27 billion in overdue taxes. Here are the earlier posts on the Yukos chapter 11 case.
Meanwhile, in Houston, Deutsche Bank filed a motion to dismiss the Yukos chapter 11 case with the Houston Bankruptcy Court on Tuesday. Duetsche Bank was was one of a group of Western banks that had committed to finance OAO Gazprom's acquisition of Yugansk at the Russian government's auction before the Houston Bankrutpcy Court's temporary restraining order enjoined the bank and other Western financial institutions from participating in the auction.
In its motion, Deutsche Bank asserted that Yukos had tried to "artificially manufacture" a presence in the U.S. in order to seek bankruptcy protection. In obtaining the TRO earlier this month, Yukos had preliminarily persuaded the Bankruptcy Court that it had jurisdiction over Yukos based on, among other things, the fact that it had stablished a bank account in Houston, that its chief financial officer had recently moved to Houston and was working there, and that approximately 15% of Yukos is owned by investors from the United States.
Posted by Tom at 7:40 AM | Comments (0) | TrackBack (0)
My nomination for Sportsman of the Year
Oregon State's football team handed Notre Dame its seventh straight bowl loss last night in the Insight.com Bowl in Phoenix. However, for my money, the real story from that game is Oregon State's kicker, a 19 year old freshman named Alexis Serna, who walked on the Oregon State football team before this season without a scholarship.
Four months ago, after having attended just a few classes at Oregon State, Mr. Serna was the goat of college football after blowing three extra points in a one-point loss to then number one ranked LSU. As SI.com columnist John Walters writes in this wonderful article on Mr. Serna:
So imagine waking up as Alexis Serna in Corvallis, Ore., on the morning of Sept. 5. You don't have a scholarship. You've only dressed for one game in your college career and the entire country -- yourself included -- is blaming you for Oregon State's loss the night before. And someone at ESPN refers to any missed PAT as "pulling an Alexis Serna." You are 19 years old.
Remarkably, Mr. Serna overcame the humiliation of his first college football game to nail 40 of his next 41 kicks -- including 16 of 17 field goal attempts -- to make the second team All Pac-10 team. Late last month, Mr. Serna's coach rewarded him by giving him an athletic scholarship. From my vantage point, Mr. Serna ought to be awarded Sportsman of the Year.
Posted by Tom at 6:55 AM | Comments (0) | TrackBack (0)
More Ed Prescott on Social Security reform
2004 Nobel Prize in Economics recipient Edward C. Prescott wrote this earlier Wall Street Journal ($) piece advocating a restructuring of the current Social Security system to one based on mandatory individual retirement accounts.
In this op-ed from today's WSJ, Professor Prescott again makes the case for converting Social Security to a system based on mandatory savings accounts, and makes his case with powerful reasoning based on simple common sense:
Social Security was developed at a time when the number of workers paying into the system greatly outnumbered those who were receiving funds, and thus the promise made by government was easily kept. But times change while policies atrophy, and Social Security has evolved into a system that places an increasingly onerous burden on the young; the ratio of workers to elderly has shifted from 41-to-1 in the 1930s, to 3-to-1 today.
Professor Prescott points out that it is rational for young workers to protest having to pay a disproportionate amount to subsidize such a system by working less to support such a system. Thus, he argues, let's change the system to address such rational behavior:
Would such changes in tax rates and changes in government promises affect labor supply? Theory says "yes," the statistical evidence agrees, and common sense concurs. These young workers are rational. They make labor/leisure choices on the margin, and these marginal choices add up.
So what to do? How to move from a pay-as-you-go welfare system to a self-funding retirement system that benefits from individual maximizing incentives? Again, the answer begins with the insight that labor supply is responsive to tax rates. We simply cannot keep cranking up Social Security taxes with impunity. What we need to do is turn the present tax-and-transfer system into a bona fide individual retirement system that is in line with individual incentives.In short, the answer is to establish a system of mandatory investment accounts for retirement. Why mandatory accounts? Because without mandatory savings accounts we will not solve the time inconsistency problem of people under-saving and becoming a welfare burden.
And Professor Prescott observes that private retirement investment accounts must be made mandatory precisely because people are rational with their money:
The reason we need to have mandatory retirement accounts is not because people are irrational, but precisely because they are perfectly rational -- they know exactly what they are doing. If, for example, somebody knows that they will be cared for in old age -- even if they don't save a nickel -- then what is their incentive to save that nickel? Wouldn't it be rational to spend that nickel instead?So, indeed, people are acting rationally when they choose not to save. We have rational people making choices based on the rules. The trick is to get the rules right. A mandatory retirement system, properly designed, would establish effective rules.
And then with the wisdom that generated a Nobel Prize, Professor Prescott bores in on the main problem confronting Social Security reform and advises on how to overcome it:
No sooner did talk get serious about fixing Social Security in recent weeks than the political boo-birds went to work scaring people away from new ideas. It's rare to open a newspaper editorial page these days and not find some Cassandra screeching about evil policy-makers and cranky politicians who are trying to destroy Social Security. Why a politician from any party would want to intentionally destroy a retirement program meant to benefit the elderly is beyond me. Such political claptrap makes me glad I'm an economist. Granted, politics is a game with its own rules and incentives, and people will rationally play by those rules for political gain, but such political role-playing certainly complicates matters, at best, and makes for bad policy, at worst.Maybe one way to help avoid ad hominem attacks and political labeling would be to recast the Social Security question from one of reform to one of reconstruction. Let's stop talking about reforming Social Security -- let's rebuild it. In other words, if we could wipe the slate clean, what kind of government retirement program would we build from scratch today? It's one thing to snipe at new proposals, but it takes a plan to beat a plan, and I'm willing to bet that the best minds of both political parties, given such a charge, would not come up with a government retirement program as it currently exists.
