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December 31, 2006

Uncommon common sense to close out the year

Several items making uncommonly good sense in financial matters caught my eye on the final day of the year.

First, Don Boudreaux noticed the following letter to the Financial Times from Larry Ribstein's colleague at the University of Illinois College of Law, Andrew P. Morriss. Professor Morriss was responding to this earlier article:

Sir,

Bono is following up on his hug of German Prime Minister Angela Merkel at Davos last January and with a visit to Germany to launch “a series of debates with German thinkers on African development and the role of the west.” (“Geldof and Bono take G8 campaign to Germany,” Dec. 27). What is to debate? Only entertainers and politicians could be unaware of the straightforward starting points for solving Africa's many problems: free trade and governments that neither murder their citizens nor steal their property. The role of the west in implementing these solutions is equally clear: cut tariffs and other barriers to trade with Africa and eliminate official toleration (including foreign aid, official recognition, arms sales, etc.) of murderous regimes like Sudan's and kleptocratic ones like Zimbabwe’s.

Andrew P. Morriss
H. Ross & Helen Workman Professor of Law
University of Illinois, College of Law

Meanwhile, the Wall Street Journal editors provided this timely editorial in which they point out that it is no coincidence that the current growth and relative stability in financial markets has coincided with the enormous growth in the use of financial innovations such as securitizations and derivatives:

One of the things that has changed over the past 30 years is the extraordinary extent of financial innovation. When it comes to the decline of risk premiums and financial stability, securitization and the use of derivatives have both played an unsung role. [. . .]

The sum of a myriad of these transactions over the economy means that everything moves a little faster. Credit becomes marginally cheaper and more plentiful. Risk is dispersed to those who feel they can better afford it. Thus does the supposedly non-productive financial sector of the economy provide fuel for future growth. Seemingly obscure transactions lower the cost of capital to businesses and consumers and spread risk in a way that decreases the danger of catastrophic financial accidents.

None of which means financial accidents won't happen. Market players sometimes bet wrong--there are always two sides to a transaction, and one party can always miscalculate its ability to withstand an adverse event. . . [. . .]

But these are not reasons to fear derivatives and other financial innovations. Risk is still out there. But as we leave a successful financial year and enter a new one, take comfort in the fact that all that buying, selling, swapping, trading and securitization of risk has actually made the financial system less risky.

Good point, which makes the WSJ's support of the lynching of one of the men responsible for a substantial amount of that financial innovation all the more troubling.

Finally, not to be outdone, Professor Ribstein analyzes the latest ongoing media rationalizations regarding Steve Jobs' involvement in backdating options at Apple:

Apple’s internal investigators, including directors Al Gore and Jerome York, ignored the funny odor and expressed “complete confidence in Steve Jobs and the senior management team.”

But NYU’s David Yermack says: “They have pretty much admitted that [Jobs] was directly involved in a fraud. If he had directly participated in altering depreciation schedules, or booking revenue that wasn’t yet earned, would they have full confidence in him?”

Terrific question Professor Yermack. Suppose, for example, we’re talking about Bernie Ebbers or Jeff Skilling? At least, with Al Gore on the case, we won’t be hearing, as we did with Enron, about Steve Jobs’ Republican friends.

It looks like former GC Nancy Heinen, who may have participated in the improper documentation, might take the fall. Meanwhile, Gregory Reyes of Brocade, who did not receive any backdated options, is facing criminal charges. Apple’s story seems to be that Jobs, possibly unlike Reyes and Heinen, didn’t “appreciate the accounting implications.”

Just to summarize the emerging blackletter law: It's ok to commit “fraud” (which is what we are repeatedly told backdating is) if (1) you are a media darling who produces fancy products that everybody loves; (2) you can get Al Gore to sign off (I guess this particular truth isn't too inconvenient); and (3) you can get somebody else in your company to do the dirty work.

There's also an anecdote here about actual effect of backdating on companies: Apple’s stock sank 5% after it looked like Job's job might be on the line, but then rose the same amount when the board committee made it clear he wasn’t going to be fired. Does this mean that the market doesn’t care about the fraud, but just about the governance turmoil the media frenzy wreaks on companies?

Posted by Tom at 6:37 AM | Comments (1) |

December 30, 2006

Reacting to the DeBakey surgery story

The reactions to last weekend's fascinating story about the surgery to repair a dissecting aortic aneurysm in 97-year old Medical Center icon, Dr. Michael DeBakey, are as interesting as the story itself. The following are a few comments selected from letters to the NY Times regarding the story:

"Dr. Michael E. DeBakey’s surgery may have been a technical advance of heroic and dramatic proportions, but it was a setback for patients’ rights. Dr. DeBakey is the epitome of the informed patient, and a document evidently existed that said he did not want surgery for his disease.

Progressing into a coma as one dies is a normal part of the terminal stages of many illnesses. Directives exist to prevent such an incapacitated patient from becoming a victim of the grieving spouse or the frightened caregiver.

Because of Dr. DeBakey’s stature and publicity about his case, this surgery may decrease patients’ right to die in a manner they desire, an unfortunate result of a remarkable feat."

"Your article about Dr. Michael E. DeBakey’s aortic aneurysm operation was described as emblematic of the difficulties of end-of-life care, but it is as much or more emblematic of the difficulty patients encounter in having their wishes to forgo treatment respected. No one in the world had better capacity to refuse this operation than Dr. DeBakey, and he did.

. . .After the world’s best medical care, months in the hospital and a million dollars, Dr. DeBakey and his family had a happy outcome.

But for those thousands of ordinary patients who must struggle against family, church and state to refuse invasive, risky, experimental or simply unwanted care, it is not necessarily a happy ending."

"I wonder if Katrin DeBakey would have been so eager for her husband’s surgery if she had had to provide all the postoperative care herself as the rest of us have to do.

Almost any elderly patient with good insurance and an educated and younger spouse making decisions can get good high-tech surgery, but the system fails when the hospital dumps the patient back home on the spouse after only two days of postoperative hospital care.

In Mrs. DeBakey’s case, her husband received months of in-hospital intensive care, emergency care, more surgery, physical therapy and psychological support.

The rest of us caregivers would have long since passed the breaking point from dealing on our own with medical emergencies, unavailable doctors, no home nurses, no respite time and the psychiatric problems of many elderly male patients — rage and depression."

"The article about Dr. Michael E. DeBakey illustrates many central issues that arise in determining types of care for gravely ill patients and whether to perform a risky but potentially lifesaving procedure.

The case exposes the standards of patient autonomy and informed consent — foundational principles of ethical medicine — to be impossible ideals. Even Dr. DeBakey, likely the person most thoroughly informed about the procedure, regretted his prior decision to forgo the surgery.

Another problem exposed by this case is the persistent misuse of the do-not-resuscitate order, interpreting it to signify more general wishes about less aggressive care instead of its actual, more restricted meaning: not resuscitating in the event of cardiac arrest."

As one of the other letter-writers pointed out, the story also reflects that Dr. DeBakey is the consummate educator, using his experience to prompt consideration and discussion of important medical and ethical issues in caring for patients who are close to death. He is truly one of Houston's treasures.

Posted by Tom at 7:09 AM | Comments (0) |

December 29, 2006

My, how quickly things change

My light holiday posting was even lighter today as I've been dealing with some technical issues. But I would be remiss if I didn't point out that the glow of the Aggies' late November victory over the Longhorns is now officially gone after the Cal Bears thumped the Ags 45-10 in last night's Holiday Bowl.

Meanwhile, the best crack of the bowl season came at halftime of the Houston-South Carolina LIberty Bowl game. After a wild first half that ended with Houston leading 28-17, the sideline reporter asked South Carolina head coach Steve Spurrier as he headed to the locker room: "How do you defend the explosive Houston offense?" Coach Spurrier replied with a wry grin: "Obviously, not how we're doing it."

Posted by Tom at 6:27 PM | Comments (1) |

December 28, 2006

The Houston connection to "We Are Marshall"

Texas Longhorn uber-fan Matthew McConaughey is starring in the new movie, We Are Marshall, the story about the rebuilding of the Marshall University football program after the devastating 1971 plane crash that killed most of the university's players, coaches and support staff. But as noted in this Gene Frenette/Florida Times-Union article, the success of the Marshall rebuilding project owed much to legendary University of Houston football coach, Bill Yeoman, whose innovative Houston Veer offense allowed the undermanned Marshall program to spread the field and rely on deception and finesse in competing with its opposition. In the small world department, it was former West Virginia coach and legendary Florida State coach Bobby Bowden who introduced the Marshall coach at the time to Coach Yeoman's creative offensive scheme.

Coach Yeoman was the head football coach of the Houston Cougars from 1962-1986, and he remains a vital member of the University of Houston community to this day. Coach Yeoman and the Cougars quickly gained national prominence after he introduced the explosive Veer offense in 1964, but more importantly, Coach Yeoman that year also broke the color barrier for major Texas football programs when San Antonio’s Warren McVea accepted the University's offer of a scholarship to play football at UH.

During his 25 year coaching career, Coach Yeoman compiled a record of 160-108-8 and guided the Cougars to 11 bowl games appearances including Cotton Bowl victories over Maryland in 1977 and Nebraska in 1980. He also led the Cougars to four Southwest Conference titles (1976, 1978, 1979 & 1984), including the 1976 title that came during Houston’s first year as a member of that venerable conference. For that achievement, Coach Yeoman was named Texas Coach of the Year and runner-up for National Coach of the Year. On top of all that, Coach Yeoman is one of the nicest and most engaging people that I have ever met, and yet another one of the numerous people that make Houston such a fascinating place to live.

Posted by Tom at 6:47 AM | Comments (0) |

December 27, 2006

Culture War

The magnificent Fightin' Texas Aggie Marching Band is preparing to invade San Diego for Thursday night's Holiday Bowl game between the Aggies and the University of California-Berkeley, and this Brent Schrotenboer/San Diego Union Tribune article captures the culture war that will be one of the themes of this particular game. To put it mildly, College Station -- the home of Texas A&M -- will never be mistaken for Berkeley. A few of the other differences between the two institutions that the article notes:

School bosses:

Texas A&M: The school president, Robert Gates, was recently chosen by President Bush to supervise the war in Iraq as the new Secretary of Defense.

Cal: Chancellor Robert Birgeneau, a native of Toronto, lists on his curriculum vitae an editorial he once wrote for the Toronto Star entitled “Celebrating Sexual Diversity.”

Food:

Texas A&M: Several places serve well-cooked dead animals in College Station, especially C&J Barbecue, which serves jalapeño cheese sausage, pork loin and ribs.

Cal: The Free Speech Movement Cafe at the library boasts that its “coffee is Fair Trade and organic, and tea is organic and Fair Trade when possible. The menu is a manifestation of the ideals inherent in the Free Speech Movement ... through this philosophy, students become conscious that their choice for food is a political choice as well.”

Campus faces:

Texas A&M: Football games are attended by former President George H.W. Bush, whose presidential library is located on campus.

Cal: A student became known as “The Naked Guy” in the 1990s by attending classes nude.

Guns:

Texas A&M: The school boasts of its Metzger-Sanders gun collection, one of the state's largest, with more than 600 firearms and accessories. “The collection is host to thousands of visitors every year and serves as a point of discussion and study to gun enthusiasts,” according to the exhibit's Web site.

Cal: More than 88 percent of Berkeley freshmen agreed to a 2004 survey question that stated “the federal government should do more to control the sale of handguns.”

Girls:

Texas A&M: The school was all-male for several decades. It didn't open its doors to women students until 1963, on a limited basis. Full admission for women began in 1971, with the Corps of Cadets first allowing women to join in 1974.

Cal: The first female student enrolled in 1870. One its most famous former students is Betty Friedan, co-founder of the National Organization of Women, and author of the 1963 book “The Feminist Mystique.”

Curriculum:

Texas A&M: Students can take a class called “Amphibious Warfare.”

Cal: Students can enroll in “Introduction to Nonviolence.”

Military history:

Texas A&M: The school opened in 1876 as the Agricultural and Mechanical (A&M) College of Texas, with mandated military training. Its Corps of Cadets remains the largest uniformed body of students in the nation outside the U.S. service academies, according to its Web site.

Cal: Students formed the epicenter of the antiwar movement in the 1960s as the Vietnam War raged on. In 1965, hundreds tried to stop trains of troops by standing on the tracks in West Berkeley. More than 800 students were arrested at the school's administration building in 1964, ending their massive sit-in protest of the school's policies concerning academic freedom and free speech.

Politics:

Texas A&M: In Brazos County, home of A&M, Bush, the Republican, won 70 and 69 percent of the vote in the 2000 and 2004 elections, respectively.

Cal: In Alameda County, home of Cal, it was almost the mirror opposite. John Kerry, the Democrat, won 75 percent of the vote in Alameda County in 2004, up from the 69 percent won by Democrat Al Gore in 2000.

Posted by Tom at 7:25 AM | Comments (1) |

December 26, 2006

A patient of the surgery he created

This NY Sunday Times story by Lawrence K. Altman, MD reports that one of Houston's greatest surgeons continues to be on the cutting edge of surgical and related medical issues even as he approaches 100 years of age:

In late afternoon last Dec. 31, Dr. Michael E. DeBakey, then 97, was alone at home in Houston in his study preparing a lecture when a sharp pain ripped through his upper chest and between his shoulder blades, then moved into his neck.

Dr. DeBakey, one of the most influential heart surgeons in history, assumed his heart would stop in a few seconds. [. . .]

But when his heart kept beating, Dr. DeBakey suspected that he was not having a heart attack. As he sat alone, he decided that a ballooning had probably weakened the aorta, the main artery leading from the heart, and that the inner lining of the artery had torn, known as a dissecting aortic aneurysm.

No one in the world was more qualified to make that diagnosis than Dr. DeBakey because, as a younger man, he devised the operation to repair such torn aortas, a condition virtually always fatal. The operation has been performed at least 10,000 times around the world and is among the most demanding for surgeons and patients.

Over the past 60 years, Dr. DeBakey has changed the way heart surgery is performed. He was one of the first to perform coronary bypass operations. He trained generations of surgeons at the Baylor College of Medicine; operated on more than 60,000 patients; and in 1996 was summoned to Moscow by Boris Yeltsin, then the president of Russia, to aid in his quintuple heart bypass operation.

Now Dr. DeBakey is making history in a different way — as a patient. He was released from Methodist Hospital in Houston in September and is back at work. At 98, he is the oldest survivor of his own operation, proving that a healthy man of his age could endure it. [. . .]

But beyond the medical advances, Dr. DeBakey’s story is emblematic of the difficulties that often accompany care at the end of life. It is a story of debates over how far to go in treating someone so old, late-night disputes among specialists about what the patient would want, and risky decisions that, while still being argued over, clearly saved Dr. DeBakey’s life.

It is also a story of Dr. DeBakey himself, a strong-willed pioneer who at one point was willing to die, concedes he was at times in denial about how sick he was and is now plowing into life with as much zest and verve as ever.

But Dr. DeBakey’s rescue almost never happened.

Read the entire fascinating story, which includes Dr. DeBakey's frank admissions that death seemed like a reasonable alternative to the pain he was enduring, that he initially declined the surgery because he would rather die than risk becoming an invalid and that he went into denial as his condition deteriorated. It is a fascinating story about facing death by a man whose legacy is saving lives.

Posted by Tom at 4:20 AM | Comments (1) |

December 25, 2006

2006 Weekly local football review

Texans 27 Colts 24

There really is a Santa Claus after all.

Seemingly out of nowhere, the Texans (5-10) dug down and showed some pride as they exploited the Colts (11-4) poor run defense to control the clock and pull out a thrilling Christmas Eve victory at Reliant Stadium. After knocking off the Colts for the first time in ten games, the Texans now have an opportunity to fulfill my pre-season prediction of six wins for the team if they can knock off the Browns (4-11) next weekend at Reliant.

Troy 41 Rice 17

The Owls (7-6) storybook season came to a close with a trouncing at the hands of the Troy Trojans in the New Orleans Bowl. The loss was not really a surprise as I did not give the Owls much of a chance without their injured QB, Chase Clement. But the defeat did not take any of the luster off of the Owls great season, which vindicated my early season belief that the Owls were going to cause headaches for most opposing teams this season if they could survive a brutal early-season schedule. Things are definitely looking up on the gridiron over at Rice.

Posted by Tom at 8:52 AM | Comments (0) |

December 24, 2006

There is a football game in Houston today?

That was the question that one of my sons asked me incredulously yesterday. With the Texans generating no positive buzz in their hometown, not many folks really care much about watching or talking about the Texans. Thus, casual fans such as my son are surprised that the team is still playing.

The game today against the Colts will likely be one of the final chapters of the David Carr saga in Houston. The Texans made a mistake in using the franchise's first draft choice and the first overall draft pick in the 2002 NFL Draft on Carr at a time in which the team should have been stockpiling draft picks and players to build depth at all positions. The Texans compounded that mistake by not building a competent offensive line to protect Carr, which resulted in Carr being hit more than a punching bag by opposing defenses. As a result, Carr never developed the pocket presence or recognition skills in reading opposing defenses to succeed as an NFL quarterback. With his development in those areas stunted, he is no longer the Texans QB of the future and frankly, needs to go to a team that has a competent offensive line so that he can attempt to salvage his NFL career.

Carr's defenders often point out that his NFL passing rating is really not all that bad, currently 13th among the 32 starting NFL QB's. However, as with batting average in baseball, the NFL passing rating is a highly misleading standard to evaluate QB's. As noted several times earlier, the folks over at the Wages of Wins have developed a far superior statistical model for for evaluating QB's and, based on that standard, the bottom has really fallen out of Carr's season. After meandering around 20th among the 32 starting NFL QB's for most of the season, Carr has slid to 29th among the 32 starting NFL QB's for the season, including individual week rankings of 31st and 34th (a couple of backups also played that week) over two of the past three weeks.

As noted earlier, Carr is a fine young man, so it's too bad that it has not worked out for him in Houston. However, Saints QB Drew Brees is one of the top-ranked QB's in the NFL this season and he is essentially a contemporary of Carr (Brees is in his sixth season, Carr is in his fifth) who was placed in a similarly difficult position with his initial team as Carr was here. The bottom line is that Brees developed while Carr has not. In the dog-eat-dog world of the NFL, that lack of development will be what buys Carr a ticket out of Houston.

Posted by Tom at 7:11 AM | Comments (2) |

December 23, 2006

A couple of interesting Houston real estate entreprenuers

I've been meaning to pass along a couple of interesting recent New York Times articles on Houston real estate entreprenuers, including this one on former Houston Rocket star Hakeem Olajuwon's development of his Houston real estate empire, which one local observor notes was built by "buying high and selling higher."

The other article is this one on the Third Ward's Project Row House project, artist Rick Lowe's ambitous redevelopment effort that utilizes contributions of services from local architectural students and members of Houston's art and charity communities.

Unfortunately, the Times piece missed several less alluring parts of the Project Row story, which are filled in aptly by the always entertaining Slampo.

Houston has traditionally been an incubator for business entreprenuers, what with its relatively low cost of living, few barriers to entry and restrained regulatory environment. Olajuwon -- despite his occasional missteps -- and Lowe -- despite the seemier side to his project -- are actually couple of reasons why we should try to keep it that way. Progress is rarely achieved without risk. The best way to inhibit progress is to attempt to control risk-taking, which generally leads to perverse incentives. A much better policy is to encourage risk-taking and then allow the market to weed out the shysters. That some parts of that market must learn about the downside of risk the hard way is not a good reason to adopt policies that constrict creation of jobs and wealth.

Posted by Tom at 6:53 AM | Comments (0) |

December 22, 2006

Thoughts for a Christmas season

During this holiday season, I find myself thinking often of my friend and mentor, the late Ross M. Lence, who was the happiest and most fulfilled man who I have known in my life. A couple of weeks ago, as I was preparing my tribute to Ross, I listened to a remarkable sermon at my church in The Woodlands in which a visiting speaker, Craig Hill, a New Testament scholar at Wesley Theological Seminary in Washington, D.C., talked about his lifelong "project" to find fulfillment in his life:

Beyond mere survival, to what goal are we most directed? With what do we most concern ourselves during the course of our waking hours? Certainly, a variety of things require our attention: what we'll eat, what we'll wear, how we'll accomplish the tasks before us. These all concern us, but none of them dominates our lives in quite the way that something else does. That thing is so central that it has been called "The Project."

I started working on my project when I was quite small, smaller than I can consciously remember. That time that I bought my mother a present for no special occasion with my allowance, the times I mowed the lawn or did other jobs without being asked–little did I know that I was hard at work on my project. The criticisms and childhood taunts that stung, the disappointment at not being chosen a part of the group, little did I understand that the hurt I felt was that of a project threatening to fail.

People have variously described the project. It is called the quest for meaning, the desire for competence. the need for self-esteem and purpose. Behind it all is the question "Who am I?"--or, more particularly, "Do I matter?" [. . .]

It's the pervasiveness of the project that is so interesting. It lurks around every corner; it's in the very prejudices, intentions, and dreams that guide our lives. What impression will I give by my dress, my speech, my possessions, my job? Will the others in the office think that I'm a good employee; am I a good mother or father; was I "being myself" when I behaved that way last night? How am I doing?

Dr. Hill went on to describe how each one of us shares the struggle of "the project" and how an essential element of Christian theology is based upon Christ's teaching and example of how to conquer it. His sermon was so insightful that I came away from church that day wishing I had a copy of it.

Well, Asbury Theological Institute scholar Ben Witherington happened to be at my church that day, too, and he had the same thought as I did. Except that he counts Dr. Hill as a friend and was able to get a copy of the sermon, which he has posted here. Regardless of your religious persuasion or whether you believe in a religion at all, take a moment during this holiday season to read it. You will not be disappointed.

Posted by Tom at 4:29 AM | Comments (0) |

Might the Cowboys' stadium deal actually work out?

Mitch Schnurman, business columnist for the Ft. Worth Star-Telegraph, thinks that the Dallas Cowboys stadium project (prior posts here) is -- against all odds and economic sense -- is shaping up to be a reasonable deal for the city of Arlington.

I remain skeptical of the true economic benefit of the stadium for Arlington citizens. However, make no doubt about it, the new stadium has reinforced the Cowboys' position as Texas' favored professional football team and it's clear that the Texans remain light years away from challenging the Cowboys in that regard.

Posted by Tom at 4:22 AM | Comments (0) |

A remarkable Aggie resource

Despite Desmond Howard's gaffe earlier this week, Texas A&M University is a fascinating and indelible part of Texas culture. Recognizing that stature, Texas A&M's Cushing Library has undertaken a remarkable project entitled "The Historic Images Collection--Historic Images and Photographs of the Texas A&M Community."

The collection is a treasure trove of interesting photographs, such as this one of a pre-1900s baseball squad. Another early baseball team is here, while this 1923 picture includes in the back row, second from left, King Gill, the original A&M “12th Man,” and in the middle of the back row, Pat Olsen (the tallest one), a former major leaguer for whom the A&M baseball stadium is named. Finally, this picture of Aggie great Jacob Green from the 1970's shows the Emory Bellard-era striped shoulder football uniforms.

This is only a fraction of the photos in this remarkable collection, so take a few minutes to peruse the archive. Aggies take quite a bit of ribbing in Texas for their dogged adherence to tradition, but that respect for tradition is a big part of what produced this wonderful collection.

Posted by Tom at 4:10 AM | Comments (1) |

December 21, 2006

Desmond Howard rides to the rescue of Longhorn fans

It's been a tough month for Texas Longhorn faithful.

First, there was the demoralizing loss to Kansas State, which knocked the Horns out of any chance for a rematch with Ohio State in the BCS National Championship game. Then, the Horns laid an egg against arch-rival Texas A&M, allowing the Aggies to win their first game in that hallowed series in seven years. That bitter loss has prompted some good natured ribbing of Longhorn fans, who were due to descend a notch or two after last season's magic national championship run.

However, leave it to ESPN college football commentator Desmond Howard to make things right again in Longhorn country. Seems as if Desmond is a little confused about which team from Texas is playing in the Holiday Bowl this year. So, when in doubt, Howard falls back on the one team from Texas that everyone knows. ;^)

Posted by Tom at 4:55 AM | Comments (2) |

More ripples from Kelo

The economic and legal impact of the Supreme Court's controversial decision last year in Kelo v. New London has been a common topic on this blog, so this Institute for Justice press release on a property dispute that arose from a developer manipulating a local government's eminent domain power for his own benefit:

A federal court has now approved an extortion scheme using eminent domain under last year’s Kelo decision. Unless the U.S. Supreme Court overturns the rulings, developers may threaten property owners, “Your money or your land.”

Think this is an overstatement?

Consider what is happening right now in Port Chester, N.Y., to entrepreneur Bart Didden and his business partner, whose case will be considered for review by the U.S. Supreme Court on January 5, 2007.

With the blessing of officials from the Village of Port Chester, the Village’s chosen developer approached Didden and his partner with an offer they couldn’t refuse. Because Didden planned to build a CVS on his property—land the developer coveted for a Walgreens—the developer demanded $800,000 from Didden to make him “go away” or ordered Didden to give him an unearned 50 percent stake in the CVS development. If Didden refused, the developer would have the Village of Port Chester condemn the land for his private use. Didden rejected the bold-faced extortion. The very next day the Village of Port Chester condemned Didden’s property through eminent domain so it could hand it over to the developer who made the threat.

The 2nd U.S. Circuit Court of Appeals upheld this extortion under last year’s Kelo eminent domain decision. The court ruled that because this is taking place in a “redevelopment zone” they couldn’t stop what the Village is doing.

Read the entire piece. Is it any surprise that most property owners over on Richmond Avenue in Houston want no part of the new proposed Metro light rail line? Bad law makes for perverse incentives, particularly when the incentivized party can use the 800 pound gorilla of the state for private purposes.

Posted by Tom at 4:21 AM | Comments (0) |

The blog mob?

Wall Street Journal assistant editorial features editor Joseph Rago doesn't think much of blogs:

The blogs are not as significant as their self-endeared curators would like to think. Journalism requires journalists, who are at least fitfully confronting the digital age. The bloggers, for their part, produce minimal reportage. Instead, they ride along with the MSM like remora fish on the bellies of sharks, picking at the scraps.[. . .]

[Most blogs] are pretty awful. Many, even some with large followings, are downright appalling.

Every conceivable belief is on the scene, but the collective prose, by and large, is homogeneous: A tone of careless informality prevails; posts oscillate between the uselessly brief and the uselessly logorrheic; complexity and complication are eschewed; the humor is cringe-making, with irony present only in its conspicuous absence; arguments are solipsistic; writers traffic more in pronouncement than persuasion.

Larry Ribstein, who is on the cutting edge of writing on the impact of blogging, responds to Rago here and bores in on what is really going on here -- blogging's dilution of old media's impact on the distribution and shaping of information to the public. Does Rago really believe that the old media's approach to distributing and shaping information examined here, here and here is the best way to present reasonably complex issues to the public?

Moreover, another key utility of blogs is the linking to articles in newspapers, magazines and specialized journals that the reader probably would otherwise miss. For example, corporate law bloggers such as Professor Ribstein and Stephen Bainbridge have greatly facilitated the public and legal profession's understanding and discussion of often misunderstood business law principles that otherwise would have been relegated to rarely-read law review articles and an occasional backpage op-ed. The linking process increases the efficiency of the distribution of information and often refines that information. That such flow of information may be accompanied with a blogger's opinion of the information is really beside the point. Those opinions will be alternately illuminating, worthless or in-between, but the reader does not lose the ability to evaluate the information or the opinion.

Curiously, while a WSJ editor decries the proliferation of blogs, Peter Lattman's WSJ Law Blog is one of the best blogs to emerge during 2006. Go figure.

