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October 31, 2005

It's Alito

Third Circuit Judge Samuel A. Alito Jr. is President Bush's new nominee to replace retiring Supreme Court Justice Sandra Day O'Connor. Larry Ribstein provides an overview of Judge Alito's decisions in business cases, Orin Kerr believes that Judge Alito will ultimately be viewed as being quite similar to Justice Roberts and, thus, easily confirmed, and Doug Berman provides the early analysis of the nomination from a criminal justice standpoint.

Posted by Tom at 7:11 AM | Comments (3)

John Keegan on the Dresden firebombing

John Keegan is England's foremost military historian and, for many years, was the Senior Lecturer at the Royal Military Academy at Sandhurst. His book -- The Second World War -- is arguably the best single volume book on World War II and his book The Face of Battle is essential reading for anyone seeking an understanding of the history of warfare. His latest book -- The Iraq War -- was published in 2004, and here are prior posts on Mr. Keegan's views on the Iraq War. In short, when John Keegan writes about war, it is wise to take note.

Over this past weekend, over 100,000 Germans celebrated the reopening of Dresden, Germany's beautiful Baroque church -- the Frauenkirche -- which had laid in ruins for almost 60 years as a bleak reminder of the Allied fire-bombing raids of February 1945 that killed 25,000 people and incinerated Dresden's old city. The Dresden firebombing remained largely unnoticed outside of military circles until the early 1970's when it formed the basis of Kurt Vonnegut's haunting novel, Slaughterhouse Five, which in turn formed the basis of the 1972 George Roy Hill movie of the same name.

In this Daily Telegraph op-ed, Mr. Keegan uses the occasion of the Frauenkirche celebration to review the Dresden firebombing and to observe how Allied terror bombing during World War II raises difficult issues in these times of widespread civilian terror bombing against Americans and citizens of Allied countries. As with all of Mr. Keegan's writings, the entire piece is well worth reading, and his conclusion gives you a taste of his special perspective:

In the last, remembering Dresden forces one to recognise that there is nothing nice or admirable about any war, and that victory, even a victory as desirable as that over Nazi Germany, is purchased at the cost of terrible human suffering, the suffering of the completely innocent as well as of their elders and their parents in arms. It is right to remember Dresden, but chiefly as a warning against repetition of the mass warfare that tortured Europe in the 20th century.

Posted by Tom at 6:11 AM | Comments (0)

An interesting English tradition

As noted earlier here and here, I enjoy the British tradition of witty obituaries, which often provide a hilarious review of the failings, idiosyncracies and peccadilloes of the deceased.

In that regard, this Wall Street Journal ($) article examines the tradition of Cambridge University's King's College in regard to publishing obituaries of its alumni that, as the article puts it, reflect "an anthropological study of the eccentric ways of the British intelligentsia." For example, the Journal describes the obituary of the late novelist Simon Arthur Noel Raven, whose writing was described by some as "smut for its own sake":

At boarding school, "eventually his long-suffering headmaster had enough of his complete disregard for the school moral code and he was expelled in 1945 for what was euphemistically called 'the usual thing.'" Mr. Raven nevertheless secured admission to Cambridge, where, "although his preference was for boys and young men," he dabbled in heterosexuality and sired a child by a fellow student, the alumni report said. "He agreed to marry her to placate her family, on the understanding that he would never have to live with her."

They divorced eventually, and he paid for their son's education. "He did not always, however, give [the boy's mother] the help that she needed. Famously, she once wired him when she was desperately short of cash, saying 'Wife and baby starving send money soonest.' He characteristically replied 'Sorry no money suggest eat baby.' "

Enjoy the entire piece.

Posted by Tom at 5:23 AM | Comments (0)

Wal-Mart's health care finance problem

One of the often overlooked historical aspects of America's health care finance crisis is that employer-based medical insurance was largely non-existent until World War II. During the war, governmental wage and price controls prompted employers to offer medical insurance as a means to attract scarce labor without violating the wage controls. Employers quickly realized that such insurance was a cheaper way to attract labor than increasing wages, so the concept of employer-based medical insurance became a standard component of many American employers' compensation plans for employees over the past generation.

Well, as this NY Times article notes, the market distortion of substituting medical insurance for direct employee compensation has generally benefitted employers, but now rising health care costs are making employer-based medical insurance more expensive than simply paying employees direct compensation. The Times article notes the following about Wal-Mart, which employs a large number of low wage earners:

The Wal-Mart work force reflects a growing fear of many employers that the people who work for them are increasingly at risk for health problems. Many of Wal-Mart's employees are obese, the company says, and a result is rapidly rising numbers of cases of diabetes or heart disease. The prevalence of these diseases among Wal-Mart employees is increasing much faster than the national average, it says.

"The low-income population generally is not as healthy and does not engage as much in preventive care," said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured. A risk that a company like Wal-Mart faces, especially when it competes with smaller retailers that offer no insurance at all, Ms. Rowland said, is attracting too many workers who want the job primarily for the health coverage.

Inasmuch as Wal-Mart pays its employees relatively low wages but provides a good employee medical insurance plan, the company is experiencing what economists call "adverse selection" -- as the value of the wage component of the Wal-Mart employee compensation package has declined relative to the value of the health insurance component, Wal-Mart is attracting an unhealthier class of workers who apply for job at Wal-Mart primarily for the generous medical insurance. Wal-Mart's management is attempting to reverse this trend by seeking to attract a healthier type of worker who is not seeking the job primarily for the medical insurance.

Nevertheless, the core of Wal-Mart's problem is the market distortion in the employee compensation system that derives from substituting employer-based medical insurance for direct compensation. Couple that market distortion with the equally misleading economic impact of having third-party insurers pay for most health care choices and you have gone a long way towards understanding the basis of America's flawed health care finance system. Alex Tabarrok has more on the issue over at Marginal Revolution.

Posted by Tom at 4:29 AM | Comments (8)

October 30, 2005

2005 Weekly local football review

Texans 19 Browns 16.

That's a huge sigh of relief that you are hearing from the South Main area as the Texans (1-6) avoided the real possibility of a 0-16 season with their win over the equally hapless Cleveland Browns (2-5). Amazingly, the Texans were able to pull out this field goal battle with only 237 yards of total offense, including 120 yards passing on David Carr's 10 completions on 20 attempts. Let's just say that I don't think that's a prescription for another victory next week in Jacksonville against the 4-3 Jaguars.

Cowboys 34 Cardinals 13.

The Cowboys (5-3) continued to get stellar defensive play as they held the Cardinals (2-5) to just over 200 yards total offense in cruising to an easy victory. The Pokes needed a win in this one as they head into their bye week, after which they have to play three games in 11 days, including tough ones at Philadelphia against the Eagles (4-3) and at home against the Broncos (6-2).

Texas Longhorns 47 Oklahoma State 28

The 8-0 Horns fooled around for a half, but then Vince Young ran 80 yards for a touchdown on the first play of the second half and the Horns were off to the races against Okie State (3-5). The next junior varsity games for the Horns are at Waco against Baylor (4-4) and at home against Kansas (4-4). Then, it's the Horns rivalry game against A&M (5-3) on the day after Thanksgiving and hopefully a date in the Rose Bowl against USC for the national championship. Stay tuned.

Iowa State 42 Texas Aggies 14

That sinking sound you hear is coming from College Station, where the Aggies (5-3) were clobbered by an underrated Iowa State (5-3) team and now face games at 7-1 Texas Tech (the current 16.5 point line in favor of Tech is a good bet -- for Tech!), at Oklahoma (5-3), and at home against 8-0 Texas to close out the season. That 5-6 record that the Aggies are staring at is not what the Aggie faithful expected in Year III of the Coach Fran era. By the way, you can read about my experience trolling the sidelines in this game here.

UTEP 38 Rice 31.

The plucky Owls (0-7) scored three times after UTEP (6-1) turnovers in the second half and moved to the Miners' 3-yard line in the final minute after recovering on onside kick. But the Owls lost 2 yards on fourth down with a minute left and that iced the Owls' 13th straight loss. However, the Owls have a decent chance next Saturday at Dallas against 2-6 SMU, so keep your fingers crossed.

The Houston Cougars (4-3) were off this week and travel to Orlando next Saturday to play Central Florida (5-3). And, after a brief respite, Kevin Whited is back to summarizing all of the Big 12 Conference games from the past week over at PubliusTX.net.

Posted by Tom at 8:48 PM | Comments (2)

An afternoon on the sidelines at Kyle Field

On Saturday, I spent a beautiful Texas fall afternoon on the sidelines of Kyle Field in College Station to watch the Texas A&M Aggies host the Iowa State Cyclones in a Big 12 Conference football game.

Iowa State head football coach Dan McCarney and I grew up together in Iowa City, Iowa, where we were teammates on a championship high school football team at City High in 1970. We have remained close friends over the years, and so I have tried to attend each game in Texas that Iowa State plays since Coach Mac became head coach at Iowa State in 1994, and Coach Mac always comes through with a sideline pass for me to each of the games. The following are a few photos that I took Saturday afternoon as the 10.5 point underdog Cyclones steamrolled the Aggies 42-14 in front of over 86,000 rather disheartened Aggie fans.

The Corps "Steps Out". One of many fabulous traditions at A&M on gameday is when the A&M Corps of Cadets "Steps Out" of the Corps' dorm about two blocks away from Kyle Field. Precisely one hour and 45 minutes before kick-off, a cannon blast signals that the outstanding Fightin' Aggie Marching Band is beginning to lead the various Corps squadrons out of the dorm area as they parade down a boulevard to Kyle Field. Thousands of Aggie fans stand along the parade route and cheer the Band and the Corps members as they march toward Kyle Field. When they reach Kyle Field, the band and the Corps march into the stadium before the watchful eye of visiting dignitaries on a reviewing stand, which yesterday included former President Bush and Texas Governor Rick Perry. "Step Out," the parade, and "March In" are truly among the great college gameday traditions in all of college football.

Coach Mac chats with Coach Fran. Coach Mac and Texas Aggie Coach Fran (Dennis Franchione) engage in the traditional head coach pre-game chat at mid-field as both teams go through their pre-game warmups.

Coach Mac and Coach Fran are about the same age, but Coach Mac has been coaching in the Big 12 far longer (11 seasons) than Coach Fran, who is in his third season at A&M. Inasmuch as Coach Fran and his squad are going through a tough season, he's probably passing along his troubles to Coach Mac, who has plenty of experience in enduring tough seasons. By the way, that fellow below the two coaches is fixing something on the turf rather than tying Coach Mac's shoe.

An old quarterback shows he can still throw the pigskin. One of Iowa State's associate head coaches is Terry Allen, shown here throwing pregame warmup tosses to the Iowa State receivers. Terry's family lived across the street from my family while we grew up in Iowa City, although Terry is several years younger than Coach Mac and me, so he did not play ball with us in high school. However, Terry was quite a player, and he went on to be the starting quarterback for three seasons in the late 1970's for the University of Northern Iowa, where he eventually became a successful head football coach. Terry parlayed that success into the head coaching job at the University of Kansas during the early part of this decade, but he -- like many other coaches at that football coaching graveyard -- was fired after just a few seasons. Coach Mac hired Terry immediately and he has become a key member of the Iowa State staff.

Kyle Field is a very intimidating place to play. This is a photo of one of Iowa State's first plays during the game, which prompts me to comment on what it's like on the sidelines of Kyle Field when the visiting team has the ball. To put it gently . . .

IT IS VERY LOUD!

One of the A&M traditions is the 12th Man, which means that all students and many other Aggie fans stand during the entire game and make an incredible amount of noise while the visiting team is attempting to call its signals at the line of scrimmage. The effect of this din is disconcerting, to say the least, and most teams end up relying on hand signals to their wide receivers because of their inability to hear the signals that the quarterback is calling at the line of scrimmage. As a result, more illegal procedure penalties are generated from opponents at Kyle Field than any other venue in college football.

A key play in the game. Although I did not realize it when I was taking this picture, this play turned out to be a key one during the game. With A&M trailing 14-7 late in the first half, A&M's talented quarterback Reggie McNeal is dropping back to pass on the play, but is flushed by the Iowa State defensive line. The fleet McNeal took off done the far sideline, then cut back across the field and raced 65 yards for an apparent touchdown, except for those dreaded words . . .

"There was a flag on the play."

As you can see from this photo, directly in front of McNeal, an Aggie offensive lineman is holding Iowa State defensive lineman Nick Leaders, who has beaten the Aggie lineman badly on the play. That indiscretion cost A&M a game-tying touchdown and, frankly, the Ags never recovered.

The Fightin' Aggie Marching Band lines up for its halftime performance. The Aggie Marching Band is one of the great bands in college football, and this picture shows the band lining up for their halftime performance directly under A&M's "Zone" facility that looms over Kyle Field's north end zone. When the opposing team has the ball and is near the "Zone," the noise down on the field is absolutely deafening. A&M's master facility plan projects that a similar facility will eventually be built in the south end zone of Kyle Field, which will raise the stadium's capacity to 110-115,000.

The Aggie Band specializes in precision military marching drills and patriotic music (think John Phillip Sousa on steroids). My favorites -- the theme to the movie Patton, Noble Men of Kyle and the Strategic Air Command March.

The Tuba Pivot. A favorite part of the Aggie precision marching drills is the pivot that the tuba players make while turning during the drills. You have to see the Tuba Pivot to appreciate it fully, but take it from me -- the Aggie Tuba Corps is one precision outfit!

During the days of the now defunct Southwest Conference, the Aggie Band used to come to Houston each season when the Aggie football team played either Rice or the University of Houston. During those days, the Aggie Band and the Corps of Cadets used to parade down Main Street in downtown Houston the morning of their game against either Rice or UH, and the parade was always well-attended. That's a part of Texas football culture that I miss.

The Final Score. The scoreboard tells the story as the Cyclones beat the Aggies for the first time in eight games between the two schools. Inasmuch as it's highly unusual for Iowa State to beat A&M -- and even more unusual to hammer them at Kyle Field -- Coach Mac came over to me as the final seconds on the clock were winding down to commiserate for a moment before he had to rush off at the end of the game for the midfield handshake with Coach Fran, post-game interviews and his many other responsibilities.

It was a heartwarming moment as I embraced my old friend on the sidelines and congratulated him on his first win over the Aggies until . . . the Iowa State players decided to give Coach Mac the traditional celebratory ice-water dousing at that particular moment! As we both got drenched, Coach Mac and I had a good laugh as we parted, and it was all-in-all a satisfying -- albeit wet -- post-game ride back home to The Woodlands.

Posted by Tom at 6:42 PM | Comments (3)

October 29, 2005

Is this all you've got?

This OpinionJournal editorial does an excellent job of sizing up Special Counsel Patrick Fitzgerald's indictment (pdf here) yesterday of Vice-President Cheney's Chief of Staff, I. Lewis "Scooter" Libby:

Sometime in May 2003, or slightly before, Nicholas Kristof, a columnist for the New York Times, was informed of Joe Wilson's 2002 trip to Niger to investigate claims that Saddam Hussein had attempted to buy yellowcake there. Mr. Kristof wrote a column, and Mr. Libby began to ask around, to determine why a Democratic partisan had been sent on such a sensitive mission in the run-up to the Iraq war. He allegedly learned in the course of his inquiries that Mr. Wilson's wife worked for the CIA.

Mr. Fitzgerald alleges that Mr. Libby informed Judith Miller of the New York Times about Mr. Wilson's wife in June, but she never wrote it up. In the meantime, Mr. Wilson went public with his own account of his mission and its outcome, without reference to his wife's employment or possible involvement in his trip.

Mr. Libby also spoke to Mr. Cooper of Time about it, who did write it up, but only after Mr. Novak's column had run. In this same time period, he had a conversation with Mr. Russert, which may or may not have covered Mr. Wilson and his wife, depending on whom you believe.

So, we are left with this. Did Mr. Libby offer the truth about Mr. Wilson to Mr. Cooper "without qualifications," as Mr. Fitzgerald alleges, or did he merely confirm what Mr. Cooper had heard elsewhere? Did he, or did he not, discuss Mr. Wilson with Tim Russert at all?

So, let's review what we have here. Charges based on then innocuous discussions that occurred two years ago. Now, prosecutor Fitzgerald is pursuing a 30-year jail term and $1.25 million in fines against Mr. Libby based upon alleged inconsistencies between Mr. Libby's recollection of those discussions and those of the other participants in them.

Suffice it to say that I've seen stronger cases.

Finally, Ellen Podgor provides this good technical analysis of the perjury charges in the indictment.

Posted by Tom at 8:15 AM | Comments (8)

October 28, 2005

Richard Smalley, R.I.P.

World-renowed Rice University chemistry, physics and astronomy professor, Richard E. Smalley, died today at the age of 62. The Chronicle's Eric Berger provides an excellent obituary of Professor Smalley, who was one of the best of Houston's numerous fine scientists. Among his numerous awards, Professor Smalley won the 1996 Nobel Prize in Chemistry.

Eric's obituary passes along a fine anecdote about Professor Smalley's Nobel award banquet that had been passed around Houston professional and business circles for years:

The chairman of Rice's board of governors at the time [that Smalley was awarded the Nobel], William Barnett, recalled Smalley agonizing over whom to give the 10 tickets he had received for the awards banquet in Sweden. Barnett said Smalley gave two to his son, Chad, who later told his father he was bringing his mom, one of Smalley's ex-wives. Smalley had three.

"I think his reaction was, 'Oh lord, now I've got to ask the other one,'" Barnett said. "The Swedes were so taken with this, the joke going around the banquet was that they were going to tell Rick, if they had only known this in advance, they would have awarded him the peace prize as well."

Posted by Tom at 4:41 PM | Comments (0)

Protectors of the Krispy Kreme Brand

The travails of Krispy Kreme over the past couple of years have been a common subject of posts here, so it is worth noting that some Southern California-based Krispy Kreme franchisees have started a blog about the company and its problems called Protectors of the Krispy Kreme Brand (introductory post here). Gotta love those Spiderman Krispy Kreme doughnuts! ;^)

Posted by Tom at 11:16 AM | Comments (0)

Hold on to your wallets

Almost on cue with the latest round of energy company earnings announcements, our political leaders in Washington -- both Democrats and Republicans -- signaled their intent to attempt to demonize the energy industry for political gain and, in so doing, make it more difficult for markets to respond to the current limited supplies of oil, natural gas, and refined products.

This really is utterly amazing. Sen. Bill Frist (R., Tenn.), the Senate majority leader, asked the chairmen of three Senate committees to investigate high energy prices and declared that he might support a federal anti-price gouging law.

Meanwhile, Energy Secretary Samuel W. Bodman advised a Senate committee that the Bush administration is considering taking steps to create a stockpile of refined products like gasoline, diesel and jet fuel that would require the industry to set aside stocks of a variety of fuels that could be tapped in future crises. In other words, Secretary Bodman is showing government's usual tendency to make matters worse and more expensive by buying limited supplies of oil products at their currently high price. And this policy is supposed to be a stabilizing force in the energy market?

Mr. Bodman did recommend that the energy industry increase its spending on refining to ease the capacity crunch that has contributed to the recent increase in prices for refined products. However, at almost the same time, Senate Democrats on the Senate Environment and Public Works Committee engineered a deadlock on that committee over a Republican proposal to streamline federal and state permit procedures for companies that want to build refineries or expand plants.

Finally, despite the cyclical nature of the energy business and the need for reinvestment of energy company profits into drilling and exploration for new supplies of energy, politicians are already talking about instituting a windfall profits tax on the industry to make such investment even more expensive and difficult.

Hopefully, our pocketbooks can survive all this nonsense.

Posted by Tom at 5:56 AM | Comments (4)

Epstein on Bork's Originalism

In this previous post, former Solicitor General and unsuccessful Supreme Court nominee Robert H. Bork provided a handy shorthand description of the judicial philosophy of originalism. In a letter to Wall Street Journal's ($) editor yesterday, Richard A. Epstein -- the James Parker Hall Distinguished Service Professor of Law at the University of Chicago and the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution (previous post here) -- provides an equally tidy explanation of the primary criticism of the originalist approach to interpreting the Constitution:

[Mr. Bork] is wrong to assume that his brand of originalism is the preferred form of constitutional interpretation, much less the only means to combat inherent tendency of left-wing judges to improperly expand the scope of judicial power.

First, the best modes of interpretation do not rely on an assortment of secondary texts that detract attention from the text and structure of the Constitution. Why buy into endless disputes over which newspaper said what when standard dictionaries and contemporary usage can often lead to clearer results. The best readings of the Commerce Clause take only the common usage of the term -- trade as opposed to manufacture -- without reliance on the words of a single drafter or ratifier. It was for good reason that the ratification debates were not published when the Constitution was drafted. It had to stand on its own.

Second, structural considerations often require us to go beyond the text, but in principled fashion. The Constitution prohibits a tax on imports. Chief Justice Marshall rightly extended that protection to cover taxes on importers designed to circumvent a rule intended to preserve a national market. He was right to do so without any explicit blessing from the Framers.

Finally, there is no necessary reason to think that faithful constitutional interpretation leads to an expansion of legislative power. That is not true with the Commerce Clause, nor should it be true in dealing with such matters as economic regulation or abortion. Mr. Bork is much closer to the mark on abortion in Roe v. Wade because any sensible interpretation of the police power (not found in the written Constitution) would include the protection of innocent life. But he is wrong on the 10-hour work-day in Lochner v. New York, where the police power should not be allowed to advance protectionists' economic regime.

Our Constitution is a charter for economic liberty and limited government. It contains no full-throated endorsement of popular democracy at either the federal or state level.

Thus, in matters of Constitutional interpretation, be wary of labels. A strict originalist approach that overly restricts judicial activism can lead to as much injustice as the opposite extreme. Indeed, a lack of judicial activism has been at the root of the appalling lack of judicial intervention that we have seen over the past several years as numerous judges have failed to uphold the Constitution's balance of power and rein in the executive branch's dubious criminalization of business during the post-Enron era.

Consequently, criticism of judicial activism and advocacy of strict constructionism is often merely a political front for deference to the abusive exercise of state power. For example, the Supreme Court's recent unanimous decision in the Arthur Andersen was judicial activism being used to right an injustice, albeit better late than never. On the other hand, the Supreme Court's recent decision in Kelo v. The City of New London could easily be construed as an example of originalist deference to legislative action where judidial activism was desperately needed to prevent the courts from eviserating the text and purposes of the "Public Use" Clause.

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

Well, at least no one outside Houston and Chicago watched

The White Sox's four-game World Series sweep over the Stros generated the lowest television ratings on record for the Series, and resulted in the Fox television network not meeting its ratings guarantees to sponsors. The World Series averaged about 17.2 million viewers and drew a record low rating of 11.1 (A rating point represents approximately 1.1 million homes), which is a 30% decline from the 25.4 million viewers and 15.8 rating that the Boston Red Sox-St. Louis Cardinals Series averaged last season.