Read the entire piece. Ed Prescott is a true clear thinker.
Posted by Tom at 6:30 AM | Comments (0) | TrackBack (0)
WSJ profiles the Texas Pacific Group
This Wall Street Journal ($) article profiles the Texas Pacific Group, the Fort Worth-based investment fund founded by former bankruptcy lawyer David Bonderman and business whiz Jim Coulter in 1993.
Originally established to invest in and restructure Continental Airlines to avoid a third bankruptcy case for the airline, TGP has raised over $15 billion, with which it has bought control of companies ranging from Continental to the clothing retailer J. Crew to the Enron's Northwest pipeline subsidiary, Portland General Electric. TGP is now one of the busiest and most-successful private-equity boutiques, controlling companies with combined annual revenue of more than $40 billion. Before fees, TGP's return to investors have averaged 55% annually.
Interestingly, TGP's success is directly tied to its policy of never hesitating to take on troubled companies that its competitors avoid. Moreover, despite its strong reputation and track record, TGP prefers to play behind-the-scenes -- it is so invisible that it does not even have a Web site.
"The market often thinks we are crazy when we invest," Mr. Coulter told the WSJ. "We have, however, made a decent living proving the market can be wrong."
Posted by Tom at 5:36 AM | Comments (0) | TrackBack (1)
The mismanagement of the Houston Rockets
Although I have followed basketball most of my life, I find it difficult to generate any enthusiasm for the Houston Rockets.
It has not always been that way. I moved to Houston in 1972 at about the same time as the Rockets franchise moved to Houston from San Diego, so I have always felt a connection to the club. As noted in this earlier post, my late father and I used to attend Rockets games regularly, even back before the Rockets had their own arena. Until 1975, the Rockets played mostly at Hofheinz Pavilion on the University of Houston campus.
Then, in 1994-5, the magnificent Hakeem Olajuwon led the Rockets to two straight NBA titles, the second of which was achieved with the help of local legend Clyde Drexler, who originally burst on the scene with Olajuwon on the University of Houston's memorable Phi Slama Jama teams from 1982-84. With the demise of the Oilers before their exodus to Nashville, and before the Biggio-Bagwell era of the Stros led to multiple MLB playoff appearances, the Rockets were the toast of the town for most of the 1990's.
However, despite the two NBA titles, Rockets' management has always had a curious tendency to make poor personnel decisions. For example, after it was clear that Olajuwon would be a far better player than former number one draft pick, Ralph Sampson, the Rockets delayed trading Sampson until his value had eroded to the point that they could only get Sleepy Floyd and the eminently forgettable Joe Barry Carroll in return.
Even more galling is the fact that Rockets management overlooked talented local players such as Ricky Pierce (Rice), Bo Outlaw (UH), Rashard Lewis (Alief Elsik HS), and Damon Jones (UH), the last three of whom could be playing significant roles on the current Rockets club.
To make matters worse, the Rockets management decisions over the past several years have gone from dubious to just plain horrible. First, they used a second overall pick in the NBA draft on Steve Francis -- a good player who has limitations that will keep him from ever achieving elite stature in the NBA -- who they proceeded to trade over this past offseason to Orlando as a part of the deal for the overrated Tracy McGrady.
Rockets management used another number one draft choice on power forward Eddie Griffin, who was more interesting in the daily police report than the sports section during his short stay with the club. Finally, Rockets management either gave or acquired expensive long term contracts on such mediocre role players as Matt Maloney, Moochie Norris, Brent Price, Maurice Taylor, Kelvin Cato, Juwan Howard -- the list of bad personnel moves just goes on and on.
Comparing the public's waning interest in the Rockets to the popularity of the Texans, one Houston businessman put it to me in this way: "How would you like to be trying to sell luxury suites to the Toyota Center?." Had Rockets management not at least had the common sense to draft and sign Yao Ming, things might be utterly hopeless at this point.
So, it is against this backdrop that Peter Vecsey, the longtime NBA columnist based in New York, absolutely lays the wood to Rockets management over the team's latest move:
[I]t's beyond comprehension what [Rockets General Manager Carroll] Dawson and [Rockets coach] Jeff Van Gundy are thinking.Acquiring [New Orleans Hornets guard David] Wesley, 34, isn't as irrelevant as the Mavericks swapping Dan Dickau (again, at least the Hornets got potential) for dead end Darrell Armstrong, but it's not much better. . . Wesley will take shots away from Tracy McGrady and Yao Ming, and maybe even Hakeem.
. . . Wesley doesn't loosely qualify as a pure point guard. Wherever he's roamed he's been a shoot-first, pass-as-a-last-resort type guard. Meanwhile, Jackson's a deadlier shooter. Moreover, Wesley doesn't give it up. I'll say! He wouldn't even make a pass at Kobe's wife.