Posted by Tom at 4:06 AM | Comments (1) |

December 20, 2006

Navy Coach Johnson is not happy

This previous post introduced Navy head football coach Paul Johnson, who is a throwback to an earlier era before media relations reps and banal press releases. Coach Johnson took some questions the other day as he prepares the Midshipman to play Boston College in the Meineke Car Care Bowl in Charlotte on Dec. 30:

Q: You seem a little perturbed. Can I ask you why?

Johnson: Yeah, we didn't practice very well.

Q: You had told me originally that you would only go full pads the first couple of days, but it looks like you are going to do a little more full pad work.

Johnson: Yep. We will probably go full pads every day right up to the game.

Q: Why is that?

Johnson: We haven't exactly practiced the way I thought we should.

Q: Anything in particular you're seeing?

Johnson: We are lackadaisical and have no focus. Other than that it's been OK.

Q: Does hitting wake them up a little bit?

Johnson: I don't know. It hasn't yet, but it makes me feel better. I can't him them, but they can hit each other.[. . .]

A little more entertaining than the typical platitudes emanating from most head football coaches these days, don't you think? Considering how he has turned the Navy program around, I cannot understand what Alabama is waiting for -- Coach Johnson would be an instant hit at Bama.

Posted by Tom at 4:30 AM | Comments (2) |

The Brownback judicial litmus test fails

This previous post reported on the political posturing of Republican Senator Sam Brownback of Kansas, who was blocking a long-delayed judicial nomination by President Bush because the nominee had attended a commitment ceremony between a couple of gay friends. Well, Senator Brownback has finally backed off, but he still sounds demagogic even when he tries to do the right thing:

Senator Sam Brownback of Kansas, who blocked the confirmation of a woman to the federal bench because she attended a same-sex commitment ceremony for the daughter of her long-time neighbors, says he will now allow a vote on the nomination.

Mr. Brownback, a possible contender for the Republican presidential nomination in 2008, said in a recent interview that when the Senate returned in January, he would allow a vote on Janet Neff, a 61-year-old Michigan state judge, who was nominated to a Federal District Court seat.

Mr. Brownback, who has been criticized for blocking the nomination, said he would also no longer press a proposed solution he offered on Dec. 8 that garnered even more criticism: that he would remove his block if Judge Neff agreed to recuse herself from all cases involving same-sex unions.

In an interview last week, Mr. Brownback said that he still believed Judge Neff’s behavior raised serious questions about her impartiality and that he was likely to vote against her. But he said he did not realize his proposal — asking a nominee to agree in advance to remove herself from deciding a whole category of cases — was so unusual as to be possibly unprecedented. Legal scholars said it raised constitutional questions of separation of powers for a senator to demand that a judge commit to behavior on the bench in exchange for a vote.

Senator Brownback "did not realize" that his proposal violated the separation of powers upon which the federal government is based?

Posted by Tom at 4:13 AM | Comments (0) |

Epstein on Seton Hall's "ethics"

It all started a couple of weeks ago when Richard A. Epstein wrote the op-ed discussed in this post in which he decries the deferred prosecution racquet that coerced Bristol Myers into making a "contribution" to fund an ethics endowment at the prosecutor's law school, Seton Hall.

Professor Epstein's piece prompted a response from Seton Hall Law Dean Patrick Hobbs, who contends essentially that the ethics program is for such a good purpose that the school can overlook the serious breach of ethics that was involved in funding the program in the first place.

As you might expect, Professor Epstein has the last word in this WSJ ($) letter to the editor:

My Nov. 28 editorial-page commentary "The Deferred Prosecution Racket" brought forth a spirited but wholly unconvincing response by Patrick E. Hobbs, dean of the Seton Hall Law School ("Fighting the Infection of Unethical Behavior in Corporate Culture," Letters to the Editor, Dec. 8). Dean Hobbs defends his law school's decision to accept money for a business ethics program pursuant to the deferred prosecution agreement between the U.S. Attorney for New Jersey, Christopher J. Christie, and Bristol-Myers Squibb. It is sheer naivet� to assume that BMS and its attorneys signed on, as Dean Hobbs suggests, because of their deep belief that "the wrong corporate culture can become a breeding ground for unethical and criminal behavior." There's no way that BMS would have made that donation if freed from the risk of corporate prosecution. To avoid the taint, let Dean Hobbs raise money for a worthy project from one of thousands of New Jersey firms not faced with the threat of federal indictment.

If anything, his defense of the BMS-Seton Hall gift shows just how cancerous DPAs can be. Any good course in business ethics would stress the dangerous institutional incentives put in play if DPAs can direct payments to public charities. Let's posit that Seton Hall did nothing whatsoever to urge Mr. Christie to funnel money to it through the DPA. No matter: Once this precedent is set, it's open season for every public institution to lobby prosecutors for a piece of the action. Worse still, nothing prevents these organizations from quietly supporting criminal investigations to increase the likelihood of such windfalls. The public should not tolerate any arrangements that introduce these third-party influences into the prosecutor's office. Any excellence of Mr. Christie as a prosecutor or of Seton Hall in ethics reform are tainted by this gift, which the law school should return forthwith.

The systemic problems with DPAs, unfortunately, cannot be solved by Timothy Coleman's proposal (Letter, Dec. 8) to incorporate the various mitigating elements of DPA into the underlying criminal case. That approach will only clog criminal trials with matters wholly irrelevant to guilt or innocence. And it will fail to soften the present dire consequences from the threat of prosecution. Similarly, it is unwise (and futile) to seek congressional legislation to eliminate the harsh collateral consequences of a federal indictment in other federal agencies. Even if enacted, that legislation would not keep state regulators from pulling their licenses. The downward spiral of DPAs must be stopped at its source, by insulating corporations (but not their senior officers) from criminal prosecution. The recent McNulty memorandum doesn't shred the Thompson memorandum. But at least it is a start.

Game, set, match -- Epstein.

Posted by Tom at 4:05 AM | Comments (0) |

December 19, 2006

Tributes to a marvelous teacher

Today is the birthday of the late Ross M. Lence, one of Houston's finest teachers of the past generation. On Dec. 1st -- the final day of classes for the fall semester at the University of Houston -- I was privileged to be one of the speakers at the University's memorial service for Ross at the A.D. Bruce Religion Center on the University's central campus.

As with most anything that involved the reasonable Dr. Lence, the service was a joyous affair, alternately hilarious and moving. Bill Monroe, one of Ross' colleagues at The Honors College, had one of the best cracks of the day when he passed along another colleague's observation about the notoriously difficult-to-pin-down Dr. Lence:

"A colleague and mutual friend said that, for over a decade, he thought Lence was a liberal Jew from Chicago, only to discover that he was a libertarian Catholic from White Fish, Montana."

After a festive reception at the UH Honors College, many of those who attended the memorial service walked across campus to Robertson Stadium to attend the Conference USA Championship game between the Houston Cougars and the Southern Mississippi, which the Coogs won in stirring style. All in all, a wonderful afternoon paying tribute to a dear friend and then an enjoyable evening of college football on a beautiful fall day in Houston.

The following are pdf's of the tributes to Ross delivered at the memorial service. Take a moment to read a bit about a great teacher and fine man who influenced the lives of thousands of Houstonians over the past 35 years:

The program for the memorial service is here;

Bill Monroe's opening and closing remarks are here;

Susan Collins, one of Ross' colleagues in the UH Political Science Department, gave this tribute and also passed along this tribute to Ross for PS Magazine that Susan wrote with former UH Political Science Professor Donald Lutz, who was instrumental in bringing Ross to the University of Houston;

Ed Willems, a UH Professor Emeritus of Psychology and a longtime teaching partner with Ross, gave this heartfelt tribute entitled "Ross Lence: He taught students and me."

Andy Little, one of Ross' longtime students and a student advisor in The Honors College, read Ross' moving essay On Teaching;"

My tribute to Ross is here, Harris County Treasurer-elect Orlando Sanchez's tribute is here, and the tribute of Jeff Dodd, a partner at Andrews & Kurth who specializes in corporate securities law, is here; and

Finally, Honors College Dean Ted Estess was scheduled to reprise his moving eulogy that he originally delivered in July at Ross' funeral mass, but he chose instead to pass along extemporaneously several anecdotes and observations about Ross, a couple of which brought the house down with laughter.

Inasmuch as Ross often used to help needy and deserving students financially, The Honors College has established a scholarship fund in Ross' name. Donations to that fund may be sent to the Ross Lence Scholarship Fund, The Honors College, University of Houston, 212 M.D. Anderson Library, Houston, TX 77204-2001.

Posted by Tom at 4:49 AM | Comments (0) |

Progressive destruction

As noted in this post from earlier in the fall, the University of Texas began the next stage of its master redevelopment plan for D.K. Royal Memorial Stadium immediately after the Horns' final home game of the season against the Aggies.

This stage involves destroying the "horseshoe," the part of the stadium that wound around the north side. The horseshoe was built in 1926 for $125,000, but it is a remnant of the days when the stadium also served as a track stadium, so the seats in the horseshoe were far from the field and not a particularly good place to watch a football game. Thus, the horseshoe will be replaced with a new end zone facility that will be much closer to the field of play and, of course, include the ubiquitous ring of club boxes. The end zone seats will be finished in time for next season and the club boxes will be completed in time for the 2008 season.

By the way, once UT got crackin', it didn't take long to knock out the old horseshoe, as the time-lapse photo sequence below reflects:

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

An Aggie Rudy?

As this Brent Zwerneman/San Antonio Express-News article reports,Texas Aggie non-scholarship football player Ben Bitner walks to the beat of a different drummer:

Texas A&M football player Ben Bitner's long hair and serene manner earned him the nickname "Baby Jesus" from a teammate.

And in a tale of biblical proportions, two years ago Bitner found himself with no room at the inn.

After a dispute with a roommate over bills, Bitner, a nonscholarship junior defensive back for A&M, moved out of a house in College Station following the Aggies' appearance in the Jan. 1, 2005 Cotton Bowl.

For a year and a half, Bitner didn't have a place to stay. He lived under creek bridges on the A&M campus, in a fort he built in the woods near the school's golf driving range and anywhere he could stretch his hammock or lay his sleeping bag around Aggieland.

When he wasn't finding shadowy crannies to catch some shuteye — "Out of sight, out of mind," he said — Bitner was attending classes as a history major and excelling on the Aggies' scout team. The 5-foot-3, 160-pounder from Round Rock has played in two games this year as a member of the kickoff squad.

"I guess I'm not that smart of a guy," said Bitner, who's finally living in a house again. "But it was enjoyable. I slept better then than I sleep now. I didn't have to worry about cleaning up after myself or paying bills. It suited me just fine." [. . .]

Bitner owned a couple sets of clothes — "I'm not one of those guys who needs 10 different shirts," he said — and occasionally he simply would throw his duds in his laundry bag in the team's locker room by Kyle Field.

He would shower and clean up in the locker room or at the school's recreation center. At night, wherever he was curled up, campus security occasionally approached him and wondered what he was doing.

"I never tried to sleep in the same place on consecutive nights," Bitner said. "If they ran into me, they'd ask if I was student while I'd start packing my stuff. I'd tell them, 'Yeah, sorry, I'll get going,' and I'd just walk off."

Bitner said he never minded the cold days, because his parents kept their house cold when he was growing up.

"In December, January and February, that's when it was easiest for me to sleep outside," Bitner said. "It was hard to sleep in the summer." [. . .]

Starter Melvin Bullitt always drilled Bitner with one question, too, during his nomadic days.

"If you take a girl out," Bullitt would inquire, "do you ask her, 'Hey, want to come back to my place?'"

Explained Bitner: "Hopefully, the girl would invite me back to her place. If not, I needed to get to know her a little better before I broke the news that I was homeless. . ."

Posted by Tom at 4:12 AM | Comments (0) |

December 18, 2006

Is Tony Blair's Princess Di premonition coming true?

During a scene of Stephen Frears' clever film, The Queen, British Prime Minister Tony Blair's staff is relishing the public disdain for the Royal Family's restrained response to Princess Diana's death because it makes Blair -- who made a passionate public response -- look good in comparison. Blair -- played brilliantly by Michael Sheen -- grows frustrated with his staff's gloating because he knows that the same public venom that is being directed toward the Royal Family could just as easily be directed toward him.

Based on this Daily Telegraph article, Blair may be receiving precisely what he feared:

We have become like any other nation. No more can we tell ourselves that British corruption scandals are qualitatively different from those of hot countries, or that the peccadilloes that shake our polity would barely make the newspapers in Italy. In 1994, in his first major speech as Labour leader, Tony Blair promised that, under his leadership, Britain would never again be out of step with Europe. Now, in a grisly kind of way, his ambition has been fulfilled.

With so many sleaze stories in our news pages, it is easy to become confused. A prominent Labour donor has been profiting from the recommendations of his own task-force. Gordon Brown's supporters accuse Mr Blair of seeking to drag their man into the mire with him. Meanwhile, the Government has ordered an abrupt halt to the inquiry into allegations of hidden arms commissions, just as others begin to suspect corruption.

The sheer blizzard of allegations can leave us snow-blind. Perhaps, we tell ourselves, this is what all governments do. Perhaps Labour is no different from its predecessors. After all, wasn't John Major brought down after a series of sexual and financial scandals?

Yes, he was. But what is happening now is of a different order. The central accusation against this ministry – that it has sold favours, possibly even places in the legislature, to secret donors – is one that has not been seriously levelled at a British government since the introduction of the universal franchise. [. . .]

Tony Blair's belief in the superiority of his motives leads him to reason that, when the New Labour project is at stake, the ends justify the means.

We saw this within weeks of his accession when he sought to explain the Ecclestone affair – the first of many cash-for-favours scandals – on the basis that he was a pretty straight kinda guy. That, essentially, remains his attitude: he regards complaints about probity as petty next to what he is doing for Britain.

A decade later, parliament is cheapened, and the police have been called into Downing Street. That, more than the transformation of his party, more than Scottish devolution, more even than Iraq, will be his legacy.

Posted by Tom at 4:29 AM | Comments (0) |

The Smart Money

As Captain Renault -- Claude Rains' character in Casablanca -- might say, "I'm shocked, shocked that there is betting on sporting events!:"

The Brain Trust [is] a shadowy cabal of gamblers who wager enormous amounts of money on sports events, using a supercomputer and a SWAT team of injury and weather experts to take advantage of minor discrepancies in the point spreads set up by the Vegas linemakers. It’s a multimillion-dollar business — and legal — but there’s a wrinkle: they like to bet hundreds of thousands of dollars per game, and whenever the casinos sniff out betting syndicates like the Brain Trust, they show them the door in a heartbeat. That’s because in addition to risking huge losses each week, the bookmakers are forced to adjust their betting lines — sometimes by two or three points for a football game — whenever the “smart money” wades in, since they desperately need other customers to bet the other side to balance their action and stand a chance of making money.

The foregoing excerpt is from this NY Times book review of Michael Konik's new book, The Smart Money (Simon & Schuster 2006). As Konik notes, the Brain Trust attempts to manipulate the point spread on sporting events in the same way that hedge funds and currency speculators attempt to move the stock market on certain stocks and currencies. Capt. Renault would almost certainly be playing.

Posted by Tom at 4:10 AM | Comments (1) |

2006 Weekly local football review

Patriots 40 Texans 7

Just when you thought it was impossible for the Texans (4-10) to stoop any lower, the Texans' offense rolled over and played dead against the Patriots.

This one was over by Sunday morning brunch as the Texans were down 17-zip after the first quarter and 27-zip at half. Actually, the Texans' defense did not play badly, but the Texans offense continually placed the defense in untenable positions. QB David Carr continues to look like a basket case, going 16-28 for a net 93 yards with 4 interceptions, 4 sacks and, as usual, no TD passes. I have long had doubts about Carr, but it's becoming more certain with each passing game that Carr will not be an effective QB for the Texans. Whether it's the constant pounding that he has taken as a result of the lack of protection from the Texans' deficient offensive line, his poor recognition skills or his dubious leadership qualities, Carr has regressed to a point in Houston that Coach Gary Kubiak's sideline vibes decisively indicate that he has given up on Carr.

However, as bad as Carr has been, certainly Kubiak and Texans' owner Bob McNair have to share in the blame for the woeful state of this team. As noted earlier here, after giving up on the Casserly-Capers regime, McNair changed the management model of the Texans football operation from a strong GM model to a strong head coach model. There is nothing wrong with that, but rather than hiring an experienced head coach, McNair opted for local boy-made-good Kubiak, who had never been more than a top offensive assistant in a strong head coach model that was run by an offensive coach (Denver's Mike Shanahan). The transition from assistant to head coach has been anything but smooth for Kubiak -- the Texans' defense has improved somewhat from last season's disastrous unit, but the Texans' offense is actually worse than last season's, which was almost unimaginable before this season began. Add in the fact that Carr and the Texans' offense have actually regressed in development under Kubiak's tutelage, the luster of Kubiak's reputation as an up-and-coming offensive coach has certainly been dulled.

At any rate, the Texans have two home games left to end the season, against the Colts (10-3, playing tonight) and the Browns (4-10). It looks as if the Texans' offense has packed it in, so it's hard to imagine that the team could beat anyone these days. But stranger things have happened. Let's just hope that another win or two doesn't result in a dramatic downward change in the Texans' draft position for the 2007 NFL Draft. The Texans need all the help they can get.

Posted by Tom at 4:01 AM | Comments (0) |

December 17, 2006

The University of Houston Master Plan

The University of Houston has been making some big plans recently, and this Matt Tresaugue/Chronicle article reviews them:

UH leaders intend to transform the campus with more housing, more restaurants, more shops and other places to be outside the classroom.

The goal, campus leaders said, is to create an environment that attracts the best scholars and encourages them to stick around. [. . .]

The plan also calls for doubling the usable square footage of classroom and office space, replacing parking lots with garages and closing part of Cullen to create a tree-lined pedestrian walkway by 2020.

What's more, the campus would meld with the surrounding Third Ward while reducing blight and encouraging more retailers to move in. University officials already are talking with private developers about a "town center" with shops and restaurants on both sides of Scott between Holman and Alabama.

Campus leaders do not know how much everything would cost but estimate the first five-year phase at $300 million, and largely at the university's expense. The redevelopment plan will be a key piece of an upcoming fundraising campaign, officials said.[ . . .]

The new plan would establish five themed precincts on campus, reflecting the "smart growth" trend elsewhere, with dense housing, retail and office space in village configurations.

The interior of the campus would be almost untouched.

To the north, campus leaders envision an arts village with a sculpture garden, outdoor amphitheater, cafes, galleries and housing, including loft apartments, on what are now parking lots.

About 1.6 million square feet of academic buildings and housing for graduate students would be added to the so-called professional precinct, to the east of the campus core.

Another area, the Wheeler precinct, would be devoted to undergraduates, with plans calling for low-rise residence halls to blend with the nearby University Oaks neighborhood.

To the west would be a Robertson Stadium precinct with 1.9 million square feet in new academic buildings, housing and retail near two proposed Metro light rail lines.

The University's summary of its master plan -- with renditions and video -- is here.

Despite the story on the ambitious UH master plan, the Chronicle still ignores the more important story about UH. As noted in this this previous post, UH in many ways is the most remarkable major public university in Texas. Started in 1927 as a junior college, UH grew quickly during its infancy while being endowed entirely with philanthropic contributions from generous Houstonians, which was made all the more remarkable by the fact that, at the same time, Houstonians were also contributing substantial amounts to the Rice University endowment. Inasmuch as bustling UH did not even become a state university until 1963, UH has received only a fraction of the endowed capital that the state has provided to its two older public university systems, the University of Texas and Texas A&M University. As a result, UH provides a comparable contribution to Houston and the state as UT and A&M while operating with far less capital than those two institutions, which prompted my earlier observation that UH provides "more bang for the educational buck" than either UT or A&M.

With the recent expansion of the MD Anderson Library into the centerpiece of the central campus, along with the development of innovative programs such as the Honors College, UH has already become an increasingly attractive choice for Texas students. Implementation of the master plan is the next logical step in that evolution. It's good that the local newspaper is noticing that, but it makes one wonder how much more benefit UH could contribute to Houston and the state if its endowed capital were on par with that of UT or A&M? That's a story that needs to be examined, and here's hoping that the Chronicle eventually tackles it.

Posted by Tom at 4:57 AM | Comments (1) |

December 16, 2006

It's football time in Texas

It's the lull before the onslaught of the college football bowl games, but football still permeates the culture of Texas as the high school playoffs move toward conclusion, the Cowboys contend for an NFL playoff berth and the Texans prepare for the 2007 NFL draft. The following are a few interesting football-related items that I noticed over the past week:

Dallas native and longtime Kansas City Chiefs owner Lamar Hunt died after a long bout with cancer. Chronicle NFL columnist John McClain recalls a funny story about a meeting between Hunt, Bud Adams and legendarily crusty Chicago Bears owner George Halas at the time that Hunt and Adams were starting the old American Football League in the early 1960's.

Despite the Texans' problems, it's reassuring to know that owner Bob McNair does not panic.

Chronicle sportswriter Dale Robertson reports on the remarkable success story that is the Southlake Carroll Dragons football program (the cheerleading team is another matter, though).

In this interesting column ($), the Wall Street Journal's resident stathead, Allen St. John, makes a stab at objectively evaluating the pass protection of NFL teams. In so doing, he comes up with a stat that he calls the Sack Factor, which takes the sack yardage a team allows and divides it by the number of pass attempts. The lower the number, the better the protection. Although he finds a correlation between good teams and a low Sack Factor, the statistic needs some refinement -- the Texans pass protection, which is hideous, does not rate as one of the worst in the NFL, probably because the Texans' passing game is based on short, ineffectual pass routes that limit sacks as much as possible.

The lovable Ida Mae Crimpton pens her latest column from her porch in Elgin on her beloved Texas Longhorns' preparations for the Alamo Bowl against the Iowa Hawkeyes. As Ida Mae observes, "Boy, whoever said it isn't far from the castle to the outhouse sure knew what they were talking about."

And finally, don't miss Matt Damon's hilarious impersonation of Longhorn fan Matthew McConaughey on a recent Letterman show. As Clear Thinkers favorite Dan Jenkins might say, "Dead Solid Perfect!"

Posted by Tom at 7:28 AM | Comments (0) |

December 15, 2006

BlawgSearch

The blawgosphere -- that is, the world of law-related blogs -- has really come of age over the past couple of years as a research source, so it is becoming increasingly important to have a tool that facilitates research contained in blawgs.

BlawgSearch is a search engine that Tim Stanley and the folks at Justia.com have developed that focuses one's search on blawgs (Tim's blog post on BlawgSearch is here). It is in beta right now, but Tim and his crew are adding blawgs on a daily basis. While using it on a variety of issues over the past couple of days, I have found the coverage to be excellent already and far more focused than blawg searches on more generalized engines. Check it out and include it in your bookmarks. This looks like a winner.

Posted by Tom at 4:50 AM | Comments (0) |

Those darn "four-legged fire ants"

This earlier post reported on the emerging market for the meat of feral hogs, which are a fixture of rural (and, increasingly, suburban) Texas.

The Chronicle's Shannon Tompkins takes the discussion of earlier post several steps further and provides this excellent overview of the feral hog phenomenom in Texas. The battle between humans and hogs is a fascinating story involving a myriad of subjects -- including biology, ecology, farming, hunting and game policy -- and it appears that the hogs are winning that battle!

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

Phoenix's light rail boondoggle

The dubious economic nature of Houston's light rail system is a common topic on this blog, so I took interest in this insightful Warren Meyer post that ponders why a light rail system is being built in Warren's hometown of Phoenix, which is one of the few metro U.S. areas that may be even less conducive to such a system than Houston.

Given the inefficiency and inflexibility of such systems, Warren wonders who supports such boondoggles and suspects that a few powerful businesspeople are using the rail line in an effort to jumpstart the misguided goal of establishing a dominant downtown area in the decentralized Phoenix metro area. Add in a few high-minded environmentalists and many others who are simply ignorant of the enormous cost relative to the benefit of such systems and, as Peter Gordon wryly-noted awhile back:

"It adds up to a winning coalition."

Unfortunately, as another Phoenix-area resident -- Nobel Laureate Ed Prescott -- reminded us recently, once such coalitions are successful in establishing a governmental policy subsidizing such boondoggles, it is much more difficult to end the public subsidy of the boondoggle than to start it in the first place.

By the way, Houston Metro's subsidy of its light rail system has other perverse effects, such as the lack of security for one of the transit options that actually makes sense for the Houston area.

Posted by Tom at 4:04 AM | Comments (2) |

December 14, 2006

Ed Prescott's five macroeconomic myths

2004 Nobel Laureate Edward Prescott in this WSJ ($) op-ed lays out five macroeconomic myths and observes as follows:

The sky is not falling. No need to panic and start playing around with all sorts of policy responses. Despite the impression created by some economic pundits, the U.S. economy is not a delicate little machine that needs to be fine-tuned with exact precision by benevolent policymakers to keep from breaking down. Rather, it is large and complex, with millions of people making billions of decisions every day to improve their lives, the lives of their families and the health of their businesses.

On the one hand, it's difficult to screw up all these well-intentioned people by crafting bad policy, but, on the other hand, it is of course entirely possible to do so. And once things are broken, they are much harder to fix. For example, all those doomsayers predicting a recession will get their wish if taxes are suddenly raised, new productivity-strangling regulations are enacted, the U.S. turns against free trade, or some combination thereof. Otherwise, we should expect 3% real growth, based on 2% increases in productivity and 1% population growth. This economy is fundamentally sound.

So we have to be careful that we don't believe everything we read in the papers. Things are never as bad as the last data that was released, nor are they as good. Likewise, policy should not be revised at every turn, nor rules changed by political whim. Meaning, we should be careful about accepting conventional wisdom as, well, being wise. One of the great disciplines of economics is that it challenges us to question status quo thinking.

In other words, it's hard to screw up something as big and complex as the U.S. economy, but we're eminently capable of doing it with unnecessary and ill-advised policy moves. And it's much harder to correct the bad policy than to screw up in the first place. That's a good reason to support this.

Posted by Tom at 4:55 AM | Comments (0) |

The NFL Network's one week special

You have to hand it to the owners of the National Football League -- they recognize a public relations blunder when they see one coming.

As noted in earlier posts here and here, the NFL owners' attempt to drive a hard bargain with cable companies that service most of the nation's television viewers has backfired badly in regard to the owners' NFL Network venture. The viewing marketplace couldn't care less about the NFL Network's product and the NFL owners have come off looking like petty moneygrubbers by not making a deal that allows most football fans to watch the NFL Network's games. In the meantime, the NFL owners' refusal to cut a deal with the cable companies meant that two post-season bowl games to be televised by the NFL Network -- Houston's Texas Bowl between Rutgers and Kansas State and the Insight Bowl pitting Texas Tech against Minnesota -- would not be seen by most viewers in the nation.

Well, the huge collective yawn of viewers, combined with the growing crescendo from long-suffering Rutgers fans who were not going to be able to watch their team play in the Texas Bowl, has prompted the NFL owners to offer an olive branch -- one week of free access to the NFL Network in the New York area during the week of the two bowl games.

Now, the only problem with the offer is that Time Warner -- one of the largest cable companies in the country and the one that services most of Houston -- has not decided whether to accept the NFL owners' offer. Regadless, most football fans in Houston won't see the game because the NFL owners' offer is limited to the New York area.