Frankly, the numbers aren't particularly surprising. Neither the White Sox nor the Stros have a national fan base such as Fox enjoyed in last season's Series with the Red Sox. Moreover, the Stros' Roger Clemens -- who pitched a total of two innings -- was the only well-known star in the Series. Finally, comparing ratings from recent Series with those of even more than five years ago can be a bit similar to comparing apples and oranges. The increase in television entertainment choices has diluted ratings for all special programs such as the Series, reflected by the fact that the ratings for this Series were still 50% higher than the prime time average of NBC, CBS and ABC combined this season. Interestingly, Fox was still able to charge $350,000 for each 30-second commercial spot this season, which was up from $330,000 it charged last season.

Posted by Tom at 5:00 AM | Comments (1)

October 27, 2005

Former Seitel CEO sentenced

The former CEO of Houston-based geophysical seismic company Seitel, Inc. -- 58 year old Paul Frame, Jr. -- was sentenced today in federal court to over five years in federal prison for converting $750,000 from the company to fund a settlement of a civil lawsuit filed by a former fiancee. Here are previous posts on Seitel and Mr. Frame's case, and here is the Chronicle story on the sentencing.

Posted by Tom at 1:39 PM | Comments (0)

Unconstructive criticism

Kevin Whited over at blogHouston.net is one of the most insightful local bloggers on matters relating to football. In this post, he observes that John McClain -- the Chronicle's main beat writer on the National Football League for many years -- is a rarity among Houston media types in now suggesting that Houston Texans owner Bob McNair ought to fire General Manager Charlie Casserly along with Texans Head Coach Dom Capers for the Texans' miserable 0-6 start to the 2005 season. Kevin notes that Mr. McClain's criticism of Mr. Casserly is unusual in comparison to the normally fawning treatment that most local sports media types give to the personable and media-savvy Texans General Manager.

Kevin makes a valid point, but what I would like to know is Mr. McClain's explanation for his sudden turnabout -- as late as the pre-season this year, he was also one of the local media types who was fawning over Mr. Casserly and the Texans. For example, check out the following from Mr. McClain's July 24, 2005 column entitled "Playoffs on minds of Texans: Players to put gear for start of camp:"

For the first time in the four-year history of the franchise, the Texans enter training camp as a playoff contender.

While it probably is unfair to expect them to win the AFC South when they never have defeated Indianapolis, it is not too much for fans to expect them to contend for a wild-card berth after the Texans swept Jacksonville and Tennessee last year on the way to a 7-9 record.

This particular article is not unusual. Mr. McClain wrote dozens of similar articles over the past four years in which he breathlessly extolled the virtues of Mr. Casserly and the Texans' front office as he trumpeted the Texans' party line that the team was becoming an NFL playoff contender. Not until the Texans began this season with one of the most devastatingly bad string of performances in recent NFL memory has Mr. McClain began to make the rather obvious point that the Texans do not have enough frontline NFL-quality players and that the players that they do have are not performing well. Ergo the criticism of Mr. Casserly and Coach Capers.

However, what I want to know is this -- how has Mr. Casserly bamboozled experts such as Mr. McClain for all this time? The Texans did not become this bad overnight, although the team did show steady improvement during its first three seasons. Where is Mr. McClain's admission that he and other "experts" at the Chronicle were wrong in gobbling up Mr. Casserly's blather over the past several years that the team was being built "the right way." Rather than taking the easy way out, I would like to read an article by Mr. McClain that is based on thorough research that details the personnel choices of Mr. Casserly, compares those choices to alternatives that were available at the time of such choices, and analyzes why the choices that were made have come together to make the Texans the laughingstock of the NFL.

That type of article is much more difficult to prepare than one that simply observes that Mr. Casserly and Coach Capers ought to be fired. However, it is a much more honest approach to the Texans and one that will contribute something constructive to an otherwise desultory season for Houston's long-suffering supporters of professional football.

Posted by Tom at 7:45 AM | Comments (0)

Reflections on the 2005 World Series

Well, for Stros fans, the end of the 2005 World Series certainly did not turn out not to be as fulfilling as the ride to get there.

Nevertheless, the past two days have been a ton of fun and filled with exciting, nailbiting baseball. This was not your typical World Series sweep as each of the four games went down to the wire and could have literally gone either way. The White Sox are the better team overall and clearly deserve to be World Champions, but the Stros certainly made them earn it.

Interestingly, the first 24 innings of the Series generated more runs than expected from these two relatively weak hitting and strong pitching clubs -- the Sox scored 17 runs and the Stros 13. However, the final innings of the Series reverted to the expected form -- the White Sox scored a total of 3 runs in their final 18 innings, yet won Games 3 and 4 because the Stros scored only 1 run on 6 hits (four singles and two doubles) in their final 19 innings. In the end, the Sox slightly superior bullpen depth and better overall hitting performance in the Series was the difference.

The atmosphere at Minute Maid Park each night was electric and quite an experience. The weather for each game was absolutely perfect, and the capacity crowds both nights stood for a good part of each tantalizing game. There is nothing quite like the concentrated excitement of attending a Major League Baseball playoff game. And, by the way, Houston's own Lyle Lovett performed in his typically classy manner during Game 4 while singing an absolutely superb rendition of "God Bless America" during the 7th inning stretch.

So, now it's on to what will be a busy and eventful off-season for the Stros. The club faces the probable retirement of two of its future Hall of Famers -- Roger Clemens and Jeff Bagwell -- while accomodating the aging veteran Craig Biggio on his quest for 3,000 hits (it will probably take him two more seasons to achieve that record). The club faces big question marks in left field, catcher, and in its starting pitching after Roy O and Andy Pettitte, but Brandon Backe put on another outstanding playoff pitching performance in Game 4 and the Stros have a host of young arms in their minor league system that are close to MLB quality at this point. So, continued solid Stros pitching appears to be a reasonable expectation.

However, the continuation of the downward trend in the Stros' overall hitting remains a knawing problem, so I am hopeful that the club's futility in that area during the World Series will prompt the Stros to be active participants in the trade and free agent markets this off-season. The Berkman-Oswalt-Ensberg nucleus is basically sound, but upgrades in hitting are probably essential if the club is going to contend for another pennant and World Series berth in 2006.

That said, this was an improbable and wonderful season for the Stros organization. I was one of the few who predicted before the season that this club could contend for the playoffs, but even an optimist such as me had no inkling that this club would battle toe-to-toe for the World Series Championship. This Stros club has a big collective heart, and this season has proven that such a heart is every bit as important as the ability it supports.

It was a great run, Stros. Thanks for letting us ride along.

Posted by Tom at 12:14 AM | Comments (9)

October 26, 2005

"Uh, remember that hurricane damage? Never mind"

Given what I endured last night, I'm in the mood for some disaster news.

As noted in this earlier post, BP Global had been going through a difficult stretch earlier this year when Hurricane Dennis (remember that one?) apparently caused the near total collapse of its huge $1 billion Thunder Horse Drilling Platform in the Gulf of Mexico.

Well, never mind about that hurricane excuse.

BP has announced that the collapse was the result of "human error" rather than damage from the hurricane:

"After a thorough investigation, we have concluded that it was not storm-related, but was caused by a design weakness in the ballast system," Lord Browne of Madingley, BP's chief executive, said.

Translation: "Attention insurers! Grab your wallets!"

Posted by Tom at 11:00 AM | Comments (3)

Light blogging

Blogging will be on the light side today because I didn't get home last night until quite late, . . er, make that early.

Posted by Tom at 2:04 AM | Comments (0)

October 25, 2005

In defense of urban sprawl

Robert Bruegmann is a professor of architecture, art history and urban planning at the University of Illinois at Chicago, where he is chair of the art history department. He is also a well-regarded author on the issue of suburban growth and is the author of the recent book Sprawl: A Compact History (UChicago Press 2005). In this LA Times op-ed (free reg required), Professor Bruegmann challenges the conventional wisdom that Los Angeles is the epitome of urban sprawl run amok and that the northeastern metro areas are paragons of sound urban planning:

Los Angeles is not a particularly good example of urban sprawl. Take the part about being unplanned. The truth is that New York, Chicago and most of the older American cities had their greatest growth before there was anything resembling real public planning; the most basic American land planning tool, zoning, did not come into widespread use until the 1920s.

L.A., by contrast, was one of the country's zoning pioneers. It has had most of its growth since the 1920s, during a period when planning was already important, and particularly since World War II, when California cities have been subject to more planning than cities virtually anywhere else in the country.

Professor Bruegmann proceeds to point out that the density of the Los Angeles region has increased dramatically in the post World War II era as the density of the northeastern U.S. metro areas has plummeted, and that such increase in density has occurred during a time when Los Angelinos were becoming more automobile dependent rather than less. In fact, Professor Brudgmann notes that the growing congestion in the Los Angeles region is not so much a result of urban sprawl, but of increasing density of population coupled with too few miles of freeway per capita in L.A. compared with most other U.S. urban areas. He concludes by observing why these facts often do not make a dent in the conventional wisdom:

Of course, none of these objections to standard wisdom are likely to sway many highbrow critics of sprawl. Their desire to see L.A. as sprawl and therefore as not truly urban is based less on rational analysis than on subjective aesthetic judgments and class resentment.

But there are major problems with their position. First, there is considerable room for doubt that sprawl is necessarily the major problem that many anti-sprawl crusaders believe it to be. But, in any case, Los Angeles is not a good model of sprawl. The urban area of New York or Boston, for example, each surrounded by a huge low-density penumbra, would make a better poster child for sprawl than the dispersed but relatively dense and compact Los Angeles.

Read the entire piece. Hat tip to Peter Gordon for the link to Professor Bruegmann's op-ed.

Posted by Tom at 9:28 AM | Comments (2)

The Frasier Lawsuit

In many respects, investment in an entertainment project is similar to investment in an oil and gas well. Often, individuals involved in putting together such a project negotiate "sweat equity" in the form of a "back-in working interest" -- i.e., an interest in the net profits of the project after payment of all expenses of creating and maintaining the project.

The agents involved in putting together the popular Paramount Pictures' television sitcom Frasier cut such a deal with Paramount and, after the show ran for 11 seasons and grossed over $1.5 billion, it looked like they had made a pretty good deal. When the agents demanded an accounting from Paramount regarding their back-in interest, Paramount responded by asserting that the show had never reached profitability and had actually lost $200 million. Lawsuit ensues, as this L.A. Times article reports.

This type of lawsuit is becoming increasingly common in Hollywood, as reflected by this earlier post about Peter Jackson's lawsuit over the Lord of the Rings movies. And you thought the oil and gas business was hard-knuckled?

Hat tip to Craig Newmark for the link to the LA Times article.

Posted by Tom at 8:05 AM | Comments (0)

Wilma devastates Cancun

If you were thinking about a holiday vacation in the popular Mexican resorts of Cancun or Cozumel, then you better start considering other alternatives.

As predicted earlier here, reports are now confirming that Hurricane Wilma devastated the Cancun and Cozumel hotels and shopping areas that are at the heart of Mexico's tourism industry. Hotels in the area will not open for the Christmas season because of the extensive damage, and early indications are that the area will not be in a position to take on large numbers of tourists until at least Easter weekend in 2006. Marriott International Inc. closed its three resorts in Cancun until at least the end of December and the Ritz-Carlton Cancun said it was closing and not taking reservations until the New Year. The two Hyatt Regency hotels will also be closed for at least a month. Hotel damage in Quintana Roo state -- where both Cancun and Cozumel are located -- is currently estimated at $1.5 billion.

Posted by Tom at 3:38 AM | Comments (0)

October 24, 2005

What really happened at Refco?

Those of us who have been following the Refco case are familiar with the allegations that have brought the big securities trader to its knees in bankruptcy -- Refco's former CEO, Phillip R. Bennett, hid ties to the bad debt to improve Refco's balance sheet and mislead investors. The theory of the case against Mr. Bennett is that he assumed about $430 million in bad debts of Refco -- some of which arose years ago -- that let Refco avoid reducing net income and wiping out nearly all of the company's profits for the past three years. The alleged purpose of hiding the losses was to facilitate Refco's recent IPO and an earlier deal in which Thomas H. Lee Partners LP acquired a controlling interest in Refco. For his part, Mr. Bennett has denied wrongdoing, and his lawyer has said that his client will fight the charges.

Despite the superficial allure of criminal charges against crafty businessmen, I remain skeptical of criminal cases against anyone until I truly understand them, and the post-Enron era of the government playing to the public's resentment of wealthy business executives has only reinfored my skepticism. So, I continue to look for a coherent explanation of the details behind the government's above-described theory of the case against Mr. Bennett, and this NY Times article comes closest to date of actually breaking down the transactions on which the government's indictment of Mr. Bennett is based. However, even the Times' explanation is not clear:

At the start of every quarter, Refco Capital Markets would extend loans to several hedge funds, including Liberty Corner Capital Strategies. The hedge funds would pay interest on those loans, which was recorded in Refco's financial documents and whose existence was confirmed, every quarter that it was checked, by Refco's auditor.

The next two steps were not apparent to the auditor a few days into the quarter: a loan from the hedge funds to RGHI, Mr. Bennett's company, and effectively a second loan, from Refco to RGHI. Mr. Bennett's company used the loan to repay the hedge funds, plus interest. Before the end of the quarter, the hedge funds would repay the obligation to Refco. The effect of the transaction was to convert, for bookkeeping purposes, an obligation by RGHI to Refco into an obligation by the hedge funds to Refco every time an auditor might look. But during the quarter, RGHI held the obligation to Refco.

O.K., so let's break this down:

RGHI owes money to Refco;

Refco makes loan 1 to the hedge fund;

Then, hedge fund makes loan 2 to RGHI;

Refco then makes loan 3 to RGHI;

RGHI uses the proceeds from loan 3 to pay the hedge fund for loan 2; and

Then the hedge fund uses the proceeds from the loan 2 repayment to repay loan 1 to Refco.

Got it?

There's just one big problem with the Times' explanation -- loan 3 from Refco to RGHI remains outstanding. The Times' explanation confuses repayment of loan 1 with repayment of loan 3. Consequently, based upon the Times' explanation of what occurred, Refco had a loan to RGHI -- "Mr. Bennett's company" -- that should have been reflected as a loan to an insider on the company's financial statements.

So, what again is exactly the fraud here? I await further clarification, and the original complaint against Mr. Bennett does not provide much.

By the way, Dale Oesterle, a contract law professor at Ohio State, notes in this post that Refco and Mr. Bennett's fate likely would have been far different had the company not gone public. Similarly, Larry Ribstein points out that, if Mr. Bennett really did commit a fraud at Refco, a loophole in the Sarbanes-Oxley legislation wasn't the reason he was able to do so.

Posted by Tom at 7:08 AM | Comments (4)

Hurricane Katrina's real economic impact becoming clearer

The damage from Hurricane Katrina to the Gulf of Mexico's oil and gas production facilities has had a huge impact on national and international oil and gas markets over the past two months. However, from a regional standpoint, the biggest economic impact from Katrina has been the loss of thousands of jobs, particularly in small businesses. A couple of recent articles reporting on the latest governmental statistics and reports from lending institutions provide a clearer picture of the extent of the economic carnage.

Two NY Times articles (here and here) from last week report on the extraordinary job losses in the Gulf Coast region resulting from the hurricane and the effect that such job loss is having on cities and financial institutions in the region. Louisiana and Mississippi lost a combined total of 310,000 jobs in September, which raised their unemployment rates to a United States high of 11.5% and 9.6% respectively. These are staggering job losses for the region, and since most the losses are attributable to small businesses that were either uninsured or underinsured in regard to damage from the hurricane, the restoration of those jobs will be a painfully slow process.

Meanwhile, the double whammy of Hurricanes Katrina and Rita are expected to result in at least $1.3 billion in bad loans for major financial institutions in the Gulf Coast region battered by the storms. While most of the damage came from probably uncollectible loans to now-defunct businesses and consumers who lost their jobs as a result of the storms, the banks also lost substantial revenue from fees and interest that were waived to ease the financial pressure on storm victims.

Hibernia Corp. was the hardest hit as it reported a third-quarter loss of $58.1 million (37 cents a share) compared with year-earlier profit of $76.5 million. Hibernia reported that the two storms cost it almost $200 million in the latest quarter, including a charge of $175 million to boost loan loss reserve. Hibernia also suffered another $35 million in property damage, a quarter of which was uninsured. Similarly, Citigroup Inc., which is the largest U.S. bank by stock-market capitalization, had $3.6 billion in loans in the Gulf Coast region and the bank announced last week that it expects $375 million of those loans -- mostly consumer credit -- not to be repaid.

New Orleans and the Gulf Coast region will slowly regain a portion of its lost jobs over the next 6-12 months as the region's tourist business rebounds with the repair of convention and casino facilities. However, my sense is that a substantial portion of the jobs lost in the New Orleans area are gone forever. As a result, New Orleans business officials need to be concerned much more with promoting policies that will encourage job growth in their city than worrying about costly and unproductive (at least from a jobs standpoint) frivolities.

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

The economics of deferred obligations

Chronicle business columnist Loren Steffy wrote this interesting column over the weekend that includes excerpts from an old interview with business restructuring expert Steve Miller, who is currently managing the reorganization of Delphi as its CEO.

The reorganization of Delphi is considered a precursor of the almost inevitable larger reorganization of its former parent General Motors and other large American companies -- not to mention the federal government's Social Security and Medicare programs -- that are burdened with huge unfunded pension and retiree health care costs. Mr. Miller sums up the basic problem well in describing the similar problems that he confronted in one of his former reorganization projects, Bethlehem Steel:

In 1960, when [Bethlehem Steel] adopted a lot of its benefit programs, the company had 100,000 workers and about 12,000 retirees. Promising them pensions and health care benefits for life seemed, at best, a distant worry.

More than 40 years later, Bethlehem, by then in bankruptcy, had 12,000 employees and 130,000 retirees and dependents. The math no longer worked.

Read the entire article.

Posted by Tom at 5:05 AM | Comments (2)

2005 Weekly local football review

Texas Longhorns 52 Texas Tech 17

Texas QB Vince Young didn't really have all that good a game, yet Texas (7-0) rolls over formerly undefeated Tech (6-1), anyway. The fact that Tech is arguably the second-best team in the Big 12 this season underscores just how better the Longhorns are than anyone else in the conference. The Horns now have the equivalent of junior varsity games the next three weeks against Oklahoma State, Baylor and Kansas before closing the regular season with its rivalry game against Texas A&M.

Texas Aggies 30 Kansas State 28

Although Kansas State's (4-3) program has trended downward over the past couple of seasons, this was still an important road victory for the Ags, who find themselves at 5-2 even after a disappointing first half of the season. Unfortunately for the Ags, they host a tough Iowa State (4-3) team this week, then go to Tech and Oklahoma before finishing the season at home against the Longhorns. The Ags could lose all of those games, which would not go over well in Aggieland.

Colts 38 Texans 20

Texans QB David Carr was 6 of 9 passing for 48 yards while being sacked 5 times for 42 yards in losses and scrambling for 35 yards on five carries. He also had one interception, which was returned 20 yards. Thus, out of roughly 20 pass plays called in the game, the Texans netted a total of 21 yards. On the other hand, the Texans had 133 yards on 33 running plays. The inescapable conclusion gleaned from this data is that the Texans should simply eschew the innovation of the forward pass altogether and convert to the Wishbone offense. The 0-7 Texans have a rare chance for a victory next Sunday at home against the almost equally hapless Cleveland Browns (2-4).

Seahawks 13 Cowboys 10

The Pokes (4-3) lost one like the Stros in this one by giving up 10 points in the last 40 seconds. The Cowboys really got screwed as they dominated the game defensively, but were denied a probable late touchdown that would have put the game away when the referees inexplicably picked up a defensive holding flag on a third down play near the Seattle goal line where the Seahawk defender clearly attempted to tackle Cowboy TE Jason Whitten during his route. The Big Tuna not only chewed out the officiating staff on the field after that call, but also whacked in full view of the television cameras one of his own staff members who attempted to get in his two cents during the rhubarb. Assuming that defense continues playing in such a dominate fashion, the Cowboys should be O.K. as they have their off week in between relatively easy games against Arizona and Detroit, and a tough one at Philadelphia, over the next month.

Houston Cougars 28 Mississippi State 16

Even a win over a bad Southeastern Conference team is a big step forward for the inconsistent Cougars (4-3), who are still hoping for a minor bowl bid this season. The Coogs are off this week before closing at Central Florida (4-3) and then at home against SMU, Southern Mississippi, and Rice.

Navy 41 Rice 9

The Owls (0-7) death march to a possible 0-11 season continued as a very solid Navy team -- led by its colorful coach Paul Johnson -- trampled the Owls at Rice Stadium before 12,000 friends and family members. Mike Price and UTEP get to pad their stats against the Owls next.

Posted by Tom at 3:58 AM | Comments (2)

October 23, 2005

Longhorn football and Harriet Miers

Here's a good trivia question for your next tailgate party this football season -- What's the connection between Supreme Court nominee Harriet Miers and Texas Longhorn football?

Larry Ribstein has the story about Ms. Miers' involvement in her former firm's settlement of claims arising from its representation of former All-American Longhorn placekicker, Russell Erxleben.

Posted by Tom at 8:11 AM | Comments (0)

October 22, 2005

The Stros' ride to the World Series

As you prepare to watch for Game 1 of the 2005 World Series tonight, take a few minutes to review the previous posts set forth below that chronicle the Stros' improbable and highly enjoyable run to the club's first World Series:

The first off-season moves, including the logic behind letting Jeff Kent go;

After nine years, Stros General Manager Gerry Hunsiker resigns and Mickey Herskowitz provides historical perspective on the Stros' GM's;

The Stros lose out on Carlos Beltran and why they were wise to let him go;

New Stros GM Tim Purpura's first big challenge;

The Stros re-sign the remarkable Roy O to a new contract;

Joe Sheehan of Baseball Prospectus dumps on the Stros at the beginning of spring training;

If you really want to appreciate the Stros, then read this;

The Stros re-sign their main raker, Lance Berkman;

2005 Stros Season Preview -- I go against the grain and predict that the Stros will contend for a playoff spot;

As of May 1st, things are about as expected as the Stros wait for Berkman to return;

Ten days later, things are not looking good;

A week later, things look even worse as Bags opts for shoulder surgery;

By the end of May, glimmers of hope because of the remarkable Rocket;

By mid-June, the Stros are streaking;

Bidg sets another record;

What a difference a year makes -- checking in with the Stros at the halfway point;

By late July, the Stros are hanging in and finishing off another impressive streak;

Morgan Ensberg's remarkable season, why Willy Taveras should not be Rookie of the Year, and Mike Lamb's tough season;

Even as late as September 5th, it's not looking good for the Stros' playoff chances, but Bidg changes the momentum with one mighty yak in Philadelphia;

Remembering former Stros owner, the late John McMullen;

The Stros enter the stretch run, close in and then Whew!