If Wesley's arrival in Van Gundy's starting backcourt isn't opaque enough, this is the worst he's played since the bad old days in New Jersey and Boston, his first two pro seasons.
And Vecsey goes on to point out that the Wesley deal isn't the only bad one the Rockets have made lately:
Not to say Wesley, even in his current state of disrepute, isn't an improvement on what the Rockets have on playmaking patrol. On second thought, I will say it; at best, he's a Bob Sura clone and substantially superior to Charlie Ward, whose game is so shabby four houses of worship refused him sanctuary.These are the two pointless guards management chose to sign last summer as free agents to "complement" Tyronn Lue, exchanged last week for Jon Barry, whose poisonous attitude and bad mouthing of coaches when not playing has led to his last three change of addresses.
Obviously, Van Gundy had some say regarding the recruitment of his perennial pet mistake. Ward got $1.7M and $1.8M guaranteed with a $2.04M team option. Why wait, Jeff? Pick it up right now. Nobody else was offering more than a 10-day contract. But Carroll, who helped Rudy Tomjanovich assemble Houston's two title teams ('94-'95), has the (last) sway.
Carroll has been groping since, overpaying ineligible receivers as if he were bidding against Warriors whiz Chris Mullin. Maurice Taylor, Shandon Anderson, Howard Eisley, Matt Maloney (on the Rockets' cap this season, his last, at last, for $3.237,250), Brent Price and Moochie Norris were all rewarded with senseless long-term contracts.
Sura was the latest to strike it rich without earning it, unless you deem last season's stats (7.5 points, 2.9 assists, 1.3 turnovers and 41 percent from the field) for the hopeless Hawks noteworthy. Thanks to the Rockets' tainted top talent scout, owner Les Alexander owes the 10-year rent-a-wreck $3.2M/$3.5M/$3.8M this year and the next two . . .
Thanks to Carroll (Van Gundy, too), the Rockets are being forced to restock, if not rethink. That might be asking too much.
So, Rockets owner Les Alexander is in a tough spot. Both of Houston's other major professional teams and their owners are far more popular among Houstonians than the Rockets and Alexander. While the Texans and Stros play in front of record crowds, the Rockets are regularly having trouble drawing 10,000 people to their games. Although I am a regular target of the Rockets' season ticket sales staff, I haven't attended a game in years and have little interest in doing so. Moreover, given the Rockets management's dubious track record in player evaluation, it's hard to be optimistic about the club's prospects. Yao and McGrady are the only players on the Rockets team around whom a playoff caliber club could be built.
Nearly a decade has passed since the Rockets' glory years. The club has declined dramatically since then, and the decline has accelerated over the past several years. Absent considerable improvement in the club's player evaluation process, my sense is that the Rockets will become even more of an afterthought on the Houston scene than they have already become.
Posted by Tom at 5:00 AM | Comments (3) | TrackBack (0)
December 28, 2004
Bernard Dow, RIP
A pillar of the Houston legal community -- Bernard O. Dow -- died on Sunday in Houston at the age of 74.
Bernie Dow was well-known in Houston for many years as one of the leaders of the real estate bar. In addition to being a first rate legal talent, Bernie was a gracious and courteous man who was a joy to be around regardless of whether he was on your side of the deal or not.
Funeral services will be held today at Congregation Beth Yeshurun, 4525 Beechnut, in Houston at 2:00 pm.
Posted by Tom at 10:17 AM | Comments (0) | TrackBack (0)
Bill Hinson, RIP
The Rev. William H. "Bill" Hinson, a nationally known Methodist preacher who rebuilt Houston's First United Methodist Church, died Sunday in Huntsville, Alabama at the age 68.
Reverend Hinson was a magnificent public speaker and a major spiritual presence in downtown Houston from 1983 through 2001. He will be sorely missed. Funeral services will be at 2 p.m. today at Huntsville's First United Methodist Church. Memorial services in Houston will be at 1 p.m. Saturday at First United Methodist Church downtown, 1320 Main, and 4 p.m. Sunday at the Westchase campus.
Posted by Tom at 6:51 AM | Comments (1) | TrackBack (0)
IRS Code overhaul being placed on backburner
When my Republican friends ask me why I am not a Republican (I am assiduously independent politically), I pass along to them articles such as this.
Posted by Tom at 6:20 AM | Comments (0) | TrackBack (0)
The Las Vegas Monofail
Houston's light rail boondoggle has been the subject of several previous posts here. Given that misery loves company, this Washington Post article provides Houstonians with some comfort that Las Vegas may have managed to generate an even bigger rail boondoggle than Houston's:
When it debuted in mid-July, this city's sleek $650 million monorail was supposed to be the envy of the nation, a high-tech public transit system paid for without taxpayer money that would be so popular it could even turn a profit.But during a busy convention season, bits and pieces of the trains started falling off, potentially endangering anything below, and the system was shut down indefinitely for major repairs. By Thanksgiving, newspaper cartoonists and tourists alike were dubbing it "monofail" and deriding the futuristic cars sitting idle on the costly tracks.
After being closed for 3 1/2 months, at a cost of more than $9 million in fare revenue, the system reopened over Christmas weekend, just in time for Las Vegas's busiest tourist week of the year. It was a Christmas gift from Clark County officials to monorail operators who hope to erase the memory of one of the city's most humiliating and expensive debacles.