Are you getting the same impression that I have that the NFL owners have overplayed their hand a bit on this one? ;^)

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

Krispy Kreme's new strategy

The mercurial rise and fall of Krispy Kreme used to be a common topic on this blog, so I took notice of an interesting observation about the company that the NY Times' business columnist Floyd Norris recently made on his blog:

Krispy Kreme came out with some more sort-of numbers today, and the market liked it. Its stock rose 17 cents, to $9.98.

The doughnut company said sales were down, and that it continued to lose money in the quarter ended in October. But it said it couldn’t get out a 10-Q report to the Securities and Exchange Commission, or calculate just how much it lost, because it was too busy working on older reports.

The company has not put out any reports for the current fiscal year, and is still missing one from the quarter than ended two years ago.

But the stock has done well. It is up 74 percent this year. Short-sellers still hate the company, with the last monthly report showing a short position of 19.3 million, more than 30 percent of the shares outstanding, but others think the glory days will return. Some of those shorts evidently cannot find shares to borrow, but hold on to their positions anyway. The company has been on the list of stocks with a large number of failures to deliver for 110 days.

When the New York Stock Exchange continues to list a company, and investors continue to embrace it despite long-delinquent filings, it is hard to see what incentive the company has to get the full numbers out. It promised the S.E.C. today that it “intends to file the Exchange Act Reports at the earliest practicable date,” but did not speculate on when that might be.

In other words, the company is doing so poorly that it has almost crossed the line to doing well. ;^)

Posted by Tom at 4:39 AM | Comments (0) |

December 13, 2006

Not another dime

Charles Kuffner, one of Houston's best political bloggers, notes a small sign of progress (also here) in the seemingly relentless and misguided campaign of local governments to build expensive and unnecessary fiefdoms in the guise of large jails:

State Sen. John Whitmire, D-Houston, said there is no need for [Harris County] to spend at least $267 million building two jails when it could cut the inmate population at the county jail by allowing non-dangerous offenders out on bail before trial.

"I am very suspect whether there is a need for jail space," said Whitmire, who chairs the Senate Criminal Justice Committee. "Harris County wouldn't have an overcrowding problem at all if it had an effective pretrial release program."

Whitmire said the Legislature, in the upcoming session, may look at ways to help reduce jail overcrowding, such as shorter sentences for some crimes.

Commissioners Court likely will ask voters next November to approve bonds for new jails that would add 4,600 beds.

County Judge Robert Eckels and other members of Commissioners Court said the jails are needed to reduce overcrowding now and in the coming decades.

As noted earlier here, the condition of the Harris County Jail has long been a civic embarrassment, but the solution is not simply to build more jails. As noted earlier here, Scott Henson has written this thorough and insightful analysis of the true problem with the Harris County Jails, which is overcrowding from sloppy and lazy processing of prisoners who do not need to be incarcerated pending their trial.

There are some powerful political forces -- county commissioners, contractors, police unions, etc. -- that benefit from and support this unending spiral of jail construction, while the constituencies supporting prisoners are not as powerful or well-funded. However, it is clear that the solution is not simply to build bigger and more expensive jails. Rather, building additional facilities should not even be a consideration unless or until Harris County adopts a sensible pre-trial release policy that frees up literally thousands of existing jail cells that are being wasted on folks who should not be in jail. Moreover, the county should also be required to fix the chronically deplorable condition of its existing jails before seeking to build more. This is a community issue -- and in other communities as well -- that should transcend party politics. But I doubt that it will.

Posted by Tom at 4:57 AM | Comments (1) |

Continental's big news

The big news story today in Houston is the announcement about Continental Airlines engaging in merger negotiations with Chicago-based United Airlines. Here are the stories from the Wall Street Journal ($), the NY Times, the Financial Times and the Houston Chronicle.

The bottom line on the proposed merger is that it's a longshot for a variety of reasons, not the least of which is that such mergers are traditionally complex and expensive. However, the fact that merger talks between the second-largest (United) and the fifth-largest airlines are taking place at all is a reflection that the airline industry is primed for a round of consolidations as the industry rebounds from the severe downturn that was inflamed by the effects of September 11, 2001 attacks on New York and Washington. United ended up in a long reorganization case under chapter 11 that it emerged from in early this year, but both Continental and United have absorbed higher fuel costs and added capacity, and are among the carriers that are expected to Improve financially in 2007. Mergers could help both airlines reduce overhead by eliminating overlapping routes.

One of the issues that mitigates against a merger between the two airlines is "golden share" that Northwest Airlines Corp. holds in Continental, which is a special voting series of Continental preferred stock Northwest holds in connection with a marketing alliance with Continental that does not expire until 2025. Thus, if a proposed merger requires shareholder approval of Continental, then Northwest could use those shares to block the merger. But Continental and United could simply structure around the golden share, such as having Continental buying another airline so long as such a transaction didn't require Continental shareholders' approval.

Also, United is clearly playing the field right now. The airline has recently approached Delta Airlines, which is currently wallowing in a chapter 11 case, regarding a merger through a chapter 11 plan of reorganization as an alternative to a hostile takeover bid that US Airways is currently pursuing.

Continental shares declined yesterday 5.6% to $42.88, but they continue to trade near the top of their past year range. The stock of UAL, United's parent, also is trading near its 52-week high after closing down 2.9% at $43.23. This is the type of deal that will either gain momentum quickly or fizzle out, so stay tuned.

Posted by Tom at 4:19 AM | Comments (2) |

Evaluating the Jennings deal

The Stros made their second big off-season acquisition on Tuesday as they acquired Denver Rockies ace and former Baylor star Jason Jennings and journeyman pitcher Miguel Asencio in trade for CF Willy Taveras, promising starter Jason Hirsh and mercurial starter Taylor Buchholz. A friend who was driving at the time called to alert me to the deal and to inform that the sports talk shows were bashing the trade. Although the Stros first deal was questionable, this one is not.

Giving up young pitchers such as Hirsh and Buchholz always risks depletion of pitching depth, but that is the Stros' strength right now, so they could afford to give up something in that area. Jennings is a 28 year-old, emerging star and an undervalued talent in Denver (he will make "only" $5.5 million next season) where his pitching stats suffered until the club started storing baseballs in a Coors Field humidor over the past couple of seasons. His career runs saved against average ("RSAA," explained here) is only 23 in five seasons, but he is coming off his best season in which he had a 25 RSAA and a 3.78 ERA. If the Stros can lock him up after the 2007 season, then Jennings and Roy O can anchor the starting pitching rotation for years to come. And if the Stros re-sign Roger Clemens for at least a portion of the upcoming season, then the Stros have a potentially league-leading rotation, particularly when you add in the recently-acquired Woody Williams.

Meanwhile, what the Stros gave up was mostly hat and little cattle at this point. Taveras' limitations are well-chronicled, so he will be replaced by a player -- either Chris Burke, Jason Lane or Hunter Pence -- who will generate more runs for the Stros than Taveras. The 25 year-old Buchholz has great stuff, but he mostly stunk when given an opportunity in the starting rotation last season (-17 RSAA; 5.89 ERA) and has never been able to pitch a full season of professional ball because of injury breakdown. The 24 year-old Hirsh is a potential star as he dominated the Texas League last season, but the fact of the matter is that Jennings was a better pitcher than Hirsh at his age and it is unlikely that Hirsh will develop into as good a pitcher as Jennings is right now. So, my sense is that the Stros were smart to overpay a bit with potential for an established frontline starter.

Think of Acensio, the throw-in on the deal, as sort of a right-handed Carlos Hernandez-type. He was a promising pitcher with the Royals as a 21 year-old back in 2001, but he broke down in 2004 and underwent Tommy John surgery on his right elbow. He hasn't pitched much in the majors since then, but still has mid-90's stuff and a wicked change up. He's one of the guys who we might never hear about it again, but he's young enough to take a flyer on to see whether he can develop into a middle reliever in a couple of years.

The bottom line -- the Stros gave up a potential solid starting pitcher in Hirsh for a proven starting pitcher in Jennings who is not much older. Ascencio and Buchholz are essentially a wash, and the Stros improved by subtraction in getting rid of Taveras, who cost the Stros 30 runs his two seasons with the club over what an average National League player (think Chris Burke) would have produced for the club. That's a good trade for the Stros in my book.

Williams' career stats are below and a pdf of the same is here. The abbreviations for the pitching stats are here.

Posted by Tom at 4:18 AM | Comments (1) |

December 12, 2006

The mob must wait awhile longer

As noted here last week, an angry mob lynched Jeff Skilling.

On Monday evening, the Fifth Circuit Court of Appeals postponed the final stage of the lynching while it considers his motion to remain free pending disposition of Skilling's appeal of the lynching.

Meanwhile, media members of the mob were already checking out the gallows when the Fifth Circuit issued its order postponing Skilling's report date. What a way to make a living.

By the way, the Chronicle article on the Fifth Circuit's postponement of Skilling's report date quotes as one of its legal "experts" the local lawyer who went on national television immediately after Ken Lay's death and suggested that Lay had killed himself so that his conviction could be voided.

I guess it's hard to find objective experts among members of a mob.

Update: Skilling's reprieve was short-lived as the Fifth Circuit issued this order earlier this evening lifting the postponement of the deadline to report. Although certainly disappointing for Skilling, the order's language indicates that the panel that considered Skilling's motion is clearly troubled by what occurred in Skilling's trial and signals that the panel believes that Skilling has a reasonable chance of success on at least a substantial portion of his appeal.

Posted by Tom at 4:16 AM | Comments (1) |

"Ethics" at Seton Hall

I swear, you can't make this stuff up.

This previous post reported on Richard A. Epstein's WSJ ($) op-ed that addressed a common topic of this blog -- that is, the improper use of deferred prosecution agreements by prosecutors to blackmail companies into agreeing to absurd fines and "corrective" measures to avoid being prosecuted out of business.

In the op-ed, Professor Epstein used as an example the recent conduct of the US Attorney for New Jersey. The US Attorney forced Bristol-Meyers to endow a chair of "ethics" at the US Attorney's alma mater, Seton Hall Law School, as a condition to granting a deferred prosecution agreement settlement to the company over criminal charges. Apparently, in the US Attorney's world view, the ends of endowing an ethics chair justifies the means of utilizing dubious ethics in arranging the endowment.

Normally, you would think that the publicity surrounding such an arrangement would at least raise some ethical concerns at Seton Hall. Instead, the Seton Hall Dean used this WSJ letter-to-the-editor ($) to respond to Epstein's disclosure of the questionable arrangement and brag about Seton Hall's ethics program. He doesn't even address the school's problematic ethics in accepting the endowment from a company that was coerced to pay it by a federal prosecutor!

H'mm. I wonder if the Seton Hall Dean would have had a problem if he knew that the alum's source of funding for his "ethics" program had come from a kickback or ransom paid to the alum? On second thought, his letter answers that question.

Posted by Tom at 4:05 AM | Comments (1) |

The golfing benefits of valium

It's not golf season, but this story is too good to pass up.

This John Coomber/Northern Territory article addresses the difficulties that professional athletes have in acknowledging depression and the beneficial role that antidepressants have played in the lives of professional golfers Brett Ogle, Stuart Appleby and Steven Bowditch. It's a serious issue and one that has often been swept under the rug by the folks who promote professional sports and the athletes themselves.

However, the article ends with a funny anecdote. Five-time British Open champion Peter Thomson is quoted as saying that he never noticed depression to be a much of a factor during his playing days, though he suspected that some of his colleagues self-medicated through use of alcohol. Thomson goes on to recall that the famously volatile American golfer Tommy Bolt once tried taking sedatives to control his anger on the course:

"In 1956 (the year Thomson won his third successive British Open) Tommy started taking a drug like a kind of valium to calm him down," he said.

"When I came back to America for the 1957 season I asked him if he was still taking the tablets and whether they were doing him any good.

"'Yeah,' he said. 'I'm still three-putting but now I don't give a shit.'"

Hat tip to Geoff Shackelford for the link.

Posted by Tom at 4:05 AM | Comments (0) |

December 11, 2006

The Houston bowl game that few will see

This NY Sunday Times article does a good job of reporting on Texans' owner Bob McNair's efforts to revive Houston's bowl game, renamed "the Texas Bowl" after being known over the years as the Bluebonnet Bowl, the Astro-Bluebonnet Bowl, the GalleryFurniture.com Bowl and, most recently, the EV1.net Bowl.

Now, if only McNair could persuade the other NFL owners to let most of us watch the game. Sort of silly to have a bowl game that is supposed to promote the city when most people can't watch it, don't you think?

Posted by Tom at 4:19 AM | Comments (0) |

A big cost of maintaining Auburn's minor league professional football program

This NY Times article reports on the latest developments in the Auburn University academic scandal involving the school's intercollegiate athletic program. The university's report on its internal probe indicates that at least one scholarship athlete had his grade changed from an incomplete to an "A" in a course without the professor knowing about it in order to allow the athlete to fulfill eligibility requirements. And it's not as if the course was even a real academic exercise -- it was something called a "self-study" course. Earlier posts on the scandal and the tension between academic institutions financing and operating minor league professional sports franchises are here, here and here.

Is there really any question at this point that minor league professional football is more important than academic integrity at Auburn?

Posted by Tom at 4:13 AM | Comments (2) |

2006 Weekly local football review

Titans 26 Texans 20

Unless you are a hardy soul, it would be a good idea to avoid sports talk radio this week in Houston.

It would have been bad enough given that jilted no. 1 draft choice Reggie Bush had another brilliant game in helping the Saints blast the Cowboys. However, Texas Longhorns hero Vince Young really turned the knife when he transformed a third and long situation in overtime into a 39 yard touchdown run to give the Titans their second win over the Texans this season. The Titans trailed 14-13 in the fourth quarter before Young led a 15-play, 88-yard drive that gave the Titans their first lead of the second half, 20-17. The Texans tied it up on a Kris Brown 36-yard field goal with a little under two minutes ago, and then Young's TD run occurred on the first possession of the overtime period.

Rookie Young clearly outplayed embattled fifth-year Texans QB David Carr, who could generate only 133 net passing yards on a 17-23 day. Young was 19-28 for a net 200 yards with one interception, but tacked on an additional 86 yards rushing on just 7 carries. Given how close-to-the-vest Texans coach Gary Kubiak played this one on offense, it's reasonably clear that Kubiak has little confidence in Carr and that the first draft choice in the Texans' history is probably playing his final few games with the franchise.

The Texans (4-9) now go on the road to face the Patriots (9-4) and then return home to finish the season against the Colts (10-3) and the Browns (4-9). There may be one more win in those three games, but my pre-season prediction of six wins for the Texans now appears to be a pipe dream.

Posted by Tom at 4:01 AM | Comments (2) |

December 10, 2006

The ordeal of Jamie Olis continues

As noted earlier here, former Enron CEO Jeff Skilling will report to a minimum-security prison in Waseca, Minnesota on Tuesday to begin serving the brutal 24 year sentence that he was assessed on October 23rd.

On January 2, former Enron accountant Richard Causey is scheduled to report to the federal prison in Bastrop near Austin to begin serving his five-and-a-half-year sentence that he received on November 15.

Former Enron CFO Andrew Fastow is serving his a six-year term in a federal prison at Oakdale, Louisiana that he received on September 26, and former Enron Energy Services CEO David Delainey is in a Lompac, California federal prison serving the two-and-a-half-year sentence that he received on September 19th.

But for some unknown reason, former Dynegy mid-level executive Jamie Olis -- who has endured a three year ordeal in having his absurd 24 year sentence reduced to six years on September 22nd -- remains in the marginally humane Federal Detention Center in downtown Houston awaiting reassignment to a federal prison.

Olis reported to federal prison on May 20, 2004 and was originally assigned to the Bastrop unit, about an hour and a half away from San Antonio where his wife and young daughter are living. However, in January 2005, Olis was inexplicably yanked out of the Bastrop unit and transferred to a much harsher medium-security unit in Oakdale, Louisiana, 400 miles away from his family.

Then, after the Fifth Circuit set aside Olis' original 24 year sentence on October 31, 2005, U.S. District Judge Sim Lake ordered Olis transferred to the Federal Detention Center in downtown Houston on December 20, 2005 to await his resentencing. The Detention Center is essentially an interim facility containing small jail cells that are most commonly used to hold prisoners before the Bureau of Prisons assigns them to a federal prison where they will serve their sentence. It has nominal inmate facilities (it doesn't even have a prison yard) and is ill-equipped to hold a prisoner for longer than a couple of weeks. Although closer to San Antonio than Oakdale, the Houston facility is still a four hour drive for the Olis family.

In transferring Olis to the Detention Center, Judge Lake probably thought that the resentencing would occur quickly and that it would be more expeditious to have Olis in Houston. However, the prosecution engaged in a series of delaying tactics over most of the past year that delayed Olis' resentencing until September 22, almost 11 full months after the Fifth Circuit ordered it.

To make matters even worse, Olis has now endured almost a year in his cramped Detention Center cell and still has not been assigned to a prison unit to serve the balance of his sentence. This despite the fact that he was resentenced three months ago and a number of federal criminal defendants sentenced after Olis -- including Skilling, Fastow and Causey -- have already been assigned to the prisons where they will serve their sentences.

The mainstream media has now moved on from the Olis case. But make no mistake about it, Olis' continuing ordeal is a stark reminder of the injustice that is instrinsic to the dubious governmental policy of using the state's overwhelming prosecutorial power to criminalize merely questionable business transactions. Maybe some folks insulate themselves from the brutality of Skilling's sentence because they simply can't relate to a top executive of a large U.S. corporation, but most of us could have been in the same position as Olis. As Sir Thomas reminds us, "do you really think that you could stand upright in the winds" of abusive governmental power that Jamie Olis is enduring?

Posted by Tom at 4:22 AM | Comments (0) |

December 9, 2006

Richard Justice, Andy Pettitte's press agent

It's hard to keep up with the sloppy and illogical analysis of Chronicle sportswriter Richard Justice, so usually I don't even try to do so. However, sometimes it spills over to such an extent that it simply can't be ignored.

In this column, Justice criticizes Stros owner Drayton McLane for not matching the New York Yankees' absurdly rich $32 million, two-year contract offer for former Stros pitcher Andy Pettitte. In gushing over Pettitte, Justice really lets loose with a doozy:

[Pettitte] was one of the National League's best pitchers last season. He was 10th in quality starts and 13th in innings while going 14-13. His won-loss record was unimpressive because the Astros had one of baseball's worst offenses.

Say what? One of the best pitchers in the National League last season? Pettitte was barely the fourth best pitcher on the Stros last season (behind Oswalt, Clemens, and Wheeler). As of August 1st, before pitching well down the home stretch, Pettitte was one of the worst starters in the National League. Based on the key statistic of runs saved against average, Pettitte finished tied for 46th among National League pitchers who pitched more than 100 innings last season, resulting in a C grade in my post-season evaluation of Stros players. Regardless of what you think about Pettitte generally, he clearly was not one of the best pitchers in the National League last season.

So, let's see here. The Stros agreed to pay Pettitte a then high-market contract price of $31.5 million in 2004 for three seasons of his considerable pitching talent. In return, the Stros received one season (2004) that was a complete bust when Pettitte was injured and underwent elbow surgery, one season (2005) that was one of the best of Pettitte's career (2005) and one season (2006) in which Pettitte was pedestrian.

Now, given that the Stros went to the World Series in 2005 and Pettitte contributed greatly to that, I am not going to say that the Stros ended up on the short end of the stick in their deal with Pettitte. However, it's far from clear that the Stros wouldn't have done even better over the past three seasons by allocating the money that they paid Pettitte elsewhere. Moreover, it's even less clear that it makes sense to take the Yankees' risk of allocating $32 million over the next two seasons to a pitcher who is 34 years old and is a high injury risk. And oh yeah, about Pettitte's oral commitment not to exercise his player option for the 2008 season if he is injured, you better get that in writing, Yankees. Along with a specific contractual definition of the word "injured."

The surprising super-heated free agent market in Major League Baseball this off-season proved me wrong in my post-season evaluation of Pettitte that he would not receive anywhere close to $16 million to pitch in 2007. However, that does not mean that the Stros were wrong in refusing to pay such a price. It's just baseball and not particularly important in the big scheme of things, but it's disappointing nonetheless that the Chronicle editors allow Justice's bias to trump objective analysis of the situation. Not surprisingly, the Chronicle editors allow the same thing to happen on far more important issues.

Update: Justice's colleague at the Chronicle, John Lopez, nails the truth about the Pettitte contract negotiations in this column in Monday's paper:

The Astros being smart shoppers clearly was something Pettitte and his representation did not expect. They're used to having the Astros over a barrel, making them wait, calling the shots.

The Astros made one offer here and compared it to the one over there. That's not just smart baseball, it's smart business.

Fans are smart, too, and should realize this was about good, old American greed, nothing more and nothing less.

Pettitte has every right to cash in, sure. Good for him. He had his reasons for wanting to stay, but in the end Pettitte was no different than, say, Terrell Owens.

There were 32 million reasons home is where he'll hang his Yankees cap.

Posted by Tom at 6:32 AM | Comments (2) |

December 8, 2006

The injustice of the Jeff Skilling case

In a few days, unless the Fifth Circuit grants his motion to remain free on bond pending appeal of his conviction, Jeff Skilling will report to prison to begin serving a 24-year prison sentence. The image of Skilling entering that Minnesota prison will be a powerful reminder of the utter failure of the American criminal justice system in the case against him and others caught up in the Enron maelstrom.

Given the societal bias against Skilling and nearly everything else related to Enron, it's not all that surprising how little most people know about the case against Skilling. "Wasn't he prosecuted for Enron's fraudulent accounting?" I am often asked. Well no, he was not. The government dropped those charges.

"Well then," they ask. "Wasn't he prosecuted for causing Enron to go bankrupt?" Again, no, I reply patiently, Enron Task Force prosecutors repeatedly declared throughout Skilling's case that they were not prosecuting him because Enron failed. Of course, those same prosecutors quickly dispensed with that myth during Skilling's sentencing hearing when they blamed him for Enron's failure so that they could heap a huge prison sentence on him. But that's another issue.

"But wait," they invariably say. "Didn't they go after him because of those shady partnerships that he did with that guy Fastow?" No, I point out, the prosecutors didn't even attempt to prove that any of those special purpose entities ('SPE's) were illegal.

"Well, shoot" most folks finally throw up their arms in exasperation. "He's rich and a bunch of people lost money when Enron went down the tubes. He must have done something criminal."

I have had literally hundreds of conversations similar to the foregoing. The ugly reality is the same one that we didn't want to confront when Ken Lay died and one that we resist confronting now -- Jeff Skilling was lynched by an angry mob.

The primary justification that the mob gives for the absurdly-long sentence for Skilling almost always is the plight of the innocent employees and investors who lost their nest eggs when Enron went bankrupt. But the main reason that those nest eggs ever had value in the first place was because Skilling had transformed Enron into the world's leading energy risk management company through the creative use of futures and options contracts to hedge price risk for natural gas producers and industrial consumers. Although there is nothing wrong with having compassion for folks who lose money on an investment, rarely is it mentioned in the Enron morality play that many of those investors who lost their nest egg when Enron melted down were imprudent in their investment strategy. They should have diversified their Enron holdings or bought a put on their Enron shares that would have allowed them to enjoy the rise in Enron's stock price while being protected by a floor in that share price if things did not go as planned.

Even though virtually all of those innocent Enron investors carry insurance on their homes and cars, one can only speculate why they didn't attempt to hedge the risk of their investment in Enron stock. Probably, most of them simply did not understand how Enron's risk management services created their wealth in the first place. Thus, when that wealth evaporated during Enron's meltdown, they didn't even try to understand what had occurred. They simply joined the unruly mob calling for Skilling's scalp.

The mainstream media -- always quick to embrace a simple morality play with innocent victims and dastardly villians, regardless of its validity -- was not about to complicate the story by pointing out that the investors could have hedged their risk of loss by buying insurance quite similar to that which Skilling developed in creating their wealth in the first place. Thus, instead of attempting to tell the entire story, much of the mainstream media simply became a part of the mob. Ambitious prosecutors, given wide latitude to obtain convictions of key Enron executives regardless of the evidence, gladly took advantage of the firestorm of anti-Enron public opinion to lead the mob to Skilling and others.

Although the Enron Task Force has succeeded in securing some convictions for the anti-Enron mob, the mob's work has not withstood scrutiny on appeal. After the mob had caused enormous wealth destruction and job loss by indicting and convicting Arthur Andersen, the Supreme Court unanimously reversed the conviction, concluding that the Task Force had obtained an improper mens rea instruction that allowed the jury to convict the firm for merely negligent or innocent conduct. Then, in the Nigerian Barge case (see also here), the Fifth Circuit reversed the Merrill Lynch defendants' convictions (but only after each of them had been forced to endure a year in prison) because the Task Force had pressed for an improper "honest services" theory of liability that stretched the wire fraud statute beyond any reasonable interpretation. Finally, after the spurious conviction of former Enron Broadband Services executive Kevin Howard, the Task Force recently conceded that the Fifth Circuit's decision in the Nigerian Barge appeal requires that all but one of the counts of conviction be vacated.

In fact, you won't read about it much in the mainstream media, but Skilling's appeal presents the same issues as Andersen and the Nigerian Barge case. As in Andersen, the Task Force in Skilling's case successfully argued at trial for an improper mens rea instruction on "deliberate ignorance" that invited the jury to convict Skilling based on a civil, "should have known" standard of liability. Similarly, the Task Force rested its core conspiracy count and the ensuing substantive charges against Skilling on the same "honest services" theory of criminal liability that the Fifth Circuit rejected in the Nigerian Barge case,

So, just what was it again that Skilling did that could possibly justify a 24-year prison sentence for a man who was not even accused of stealing a dime from his company? As our criminal justice system places this man in a prison cell for perhaps the rest of his life, take a few minutes to review the following summary analysis of what Skilling was accused of doing and the evidence that was presented at trial relating to those charges. It's a foreboding tale for those who understand the fragile nature of justice and the rule of law in even a civil society.

In February 2004, after three years highly-publicized investigation, the Enron Task Force filed a sweeping 35-count indictment against Skilling, alleging conspiracy to commit securities fraud, securities fraud, wire fraud, making false statements to Enron's external auditors, and 10 counts of insider trading. The same indictment contained 11 counts against former Enron chairman and CEO Ken Lay and another 34 counts against former Enron chief accounting officer Richard Causey. Just days before the trial was scheduled to commence, Causey pled guilty to one count of securities fraud in exchange for a maximum seven-year sentence with the possibility of less time should he cooperate with the Task Force (he was eventually sentenced to a 5.5 year prison term).

At the outset, it should be noted that it is impossible to determine what specific fraudulent conduct the jury concluded that Skilling committed because the jury returned only a general verdict (Skilling's lawyers requested that a special verdict to the jury, but U.S. District Judge Sim Lake denied that request). As noted above, Skilling was not charged with causing Enron's bankruptcy and, unlike Enron's chief financial officer, Andrew Fastow, Skilling was not charged with self-dealing, stealing or other acts by which he directly profited from the company. Indeed, Fastow later conceded during his testimony that he had successfully concealed his fraud from Skilling and others at the company.

At trial, the Task Force's case against Skilling was based almost entirely on the testimony of cooperating witnesses, all of whom agreed to testify in exchange for leniency and favorable sentencing recommendations from the Task Force. Dozens of other witnesses who would have provided exculpatory testimony for Skilling were "iced" by the Task Force from testifying out of fear that they would be indicted if they did so. The Task Force's case relied on virtually no documentary proof -- in fact, there were no documents or other pieces of tangible evidence directly implicating Skilling in any crime.

Skilling's defense was simple and straightforward. He essentially contended the following:

Enron was a sound company that was enduring the transient post-bubble pressures that many public companies were facing during much of 2001;

There was no wide-ranging conspiracy to cook Enron's books or lie about the company;

The challenged statements made to the public were true and that the challenged financial transactions were proper; and

Most of the cooperating witnesses pled guilty because of fear and pressure, not because they had committed crimes.