The remarkable Mr. Biggio;

A new Stros fan;

Stros and White Sox are cost-effective winners;

Stros beat the Braves in the NLDS after the longest playoff game in history;

It's not easy being a Stros fan and Houston's legacy of sports disasters;

Peaches, Baby!

The cultural aspects of baseball in Chicago;

and, last, but not least the

The 2005 World Series Preview.

Batter up!

Update: There is no joy in Mudville, but it was one heckuva ride!

Posted by Tom at 11:50 AM | Comments (0)

Wilma devastates Cancun and Cozumel

Hurricane Wilma came ashore yesterday afternoon directly on the popular Mexican resort communities of Cozumel and Cancun as a devastating category 4 storm. Although damage reports are still skimpy because of poor communications to the area, there is high probability that both of these communities and the surrounding area will suffer catastrophic damage that in some cases will take years to rebuild. Suffice it to say that this area will not likely be in a position to accomodate tourists for an extended period of time. Jeff Masters puts the situation in perspective:

Wilma's landfall will bring enormous devastation to the 40 to 70 mile wide section of coast exposed to the intense winds of the hurricane's eyewall. A long period of calm lasting up to seven hours will accompany the passage of the slow-moving eye. During the next two days, Wilma will move very slowly over or just offshore the Yucatan. This will expose structures in the hurricane zone to very long duration hurricane force winds, likely making Wilma Mexico's most expensive hurricane disaster ever. Wilma's rains will add to the misery, reaching 20 inches or more over not just the Yucatan, but the western tip of Cuba as well.

Although the current track of the storm into Florida on Monday is still unclear, the current predictions are that it will not be a major hurricane (cat 3 or above) by the time that it makes landfall in Florida. That's good news for Florida and the U.S., but not much consolation for our friends in Mexico.

Posted by Tom at 4:50 AM | Comments (2)

Oscar Wyatt indicted in Oil-for-Food scandal

Colorful Houston oilman Oscar Wyatt -- who was once described as a businessman who would not be afraid of dealing with the Devil himself -- was arrested yesterday morning in Houston and charged in New York with bribing Iraqi officials in a scheme to corrupt the United Nations oil-for-food program. Earlier posts on Mr. Wyatt's connection to the scandal are here and here and a copy of the indictment -- which is so poorly written as to be nearly incomprehensible -- is here. Mr. Wyatt has been released after posting bail of $2.5 million.

The indictment against Mr. Wyatt is an expansion of another federal case that was brought in April against David B. Chalmers Jr., president of Houston-based Bay Oil USA Inc. The indictment against Mr. Wyatt also names two Swiss business executives -- Cathy Miguel and Mohameed Saidji, who are accused of conspiring with Wyatt. Under the indictment, the 81 year old Mr. Wyatt faces a potential jail term of at least 60 years and the threat that the Justice Department will attempt to freeze a substantial amount of his assets.

Mr. Wyatt was a controversial supporter of Saddam Hussein and an acerbic critic of President George H.W. Bush's decision to liberate Kuwait and invade Iraq during Operation Desert Storm in 1991. The indictment alleges that Mr. Wyatt arranged for his first Iraqi oil as chairman of Coastal Corporation in 1996 under the U.N. Oil for Food Program, and that Mr. Wyatt allegedly arranged illegal payments over the next four years to front companies and bank accounts that Hussein controlled. In return for the alleged bribes, Mr. Wyatt, who was allegedly aided by the two Swiss businessmen, arranged to receive millions of barrels of oil from Iraq. Mr. Wyatt later engineered the sale of Coastal to El Paso Corporation in 2001.

Posted by Tom at 4:15 AM | Comments (2)

October 21, 2005

A truly scary thought -- Metro morphs into real estate developer

The Chronicles Nancy Sarnoff writes in this article about the Metropolitan Transit Authority's latest venture to do something other than what it is chartered to do, which is to provide a flexible and effective mass transit system for citizens of the Houston metropolitan area:

[Metro] has selected Houston-based Transwestern Commercial Services to build [a $105 million building above the transit center on Fannin near the Medical Center], which could include condominiums, a hotel, office and retail space in the Texas Medical Center.

Metro hopes the project will increase ridership, create a neighborhood-friendly sense of place and generate revenue from its real estate assets.

"We want to do things where people can live, work and play that enhance their quality of life," said Todd Mason, vice president of real estate services for Metro.

The development plan calls for a 175-room hotel, 30 condominiums, 35,000 square feet of shops 168,000 square feet of medical office space and a 15,000-square-foot wellness center.

Transwestern and Metro will spend the next year looking for a hotel operator and tenants to fill the space.

Chip Clarke, president of Transwestern's southern region, said the project details are "fluid" and that its ultimate uses will be driven by the market.

Construction, which could take three years to complete, is expected to begin in the second half of 2006.

The article goes on to describe how Metro plans similar projects for other parts of the light rail line.

H'mm. We already know that Metro does not perform particularly well at that which it is chartered to do. In view of that, it's not a good idea for Metro to be getting into the notoriously speculative real estate development business, where it can lose even more money. Indeed, our local government already has a dubious record of boondoggles in that area. Finally, given Metro's governmental subsidy for this project, how on earth are private developers -- who risk their investment based on market conditions -- supposed to compete with such projects when they must rely on higher-cost private financing?

Consequently, count me as skeptical that this approach to spurring development along Metro's rail line makes sense. When this type of thing gets started, we're not very far from having to deal with this even bigger problem.

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

Stros 2005 Review: World Series Preview

"2005 World Series Preview." Sounds pretty good, doesn't it?

Well, the 2005 edition of the Fall Classic is shaping up be an interesting one. The Stros and the White Sox are two good, but certainly not great, clubs that are built around solid pitching staffs. The Stros (89-73) struggled to get into the playoffs, while the Sox (99-63) pretty much cruised for most of the season, only to falter during the final month before turning it on in the last two weeks to win their division. The Stros have run up a 7-3 playoff record while engaging in two pressure-packed series with the Braves and then the Cardinals, while the Sox are 7-1 in the playoffs after polishing off the defending World Series champion Red Sox and then the Yankee-killing Angels in surprisingly easy fashion. The Sox won 10 more games than the Stros during the regular season, but the Stros have the better record over the past four months and the hitting-challenged Stros actually hit better than the White Sox. Nevertheless, both clubs rely primarily on stellar pitching that is based upon some of the best starting pitchers in Major League Baseball. Consequently, expect a low-scoring series involving tight, well-pitched games in which runs are precious and home runs decisive.

As we all know, the Stros hitters (final statistics here) are not a strong group. The Stros' final runs created against average ("RCAA," explained here) for the 2005 regular season ended up at a -26 (12th out of the 16 National League teams), which means that the Stros scored 26 fewer runs than an average National League team would have scored during the season. The Stros rely primarily on one very good hitter -- switch-hitting Lance Berkman (35 RCAA/.411 OBA/.524 SLG/.935 OPS) -- and another hitter who has had a great season overall Morgan Ensberg (39 RCAA/.388 OBA/.557 SLG/.945 OPS), although he has tailed off during the second half of the season. Jason Lane (6/.316/.499/.815), Mike Lamb (despite his generally horrible season) (-12/.284/.419/.703), and 40 year old freak-of-nature Craig Biggio (8/.325/.468/.793) can have their moments, but the remainder of the Stros' hitters are an odd combination of young and old spray hitters, Ausmus and Burke's historic yaks in the Braves series notwithstanding.

Remarkably, the White Sox (final hitting statistics here) are an even weaker hitting team than the Stros. The Sox had a miserable -59 team RCAA, which was 10th among the 14 American League clubs and, of their regular players, only Paul Konerko (38/.375/.534/.909) and Jermaine Dye (7/.342/.438/.780) are above-average in terms of creating runs. In addition, the Sox ranked in the bottom five teams in the American League in batting average, on-base percentage, walks, and stolen base success rate. Thus, at least on paper, the matchup with the Stros' pitching staff -- fresh off mowing down two stronger offenses than the Sox can muster -- cannot be a particularly inviting prospect for the ChiSox.

Although the hitting in this series is unlikely to remind anyone of the need for steroid testing, the pitching is another matter altogether. No team can match the Stros' three frontline starters (Stros' pitching stats here). The Stros pitching staff's 97 team runs saved against average ("RSAA," explained here) was second among the 16 National League teams, and The Rocket and Andy Pettitte finished 1-2 in National League RSAA while National League Championship Series MVP Roy Oswalt finished seventh. That performance by the three primary Stros starters is one of the finest seasons by three starting pitchers on one staff in modern baseball history. With Lidge, Wheeler and Qualls all pitching well out of the bullpen, the Stros have the most formidable pitching staff of any club in the 2005 playoffs.

Nevertheless, the White Sox pitching staff overall (pitching statistics here) is even stronger than the Stros' lights out staff. The Sox team RSAA of 159 was tops in the American League, and their four starters -- RHP Jose Contreras (20 RSAA/3.61 ERA), LHP Mark Buehrle (38/3.12); RHP Jon Garland (24/3.50) and former Stros farmhand RHP Freddy Garcia (15/3.87) -- are every bit as good as the Stros because of the dilution to the Stros' starting four caused by the under-average Brandon Backe (-11/4.86).

Moreover, the Sox bullpen is equally as impressive. Bobby Jenks (8/2.75) is the most well-known, but Cliff Politte (19/2.00) may have been the most underrated reliever in MLB this season. Combined with Dustin Hermanson (16/2.04) and Neal Cotts (17/1.94), the top four White Sox relievers have a 55 RSAA this season, which is the third best total in MLB this season (behind only the Yankees and A's) for a team’s top three relievers. Thus, the White Sox have four fresh, dominant relievers on which they can rely, something that the Stros did not face in either of their series against the Braves or the Cardinals.

Thus, don't expect many runs or hitting extravaganzas in this World Series. This series is likely to be decided by small miscues, which are often unnoticeable over a long season, but are utterly unpredictable in a short series. Most of the games will likely be decided by one or two runs, and the premium on runs will make it difficult for either team to recover from small miscues in the field. Inasmuch as these two teams are remarkably similar -- weak hitting, excellent run prevention, and a heavy reliance on right-handed pitchers and hitters -- predicting a winner between them is a real shot in the dark. But as with the series against the Cardinals, I like the Stros chances in this one.

Just don't expect it to go less than seven games, and do not start celebrating until the final out in the final inning is recorded in the official scorebook.

Posted by Tom at 6:00 AM | Comments (3)

October 20, 2005

Sociological implications of the 2005 World Series

So, it's the Stros versus the Chicago White Sox in the 2005 World Series. Houstonians know Chicago well, as the Cubs are fierce National League Central Division rivals of the Stros, most recently responsible for knocking the Stros out of a 2003 National League playoff spot on the final weekend of the regular season. We long-suffering Houstonian sports fans in general -- and Stros fans in particular -- tend to remember those things for awhile.

However, the rivalry between the Stros and the Cubs pales in comparison to the rivalry among Chicagoans between supporters of the Cubs and White Sox, a rivalry that cuts across generations and class lines. Former Chicagoan (and Cubs fan) Larry Ribstein recently passed along the following excerpt from a John Kass-Chicago Tribune article that describes the Cubs-White Sox rivalry from the perspective of a Cubs fan:

As per your offer asking Cubs fans to beg for a chance to sit with you in your seats at Sox Park: I'm absolutely astounded that you think any Cubs fan would want to sit amongst greasy pork-butchers, filthy plumbers and inebriated truck drivers watching the laughable White Sox.

Please don't get me wrong. The South Side serves a purpose. It provides a place for the lower classes to live. I am sure that cabdrivers, sewer workers and other lower-class denizens all need a place to live that is inexpensive and close to the odoriferous bars where they drink non-premium beer and lament their wasted lives.

Why would I trade an enjoyable afternoon to suffer the endless buffoonery of the White Sox? I'll tell you why: I would like the opportunity to show those crotch-scratching, tobacco-chewing malingerers (and the White Sox team as well) how a real gentleman attends a baseball game with panache and elan. If you choose me, I will show you how we do it at Wrigley Field, complete with a picnic basket and a fine Chardonnay. And being the gentleman that I am, I promise not to stare at the locals . . . not even at you. Regards from the civilized world.

That condescending view is fairly standard in the cultural divide between Sox and Cub fans, so Sox fans in Chicago are having quite a good time these days reveling in the first trip of their club to the World Series since 1959, while Cub fans deal with the perpetual disappointment of yet another underachieving season from their club. As a result, some enterprising Sox fans have prepared this "Cubs to White Sox Conversion Form" that they are delivering en masse to Cubs fans over the next few days to give them an opportunity to jump on the Sox bandwagon. The first question on the conversion form gives you an idea where it is going:

1. Please indicate the last time that you watched the Chicago Cubs win the pennant:

[ ] 1945 (please leave this completed form at the front desk of your nursing home)

[ ] Have never witnessed this event.

Update: My cousin and native Chicagoan Steve Rassenfoss passes along this Chicago Sun-Times article that reports on a demographic study that reveals shocking information for Sox fans:

You're not gonna believe this, Sox fans.

You're better educated, wealthier and more white-collar than the general public.

In fact, Sox fans are remarkably similar to Cubs fans in nearly every demographic category . . . , even down to political affiliation.

In short, you're almost identical -- gulp -- to Cubs fans.

"Almost identical to a Cubs fan"? The ultimate insult to a Sox fan!

Posted by Tom at 1:48 PM | Comments (2)

Miers on business

Larry Ribstein notes in this post that, based upon Harriet Miers' investment track record, it may be a mistake to presume that she will be as adept on business-related issues as a Supreme Court Justice than a proven Judge such as, say, Edith Jones would be. But Professor Ribstein shares my view that we should wait to evaluate Ms. Miers' performance in the Judiciary Committee hearing before deciding whether to support her nomination, although he wryly notes:

I’m still reserving judgment until I see Miers’ performance in the Senate. But, then, I’m still expecting Ernie Banks to some day lead the Cubs in the World Series.

Gordon Smith shares Professor Ribstein's skepticism of Ms. Miers' track record on business-related issues.

Posted by Tom at 8:01 AM | Comments (0)

Enron cases are simply different

It is standard operating procedure in white collar criminal cases for the defense attorney to advise the defendant not to make public statements prior to trial so as not to risk making a statement that the prosecution could discover and use against the defendant during the trial.

However, the Enron-related criminal cases are fundamentally different than your typical white collar criminal case -- amorphous charges, extensive and often-biased media coverage, prosecution propaganda campaigns and efforts to silence key witnesses, etc. So, in that context, it's probably not surprising that former Enron chairman and CEO Ken Lay has agreed to be the Houston Forum's speaker at lunch on December 13th (scroll down for reservation information) to talk about "the collapse that rattled Wall Street and the corridors of political power," just a month before his criminal trial with former Enron colleagues Jeff Skilling and Richard Causey begins in Houston. This Mary Flood article quotes Mr. Lay's defense counsel, Mike Ramsey, on Mr. Lay's scheduled talk: "Enron's collapse hurt the community. I think Ken owes it to the community to explain his view."

Mr. Lay's talk will likely preview his theory of defense at trial, which will concede mistakes in judgment in managing Enron, but contend that those mistakes were not criminal in nature.

Posted by Tom at 6:34 AM | Comments (0)

Selling socially responsible ice cream

Stephen Moore is a senior economics writer for the Wall Street Journal and a member of the WSJ's editorial board. He also enjoys ice cream, and he has written this clever OpinionJournal piece about the socially-responsible nonsense that Ben & Jerry's Ice Cream spews while selling its quite good -- but unhealthy (i.e., socially irresponsible) -- ice cream. He describes a recent tour that he took of the ice cream maker's factory in Vermont:

The tour itself is a 30-minute propaganda campaign explaining why the company's founders, Ben Cohen and Jerry Greenfield, deserve the Nobel Peace Prize for their unwavering commitment to the environment and economic justice.

Meanwhile, their factory is a monument to the efficiencies of capitalism and technological progress: Several dozen giant computer-operated machines churn out hundreds of thousands of cartons a day. I half expect the massive energy-gulping freezers to be solar-paneled or powered by green-friendly windmills, but no, they use lots and lots of conventional electricity. It turns out that if you want really good ice cream, you just have to tolerate a little more global warming. That's a trade-off that I personally am willing to make.

Most of my fellow tourists are a bit on the chubby side, and a few start wheezing as we climb the half-flight of stairs to the observation area. These folks need another scoop of Cherry Garcia like a hole in the head. Although this company touts its "wholesome and natural ingredients mixed with euphoric concoctions," the truth is that Ben & Jerry's ice cream mostly contains two hazardous ingredients: fatty cream and sugar.

Herein lies a second irony: This product is probably about as good for your health as a pack of Camel cigarettes--and at least cigarettes carry the Surgeon General's warning labels. At Ben & Jerry's, the saying goes "if you can't eat a whole pint . . . in one sitting, you aren't really trying." But if you do, you might as well be injecting your arteries with Elmer's glue. And they have no qualms about marketing this dangerous product to children. If you want to know the definition of a liberal's dilemma, just wait till the trial lawyers slap Ben & Jerry's with a billion-dollar lawsuit.

Read the entire piece, then check out Larry Ribstein and Stephen Bainbridge, who give you the straight scoop that wealth maximization for equity owners is the corporate purpose that is truly socially responsible.

Posted by Tom at 5:47 AM | Comments (0)

Wilma!

This is getting very monotonous.

Hurricane Wilma moved toward Mexico's popular Cancun resort Wednesday as an extremely dangerous category 4 storm that has already become the most intense hurricane to form in the Americas since such storms began being recorded over a century ago. The National Hurricane Center in Miami warned that Wilma would be a significant threat to Florida by the weekend and could hit the western coast of Florida as at least a category 3 storm. About the only good thing about the storm's projected path is that it is far enough south at this point that it would probably not cause much additional damage to the Katrina and Rita-ravaged Gulf of Mexico oil and gas production facilities.

Wilma is on on a curving course that will likely go through through the narrow channel between Cuba and Mexico's Yucatan Peninsula on Friday, then on a northeast track toward Florida. Wilma's confirmed pressure readings early Wednesday dropped to 882 millibars, which is the lowest minimum pressure ever measured in a hurricane in the Atlantic/Gulf region (lower pressure = stronger storm). The strongest Atlantic storm on record had been 1988's Hurricane Gilbert, which registered 888 millibars.

For you hurricane junkies, that means that Wilma is stronger than Hurricanes Andrew and Katrina ever were, and is comparable to Hurricanes Rita and Allen at their peak intensities. Including Katrina and Rita earlier this hurricane season, we have now experienced the 1st, 4th, and 6th strongest hurricanes ever recorded in the Atlantic/Gulf region. Wilma is the record-tying 12th hurricane of the season -- equaling the same number from the 1969 season -- and it is the Atlantic hurricane season's 21st named storm, which ties the record from 1933 and exhausts the list of hurricane names for this year. If there is another one, then it would be named after letters from the Greek alphabet, starting with Alpha.

As noted while covering Katrina and Rita earlier this year, my favorite sites for keeping up with hurricanes are the following:

Jeff Masters Wunderblog;

Eric Berger's SciGuy;

StormTrack; and

The National Hurricane Center.

Although there is a good chance that Wilma will weaken as it experiences wind shear and cooler Gulf waters during its approach to Florida, stay tuned. There remains a good chance that it will hit Florida as at least a cat 3 storm, which could make it the worst storm ever to hit the U.S. mainland during the month of October.

Posted by Tom at 5:04 AM | Comments (0)

Peaches, Baby!

Roy O -- simply the best pitcher ever developed within the Houston Astros system -- brought home the bacon. The Stros are going to their first World Series.

Since moving to Houston in 1972, I've been following the Stros for the past 33 years, the last 20 as a season ticket holder. Both of my teenage sons are lifelong Houstonians who have been attending Stros games with me since they were toddlers. Immediately after Jason Lane clutched that final out, my boys and I hugged each other and laughed about our experiences over the years with the Stros as we watched the players celebrate on the Busch Stadium field.

That special moment made every one of those Stros games that I have watched during the past 33 years worth every minute.

Posted by Tom at 4:00 AM | Comments (5)

October 19, 2005

But Mr. Bork, what do you really think about the Miers nomination?

Robert H. Bork, whose own nomination to the Supreme Court generated the verb "to bork" in American political lexicon, lays the wood to President Bush's nomination of Harriet Miers to the Supreme Court in this Opinion Journal piece, which includes these gems:

There is, to say the least, a heavy presumption that Ms. Miers, though undoubtedly possessed of many sterling qualities, is not qualified to be on the Supreme Court. It is not just that she has no known experience with constitutional law and no known opinions on judicial philosophy. It is worse than that. As president of the Texas Bar Association, she wrote columns for the association's journal. David Brooks of the New York Times examined those columns. He reports, with supporting examples, that the quality of her thought and writing demonstrates absolutely no "ability to write clearly and argue incisively."

The administration's defense of the nomination is pathetic: Ms. Miers was a bar association president (a nonqualification for anyone familiar with the bureaucratic service that leads to such presidencies); she shares Mr. Bush's judicial philosophy (which seems to consist of bromides about "strict construction" and the like); and she is, as an evangelical Christian, deeply religious. That last, along with her contributions to pro-life causes, is designed to suggest that she does not like Roe v. Wade, though it certainly does not necessarily mean that she would vote to overturn that constitutional travesty.

This George Bush, like his father, is showing himself to be indifferent, if not actively hostile, to conservative values. He appears embittered by conservative opposition to his nomination, which raises the possibility that if Ms. Miers is not confirmed, the next nominee will be even less acceptable to those asking for a restrained court. That, ironically, is the best argument for her confirmation.

Read the entire piece, which is quite devastating. By the way, Mr. Bork includes as a part of the op-ed one of the best shorthand descriptions of the judicial philosophy of originalism:

Originalism simply means that the judge must discern from the relevant materials -- debates at the Constitutional Convention, the Federalist Papers and Anti-Federalist Papers, newspaper accounts of the time, debates in the state ratifying conventions, and the like -- the principles the ratifiers understood themselves to be enacting. The remainder of the task is to apply those principles to unforeseen circumstances, a task that law performs all the time. Any philosophy that does not confine judges to the original understanding inevitably makes the Constitution the plaything of willful judges.