However, the Las Vegas monorail has an interesting characteristic that is not shared by most rail systems -- it was not built with government funds and is not designed for commuters:
Unlike any of the nation's other transit systems, the Las Vegas Monorail is not designed to aid local commuters or even to alleviate roadway congestion. The traffic reduced by this train is in the casino corridor, making visitors its chief beneficiary.
The Las Vegas Monorail deal is unique . . . Transit Systems Management is a private entity that reports to the Las Vegas Monorail LLC, a board appointed by the governor. . . it is largely a privately operated venture funded by construction bonds sold to investors using the state's bond rating but with debt insurance so Nevada taxpayers are not liable in a default.
Nevertheless, the ubiquitous governmental subsidy of the system appears to be on the horizon:
[F]ederal and county funds will be used for future legs of the monorail -- including a $450 million, 2.9-mile stretch to the downtown casino center northeast of the Strip, planned to open in 2008 but now pushed back by the closure. The monorail also is slated to be extended to McCarran International Airport to the south by 2012, using taxpayer money.
Thus, as with publicly-financed stadiums, the scam of these publicly-financed rail systems lives on because the benefits of light rail are highly concentrated in a few interest groups such as elected officials, environmental groups, labor organizations, engineering and architectural firms, developers and regional businesses. On the other hand, the costs of such systems are widely dispersed among the general population. Consequently, the many who stand to lose will lose only a little while the few who stand to gain will gain a lot.
This is why a politically savvy minority can con a large group of taxpayers facing relatively small costs into voting for an uneconomic rail system based on perceived benefits such as helping the poor, reducing congestion and pollution, and fostering development. Even though these benefits are exaggerated, it is usually not worth the relatively small cost per taxpayer for most taxpayers to spend any substantial amount of time lobbying against the cost-ineffectiveness of the rail system. With political leadership usually more interested in reading tea leaves than balance sheets and pro forma operating statements, these uneconomic rail systems just continue to perpetuate like a bad virus.
Of course, if other public projects are proposed where the overall costs outweigh benefits, then the small cost to the taxpayer per project could add up to quite a hefty boondoggler�s bill after awhile. Las Vegans should think about that as they consider publicly financing both the extensions of the monorail and a stadium to attract a Major League Baseball team.
Posted by Tom at 5:36 AM | Comments (0) | TrackBack (0)
Put US Airways out of its misery
The airline industry in the United States is beset with an oversupply of airlines, a number of which have been wallowing in chapter 11 while unsecured creditors try to come to terms with the fact that their claims will never be paid. Here are prior posts from over the past year that examine the battered condition of the U.S. airline industry.
But US Airways Group Inc. may have done the rest of the American airline industry a favor -- its management and employees outraged thousands of its customers by providing inadequate staffing, canceling flights and losing large amounts of luggage over the hectic holiday weekend.
US Airways pulled this stunt while operating in a chapter 22 bankruptcy case that it filed earlier this year after emerging from its prior chapter 11 case less than two years ago. While a big winter storm in the Midwest and Northeast complicated travel, US Airways' incredibly poor performance alienated thousands of customers, many of whom will never even consider a US Airways flight again. Already faced with crucial financial deadlines in its bankruptcy case for reducing labor costs and persuading various lenders to provide additional forbearance, US Airways' weekend performance should be the straw that breaks the camel's back and pushes the company into a liquidation.
For its part, US Airways blamed more than 450 canceled weekend flights and thousands of pieces of stranded luggage on the winter storm and higher-than-usual numbers of sick calls during the crucial travel period. Over the weekend, US Airways' flight-attendant sick calls ran around 300 a day instead of the usual 100 and that staff shortages were common among ramp workers at its big Philadelphia hub. As a result, unclaimed baggage continued to sit at Philadelphia International Airport and Washington's Reagan National Airport, although the carrier had fewer than 1,000 pieces of luggage left to deliver on Monday, down from a peak of 10,000 lost bags over the weekend. The federal Transportation Department has already commenced an investigation into whether the staff shortages were a deliberate attempt by employee groups to undermine US Airways' operations over the holiday weekend.
Is there any compelling reason for US Airways to continue operating?
Posted by Tom at 4:45 AM | Comments (0) | TrackBack (0)
December 27, 2004
Updating the Yukos case -- Rosneft debt downgraded
OAO Rosneft, the Russian government-controlled oil company that has bought OAO Yukos' Yuganskneftegaz ("Yugansk") huge oil unit, has been put on credit watch by Standard & Poor's Ratings Services in a quintessentially Western financial assessment of the riskiness of the deal.
S&P observed that were "major uncertainties regarding the financing of the acquisition and the tax and litigation risks." S&P also continued its credit watch on OAO Gazprom, the Russian government-controlled natural gas company that is scheduled to merge with Rosneft by the end of January.
Gazprom and Rosneft are coordinating the acquisition in defiance of a Bankruptcy Court's temporary restraining order in Yuko's pending chapter 11 case in Houston that enjoined firms from participating in the Russian government's auction of Yugansk to pay for alleged Yukos' tax debts. Yukos' attorneys announced in open court last week that Yukos intends to sue whoever was involved in the acquisition of the Yugansk unit. Here are earlier posts on the Yukos case and the Russian government's auction.