The theory of Skilling's defense is particularly important because it did not rely on an "I didn't know" or "ostrich" defense. Nevertheless, the Task Force convinced the Judge Lake to give the jury a "deliberate ignorance" jury instruction and other instructions permitting the jury to convict Skilling for depriving Enron of his "honest services." As is now clear Fifth Circuit law, such a theory of liability applies only where the defendant looted from the company or engaged in self-dealing. Those faulty jury instructions are now at the core of Skilling's appeal of his conviction.

Despite the myriad of claims that the Task Force initially asserted in its indictment against the Skilling, the Task Force's case against Skilling at trial ultimately boiled down to only seven discrete areas:

1. Use of SPEs/LJM Partnership to misrepresent Enron's financial condition;

2. Use of Enron Wholesale reserve accounts to misrepresent Enron's financial condition;

3. Misrepresentation of Enron Energy Services' financial condition;

4. Misrepresentation of Enron Broadband Services financial condition;

5. Misrepresentation of Enron's third quarter 2001 earnings;

6. Involvement in filing false SEC Annual and Quarterly Reports; and

7. Skilling's September 17, 2001 Enron stock sale.

The following is a summary of the evidence on each of the foregoing areas:

Use of SPEs/LJM Partnership. As with the Nigerian Barge case and the Kevin Howard case, the Task Force argued at trial that Enron's off-balance sheet accounting treatment for several transactions entered into with the LJM Partnership -- one of Fastow's infamous SPE's -- was rendered fraudulent by virtue of "secret side deals" between Skilling and Fastow. To prove the side deals, the government relied on the testimony of Fastow, former Enron treasurer Ben Glisan, and a former junior Enron finance division executive, Christopher Loehr.

With the exception of Fastow, no witness directly implicated Skilling in the alleged oral side deals. Loehr never mentioned Skilling in his direct testimony, stating only that he had heard from Fastow about an understanding with Enron. Glisan testified that he had no knowledge of Skilling giving an oral guarantee or verbal assurance on any deal. Indeed, with respect to the Nigerian Barge transaction, Glisan testified that he heard that an "oral assurance" came from Causey, not Skilling. Likewise, Glisan's notes indicated no improper dealings involving Skilling. The Task Force elected not to call Causey as a witness. Even Fastow conceded that Skilling never used the word "guarantee" in their conversations and that Skilling's alleged "bear hug" in regard to the Cuiaba transaction was not legally enforceable. The Task Force produced no documents, emails, memos, or notes that corroborated Fastow's testimony regarding the alleged side deals.

Skilling denied having made any oral side agreements or secret guarantees, or being aware of anyone else at Enron making them. He explained that Enron's internal and external accountants and lawyers reviewed each of the transactions and signed off on the accounting treatment. Moreover, although accountants such as Glisan and former Arthur Andersen partner Tom Bauer testified that an oral guarantee would invalidate Enron's accounting of the LJM transactions, the Task Force did not ask either one whether the words that Fastow alleged Skilling said to him -- "you won't get hurt; you won't lose any money" -- constituted such a guarantee or would invalidate the accounting treatment.

Wholesale Reserve Accounts. The Task Force attempted to prove that Enron improperly manipulated its earnings by adjusting reserve accounts in the company's Wholesale business unit. Former Enron accountant Wesley Colwell and former Enron Wholesale executive David Delainey testified that they personally used reserve accounts to meet quarterly estimates, and Andersen accountant Bauer opined that such use of reserves violated accounting rules.

However, the Task Force introduced no evidence that Mr. Skilling authorized, directed or even knew about any improper use of reserves. Colwell's interactions were solely with Causey. Colwell testified that Causey had told him that Skilling would "like an additional two pennies of earnings" in the second quarter of 2000 and later, in the fourth quarter of 2000, that Mr. Skilling would like to "land the quarter" on a specific number. But the Task Force introduced no direct evidence that Skilling's alleged statements -- or even the statements of Causey, for that matter -- directed or even suggested to Colwell that he should improperly use reserves to meet earnings or revenue targets.

As with his testimony regarding the SPE's, Skilling testified that Enron's experts on establishing reserves advised him that the reserve amounts were appropriate. Accounting expert Walter Rush, who appeared as an defense expert (the Task Force did not call an independent expert on this issue), testified about the accounting rules applicable to reserve accounts and concluded that the reserve amounts for both second and fourth quarters of 2000 were proper and lawful. Likewise, Andersen accountant Bauer confirmed that Arthur Andersen had independently reviewed the reserve amounts each quarter and determined them to be the appropriate number. Finally, the evidence at trial reflected that the second quarter reserve ended up being almost precisely equal to the value of the contingency for which it was originally established, and that the fourth quarter volatility reserve tracked almost exactly the volatility in the marketplace.

Enron Energy Services. The Task Force attempted to prove that Enron and Skilling lied about EES's growth while simultaneously hiding mounting EES debts. Relying on the testimony of Delainey, Timothy Belden, and Wanda Curry, the Task Force asserted that EES first moved an uncollectable receivable to the Wholesale division in the fourth quarter of 2000 and then transferred the entire EES risk management book to Wholesale in the first quarter of 2001 ("the resegmentation issue"). According to the Task Force's theory, these events occurred solely to make EES look more profitable than it really was.

The various witnesses expressed different opinions as to the reasons for the moves with regard to EES, but not one of them stated that someone had told them that the reason for the moves was to bolster EES's profitability. Likewise, not one of the witnesses attributed knowledge of that alleged motive to Skilling. With respect to the transfer of the fourth quarter 2000 receivable, the Task Force did not dispute that Arthur Andersen had analyzed the transfer and approved the accounting treatment. Defense witness Diann Huddleson testified that Enron management believed it could collect on the receivable and ultimately did collect the majority of the outstanding amount.

As for the resegmentation issue, Skilling testified that moving the risk book made sense from a business standpoint, and former Wholesale division executive Rogers Herndon confirmed Skilling's version by testifying that the Wholesale unit improved the efficiency and value of that risk book. Even Delainey, the government's primary witness on this issue, conceded that he ultimately recommended to Skilling that the risk book be moved and accounting expert Rush testified that the transfer complied with applicable accounting rules.

Enron Broadband Services. The government attempted to prove that Enron lied about the health of EBS through the testimony of former Broadband executives Ken Rice and Kevin Hannon, and former Enron investor relations executives Mark Koenig and Paula Rieker. They testified that the floundering unit had no customer base and propped up its revenue numbers through the sale of dark fiber, investment returns, and monetizations, all of which constituted non-core activities. They also testified that Skilling told analysts that EBS was a strong division with sustainable high earnings power when, at the same time, the unit was starting to lay off employees.

The Skilling defense refuted all of that testimony. Documentary evidence showed that EBS experienced substantial growth during 2000 in volumes traded and number of counterparties, and that Enron repeatedly had disclosed sales of fiber through monetizations as part of EBS's business. As to the allegations regarding layoffs, both government and defense witnesses refuted the Task Force's allegations. Marla Barnard, former head of human resources for EBS, testified that she developed the redeployment plan and it was a bona fide redeployment. Task Force witness Hannon also confirmed that the EBS employee reassignments were the result of a redeployment, not a layoff.

Third Quarter 2001. Skilling announced his resignation to Enron's Board early in the third quarter of 2001 and resigned on August 14, 2001. As a result, he could not have participated in the alleged third quarter frauds and misrepresentations. Nevertheless, the Task Force attempted to connect him to information discussed during an August 13, 2001 joint meeting of the Board, which the Task Force claimed should have been disclosed to the public.

Rieker, Koenig, Glisan, and Fastow testified about two parts of that meeting. The first was a liquidity presentation that previewed a series of events that could result in a bankruptcy of Enron and also showed that Enron had recorded several assets at a combined $5 billion dollars above their present value. The second was a discussion about several challenges facing the company, including EES and EBS income issues, Wholesale trading and the Raptor transactions, all of which had increased the company's financial risks.

Skilling explained in his testimony that there was nothing fraudulent or even particularlry unusual about the liquidity presentation. It had been prepared at his direction by the company's Risk Assessment and Control Department as part of established procedures to manage Enron's risks. The presentation analyzed several extreme risk scenarios, including nuclear disaster, credit downgrade, recession and hurricane. Notably, the presentation concluded that, even under these highly unlikely worst-case scenarios, Enron would be able to survive.

Similarly, Skilling refuted the allegation that Enron's asset portfolio was inflated. The asset valuation question had been referred to the accountants, who opined that an impairment was not necessary. In addition, documentary evidence indicated that the valuation was preliminary in nature and based on dated models. The lower estimate of value that Skilling provided was his best estimate as to what Enron could generate for the assets in a "fire sale" given unfavorable foreign currency markets. Finally, with respect to the business challenges that Enron faced, these were all issues that management and the board knew needed special attention, but they were not particularly unusual for a company of the size and complexity of Enron and did not present revenue concerns. On the contrary, the Skilling defense presented evidence that corroborated Skilling's view that Enron was in great shape when he resigned.

SEC Annual and Quarterly Reports. The Task Force argued that Skilling, along with Causey, was responsible for the preparation, drafting, and accuracy of Enron's financial statements. In the Task Force's view, any proven misrepresentation not disclosed in the financial statements was unlawful. Although Skilling was responsible for the accuracy of those statements, he did not prepare or draft them. Rather, he reviewed them at the very end of a lengthy preparation and review process, which involved scores of business unit personnel, accountants, and lawyers. Defense witness and former Enron general counsel Jim Derrick testified about this process and stated that Skilling had never once overruled a recommendation concerning preparation of Enron's financial statements. Derrick's testimony was uncontroverted at trial.

September 17, 2001 Sale of Stock. Skilling was acquitted on all counts of insider trading except for his sale of 500,000 shares of Enron stock for approximately $31 dollars per share on September 17, 2001. The Task Force contended that Skilling knew about the alleged criminal conspiracy at Enron and chose to unload his stock before the fraud was disclosed. The Task Force further alleged that Skilling met with Lay and others at Enron after his resignation, and intimated that Skilling must have known about the Sherron Watkins memo and related investigation. That allegation was unsubstantiated by any testimony or evidence during the trial.

The actual evidence at trial showed that Mr. Skilling's historical trading patterns were inconsistent with a scheme to pump and dump Enron stock. From January 1999 until he left Enron in August 2001, Skilling increased his stock holdings by 255%. Moreover, as Skilling explained, and contemporaneous tape recordings and the testimony of witness Glenn Ray corroborated, he received no inside information after his departure from Enron, did not trade on any inside information and did not have a plan to sell his Enron stock prior to September 11.

Shortly after resigning, Skilling shorted the stock of one of Enron's competitors, AES Corp. As a result, Skilling was considering selling shares of Enron on September 6, 2001 to create what is known as a bull hedge to spread risk throughout his portfolio. However, Skilling's broker advised him that he could not execute the sale at that time because he had not yet received a letter from Enron confirming Skilling's resignation. After additional discussion with the broker, Skilling elected not to sell any Enron shares at that time. After September 11, Mr. Skilling (along with most investors) became concerned about the effect that the event would have on the market and sold a large portion of his Enron shares on the day the markets reopened. By then, Skilling and his broker had been advised by Enron general counsel Derrick and SEC lawyer Rex Rogers that he was free to sell Enron stock.

After Enron melted down, the SEC, toward the end of a lengthy examination of Skilling, asked him why he sold the 500,000 shares of Enron stock on September 17, 2001. Skilling replied that he feared the market reaction to the tragic events of September 11. The SEC then asked if there was any other reason why he sold the stock, and Skilling replied, "[t]here was no other reason other than September 11th that I sold the stock." The SEC followed up, asking if Skilling had a plan to sell his Enron stock before September 11, and he replied "no."

At trial, the Task Force argued that Skilling's tape-recorded conversation with his broker on September 6 proves that he lied to the SEC and that his trial testimony that he had forgotten about the September 6 call was not credible. However, Skilling's September 6 broker call was hardly a part of any plan to liquidate his Enron position -- he was simply exploring whether to sell some stock as a part of a bull hedge. When he discovered that he could not do so at that time, he moved on to other matters with the broker and soon thereafter terminated the call. Inasmuch as Skilling sold 2.5 more shares of Enron stock on September 17 than he was contemplating selling on September 6, it is certainly reasonable that Skilling could have simply forgotten about his September 6 conversation with the broker, particularly given that he was asked about it during the SEC examination at the end of a long day.

So, there you have it. Is that a record that even comes close to being enough to throw a talented and tortured man behind bars for most of the rest of his life? Not in a truly civil society. The truth is that Enron was simply a highly-leveraged, trust-based business with a relatively low credit rating and a booming trading operation that got caught in a liquidity crunch when the markets became spooked by revelations about Fastow embezzling millions in the volatile months after September 11, 2001.

Fastow's embezzlement is a crime, but Enron's unfortunate demise is not, nor should it be. Beyond the shattered lives and families, the real tragedy here is that the angry anti-Enron mob convicted Jeff Skilling, trumping the rule of law and the dispassionate administration of justice along the way. The truth is that none of us would be able to survive "in the winds that blow" from the exercise of the government's overwhelming prosecutorial power in response to the demands of the mob. Here's hoping that Skilling's unjust conviction and sentence are reversed on appeal. Not only for his benefit, but for ours.

Posted by Tom at 4:49 AM | Comments (12) |

A silver lining in David Carr's cloud?

Let's just say it's been a bad week for Texans QB David Carr. First, he was horrible in the Texans' win over the Raiders last Sunday, registering -5 passing yards. The local media has been all over him. To make matters worse, former University of Texas National Championship hero Vince Young -- who thousands of UT fans thought the Texans should have drafted earlier this year -- is returning to Houston on Sunday with his professional team, the Tennessee Titans. There is little question that Young will be more warmly received by the fans at Reliant Stadium than Carr.

Amidst this stressful week, the folks over at Wages of Wins have updated their weekly NFL quarterback ratings covering last Sunday's games, which provides some solace for the beleaguered Texans' QB -- he wasn't the worst QB in the league last Sunday!:

The Worst Performance, Times Three

Back in week six Rex Grossman of the Chicago Bears posted a QB Score per play of -7.12. Up until week 13 this was the worst performance by an NFL quarterback in 2006. The Bears defense apparently wished to take Grossman off the record books, forcing Brad Johnson of the Vikings into a QB Score per play of -7.28 in week thirteen.

Johnson’s performance, though, was not the worst performance of the week. David Carr of the Houston Texans finished his game on Sunday with 32 yards passing, 5 yards rushing, and 37 yards lost from sacks. In sum, Carr had zero yards at the end of the game. With a QB Score per play of -7.55, Carr was ranked even lower than Johnson.

Grossman, though, was not going to relinquish his crown of worst quarterback so easily. Grossman accumulated only 15 yards. Coupled with three turnovers, Grossman had a QB Score per play of -8.63. So despite a determined effort by Carr and Johnson, Grossman finished week thirteen where he started. Grossman has still offered the worst performance by a signal caller in the league this year.

By the way, although Carr ranks 9th in the league under the NFL's antiquated QB ratings, the Wages of Win's more credible QB rating puts Carr as 21st in the league, which sounds about right.

Posted by Tom at 4:26 AM | Comments (0) |

Badger nonsense

This article is dispositive proof that the University of Wisconsin attorneys -- as with some Congressional investigators -- do not have enough to do. University lawyers have demanded that Waukee High School, just outside Des Moines, Iowa, to stop using the "motion W" on the side of the school's football helmets. The university claims a trademark for the "motion W" and, thus, the high school must cease and desist from infringing on the university's intellectual property.

Beyond the utter absurdity that anyone would confuse a Des Moines high school football team with the Wisconsin Badgers, the Sports Law Professor is not impressed with the legal basis of the university's demand.

By the way, I hope Arkansas kicks Wisconsin's ass in the Cap One Bowl on New Year's Day.

Posted by Tom at 4:06 AM | Comments (2) |

December 7, 2006

The Poston Congressional hearings?

This previous post reported on the strange case of Houston-based lawyer and former sports agent, Carl Poston, who is currently serving a two-year suspension levied by the National Football League Players' Association from representing any NFL players. I thought the suspension pretty much ended that story, at least until coming across this ESPN.com article:

New York Giants linebacker LaVar Arrington is tentatively scheduled to testify before Congress this week at a hearing involving his former agent. Arrington, a three-time Pro Bowl player; NFL Players Association general counsel Richard Berthelsen; and a law professor were on a "tentative witness list" e-mailed to The Associated Press on Tuesday by House Judiciary Committee press secretary Terry Shawn. [ . . .]

The Subcommittee on Commercial and Administrative Law has scheduled an oversight hearing for Thursday to examine the NFL Players Association's arbitration process. Lawmakers will be looking into the NFLPA's suspension of Arrington's former agent, Carl Poston, stemming from his handling of a contract the linebacker signed with the Washington Redskins near the end of the 2003 season.

Now, I recognize that a post-election Congress is the Washington, D.C.-equivalent of professional golf's "silly season," where members of a lame duck Congress are passing time until the new Congress is sworn in early next year. But still, can't our elected officials find something more noteworthy on which to hold a Congressional hearing than a relatively small, not-very-well handled contractual matter between two private parties?

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

Priceless!

These previous posts passed along that the Aggies are having quite a bit of fun over their recent victory over the Texas Longhorns, and now it appears that fans of the Horns' other primal rival -- the Oklahoma Sooners -- are getting in on the act.

During the Big 12 Championship game between the Sooners and Nebraska in Kansas City last weekend -- which the Sooners were playing in only because of the Aggies' upset win over the Horns -- several OU fans were spotted by the television cameras holding up three sequential signs that read as follows:

"Cost of tickets to the Big 12 championship football game . . . $350"

"Cost of hotel rooms to attend the Big 12 championship football game . . . $700"

"Cost of taking Texas' tickets and hotel rooms . . . PRICELESS!"

Posted by Tom at 4:22 AM | Comments (0) |

C.T.'s Time profile

I have to admit that it's not every day that an old buddy of mine is profiled in Time:

There are two paths to music immortality: the Prince route and the Patty and Mildred Hill route. In the Prince model, you write a piece of music that people love so much, they seek it out, download it and turn up the radio whenever it comes on. The Hill sisters model is trickier; they composed the melody for Happy Birthday to You. They achieved their fame by writing a tune that people don't listen to so much as sing.

Chris Tomlin belongs in the second camp. People sing his songs a lot, often repeatedly. Specifically, they sing them in church. According to Christian Copyright Licensing International (CCLI), an organization that licenses music to churches, Tomlin, 34, is the most often sung contemporary artist in U.S. congregations every week. Since glee clubs have fallen out of popularity, that might make Tomlin the most often sung artist anywhere.

Chris started his ministry at my family's church in The Woodlands when he was freshly graduated from Texas A&M University, and we hit it off immediately. He has sinced moved on to base his ministry in a church comprised of mostly students and young couples in Austin, but we stay in touch as his career continues to flourish. The success that Chris is experiencing could not happen to a nicer fellow and is a testament to his grace and humility. But he still does lose control on the golf course at times. I'm helping him work on that. ;^)

Posted by Tom at 4:13 AM | Comments (1) |

December 6, 2006

Executive compensation is actually too low?

Larry Ribstein has been waging a lonely fight (examples here and here) against the politicians and media pundits who think that executives make too much money because . . well, . let's see, . . because some of them make a lot of money. Or some logic similar to that.

At any rate, Dominic Basulto -- who is the editor of the Fortune Business Innovation Insider -- observes in this American.com op-ed that the conventional logic on executive pay actually has it backwards. Most executives are underpaid:

In fact, there’s strong evidence that, far from being paid too much, many CEOs are paid too little. Not only do the top managers of multibillion-dollar corporations earn less than basketball players (LeBron James of the Cleveland Cavaliers makes $26 million), they are also outpaced in compensation by financial impresarios at hedge funds, private equity firms, and investment banks. Should we care? Yes. If other positions pay far more, then the best and the brightest minds will be drawn away from running major businesses to pursuits that may not be as socially useful—if not to the basketball court, then to money management.

Read the entire piece. I wonder what Gretchen Morgenson will say?

Posted by Tom at 4:55 AM | Comments (3) |

Are you ready to rumble?

What's the old saying about hockey fans went to see a fight and a hockey match broke out?

Well, as Gary Gaffney reports, when the University of Iowa and Iowa State University wrestling squads got it on over the past weekend, 13,700 screaming Iowans showed up and the respective coaches -- including Iowa's legendary former head coach, Dan Gable -- almost got it on, too.

Even though the other coaches involved are quite a bit younger than Gable and -- like Gable -- former Olympic wrestlers, don't bet against Gable in a fracas.

Posted by Tom at 4:46 AM | Comments (1) |

The penultimate Oddsmakers Top 25

Previous posts here and here reported on the Oddsmakers Top 25 Football Poll, a poll developed by Las Vegas Sports Consultants based on the company's profit motive-driven incentive to provide their sports betting customers the most accurate rating of college football teams. The following is LVSC's final Oddsmaker's Top 25, with the BCS ranking in parenthesis:

1. Ohio State (1)
2. Michigan (3)
3. Florida (2)
4. Southern Cal (5)
5. LSU (4)
6. Louisville (6)
7. Oklahoma (10)
8. Texas (19)
9. Notre Dame (11)
10. Wisconsin (7)
11t. West Virginia (13)
11t. California (18)
13. BYU (20)
14. Virginia Tech (15)
15. Arkansas (12)
16t. Boise State (8)
16t. South Carolina (NR)
18. Tennessee (17)
19t. Nebraska (23)
19t. UCLA (25)
21. TCU (NR)
22. Rutgers (16)
23t. Oregon (NR)
23t. Clemson (NR)
23t. Arizona State (NR)

Unranked by Vegas: Auburn (ninth in BCS), Wake Forest (14th), Texas A&M (21st), Oregon State (22nd), Boston College (24th)

In addition to picking Michigan rather than Florida as the proper opponent for Ohio State in the BCS National Championship Game, the Oddsmakers Top 25 raises a couple of interesting issues.

First, the credibility of the Vegas-based poll versus the BCS poll will have a lot riding on the Oklahoma-Boise State matchup in the Fiesta Bowl. The Oddsmakers Poll has Oklahoma 7th and Boise State 16th, while the BCS has Boise 8th and Oklahoma 10th. The initial line has the Sooners favored by a touchdown. My sense is that the Oddsmakers Poll has these two teams more accurtely aligned -- Oklahoma and a bunch of other teams in the Top 25 would probably have gone unbeaten if they had played Boise's schedule.

Despite LSU's two early-season losses, the Oddsmakers Poll is looking prescient for not giving up on the Tigers. The first BCS Poll had LSU 18th while the Oddsmakers Poll had the Tigers fifth. This week, the Oddsmakers Poll still has LSU at fifth while the BCS has the Tigers fourth.

I say ditch the BCS rating system and let the purity of the profit-driven Oddsmakers Top 25 determine the rankings for the BCS bowl games. It's all about the money anyway, isn't it?

Posted by Tom at 4:23 AM | Comments (1) |

December 5, 2006

The Bobby Maxwell Lawsuit

This NY Sunday Times article reports on the lawsuit of former federal government oil and gas auditor Bobby L. Maxwell, who is suing Kerr-McGee Corporation in Denver federal court for underpayment of oil and gas royalties to the federal government on oil and gas wells producing on federal lands. Under an obscure federal statute that rewards private citizens who expose fraud against the government, Maxwell and his counsel stand to recover as much as $15 million if they ring the bell in the lawsuit, which is scheduled for trial on January 16.

Although I know nothing about the particulars of the Maxwell case other than what is reported in the article, underpayment of oil and gas royalties is not uncommon. Indeed, when I am retained by royalty owners in a reorganization case of an oil and gas company, my standard advice is for the royalty owners to hire an experienced oil and gas auditor to conduct at least a review of the debtor's royalty payments. When an oil and gas company starts having financial problems, scrimping on royalty payments is not an unusual occurrence.

Posted by Tom at 4:35 AM | Comments (1) |

Controversial Justice

Longtime Eastern District of Texas U.S. District Judge William Wayne Justice has long been one of most controversial federal judges and, thus, one of the best-known in Texas. The 86-year old Judge Justice was recently back in the news as the first honoree of the Morris Dees Justice Award, named for the famed Alabama civil rights lawyer, which prompted this profile from the Chronicle's Janet Elliott.

Judge Justice is the quintessential activist federal judge, so he is not the most popular fellow in all quarters. Maybe he should have been in the legislature, but it's hard not to admire a judge who at 86-years of age still handles a full court docket and chooses to be activist in cases that promote desegregation in education, equal educational opportunity and prison reform. The legislature has never done a particularly good job of dealing with those issues, anyway.

Posted by Tom at 4:16 AM | Comments (1) |

Keep those buses handy

Wendell Cox reports on a little problem that occurred in St. Louis recently that ought (but probably won't) give the Houston Metropolitan Transit Authority pause:

Buses Replace Light Rail in St. Louis

A large ice storm hit the St. Louis area last night and power is out to nearly one-half of the area. The area’s light rail line, Metrolink, has suspended service for much of its alignment and is providing substitute bus service.

Meanwhile, there appears to be no instance of light rail providing replacement for buses anywhere in the metropolitan area --- for that matter probably never in history, anywhere. Another demonstration of the flexibility of urban rail.

The enormous cost relative to usage and inflexibility of most rail systems reminds me of something that Peter Gordon observed awhile back about the political forces that support these boondoggles. Some are disingenous promoters seeking to profit from the rail lines, some pose as high-minded environmentalists and many are simply ignorant of the inefficiency and inflexibility of such systems. As Professor Gordon wryly points out:

"It adds up to a winning coalition."

By the way, Anne Linehan over at blogHouston.net continues to follow another cost of the Houston light rail system that Metro doesn't much like talking about.

Posted by Tom at 4:12 AM | Comments (0) |

December 4, 2006

What's going on at Ford?

While most of the auto industry news of late has been the hubbub over Kirk Kerkorkian bailing out on his investment in General Motors, my sense is that the more interesting (or pathetic) snippet is this one reporting that Ford Motor Company fell in November to fourth place in vehicle sales for the first time in history. Ford sold 10% fewer vehicles last month than it did a year earlier.

Meanwhile, Ford management is pursuing a restructuring plan in which the company is raising $18 billion secured by essentially all of the company's assets in order to spend about $17 billion in an effort to stem Ford's current annual revenue loss of close to $10 billion a year. About 38,000 employees -- over 10% of the company's work force -- have resigned and accepted a buyout offer from the company. Thus, the new creditors are placing a rather large bet that Ford will be able to service the new mountain of new debt with expected profits from new products generated by a knockoff strategy similar to the one that the Japanese automakers used to make inroads in the US market during the 1970's (Ford's new products are expected to emulate the Lexus brand).

My impression of all this is to question what these people are smoking.

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

The BCS muddle

The Washington Post's Sally Jenkins is the daughter of my all-time favorite sportswriter, Dan Jenkins, and an insightful sportswriter in her own right. In this column, she eviscerates the Bowl Championship Series and everything it stands for in classic Jenkins family style:

Try to find some legitimacy in the Bowl Championship Series. Go ahead, try. Exert all of your ability, industry and intelligence toward the task. You can't do it. The fact of the matter is that the treasure called the college football postseason has become buried beneath corporate scams. All you need to know is that the Fiesta Bowl has a CEO. His name is John Junker, and when he testified before the House Committee on Energy and Commerce last year in defense of the BCS, he actually called the bowl games "independent business units" and referred to universities as "customers."