Posted by Tom at 6:06 AM | Comments (0)

Continental's quarterly earnings report

Houston-based Continental Airlines announced yesterday a modest third-quarter profit despite high fuel costs, parleying lower labor costs with increased revenue from its international flights and higher fares. Nevertheless, Continental announced that it expects to post a "significant loss" for the fourth quarter and that it will lose money for the full year. With various U.S. airlines currently operating in chapter 11, it is expected that combined losses in the U.S. airline industry this year will exceed $5 billion. For its part, Continental said that it had "sufficient" cash and projected cash flows through 2006.

Talk about a tough business. Announce a quarterly profit, reiterate that the company will lose money for the year, and offer that the company might be able to stay out of the tank for another year. And that's considered a relatively rosy quarterly earnings report within the industry. So it goes in the U.S. airline industry, which is in dire need of a huge shakeout at a time when it remains difficult to put an airline out of its misery.

Posted by Tom at 5:39 AM | Comments (0)

Income tax panel announces overhaul proposals

Income tax simplification is a recurring subject on this blog, so I took notice of this NY Times article regarding yesterday's announcement that President Bush's tax-overhaul panel had agreed to offer two alternatives to the present tax code -- one alternative that essentially streamlines the current income tax and a second, bolder alternative that would replace it with a progressive tax on consumption. Although both proposals would do away with the deduction for state and local taxes, limit the current deduction for home-mortgage interest and tube the unpopular alternative minimum tax, the two plans differ in their approach to taxing business.

Both proposals will be included in the panel's final November 1 report to the Treasury Department, and the report is expected to be the framework for legislative proposals regarding overhauling the tax code next year. The income tax that the panel approved in principle yesterday is based on the following basic framework:

Creating four income-tax brackets of 15%, 25%, 30% and 33%, which is below the current top rate of 35%;

Reducing the top corporate-tax rate to 32% from 35%, eliminating the corporate alternative minimum tax and eliminating the tax on profits from active businesses overseas so that firms could repatriate overseas profits tax-free;

Reducing the tax on capital gains to 25% of the ordinary income-tax rate, or a top rate of 8.25%, which is less than the current 15%;

Eliminating the tax on dividends;

Creating a new limit on health insurance provided tax-free by employers of about $11,000 for families, $5,000 for individuals;

Replacing the mortgage-interest deduction with a tax credit equal to 15% of mortgage interest paid, but limiting it to interest on mortgages between $172,000 and $312,000 depending on the geographic region;

Eliminating the "marriage penalty" by providing a family credit of $1,650 for singles and $3,300 for couples;

Simplifying tax breaks for savings; and

Reducing the Form 1040 tax return to 32 lines from 75.

The second, bolder alternative would fundamentally change the U.S. tax code toward an approach of taxing spending rather than income in an effort to encourage saving, investment and economic growth. For individuals, it would have two major exceptions from the other alternative -- its four tax brackets would be 15%, 25%, 30% and 35%, and it would impose a flat 15% tax on dividends, capital gains and interest.

However, the second alternative would take a very different approach in tax policy toward business, although the top corporate rate would remain at 32%. Companies would be allowed to expense all capital spending in the first year (rather than of depreciating it over time), but businesses would no longer be allowed to deduct interest payments.

As the blogosphere digests these two proposals over the next several days, I will provide links to insightful expert analysis of the proposals.

Posted by Tom at 4:44 AM | Comments (2)

Rubbing salt in the wound

After enduring a day of painful memories of Stros previous heartbreaking playoff losses in the final game of the 1980 NLCS, the Game Six of the 1986 NLCS, and Game Seven of last season's NLCS, my old friend and former Houstonian Dr. Jim Bob Baker of Temple, Texas passes along the following on the heels of Houston's latest sporting disaster:

I was just over at the physicians' lounge at the hospital before coming back to the office to finish some things up. ESPN SportsCenter was on the TV there. As an aftermath of the Astros' loss last night, ESPN graciously also showed highlights from:

The University of Houston's loss to Joe Montana and Notre Dame in the 1979 Cotton Bowl;

The University of Houston's Phi Slamma Jamma losing to Jim Valvano and North Carolina State on a tip-in at the buzzer in the 1983 NCAA National Championship Game;

The Houston Rockets' 1997 Game Six Western Conference Final playoff loss to Utah on John Stockton's last-second 3 pointer;

The Houston Oilers' 1991 NFL playoff loss to Denver on John Elway's last minute 98 yard drive;

and last but not least:

The Oilers' 41-38 overtime loss to Buffalo in the 1993 NFL playoffs after leading at halftime 35-3.

Thanks for the memories, ESPN.

Bill Simmons also has this humorous piece on special Houston sports fiascos. And Brian Goff notes that, if you are going to pitch to Pujols in that situation at all, breaking pitches are not the way to go. Finally, it took 24 hours for lifelong Houstonian Mike Falick to gather himself sufficiently to write this post on the latest Houston sports fiasco that he has endured.

Posted by Tom at 4:00 AM | Comments (2)

October 18, 2005

KPMG serves up more sacrificial lambs

As KPMG LLP attempts to survive as a going concern after cutting a deal with the federal government to avoid a criminal indictment in connection with its controversial tax shelter practice, the firm served up 10 additional criminal defendants for the Justice Department to indict, including the firm's former chief financial officer and its former Associate General Counsel. Here are the previous posts on the KPMG tax shelter saga.

Federal prosecutors had a federal grand jury in New York yesterday charge the 10 defendants and the nine previous ones in a superceding indictment (copy here, courtesy of the TaxProf blog) with at least 39 counts of tax evasion and a single count of conspiracy to defraud the Internal Revenue Service. Three of the defendants are also charged with obstructing government investigations, and 17 of the 19 defendants are former KPMG tax professionals.

As noted in the previous posts, the case centers on four types of allegedly fraudulent tax shelters that KPMG promoted and sold from 1996 to 2002 to about 600 wealthy individuals, generating an estimated $2.5 billion in tax savings. KPMG copped a plea bargain with the Justice Department to avoid an Arthur Andersen meltdown, agreeing to pay about a $460 million fine, admitting criminal wrongdoing, and cooperating with the prosecutors. The latest indictment is a reflection of that cooperation.

As noted in this previous post, one small problem with all of this is that no court previously has ruled that the underlying tax strategies involved in the tax shelters are illegal, although the IRS has challenged the shelters as abusive tax-avoidance schemes.

Posted by Tom at 7:18 AM | Comments (0)

Refco tanks

As predicted here last week, Refco Inc. filed a chapter 11 case yesterday and announced late in the evening that an investment consortium led by private-equity fund J.C. Flowers & Co. LLC and Texas Pacific Group would seek Bankruptcy Court approval of a bid to buy Refco's key regulated futures-trading unit

The regulated futures business that the consortium wants is a key component of Refco. Before the run on bank with regard to Refco's business over the past week, the firm was one of the most active trading firms in the commodities and financial futures markets. Over the past week, Refco customers -- typically hedge funds, individuals and institutions -- had removed at least 20% of the assets from Refco's futures brokerage business, which previously had about $4.1 billion in customer assets under management. That's a big run on the bank in anyone's book.

Goldman Sachs is apparently all over the place with regard to current matters having to do with Refco. The brokerage firm had helped lead Refco's recent initial public offering that failed to disclose Refco's CEO's assumption of $430 million in debts to the firm, and last week had offered its services to the firm as a "pro bono" crisis adviser. J.C. Flowers -- one of the companies heading the consortium to buy Refco's regulated futures business -- is run by a former Goldman Sachs partner.

Federal prosecutors have accused Refco's former CEO, Phillip R. Bennett, of securities fraud for allegedly hiding his ties to the bad debt to improve Refco's balance sheet and mislead investors in advance of Refco's IPO this past August. The prosecutors theory of the case is that Mr. Bennett's assumption of the bad debts let Refco avoid reducing net income and wiping out nearly all of Refco's profits for the past three years, which would have killed Refco's IPO and an earlier deal in which Thomas H. Lee Partners LP acquired a controlling interest in Refco. Mr. Bennett has denied wrongdoing, and his lawyer has said that he will fight the charges.

Meanwhile, Liberty Corner Capital Strategies, the New Jersey hedge fund that was involved in the questionable transactions with Refco and Mr. Bennett, disclosed yesterday that Mayer, Brown, Rowe & Maw drafted some of the loan documents relating to the transaction. Liberty Corner's counsel asserted that Mayer Brown's involvement in the deal is one reason why Liberty Corner's management did not question the legitimacy of the arrangement.

Defense counsel for Mayer Brown, meet defense counsel for Grant Thornton.

Posted by Tom at 6:46 AM | Comments (0)

It's not easy being a Stros fan

I get up early for eight Tuesdays in the fall and spring to help cook breakfast for a 300 member men's group at my family's church, and the kitchen crew I work with is a pretty tough crowd. So, after the Cardinals' Albert Pujols stuck the pin in the Stros' World Series balloon last night, the subject of the comments from the crew members this morning were focused on the Stros, particularly Stros Manager Phil Garner's dubious decision to pitch to Pujols -- rather than walk him -- with a two run lead and two out in the top of the ninth inning of the potential National League Championship Series clinching game:

"Of course, you have to pitch to Pujols in that situation," noted one crew member with more than a touch of sarcasm. "Sanders and Mabry (the much lesser batters who followed Pujols) could have knocked in even more runs."

"What, not pitch to the best hitter in the National League with two on, two out, a two run lead in the top of the ninth and a World Series on the line?" commented another crew member with an equal amount of sarcasm. "Hell, he was 0 for 4."

"First pitch (a swinging stike in the dirt) good. Second pitch (over the railroad track over the left field pavilion) bad."

"One good thing out of this is that Manager Garner has decided to seek some professional assistance. Word has it that he has set up an appointment today with (0-5 Houston Texans' head coach) Dom Capers."

"You know, I don't think the Texans (0-5) are going to make the playoffs this season."

Add your own comment. It's good therapy. ;^)

Posted by Tom at 6:44 AM | Comments (11)

October 17, 2005

Does Phil Garner read Clear Thinkers?

This NY Times article from over the weekend contains the following blurb from Stros manager, Phil Garner:

Phil Garner praised the Astros' owner, Drayton McLane, for his willingness to re-sign Carlos Beltran after his scintillating 2004 postseason, but he said he thought the team was better off this season without him. The rookie Willy Taveras has emerged as a fine defensive center fielder and has performed better at the plate than expected.

"I didn't necessarily think it was a big loss," Garner said before Saturday's game. "One of my things that I feel is, if you put so much of your capital in any one player, it's going to hurt you, in my opinion. So I think it might have been a little bit of a blessing."

Did Phil read that here first?

By the way, that Taveras has performed well defensively and has hit better than expected is true, although that latter point is a bit frightening, given how bad Taveras' hitting has been.

Posted by Tom at 7:18 AM | Comments (0)

It's a small world in auditing

As accounting firm Grant Thornton, LLP reviews its liability insurance limits in connection with its audits of Refco, a couple of interesting facts are emerging.

Turns out that Refco hired Grant Thornton in 2002 to replace Arthur Andersen as the company's auditor as Andersen was collapsing under the pressure of its criminal indictment in connection with the Enron case. Moreover, the lead partner on Grant Thornton's audits of Refco is Mark Ramler, who also had been the lead partner on Andersen's audits of Refco.

Despite that juicy grist for the plaintiffs' lawyers mill, Grant Thornton apparently discovered the questionable arrangement that has led to the current run on the bank with regard to Refco.

As noted earlier, Refco disclosed last week that its chairman and CEO, Phillip R. Bennett, assumed responsibility over time for paying Refco $430 million of uncollectible debts that Refco customers owed the company, including some debts that were incurred in the late 1990s. The ostensible purpose of the debt assumption was to allow Refco to show greater profitability by avoiding write-offs.

Mr. Bennett's obligation to Refco was allegedly hidden from Grant Thornton through a series of transactions between a Refco subsidiary and a hedge fund -- Liberty Corner Capital Strategy LLC -- that essentially allowed the Refco to rent Liberty Corner's balance sheet for use in Refco's regulatory filings. Grant Thornton apparently raised questions with Refco in late September about the arrangement during a routine quarterly review, and Refco executives then notified Grant Thornton that the company had hired its own outside advisers to investigate. That investigation resulted in Refco board meeting earlier this month at which Refco directors confronted Mr. Bennett with the Liberty Corner arrangement. Although Mr. Bennett repaid the debt after being confronted, the Refco board placed him on leave. Mr. Bennett was arrested and charged with securities fraud shortly thereafter.

By the way, it's interesting to note that the Sarbanes-Oxley legislation, which was supposed to protect investors from this sort of thing, did not deter Mr. Bennett from concocting this arrangement. Assuming that the arrangement is in fact illegal and was hidden, it is an unfortunate fact of life that people lie sometimes -- and do so pretty well -- and no amount of oversight or legislation will change that cold, hard truth about humanity.

Posted by Tom at 5:16 AM | Comments (0)

Finessing witness intimidation

When Don Corleone wanted to intimidate someone, he would "make them an offer that they could not refuse." Taking a page from the Don's book, when the Enron Task Force wants to intimidate a favorable defense witness from testifying in an Enron-related criminal case, the Task Force simply "informs" the witness that he or she is a co-conspirator with an Enron criminal defendant and might be indicted if they assist the defense of that defendant.

That's certainly the impression one gets from this Mary Flood/Houston Chronicle article that reports on the Task Force's response to the earlier motion of former key Enron executives Kenneth Lay, Jeff Skilling, and Richard Causey to dismiss the criminal case against them because of the Task Force's misconduct in intimidating prospective defense witnesses. The Task Force apparently gave a copy of its response to Ms. Flood before they filed it on the electronic docket of the case, so a copy of the pleading is not yet available to the general public. I will post a copy when it becomes available.

According to Ms. Flood's review of the Task Force's response, the Task Force concentrates on the fact that the defendants' motion relies to a substantial degree on hearsay statements of attorneys who are respresenting the prospective defense witnesses who the Task Force has threatened. Of course, the fact that the lawyers for intimidated witnesses will only disclose such threats on a confidential basis is not particularly surprising, given the risk of Task Force retribution if the lawyers were to implicate their clients publicly.

Nevertheless, it's reasonably certain from prior testimony of two witnesses (here and here) and the Task Force's unprecedented fingering of 114 co-conspirators in the case that witness intimidation is taking place, so U.S. District Judge Sim Lake clearly has a problem confronting him and he is struggling to figure out how to deal with it.

Ms. Flood's article does note additional information about a documented incident of intimidation that was referred to in the Lay-Skilling-Causey motion, but much of the information was redacted in the motion. The incident referred to in the Lay-Skilling-Causey motion involved an email from a Task Force prosecutor to a defense attorney for a cooperating government witness in one of the Enron cases that told the lawyer for the cooperating witness to direct his co-counsel to stop talking to Mr. Skilling's lawyer or that he should "get rid" of him. The Lay-Skilling-Causey motion does not name the identity of the Task Force member who sent the email or the attorney to whom it was sent.

Ms. Flood reports that the Task Force's response provides that information. Former Enron Task Force director Andrew Weissmann sent the email to "a Washington, D.C., area lawyer for former Enron official Ken Rice." The docket of Mr. Rice's case reflects that attorney to be William Dolan, but the more interesting revelation is Mr. Dolan's co-counsel in defending Mr. Rice -- i.e., Houston-based criminal defense Dan Cogdell.

H'mm, isn't that a coincidence. Mr. Cogdell happens to be the attorney who successfully defended the only defendant in the Nigerian Barge case -- former Enron accountant Sheila Kahanek -- who was acquitted in the trial of that case. Mr. Rice is the former Enron Broadband executive who testified falsely during the trial of the Enron Broadband case after copping a plea with the Task Force in the face of an almost certain conviction on insider trading charges that are unrelated to either the Broadband case or the Lay-Skilling-Causey case. Mr. Rice -- whose plea bargain allows the Task Force to withdraw its support for a light sentence if fails to "cooperate" with the Task Force in various Enron-related criminal trials -- is expected to be a key prosecution witness in the upcoming trial of the Lay-Skilling-Causey case. Accordingly, Mr. Weissmann's email during the early stages of the Enron Broadband trial appears to be a clear attempt at least to remind -- if not outright threaten -- Rice's counsel that Rice's plea deal could be at risk unless Cogdell quit talking with Mr. Skilling's counsel. Even more telling is that Weissman's threatening email to Rice's counsel was sent almost immediately after the Enron Broadband defense had caught Rice providing false testimony on behalf of the prosecution during the Enron Broadband trial.

Thus, rather than seeking the truth of whether the defendants committed crimes at Enron, the Task Force suppresses exculpatory testimony for the defendants by fingering over a hundred alleged co-conspirators, threatens defense witnesses, and threatens a cooperating witness with breach of his plea bargain if his counsel even chats with defense counsel for Mr. Skilling. Does anyone really believe that Messrs. Lay, Skilling and Causey -- already facing a highly anti-Enron environment that the prosecution has helped fuel -- can receive a fair trial under these circumstances? And is this really the way that we want our Justice Department to be operating?

Posted by Tom at 4:15 AM | Comments (0)

2005 Weekly local football review

Texas Longhorns 42 Colorado 17

Vince Young prevents the Horns (6-0) from having a post-OU letdown as the Horns cruise over what probably is the best Big 12 North team. The win sets up what will certainly be one of the most entertaining games of the Big 12 season next Saturday in Austin as the Horns host 10th-ranked Texas Tech, which is also 6-0. My sense is that Horns' Defensive Coordinator Gene Chizik is licking his chops at the opportunity to unleash the Horns' defensive unit against Tech's idiosyncratic pass-happy offense, but this one should be fun.

Seahawks 42 Texans 10

So, who do you think the Texans should take as the first pick in the 2006 NFL Draft? At this point, it's inconceivable to me that the Texans could win a game this season absent the other team simply laying down and letting them do so. And then the Texans might trip and screw it up, anyway. The team simply does not have enough NFL-quality players, and Head Coach Dom Capers has clearly lost the team -- the Texans gave up 320 rushing yards in an NFL game, had 13 penalties for 95 yards, and the offensive line couldn't even line up without a penalty during the first quarter! Accordingly, Texans owner Bob McNair is facing the unsettling prospect of cleaning house in his football operation -- from General Manager Charlie Casserly on down -- less than four years after the franchise played its first game. Ugh.

Cowboys 16 Giants 13

What a strange game. The Cowboys (4-2) committed four turnovers, missed two field-goal attempts and allowed a tying touchdown with 19 seconds left in regulation. Nevertheless, the Pokes won the toss in overtime, and calmly drove down the field for a 45-yard Jose Cortez field goal for the victory.

"I feel pretty fortunate," Cowboys coach Bill Parcells remarked after the game, in the understatement of the NFL season so far. Much to my surprise, the resilient Pokes are remaining in playoff contention, although they face a tough game next Sunday against the high-powered Seahawks at Seattle.

Texas Aggies 62 Oklahoma State 23

Ags QB Reggie McNeal and freshman RB Jovorskie Lane ran roughshod (almost 300 yards between them) in leading the Ags (4-2) over an inept Oklahoma State team. After three weeks of uninspiring performances, the performance against even a weak opponent was a relief for Aggie faithful, but the calm may be short-lived. The Ags travel to play a hungry Kansas State team next week.

Memphis 35 Houston Cougars 20

In a game that was closer than the final score indicates, the Coogs (3-3) gift-wrapped this one for Memphis as they lost two fumbles in the end zone and missed a 21-yard field goal, all in the second half. The Coogs travel to take on SEC opponent Mississippi State next weekend.

Tulsa 41 Rice 21

After rearranging deck chairs on the Titanic by reassigning his defensive coordintor, embattled Rice head coach Ken Hatfield saw his Owls endure their fifth straight defeat. A rugged Navy team visits Rice Stadium next Saturday, so things don't get any easier anytime soon for the overmatched Owls.

Posted by Tom at 4:00 AM | Comments (5)

October 16, 2005

Whew!

Once again, the Stros are within a game of the first World Series in franchise history.

I take back everything I said about Wily Taveras, who in a reserve role scored the winning run and made a clutch catch on Tal's Hill to close out the top of the eighth.

Adam Everett is simply the smoothest shortstop ever to wear a Stros uniform, and Eric Bruntlett can flat out trigger a double-play.

And Brandon Backe -- while a below-average National League starting pitcher -- has a far above-average heart.

By the way, the Stros have now won three out of four games in the NLCS by scoring a total of 13 runs. After scoring five runs in the first five innings of the NLCS, the Cardinals have scored a total of five runs over the past 30 innings.

Posted by Tom at 7:29 PM | Comments (4)

Southwest, you're welcome here

This NY Sunday Times article provides a good overview of the challenges that Southwest Airlines faces in the rough and tumble airline business as its fuel hedging strategy (noted in earlier posts here and here) fades and it faces the prospect of dealing with the higher fuel prices that its less-liquid competition has been dealing with over the past year and a half.

The analysis of Southwest's business prospects is interesting, but even more so is the blurb at the end of the article that Dallas, Southwest's home base, is not being particularly supportive in Southwest's effort to have Congress repeal the Wright Amendment (earlier posts here, here and here), which restricts Southwest's routes in and out of its Dallas Love Field hub. The article notes that, if the Wright Amendment is not repealed, it makes sense for Southwest to look for a new corporate home where their business is growing as opposed to the restricted nature of its current Dallas operation.

Mayor White, get on this one -- Southwest Airlines in Houston is a natural fit.

Posted by Tom at 3:01 PM | Comments (0)

Help me understand this

Daniel L. Gordon, Merrill Lynch's former chief energy trader, was sentenced Friday to 3 1/2 years in prison after admitting that he had stolen $43 million from the brokerage firm. Although the prosecution was only requesting a couple of years in the pokey, the judge decided that the longer sentence was called for in light of the nature and size of the theft.

I'm all right with that. But how on earth does one reconcile that sentence with the comparable sentences handed down to these two (here and here) former Merrill Lynch executives, neither of whom profited a lick from the transaction that is the basis of their alleged crime?

And when you get done trying to figure that one out, try reconciling Mr. Gordon's three year sentence with the 24 year sentence that is being endured by Jamie Olis, who also did not receive a dime from the transaction that is the basis of his alleged crime.

Let's see. Embezzle $43 million and, if you get caught, cop a plea and serve 3 1/2 years. Or, do your job, don't embezzle a cent, defend your innocence against criminal charges even when your employer serves you up as a sacrificial lamb so that the employer can avoid criminal charges, and then endure either as long, or much longer, a sentence if you are convicted.