Inasmuch as the deadline for Rosneft's purchase of Yugansk is January 2, the S&P cautionary assessment reflects the marketplace's skepticism that Rosneft will be able to raise the billions in financing necessary to close the deal that quickly.
Posted by Tom at 7:35 AM | Comments (0) | TrackBack (0)
Criminalizing auditors out of business
As a part of a management shakeup, Fannie Mae decided late last week to fire KPMG LLP as its outside auditor after 35 years of service because its financial statements from 2001 through mid-2004 can "no longer should be relied upon."
Oh well, announcements of accounting scandals are no longer any big deal in this post-Enron era where auditors are viewed by many as business cops that go on the take to cover up financial improprieties when they get too cozy with a client's management.
However, what is not as widely reported is that Fannie Mae's decision to dismiss KPMG is providing a glimpse of the big accounting firms' increasingly precarious state of affairs. Indeed, with the firing of KPMG, it is not at all clear which big accounting firm is in a position to take on Fannie Mae as a client.
For all practical purposes, of the Big Four accounting firms -- KPMG, Deloitte Touche Tohmatsu, Ernst & Young LLP and PricewaterhouseCoopers -- Fannie Mae is left with essentially two choices: Deloitte & Touche LLP and PricewaterhouseCoopers.
Ernst & Young likely will not be the choice because it has already been advising Fannie's audit committee and management in responding to various ongoing government probes. Similarly, Deloitte will not be the choice because it has been advising Fannie Mae's chief regulator, the Office of Federal Housing Enterprise Oversight's ("Ofheo") examination of Fannie's accounting practices.
Normally, PricewaterhouseCoopers might be the choice because it does not currently provide any services to Fannie Mae. However, PricewaterhouseCoopers is the auditor for Freddie Mac, for whom it identified numerous accounting violations after replacing the criminalized Arthur Andersen LLP in 2002. Fannie Mae regulator Ofheo might not approve of both major mortgage corporations using PricewaterhouseCoopers as their outside auditor.
Consequently, the Fannie Mae situation highlights one of the largely ignored consequences of the federal government's dubious decision to prosecute Andersen out of business over its role in the Enron accounting scandal: There are simply not enough big accounting firms left to provide audit services for the big companies that need them. Complicating matters even further is that each of the Big Four are literally under siege from civil lawsuits seeking large damage awards that could cripple any or all of them.
So, we already know that the government's regulation of Andersen through criminalization of their audit services cost the marketplace thousands of jobs and one of the relatively few accounting firms that could provide the specialized services that big companies need. Now, we are coming to understand that this dubious governmental policy of criminalizing auditors may result in big companies not being able to to find auditors capable of providing adequate audit services at all.
Remember that the next time that you read a Justice Department press release touting its "success" in its prosecution of Andersen in connection with the Enron scandal.
Posted by Tom at 5:56 AM | Comments (0) | TrackBack (1)
Kellner takes over at Continental
On Dec. 31, Larry Kellner -- Houston-based Continental Airlines' president and chief operating officer -- will take over as chief executive of Continental, replacing 63-year-old CEO Gordon Bethune, the former mechanic who pulled Continental from the brink of what would have been its third bankruptcy a decade ago.
This Wall Street Journal ($) article profiles Mr. Kellner and Continental, which is the nation's fifth-largest airline with revenues of $8.87 billion over the past year. It is a good introduction to the new CEO of one of Houston's largest employers. Check it out.
Posted by Tom at 5:37 AM | Comments (0) | TrackBack (0)
December 26, 2004
2004 Weekly local football review
The Texans defense laid the wood to Jags' QB Byron Leftwich in holding the Jags' offense to 126 total yards and the Texans' much maligned offensive line sprung RB Dominick Davis for 150 yards rushing and a TD as the Texans humbled the Jags in chilly Jacksonville, 21-0. The shutout was the first in Texans' franchise history.The Texans defense gave Leftwich a concussion early in this one, and the Jags QB could never get untracked as the Texans forced three turnovers and held the Jags to 54 yards passing. Meanwhile, the Texans offense generated 333 total yards behind another average but adequate performance by QB David Carr (14-20, 122 yds., 1 TD, 2 INT). Actually, Carr's line would look better except that one of his interceptions came on a great play by Jags DB Dewayne Washington. Washington made a spectacular one-handed interception on a Carr pass that Andre Johnson probably would have taken to the house for his second TD catch of the game but for Washington's incredible play. About the only phase of the Texans' performance that was subpar on this day was the punt return team, which had one adventure after another while trying to cope with the absence of injured regular returner J.J. Moses.
The 7-8 Texans, who are clearly on a roll, could end the season with a .500 record with a win over the Browns at Reliant Stadium next Sunday. That would be quite an accomplishment for this third year franchise.
Oh, how the might have fallen. In an excrutiatingly boring game between two teams with inept offenses, Cowboys QB Vinnie Testaverde somehow three a 39 yard TD pass to someone named Patrick Crayton with 30 seconds to go to pull out the win before a feisty crowd at Texas Stadium. The 6-9 Cowboys close this disastrous season next week at the Meadowlands against the Giants, and then the off-season process of revamping the Cowboys offense begins. It will not be an easy task.