When a sports organization is more concerned with revenue distribution than with fair competition, it is asking for problems.

The BCS system is the natural outgrowth of corrupt big-time college athletics, a subject examined in previous posts here, here, here, here and here. The good news is that the market forces of big-time college athletics are pushing the system toward change as the relative few universities that make money off of their football and basketball programs likely will likely gravitate in a few years into a collection of "super conferences" similar to the divisions of the National Football League and the National Basketball Association. The bad news is that many of the traditional rivalries of college football and basketball will be lost in the process.

Is the money worth that?

Posted by Tom at 4:21 AM | Comments (0) |

2006 Weekly local football review

Houston Cougars 34 Southern Miss 20

The Cougars (10-3, 8-1) won their first Conference USA football championship in ten years with a Friday night win over Southern Miss (8-5, 7-3) before a raucous crowd of 32,000 at Robertson Stadium on the UH campus (that's star RB/WR Anthony Alridge conducting the UH band during the post-game celebration). After a seesaw first half, the Coogs blew a chance of taking the halftime lead when time expired with UH at the Southern Miss two-yard line. But the Cougars regrouped and dominated the second half to pull out the win. The offensive stars were QB Kevin Kolb and WR Vincent Marshall, but the unsung heroes of the game were the UH defensive players, who limited Southern Miss to 122 yards total offense in the 2nd half. The Cougars will play Steve Spurrier's South Carolina (7-5,3-5) from the Southeastern Conference in the Liberty Bowl on Friday, December 29th at 3:30 pm on ESPN HD.

Texans 23 Raiders 14

In a game that set back offensive football to before the invention of the forward pass, the Texans (4-9) defense played well and forced five turnovers to pull out a win despite the fact that the Texans' offense managed only 122 yards total offense. The Raiders offense was horrifying, scoring just one TD while fumbling three times, missing three field goals, and allowing five sacks to go with two interceptions. Except for the turnovers, the Texans were worse as overwhelmed Texans QB David Carr finished 7-of-14 for 32 yards and did not complete a pass in the final 32 minutes. Inasmuch as Carr was sacked five times for 37 yards, the Texans finished the game -5 yards passing, which is not going to do much for Carr's QB rating.

Despite Carr's abysmal showing, the primary problem with passing game continues to be the complete breakdown of the Texans' pass protection. Neither of the Texans offensive tackles were even slowing down the Raiders' defensive ends as they rushed Carr, so the Texans QBr barely had time to drop back, much less survey the field and throw a competent pass. The Texans play the suddenly hot Titans (5-7) next Sunday at Reliant Stadium in Vince Young Bowl II, and then visit New England the next weekend before ending the season at home against the Colts (10-2) and the Browns (4-8). Getting one win in those final four games is possible, but certainly not likely for a team as bad as the Texans. So, my pre-season prediction of six wins for the Texans is looking like a loser.

Rice is bowl bound

Finally, congratulations to the Rice Owls (7-5,5-2) as they accepted an invitation to play in their first bowl game since 1961, the R&L Carriers New Orleans Bowl at the Louisiana Superdome on Friday, Dec. 22 at 7 p.m. The Owls opponent will be Sunbelt Conference champ Troy (7-5, 6-1), which was blown out only once this season (56-0 at Nebraska) and played tough (losing 24-17) at Florida State early in the season (the Seminoles beat the Owls 55-7 two weeks later). The bowl game will be televised on ESPN2 HD.

By the way, most Houstonians (and most of the nation, for that matter) will not be able to watch Rutgers play Kansas State in the Texas Bowl at Reliant Stadium on the evening of December 28th or Texas Tech play Minnesota in the Insight Bowl on the evening of December 29th. Both games are being televised by the NFL Network, which -- as noted in these prior posts -- the NFL owners are withholding from most viewers who receive their television through cable companies. What holiday spirit those NFL owners have!

Posted by Tom at 4:10 AM | Comments (1) |

December 3, 2006

Why don't you tell us what you really think?

The NRO Corner's John Podhoretz in this NY Daily News op-ed makes clear that he is not buying into that whole "elder statesman" thing that the NY Times reported last week regarding James Baker, III's co-chairmanship of the Iraq Study Group:

As Dana Milbank reports in The Washington Post, on Monday the [Iraq Study Group's] "co-chairmen, James Baker and Lee Hamilton, found time . . . to pose for an Annie Leibovitz photo shoot for Men's Vogue."[. . .]

Baker, Hamilton and their crew of old Washington hands (and I mean old, like Metheuselah-level old) are recommending a "gradual pullback" of American troops but without a timetable. That basically translates into a nice, long, slow defeat - the "graceful exit" of which the president spoke so harshly.[. . .]

This is the consensus view of the Iraq Study Group, which is very proud that it reached consensus.

Its members also reached a consensus view that Depends is a really fine brand of adult diaper, and that they love reruns of "Murder, She Wrote."

You perhaps note that I am writing with extreme disrespect toward the Iraq Study Group. That's because its report is a scandal and an embarrassment; it's flatly immoral to seek to make or guide policy in this fashion.

Look, if its members believe the war is lost, they should say so. They should bite the bullet and advocate a pullout of American forces sooner rather than later.

If its members could not actually achieve consensus on that point - if, in other words, some of its members still believe the war can be won while others believe there's no way to achieve victory - then it was simple vanity on the part of the Gang of 10 that led to the creation of a "consensus" document that split the difference.

There's no way to split the difference, unless you're hurrying off to have your mug immortalized by Annie Leibovitz and want to bang down the gavel so you can get plenty of time to get hair and makeup done.

America and its allies are either going to win this war or we're going to lose. We will either conclude our military actions in Iraq with terrorists and insurgents dead or fled and an imposition of civil order in the country by its elected government, or we will turn tail and leave the place in chaos and ruins.

What's even more appalling, if true, is the group's other key recommendation - which is that America should try to find answers to its problems through an international conference that would include Syria and Iran.

What do Syria and Iran want more than anything else in the world? To see an American defeat in Iraq. To see an America so crippled that they can work their will in the Middle East without fear of retribution. Syria could swallow up Lebanon whole once again. Iran could do whatever it chooses inside and outside its borders (develop and peddle nuclear weaponry, sponsor terrorism against Israeli and Western targets) with impunity.

They're going to be a great help. But then, that's Baker for you. Give him a problem and he'll tell you your best hope of solving it can be found in sucking up to an Arab dictator.

Read the entire op-ed. The Chronicle's Anne Belli chimes in with a more respectful profile of Baker here.

Posted by Tom at 7:19 AM | Comments (0) |

December 2, 2006

Divided over powerful government

The late Milton Friedman commented recently that he had concluded that the best political make-up for the federal government was one that had the greatest likelihood to develop gridlock because of the damaging policies that the government enacts when one party or the other controls both the legislative and executive branches. In this TCS Daily op-ed, Arnold Kling of EconLog channels that thought:

The conventional wisdom is that we would be better off if politically powerful leaders were less mediocre. Instead, my view is that we would be better off if mediocre political leaders were less powerful. [. . .]

We have to expect mediocrity from political leaders. They are selected by a very unreliable process. In general, I try to avoid contact with narcissists who spend their time pleading for money. Those are hardly the intellectual and emotional characteristics that make someone admirable, yet they are the traits of people who go into politics. [. . .]

The libertarian view is that private institutions, both for-profit and non-profit, are better at problem-solving than government institutions. Regardless of whether political leadership is wise or mediocre, our goal should be to limit the damage that public officials can do. Do not demand that they "solve" health care, "fix" education, or launch a "Manhattan project" for energy independence. Even for experts, those are impossible tasks. The harder we press our existing leaders to address these issues, the more trouble they are going to cause.

The belief that the problem with government is the particular individuals in power is dangerous. The myth is that somewhere out there we could find great leaders who could use government to solve all of our problems. Instead, we need to be vigilant against the enlargement of government, by either mediocre or expert leaders.

Do not look upon the electoral process as a search for great leaders. At best, it gives us an opportunity for damage control.

Posted by Tom at 7:40 AM | Comments (3) |

December 1, 2006

Benny Hinn has a deal for you

The last time we checked in on televangelist Benny Hinn, he was having a snit with the Nigerian hosts for one of his crusades and fighting with the IRS. Recently, Hinn has been in the news again as the subject of this NBC Dateline piece regarding Hinn's rather lavish lifestyle and tastes that are, might we say, a tad alien to Christ's message of sacrificial atonement upon which his business, . . uh, I mean, "ministry" is based.

A $10-million, 7,000 sq. ft. home, $112,000 per month for a private jet, a couple of $80,000 cars, luxury hotel rooms that are 5,400 sq. ft. at $10,800 per night for a "layover." At least Hinn is generous with his tips, which totaled over $4,500 during a recent three-day period. A salary of half a million to a million dollars per year--plus book royalties. Business, . . . er, I mean the ministry is good, eh?

At any rate, Hinn has now decided that the lease payments for his corporate jet are a tad steep, so he wants to acquire a corporate jet, which he has already named "Dove One." Hinn is ramping up his money-raising machinery to pay for his new toy, and for a mere $1,000 "donation," here's what Hinn promises:

You will receive a beautiful art-quality model of Dove One for your desk or mantle as a constant reminder that you are a vital part of this last-days harvest for souls.

Your name will be placed prominently in a special area of Dove One where I study and pray during my travels, where I will also pray for you and your family as I go around the world preaching the Gospel. Everywhere I fly, your name will travel with me, millions of miles and for years to come, reminding me that you have made it possible for me to go and preach as God has called me to do.

What a deal! ;^)

Posted by Tom at 4:49 AM | Comments (1) |

The Delta Center becomes the Melta Center

Naming rights deals on stadiums and arenas are notoriously speculative ventures, and sometimes the naming itself becomes rather odd. Inasmuch as debtors in bankruptcy such as Delta Airlines don't normally renew naming rights deals, a nuclear waste company has bought the naming rights for what was formerly known as the Utah Jazz's Delta Center, prompting local wags to propose nicknames such as Glow Bowl, the Isotope, the ChernoBowl, the Tox Box, and the Melta Center.

Of course, the Times story can't report on this development without reminding us of Houston's naming rights fiasco:

Radioactivity is quite new to naming rights, unless you count the brief time before Minute Maid replaced Enron as the name of the Houston Astros’ ballpark.

By the way, this Forbes slideshow (related article here) reviews the ten largest naming rights deals, which is led by another Houston deal.

Posted by Tom at 4:19 AM | Comments (0) |

Ida Mae consoles the Horns after the A&M loss

After you get done playing a game of Teasip Bingo, take a moment to read this report on the Texas Longhorns' tough loss to the Texas Aggies by longtime Horns fan Ida Mae Crimpton, who writes regular reports on her beloved Horns from her perch in Elgin just east of Austin. Here's a part of what Ida Mae had to say about the Horns' most recent tough loss:

With Colt coming back off of his injury and since we were just playing the Aggies, no one really seriously thought that there was a possibility that we could lose. But when the game was finally over and we'd lost, a funny thing happened; Mack didn't seem to be too bothered. He went to midfield, shook coach Frangipani's hand and then led the team back to the locker room. Coach Chizik told Earl what happened next. Mack gave the guys a post game talk like he usually did but this one was different because of what he talked about. He told the guys not to worry too much about losing because there were other things more important than winning, like God, family, the Gross National Product, the danger posed by international communism, and erosion (which, if you stop to think about it, really is a problem in some areas of south Texas). Well, needless to say, there were more than one set of eyes rolling around that room as everybody tried to figure out what the heck the coach was talking about. Then, Mack told the whole team that they were invited to his house for cherry cheesecake and Frescas, which sent Sally into a panic when she heard about it because they didn't have any cherry cheesecake in the house and if the team did come over they'd just have to settle for Nabisco Honey Grahams with canned cake frosting (one of Mack's favorite snacks). But after Mack left, coach Chizik spoke to the team and told them that it probably wouldn't be a good night to drop by Mack's house and that maybe they could take a rain check.

Read the entire hilarious piece, and also Ida Mae's other priceless reports on the Horns' season, particularly this priceless report on the Horns' recent loss to Kansas State.

You gotta love football in Texas.

Posted by Tom at 4:13 AM | Comments (0) |

November 30, 2006

The Committee on Capital Markets Regulation Report

As expected, the report of the Committee on Capital Market Regulation issued today is calling for represents arguably the most high-profile effort to date to present in the public forum the case that excessive business regulation -- much of it an overreaction to the corporate scandals of the post-stock market bubble period earlier this decade -- is stifling public securities markets and causing the U.S. markets to lose business to foreign competitors. A copy of the 148-page report can be downloaded here.

Most notably, as Larry Ribstein explains in more detail here, the report suggests that the premium for listing on both United States and a foreign market for foreign companies has dropped dramatically since 2002. Shares of a foreign company are generally worth more if they are listed both on U.S. markets as well as their home markets because -- at least in theory -- investors will pay more for the stock due to the additional confidence provided under the United States regulatory system. The report finds that the cross-listing premium has declined for companies also listed in countries with sophisticated markets and less onerous corporate governance controls, such as Hong Kong, Japan, and England, and that the premium has remained steady or increased only in regard to companies cross-listing from countries with questionable controls, such as Italy, Brazil and Turkey. Thus, the clear implication is that the U.S. is losing its previous competitive edge in securities markets to countries with sophisticated securities markets and less onerous corporate governance regulations.

The committee is directed by Harvard law professor Hal Scott and is co-chaired by former White House adviser Glenn Hubbard, now dean of Columbia University's business school, and John Thornton, former president at Goldman Sachs Group Inc. and now chairman of the Brookings Institution. Treasury Secretary Henry Paulson is expected to welcome the report as he is already publicly advocating many of its recommendations and recently called for a broad re-examination of business regulations and laws.

The report's theme is that a change in regulatory philosophy is necessary to preserve the viability of U.S. securities markets. The revised philosophy is one based more on general principles than rules, similar to England's Financial Services Authority, which uses principles-based regulation and oversees all British financial firms, in comparison with the U.S.'s web of federal and state banking and securities regulators. The report recommends generally that the SEC act more like federal banking regulators and concentrate more on the underlying soundness of the financial markets and less on individual acts of wrongdoing "with less publicity surrounding enforcement actions," a clear jab at the public relations campaigns that prosecutors have mounted over the past several years to demonize businesspersons.

The report makes 32 specific recommendations, six or which pertain to easing the application of Section 404 of the Sarbanes-Oxley Act governing internal company-financial controls that are absurdly expensive for most businesses to implement. Other recommendations call for setting a higher bar for regulators or private litigants to sue outside auditors, independent directors and company employees, and also recommends that Congress cap auditors' liabilities.

Posted by Tom at 4:50 AM | Comments (0) |

Hugo Chavez's odd charitable venture

This OpinionJournal editorial reviews the rather odd arrangement under which Houston-based energy company Citgo -- which is controlled by the Socialist Venezuelan government of Hugo Chavez -- supplies home heating oil to former Democratic Congressman Joseph P. Kennedy, II's Citizens Energy Corporation at a 40% discount. The nonprofit Citizens passes the savings onto the poor and contends that it helps 400,000 homes in 16 states that would otherwise have trouble heating their homes.

The OpinionJournal piece scours Kennedy for playing nice with Chavez, but the article fails to mention the oddest aspect of this supposed charitable venture. The poorest of the U.S. citizens who will receive the discounted price on the home heating fuel that Citgo sells to Citizens are far wealthier than the poor people of Venezuela, four out of 10 of whom survive on $2 a day or less. How does it make sense for Chavez and Kennedy to sell oil at a 40% discount to people in the U.S. who are far richer than Chavez's constituents in Venezuela? Sort of sounds like taking from the poor to give to the not-as-poor to me.

By the way, as noted in this earlier post, don't worry too much about Chavez cutting off Venezuelan energy supplies to the U.S. We'll be just fine without them.

Posted by Tom at 4:29 AM | Comments (0) |

It's Texas high school football playoff time

The Texas High School Football Playoffs are taking place all across Texas right now, and there is no better way to get a good dose of Texas culture than to take in a game or two.

The video below is an example of what can happen in the Texas high school playoffs as Plano East mounts a furious comeback from a 42-17 deficit with 2:42 left in a 1994 playoff game against John Tyler High School. It's an incredible video, spiced by the absolutely hilarious commentary from a couple of good ol' boy announcers. Make sure you watch the entire video, though, because there is a surprise ending.

By the way, the town of Refugio (see name on the jersey in the picture above) is pronounced "Ruh-fur-rio" in Texas.

Posted by Tom at 4:10 AM | Comments (3) |

November 29, 2006

Teasip Bingo!

Football during autumn is an indelible part of Texas culture, and the University of Texas Longhorns tend to dominate the state's college football scene, particularly coming off of a national championship season.

So, when the Texas Aggies rise up and achieve one of their relatively rare wins over the Horns, the Aggies really enjoy it. This year, the Aggies have developed the Teasip Bingo game below (pdf here) in which "each time a 'friend' throws out one of those ridiculous excuses for A&M's victory over UT in Austin, mark it off your list. Get the most marks and you can say Teasip Bingo!"

We play hard down there in Texas.

Posted by Tom at 4:43 AM | Comments (2) |

Epstein on the deferred adjudication racket

Richard A. Epstein of the University of Chicago and the Hoover Institution authors this WSJ ($) op-ed that takes up a common topic on this blog over the past couple of years (see also here) -- the improper use of deferred prosecution agreements by prosecutors to blackmail companies into agreeing to absurd fines and "corrective" measures to avoid a deabilitating indictment. Professor Epstein notes one particularly egregious such arrangement:

In one such notable agreement, the U.S. attorney for New Jersey, Christopher J. Christie, put the screws to Bristol-Myers Squibb, which got into hot water because of a potential securities violation for inflating its quarterly earnings by a business practice known as channel stuffing. BMS told its distributors that they had to take into inventory large amounts of BMS products immediately, with the understanding that down the road they could return the excess for a refund. The alleged securities violation arises from the overstated earnings quarterly reports, without indication of any expected future write-offs.

The na�ve reader might think that a DPA should prohibit the firm from engaging in future conduct of the sort that got it into hot water in the first place. But Mr. Christie had larger ambitions. The most striking evidence of the abuse of power is paragraph 20 of the agreement, which requires BMS to "endow a chair at Seton Hall University School of Law," Mr. Christie's alma mater, for teaching business ethics, a course that he himself could stand to take.

And Professor Epstein understands precisely what needs to be done to correct this prosecutorial misconduct:

[T]he Department of Justice should engage in unilateral disarmament by disavowing the odious Thompson memo, and rethinking why it ever needs to threaten the nuclear option of a corporate indictment. For its part, our new Congress should repeal by statute the doctrines of vicarious liability for criminal conduct in a corporate context -- because these give the government unwarranted and arbitrary power over corporations.

At bottom, corporations are just individuals tied together by an elaborate network of contracts; and we don't need yet another sorry reminder of how mindless government policies harm the innocent shareholders whom they are supposed to protect. The government has a vital role in criminal enforcement. So let it go after real, i.e., human, criminals the old-fashioned way, by careful investigation and skilled prosecution.

Epstein makes his point without even mentioning the Enron Task Force's irresponsible destruction of wealth in connection with prosecuting Arthur Andersen out of business. As Geoffrey Manne asked awhile back -- Where's the outage?

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

NFL Network draws a big yawn

This earlier post noted that the dispute between the fledgling NFL Network and various cable companies has kept the network off of most the nation's homes that are wired for cable or satellite television.

Now, this NY Times article indicates that the inability to see the NFL Network's first game on Thanksgiving Day evening was met with a huge collective yawn by viewers.

As noted in the earlier post, the Los Angeles area gets along just fine without its own NFL team. This WSJ ($) article notes that that there is a buyer's market for advertising time to this year's Super Bowl. There is no need for regulatory action in regard to the NFL Network's petulant stance with the cable companies. Just let the markets give the NFL owners the message that there are other things to do on weekends and holidays than watch NFL games.

Posted by Tom at 4:08 AM | Comments (0) |

November 28, 2006

More Friedman anecdotes

The fine remembrances of the late Milton Friedman continue unabated.

In this post, Professor Friedman's son, David Friedman, explains how Time Magazine came to misquote Professor Friedman's comment that “We are all Keynesians now.”

Then, in this WSJ ($) letter to the editor, Professor Marina v.N. Whitman of the University of Michigan passes along a fun story about cocktail party chatter with Mr. Friedman:

Nearly 30 years ago, my husband and I were guests at a dinner party . . . Among the other guests were Milton Friedman and his wife, Rose. Milton was having a fine time baiting the wife of the dean of the Business School, a feminist whose conviction was unleavened by any sense of humor, by proclaiming the foolishness of affirmative action.

"If businesses are forced to hire and train young women, many of whom will leave for marriage and family," he proclaimed, "they should at least be allowed to discriminate in favor of homely women, whose opportunities for marriage are below average." As the dean's wife reddened with fury, I leaned over and said softly, "Thank you, Milton. I've always wondered what accounted for my professional success. Now I know." Milton, always the courtly gentleman where women were concerned, was speechless.

By the way, Professor Friedman's class television show -- Free to Choose -- can be viewed here.

Posted by Tom at 4:45 AM | Comments (0) |

Chizik leaves Austin for Ames

Let me see if I've got this straight.

Iowa State University has hired former University of Texas defensive coordinator, Gene Chizik, as its new head football coach to replace my old friend Dan McCarney, who resigned under pressure a couple of weeks ago despite being the most successful coach in Cyclone football history.

Chizik is essentially the same age as McCarney was when ISU hired him in 1995. Moreover, Chizik's background is basically the same as McCarney's was at the time that ISU hired him, except that McCarney had far superior experience to Chizik in the Midwestern recruiting areas that are key to the ISU program.

Chizik’s deal is worth a guaranteed $6.75 million over six years — with incentives that could increase that to as much as $10 million over those years — while McCarney's contract was worth about $4.4 million, but only $780,000 guaranteed, through 2010.

More notably, however, is that ISU is guaranteeing Chizik $1.5 million annual budget for compensating his assistant coaches, which is one of the highest of such budgets among Big 12 Conference members. On the other hand, McCarney constantly requested ISU throughout his 12-year tenure for a budget sufficient to pay for the best assistants available on the market, but he was continually rebuffed by ISU's athletic administration. As a result, McCarney's budget for paying his assistants was in the lower tier of such budgets among Big 12 Conference members.

My question is this — why didn't ISU simply increase McCarney's assistant coach compensation budget, and then avoid the extra money and risk involved in hiring Chizik? Maybe this all works out, but it sure looks to me as if ISU has taken a huge risk where a much smaller one would have been more likely to continue the most successful era in ISU football history.

By the way, UT's defense gave its two most uninspired defensive performances of Chizik's two seasons in Austin during losses to Kansas State and the Texas Aggies in its final two games of this season. Did Chizik's distraction with negotiating a deal with ISU have anything to do with that? Mark Wangrin of the San Antonio Express-News observes:

Chizik has been more careful in his choice of destinations. Now, though, with the shine off his reputation, he may not have much of a choice. He must decide whether to jump toward a more mediocre program or stay at least another year and try to rehabilitate his reputation as a defensive mind. He must prove this season hasn't exposed his thinking as only working when he has exceptional talent at safety. He must show he can adjust.

Posted by Tom at 4:34 AM | Comments (2) |

Bainbridge Cubed!

A month or so ago, Clear Thinkers favorite Stephen Bainbridge took some time off from blogging while revamping his blog site.

Now, he's back. And he's tripled!:

Professor Bainbridge's Business Associations Blog

Professor Bainbridge's Journal (Politics, Religion, Culture, Photography, and Dogs)

Professor Bainbridge on Wine

Posted by Tom at 4:16 AM | Comments (0) |

November 27, 2006

The UH Memorial Service for Ross M. Lence

In a fitting tribute on the final day of classes for the fall semester, the University of Houston will host a memorial service for its late and beloved Professor, Ross M. Lence, at 1:30 p.m., this Friday, December 1 in the AD Bruce Religion Center on the UH campus. Dr. Lence died this past July after a year-long battle with pancreatic cancer.

UH Honors College Dean Ted Estess and several of Ross' colleagues, former students and friends (including me) will give short remembrances of Ross during the service, which will also include music performed by Honors College students. A reception will follow the service at the Commons of the the Honors College, which is a short walk from the Religion Center. Later that day at 7 p.m., the University of Houston football team will play Southern Mississippi in the Conference USA Championship game at Robertson Stadium on the UH campus, a game that Dr. Lence would not have missed.

Ross Lence was one of the most gifted teachers of our time and a selfless mentor to hundreds of students and colleagues. If you were touched by Ross or simply want to pay tribute to a treasure of our community, then come by the service and reception on Friday afternoon. You will be inspired.

Posted by Tom at 4:45 AM | Comments (0) |

Houston's Mr. Fix-It returns to Washington

This NY Sunday Times article reviews Former White House Chief of Staff, Secretary of State and Secretary of Treasury James Baker, III co-chairmanship of the Iraq Study Group, which is currently scheduled to deliver its report to the President by mid-December. Mr. Baker, who spends most of his time these days at the Baker Institute at Houston's Rice University, is described in the article as wanting the chairmanship of the Iraq Group to be the template for his role as an elder statesman in the coming years:

Now, at 76, Mr. Baker is in high diplomat mode, on a mission, friends and supporters say, to aid his country and his president — and, while he is at it, seal his legacy in the realm of statesmen, a sphere he cares about far more than politics.

“I think he’d like to be remembered as a 21st-century Disraeli,” said Leon Panetta, a Democratic member of the group, referring to the 19th-century British statesman and prime minister. “I think deep down he is someone who believes that his diplomatic career, in many ways, helped change the world.”

Read the entire article.

Posted by Tom at 4:26 AM | Comments (0) |

2006 Weekly local football review

Texas Aggies 12 Texas Longhorns 7

In the signature moment of Dennis Franchione's mostly rocky tenure at A&M, the Aggies (9-3, 5-3) rode a magnificent defensive performance and an already legendary 16-play, almost 9 minute, 88-yard fourth quarter TD drive to hand the Longhorns (9-3, 6-2) a BCS bowl-bashing loss. The Aggies surprisingly battered the Horns nation-leading run defense with almost 250 yards rushing, while the Aggie defense gave up only about 160 yards after the Horns came up empty on their initial 75 yard drive to open the game. Horns QB Colt McCoy did not look sharp coming off his injury in the Horns' previous loss to KSU, and Horns coach Mack Brown's decision to go with McCoy in the game re-triggered discussion of Brown's often dubious QB decisions during the pre-Vince Young era. Both the Ags and the Horns will be going to top-flight bowl games, but it won't be determined which ones until after the Oklahoma-Nebraska Big 12 championship game next week.

Rice 31 SMU 27

Placing an exclamation point on the one of the best stories of the college football season, the Owls (7-5,6-2) pulled out another come-from-behind win to qualify for a post-season bowl game for the first time since the 1961 season. The win was particularly impressive given that the Owls played without star QB Chase Clement, who sat out the game (except for one pass) with an injury. The win also prompted the Chronicle to notice the Owls by finally giving them a headline and a couple of well-deserved front page stories. Heck, the Chronicle even ran a story on another remarkable story that it has ignored for most of the season, Houston RB/WR Anthony Alridge. Better late than never, I guess. The Owls now wait a week or so for their bowl assignment, which quite likely will be in Ft. Worth.