H'mm. Doesn't seem like much of a choice to me. Something is seriously out of whack here.

Posted by Tom at 2:16 PM | Comments (3)

October 15, 2005

Interesting conversation about the Stros today

While riding to the Stros-Cardinals Game 3 of the National League Championship Series today, one of my sons asked whether I thought that Stros manager Phil Garner would play red-hot Chris Burke, who has continued to hit well after his walk-off yak last week to win the National League Division Series over the Braves.

"No," I said. "He'll probably play Lamb at first base today because he hits (St. Louis pitcher Matt) Morris well. That means Berkman moves to left field and Burke sits. What Garner should do is put Burke in centerfield and bench Taveras, who is a marginal player. But he will never do that because everyone thinks Taveras is good, which he is not."

So, what does Phil Garner do? He starts Burke in centerfield in place of Taveras.

Stros win a 4-3 nailbiter to take a 2-1 lead in the National League Championship Series against the Cards.

Posted by Tom at 9:14 PM | Comments (3)

October 14, 2005

Interesting Stros' stat of the day

With his two shutout innings in relief of Roy O during Game 2 of the National League Championship Series last night, Stros closer Brad Lidge -- counting the past two NLCS -- has not allowed a run to the Cardinals in almost 30 innings over the past two years.

Here's hoping that the Cardinal players are thinking about that this weekend while trying to hit that nasty slider.

Posted by Tom at 12:15 PM | Comments (0)

A couple of good ones

A couple of good ones to pass along to friends as we move on toward the weekend. First, from Letterman:

"We've had so much rain here this week. Do you realize that we are this close to being ignored by FEMA!"

Then, from Leno on the Minnesota Vikings players' recent Lake Minnetonka escapade:

"What are they, 1-3? That's the only offensive thing they've done all season."

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

Exploring home run hitting

As Roy O brings the Stros home from St. Louis in a 1-1 tie in the National League Championship Series, Art De Vany, Professor Emeritus of Economics at the University of California, Irvine, provides this thought-provoking paper (pdf) in which he debunks the popular theory (of which I have never been comfortable) that MLB sluggers' taking of muscle-enhancing steroids were the primary reason that several old home-run records were broken over the past decade. As Professor De Vany notes here and here:

The latest version of my paper, "Has Home Run Hitting Changed in Major League Baseball" is now up.

I take up the matter of steroids more directly and also such possible influences as "hotter" baseballs, altered ball parks, smaller strike zone and find them all to be lacking. They do not stand up to verifiable tests or statistics. And they shouldn't because no explanation is required. There has been no increase in MLB home run hitting. Three home run hitting geniuses appeared in a brief time span and will soon be gone. Enjoy them and don't look for explanations when none are required. The law of home runs and extreme human accomplishment that I develop tell us that we never know when this kind of genius will appear, only that it will be rare and intermittent.

Posted by Tom at 7:14 AM | Comments (4)

"Mom, look what I found while playing down at the bayou!"

Among the interesting aspects about living in the Houston area are the interesting things that one can find near one of the area's many bayous in residential areas within or near Houston's inner loop:

A contractor hired by the Texas Parks & Wildlife Department captured a 9-foot-long, 275-pound male alligator Thursday near Greens Bayou just outside Houston.

"He was removed without incident," said Capt. Albert Lynch, a state game warden in Harris County, "but as many alligators as I've moved over the years, they usually do put up quite a fight."

The alligator was caught right off Interstate 10 near the intersection of Normandy, in a flood-detention canal near Greens Bayou, . . .

Posted by Tom at 6:28 AM | Comments (0)

Refco's Enronesque experience

As noted in this earlier post, an old fashioned run on the bank resulting from a lack of trust in the marketplace -- as opposed to losses attributable to a relatively small number of shady business deals -- is what really caused the demise of Enron. The revelations over the past week relating to Refco, Inc. -- the largest independent futures-brokerage firm in the U.S. -- has generated a similar lack of trust in the marketplace that has thrown Refco into its own Enronesque experience.

Although no where near the size of Enron, Refco is still a pretty darn big outfit. It has over $4 billion in approximately 200,000 customer accounts, and Refco's futures-brokerage business is as big as the derivatives desks of most major Wall Street firms. The company is well-known for trading commodities, currencies, bonds and derivatives transactions with a wide-range of trading partners and counterparties, including hedge funds and customers attempting to hedge risk. Nevertheless, Refco -- as with many such trading firms -- is highly-leveraged, as its most recent public filings reflect about $75 billion in assets and a roughly equal amount in liabilities.

Refco's problems began this past Monday when the company put CEO Phillip R. Bennett on indefinite leave after discovering that Summit, N.J. hedge fund, Liberty Corner Capital Strategy helped Mr. Bennettt cover up that he owed Refco $430 million. Mr. Bennett apparently owed the debt to Refco personally, but periodically had arranged for Liberty Corner to confirm the $430 million debt as its own so that Refco could reflect the same on its balance sheet for reporting purposes at the end of several of quarters. Federal prosecutors promptly arrested Mr. Bennett and charged him with fraud in connection with the firm's IPO.

Although the details of the arrangement remain hazy, for its part, Liberty Corner is contending that it believed that it was simply borrowing from one Refco subsidiary and lending to another Refco sub, and not lending to an entity that Mr. Bennett secretly controlled, as the indictment of Mr. Bennett alleges. For example, one transaction described in the indictment alleges that a Refco subsidiary Refco Capital Markets loaned $335 million to Liberty Corner, which was to be repaid two weeks later just after the end of Refco's fiscal year. At the same time, Liberty Corner loaned the same amount to Refco Group Holdings Inc., which Mr. Bennett controlled, for the same two-week period at a slightly higher interest rate. Thus, Liberty Corner made an estimated profit of roughly $100,000 on the deal, which apparently was repeated on a number of occasions.

Yesterday, Refco's crisis deepened as the company shut down one of its key units and the New York Stock Exchange indefinitely halted trading in its stock. Although Refco contends that its core regulated futures trading business remains on solid financial footing, former trading partners and lenders of the firm are fleeing in droves. Inasmuch as Refco relies heavily on borrowed funds to participate in billions of dollars in transactions, even the trading partners and lenders who are hanging in with the company are demanding greater financial assurances before doing deals, which simply diminishes Refco's ability to sustain profitability all the more.

Refco shares -- which have decreased in value by over 60% just since the week began -- were at $7.90 when the NYSE halted trading. In the meantime, rating agency Standard & Poor's downgraded Refco's long-term counterparty credit rating further into junk status as Refco's junk-rated bonds were quoted as low as 30 cents on the dollar -- a price level associated with distressed companies -- and its syndicated bank loans were quoted in the 60s. That does not go over well with institutions that invested in Refco's debt at par (i.e., 100) or close to that price.

Refco's board of directors attempted to place a finger in the leaking dike yesterday by hiring former Securities and Exchange Commission Chairman Arthur Levitt and former U.S. Comptroller of the Currency Eugene A. Ludwig to advise its board. However, even with that move, absent a white knight buyer emerging -- such as private-equity firm Thomas H. Lee Partners LP (owner of a 38% stake in Refco) -- the question increasingly is not whether Refco can avoid filing bankruptcy, but when it is going to file.

Interestingly, one of the lenders that apparently has flown the coop on Refco is American International Group, which had its own Enronesque experience earlier this year.

Finally, the litigation buzzards are circling Refco's auditor, Grant Thornton LLP. The firm did not catch Mr. Bennett's alleged scheme with Liberty Corner, although it appears that Liberty Corner advised the auditors that it owed the debts in response to audit confirmation requests that the firm sent out during its audits of Refco. Nevertheless, the Public Company Accounting Oversight Board has already opened an inquiry into Grant Thornton's audits of Refco.

Welcome to the big leagues of risk relating to audits, Grant Thornton.

Posted by Tom at 4:36 AM | Comments (0)

October 13, 2005

All about Miers

Here are a couple of sites that provide comprehensive information regarding President Bush's nomination of Harriet Miers to the Supreme Court:

This University of Michigan Law Library site is a good resource for background materials on Ms. Miers (hat tip to Tom Mighell for the link);

and

This Legacy Network site that provides a comprehensive outline of, and background materials on, the pro and con arguments in regard to the Miers nomination (hat tip to Gordon Wood for the link).

Better, I think, to focus one's evaluation of the nomination based on information gleaned from these resources than this type of thing.

Posted by Tom at 8:32 AM | Comments (0)

Criminal case against former Duke Energy traders goes to trial

It's not as sexy as some of the Enron-related criminal trials, but the trial of two former Duke Energy natural gas traders began in Houston federal court yesterday.

Former Duke traders Timothy Kramer and Todd Reid face racketeering, conspiracy, wire and mail fraud, money laundering and falsifying corporate books charges in connection with an alleged scheme to book phony electricity and natural-gas trades to boost trading volumes and inflate profits in a trading book that was the basis of their annual bonuses (you can download a copy of the indictment here). A third former Duke Energy trader defendant -- Brian Lavielle -- previously copped a plea and will presumably testify against Messrs. Kramer and Reid during the trial.

By the way, a couple of seasoned veterans who were involved in prior Enron-related criminal trials are representing the defendants in this case. Jack Zimmermann, who represented Kevin Howard during the recent Enron Broadband trial, is representing Mr. Kramer and Tom Hagemann, who represented Daniel Bayly in the Nigerian Barge trial, represents Mr. Reid.

This is one of the first criminal cases of which I am aware in which senior-level executives have been accused of devising schemes to generate profits in a trading book by using "mark-to-market" accounting in calculating bonuses, on one hand, and entering losses in an "accrual book" that had no bearing on bonuses, on the other. Duke Energy and many other energy traders previously used mark-to-market accounting to record profit and loss for energy contracts that might not settle for years into the future. However, the mark-to-market accounting method has come under intense scrutiny since the demise of Enron Corp. in late 2001 because of the latitude that the method allows in recording profitable results in trading operations. Consequently, if the defense can make this a trial over the advisability of using mark-to-market accounting, then my sense is that the defendants have a decent chance of acquittal. Stay tuned.

Posted by Tom at 6:25 AM | Comments (4)

The Lord of Regulation stumbles

Well, Eliot Spitzer has had better days at the office than yesterday.

First, Mr. Spitzer finally chose not to retry (persecute ?) former Bank of America Corp. broker Theodore Sihpol III, who was acquitted on 29 of 34 criminal charges relating to alleged improper trading of mutual funds in June and settled related civil charges with the Securities and Exchange Commission yesterday. The Lord of Regulation had announced a short time ago that that he planned to retry Mr. Sihpol on the charges. Here are the earlier posts on the Sihpol case.

In announcing the dismissal of the remaining charges against Mr. Sihpol, Mr. Spitzer's office stated that the prosecution was no longer necessary because Mr. Spitzer was satisfied with terms of the SEC settlement and Mr. Sihpol's statement in court relating to the charges. In his deal with the SEC, Mr. Sihpol agreed to pay $200,000 and be banned from the securities business for five years without admitting or denying wrongdoing. In state court, where the criminal charges were dismissed, Mr. Sihpol said: "I now recognize and regret that my conduct helped give Canary Capital an unfair trading advantage over other Bank of America mutual-fund shareholders."

Mr. Spitzer and the SEC had alleged that Mr. Sihpol played a key role in allowing hedge fund Canary Capital Partners to receive same-day pricing of fund shares on trades made after the deadline of 4 p.m. Eastern time. Mr. Spitzer thought he had a layup in prosecuting the relatively young Mr. Sihpol, in part because of recorded telephone conversations between Mr. Sihpol and Canary traders that showed that Mr. Sihpol knew about the late trading and the testimony of two key Canary executives against him. Those Canary witnesses had previously bartered their testimony against Mr. Sihpol for a deal with Mr. Spitzer in which they avoided criminal prosecution and paid a fine without admitting or denying wrongdoing.

But Mr. Spitzer has always been more about bludgeoning corporate defendants into coughing up money to avoid the courtroom than actually proving anything in the courtroom. During Mr. Sihpol's trial, Mr. Spitzer's case unraveled quickly as Mr. Sihpol's lawyers pointed out that Mr. Sihpol did not believe that the late-trading was improper and that his superiors at Bank of America -- which had also kowtowed to Mr. Spitzer in a previous settlement -- knew about it.

Although Mr. Spitzer has promised to "continue to vigorously defend the interests of investors," (and to use the publicity in doing so to promote his political campaigns), some targets are becoming more willing to fight back. Last month, J. & W. Seligman & Co. sued Mr. Spitzer and alleged that he exceeded his authority by launching an investigation into the supposedly excessive advisory fees that the firm charges its mutual fund customers. The investigation began when Seligman refused to agree to Mr. Spitzer's terms (extortion?) for settling his allegations that the firm allowed improper trading in its mutual funds.

Meanwhile, in another courtroom in Manhattan yesterday, Mr. Spitzer was dealt another embarrassing blow by U.S. District Judge Sidney Stein who thankfully barred Spitzer's office from issuing subpoenas or bringing enforcement actions in his effort to damage the sub-prime mortgage market under the guise of investigating possible racial discrimination in residential-lending practices at national banks.

The Office of the Comptroller of the Currency and the Clearing House Association, a commercial-banking group, had sued Mr. Spitzer earlier this year, alleging that his investigation infringed on the OCC's regulatory role over national banks. Judge Stein has been sympathetic to the OCC's lawsuit and yesterday ordered Mr. Spitzer's office to cease and desist its transparently political investigation into "discriminatory" sub-prime mortgage lending. In so doing, Judge Stein permanently barred Mr. Spitzer from subpoenaing documents from, or bringing enforcement actions against, national banks with regard to his investigation (campaign commercials?).

This ruling is particularly satisfying in that it halts Mr. Spitzer from pursuing a disingenuous political agenda that hurts a market that helps many of the voters that he is attempting to attract. Over the years, the sub-prime mortgage market has developed as national banks have gotten better at pricing risk-based loans. Thus, people who would not be creditworthy for conventional mortgages are now able to get a home loan, although at a higher price that reflects the greater risk of loaning money to folks who do not have the credit to buy a conventional mortgage. A significant number of sub-prime loans are made to members of minority groups, but without such risk-based pricing, the members of those groups with bad credit would never have received a mortgage in the first place. So, while cloaking his investigation in the veneer of fighting racial discrimination to play up to voters from minority groups, Mr. Spitzer's probe into sub-prime lending practices is really just a front for buying cheap campaign publicity at the expense of a market that helps the very voters he is attempting to attract.

Given how most entities cower at the thought of doing battle with Mr. Spitzer in the courtroom, the OCC's decision to stand up and pin back the Lord of Regulation's ears back -- and preserve a valuable market in the meantime -- is refreshing.

Posted by Tom at 4:33 AM | Comments (0)

October 12, 2005

Miers nomination = the Peter Principle?

Although not particularly impressed by the nomination of Harriet Miers to the Supreme Court, I decided to wait to evaluate her performance during the Judiciary Committee hearings before finally deciding whether to support or not support her nomination (as if anyone cares what I think, anyway!) ;^).

However, several bloggers are doing a good job discussing the implications of the nomination, particularly Stephen Bainbridge and William Dyer. Most of the debate from such responsible bloggers is well-reasoned and above-board, but David Frum weighed in a couple of days ago (see post "What the Insiders are Saying") with a post based on alleged well-placed confidential sources who contend that the Miers nomination is the product of the Peter Principle.

Welcome to the big leagues of petty politics, Harriet.

Posted by Tom at 8:36 AM | Comments (1)

Behind the scenes report on winning the Scrushy trial

This Criminal Crime Reporter article reports on the talk that one of Richard Scrushy's attorneys -- Jim Jenkins of Atlanta, Ga. -- gave at the at the recent National Association of Criminal Defense Lawyers - Georgetown University White Collar Crime conference. The article provides a fascinating glimpse of the behind-the-scenes story of how the Scrushy defense team developed and implemented its defense of Mr. Scrushy against the government's charges. Previous posts on the Scrushy case may be reviewed here, here, here and here.

Hat tip to Ellen Podgor for the link to the piece on Mr. Jenkins' talk, which she notes was "the most popular event" at the conference. I can see why, as the article relates numerous solid observations regarding defending a complex business case, the most important of which is to communicate with integrity a simple and straightforward theory of the case to the jury, and to remind the jury of that theory throughout the trial. Cases such as the Scrushy case are nearly impossible to win in the court of public opinion, but -- even with the overwhelming odds in favor of the prosecution in such cases -- they can be won in the courtroom.

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

More on criminalizing risk-taking

Robert Weisberg is Edwin E. Huddleson, Jr. Professor of Law and director of the Criminal Justice Center at Stanford University, where he teaches a course on white collar crime with David Mills, who is a senior lecturer there. In this Wall Street Journal ($) op-ed, Messrs. Weisberg and Mills dissect the Justice Department's indictment against eight former KPMG partners for their involvement in advising and promoting allegedly illegal tax shelters for clients of the firm. Messrs. Weisberg and Mills point out that there is just one small problem with the indictment:

In the months leading up to it (and the now-rumored indictment of other tax advisors on similar grounds), numerous news stories suggested the KPMG accountants had somehow knowingly participated in tax fraud by creating fake losses for wealthy clients. Whether or not this proves true, the indictment makes no such allegation.

H'mm. Sound familiar?

In this era of misusing criminal laws to punish merely questionable business transactions, precisely the same situation is also playing out -- i.e., pre-emptive criminalization of business conduct being asserted before such conduct has even been determined to be illegal from a civil standpoint -- in the sad case of Jamie Olis and in the Enron-related Nigerian Barge case, Coyote Springs case, the Enron Broadband case, and the government's legacy Enron case against former Enron executives Ken Lay, Jeff Skilling and Richard Causey. The weakness of the government's charges in the Enron-related cases has prompted an increasingly desperate Enron Task Force to engage in a wide range of abuses -- such as intimidation of witnesses and proferring false testimony -- in an effort to obtain publicly-expected convictions of business executives while denying those executives exculpatory evidence that they could present in their defense at trial. The same syndrome is also playing out with regard to Eliot Spitzer's despicable public bludgeoning of former AIG CEO, Maurice "Hank" Greenberg.

Absent clear evidence of a crime -- which should be easily explainable in an indictment rather than the amorphous messes that masquerade as indictments in the cases described above -- all of these cases should be left to the civil justice system for remedying the actions that allegedly caused damages. That the government in many of these cases has resorted to serious abuses of power in an effort to obtain unfair convictions reflects that criminalization of business in the post-Enron era is much more about the political goal of placating public resentment toward wealthy business executives than upholding justice and the rule of law.

Are you listening, Tom DeLay?

Posted by Tom at 5:29 AM | Comments (0)

Stros 2005 Review: 2005 NLCS Preview

So, after vanquishing the Braves for the second straight season in the National League Divisional Series, the Stros (89-73) face a 2005 rematch of the thrilling 2004 National League Championship Series against their arch-rival -- the St. Louis Cardinals (100-62).

As was the case before the 2004 series, the Cardinals have had the better season (combined RCAA/RSAA of 168 to the Stros' 75), but the two clubs are surprisingly evenly-matched coming into the NLCS. The Cardinals hit better than the Stros and actually have a slightly stronger pitching staff overall, but the Stros front three starting pitchers are the best in baseball and their key closers are pitching better than the Cards' main closers at this point. In fact, since bottoming out in late May, the Stros had precisely the same record as the Cards over the final 120 games of the seasons -- 74-46 for .617 winning percentage. Thus, the 2005 NLCS -- as with last season's seven game gut wrencher -- has all the makings of another close, hard-fought series.

The biggest discrepancy between the two clubs is in hitting, and there is really no way to get around that problem for the Stros. The following are the Stros hitters' final runs created against average ("RCAA," explained here) for the 2005 regular season, courtesy of Lee Sinins:

Morgan Ensberg 39
Lance Berkman 35
Craig Biggio 8
Jason Lane 6
Orlando Palmeiro 1
Jeff Bagwell 0
Charlton Jimerson 0
Charles Gipson -1
Todd Self -4
Eric Bruntlett -5
Luke Scott -6
Humberto Quintero -7
Jose Vizcaino -8
Chris Burke -12
Raul Chavez -12
Mike Lamb -12
Willy Taveras -13
Brad Ausmus -14
Adam Everett -21

The Stros ended up at a -26 team RCAA for the regular season (12th out of the 16 National League teams), which means that the Stros scored 26 fewer runs than an average National League team would have scored during the season.

The Stros lineup is not particularly balanced, but it's not without strengths, either. Lance Berkman (35 RCAA/.411 OBA/.524 SLG/.935 OPS) -- as with the Cards' Albert Pujols -- is one of the best hitters in the game, and Morgan Ensberg (39 RCAA/.388 OBA/.557 SLG/.945 OPS) has had a remarkable season. Moreover, although Jason Lane (6/.316/.499/.815) started slowly in his first season as a regular, he has produced at the same level as Ensberg (13 RCAA) since the All-Star break. Similarly, Mike Lamb has had generally horrible season (-12/.284/.419/.703), but he has picked it up recently, hitting 8/.319/.392/.609 over the final month of the season. Finally, 40 year old freak-of-nature Craig Biggio (8/.325/.468/.793) has had a wonderful season, but the remainder of the Stros' hitters are an amalgamation of young and old punch and judy hitters, Ausmus and Burke's latest historic yaks notwithstanding.

On the other hand, the Cardinals -- although not hitting as well as they did last season -- still hit considerably better than the Stros. Here are the Cardinals hitters' RCAA:

Albert Pujols 75
Jim Edmonds 30
Larry Walker 16
Reggie Sanders 12
John Rodriguez 6
John Gall 1
David Eckstein 0
Hector Luna 0
Chris Duncan -1
Skip Schumaker -1
Scott Rolen -6
So Taguchi -6
Scott Seabol -7
Mark Grudzielanek -8
Roger Cedeno -9
Mike Mahoney -9
Abraham Nunez -9
John Mabry -10
Einar Diaz -15
Yadier Molina -21

The Cardinals team RCAA of 38 was 5th among the 16 National League teams. Although not as strong as they would be with a healthy Scott Rolen at third base, the Cards' lineup is still reasonably bullish now that Walker and Sanders have come back from injuries to complement Pujols -- arguably the best hitter in the league -- and Edmonds, who is hitting at about half his RCAA from last season. The Cards' hitting approach is essentially to get men on base at the top of the order and then whack them in with their power in the middle of the lineup. Although this Cardinal team does not steal many bases, they really do not need to do so because they rely on big innings generated from the power-hitters in the middle of the lineup.