Posted by Tom at 9:41 PM | Comments (5) | TrackBack (0)
December 24, 2004
Wishing you and your family Happy Holidays and Clear Thinking from the Kirkendall Family
Posted by Tom at 11:25 AM | Comments (3) | TrackBack (0)
Is your surgeon a "Nintendo surgeon?"
Following on this earlier post about video games being used as anesthetia for young patients, several of my surgeon friends, nephews, and my two sons are going to enjoy this latest finding:
Surgeons who play video games three hours a week have 37 percent fewer errors and accomplish tasks 27 percent faster, . . [based on] observation on results of tests using the video game Super Monkey Ball.
Link hat tip to Tyler Cowen, who hilariously suggests that maybe the surgeons and the patients could play each other?
Posted by Tom at 8:53 AM | Comments (1) | TrackBack (0)
What to do with the Astrodome?
Following on this earlier post on the dilemma posed by the obsolescent Astrodome, this Richard Connelly Houston Press article does a good job of reviewing the Astrodome hotel project and the other options that are being considered.
Given the constraints posed by regular events at Reliant Stadium and the use of Reliant Park by the Houston Livestock Show and Rodeo and other conventions, retrofitting the Dome into a commercial development is not feasible. The Dome is an important part of Houston's history, but its time is passed and the nostalgia is the only productive aspect of it that remains. It's time to recognize that the only viable option is to demolish the Dome and use the valuable land for better and more productive purposes at Reliant Park.
Update: Charles Kuffner has an interesting thought on the Dome dilemma.
Posted by Tom at 7:38 AM | Comments (0) | TrackBack (1)
Updating the Yukos case -- Gazprom confirms control of Yugansk
Russian gas giant OAO Gazprom confirmed yesterday what everyone in the international oil and gas business suspected -- that it will control Yuganskneftegaz ("Yugansk"), which was formerly the main oil-production unit of OAO Yukos. Here are the earlier posts about the Yukos chapter 11 case in Houston and the Russian government's auction of Yugansk.
Gazprom's control of the Yugansk unit -- which generated 60% of Yukos' oil and gas production -- is a key development in the Russian government's plan to transform Gazprom into a major international oil and gas company on the level of Exxon Mobil Corporation and other majors.
When the Russian government announced the auction of Yugansk earlier this fall in order to fund payment of a portion of Yukos' alleged $28 billion tax debt, Gazprom -- which is 60% owned by the Russian government -- was generally considered to be the odd's on favorite to be the winning bidder at the auction. However, Gazprom's financing for its bid through Western financial institutions was undermined last Thursday by the entry of a TRO in Yukos' surprise chapter 11 case in Houston. That TRO enjoined Western financial institutions from participating in financing an acquisition of Yugansk.
Nevertheless, Russian officials scurried around last Friday and Saturday to arrange alternative financing, and Baikal Finance Group -- a new special purpose entity controlled by Russian individuals with close ties to Gazprom -- submitted the winning bid at the auction. On this past Tuesday, Russian oil company OAO Rosneft -- a Russian government-controlled company that Gazprom is acquiring in a previously announced merger -- announced that it had purchased Baikal Finance. That announcement confirmed Gazprom's effective control of the Yugansk unit.
By controlling the Yugansk unit, Gazprom adds a prodigious oil production unit to its already formidable gas production unit. Already the world's largest producer of gas, Gazprom will now become one of the world's biggest oil and gas companies with combined reserves that are about six times more than Exxon Mobil's. Russia is second in world oil production after Saudi Arabia.
Nevertheless, the Kremlin's heavy-handed handling of Yukos and its valuable Yugansk unit may have far reaching implications for Russian business interests in the international business community. The Russian government's willingness to elevate its control of Russian oil and gas interests over the promotion of Western business interests is a serious deterrent to future Western investment in Russian companies. Yukos is now the poster boy of that policy -- once a darling of Western investors, the Russian government's actions have now rendered Yukos essentially worthless. It's hard for the Moscow Chamber of Commerce to put a happy spin on that story in attempting to attract Western capital.
Moreover, Gazprom faces huge obstacles in maintaining a presence as a major oil and gas company. Although it is currently pumping huge quantities of natural gas, replacing that gas is not easy. Inasmuch as most of Gazprom's reserves are in remote regions that require technological expertise that Gazprom does not currently possess, Gazprom will face increasing production costs as it attempts to maintain or increase its production levels. During the first half of this year, Gazprom's net income fell 13% to $3 billion even though its revenue rose 12% to $15.7 billion. By way of comparison, Exxon Mobil earned $11 billion in the same period on revenue of $138 billion. Consequently, if oil and gas prices dip, Gazprom's profit margins could be squeezed even further.
Meanwhile, Houston-based ConocoPhillips announced an agreement yesterday with Gazprom to study at development of the potentially lucrative Shtokman gas field in the Barents Sea. The study will evaluate the feasibility of producting and transporting liquefied natural gas from the field to the United States and European markets.
Discovered in 1988, The Shtokman field is estimated to contain more than 100 trillion cubic feet of gas. Inasmuch as it is located approximately 350 miles off the northwest coast of Russia in the South Barents Sea Basin in water depths of 1,000 feet, the Shtokman field will require at least three or four phases for full field development.