Jets 26 Texans 11

In a game that was unwatchable, the Texans (3-8) rode the incessant mediocrity of QB David Carr to yet another loss in the weak portion of their schedule. As usual, Carr -- who appears to be a very nice young man with almost no leadership skills whatsoever -- was 39 for 54 for 321 yards with a late TD, one interception, and four sacks, but that included a 19-of-24 performance for 162 yards in the final 8 minutes when the game was largely out of reach. That works out to around a 4.63 yards per pass (YPA), which is horrible and not close to a rate that is required to win consistently in the NFL. In this Weekend Journal article from over the weekend, Allen St. John explores YPA, a simple statistic that is a far better measure of a QB's true effectiveness than the NFL's arcane and misleading QB rating. Carr's YPA is pedestrian this season, as it has been for his entire career. Even more revealing, though, is that Carr's offensive teammates simply do not respond positively to Carr. It's time for the Texans to make the change at QB and let Carr attempt to create a productive NFL career for himself elsewhere. It is not going to happen here. The Texans go to Oakland next week to play the equally hapless Raiders (2-9) before returning home the following week to play Vince Young Bowl II against the Titans (4-7).

Posted by Tom at 4:06 AM | Comments (5) |

November 26, 2006

Does anyone have a radio?

Unless you are among the very small percentage of citizens who thinks that there are not enough National Football League games on television already, you may not have noticed that the NFL owners have started their own network to televise certain NFL games. And as if on cue, a dispute has arisen between two particularly distasteful business interests -- the NFL owners and some of the country's biggest television cable companies. The two sides are effectively playing a high-stakes game of chicken over whether the NFL Network is going to be available to a large part of the country.

The NFL reportedly left about a half-billion on the bargaining table in its last round of television-rights negotiations to reserve for the NFL Network eight late-season prime-time games featuring attractive teams with wide followings. The first took place on Thanksgiving night between the Kansas City Chiefs and the Denver Broncos, but it was available in less than half of the 90 million or so homes wired for cable or satellite.

Indeed, in an absolutely appropriate bit of fate, ailing Chiefs owner Lamar Hunt -- who has lobbied his fellow NFL owners for 37 years to put a Thanksgiving Day game in Kansas City -- had to listen to his Chiefs beat Denver on this past Thanksgiving Day night over the phone in his hospital bed. As with most NFL fans, Hunt was unable to view the game because the hospital he had been admitted to is not hooked into the NFL Network. So, his daughter held the phone near her television while he listened on the other end.

Cable operators such as Cablevision Systems Corp. and Time Warner Inc. are balking at carrying the network because the league wants to boost what it charges them each month to carry the network to a reported 70 cents per subscriber. The NFL currently charges those companies a the fee of about 20 cents per subsciber to carry its non-NFL Network games. Moreover, NFL owners are not only insisting on a high price for the NFL Network, but they are also pushing to have the network included as a part of each company's standard cable package, which doesn't charge subscribers premium fees to get the network. Cable companies are contending that customers who do not watch the NFL should not be required to foot the bill to indulge those who want those games.

The NFL owners are banking on cable company customers pitching such a fit that there companies will give in to the NFL owners' demands. On the other hand, some publicity-seeking politicians are already using the spat as a reason to attempt to extend the government's regulatory power over the "key" issue of whether a few NFL games will be televised. From my viewpoint, I hope the cable companies hold firm, the NFL owners put even more games on their little network and that market forces inform NFL owners what millions in the Los Angeles area have already discovered with regard to live NFL games -- that life without the NFL is not all that bad.

Posted by Tom at 7:36 AM | Comments (1) |

November 25, 2006

The Lee and Williams deals

The Stros jumped into the super-charged 2006 free agent market in a big way yesterday by signing former Brewers slugger Carlos Lee and, in a lesser deal, former Padres starter Woody Williams. Although there is always a certain amount of giddiness whenever the hometown club opens up the bank vault to attract a couple of star players who might propel the Stros back into the playoffs, the stark reality is that these two deals are highly risky and do little to solve the Stros' main problem.

The Lee contract is the bigger of the two deals by far, $100 million spread over 6 seasons with a no-trade clause for the first four, which makes Lee the highest-paid Stro player this side of Roger Clemens. Lee is a 30 year old, 6'2", 235 lbs Panamanian leftfielder who reached the majors in the White Sox organization at the age of 23 and basically showed little potential during his first three seasons. He had his first good season with Sox in 2002 as a 26 year old, hitting 17 RCAA/.359 OBA/.484 SLG/.843 OPS. After falling off some in 2003, Lee had his best season in the majors in 2004 when he hit 26/.366/.525/.891, including 31 taters. After falling off a bit again in 2005 when he was traded to the Brewers, Lee had another solid season in 2006 with the Brewers and the Rangers, hitting 24/.355/.540/.895, including 37 yaks. His career statistics over eight seasons are 78/.340/.495/.835 with 221 homers, although it should be noted that he has been substantially more productive during his past four seasons than he was in his first three.

Thus, although he becomes the highest-paid Stros hitter, Lee has been nowhere near as productive a hitter over his career as Stros 1B Lance Berkman (353/.420/.621/1.041). Perhaps Lee is a late-bloomer and will continue his productivity surge of the past four seasons over the next six seasons. However, Lee doesn't walk much, so there is a higher than normal risk that his on-base average will decline as he gets older, and he is neither fast nor a good fielder. Accordingly, the Stros bought high and long on a hitter who has been roughly 20% as productive as Berkman during his career to date. Maybe it works out, but nobody should be deluding themselves that the Stros got a steal.

The two-year, $12.5 million Williams deal is not as risky as the Lee deal, although any type of deal on a 40 year-old pitcher not named Clemens has to be viewed with at least one raised eyebrow. The good news is that Williams has been a consistently productive pitcher over his 14 year career, rarely magnificent but just as rarely bad. He has had only one really good season, from midway thought the 2001 season through midway through the 2002 season when he pitcher 32 RSAA/2.40 ERA, but he was shelved midway through the 2002 season with arm trouble. On the other hand, his only really bad season was in 2004 with the Padres (-19 RSAA/4.85 ERA), but he bounced back last season to post a respectable 9 RSAA/3.65 ERA, which was about the the same as Andy Pettitte posted last season with the Stros. Williams' career numbers are 41 RSAA/ 4.09 ERA.

So, the Stros clearly strengthen their club with these signings, but the question looms whether they overpaid for what they are likely to receive. I would have preferred J.D. Drew to Lee among free agent sluggers, but Lee is clearly more durable than Drew and there is that whole Scott Boras thing with regard to dealing with Drew. Williams appears to be a reasonable risk, but without Clemens and Pettitte, the Stros are still in need of several of their young pitchers to step up to fill out their starting rotation next season.

But more importantly, neither of these deals addresses the Stros' main problem, which is having unproductive hitters such as Taveras, Everett, Ausmus and Bidg last season in the Stros' everyday lineup. If Luke Scott can continue his productive hitting and takeover in right field, then the Stros could take care of one of those problems by repacing Taveras in centerfield with either Chris Burke or a hopefully rebounding Jason Lane. But even with that move, given the Stros' indulgence of Bidg's quest for 3,000 hits and Everett's superlative defense at short, something needs to be done to replace Ausmus at catcher or else the Stros will continue to have three far-below National League-average hitters in their everyday lineup. The Stros got to a World Series in 2005 with such a lineup, but it took one of the best pitching performances by three starting pitchers on one team in Major League Baseball history to accomplish that. Inasmuch as that is not likely to happen again, here's hoping that the Stros aren't finished dealing this off-season to plug at least another of those holes in their lineup.

Lee and Williams' career statistics are below.

A pdf of Lee's statistics is here and of Williams' statistics is here. The abbreviations for the hitting stats are defined here and the same for the pitching stats are here.

Posted by Tom at 7:25 AM | Comments (0) |

November 24, 2006

An NY Times snit fuels Gretchen Morgenson's nightmare

It's not every day that a newspaper editor's defense of one of the newspaper's star columnists ends up fueling the cause to expose the vacuity of the columnist's work.

As noted earlier here and here, Clear Thinkers favorite Larry Ribstein has written a series of posts over the past year or so in which he uses the weekly columns of NY Times business columnist Gretchen Morgenson as examples of the mainstream media's misrepresention and misinterpretion of business issues to further a generally anti-big wealth agenda. That anti-big wealth agenda was in full bloom during the Enron criminal trials, which I noted on several occasions, most recently here.

Well, along those same lines, the Wall Street Journal's Holman Jenkins recently wrote this column ($) (described here in length in an earlier Ribstein post) in which he exposes an interesting fact about this earlier Times story (Times Select-$) on a supposedly virtuous CEO who turned down stock options because his father told him "'don't ever feel that you are worth it.' I don't want him to say that to me again."

Turns out that Jenkins had been offered the story before it ended up in the Times, but passed on it when he discovered facts the largely undermined the excessive compensation slant that the Times ultimately put on the story -- the CEO owned a big stake in a privately held company and so didn't need the options as an incentive and the CEO's doting father was a former Tyco board member and mentor of Dennis Kozlowski who suffered as a result of Kozlowski's excesses in that case. Neither of those salient facts made it into the Times story, which was written by Morgenson, a fact that Jenkins didn't even mention in his column.

At any rate, it didn't take long for the Times long to spring to Morgenson's defense. In this WSJ letter to the editor ($) entitled "Misrepresented, Insulted and Belittled." Times executive editor Bill Keller lashes out at Jenkins:

Mr. Jenkins misrepresented my paper's reporting, casually insulted one of the best journalists in the business, denounced our editors for dereliction of duty, and, in conclusion, belittled the corporate structure that prevents the New York Times from being owned by a hedge fund.

The rest of Keller's letter is long on similar bombast but short on substance, a point that Professor Ribstein makes in this post disassembling Keller's letter. In a wonderful twist of fate, Professor Ribstein reveals at the end of his post that Keller's letter has actually had the effect of facilitating the cause of exposing Morgenson's agenda:

I confess that after seven months of Morgenson I was tempted to go onto other subjects. I've got articles and books to write, classes to teach, papers to grade. The blog basically comes out of my sleep time. So I have to make sure that what I write about has some sort of payoff (after all, I don't even sell ads). I was starting to wonder whether I should continue to cast my stones into the darkness.

But the NYT's editor's odd and completely unjustified attack on Jenkins (who, by the way, didn't even mention Morgenson by name in his column) convinced me that the problem here runs very deep. So I'm going to keep slogging.

Can someone please get Ms. Morgenson another stiff drink?

By the way, Keller's piece also contains a curious defense of the Times' anti-takeover mechanism that is contrary to Morgenson's usual position regarding shareholder supremacy. Keller contends that the family trust that controls a majority of the voting shares (but not a majority of the equity) is committed to serious journalism, while the majority owners (you know, which could be those devious and profit-fixated hedge funds) would not be. In other words, shareholder power is good for those bad companies that allow their executives to make too much money, but it is bad for news media companies, which have no such problems.

Got that?

Posted by Tom at 7:16 AM | Comments (0) |

November 23, 2006

Giving thanks to Milton Friedman's bookie

One of the underappreciated contributions of the late Milton Friedman is the impact of his market theories on the explosive development of derivative financial markets, particularly after the Nixon Administration abandoned in 1971 the fixed exchange rates that the Allies had established under the Bretton Woods Accords of 1944.

As Jim Johnston of the Heartland Institute notes here, Nixon Administration Treasury Secretary George Shultz -- a close friend of Professor Friedman's -- led the campaign to remove the fixed exchange rates. As the story goes, part of Secretary Schultz's motivation for removing the fixed exchange rates was Professor Friedman's disappointment that he could not place a bet against the British pound in the financial markets of the late 1960s. As we all know now, replacing regulation of fixed exchange rates by central bankers with markets for foreign exchange futures such as FOREX derivative contracts substantially improved the ability of business interests to hedge risk in currencies. Johnston explains:

Banks initially opposed the [Forex derivative] contracts, calling them the creation of Chicago "crapshooters." Later the banks used the FOREX contracts to hedge the tailored currency guarantees they sold to their customers. The move from regulation to markets was to pave the way for derivative contracts in heating oil, gasoline, crude oil, and natural gas in the order that they were deregulated.

The growth in financial and other derivatives, where speculators meet hedgers, continues even today. Indeed, so much so that the daily volume of trading exceeds trillions of dollars. It would not be unfair to say financial derivative trading is one of the largest institutions in the world.

Just think, it started out by being Milton Friedman's bookie.

Posted by Tom at 4:02 AM |

November 22, 2006

The story of the open road

As many of us get ready to hit the road over the holiday weekend, Ralph Bennett in this TCS Daily article provides an excellent overview of the birth of the nation's Interstate Highway System during the Eisenhower Administration. We tend to take the system for granted these days, but it is truly an engineering and economic marvel that is one of our many blessings for which we will give thanks this holiday weekend.

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

A dream golf round

Sounds as if Jack Kendall, who owns a couple of Lexus dealerships in the Houston area, had the round of a lifetime recently at Pebble Beach Golf Club:

Kendall, 63, . . . made Pebble Beach history when he became the first golfer, amateur or professional, to ace two holes in the same round on the first nine holes of the 86-year-old course. His holes-in-one came on the par-3 5th and 7th holes.

To put this accomplishment in perspective, many very good golfers go a lifetime without ever making a hole in one. To it twice in a round is almost unheard of. To do it twice in a round while playing one of the most revered golf courses in the US? Now, that's going to be rather difficult to top.

Posted by Tom at 7:24 AM | Comments (0) |

While the Weary case is dismissed, the SWAT danger continues

In the right move, Texans' offensive lineman Fred Weary's criminal case was dismissed yesterday by Harris County Court at Law Judge Pam Derbyshire, who commented from the bench that Weary did not use enough force against police officers during the Nov. 14 incident to justify either the charge or, presumably, being Tasered.

Meanwhile on the police overreaction front, this Pokerati series of posts chronicles the latest Dallas SWAT team "success" -- breaking into and destroying several of the city's underground poker rooms. Pokerati has firsthand accounts of Dallas SWAT teams swooping into the poker rooms, breaking windows, kicking down doors, and charging with assault weapons drawn into peaceful gatherings of "dangerous" Texas Hold 'Em enthusiasts. I'm sure everyone in the Metroplex is sleeping more restfully now that these evil card sharpies are behind bars.

As former Cato Institute policy analyst Radley Balko shows in this Cato study, small municipalities frequently misuse SWAT squads for routine police work, which has led to an increasing number of botched raids resulting in injury or even death to innocent citizens. The Dallas poker raids were only the most recent example of unnecessary and dangerous SWAT unit deployments; this earlier post reported on one in a Houston suburb. Police overreaction is dangerous enough when it occurs in the spur of the moment as in the Weary case. But the risk of innocent citizens being harmed goes off the charts when SWAT teams are unnecessarily deployed to break up peaceful gatherings of people engaging in harmless activities.

Posted by Tom at 6:31 AM | Comments (0) |

November 21, 2006

Is the Big 12 Conference really viable?

As noted earlier here, the Big 12 Conference was formed as a money grab rather than because of any meaningful allegiances between most of the conference members. And, as noted here, football programs of the institutions in the Big 12 North Division have a difficult time competing with their better-funded and located (at least in terms of attracting good football players) brethen in the Big 12 South Division.

Well, Mark Kiszla of the Denver Post has been noticing the same thing. In this column entitled Divided, Big 12 bound to fall, he observes that the Big 12 is a poorly-structured alliance of convenience based almost entirely on money. As such, Kiszla predicts that the conference is destined to fail:

A football conference divided cannot stand.

There's a feud in the Big 12 Conference between the North and South. It's a civil war in which nobody wins and Colorado too often loses.

This league - held together by little except greed and a championship game that's regularly as flat as a too-long-open can of Dr Pepper - is a clash of cultures as different as the Birkenstocks in Boulder and the ten-gallon hats of Texas.

In a conference in which the haves and have-nots are divided by geography, what has gone wrong? [. . .]

Can't we all get along here?

I'm afraid not.

For a league in which almost half the football teams have trouble putting up a good fight, there's way too much bad blood.

The Big 12 is a conference split by a Red River of tears, as the bullies from the south have won 13 of 16 games this season against the 98-pound weaklings from the northern plains.

Although the Big 12 boasts of three squads ranked among the top 25 (Longhorns, Sooners, Aggies), you again hear barely any noise from the north, other than the wind blowing through towns from Lawrence, Kan., to Ames, Iowa, as the Jayhawks and Cyclones get blown away by real football teams.

If something does not change, the Big 12 will be slowly ripped asunder, and I fear as the imbalance of power grows worse, the league as we know it will not exist 10 years down the road.

Just another example of the pressures arising from the increasing gap between the haves and the have-nots in big-time minor league -- er, I mean -- college football.

Posted by Tom at 4:28 AM | Comments (3) |

Does anyone take John Edwards seriously anymore?

As noted in this post from late 2004, a decent case can be made that former Democratic vice-presidential candidate was the difference in costing John Kerry the close 2004 Presidential election, particularly after his Benny Hinn imitation on the campaign trail.

But now as Edwards postures toward a run for the Democratic Party presidential nomination in 2008, he provided us an exhibition of hypocrisy that is brazen even by Washington, D.C. standards. On the same day that Edwards was bashing Wal-Mart on a conference call with labor leaders, an Edwards "aide" was requesting that the local Wal-Mart bump the former senator to the front of the line to get a Playstation 3 for his son. Reason's Jeff Taylor wryly observes:

The alternative to a Democratic presidential campaign marked by a downward spiral of Pythonseque depravation one-upsmanship might actually address issues like the federal entitlement explosion or comprehensive income tax reform, two areas where Republicans have failed miserably to advance any coherent solution. Should Edwards or Hillary Clinton or someone find away to talk about these things without class-warfare cant, they'll have a head start on the general election.

In any event, maybe the best thing for Wal-Mart to do is stop chortling and go ahead and give John Edwards a PS3 and a couple games. Throw in a flat-panel too. Maybe that way he'll reacquaint himself with American prosperity and abundance and be a better candidate for the experience.

Is Hillary Clinton even going to have any competition for the 2008 Democratic Party presidential nomination?

Posted by Tom at 4:06 AM | Comments (5) |

Piling on in the Slade case

This Chronicle article reports that the criminal case of former Texas Southern University president Priscilla Slade does not appear to be moving toward an amicable resolution:

The Harris County District Attorney's Office is investigating suspicions that former Texas Southern University President Priscilla Slade may have lied to the grand jury.

Prosecutor Donna Goode sought today to unseal Slade's grand jury testimony so that Slade's former assistant could review it for inconsistencies.

If conflicts are found, Slade could be charged with aggravated perjury.

Slade already faces an effective life prison sentence if convicted on felony charges of misapplication of fiduciary property, so why seek an additional ten years on an aggravated perjury charge? Slade attorney Mike DeGeurin suggests that the prosecution wants to use the grand jury testimony in preparing witnesses who would not otherwise have access to the secret testimony.

Meanwhile, Slade faces a possible February 16, 2007 trial date in what is shaping up to be one of the ugliest white collar criminal cases to take place in Harris County District Court in a long while.

Posted by Tom at 4:04 AM | Comments (1) |

November 20, 2006

Politics and the Evangelicals

This NY Times article reports on the how Ted Haggard's evangelical church dealt with the termination and succession issues in the large Colorado church that Haggard had started and had become identified with him. The article concludes that the church ultimately handled the termination and succession reasonably well, although it appears that warning signs regarding Haggard's behaviour went largely unheeded among church leaders before his public meltdown.

But the more interesting analysis of the current state of the Evangelical movement is contained in this Ben Witherington post, which includes these following observations regarding the dubious political allegiance between Evangelicals and certain elements of the Republican Party:

[T]he alliance between Evangelicals and the hard line conservatives in the Republican party has made it difficult for many Evangelicals to see the difference in our time between being a Christian and being an American, and in particular being a certain kind of an American—namely a Republican. The problem is that this reflects a certain kind of mental ghettoizing of the Gospel, a blunting of its prophetic voice on issues ranging from war to poverty, and sometimes this even comes with the not so subtle suggestion that to be un-American (defined as being opposed to certain key Republican credo items) is to be un-Christian. But Christianity must and does transcend any particular cultural expression of itself, otherwise we have the cultural captivity of the Gospel which leads to a form of idolatry. It is one thing to sing ‘my country tis of Thee’, its another thing to have a bunker mentality which makes our countries ills hard to define and our flaws even harder to critique and correct. [. . .]

Christians should never be making their major decisions in life chiefly based on fear or a desire for revenge, or both. Nor should we support politicians who do so, whether they go to church or not. They are part of the problem, not part of the solution. If the question is WWJD, for sure its not what we’ve been mostly doing as a nation in the last six years.

So its time to wake up and smell the coffee. Does it smell like the aroma of Christ and his Gospel, or does it smell like dirt, like grounds, like mud? I hope someone out there in the Evangelical Church is listening. We need a whole new approach to ethics and ministry in the years to come in the 21rst century. It's time for a year of Jubilee. It's time to mend fences with our neighbors and the neutral. It's time to stop sticking sticks in hornet’s nests and wondering why we keep getting stung. May God help us overcome our American and Evangelical myopia.

Read Dr. Witherington's entire post. It's well worth it.

Posted by Tom at 4:54 AM | Comments (0) |

Liberty and Justice for all?

The chronically overcrowded and abysmal condition of the Harris County Jail has been a frequent topic on this blog (most recently here), so this Bill Murphy/Houston Chronicle article from over the weekend caught my eye because it concerned the changing views of one of the formerly toughest sentencing judges in the Harris County District Courts:

State District Judge Michael McSpadden once believed that long sentences would deter drug sales and drug use.

But after more than two decades hearing felony cases in Harris County, the former prosecutor is calling on the governor and Legislature to reduce sentences for low-level drug possession.

"These minor offenses are now overwhelming every felony docket, and the courts necessarily spend less time on the more important, violent crimes," he recently wrote to Gov. Rick Perry.

Nearly twice as many defendants in Harris County were sent to state jails last year for possessing less than 1 gram of a drug than in Dallas, Tarrant and Bexar counties combined.

McSpadden recommended making delivering or possessing a small amount of drugs a Class A misdemeanor carrying no more than a year in county jail. [. . .]

The judge said the Houston Police Department and District Attorney's Office are clogging court dockets and causing crowding in the county jail and state jails by bringing so many drug-possession cases against those found with pipe residue or a sugar packet's worth of cocaine.

Scott Henson over at Grits for Breakfast recently touched on the overcrowding issue and the related waste of resources issue in connection with the arrest in the Houston area of Doug Supernaw, the Bryan-born Texas country and western music star, for possession of a roach clip with a small amount of marijuana. Scott also blogged a post on the McSpadden story, and he has compiled a valuable series of posts on why Texas prisons are overcrowded, what counties can do about it, and the particular reasons why the Harris County jails remain such a mess.

Meanwhile, Doug Berman over at the Sentencing Law and Policy blog posted this piece on this Fact Sheet from the National Council on Crime and Delinquency that compares United States incarceration rates with those of other countries around the world. The data does not reflect well on the U.S.:

The U.S. has less than 5% of the world’s population but over 23% of the world’s incarcerated people.

The U.S. incarcerates the largest number of people in the world.

Some individual US states imprison up to six times as many people as do nations of comparable population.

The incarceration rate in the U.S. is four times the world average.

Crime rates do not account for incarceration rates.

The U.S. imprisons the most women in the world.

Professor Berman observes: “And we are supposedly a country founded on freedom? We may talk the talk about liberty, but we certainly do not walk the walk in the way we approach and apply our criminal justice system.”

The overly-harsh and wasteful sentences handed down to businessmen such as Jamie Olis and Jeff Skilling tend to receive the most publicity, but the equally harsh sentences meted out in Texas and much of the rest of the US over minor drug offenses and the like is a national disgrace. As the late Milton Friedman observed in this letter to former drug czar Bill Bennett, we all should be "revolted . . . by the prospect of turning the United States into an armed camp, by the vision of jails filled with casual drug users and of an army of enforcers empowered to invade the liberty of citizens on slight evidence."

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

2006 Weekly local football review

Bills 24 Texans 21

Key note to first year Texans' coach Gary Kubiak -- the Texans (3-7) are not yet good enough to put the offense in a phone booth while trying to milk the clock with a narrow 4th quarter lead. It's pretty hard for the Texans to lose a game in which their generally anemic offense generates almost 400 yards, but giving up over 200 yards passing and two long TD passes to the eminently forgettable Bills QB J.P. Losman in the 1st quarter is a good way to start to do it. And then making only four first downs in the second half (the Bills had as many in the game-winning drive) and just one in the fourth quarter is the way to finish it off. By the way, does anyone else think that John McClain's entry into the world of blogging has actually improved his analysis of Texans football (blog post on yesterday's game is here)? The Texans go on the road the next two weeks to meet the Jets (5-5) and the Raiders (2-8) before returning home the following week to meet the Titans (3-7).

Houston Cougars 23 Memphis 20 OT

In another example of what can go wrong when a team quits taking measured risks with its offense while sitting on a 4th quarter lead, the Coogs (9-3, 7-2) survived a blocked field goal returned for a Memphis (1-10, 0-7) TD in the last two minutes to win the game in overtime. Houston has an extremely difficult offense to defend when they are clicking on all cylinders, but their defense is simply not good enough for the offense to play conservatively after building a lead. The Cougars now get Thanksgiving week off before hosting the C-USA championship game on Friday evening, December 1 against probably Southern Miss (6-4, 5-2).

Rice 18 East Carolina 17

The Owls (6-5, 5-2) continue to make me look prescient for my early season prediction that they were going to surprise quite a few people this season so long as they could avoid decimating injuries during their brutal early season schedule. This win was particularly impressive in that the Owls pulled it off after losing stellar QB Chase Clement over the final quarter and a half. If the Owls can get Clement back next week and beat SMU (6-5, 4-3) at home, then they will likely be C-USA's representative in the Ft. Worth Bowl, the Owls first bowl appearance in 45 years. First year Rice coach Todd Graham is the coach of the year in my book.

The Texas Longhorns and the Texas Aggies were off this week in preparation for their annual day-after-Thanksgiving showdown in Austin.

Posted by Tom at 4:11 AM | Comments (2) |

November 19, 2006

The Friedman influence

Several clever recent posts reflect the tremendous influence that Milton Friedman has had on economics and politics.

First, Larry Ribstein -- who doesn't touch on politics much but always provides keen insight when he does -- reflects Friedman's view on government interference in markets with this observation about the current political scene:

Senate Democrats, who need 60 votes to anything, have 51, and that includes some diverse agendas (e.g., Joe Lieberman). The House Speaker-to-be got thoroughly trampled by her own party on her first move. The WP quotes Jim Moran as threatening revenge on people who voted against Murtha (who, by the way, thinks ethics rules are "crap"). Meanwhile, the last time I checked, GWB was still President, a lame duck thinking about the history books.

In short, the U.S. government appears to be totally paralyzed for the next two years, incapable of doing much more than impotently holding hearings.

I guess the fact that the stock market has been setting records every day must be just a coincidence.

Meanwhile, the Wall Street Journal's ($) Washington Wire blog passes along this anecdote about Friedman from none other than John Kenneth Galbraith:

[A]t a lunch in Geneva in 1955, India’s statistician mentioned to [Galbraith] that the Indian government had asked several economists, including Milton Friedman, to visit and comment on Indian’s next five-year plan. [Galbraith] replied:

“Asking Milton Friedman to comment on a five year plan is like asking the Pope to comment on the running of a birth control clinic.”

Over at Cafe Hayek, Don Boudreaux recounts Professor Friedman's legendary debating skill:

Mr. Friedman also was a virtuoso debater. When, to endorse conscription over the volunteer military, Gen. William Westmorland said that he did not want to command "an army of mercenaries," Mr. Friedman piped up and asked, "General, would you rather command an army of slaves?"