However, if this series is going to be won by the Stros, it will because of the Stros' pitching, particularly their starting pitching. Here are the Stros pitchers' most recent individual runs saved against average ("RSAA," explained here), although the number for each pitcher (except for Clemens and Pettitte) will change slightly based on the final week of the regular season:

Roger Clemens 53
Andy Pettitte 43
Roy Oswalt 32
Brad Lidge 14
Dan Wheeler 13
Chad Qualls 7
Mike Gallo 4
Travis Driskill 0
Scott Strickland 0
Chad Harville -1
Mike Burns -3
John Franco -5
Russ Springer -5
Brandon Backe -7
Brandon Duckworth -12
Ezequiel Astacio -14
Wandy Rodriguez -20

The Stros pitching staff's 97 team RSAA was second only to the Cardinals staff's 130 RSAA among the 16 National League teams. The Rocket and Andy Pettitte finished 1-2 in National League RSAA, and Roy Oswalt finished seventh. That performance by the three primary Stros starters is one of the finest seasons by three starting pitchers on one staff in modern baseball history. With Lidge, Wheeler and Qualls all pitching well out of the bullpen, the Stros have the most formidable pitching staff of any club in the 2005 playoffs.

However, the Cardinals' pitching staff is not chopped liver and, as noted above, has had an even better overall season than the Stros' staff. Here are the Cards pitchers' most recent RSAA numbers, which will change slightly when the final week of the regular season statistics are included later:

Chris Carpenter 40
Jason Isringhausen 13
Al Reyes 13
Mark Mulder 12
Jeff Suppan 11
Cal Eldred 9
Brad Thompson 8
Julian Tavarez 6
Jason Marquis 5
Matt Morris 5
Ray King 4
Randy Flores 3
Anthony Reyes 2
Gabe White 2
Tyler Johnson 1
Bill Pulsipher -1
Adam Wainwright -2
Kevin Jarvis -3
Jimmy Journell -3
Carmen Cali -4

Carpenter missed the tail end of last season and the postseason, so having him at the front of the rotation gives the Cardinals one of the only pitching staffs that matches up reasonably well with the Stros' staff. Carpenter has had the Stros' number so far this season -- going 4-0 in five starts against them -- but the Stros got to him in their final game against him and there are whispers that Carpenter is battling arm fatigue from the heavy load of innings that he has pitched this season. The remainder of the Cardinals' staff is essentially a group of above-average pitchers who will provide quality starts more often than not, which is about all the Cardinals need because of the high number of runs the club's lineup generates. One potential chink in the Cards' armor is their bullpen, which has not been as strong as last season and could be lit up in a game where the starter is blown out early or the team gets into a Stros-Braves Game Five-type extra-inning marathon.

So, there you have it. The clubs tangle in St. Louis tonight and tomorrow night, then come to Houston for three games over the weekend and on Monday, and then back to St. Louis for two games next week if the series goes that far. Although the Cardinals dominated the season series by winning 11 of the 16 games, that really doesn't mean much nwo. Berkman was not involved in a bunch of those early games, and the Cardinals' starting pitching depth is not as important in a short series as it is over the long haul. Busch Stadium is a bit more of a pitcher's park than Minute Maid Park, although Minute Maid is not as much of a hitter's park as many media and fans perceive. Both teams have sufficient power hitting to generate a slugfest or two even with the clubs' outstanding pitching. The Cardinals have been on cruise control for the past couple of months -- including in their easy divisional series against the Padres -- so the competitive edge definitely favors the Stros, who have had to fight and claw for both a playoff berth and then a divisional series victory in the longest playoff game ever played. If the Stros pitchers can keep the scores low and the Stros' hitters can continue their timely hitting from the Braves' series, this is definitely a series that the Stros can win.

But don't expect it in less than seven games. ;^)

Posted by Tom at 4:30 AM | Comments (0)

October 11, 2005

Daniel Drezner is moving on

DanielDrezner.com -- maintained by University of Chicago assistant professor of political science, Daniel Drezner -- is one of the first weblogs that I regularly reviewed and it remains one of my favorites. Over its three year existence, it has become one of the most popular academic blogs in the blogosphere.

Professor Drezner disclosed this past weekend that his application for tenure at the University of Chicago had been denied and that, as a result, he will be moving on from his position there. This New York Sun article (hat tip to Howard Bashman) is already speculating that Professor Drezner's popular blog was one of the factors working against him in the notoriously stuffy academic world of considering tenure applications. Larry Ribstein -- who is at the forefront of addressing academic issues relating to blogging -- has more analysis here.

Regardless of whether Professor Drezner's blogging had any effect on the rejection of his tenure application, my sense is that this is a temporary setback for him. He is an insightful commentator on politics generally, and on foreign affairs and political economy issues in particular, so he will not be without gainful employment opportunities for long. UChicago's loss will be someone else's gain.

Posted by Tom at 10:33 AM | Comments (0)

Nobel Laureate Thomas C. Schelling

Former University of Maryland economics professor Thomas C. Schelling was named the winner of the Nobel Memorial Prize in Economic Science yesterday along with Israeli economist Robert J. Aumann for their work in game theory, which essentially attempts to explain the choices that competitors make in situations that require strategic thinking. Mr. Schelling was the mentor of Marginal Revolution's Tyler Cowen, so don't miss Tyler's excellent overview of Professor Schelling's career and extraordinary contributions to economics, foreign policy and clear thinking. Tim Harford of the Financial Times also chimes in. Enjoy.

Posted by Tom at 9:43 AM | Comments (0)

Does Time Inc.'s management read Clear Thinkers?

Last month, this post commented on the interesting story of former University of Alabama football coach and current University of Texas at El Paso football coach Mike Price's $20 million libel lawsuit against Time Inc. That post ended with the following comment:

"Does anyone else get the sense that Time needs to settle this case quietly?"

Well, Time Inc. has taken that advice and settled with Coach Price.

Time Inc. made a very good decision. Vanderbilt's football team would have a better chance of beating the University of Alabama at Tuscaloosa than Time Inc. would have had of prevailing against Coach Price in a Birmingham courtroom.

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

October 10, 2005

Addressing the real problem in New Orleans

Edmund Phelps is the McVickar Professor of Political Economy at Columbia University. In this Wall Street Journal ($) op-ed, Professor Phelps makes the remarkably simple but adroit insight that much of the political debate over the rebuilding of New Orleans from the damage of Hurricane Katrina is missing the true problem that bedeviled New Orleans:

The nation is still reflecting on the sight of New Orleans unprotected from Katrina and too feeble from poverty to run from it. Yet some basic issues have scarcely been debated.

So far, the focus has been on what to do about lost and damaged infrastructure. For our legislators and the public, that has raised fascinating questions of political philosophy. The federal government does not pay to defend New York state against Lyme disease or New York City against terrorist attack. So it is a question why it is a federal duty to pay for measures to protect or repair New Orleans from local storms.

The economist's answer is that a disrupted New Orleans has external costs on the farmers upriver and the producers everywhere who depend heavily on the city's great port to ship grain. At likely levels, New York's Lyme disease does not threaten the rest of the nation. Protecting Wall Street ranks high on that external cost test, but not high enough in the estimation of Congress. It is a matter of degree.

And then, Professor Phelps bores in on the real issue:

The talk about rebuilding, however, misses the meaning that most viewers found in the scenes from New Orleans. The impact lay in the helplessness of a large segment of the population -- helpless not because of infirmities for the most part, but because their earning power or their very employability was so meager that they lacked a car with which to get out of the city, or did not have the cash for weeks away from home. The scenes thus made vivid the failure of the American economy to offer work and pay to the less advantaged that would provide them with economic independence and with access to something like the sorts of lives and jobs found in the rest of society. Whatever scale and scope rebuilding takes, it will not raise pay rates of the working poor above pre-storm levels.

Professor Phelps goes on to explain how a regional approach to the problem of New Orleans' poverty is illusory and will not work, and that a well-designed national approach is necessary to address the underlying problem. Moreover, he explains that federal handouts are actually counterproductive to the true goal of eradicating poverty in New Orleans. He concludes with the following commen sense advice:

The events in New Orleans pointed to the tragic flaw of a great nation still in denial about impoverished workers among its own citizens and in a muddle about its causes and cures. There is emerging a sense that it would be good to solve this problem. What is needed now is an understanding of the policy innovations that would be constructive and those that would not.

Definite clear thinking. Check out the entire piece.

And while your thinking about New Orleans, take awhile to read this insightful and personal Micheal Lewis NY Times Sunday Magazine op-ed on his experience in New Orleans immediately after the hurricane, which includes gem-quality observations such as the following:

But my parents have lived their entire adult lives fighting an unwinnable war. In their lifetimes, New Orleans has gone from the leading city of the South to a theme park for low-rollers and sinners. All the unpleasant facts about a city that can be measured - crime, poverty and illiteracy rates, the strange forms of governmental malfunction - have remained high. The public schools are a hopeless problem, and the public housing is a source of endless misery. A disturbing number of my parents' white neighbors have fled to white towns on the far side of Lake Pontchartrain. My parents would never put it this way, but they are fatalists; they have come to view change as unfortunate and inevitable. That's one difference between stability and stagnation. A stable society has the ability to reject or adapt to change. A stagnant one has change imposed on it, unpleasantly. The only question is from what direction it will come.

Posted by Tom at 5:38 AM | Comments (2)

2005 Weekly local football review

Despite this, football was still noticed in these parts over the weekend. First, the good.

Texas Longhorns 45 Oklahoma 12

Dr. Vince Young found a cure for the Stoops Curse -- it's called "Give me the ball and get out of the way."

Young threw for 241 yards and three TD's as the Horns (5-0) romped to their largest margin of victory in this hallowed series. Although Young is such an extraordinary player that he tends to attract most of the attention, the Horns' defense was really the difference in this game as it absolutely manhandled an overmatched OU offense that could muster only 171 yards of total offense.

Probably the best evidence that the Stoops Curse is officially a thing of the past is Coach Stoops' dubious decision to play injured stud running back Adrian Peterson, who "ran" ineffectively for 10 yards on three carries. That was a clear sign of desperation that reflects that things are getting a bit testy these days in Norman, Oklahoma.

By the way, the Horns will have their toughest game next Saturday since the Ohio State game when they host surprising Colorado (4-1).

Cowboys 33 Eagles 10

In their most impressive performance of the season, the Cowboys crushed the Eagles 33-10 as QB Drew Bledsoe directed the Pokes' to two early touchdowns and scores on six of their first seven drives and the defense shut down Philly QB Donovan McNabb and the NFL's top offense. The Pokes host the Giants next Sunday.

Houston Cougars 35 Tulane 14

After an unimpressive start to the season, the Coogs (3-2) had their second straight reasonably impressive performance in downing Tulane somewhere in Louisiana on Saturday afternoon. The Coogs -- who have genuinely talented skilled position players -- are developing a balanced offense that could be extremely difficult to defend as the season progresses. The Coogs host Memphis next weekend then go to SEC opponent Mississippi State the following weekend.

And now, the bad:

Titans 34 Texans 20

Can the Texans (0-4) really do this every week?

The answer is "you bet." The Texans continued their downward spiral, converting none of their 13 third downs and managing just one touchdown long after the game had been decided. They are the only winless team in the league and are 0-4 for the first time in their four year history. To make matters worse, the Texans' best player -- Pro Bowl receiver Andre Johnson -- left the game in the first quarter with a strained right calf and never returned.

Although 70,430 fans purchased tickets to the game, but only about two-thirds of those bothered to show up. Those that did endured Texans' QB David Carr go 18-of-27 for 131 yards with an interception that Tennessee converted into a field goal in the fourth quarter. Carr was also sacked seven times, which brings the Texans' sack total this season to 27. The Texans' fans roundly booed the team beginning in the second quarter and the stadium was mostly empty by the beginning of the fourth. The only time the crowd really cheered was in the second half when an update of the Stros' comeback against the Braves was announced and the remaining fans began to chant "Let's go Stros!"

I saw and spoke briefly with Texans' owner Bob McNair at the Stros-Braves game on this past Saturday night. I am glad that this good man is able to find some pleasant distractions from this mess. The Texans are on the nationally-televised game next Sunday night in Seattle, which could be very ugly.

Colorado 41 Texas Aggies 21

In game that was not as close as the final score indicates, the Aggies (3-2) did their best imitation of the Texans in rolling over and playing dead in Boulder, Colorado on Saturday night. As Ag QB Reggie McNeal does his best imitation of Texans QB David Carr, the Aggie defense does not appear to be able to stop a hard-charging marching band at this point.

Of the Aggies remaining six games, the Ags look to have a good chance of winning only two of those games, and neither of those (Oklahoma State at home next week and Iowa State at home on Oct. 29th) are locks. What once looked like a promising season now has a 5-6 finish looking like a distinct possibility.

As one crusty football coach once put it to me: "That will go over about as well as a turd in the punchbowl in Aggieland."

East Carolina 41 Rice 28

In one of the few games on their schedule that they could win, the Owls (0-4) defense rolled over and allowed a mediocre East Carolina team to do pretty much anything they wanted. The Owls get Tulsa at home next Saturday.

And don't forget to check out Kevin Whited's weekly Big 12 football review.

Posted by Tom at 4:17 AM | Comments (6)

October 9, 2005

A baseball weekend in Houston for the ages

Until this weekend, I really never thought that anything would top this game. But I was wrong.

What can one say about a game in which the following occurred?:

The Stros came back from a 6-1 deficit with only four outs left in the game.

Superstar Lance Berkman lighting a fuse to the Minute Maid Park crowd that exploded when he hit a grand salami -- the second one in the game, following the Braves' Adam LaRoche's 3rd inning bomb -- to bring the Stros improbably within a run of the lead in the bottom of the 8th inning:

With the Stros within an out of returning to Atlanta for a Game 5 of the series, light-hitting Brad Ausmus -- probably the weakest hitting regular National League player over the past five years -- ripped a line drive yak to deep left-center (only his fourth home run of the season) that landed about an inch above the yellow home-run line and just a couple of inches beyond the Braves centerfielder Andruw Jones' outstretched glove;

Rookie Luke Scott -- who was the Stros' hottest hitter coming out of spring training but who eventually was farmed back to AAA Round Rock for another season of minor league training -- coaxing a key walk during the 8th inning rally and then coming within inches of winning the game in the 10th with his own walk-off yak;

The Stros using all of their position players so that burly backup catcher Raul Chavez ended up playing first base;

Every available pitcher in the Stros' bullpen pitching a total of 13 and 2rds innings and giving up just one run;

Dan Wheeler pitching three innings of masterful relief -- his longest stint of the season -- almost on fumes by the end the 15th inning;

As the last Stros pitcher available, 43 year-old Roger Clemens taking hold of his exhausted team and pulling them across the finish line with incredibly unyielding will and three innings of one hit relief pitching; and

25 year-old Chris Burke -- a potentially solid National League regular player who has accepted a part-time role on the club while a future Hall of Famer plays out his string at Burke's primary position -- pounding his first walk-off tater of his young career to end the longest Major League Baseball playoff game in history.

Remarkably, Sunday's already legendary game overshadowed an excellent Saturday night game before the biggest crowd in the history of Minute Maid Park in which Roy O held the Braves at bay until the Stros exploded for four runs against the Braves' bullpen in the bottom of the 7th to put the game away.

So, the Stros have now vanquished the Braves in the playoffs for the second straight season, at least partially removing some of the sting of losing Atlanta three straight times in the playoffs earlier during the Stros' Biggio-Bagwell era. This series was an odd one that turned out to be much higher scoring than anticipated, although the clubs ended up having a couple of close, low-scoring affairs in their final two games of the series -- they just decided to count those two games as one legendary, 18-inning game to close out the series.

Now, what does this club do for an encore? It's off to St. Louis again for a rematch of last season's gut-wrenching National League Championship Series with the Cardinals in which the Stros came within a game of their first World Series. The first game will likely be on Wednesday night with the Stros' Andy Pettitte facing Redbirds' ace, Chris Carpenter. I will post a more thorough analysis of the Stros-Cards series later in the week.

Like, after I catch my breath!

Posted by Tom at 7:38 PM | Comments (4)

October 8, 2005

Delphi finally tanks

In perhaps the least surprising business move of the year, Delphi Corp. and 38 of its U.S. subsidiaries filed chapter 11 reorganization cases today in an attempt to restructure its money-losing auto supply business and resolve over-priced union contracts. Delphi advised the bankruptcy court in its initial filings that it has secured a $4.5 billion in debtor-in-possession financing and that it hopes to emerge from its reorganization in mid-2007.

By filing for bankruptcy, Delphi effectively ends bailout talks with its top customer and former parent -- General Motors Corp. -- and with the United Auto Workers Union. Without progress being made in those negotiations, Delphi elected to file its chapter 11 case before October 17, when new amendments to the Bankruptcy Code take effect that have a generally negative effect on corporate debtors. Delphi, which was spun off from GM in 1999, employs approximately 33,000 UAW workers in the U.S., pays benefits to 12,000 union retirees, and has annual revenues of about $28 billion.

Delphi has been in a world of hurt business-wise for some time. Faced with a daunting landscape of high labor costs, rising raw material costs and falling demand from its top U.S. customers, Delphi has struggled for the past several years to generate a profit -- last year, the company lost an astounding $4.9 billion and lost another $750 million in the first half of this year. The Pension Benefit Guaranty Corp., the quasi-governmental agency that administers failed public pension plans, will probably wind up administering Delphi's pension plan, which is underfunded by $4.3 billion.

Posted by Tom at 1:24 PM | Comments (0)

Former General Re CEO receives a Wells notice

Following on earlier plea bargains, former General Reinsurance Corp. CEO Ronald Ferguson received a Wells notice from the Securities and Exchange Commission late last week in regard to the SEC's investigation into various "finite risk" structured finance transactions between General Re -- a subsidiary of Warren Buffett's Berkshire Hathaway -- with American Insurance General. A Wells notice advises the recipient that the SEC intends to pursue him for alleged violations of securities law and often precedes a criminal indictment on the same matters. Here are the previous posts on the investigation into General Re, AIG and Berkshire.

Mr. Ferguson, who was CEO of General Re from 1987 to 2001, declined to testify in May when he was first interviewed by regulators about his alleged role in the transactions with AIG. According to Justice Department allegations in the criminal cases against former General Re executives John Houldsworth and Rick Napier, Mr. Ferguson agreed in 2000 to structure a finite risk reinsurance deal for AIG that boosted AIG's loss reserves. After AIG's board blinked in the face of government threats of a criminal indictment over the transactions, AIG ran off Maurice "Hank" Greenberg -- the CEO who built AIG into one of largest insurers in the world -- and then admitted -- again under government pressure -- that it had accounted for the transactions improperly. Although Messrs. Houldsworth and Napier pled guilty in June to conspiracy to commit fraud in conneciton with the transactions and face up to five years in jail, there has been no court finding that the transactions were even improper from a civil standpoint, much less criminal in nature.

That last point apparently has been lost on the New York Times, which begins one of the paragraphs in its story with this statement: "Mr. Greenberg and Mr. Ferguson started the improper financial transactions on Oct. 31, 2000."

Posted by Tom at 12:34 PM | Comments (0)

October 7, 2005

Interesting Stros' stat of the day

O.K., so things didn't go well last night, but the Stros can take some solace in that this interesting Allen St. John Wall Street Journal ($) article notes that the Stros are one of the top teams of the eight clubs in the playoffs in at least one important area -- that is, getting the most bang for their buck. Mr. St. John calculates the each playoff team's cost per win by simply taking a club's total payroll and dividing that number by the club's win total during the MLB season.

For example, compared to the Yankees, the Stros are remarkably efficient. The Yanks' $208 million payroll was by far the highest in baseball, comparable to the combined payrolls of the second-place Red Sox and the Dodgers. Accordingly, the Yankees' cost per win ($2.2 million) is almost 70% higher than that of the Red Sox ($1.3 million) and a whopping $1.437 million greater than the cost of each Stros' win.

The surprising Cleveland Indians (93-69) were the best penny-pinching team in MLB this past season as they achieved a frugal $446,263 per win. However, the Tribe faded in the final week of the season and failed to make the playoffs, and the other penny-pinching clubs really did not do particularly well this past season. For example, the Devil Rays were the most frugal club in MLB at $442,971 per win, but who cares when your overall record is 67-95?

Thus, a club needed to expect to spend about $900,000 per win to get into the playoffs. Apart from from the big-market Yankees and Red Sox, the other playoff teams fall within a reasonably narrow range between the White Sox's $759,373 per win to the $1.03 million per win for the Angels. As a result, Mr. St. John concludes as follows:

But as baseball's resources -- both money and information -- get spread out more evenly, it is beginning to appear that while adding a few tough-to-find bargains can make a team a contender, finding enough of them to carry you into the postseason may now be baseball's most difficult task. Just ask the Cleveland Indians.

Here is the cost per win chart for this season's playoff teams.

Posted by Tom at 11:13 AM | Comments (0)

The Cost of Victory

Cost per Win
TEAM	PAYROLL	WINS	COST PER WIN
White Sox	$75.2 million	99	$759,373
Padres	$63.3 million	92	$771,839
Stros	$76.8 million	89	$862,685
Cardinals	$92.1 million	100	$921,068
Braves	$86.5 million	90	$960,636
Angels	$97.7 million	95	$1.029 million
Red Sox	$123.5 million	95	$1.30 million
Yankees	$208.3 million	95	$2.19 million

Posted by Tom at 10:04 AM | Comments (0)

The latest suicide bomber?

Maybe it's due to the distraction of Texas-OU week or perhaps it's just a sign of the times, but the fact that a suicide bomber nearly entered the University of Oklahoma's football stadium last Saturday night while 84,000 people were watching OU thrash Kansas State sure seems to be flying a bit under the main radar screens, at least outside of Oklahoma. The bomber -- Joel Hinrichs III -- detonated an explosive device while sitting on a bench about 100 yards from the stadium after he apparently rushed off upon being required to have his backpack searched at the gate. This Counterterrorism blog post does a good job of summarizing the background and implications of the event, as does the TigerHawk in this post.

Posted by Tom at 9:10 AM | Comments (1)

Louie Freeh goes J. Edgar on Bill Clinton

Does it ever seem as if, whenever 60 Minutes needs a rating boost, they do a Bill Clinton-scandal story?

At any rate, get ready for another such segment. Former Clinton Administration FBI Director Louis J. Freeh is promoting his new book My FBI: Bringing Down the Mafia, Investigating Bill Clinton, and Fighting the War on Terror (St. Martin's Press 2005), and this Washington Post article indicates that his 60 Minutes interview with Mike Wallace will be a general hammering session on former President Clinton:

Former FBI director Louis J. Freeh has denounced Bill Clinton over the scandals that marred his presidency and for his record on terrorism, saying the level of distrust was so great that he stayed in his post so Clinton could not appoint his successor.