Earlier this year, ConocoPhillips became a large equity investor in Lukoil -- another Russian oil major -- and became a 30 percent partner in another exploration joint venture with Lukoil. ConocoPhillips announced earlier this week that it is increasing its equity stake in Lukoil to 10% by the end of the year.
Posted by Tom at 6:24 AM | Comments (0) | TrackBack (0)
December 23, 2004
The amazing Cubs
The Chicago Cubs Baseball Club has always been considered somewhat of a lovable laughingstock around Chicago. Consequently, although the club's swoon in this past baseball season's National League Wild Card playoff race did not sit particularly well with Cubs fans, it was at least expected.
But according to this scathing Jay Mariotti Chicago Sun-Times article, the legendary incompetence of Cubs management may have risen to heretofore unforseen levels. Consider this snippet:
We understand the Cubs have a feeble, hapless Charlie Brown existence. We know they're battling farm animals, perpetual paranoia and turtleneck-choked fans. But if they're also so internally incompetent that they employ an unlicensed head trainer, who was ratted out by the assistant trainer just months after they fired the previous head trainer, then riddle me this, Ronnie Woo-Woo:How are they supposed to win a World Series in our lifetime? When management is appointing alleged quacks to heal injuries on a team that lost Mark Prior, Kerry Wood and too many other players to the most mysterious disabled list I've seen in sports -- remember the sneeze that toppled Sammy Sosa? -- isn't it time to dismiss the cause as hopeless and move on to junk bonds as a hobby?
Posted by Tom at 11:25 AM | Comments (0) | TrackBack (0)
Death in Texas
Sister Helen Prejean is a member of the Sisters of St. Joseph of Medaille in Louisiana. She is America's leading abolitionist with regard to the death penalty and the author of Dead Man Walking, which was made into one of the best movies about the death penalty.
In the most recent issue of the New York Review of Books, this article is adapted from Sister Prejean's new book, The Death of Innocents: An Eyewitness Account of Wrongful Executions that Random House is releasing next month. Sister Prejean sharply criticizes then-Governor George Bush's denials of clemency to a large number of Texas death row defendants in Texas, noting that he distanced "himself from his legal and moral responsibility for executions." The entire article is compelling reading, as the following excerpt reflects:
George W. Bush during his six years as governor of Texas presided over 152 executions, more than any other governor in the recent history of the United States. Bush has said: "I take every death penalty case seriously and review each case carefully.... Each case is major because each case is life or death." In his autobiography, A Charge to Keep (1999), he wrote, "For every death penalty case, [legal counsel] brief[s] me thoroughly, reviews the arguments made by the prosecution and the defense, raises any doubts or problems or questions." Bush called this a "fail-safe" method for ensuring "due process" and certainty of guilt.He might have succeeded in bequeathing to history this image of himself as a scrupulously fair-minded governor if the journalist Alan Berlow had not used the Public Information Act to gain access to fifty-seven confidential death penalty memos that Bush's legal counsel, Alberto R. Gonzales, whom President Bush has recently nominated to be attorney general of the United States, presented to him, usually on the very day of execution.[1] The reports Gonzales presented could not be more cursory. Take, for example, the case of Terry Washington, a mentally retarded man of thirty-three with the communication skills of a seven-year-old. Washington's plea for clemency came before Governor Bush on the morning of May 6, 1997. After a thirty-minute briefing by Gonzales, Bush checked "Deny" — just as he had denied twenty-nine other pleas for clemency in his first twenty-eight months as governor.
But Washington's plea for clemency raised substantial issues, which called for thoughtful, fair-minded consideration, not the least of which was the fact that Washington's mental handicap had never been presented to the jury that condemned him to death. Gonzales's legal summary, however, omitted any mention of Washington's mental limitations as well as the fact that his trial lawyer had failed to enlist the help of a mental health expert to testify on his client's behalf. When Washington's postconviction lawyers took on his defense, they researched deeply into his childhood and came up with horrifying evidence of abuse. Terry Washington, along with his ten siblings, had been beaten regularly with whips, water hoses, extension cords, wire hangers, and fan belts. This was mitigation of the strongest kind, but Washington's jury never heard it. Nor is there any evidence that Gonzales told Bush about it.
The article concludes with the following observation:
As governor, Bush certainly did not stand apart in his routine refusal to deny clemency to death row petitioners, but what does set him apart is the sheer number of executions over which he has presided. Callous indifference to human suffering may also set Bush apart. He may be the only government official to mock a condemned person's plea for mercy, then lie about it afterward, claiming humane feelings he never felt. On the contrary, it seems that Bush is comfortable with using violent solutions to solve troublesome social and political realities.
Posted by Tom at 8:36 AM | Comments (0) | TrackBack (0)
Medical Center notes 50 year anniversary of first transplant operation
On the anniversary of the first kidney transplant in Boston 50 years ago, Eric Berger of the Chronicle does a fine job in this article of reviewing the accomplishments of Houston's Texas Medical Center doctors in contributing to the advancement of transplant procedures. Inasmuch as the Chronicle does not maintain online links to many of its articles for very long, check it out soon.
Posted by Tom at 6:07 AM | Comments (0) | TrackBack (0)
Update on Landry's acquisition search
Following on this earlier post regarding Houston-based restaurant company Landry's search for acquisition targets, the Chronicle reports that the company's target is probably a Las Vegas casino and not the Stros.