Mr. Westmoreland replied, "I don't like to hear our patriotic draftees referred to as slaves." To which Mr. Friedman then retorted, "I don't like to hear our patriotic volunteers referred to as mercenaries. If they are mercenaries, then I, sir, am a mercenary professor, and you, sir, are a mercenary general; we are served by mercenary physicians, we use a mercenary lawyer, and we get our meat from a mercenary butcher."

Finally, Lawrence Summers does a fine job of placing Professor Friedman's impact on the worlds of economics and politics in perspective in this NY Sunday Times op-ed.

Posted by Tom at 7:39 AM | Comments (0) |

November 18, 2006

Bo Schembechler, R.I.P.

Former University of Michigan >Bo Schembechler -- one of the true characters in the storied history of Big Ten football -- died yesterday, adding another emotional element to today's big game between No. 2 Michigan and No. 1 Ohio State. Here is the Detroit Free Press coverage on Schembechler's life and death, including Schembechler biographer Mitch Albom's heartfelt tribute.

I never had the opportunity to meet Coach Schembechler, but I have long felt connected to him. Many of my friends in the coaching profession knew and enjoyed him, particularly how he loved to compete. Even though my family was from Iowa, we always suffered with Schembechler during Michigan's long drought in the Rose Bowl when it seemed as if the Pac-10 teams were always flying by Bo's Michigan teams. Although Schembechler was 12 years younger than my father, the two of them were both active and highly-motivated men who had heart attacks and by-pass surgery at a time when that surgery was still a somewhat iffy proposition. They both then returned to their respective professions and worked productively for many years, representing two good examples of the value of that surgical procedure. Schembechler even died in the same manner as my father, suddenly of a heart attack while enjoying what he loved to do. These were two men who were not about to let a little health problem interfere with enjoying the fullness of life.

Schembechler was also indirectly responsible for a funny story from my modest athletic career. Soon-to-be former Iowa State coach Dan McCarney and I were two of the better players on a championship high school football team in Iowa City in 1970, which was during a long drought in University of Iowa football fortunes that lasted from the early 1960's until Hayden Fry resurrected the Iowa program in 1979. Frank Lauterbur, a mostly forgettable figure who had just been hired as the new Iowa coach at the time, was recruiting McCarney, who was a much better college football prospect than me. However, because Mac and I were buddies, Lauterbur allowed me to tag along during Mac's recruitment, probably because he figured that Mac would be more likely to attend Iowa if I decided to walk-on as a non-scholarship player on the Hawkeye football team.

At any rate, one winter night at the home of Mac's family in Iowa City during early 1971, Lauterbur and two of his assistant coaches were talking to Mac and me on how they planned to turn around the struggling Iowa program. Iowa had just finished the 1970 season 3-6-1, including a 55-0 pasting at the hands of Bo's Michigan team in Ann Arbor. Lauterbur made clear to Mac and me that such disasters were no longer going to be allowed under his new regime:

"Sons," Lauterbur declared confidently. "I can assure you of one thing if you come to Iowa. Michigan is not going to beat Iowa by 55 points any longer!"

Lauterbur was right, although not in the way he meant. The next season, Bo's Michigan team beat Lauterbur's first Iowa team by 56 points, 63-7.

Posted by Tom at 8:02 AM | Comments (0) |

November 17, 2006

Kopper and Koenig step up to the plate

Two more former Enron executives who copped pleas will be sentenced this morning, former Andy Fastow confidant, Michael Kopper, and former Enron investor relations chief, Mark Koenig.

Both men will likely be presented today as paragons of virtue who simply had a lapse of judgment while embroiled in the corruption of Enron. The truth is far different, as explained in this earlier post about Kopper and this previous one about Koenig. Kopper is one of the relatively few real criminals in the entire Enron affair and should be receiving a sentence on par with that of Fastow, although that is unlikely to occur. On the other hand, Koenig is not a criminal and probably should be doing what Chris Calger is attempting to do, but that doesn't make his dubious testimony after copping a plea any less despicable.

Update: Kopper gets 3 years a month in prison and Koenig receives 18 months (Chronicle story here).

Posted by Tom at 5:36 AM | Comments (3) |

The Enron Task Force's next loss

This earlier post highlighted the Enron Task Force's extraordinary concession regarding the invalidity of four of five counts upon which the the conviction of former Enron Broadband executive Kevin Howard was based. As noted in that post, the Task Force made a half-hearted argument that the fifth count -- falsifying Enron's books and records -- should not be vacated, but this response from Howard exposes the vacuity of the Task Force's position:

The key principle here is that when the basis for the conviction cannot be determined by examining the verdict form, and a ground exists which cannot be legally support such a conviction, the conviction must be set aside. One just cannot guess that the jury chose a proper basis instead of the improper basis.

This has been the law for almost half a century: [. . .]

The consistent teaching of the cases cited by the Government is that when a reviewing court reverses a conspiracy conviction for legal error, a reversal is also required for an offense which is the object of the conspiracy unless the Government proves beyond a reasonable doubt that there was no Pinkerton connection -- that is, the defendant was convicted solely on his own direct conduct, and not because of the conduct of a co-conspirator acting in furtherance of the conspiracy.

The very heavy burden cannot be met by the Government . . . No impartial observer could find that Kevin Howard personally made any entry in the books and records of Enron Corporation, false or otherwise, or was responsible for any other person doing so. Most importantly, on this record, no reviewing court could find beyond a reasonable doubt that no co-conspirator from the common plan alleged in [the conspiracy to commit honest services wire fraud count] made such entry.

Howard's conviction is almost certain to be vacated, just as the convictions of the four Merrill Lynch executives were vacated in the Nigerian Barge case. The Task Force prosecuted the case against Howard in the same manner as the case against the Merrill Four -- assert an unwarranted expansion of a criminal law intended to punish kickbacks and bribes against defendants who did no such thing, and then blatantly appeal to the strong juror resentment (see also here) against anyone having anything to do with Enron to obtain a conviction.

Christine Hurt is currently working on a paper regarding the disparate burdens on civil and criminal defendants in business misconduct cases, and she notes here that many of the Enron Task Force prosecutors who promoted these failed prosecutions have gone on to lucrative careers in private practice. Professor Hurt observes that a defendant in a civil business misconduct lawsuit has protections against another party's vexatious litigation tactics, but those protections do not exist in a criminal business misconduct case against an unpopular and usually wealthy defendant. As a result, justice and the rule of law is easily compromised in such cases, and the damaged lives, ruined careers, and destroyed wealth that lie in the wake of the Enron Task Force is tangible evidence of the enormous cost of such spurious prosecutions. As Professor Hurt wryly asks, are the now-wealthy former Enron Task Force prosecutors going to be held responsible for that cost?

Posted by Tom at 4:22 AM | Comments (0) |

Maybe this will make the Longhorns feel better

As noted in this earlier post, Las Vegas Sports Consultants publishes their OddsMakers Top 25 each week in which they rank major college football teams based on injuries, performance, skill and game location, not on won-loss record and not on which teams will draw the greatest or least betting action (they leave that for the bookies). The poll is becoming quite popular with the betting markets and is currently published every Monday in the Las Vegas Review-Journal.

Inasmuch as this ranking is based on the profit motive (LVSC is attempting to attract betting customers through the accuracy of its research), my sense is that the OddsMakers Top 25 ends up being a more accurate ranking than the traditional polls, which tend to be plagued by the subjective bias of its voters. For your weekend football viewing pleasure, The following is this week's Oddsmakers Top 25 poll with the team record and BCS ranking in parentheses:

1. Ohio State (11-0, 1)
2t. LSU (8-2, 11)
2t. Southern Cal (8-1, 3)
4. Michigan (11-0, 2)
5. Texas (9-2, 13)
6. Notre Dame (9-1, 5)
7. Florida (9-1, 4)
8. Cal (8-2, 15)
9t. Louisville (8-1, 10)
9t. Oklahoma (8-2, 17)
11. Wisconsin (10-1, 9)
12. West Virginia (8-1, 8)
13t. Arkansas (9-1, 7)
13t. BYU (8-2, 25)
15. Oregon (7-3, 24)
16. Clemson (8-3, NR)
17. Rutgers (9-0, 6)
18. Nebraska (8-3, 23)
19t. Auburn (9-2, 14)
19t. Tennessee (7-3, 22)
21. Hawaii (8-2, NR)
22. Georgia Tech (8-2, 18)
23. Virginia Tech (8-2, 21)
24. Penn State (7-4, NR)
25. Boise State (10-0, 12)

Not ranked by Oddsmaker Top 25: Wake Forest (16th in BCS), Maryland (19th), Boston College (20th).

And in the college head coaching carousel, check out the YouTube video below by a Michigan State fan who is, might we say, quite supportive of LSU defensive coordinator Bo Pelini's candidacy for the MSU head coaching position:

Posted by Tom at 4:15 AM |

November 16, 2006

Milton Friedman, R.I.P.

I cannot improve on the brilliant simplicity of the lead sentence in the Wall Street Journal's article on the death earlier today of Milton Friedman:

Nobel prize winner Milton Friedman, one of the most influential economists of the last century, died today.

OpinionJournal chimes in with this fine tribute to Professor Friedman and the NY Times articles on Professor Friedman's death are here and here, the latter of which is by Austan Goolsbee, a University of Chicago economics professor. The Cato Institute also has posted this excellent online tribute to Professor Friedman from his 90th birthday, and the Hoover Institution's news release on his death is here. The Financial Times' excellent obituary is here, and Professor Friedman's student, Thomas Sowell, has a heartfelt tribute here.

Professor Friedman's writings are one of the primary reasons that I studied economics in undergraduate school and his wisdom and wit frequently blessed this blog over the past three years. Here are a few examples of Professor Friedman's remarkable ability to communicate complex principles with engaging simplicity:

On the progress of free markets in the world after World War II:

"After World War II, opinion was socialist while practice was free market; currently, opinion is free market while practice is heavily socialist. We have largely won the battle of ideas (though no such battle is ever won permanently); we have succeeded in stalling the progress of socialism, but we have not succeeded in reversing its course. We are still far from bringing practice into conformity with opinion."

On the fundamental problem with government spending:

"There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you're doing, and you try to get the most for your money.

Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I'm not so careful about the content of the present, but I'm very careful about the cost.

Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm sure going to have a good lunch!

Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it is, and I'm not concerned about what I get. And that's government. And that's close to 40% of our national income."

Answering a couple of questions on Social Security:

Q: If Social Security is such a terrible program, why is it the most popular government program in American history?

Friedman: "Well, because why does a Ponzi game work? It's easy to understand why it's popular. So far, on the average, retirees have gotten more out of the system than they put into it. "

Q: What about the fact that Social Security has reduced poverty among the elderly?

Friedman "Well, what it has done is transfer a lot of income from the young to the old. It is certainly true it has made the old people of the United States the best treated old people in the world."

Q: But why is that a bad thing?

Friedman: "Oh, it's not a bad thing for them, but what about the young?"

On rent controls and his influence in local political debates:

When Professor Friedman moved to San Francisco in the 1970's, the city was debating rent control. So he wrote a letter to The San Francisco Chronicle declaring: "Anybody who has examined the evidence about the effects of rent control, and still votes for it, is either a knave or a fool."

In a subsequent San Francisco Chronicle article, Professor Friedman was asked what happened after he sent his letter?

"They immediately passed it," Friedman laughed.

On a key difference between private firms and government:

"[A] private firm that makes a serious blunder may go out of business. A government agency is likely to get a bigger budget."

On competition from foreign companies that are subsidized by their government:

"Another source of "unfair competition" is said to be subsidies by foreign governments to their producers that enable them to sell in the United States below cost. Suppose a foreign government gives such subsidies, as no doubt some do. Who is hurt and who benefits? To pay for the subsidies the foreign government must tax its citizens. They are the ones who pay for the subsidies. US consumers benefit. They get cheap TV sets or automobiles or whatever is that is subsidized. Should we complain about such a program of reverse foreign aid?"

On government health care systems:

"Two major arguments are offered for introducing socialized medicine in the United States: first, that medical costs are beyond the means of most Americans; second, that socialization will somehow reduce costs. The second can be dismissed out of hand -- at least until someone can find some example of an activity that is conducted more economically by government than by private enterprise. As to the first, the people of the country must pay their costs one way or another; the only question is whether they pay them directly on their own behalf, or indirectly through the mediation of government bureaucrats who will subtract a substantial slice for their own salaries and expenses."

On the best protection for workers:

"The most reliable and effective protection for most workers is provided by the existence of many employers. As we have seen, a person who has only one possible employer has little or no protection. The employers who protect a worker are those who would like to hire him. Their demand for his services makes it in the self-interest of his own employer to pay him the full value of his work. If his own employer doesn't, someone else may be ready to do so. Competition for his services -- that is the worker's real protection."

On free markets and international relations:

"The great virtue of a free market is that it enables people who hate each other, or who are from vastly different religious or ethnic backgrounds, to cooperate economically. Government intervention can’t do that. Politics exacerbates and magnifies differences."

On conservative versus liberal economists:

"I never characterize myself as a conservative economist. As I understand the English language, conservative means conserving, keeping things as they are. I don't want to keep things as they are. The true conservatives today are the people who are in favor of ever bigger government. The people who call themselves liberals today -- the New Dealers -- they are the true conservatives, because they want to keep going on the same path we're going on. I would like to dismantle that. I call myself a liberal in the true sense of liberal, in the sense in which it means pertains to freedom."

On evaluating governmental policies:

"One of the great mistakes is to judge policies and programs by their intentions rather than their results. We all know a famous road that is paved with good intentions. The people who go around talking about their soft heart -- I share their -- I admire them for the softness of their heart, but unfortunately, it very often extends to their head as well, because the fact is that the programs that are labeled as being for the poor, for the needy, almost always have effects exactly the opposite of those which their well-intentioned sponsors intend them to have."

This OpinionJournal post also includes a number of Professor Friedman's thoughts on a variety of issues.

Finally, when you have a few minutes, take a moment to watch this remarkable Open Mind video (other videos of Professor Friedman are here and here) from over 30 years ago of Professor Friedman discussing principles of economics and limited government. The entire video is about a half hour, but if you watch nothing else, take a moment to watch the beginning of the interview in which Professor Friedman brilliantly responds to a somewhat inflammatory opening question from the interviewer, who suggests that Professor Friedman lacks compassion for his fellow man. Professor Friedman calmly refuses to take the bait and turns the question around to question the motives of those who advocate the cure-all of government intervention.

Now, that's an expert witness I would have liked to have put in front of any jury!

Posted by Tom at 1:42 PM | Comments (1) |

Fred Weary's adventure

H'mm, now let me get this one straight.

As Stephanie Stradley reports in detail (John McClain's comments are here), Texans offensive guard Fred Weary left work at Reliant Park a little after noon on Tuesday. Weary, who is 6'4", 308 lbs., was followed by a couple of Houston policemen in a squad car as he drove through the Reliant Park area to get on the South Loop and head home.

The officers followed Weary for about six miles and determined that he was "acting suspiciously" and "looking at (them) on several occasions." After seeing him commit the heinous offense of making a bad lane change, the crack team of officers swooped into action and pulled Weary over on the shoulder of the West Loop, which just happens to be the busiest freeway in Houston. After stopping Weary, the officers ramped up their investigation and determined that the front license plate on Weary's car was missing.

Weary was understandably irritated that the officiers had pulled him over in one of the most dangerous locations in Houston for doing something that occurs probably a million times in Houston each day. One thing led to another and, before you know it, the officers had Tasered Weary, arrested him and hauled him down to city jail. Verifying once again that it is virtually impossible to get someone processed out of jail in Houston in less than seven hours regardless of the offense, Weary was finally bailed out and able to head home at around 9:30 p.m. Quite a day off, eh?

As usual, HPD is contending that the officers acted reasonably in Tasering and arresting Weary. Count me as highly skeptical about that.

Update: The criminal case against Weary was dismissed in short order. Stay tuned.

Posted by Tom at 4:50 AM | Comments (5) |

Re-thinking angioplasty in certain situations

Following on a trend noted in previous posts here and here, this NY Times article (see also here) reports that findings from a major new study suggest that noninvasive treatment with beta-blockers and other heart drugs turns out to be at least as good as angioplasty for patients whose arteries remain blocked at least three days after a heart attack. The findings -- which were presented earlier this week at the annual scientific meeting of the American Heart Association and published simultaneously online by the New England Journal of Medicine -- supplement an increasing body of research that is indicating that heart-attack patients whose disease is stable and whose symptoms are under control should be wary of taking the risk of invasive treatment, which can result in infection and bleeding.

Over the past 20 years or so, treatment of heart attacks has been transformed by the ability of doctors to break up blood clots that cause the heart attacks with clot-busting drugs and angioplasty procedures. By quickly restoring blood flow to the heart muscle following an attack, doctors have been able to save lives and minimize damage that can lead to total heart failure. However, a nagging problem has been that about a third of the million or so Amerians who suffer a heart attack each year do not arrive at a hospital within the 12-hour window after the attack during which the patients are most likely to benefit from these techniques. In those patients who stabilize on their own after an attack and then are not diagnosed with blocked arteries until days after the attack, the conventional wisdom has been to go ahead and perform the angioplasty, anyway.

The trial, which was funded by the National Heart, Lung and Blood Institute, involved about 2,200 men and women who had a totally blocked artery three to 28 days after suffering a heart attack. They were assigned randomly to receive either just the best-available drug therapy or drug therapy plus angioplasty and stent treatment. Blocked arteries were opened successfully in about 90% of the angioplasty patients and they opened spontaneously in about 25% of the patients taking just medication.

After four years, 17.2% of patients in the angioplasty group had died, suffered another heart attack or developed serious heart failure. In comparison, 15.6% in the group on medication alone had the same results. Although the relatively small difference could have resulted from mere chance, researchers suggest that the findings do not support the the higher risk of aggressive intervention in such patients.

The bottom line: People with chest pains should get to the hospital as soon as possible because quick application of clot-busting drugs and angioplasty remains the best way to preserve the heart muscle. But if the patient fails to do so and stabilizes on their own, then the benefit of an angioplasty later may not be worth the risk.

Posted by Tom at 4:46 AM | Comments (0) |

Handicapping the competition for the Texas Fifth Circuit Judgeships

David Lat of AbovetheLaw.com does a good job here of analyzing the various candidates for the two "Texas" Fifth Circuit Court of Appeals judgeships that will be opening soon with Judges Patrick Higginbotham and Harold DeMoss taking senior status. Houston judges George C. Hanks, Jr. (First Court of Appeals), Jennifer W. Elrod (190th District Court), Jane Bland (First Court of Appeals) and U.S. District Judge Lee Rosenthal are on the short list, as is former Houstonian, Texas Supreme Court Chief Justice Wallace Jefferson. This should be quite a competition, so stay tuned.

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

November 15, 2006

It's all Flutie's fault?

Geez, and I thought Texas Aggie fans were taking their team's losses hard. But Aggie angst is nothing compared to what boiled over in Longhorn land after Texas' upset loss to Kansas State last Saturday night that doomed the Horns' BCS championship hopes:

An unhinged Texas Longhorn fan who blames Doug Flutie’s televised analysis for the team’s upset Saturday threatened the former football star and his family in an electronic mail message, police said.

The threat, which was not detailed by police, was sent to the Doug Flutie Jr. Foundation for Autism early Sunday, police Lt. Paul Shastany said.

“We have intentions of finding this person and speaking to this person,” said Shastany. “As threats go, it’s a pretty serious incident.”

Although the exact nature of the threat was not disclosed, the man, who investigators believe lives in California, wrote, “You jinxed the Longhorn faithful and a chance at the national title,” Shastany said.

“He was upset, wishing bad will and speaking badly about his family,” said Shastany. “At this point, the information is disconcerting enough to follow this up the best we can.”

Police spoke with Flutie, and he is aware of the threat, Shastany said, but there was no imminent danger and Flutie went ahead with a foundation fund-raiser last night at the Hyatt Regency in Boston.

Flutie is a college football analyst for ABC and ESPN. His playing career included winning a Heisman Trophy with Boston College in 1984, two stints with the Patriots and several championships in Canada. The Texas Longhorns were upset Saturday, when Kansas State beat them 45-42.

Posted by Tom at 4:27 AM | Comments (1) |

A Sonic boom fizzles in Seattle

I read this NY Times article over the weekend and found it rather refreshing:

Empowered by a wave of venture capital, a hiring boom and pride in its homegrown billionaires, this city has decided it no longer needs a mediocre professional basketball team to feel good about itself.

On Election Day, residents rebuffed their once-beloved Seattle SuperSonics, voting overwhelmingly for a ballot measure ending public subsidies for professional sports teams. [. . .]

The vote last week guarantees that the Sonics will leave their current home, KeyArena, in 2010, he said. The team may move to the Seattle suburbs and plans to talk to the State Legislature about that in coming weeks, but most people here think [the Sonics' owners] will move the team to Oklahoma City.

In short, the cost of subsidizing an NBA team has finally exceeded the benefits that most Seattle residents believe they derive from having an NBA team. The same thing has already occurred in Los Angeles with regard to the NFL. As professional sports franchises test the upper limit of what consumers are willing to pay for their product, several other cities will likely follow LA and Seattle's lead. That's not a bad development. Warren Meyer agrees.

Posted by Tom at 4:13 AM | Comments (0) |

The super-heated free agent market

Dodgers rightfielder J.D. Drew opted out of the final three years of his $11 million per year contract last week, passing up the remaining three years and $33 million on his deal to test what he could draw on the free agent market. The conventional wisdom is that Drew made a mistake.

However, based on the first week or so of free agent transactions this off-season, not only did Drew not make a mistake, it looks to me as if his decision to opt-out was a no-brainer. Drew (28 RCAA/.393 OBA/.498 SLG/.891 OPS for 2006; 146/.393/.512/.904 career) is probably the best outfielder in this year's free agent pool and maybe even the position player overall. With the upper end of of this year's market looking like 5 years and $80 million or so for a player of his caliber, the 31 year-old Drew will probably earn an additional $20-30 million of guaranteed money and almost certainly do much better than $33 million over 3 years. Yeah, he's not the most popular guy in the clubhouse and he has had injury problems, but he's coming off a solid season in which he played a career-high 146 games. Some team needing solid production from the left side of the plate (which team doesn't) will probably pay him the premium over his prior contract that prompted the opt-out.

Drew's opt-out reflects the reason why the Stros probably won't be much of a factor on the free agent market this off-season. Drew is good, but he's not as good as the Stros' Lance Berkman, who is entering the third season of his six year deal that pays him about $14 million a year. There is no way the Stros are going to pay someone like Drew more than Berkman, even though Drew probably will end up making more than Berkman from some other team.

That's why retooling a Major League Baseball club on the free agent market is really not a practical approach except for a few big-market clubs -- it's prohibitively expensive. Better to maintain the farm (and fiscal sanity) with good prospects and then tap the free agent market only when it is likely to produce a player who will propel the club into playoff contention.

Posted by Tom at 4:10 AM | Comments (0) |

November 14, 2006

Another dirty secret of the Enron Task Force

Former Enron chief accountant Richard Causey will be sentenced tomorrow by U.S. District Judge Sim Lake, and Causey's sentencing hearing highlights another of the Enron Task Force's dirty secrets that the mainstream media has largely ignored in favor of demonizing former Enron executives.

When Causey entered into his plea deal on the eve of the Lay-Skilling trial (see also here), most folks figured that the Task Force would use him as a key witness against his former co-defendant Skilling. The Task Force needed Causey to corroborate former Enron CFO Andrew Fastow's testimony regarding the Global Galactic agreement, the alleged secret handwritten agreement between Fastow and Causey under which Causey supposedly provided Enron's assurance -- allegedly with Skilling's blessing -- that Fastow's various special purpose entities would receive a guaranteed rate of return for investing in Enron assets. Inasmuch as those SPE transactions removed a substantial amount of debt and underperforming assets from Enron's balance sheet, a key contention in the Task Force's charges against Skilling and Lay was that Global Galactic proved that Enron's SPE transactions were shams that helped Skilling and Lay illegally disguise the company's deteriorating financial condition. So, Global Galactic was a pretty important element in the Task Force's case against Skilling and Lay.

During his Lay-Skilling testimony, Fastow sang like a canary about the Global Galactic agreement, although the existence of the agreement became more suspect the more Fastow talked about it. Meanwhile, the Task Force never called Causey to testify during the Lay-Skilling trial, probably because Causey would not corroborate Fastow's testimony regarding Global Galactic. And that's not the only dirty secret of the Task Force (see here and here), nor the only lie that Fastow told during his testimony.

Thus, Fastow -- who stole millions and then lied to help convict Skilling and Lay -- is doing a six-year sentence and will be out in about five. On the other hand, Causey -- who didn't steal a dime and refused to corroborate Fastow's lies -- will probably serve more time in prison than Fastow.

Is this how we want to go about learning the truth about what really happened at Enron? Ellen Podgor has more here.

Update: Judge Lake sentenced Causey to five and a half years in prison.

Posted by Tom at 4:55 AM | Comments (2) |

The indiscriminate Hammer

Ben Witherington is a noted New Testament scholar at Asbury Theological Institute in Wilmore, Kentucky near Lexington, which is not the typical place that former House Majority Leader Tom DeLay would normally have been trolling for money during his heyday in Congress. In this post explaining the danger for Evangelical Christians in aligning themselves with either major political party, Dr. Witherington passes along the following anecdote about DeLay:

Several years ago I was contacted by Tom DeLay. He figured since I was a well known white Evangelical I must be on his side on a host of things. I was invited to the White House, and I was named Kentucky Business Man of the Year. I have the plaque sitting in my office framed to prove it. Now, I am no businessman. Just ask my wife. For five years I ran a little coffee shop in Wilmore for our Christian students as a ministry to them-- its called Solomon's Porch, and its still up and running, employing and feeding students and helping them work their way through college and seminary. Its a good ministry, but its not a business that made money. In fact I lost $40,000 helping those students during that time. I was definitely not a Kentucky Businessman of the Year! There were many who did better than I, and I could talk at length about the plight of small businesses which are taxed right out of existence. Several previous restaurants in that spot had not lasted more than about six months. Wilmore is only a town of some 5,000 souls.

You see Delay was running a scam on Evangelical Protestants. It worked like this--- you call someone, and send them an award, whether they deserve it or not. You invite them to D.C. to meet influential people. Delay gets the photo-op with small business persons, but the real purpose of all this is raising money. I got endless calls out of Delay's office to send money to this, that or the other fund running out of his office to further his causes etc.

In other words, I wasn't given an award for anything. Obviously they were oblivious to the fact that my business was failing from an economic point of view, though not from a ministry point of view. What I was given was a carrot, hoping for a whole bunch of carrots in return. It was purely a quid pro quo deal. What I won was endless phone calls about races, and causes etc. some of it more or less connected to Delay's office directly. It is not a surprise to me that the man was drummed out of office. It is also not a surprise to me that he was a major player in that party and a close ally of George Bush from way back in Texas. "All power corrupts, and ultimate power corrupts uiltimately" is a wise saying.

Posted by Tom at 4:32 AM | Comments (6) |

It's lonely being a Texans fan in Austin

The Houston Texans recent improved play is not being noticed yet in Austin, at least according to this letter from a local Austin television programing director to Texans fan Brian over at Longhorn Law:

The last Texans game we aired (last Sunday) was tuned-in by just 21,000 households in Austin (a city with 589,000 households). By comparison, the Titans game we aired on Oct 8th (after Vince Young became quarterback) was watched by over 53,000 households (152% more football fan’s homes). At one point during that game there were as many as 68,000 households tuned in. It was the most-watched “early” game we’ve aired all season. Actually, that game was watched by more Austin fans than any Texans game we’ve aired going all the way back to October of last season - with two notable exceptions. The first is when the Texans played the Cowboys on October 15th (which you could expect to be highly watched) and the other, honestly, was when the Texans played the Titans on October 29th. [. . .]