In a forthcoming book and "60 Minutes" interview, Freeh, whose strained relations with Clinton were no secret, says he was so determined to distance himself from Clinton that he sent back a White House pass so that all his visits would be deemed official. This, he said, antagonized Clinton.

The WaPo report triggered the crack Clinton Scandal Response Team into action:

Clinton spokesman Jay Carson said last night: "This is clearly a total work of fiction by a man who's desperate to clear his name and sell books, and it's unfortunate he'd stoop to this level in his attempt to rewrite history." He noted Freeh contributed nearly $20,000 to Republicans, including President Bush, in the last campaign.

Gosh, seems like old times, eh? In fairness to the Clintonites, Mr. Freeh's tenure at the FBI is not without its bipartisan critics.

Posted by Tom at 5:48 AM | Comments (0)

United Airlines finalizes chapter 11 exit financing

Following on this earlier post, UAL Corp., the parent of United Airlines, announced that it has finalized $3 billion in debt financing commitments from Citigroup Inc. and J.P. Morgan Chase & Co. that will allow the company to exit its long-pending chapter 11 case early next year. Here are the previous posts about the United Airlines bankruptcy saga and related airline industry financial issues.

The airline industry is in a world of hurt right now, suffering under the toxic combination of record jet-fuel prices, stiff competition from lower-cost discount airlines, and dubious management decisions of legacy airline companies. UAL filed for Chapter 11 in December 2002, so even if it stays on course with its reorganization plan, it will emerge from chapter 11 after operating for over three years under bankruptcy court protection. US Airways Group Inc. has gone through a chapter 22 case (two Chapter 11 filings) over the past three years, and just recently emerged from bankruptcy under a plan based on a merger with America West Holdings Corp. Delta Air Lines and Northwest Airlines both filed chapter 11 cases on Sept. 14.

UAL had been shopping its exit financing package over the past several months to a number of institutions, including Deutsche Bank AG and General Electric Co. During that time, UAL considered an exit financing approach that would include equity funds from a rights offering or private-equity investment, but opted for the highly-leveraged debt package when the prospective equity investors demanded too big a piece of the reorganized airline's equity pie. Under the deal that UAL selected, Citigroup and J.P. Morgan Chase will syndicate the secured loan to a consortium of financial institutions.

United will submit the exit-financing agreement to the bankruptcy court today, and a hearing on UAL's pending disclosure statement is scheduled for Oct. 20. Once the disclosure statement is approved by the bankruptcy court, then the process of creditor voting on the plan will take place over the next couple of months. United's proposed plan proposes to pay secured claims, priority tax claims and administrative claims in full, and to pay a dividend of 4% to 7% on unsecured claims in the form of common stock in the reorganized UAL.As in typical in such debt for equity plans, existing common and preferred equity in UAL is washed out and holders of such equity receive nothing under the plan.

Posted by Tom at 4:35 AM | Comments (0)

October 6, 2005

Interesting Stros' stat of the day

As Stros fans bask in the warm glow of the Stros' decisive victory over the Braves yesterday in the first game of their National League Divisional Series, ponder this -- in games in which the Stros score at least six runs, their record is an astounding 48-4, which computes to a .923 winning percentage.

Stated simply, the Stros are nearly unbeatable if they score at least six runs in a game.

Two of the premier pitchers of this era -- the Stros' Roger Clemens and the Braves' John Smoltz -- hookup in tonight's second game (tropical storm weather permitting) in Atlanta.

Posted by Tom at 10:21 AM | Comments (1)

The Stoops Curse

On the surface, all things look rosy in Texas Longhorn football land these days.

The Horns are the second-ranked team in the U.S., dramatically defeated Michigan in the Rose Bowl after last season, have already beaten mighty Ohio State on the road this season, and have a bonafide Heisman Trophy candidate in QB Vince Young. So, coming into the annual Texas-OU game this weekend in Dallas against an Oklahoma team that has been relatively unimpressive this season, the Horns and their faithful should be calm and supremely confident, right?

Not a chance.

As this Ted Lewis piece notes, you can almost feel Coach Brown and his team gripping the golf club too tightly as they prepare to confront their nemesis, OU head football coach Bob Stoops, whose teams have beaten the Horns for the past five straight years. There is a palpable sense that the mere thought of Coach Stoops throws Coach Brown into a panic, and that Texas' dull offense (at least pre-Vince Young) does not even challenge the defensive-minded Stoops:

Chicago Bears rookie running back Cedric Benson, who just finished playing four years for Brown, sees it much the same way, saying during an ESPN radio interview that "without a doubt" the Texas coaches approached the Oklahoma game trying not to lose more than planning to win.

Certainly the Longhorns, dominant against just about everybody else during Brown's tenure (their 73 victories in his seven-plus seasons at Texas are more than anyone else in the same span), have not been at their best against the Sooners of late.

"We know there are questions about Oklahoma, and that's fair," Brown said. "We haven't played very well or coached very well on that day."

Indeed.

Two of the last five games wound up in humiliating blowouts – 63-14 in 2000 and 65-13 in 2003.

Last year, Oklahoma won 12-0, handing Texas its first shutout in 24 years.

Small wonder frustrated Texas fans have taken to wearing "Reverse the Curse" ornaments.

Still, the Horns are a 14-point favorite, the biggest spread in the game since 1970. OU lost two of its first three games this season, including a shocking home defeat to TCU. Given the Horns' strong play so far this season, Coach Brown should be brimming with confidence, right? Well, not exactly. Commenting on OU's victory this past weekend over Big 12 rival Kansas State, Coach Brown said the following:

"Bob has done an amazing job getting his kids back together. They used that week off to get themselves back to being the Oklahoma teams we're used to -- quick, tough and aggressive."

Yeah, and there is that little problem about the five straight losses to OU, which Coach Stoops uses with the mastery of an experienced gridiron psychologist:

"It gives us the confidence that we match up well against them and we understand what they like to do," Stoops said. "Our players have a sense of that."

Even Barry Switzer, the hated former OU coach whose teams dominated UT for over a decade, chimed in:

"The problem for Mac is getting it done," Switzer said. "He's supposed to win, and by more than he was before the season began. If he can't get it done this time, it's really going to eat away at him. . . "

This is clearly a huge game for Texas and Coach Brown, another put-up-or-shut-up game for a program that has been notorious for underachieving during most of Coach Brown's tenure. Last season's Rose Bowl game was the Horns' highest-profile bowl appearance since they lost the 1978 Cotton Bowl game to Notre Dame while ranked no. 1 in the country. Despite Texas' dramatic win, Michigan was not really a top-tier team last season -- it lost to mediocre Notre Dame and Ohio State (7-4) teams, and San Diego State came within three points of beating the Wolverines at Ann Arbor. As a result, Michigan was ranked only 13th in the BCS standings going into the game and only Pitt, the Big East co-champion, had a worse BCS standing (21st) among the eight schools that played in the last season's BCS bowl games.

In 17 seasons at North Carolina and Texas, a Coach Brown team has never won a conference title. Now, that is understandable at North Carolina, which is a basketball school and had to deal with conference-rival Florida State during Coach Brown's tenure. But no conference championships at Texas -- where the resources and talent pool is virtually unlimited -- is almost unfathomable.

In fact, the quality of play of Coach Brown's Texas teams has often had an inverse relationship with the relative importance of the game, as the following reflects:

Those five consecutive losses to Oklahoma.

An 0-2 record in Big 12 championship games, where the Horns lost to Nebraska in 1999 and, with a BCS bowl berth seemingly in the bag, were upset by Colorado in 2001.

A 4-3 bowl game record, including that horrifying 28-20 loss to Washington State in the 2003 Pacific Life Holiday Bowl in which Texas' offense acted as if it had never seen a zone blitz before.

Accordingly, despite the apparent mismatch, this particular OU game may be the most important game of Mack Brown's coaching career. The Horns' win over a strong Ohio State team on the road was arguably the most impressive win by a Brown-coached team. But if the Horns blow this one to OU and its uber-coach Stoops, then the Ohio State win will quickly fade from memory as Longhorn fans contemplate whether the Texas program will ever gain true top-tier status under the very well-paid Coach Brown.

Posted by Tom at 7:04 AM | Comments (0)

And you thought the recent hurricanes were bad?

As the U.S. goes about recovering from the double whammy punch of the two hurricanes that hit the Gulf Coast region over the past month or so, this NY Times article reminds us that a potentially much more serious threat to our well-being is looming on the horizon:

"Two teams of federal and university scientists announced today that they had resurrected the 1918 influenza virus, the cause of one of history's most deadly epidemics, and had found that unlike the viruses that caused more recent flu pandemics of 1957 and 1968, the 1918 virus was actually a bird flu that jumped directly to humans.

The work, being published in the journals Nature and Science, involved getting the complete genetic sequence of the 1918 virus, using techniques of molecular biology to synthesize it, and then using it to infect mice and human lung cells in a specially equipped, secure lab at the Centers for Disease Control and Prevention in Atlanta.

The findings, the scientists say, reveal a small number of genetic changes that may explain why the virus was so lethal. The work also confirms the legitimacy of worries about the bird flu viruses that are now emerging in Asia.

The new studies find that today's bird flu viruses share some of the crucial genetic changes that occurred in the 1918 flu. The scientists suspect that with the 1918 flu, changes in just 25 to 30 out of about 4,400 amino acids in the viral proteins turned the virus into a killer. The bird flus, known as H5N1 viruses, have a few, but not all of those changes."

Here is a companion NY Times article on the growing political concern in Washington over the prospects of an epidemic. The 1918 flu pandemic killed an estimated 25 to 50 million people and, as the articles report, we are not much better protected from the virus now as the world was then. Even the mere reconstruction of the virus for research purposes has raised concerns:

Richard H. Ebright, a molecular biologist at Rutgers University, said he had concerns about the reconstruction of the virus and about publication of procedures to reconstruct the virus. "There is a risk verging on inevitability, of accidental release of the virus; there is also a risk of deliberate release of the virus," he said, adding that the 1918 flu virus "is perhaps the most effective bioweapons agent ever known."

During a closed door Senate briefing last week, Secretary of Health and Human Services Michael O. Leavitt and other senior government health officials warned of the implications of such a flu pandemic in the U.S.:

Mr. Leavitt warned in the briefing last week that an outbreak could cause 100,000 to 2 million deaths and as many as 10 million hospitalizations in the United States, one person who was present said. Those numbers have been presented publicly many times before. But hearing them in closed session gave them urgency, some who were at the meeting said.

Since 1997, avian flu strains have infected thousands of birds in 11 countries, primarily in Southeast Asia. So far, it is probable that virtually all of the 100+ people who have been infected with the disease (about 60 of whom have died) received the virus directly from infected birds. Thus, at least to date, there has been no or very little transmission between people, which is a requirement for an epidemic. Moreover, if the virus does begin being transmitted between humans, then there is a possibility that the mutated virus may be weaker and less lethal than the viral strain contracted directly from birds.

However, this remains a huge potential public health problem and not one that should be ignored merely because the pandemic may not occur or may be years away. Here's hoping that the federal government does a better job planning for this potential problem than it did for a direct hit by a category 4 hurricane on New Orleans.

Update: Eric Berger chimes in with this informative post over at his very smart SciGuy blog.

Posted by Tom at 6:24 AM | Comments (1)

WSJ editors do better, but where have they been?

After criticizing the Wall Street Journal yesterday for running a listless article about prosecutorial misconduct in the Enron-related criminal cases, it's only fair to note that the WSJ editors do much better today in this editorial ($) (see this related NY Times article) decrying the fact that nine defendants -- including eight former KPMG partners -- have been sold out to the government by the firm (see also this post) and face criminal prosecution for tax shelters that have never even been determined to be illegal from a civil standpoint (here are the previous posts on the KPMG tax shelter saga). The WSJ notes as follows:

The KPMG case attempts to short-circuit the messy business of proving that a tax shelter is illegal by using the power of prosecution to target the tax advisers directly. And by cutting them off from the support of their firm through the threat of a death-sentence indictment of KPMG itself, the government seems intent on compelling the accused to cop a plea or settle the case, and so deny them their day in court.

Tax evasion is a serious matter, but so is a criminal indictment for conspiracy. KPMG's partners in this case believed they were selling shelters that were entirely legal, and the underlying legality of those shelters has never been formally challenged. Yet the government has come down on those accountants and tax lawyers as if they belonged to the mob. A case of curiouser and curiouser, said Alice.

The Journal should be complimented for addressing the misuse of criminal law in the KPMG case, which is another example of the criminalization of business generally that has taken place in the U.S. since the hyper-publicized demise of Enron. However, precisely the same situation that is taking place with regard to the KPMG defendants -- i.e., defendants sold out by their employer and pre-emptive criminalization of business conduct before it has even been determined to be illegal from a civil standpoint -- has already resulted in egregious miscarriages of justice in the sad case of Jamie Olis and in the Enron-related Nigerian Barge case and Coyote Springs case. It's convenient to criticize such conduct when the target is a high-profile executive or former partners in a highly-publicized accounting firm. But where has the WSJ been with regard to those lesser-known but equally misguided prosecutions, which have already resulted in untold misery to the imprisoned executives and their families?

Oh well, better late than never, I guess.

Posted by Tom at 4:26 AM | Comments (1)

October 5, 2005

The Katrina and Rita ripples on the natural gas market

Following on this thread of posts over the past month, natural gas for November delivery rose 20.7 cents to a record $14.224 per million British thermal units on the New York Mercantile Exchange Tuesday afternoon after Interior Secretary Gale Norton warned it would probably take months before repairs to oil and gas production facilities in the Gulf of Mexico region would return production from that key region to normal. The Minerals Management Service reported that Gulf oil and gas production remains severely restricted, with 90% of the oil and over 70% of natural gas still off-line now a week and a half after Hurricane Rita came ashore.

The gas market was already stretched thin by heavy demand from power generators over the summer, but the double whammy of damage to production facilities from Hurricanes Katrina and Rita over the past month have jolted the natural gas market. As a result, futures contracts on the Nymex have nearly doubled since late July. The one good piece of news from the oil and gas markets was that crude oil, gasoline and heating-oil futures continue to weaken in the face of high pump prices and resultant diminished U.S. gasoline consumption in recent weeks. Oil futures fell for the third straight session on the Nymex as November light, sweet crude-oil futures slid $1.57 to $63.90 a barrel, the lowest price since mid-September.

Posted by Tom at 6:00 AM | Comments (0)

Is this all the better that the WSJ can do?

I recognize the Wall Street Journal's John R. Emshwiller has already cashed in on the Enron saga. But even that reason for wanting to move on to something else cannot explain this tepid ($) article on the prosecutorial misconduct that has tarred the Enron case and is now the subject of a pending motion to dismiss the criminal charges against former Enron key executives Ken Lay, Jeff Skilling and Richard Causey.

Although Mr. Emshwiller notes some of the allegations regarding prosecutorial misconduct in the pending Lay-Skilling-Causey motion, he inexplicably ignores compelling evidence of misconduct that has already occurred in other Enron-related cases, including the fact that such misconduct has already contributed greatly to the unjust conviction of at least four men. Meanwhile, Mr. Emshwiller's article even suggests that the Enron Task Force is on the side of the greater public interest in requesting public disclosure of the confidential sources of information relating to prosecutorial misconduct that has provided under seal to the judge in the case, but then fails to explain how such confidential sources could be protected from Task Force retribution if they were publicly revealed and fails to report that it's been the Task Force that has continually attempted to suppress evidence that would be helpful to the defendants in the only Enron-related criminal cases that have actually gone to trial.

My goodness, has the presumption of guilt toward any Enron-related defendant reached the point where even the nation's leading business newspaper has simply dispensed with even reasonably detailed or at least balanced reporting on the case?

Posted by Tom at 4:57 AM | Comments (0)

Stros 2005 Review: National League Division Series Preview

Didn't we just preview a series between these two teams?

For the fifth time in less than a decade, the Stros and the Braves -- two of the most successful National League clubs during that era (see this timely Wall Street Journal ($) interview with Atlanta GM John Schuerholz) -- meet in a post-season playoff series. The Braves have won three of the previous series, but the Stros won the one that means the most to this series -- i.e., the most recent one last season.

Interestingly, both the Stros and the Braves are a different type of club than they were last season, and they are quite similar teams. Each team has several strong hitters, but both clubs are below average hitting-wise overall with the Braves being slightly stronger in that department. Similarly, both teams have strong pitching staffs, although the Stros are stronger than the Braves in that department. Overall, both clubs have a combined RCAA/RSAA score of around 70, so these are evenly-matched clubs. Indeed, the Braves won just one more game than the Stros during the regular season.

The following are the Stros hitters' final runs created against average ("RCAA," explained here) for the 2005 regular season, courtesy of Lee Sinins:

Morgan Ensberg 39
Lance Berkman 35
Craig Biggio 8
Jason Lane 6
Orlando Palmeiro 1
Jeff Bagwell 0
Charlton Jimerson 0
Charles Gipson -1
Todd Self -4
Eric Bruntlett -5
Luke Scott -6
Humberto Quintero -7
Jose Vizcaino -8
Chris Burke -12
Raul Chavez -12
Mike Lamb -12
Willy Taveras -13
Brad Ausmus -14
Adam Everett -21

The Stros ended up at a -26 team RCAA for the regular season (12th out of the 16 National League teams), which means that the Stros scored 26 fewer runs than an average National League team would have scored during the season. However, the hitting has stabilized over the second half of the season as the club has a 2 team RCAA since the All-Star Game. Had the club been able to maintain just that barely above average level of hitting throughout the season, the Stros pitching has been so strong that the club would have challenged the Cardinals for the NL Central Division title.

The Stros have four reasonably strong hitters -- Morgan Ensberg (39 RCAA/.388 OBA/.557 SLG/.945 OPS), Lance Berkman (35/.411/.524/.935), Craig Biggio (8/.325/.468/.793) and Jason Lane (6/.316/.499/.815). Since the All-Star break, Berkman has been the club's best hitter with a 24 RCAA, and actually Lane and Ensberg have produced at the same level (13 RCAA) during that period, although Ensberg had a much stronger first half of the season.

Beyond those four hitters, the Stros are pretty much a hit and miss (mostly miss) group. The only other Stro regular with much hitting potential is Mike Lamb, who has had a generally horrible season (-12/.284/.419/.703) but has had a strong 8 RCAA since September 5th. With the exception Jeff Bagwell -- who has been relegated to pinch-hitting duties since returning from shoulder surgery to contribute to the playoff drive down the stretch of the regular season -- the rest of the Stros are a mish-mash of singles hitters with below-average on-base averages. That's the primary reason why the Stros are a below-average hitting club.

On the other hand, the Braves' hitters are a bit better, but they aren't reminding anyone of the 1927 Yankees, either:

Chipper Jones 33
Andruw Jones 22
Marcus Giles 14
Jeff Francoeur 9
Rafael Furcal 5
Wilson Betemit 1
Ryan Langerhans 1
Julio Franco -1
Pete Orr -2
Eddie Perez -3
Todd Hollandsworth -4
Brian McCann -4
Brayan Pena -4
Andy Marte -8
Kelly Johnson -9
Adam LaRoche -9
Raul Mondesi -11
Brian Jordan -13
Johnny Estrada -19

The Braves have a 2 team RCAA, which places them 9th among the 16 National League teams. Andruw Jones (22/.347/.575/.922) has gotten the most publicity of all the Braves hitters this season because of his 51 yaks, but the other Jones -- Chipper (33/.412/.556/.968) -- is actually the more productive hitter. Marcus Giles (14/.365/.461/.826) and Rafael Furcal (5/.348/.429/.777) are reasonably steady hitters with good speed, and Jeff Francoeur (9/.336/.549/.885) has had a better rookie season than the Stros' rookie Wily Taveras, but he slumped badly at the end of the regular season and shares Taveras' dubious aversion to accepting walks that would make his on base average better than an average National League hitter. The remainder of the Braves' hitters are similar to the lousy Stros hitters, although the Braves bad hitters do have a bit more power than the Stros bad hitters.

In the pitching department, the Stros have a clear edge, but the Braves pitchers are not chopped liver by any means. Here are the Stros pitchers' most recent individual runs saved against average ("RSAA," explained here), although the number for each pitcher (except for Clemens and Pettitte) will change slightly based on the final week of the season:

Roger Clemens 53
Andy Pettitte 43
Roy Oswalt 33
Brad Lidge 14
Dan Wheeler 13
Chad Qualls 7
Mike Gallo 4
Travis Driskill 0
Scott Strickland 0
Chad Harville -1
Mike Burns -3
John Franco -5
Russ Springer -5
Brandon Backe -7
Brandon Duckworth -12
Ezequiel Astacio -14
Wandy Rodriguez -20

The Stros pitching staff's 100 team RSAA is second only to the Cardinals staff's 130 among the 16 National League teams. The Rocket and Andy Pettitte finished 1-2 in National League RSAA, and Roy Oswalt finished seventh. That performance by the three primary Stros starters is one of the finest seasons by three starting pitchers on one staff in modern baseball history. With Lidge, Wheeler and Qualls all pitching well out of the bullpen -- and with Backe already a proven commodity in post-season play -- the Stros have the most formidable pitching staff of any club in the 2005 playoffs.

As noted above, the Braves pitchers also are a solid group. Here are their most recent RSAA numbers, which will change slightly based upon the final week of play:

John Smoltz 34
Jorge Sosa 28
Tim Hudson 19
Blaine Boyer 8
Kyle Farnsworth 8
Mike Hampton 7
Chris Reitsma 6
Kevin Gryboski 3
Jay Powell 2
Jorge Vasquez 1
Frank Brooks 0
Matt Childers 0
John Foster 0
Seth Greisinger 0
Jim Brower -1
Anthony Lerew -1
Macay McBride -1
John Thomson -1
Roman Colon -4
Kyle Davies -4
Tom Martin -4
Joey Devine -6
Dan Kolb -6
Horacio Ramirez -6
Adam Bernero -11

The Braves 71 team RSAA is fourth in the National League. Smoltz is the best post-season pitcher of this era, and Sosa has developed into a legitimate stud. Tim Hudson has already shutout the Stros earlier this season, although that's probably not that big a deal given how often the Stros have been shutout this season. The Braves pitching problem this season has been an inconsistent bullpen, although former Cub Kyle Farnsworth has provided an unexpected boost in that area during the second half of the season. Here's hoping that he reverts to his Cubs form during the playoffs.