Landry 's is a national restaurant company that owns and operates 300 restaurants, including Joe's Crab Shack, Rainforest Cafe and Landry's Seafood House. Landry's CEO Tilman Fertitta, who founded the company and controls about a quarter of the company's outstanding stock, is the cousin of the Fertitta family that runs Station Casinos Inc., so the gaming industry is already in the Fertitta family.
What's particularly interesting is that Landry's is dipping into the junk bond market to fund its venture into the gaming industry. Last week, Landry's priced its inaugural $450 million speculative-grade issue in the high-yield market last Wednesday, and the resulting 7.50% rate for the offering of senior notes due in 2014 was about 50 basis points more than Landry's would have had to offer if it had a track record in the high-yield market. Nevertheless, wWith that kind of yield, Landry's bond offering received a warm reception in the high-yield junk bond market.
Landry's will use $300 million of the unrestricted proceeds of the offering to pursue its new acquisition and the remaining $150 million for restaurant operations. If Landry's makes a deal for a casino, it is likely that it would return to the junk bond market for additional financing.
In addition to its junk bond financing, Landry's is also arranging a new $450 million credit facility, which consists of a $300 million revolving credit facility and a $150 million term loan.
Finance market analysts are cautious with regard to Landry's financing moves. Standard & Poor's Ratings Services assigned its 'BB-' rating and a '2' recovery rating to the $450 million credit facility, which means that the expectation is that there would be an 80-100% chance of recovering principal in the event that Landry defaults on the loan. S&P also issued a 'B' rating to Landry's $400 million junk bond offering, and an overall 'BB-' corporate credit rating with a negative outlook.
S&P assigned the junk bond offering a rating two levels below the corporate credit rating because the junk bonds are subordinate to the of substantial amount of priority debt in Landry's capital structure. S&P provided the following cautionary comment on Landry's:
The ratings reflect Landry 's participation in the highly competitive casual dining sector of the restaurant industry, its growth-through-acquisition strategy, the inherent difficulties in operating multiple concepts, a very aggressive financial policy, and the high leverage that results from the recapitalization. These risks are only partially offset by the company's established presence in the causal seafood dining sector of the restaurant industry, good locations for its restaurants, and adequate financial flexibility.
Posted by Tom at 5:28 AM | Comments (0) | TrackBack (0)
Updating the Yukos case -- Rosneft buys Yugansk unit
Russian oil company OAO Rosneft announced today that it has acquired Baikal Finance Group, the purchaser of OAO Yukos' main production unit Yuganskneftegaz ("Yugansk") at a Russian government auction last Sunday. Here are the earlier posts covering the auction and the Yukos chapter 11 case.
The Russian government controls Rosneft, so the company's acquisition of the Yugansk unit gives the Russian government effective control over a substantial portion of the Russian oil and gas industry. Yukos believes that the Rosneft acquisition is preliminary to the ultimate transfer of the Yugansk unit to Russian government-controlled OAO Gazprom. Gazprom was expected to be the primary bidder at the auction until the U.S. Bankruptcy Court in Houston issued a TRO late last Thursday in Yukos' chapter 11 case that chilled Western financial institutions that were scheduled to provide financing for Gazprom's bid. When Gazprom could not finance its anticpated bid for Yugansk, Baikal Finance stepped into the breach and emerged on Sunday as the winning bidder at the auction by posting a $9.37 billion bid.
Gazprom and Rosneft announced a merger this past September, and many analysts of the Russian economy expect that the Russian government will use Gazprom as the vehicle to create Russia's major oil and gas company. Before Gazprom's bid was undermined by the TRO, Rosneft was expected to become part of Gazprom's new oil subsidiary -- OOO Gazpromneft -- and Yugansk was to be merged into that unit.
Adding to the quickly changing events of the past week, Gazprom earlier this week announced that it had sold the Gazpromneft unit last Friday to an unidentified buyer for an undisclosed sum. Gazpromneft took part in the auction on Sunday, but did not bid.
Meanwhile, Yukos announced in a Bankruptcy Court hearing in Houston on Wednesday that it is preparing a massive lawsuit against all parties that participated in the auction in violation of the Bankruptcy Court's TRO. In that regard, Yukos accused Gazprom of violating the Bankruptcy Court's TRO by participating -- although not bidding -- in the auction of the Yugansk unit.
In rattling this litigation saber, Yukos is clearly signaling that it will attempt to put the assets of Gazprom and any Western financial institution that participated in the auction at risk. In so doing, Yukos is attempting to gain some leverage in its battle with the Russian government by chilling the market for Western financing of the Russian companies' oil and gas ventures. It is a creative strategy, but it is far too early to predict whether it will have any meaningful impact on the Russian government's conduct toward Yukos and the rest of the Russian oil and gas industry.
Posted by Tom at 4:57 AM | Comments (0) | TrackBack (0)
December 22, 2004
Sports notes on UH bball, Jackie Sherrill, golf, Mack Brown, Gene Conley and Friday Night Lights, Houston style
The Houston Cougars men's basketball team had a nice win over LSU last night, as new coach Tom Penders continues to make my post on his hiring look bad.
Meanwhile, former Texas A&M, Pittsburgh, and Mississippi State hea