So, there you have it. Two closely matched teams playing for the probable opportunity to take on a somewhat diminished Cardinals team for the National League Championship. Although it seems simplistic to say that the team that scores the most runs will probably win the series, each run scored will be a precious achievement during this series given the strength of the pitching on both clubs. I expect a tense, close, low-scoring series that will go the entire five games and produce a winner that will beat the Cardinals in the NLCS. Now let's sit back and enjoy the ride. Game one of the series begins today at 3 p.m. with Pettitte going for the Stros against the Braves' Hudson, and then tomorrow's second game of the series gets prime-time coverage at 7 p.m. as Clemens and Smoltz tangle.

Posted by Tom at 4:00 AM | Comments (3)

October 4, 2005

A popular Stros fan in Boston

According to the Boston Herald, Red Sox center fielder Johnny Damon did not realize that he had accidentally received a Houston Astros Division Series cap Sunday afternoon until someone pointed it out to him during a live television interview:

"I saw the star, and I just thought it was a different (cap) design," said Damon about the Astros insignia. "I'm sure people thought I was rooting for the Astros."

Red Sox equipment manager Joe Cochran said "slip-ups like that occasionally happen."

Posted by Tom at 10:01 AM | Comments (3)

The "Energy Hog?" -- Let's hope for a mild winter instead

On the heels of announcing the sale of almost a billion dollars worth of power plants in New York City and the Bush Administration announcing an energy conservation campaign centered around a mascot called the "Energy Hog," Houston-based Reliant Energy Inc. announced Monday that it would be raising its electricity prices for Houston-area customers by almost 15% as soon as possible and could implement an additional increase of about 10% in January. Those price increases will make Reliant's price for electricity among the highest in the nation.

Under Texas' deregulation law, Reliant is required to offer a semiregulated price through 2006 that is tied to natural-gas prices. Reliant's current electricity rate is based on a price of $7.50 per million BTUs for natural gas, so it is increasing its electricity rates based on a benchmark price of $11.38 per unit for natural gas. Reliant's two-step increase will result in a price of more than 16 cents a kilowatt-hour from the current 12.88 cents.

Reliant's move comes as markets continue to adjust to the soaring price of natural gas. Supplies of natural gas have been severely constricted as a result of the two Gulf Coast hurricanes over the past month, and federal officials and industry analysts are becoming increasingly concerned about rising energy costs over the winter months. Natural gas heats and cools about 52% of the nation's homes and, over the past year, natural gas prices have risen to $14.02 per million British thermal units from $6.73 per mBtu, a 108% gain. Similarly, heating oil has risen 50%, to $2.08 a gallon from $1.39 a gallon. Those increases make crude oil's 31% increase from $49 a barrel to $65.47 seem tame in comparison.

In deregulated markets such as Texas, gas-burning plants generally set the market price. Thus, power companies such as TXU Corp. that have large portfolios of low-cost nuclear and coal-fired plants are allowed to sell electricity at retail prices that far exceed their actual wholesale generating costs because the price is established based on the higher cost natural gas-fired plants. Reliant owns only one big power plant in Texas, so it has to contract to buy electricity from other suppliers such as Texas Genco LLC, which is being purchased by NRG Energy Inc. Those Texas Genco plants once belonged to Reliant, but they were sold as a part of the move toward deregulated market in Texas.

Meanwhile, the seriousness of the problem relating to reduced natural gas supplies was underscored yesterday as the Bush Administration resembled the Carter Administration in calling for energy conservation throughout the nation. The Department of Energy announced a new campaign to educate the public on ways to cut energy use, particularly with regard to home heating. The effort will include radio and television spots, newspaper advertisements and a consumer's guide with energy-saving tips focusing on tips on improving home insulation, monitoring thermostats and using products to curb energy consumption. The campaign's mascot is the Energy Hog, which is unlikely to be remembered in the same vein as Ronald McDonald after this current situation passes.

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

The remarkable Mr. Biggio

On the heels of their dramatic win in the last game of the regular season to seal the National League Wild Card Playoff berth, the Stros announced today that the club had signed future Hall of Famer and lifelong Stro Craig Biggio to a one year, $4 million contract covering the 2006 season. Bidg will play that season as a spry 40 year old.

Although the purely baseball-related analysis of whether to bring Bidg back is a closer question than the casual fan might think, it's hard to look at what the Stros accomplished this season and not think back to the one game that was truly the turning point -- that September 7 game in Philly when a ninth-inning, two-out, three-run home run by Bidg completed an Astros sweep of the Phillies. That Billy Wagner fastball that Bidg parked in the leftfield seats turned out to be the difference between the Stros going to the playoffs and the Phils going home.

But as good a baseball player as Bidg has been to the Stros, he has turned out to be something more for the club and the city. Bidg is a genuinely nice man who has embraced Houston as his family's home as much as Houston has embraced him as the face of its baseball team. Craig Biggio is a dying breed, the professional athlete who plays his entire Hall of Fame career in the city that he adopts as his home. As a result, Stros owner Drayton McLane is clearly making the right decision in accomodating this aging star in playing out his string in Houston. As with Roger Clemens, it is highly unlikely that any of us will ever see the likes of Craig Biggio on a baseball field again in our lives.

Bidg's recent seasons and career statistics are here.

Posted by Tom at 3:17 AM | Comments (0)

Craig Biggio statistics

Craig Biggio
YEAR	AGE	RCAA	OBA	SLG	OPS	AVG	HR	RBI	SB	G
2003	37	1	.350	.412	.763	.264	15	62	8	153
2004	38	8	.337	.469	.806	.281	24	63	7	156
2005	39	8	.325	.468	.792	.264	26	69	11	155
CAR		354	.370	.437	.807	.285	260	1063	407	2564
LG AVG		0	.338	.419	.757	.268	279	1229	207
POS AVG		-104	.333	.392	.726	.265	202	1037	232

Posted by Tom at 3:15 AM | Comments (0)

October 3, 2005

Guardian profiles Jon Stewart

This Guardian article profiles Comedy Central's Jon Stewart, who reveals that his real name is Jonathan Stewart Leibowitz and why he dropped his last name for show business purposes:

"I'm not a self-hating Jew. Actually, to borrow a line from Lenny Bruce, I just thought Leibowitz was too Hollywood."

In the meantime, while discussing celebrities, the Onion reports that Lance Armstrong recently confronted an endurance test that almost overwhelmed him.

Posted by Tom at 8:01 AM | Comments (0)

Can't say I expected this

President Bush has nominated White House counsel and Dallas-based attorney Harriet Miers to replace Sandra Day O'Connor on the Supreme Court of the United States. Ms. Miers has never been a judge before, the first such non-judge nomination since that of the late Chief Justice William Rehnquist.

Ms. Miers was the first woman to be president of the State Bar of Texas and, for a time during the President's stint as a businessman, she was his personal lawyer.

Howard Bashman has an extensive list of developing links on Ms. Miers. And Professor Bainbridge asks very reasonable questions and makes challeging observations regarding the nomination here. And Tom Goldstein and Lyle Denniston over at SCOTUSBlog are already expressing skepticism that the Senate will approve the nomination. On the other hand, William Dyer provides an impassioned defense of a nomination of a non-jurist to the Supreme Court.

Posted by Tom at 7:34 AM | Comments (0)

Defending the most important executive perk

A fair bit of chatter was generated in the locker rooms of many golf clubs over the past weekend by this Wall Street Journal ($) article on Friday that detailed the rather embarrassing use of corporate aircraft as airborne limousines to fly CEOs and other executives to golf dates or to vacation homes where they have golf-club memberships. In the article, Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, calls it "disgusting" for a company to guarantee its CEO numerous hours of free personal flight time in order for the exec to make his tee times:

"A corporate aircraft isn't supposed to be a shuttle to a vacation home. We pay CEOs enough. They can afford to pay to fly to their vacation homes."

Is nothing sacred anymore? The hard-earned right to jet off to a golf game has been a savored executive perk for years. In this post-Enron era of demonizing business executives, is not there anyone who will stand up and defend the beleaguered executives in retaining this hallowed perk?

You bet there is. Just call Professor Bainbridge.

I'm betting that the Professor gets some major consulting work out of his work in this area. ;^)

Posted by Tom at 7:12 AM | Comments (0)

The latest urban boondoggle

Houston's light rail system is a depressing black hole that gobbles huge amounts of money, so we are reduced to feeling somewhat better about that waste by stories such as this one that portend an even bigger urban boondoggle:

A decade ago, local leaders [in the Raleigh-Durham Research Triangle area of North Carolina] started planning a regional rail system, hoping to avoid a future of clogged highways and frustrated commuters. . .

The Triangle Transit Authority wants to build the $759 million system. But TTA is struggling to answer rigorous questions from federal officials about predictions of how many people will ride.

No dirt has yet been turned, although TTA has spent nearly $43 million acquiring land and access to an existing railroad corridor.

The project's cost has ballooned from a 1994 estimate of about $100 million to a new estimate of $759 million.

Even at that price, the 28-mile route would be seven miles shorter than its backers have long wanted, a reduction that saves money. Four stations were cut, three in North Raleigh and one at Duke University Medical Center.

For now, federal authorities have held up approval of most of the money needed for the project, more than $400 million. . . TTA's ridership forecasts were "unexpected and unexplainable," according to a memo written Aug. 1 by Jennifer L. Dorn, administrator of the Federal Transit Administration.

For the first time, [area leaders are] talking about possibly needing more money from Triangle taxpayers to keep the project on track. Previously, he and other TTA leaders have said that new local taxes would only be needed later to expand to North Raleigh and Chapel Hill. . .

TTA's predictions for riders make clear that taxpayers should not expect the rail to make a huge dent in traffic. The system was last forecast to carry about 14,000 riders a day when trains start.

That number amounts to removing less than a lane of traffic on the busiest part of today's Interstate 40.

Read the entire piece. Is there simply no end to this type of pork barrel spending run amok? Hat tip to Craig Newmark for the link to the Triangle area story.

Posted by Tom at 6:33 AM | Comments (0)

Choi wins at Greensboro

K.J. Choi of The Woodlands cruised to a two-shot victory on Sunday in the Chrysler Classic of Greensboro to win his first PGA Tour golf tournament in almost three years. The sweet-swinging South Korean native led the field during the tournament in both driving accuracy (83.9%) and putts per green in regulation (1.618), and shot 22 under par for the tournament. That's a good prescription for winning golf tournaments.

Choi is an interesting fellow. His life story -- which he recounted in this speech several years ago -- is quite inspiring. Check it out.

Posted by Tom at 5:40 AM | Comments (0)

Texas Genco turns power generating assets for huge profit

Less than a year after a group of four private equity funds banded together to acquire Texas Genco Holdings, Inc. from CenterPoint Energy for $3.7 billion, the buyers are proposing to sell Texas Genco to NRG Energy Inc. for $5.8 billion in cash and stock in a deal that confirms the red-hot nature of the market for power generation assets.

Under the deal, NRG -- which emerged from chapter 11 just two years ago -- will pay $4 billion in cash and will give the sellers $1.8 billion in stock in NRG, which amounts to about a 25% stake in NRG. NRG also will assume an additional $2.5 billion in debt. As a result of the acquisition, NRG will become one of the country's largest independent generators with more than 24,000 megawatts of capacity from plants in California, the Northeast, the Southeast and Texas.

Through the purchase, NRG gets a large presence in the lucrative Texas power market where, as an independent generator, it will not be tied to any particular utility and will be able to sell its power at wholesale to utilities and other retail suppliers. The deal also gives the private equity fund-owners of Texas Genco a profit of about six times their original investment of nearly $900 million, including the value of the investors' new 25% stake in NRG.

One controversial aspect of the power generating assets being sold under the deal is that the Texas customers of CenterPoint Energy Inc -- the Houston-based utility that originally sold the power plants to the private equity funds -- are obligated to pay more than $2 billion to make up the difference between what state regulators concluded that the power generating assets were worth and the higher book value that CenterPoint attributed to the assets. As a result, a fair question is how those supposedly undervalued assets could have appreciated in value so quickly, but the answer is simple -- the recent large increase in natural-gas prices. Since Hurricane Katrina hit the Gulf Coast in late August, natural gas prices are up more than 42% to $13.921 a million British thermal unit, which means that the price has nearly doubled for the quarter. Inasmuch as roughly half of the assets being sold consist of nuclear and coal-fired power plants that have low operating costs, NRG will be able to sell that power at the higher prices that gas-powered plants command because Texas allows power to be sold at the price commanded by the most expensive source.

Finally, in another reflection of the super-heated market for power generating assets, the Wall Street Journal is reporting today that Houston-based Reliant Energy Inc. will announce as early as today that it will sell $975 million worth of New York City power plants to a buyout group led by Madison Dearborn Partners and U.S. Power Generating Co. That deal will involve 23% of New York City's power-generating capacity.

Posted by Tom at 4:47 AM | Comments (1)

October 2, 2005

2005 Weekly local football review

Bengals 16 Texans 10

The local media will likely view this game as a moral victory because the Texans (0-3) at least had a chance to win the game. However, the Texans passing game generated a measly 128 yards on a 4.9 yards per pass average. The rushing attack generated 126 yards for a slightly-better 5.5 per rush average. The bottom line is that 254 yards of total offense will not win many NFL games. The defense was decent, allowing less than 100 yards rushing and keeping the team in the game for the most part. But folks, this is shaping up as a very looong season for the Texans. The Texans better beat Tennessee at home next Sunday because they have Seattle on the road and Indianapolis at home the two weeks after that one. 0-6 is looking like a distinct possibility.

Raiders 19 Cowboys 13

That hissing sound is the air leaking out quickly of the Cowboys' (2-2) once promising season. The Pokes are now 2-2 and in the cellar of the strong NFC East Division. Dallas is not running the ball particulary well so far this season, and Drew Bledsoe is probably not capable of putting up the kind of passing statistics necessary to carry this team's offense. The Cowboys are light years better than the Texans, but this does not look so far like an NFL playoff caliber team.

Texas Longhorns 51 Missouri 20

Let's see now. Second-ranked Texas (4-0) has 14 penalties in the game, has two turnovers and a fumbled snap on a fourth down play near the goal line, and is only a point ahead after the first quarter on the road. Sounds as if they should be in trouble, right?

Nope. This is an exceptionally explosive Longhorn team, so it doesn't take them long to pile up the points. But the big hurdle for this team is directly in front of them this week in Dallas: The Horns face Oklahoma (2-2), which has won five straight games in the series, and UT coach Mack Brown must deal once again with the intimidation of being continually out-coached by Sooners' coach Bob Stoops. OU superback Adrian Peterson appears to have a hitch-in-his-giddyup and the Horns appear to have the much better balanced team, but you can throw out the statistics and record-to-date in this one. I think Texas will have all that it can handle in this one.

Texas Aggies 16 Baylor 10

I don't think this result is what Aggie (3-1) fans had in mind before their team goes on the road to face Colorado (3-1) and Kansas State (3-1) in two of the next three weeks. In fact, I'm sure it's not.

Houston Cougars 30 Tulsa 23

The hard-luck Cougars (2-2) get a nice road win after bailing out before Hurricane Rita and spending the week in a downtown Tulsa hotel. The Coogs play hurricane-displaced Tulane (2-1) in Lafayette, La. next Saturday.

UAB 45 Rice 26

The 0-3 Owls lose their ninth straight game stretching back to last season. The seat is getting very hot for Rice coach and genuine nice guy Ken Hatfield.

For more thorough analysis of the week's Big 12 games, check out Kevin Whited's weekly review.

Posted by Tom at 8:57 PM | Comments (6)

Whew!

Well, as predicted, the Stros (89-73) didn't get to celebrate winning the National League Wild Card Playoff berth until the last out of their weekend series with the Cubs (79-83) was recorded in the scorebook.

The Stros clinched on Sunday by pulling out a heart-stopping 6-4 victory over the Cubs after setting up that victory with a similarly tight 3-1 win over the Cubs on Saturday. Preceding those nerve-wracking victories were two even closer games that the Stros lost to the Cubs, 3-2 on Thursday and then 4-3 on Friday in which Stros closer Brad Lidge uncharacteristically blew a two-run lead in the ninth. Lidge came back to save both wins over the weekend.

So, the Stros make the playoffs for the sixth time in the past nine seasons as they close out the remarkably successful Biggio-Bagwell era. I was one of the few to predict that this light-hitting club could contend for yet another playoff berth, although even I wavered during the early part of the season and as recently as a month ago. But after a horrible 15-30 record in their first 45 games, the Stros were a remarkable 74-43 for the remainder of the season to lock up the playoff berth with only three less wins that last season's club that came within a game of the World Series.

The Stros have a couple of days of rest before taking on their perennial playoff opponent, the Braves (90-72) in Atlanta on Wednesday. They will follow that game with another on Thursday in Atlanta and then games in Houston on Saturday and, if necessary on Sunday, and then a fifth game, if necessary, in Atlanta next Monday. I will post a thorough analysis of the Stros versus Braves series on Tuesday.

Posted by Tom at 8:01 PM | Comments (1)

October 1, 2005

The real Republican deficit

Following on a theme addressed in this earlier post from last fall, this timely OpinionJournal op-ed points out that the real problem to the Republican Party represented by Tom DeLay is not his dubious ethics, but that he is devoid of ideas other than self-preservation:

The real danger for Republicans now isn't ethics; it is that, like those 1994 Democrats, they seem to have grown more comfortable presiding over the government than changing it. No one typified this more than Mr. DeLay, who has always been more fiercely partisan than he is conservative. . .

. . . [T]he GOP Congress has become mostly about its money and muscle--and the incumbency it helps to sustain. The policy and intellectual fervor, such as it was, has all but vanished. Nothing typified that more than Mr. DeLay's comments on September 13, when he declared post-Katrina that there was nothing left in the federal budget to cut. They had already trimmed all the fat. . .

Read the entire piece. As OpinionJournal points out, if voters come to the conclusion that the GOP's primary ambition is simply to remain in power, then "no amount of money or muscle will save Republicans at the polls."

Posted by Tom at 10:47 AM | Comments (1)

Texas Medical Center players make nice

The Chronicle's Todd Ackerman, who has done a fine job over the past couple of years of covering the divisive split between former Texas Medical Center partners, Baylor College of Medicine and the Methodist Hospital -- reports today that Baylor and Methodist have entered into a settlement brokered by Texas Attorney General Greg Abbott and that Baylor and its new teaching hospital -- St. Luke's Episcopal Hospital -- have decided to shelve their ongoing merger negotiations for the time being.

Whew! Never a dull moment in the Medical Center, eh?

Mr. Ackerman reports that the Baylor-Methodist truce is centered around a new collaborative $16 million program between the institutions to improve immunization and emergency room programs for Houston's underprivileged:

"I have great respect for these institutions and am grateful we were all able to sit at the table to transform some serious differences into a cooperative environment of good will," said Abbott. "The ultimate goal is to ensure the highest level of care to the community, as well as to the neediest among us, especially the children of Houston."

The agreement also calls for Baylor and Methodist to renew a spirit of collaboration by agreeing to share teaching, research and clinical programs and to limit the recruitment of staff from one institution to another.

During the negotiations, chaired by former Harris County Commissioner and current Texas Medical Center board member Elizabeth Ghrist and attended by three members from both insitutions' boards, Abbott barred negative communication and recruiting of staff by either institution. He extended the negotiations, originally scheduled to finish at the end of August, through September, when he promised to make a pronouncement.

Friday, Abbott made that pronouncement. Joined by top officials of Baylor, Methodist and the Texas Medical Center, he said the new agreement ends the protracted dispute and marks "a new era."

The agreement between the institutions calls for 90 to 130 Baylor residents to rotate through Methodist for at least the next five years; for the two to share urology; ear, nose and throat; cardiovascular disease prevention; and cell and gene therapy programs; and for scientists at Baylor and at Methodist's new research institute to collaborate.

It calls for both institutions to attract new doctors and scientists to the Texas Medical Center rather than recruit from each other.

Given the raid on Baylor's faculty that Methodist engineered over the past year, it remains to be seen whether that last provision of the settlement holds up. However, Mr. Abbott's involvement in brokering the settlement certainly adds an element of governmental action that did not exist before in the various dust-ups that have taken place between the two institutions in their messy divorce.

Meanwhile, Mr. Ackerman reports that the Baylor-St. Luke's merger negotiations have been shelved on a friendly basis as the new partners assess their new medical school-teaching hospital relationship. That such negotiations have been put on hold is not particularly surprising given that such a merger would be highly unusual in the world of academic medicine between even longtime partners, much less ones that have been together for a less than a year. My sense is that the negotiations may revive as the parties get more comfortable with their relationship and evaluate how a merger could facilitate both parties' goals in the ever-shifting sands of financing and providing health care in the U.S.

Posted by Tom at 8:47 AM | Comments (0)

KPMG moves to settle tax shelter class action

Battered and bruised after negotiating a deferred prosecution agreement with the Justice Department that narrowly prevented a criminal indictment of the firm, accounting giant KPMG LLP took another baby step yesterday in its plan to attempt to preserve the firm as a going concern by agreeing to submit a proposed $225 million settlement to the federal court overseeing the class action lawsuit by about 275 former KPMG clients who bought illegal tax shelters promoted by the firm. The Sidley Austin Brown & Wood LLP law firm -- another defendant with KPMG in the class action -- is also included in the proposed settlement, which remains subject to the U.S. District Court's approval in Newark, N.J. Here are the previous posts on the KMPG tax shelter fiasco.

Interestingly, lead plaintiffs' counsel in the class action is Milberg Weiss Bershad & Schulman LLP, which has a few problems of its own.

The proposed settlement covers former clients who participated in the tax shelters known as Blips, Flip, Opis, and SOS. The four shelters are the same ones that were the subject of KPMG's deferred prosecution agreement under which KPMG admitted criminal wrongdoing and agreed to pay about $450 million in penalties. A New York grand jury recently indicted eight former KPMG tax professionals and a former Sidley Austin attorney in connection with the promotion of the tax shelters. Under the proposed class action settlement -- which is scheduled for a preliminary hearing on October 7 -- KPMG would pay about 80% of the $225 million and Sidley Austin about 20%.

Even if approved, the settlement does not solve KPMG's tax shelter woes by any stretch because dozens of other former KPMG clients are pursuing their own individual lawsuits against the firm in various state and federal courts. There are approximately 325 former KPMG clients who bought the tax shelters who are not involved in the class action.

Cohen Milstein Hausfeld & Toll PLLC -- a law firm that has requested class action status for its own shelter lawsuit against KPMG -- has already filed an objection to the proposed settlement in which it requested a stay of the class action until the Court determines whether Milberg Weiss should be disqualified as lead plaintiffs counsel in the case. In the pleading, Cohen Milstein accuses Milberg Weiss of taking on a former KPMG shelter customer as an individual client three years ago and subsequently failing to notify the client that Milberg had begun negotiating the class action settlement with KPMG. Milberg filed the Newark class action lawsuit in June 2005.

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