So, where does all this leave us now? To try and answer that, we need to go back to the start. In the Texans’ first season KEYE aired every Texans game we could get our hands on. In the second season we did the same thing, no matter how bad the actual football games were, and in the third season we did it yet again. (No one could claim that KEYE hadn’t done its best to put Texans games on the air in Austin).

In the fourth season, last year, we aired every Texans game we could - even after it was abundantly clear they would have their worst season to date. What was once just a steady flow of email to the station (questioning why the heck we were airing Texans games when there was much better competition) had become a roar that we simply could no longer ignore. In that season we aired every Texans game we could in August, September, October, and November. Our last Texans game was December 4th with just 15,000 households watching, and then we moved on to other games that had actual play-off implications. The very next non-Texans game we aired that year was tuned-in by almost 75,000 homes. In other words, we did the best we could do.

Hang in there, KEYE!

Posted by Tom at 4:05 AM | Comments (0) |

November 13, 2006

Gearing up already for the 2008 Ryder Cup

Paul Azinger was the choice earlier in the month to be the captain of the U.S. Ryder Cup team for the 2008 matches at Valhalla in Louisville, and Golf World's John Hawkins thinks it's a great choice:

In his prime as a player, Azinger was fiery but focused, a natural leader with the talent and disposition to excel in the Ryder Cup’s high-intensity atmosphere. In his second life as a TV analyst, the 1993 PGA champion has proven to be an independent thinker whose insights and observations are accentuated with a touch of redneck bravado. Azinger has long been one of my go-to guys in my years covering the PGA Tour. He speaks from the heart, doesn’t compromise his thoughts, and he shares anecdotes. He’s a fabulous source.

But Hawkins doesn't think choosing Azinger will make much of a difference in the outcome:

You’d have thought the ’04 rout at Oakland Hills would have brought the ’06 squad together, motivating them to perform at a level close to their potential. And with Lehman in charge, there was unity and camaraderie. There just wasn’t any chemistry—it’s a component that can’t be manufactured. I hope I’m wrong, but things are likely to get worse before they get better. European squads have gotten younger and deeper, and passion has become their most valuable weapon. Azinger is the perfect man to lead the Yanks, which leads me to wonder: Are certain groups, for whatever reasons, averse to being led?

Meanwhile, on the other side of the pond, it's good to see that the Scotsman's John Huggan is already getting the juices flowing:

Over the course of four Ryder Cups, the 46-year-old [Azinger] all but covered the playing and behavioural spectrum, from sublime to distasteful. Indeed, Azinger's whole career has been regularly blighted by doubts over his character amid accusations that his adherence to golf's rule-book is sometimes less than exemplary.

Hoo boy! Read the entire article. Then get ready to rumble.

Speaking of remarkable feats under intense pressure, Craig Kanada chipped in on each of the final two holes yesterday to win the Nationwide Championship held at the Houstonian Golf Club in the far southwest part of the Houston area and, in so doing, earning his PGA Tour card for 2007. Melanie Hauser provides this interesting story on Kanada's long quest to regain his Tour card.

Posted by Tom at 4:50 AM | Comments (1) |

The Blind Side of big-time college football

Last week, the resignation of my friend, Iowa State head football coach Dan McCarney, prompted this post reflecting on how the pressures of big-time college football prompted a resignation that is quite likely contrary to the long term ability of Iowa State to remain competitive in big-time college football. As if on cue, George Will, in this NY Times book review, provides his view on the new book by Michael Lewis of Moneyball fame, The Blind Side: Evolution of a Game.

In Moneyball, Lewis explored how the small-market Oakland Athletics were able to remain competitive against far richer clubs in Major League Baseball by emphasizing objective evaluation of players and, in so doing, introduced sabremetric statistical analysis to the general public. As Will notes, Lewis “is advancing a new genre of journalism that shows how market forces and economic reasoning shape the evolution of sports.” Lewis’s latest book involves big-time college football, which -- as noted earlier here -- has long been a means by which universities in the U.S. have compromised academic integrity to rent athletically-gifted young men to serve as cash cows for the institutions. As noted in my earlier post, the National Football League reaps the fruits (as if those teams really needed it) of an effectively free farm system that college football provides, while the vast majority of the universities -- including Iowa State -- either lose money or barely eke out a profit in their football programs.

Moreover, Lewis examines how the winds of change ripple down from the NFL to big-time college football and dictate the course of the college game. One case in point is Lawrence Taylor, who singlehandedly changed the nature of professional football by becoming the prototype of the huge, athletic and extraordinarily fast outside linebacker who could increase the pressure on the quarterback. At about the same time as Taylor was wreaking havoc on QB's, Bill Walsh's West Coast offense was spreading the field, which made it even more important for teams to find agile offensive linemen to block the likes of Taylor. Most important was to protect the QB's blind side, so the position of left offensive tackle increased in importance and, as a result, the position's economic value skyrocketed.

As demand increased in the NFL for the colleges to produce another kind of freak of nature to play what had been an obscure position but now was now one of the most important positions on the field, Lewis explains that the colleges were more than willing to compromise any notion of academic integrity to admit athletes who project to have the physical stature and talent to play the demanding left tackle position. In short, it's not just the star QB or running back who gets the royal treatment from the institutions in this day and age -- potential left tackles are now included, too. Lewis' book describes one of those freaks of nature, a freshman tackle at the University of Mississippi with an I.Q. of 80 who bounced from foster home to foster home as a youth.

Just as we should not be surprised that many folks enjoy betting illegally on college football, neither should we be shocked with the corruption in college football that Lewis examines in his book. One of my uncles who played SEC football during the late 1920's used to tell me how much money he was paid under the table even in those days. Moreover, there is no question that big-time college football -- even as corrupt as it is -- is a pretty darn entertaining form of corruption. As noted in my previous post, there is a model that would likely minimize the corruptive elements while not affecting the entertainment value of college football much, but it's going to take leadership and courage from the top of the educational institutions to promote and implement such reform.

Unfortunately, those considerations were not on the minds of the Iowa State administrators last week as they began figuring out how to replace a very good football coach who had just left one of the most difficult jobs in his profession. Similarly, my sense is University of Miami president Donna Shalala will not be contemplating those matters when she begins her search to replace Larry Coker later this month as head coach of one of the most storied programs in all of big-time college football. That seems to be the tunnel vision that is generated from the sponsorship of professional football by U.S. academic institutions.

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

2006 Weekly local football review

Texans 13 Jaguars 10

If I didn't know better, I'd think that the Texans (3-6) have the Jaguars' (5-4) number.

In a game that stands for the proposition that you don't have to play great offensively to win when the other team's QB plays poorly, the Texans took advantage of four Jaguar QB David Garrard interceptions and a stout defensive effort to win their third game of the season, two of which have been over the Jags. The win was the Texans' first road in almost two years and ended an NFL-leading 12 game losing streak in road games, The Texans mostly stunk offensively (306 yds total offense) , but they were at least well-balanced (148 yds rushing/158 yds passing) and most importantly, protected the football. Texans QB David Carr was knocked out with a sprained shoulder in the 4th quarter, but it did not look like a serious injury. The Texans now actually have a chance of stringing some wins together as their next four games are at home against the Bills (3-6), at the Jets (5-4) and Raiders (2-7), and at home against the Titans (2-7).

By the way, Chronicle sportswriter Richard Justice -- who is presumably paid to notice such things -- is just noticing that Texans kicker Kris Brown is not very good:

"K Kris Brown is becoming something of a concern. His miss of a 32-yard field goal late in the first half was his third miss in four games. He missed a more difficult kick, a 52-yarder, later in the game."

Uh, Earth to Richard, Earth to Richard -- Brown has been a concern for the past several seasons!

Nebraska 28 Texas Aggies 27

That huge sigh of exasperation that you hear is coming from the Bryan-College Station area.

After last week's frustrating one-point loss to Oklahoma, the Aggies (8-3, 4-3) lost this one on a short TD pass with 20 seconds left in the game after having a field goal attempt blocked just a minute earlier and after a stupid roughing-the-passer penalty helped extend the Cornhusker scoring drive. Inasmuch as the Ags had almost 450 yards of total offense on 288 yards passing and 155 yards rushing with no turnovers, they really should have won this one, but a generally uninspired first half performance put the Aggies in a 21-10 hole. Given the developments in Manhattan, KN on Saturday night, the Aggies final game against Texas looks more winnable than before, but the Aggies will need to win that one to avoid the ignominious invitation to a minor bowl game. As Kevin Sherrington reports, it's getting harder with each passing week to defend Coach Fran.

Kansas State 45 Texas Longhorns 42

The Horns (9-2, 6-1) run of good luck ran out in Manhattan on Saturday night as star QB Colt McCoy was injured and inexperienced backup QB Jevan Sneed was forced to play from a deep hole that was dug mostly by a leaky Horns defensive secondary. Two fumbles by the Horns' running backs and a blocked punt in a disastrous three minute stretch of the 3rd quarter didn't help, either. If McCoy's banged up shoulder does not heal in time for the Horns regular season finale against the Aggies, then a season that was headed for a BCS bowl game could end up in a cold Cotton Bowl in Dallas in January.

Houston Cougars 37 SMU 27

The Cougars (8-3, 6-1) clinched the Conference USA West Division championship with the win over the Ponies (5-5, 3-3) and can wrap up hosting the C-USA championship game on December 1 with a win at Memphis (1-9, 0-6) next Saturday. As usual, nothing comes easy for the Coogs, who went up 14-0 in the 1st quarter, only to go to sleep for the next quarter and a half to find themselves behind 24-14 at the half. However, behind the incomparable Anthony Alridge (225 yds on 14 carries; two 77 yd TD runs!) and resourceful senior QB Kevin Kolb, the Cougars outscored the Mustangs 23-3 in the 2nd half to put this one away. As noted last week, Alridge's phenomenal performance this season -- he is currently averaging 12.5 yds per carry (797 yards on 64 carries) -- is one of highlights of this college football season. Alridge has 8 TD runs this year the following yardages: 87, 77 (twice), 44, 29, 15, 14, and 3. Thus, one out of every eight carries is a TD and he averages taking it to the house from 46 yards. Too bad that his effort is utterly underpublicized because of the local media's abysmal coverage of the Cougar football program.

Rice 41 Tulsa 38 (2 OT)

In another of the most remarkable stories of this college football season that the local media has largely ignored, the Rice Owls (5-5, 4-2) came within a game of bowl eligibility with a stirring double overtime victory over Tulsa (7-3, 5-2), which has had its once-promising season undermined by losses over the past two weeks to the Owls and the Houston Cougars. Although he probably has no chance because of the lack of publicity that the Owl program draws, first-year Rice head coach Todd Graham should be in the running for Coach of the Year honors for converting in less than a year a team based on an option-oriented ground game into an effective spread formation, pass-oriented team that has a chance of becoming the first Rice team to finish with a winning record since the 2001 team finished 8-4. The Owls conclude their season with home games the next two weekends against East Carolina (6-4, 5-2) and SMU (5-5, 3-3).

Posted by Tom at 4:09 AM | Comments (1) |

November 12, 2006

Re-evaluating the kickers

As noted in earlier posts here and here, Aaron Schatz is the lead author of Pro Football Prospectus 2006, which is an innovative effort to develop the same type of objective statistical framework for evaluating professional football players that Bill James and other sabermetricians have developed and refined for evaluation of Major League Baseball players.

In this provocative NY Sunday Times op-ed, Schatz suggests that NFL teams are using the wrong criteria when they pay a large amount to acquire or retain a field goal kicker who has made almost of all of his field goal attempts in the previous season. Schatz's argument is that a field goal kicker may have a "hot" season from time-to-time, but will almost always regress in the following season to his career success rate for field goals. On the other hand, Schatz notes that another key kicking statistic -- average kickoff distance -- shows far more consistency from season-to-season than field goal percentage. Kickoff distance is important because longer kickoffs generally give the team kicking off a better chance of pinning their opposition deep in their own territory, which reduces the risk of giving up touchdowns and field goals. A case in point is the Cardinals' Neil Rackers:

No kicker reflects the difference between field goals and kickoffs better than Neil Rackers of the Arizona Cardinals. Last season, Rackers set an N.F.L. record with 40 field goals, and led the league by converting 95 percent of his attempts. But in 2004, he connected on 76 percent of his attempts. This year, Rackers is even worse, making just 67 percent of his tries. His high-profile misses include a 40-yard attempt that probably would have completed an upset and handed the Chicago Bears their first loss of the season.

Nonetheless, while his field-goal percentages have swung up and down over the past three seasons, Rackers has consistently ranked as one of the league’s premier kickoff men. He led the N.F.L. in average kickoff distance in 2004 and 2005, and is fifth in the league this year.

This disparity in consistency between field goals and kickoffs means that N.F.L. teams are generally signing and drafting kickers based on the wrong skills.

Posted by Tom at 7:42 AM | Comments (2) |

November 11, 2006

Saves you money!

In this column, Chronicle business columnist Loren Steffy profiles Gallery Furniture owner "Mattress Mac" Jim McIngvale, who transformed a run-down location on Houston's near northside over the past 20 years into a furniture sale and distribution center that generates over $100 million in annual revenues.

Everyone in Houston knows Mattress Mac because of the idiosyncratic television commercials in which he frenetically hawks his store's furniture and immediate delivery service, punctuated by his trademark "Gallery Furniture saves you money!" declaration. But under that playful exterior is a savvy businessman who has built an extraordinary business based on simple principles -- a broad selection, easy access, quick service and same-day delivery. In many ways, Mattress Mac's business success reflects why the Houston area is such a good incubator of new business. With low barriers to entry, no zoning, relatively few regulations and a public that prefers low prices and quick service to allegiance to brand name stores, Houston provided the perfect launching pad for Gallery Furniture's success.

Some folks look down their noses at Gallery Furniture, but I've always admired Mac's operation as an utterly unpretentious business that delivers its product and service in a remarkably efficient manner. Here is a case in point. On a Sunday evening late last summer, my wife mentioned to me that she had spent the previous Saturday afternoon trudging around furniture stores near our home with one of our sons unsuccessfully looking for an easy chair for one of our son's college apartment. Inasmuch as wandering around furniture stores is not how most young college-age men prefer to spend their Saturday afternoons, our son was a bit discouraged because they had not found anything within the price range that my wife and I had set.

It was about only 7 p.m., so I suggested that we make the half-hour drive down to Gallery Furniture to check out its selection. We arrived there at 7:45 p.m. and, immediately after we walked into the store, a salesperson was helping us browse through the huge selection of easy chairs. In less than a half hour, we had found a nice chair and it took us less then 10 minutes to pay for it and arrange for delivery of the chair to our home later than evening. We returned home by 9 p.m. and, promptly at 10:15 p.m., a van pulled up to deliver the chair. Thus, by the time our son returned home later that evening from a movie, he found his new chair sitting in our living room. He could not have been more pleased, particularly that he was not going to have to shop any further for a chair.

Although a broad selection and quick service are important components of Gallery Furniture's appeal, my wife and I caught a glimpse of the primary reason for the company's success as we were leaving the store that evening. At 8:30 p.m. on a late August Sunday evening, Jim McIngvale was at his store's front desk, helping customers and directing his sales staff. Regardless of what you think about Mac's style, it's hard not to admire that type of dedication to his company, even well after it has become a business juggernaut. Sometimes success in business is complicated, but Mattress Mac reminds us that, most of the time, it is quite simple.

Posted by Tom at 7:01 AM | Comments (2) |

November 10, 2006

Fastow singing like a canary

The NY Times' Alexei Barrionuevo provides this entertaining article on former Enron CFO Andrew Fastow's deposition in connection with the various civil lawsuits involving the demise of Enron.

Frankly, it's rather remarkable that anyone would be particularly interested in what Fastow might have to say or so gullible to believe anything that might come out of his mouth, but you know how such lawsuits go.

Posted by Tom at 7:37 AM | Comments (0) |

The Enron Task Force's extraordinary admission

Flying somewhat beneath the radar screen of the lynch mob that is fascinated with watching former Enron CEO Jeff Skilling imprisoned for the rest of his life is the case of former Enron Broadband executive, Kevin Howard. As you may recall, Howard was tried and convicted of five counts of conspiracy, wire fraud, and falsifying the books and records under extremely prejudicial circumstances at the end of the Lay-Skilling trial. Subsequent to Howard's conviction, however, the Fifth Circuit issued its decision in the Nigerian Barge case (see also here), which formed the basis of Howard's motion to vacate his conviction on all charges.

The Enron Task Force put off responding to Howard's motion to vacate for several weeks hoping that the Fifth Circuit might reconsider its Nigerian Barge decision. However, the Fifth Circuit recently declined to do so, so the Task Force was required to buck up and finally respond to Howard's motion. In an uncharacteristic moment of clarity, the Task Force essentially admits in its response that Howard's entire conviction must be vacated:

The United States concedes that under [the Fifth Circuit's Nigerian Barge decision] the conduct that forms the basis for Howard’s convictions on Counts One through Four does not fall within the honest services provision. Because a reviewing court cannot determine whether the jury relied on the honest services theory to convict Howard, his convictions on those counts must be vacated.

The Task Force's response goes on to argue unpersuasively that Howard's conviction on one count of falsifying Enron's books and records should not be vacated, but it's clear that the Task Force does not have much confidence in its position on that count. I will be surprised if U.S. District Judge Vanessa Gilmore does not throw out Howard's conviction on all counts.

Thus, the Task Force's response underscores what I have been saying for almost three years now. The true criminal activity in regard to the Enron was limited to former CFO Andrew Fastow and a few of his close associates -- such as Ben Glisan and Michael Kopper -- who effectively embezzled millions from Enron. As with Jeff Skilling, Kevin Howard didn't embezzle a dime from Enron and was simply trying to do the best job he could of preserving value in Enron Broadband under difficult market conditions. Violation of honest services charges are supposed to address the situation where an executive takes a kickback or a bribe from a third party in violation of his fiduciary duty to his company. In Howard's case -- as with the case agaisnt Jeff Skilling -- the Task Force simply used those inapplicable charges as a means to appeal to juror resentment against anything having to do with Enron to obtain a conviction.

As the Fifth Circuit panel observed in its decision in the Nigerian Barge case, if you start from the premise that a defendant is guilty of a crime, then it's far easier to conclude that the defendant is guilty of the crime. It's far tougher to prove it honestly.

Posted by Tom at 5:24 AM | Comments (1) |

A good football coach steps down

Dan McCarney, the "dean" of the Big 12 Conference football coaches, resigned under pressure on Wednesday as head football coach at Iowa State University after 12 seasons. The announcement barely made a blip in the local Houston media, but Coach Mac's resignation highlighted many aspects of the troubling direction of major college football, a topic that has also been touched on here, here, here and here.

I am biased about Coach McCarney, who is called Coach Mac by most everyone. As regular readers of this blog know (see here and here), Coach Mac and I have been friends since growing up together in Iowa City, Iowa, where we played together on City High School's championship football team in 1970. I moved to Houston with my family shortly after finishing high school and Mac went on to play football at the University of Iowa in Iowa City, but we remained in contact over the years as I went to law school and began a legal career in Houston and Mac went on to the Iowa coaching staff after graduating from undergraduate school. When Hayden Fry was hired to revive the downtrodden Iowa program in 1979, Coach Mac was one of the only coaches who Coach Fry retained from the previous coaching staff. As with most of Coach Fry's personnel decisions, retaining Coach Mac was a good one.

For the following decade, Coach Mac was a part of an extraordinary Iowa coaching staff that not only revived Iowa's football fortunes, but also produced such outstanding head coaches as Wisconsin's Barry Alvarez, Oklahoma's Bob Stoops, Kansas State's Bill Snyder, Iowa's Kirk Ferentz and South Florida's Jim Leavitt. In 1990, Coach Mac followed Alvarez to Wisconsin, where they took over a 2-9 Badger program and, by 1993, had the team winning the Big Ten Conference championship with a 10-1-1 record, which included a Rose Bowl victory over UCLA. The next year, Iowa State came calling for Coach Mac and the native Iowan was off to Ames for his first head coaching job.

Over the years, Mac and I have laughed many times about the fact that neither of us really had a clue of what he was getting into at Iowa State. We both knew that the university had long been a coaching graveyard and had eeked out a barely-winning record only a couple of times in the previous 15 years. Ames is nice little college town, but it is in north central Iowa, pretty much in the middle of nowhere in the opinion of most good college football players. As a result, the football program has always struggled to attract good football prospects, who usually have sexier alternatives to living in central Iowa for four years. The physical facilities of Iowa State's football program were poor and the entire football budget at the time was just over $3 million, which was by far the smallest of any public school in the then newly-constituted Big 12 Conference that included such far better-funded programs as Texas, Texas A&M, Oklahoma, and Nebraska, just to name a few. To make matters worse, Iowa State was a clear second fiddle in the state of Iowa to the University of Iowa, which has a far superior football tradition and an athletic budget more than twice as large as Iowa State's. Most folks assume that Kansas State was the toughest head coaching job in the United States before Bill Snyder resurrected it in the 1990's, but I think a good case can be made that the Iowa State job was even more difficult before Coach Mac took over.

To Mac and Iowa State's credit, they agreed at the outset that turning Iowa State's program around was going to be a long-term project. As he did at Iowa and Wisconsin, Mac literally threw himself into the job of rebuilding the Cyclone football program, taking on any speaking engagement and going anywhere to promote Iowa State and its athletic teams. An outstanding recruiter, Mac and his coaching staff began to expand Iowa State's traditional Midwestern recruiting base to such football hotbeds as Texas, Florida and California. Mac began to challenge Iowa's traditional toehold on the best recruits in the state of Iowa. The progress was slow, though -- Mac's teams lost 42 or their 57 games during his first five seasons.

However, by the 2000 season, Mac and his staff had built a solid foundation for the program. Behind QB Sage Rosenfels (yes, the Texans' backup QB), Iowa State went 9-3 during that season and won the university's first post-season bowl game in the university's 108-year football history (over Pitt in the Insight.com Bowl in Tucson). That started a 40 game run where Mac's teams were 25-15, a remarkable feat considering that Iowa State was competing in the brutally-tough Big 12 Conference and playing tough Iowa each season (Mac's teams won six of their last nine games against their in-state rival). By the 2004 and 2005 seasons, Coach Mac had his teams on the cusp of the Big 12 North Division title both seasons only to lose them in an excrutiatingly close final game in each season. Nevertheless, after Iowa State had gone to only four bowl games in its history before Coach Mac's tenure, Mac took the Cyclones to five bowl games in six years, winning two of them. Coming into the 2006 season, optimism was high that the Cyclones would again contend for the Big 12 North Division championship and go to yet another bowl game.

Alas, the 2006 season did not turn out as planned. First, the Cyclones faced one of the toughest schedules in the country, including an initial stretch of Big 12 games at Texas, at home against Nebraska, at Oklahoma and at home against Texas Tech. Iowa State lost all four and were battered in the process, losing six senior starters to season-ending injury. Lack of depth is a chronic Achille's Heel at a place such as Iowa State, so a thin and deflated Cyclone team was smoked over the past two weeks by mediocre Kansas State and Kansas teams. That brought out the "what have you done for me lately" crowd in full force, many of whom were calling on Iowa State to fire Coach Mac despite the fact that few of them have any idea how difficult it is to win consistently at the top levels of major college football.

Suddenly, a little over a year after one of Mac's best wins as a coach, Mac concluded it was not right for him to become a divisive issue for the university. Understanding Spike Dykes' advice that "you lose 10% of your support each season" as a college football coach, Mac understood that he was 20% in the hole at Iowa State based on that formula. So, he elected to resign as head football coach at Iowa State, a difficult job that he would have gladly continued to perform for the rest of his coaching days. Take a moment to watch his performance during the press conference (click the video camera icon on the left side of the page) to announce his resignation -- Mac exudes the class and passion with which he handled all of his duties at Iowa State. In this age of cold-hearted and businesslike coaches who are constantly posturing for the "better" job, it is refreshing to watch someone such as Mac, who wears his big heart and humanity on his sleeve.

Thus, 12 years after arriving at Iowa State, Mac leaves the football program in far better shape than he found it. The football budget has quadrupled in size under Mac, but it remains the smallest of any public institution in the Big 12 Conference (Texas and A&M's football budgets are at least 4 to 5 times larger than Iowa State's). Mac worked behind the scenes continually to improve Iowa State's facilities and they have improved substantially during his time there. However, Cyclone athletic department officials are now attempting to raise another $135 million for facilities upgrades in an effort to keep up with the seemingly endless arms race of major college football. In one of the more bizarre aspects of Mac's resignation, that imminent capital funds campaign was one of the key pressure points that prompted the resignation of the best fundraiser in the history of the Cyclone football program. So it goes in trying to keep up with the Joneses in the wacky world of college football.

After coaching the Iowa State team in its final two games this season, Mac will kick back for a few days, but then I suspect that he will back out looking for another opportunity. His motor is always running and he has a passionate love for coaching. Inasmuch as Mac is widely popular among his fellow coaches, I am confident that he will land on his feet.

However, I am not so sure about Iowa State. The institution is caught in the proverbial rat race of attempting to compete with far-better funded programs and the gap between Iowa State's resources and those of programs such as Texas and A&M are likely to get even larger. The pressure of that competition has now prompted Iowa State's administration to take what appears to be a huge risk that the program will decline from the solid foundation that Mac painstakingly built over the past 12 years.

Does Iowa State think that it is going to hire someone who will magically recruit better athletes to Ames than Mac? That's highly doubtful as Mac is one of the best recruiters in the business and Ames is always going to be a difficult sell to all but a few of the best football prospects. Does the institution think that it is going to hire someone who will coach better than Mac? Maybe, but Mac is a pretty darn good coach and how many more wins does Iowa State really believe it can achieve through slightly better coaching methods? And even Iowa State officials readily concede that it is highly unlikely that they will ever be able to find someone who can match Mac's tireless enthusiasm for promoting the institution and the football program.

The bottom line is that seasons such as the one that the Cyclones and Mac are enduring this season are inevitable at a program such as Iowa State's. That is one of the costs of attempting to compete with limited resources at the highest level of major college football. That's not a particularly pleasant reality, but it's dubious decision-making to take big risks based on an emotional reaction to a disappointing result that is inevitable. That appears to be precisely what Iowa State is doing in letting Mac get away. Wouldn't embracing a good coach who understands the institution's limitations and has competed effectively in spite of them be far less risky and much more likely to result in continued success?

Ironically, the Cyclone family now finds itself looking for a new head coach who has the depth and characteristics of . . . well, Dan McCarney. Iowa State will be extremely fortunate if they find one.

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

November 9, 2006

Why it's not a good idea to soak the energy companies

When you meet someone who doesn't quite get the correlation between high energy company profits and the capital-intensive nature of oil and gas production, pass along this NY Times article to them:

As oil consumption grows and access to most oil-rich regions becomes increasingly restricted, companies are venturing farther out to sea, drilling deeper than ever in their quest for energy. The next oil frontier — and the next great challenge for oil explorers — lies below 10,000 feet of water, through five miles of hard rock, thick salt and tightly packed sands.

“It’s not a place for the timid,” said Paul K. Siegele, the vice president for deepwater exploration at Chevron, which commissioned a survey by the Neptune. “It’s a place where a lot of people have lost their shirts.”

To picture the challenge, imagine flying above New York City at 30,000 feet and aiming a drill tip the size of a coffee can at the pitcher’s mound in Yankee Stadium. Then imagine doing it in the dark, at $100 million a go.

Even after hitting pay dirt, it will take another decade and billions of dollars to transform oil from these ultra-deep reserves into gasoline. Some of the technology to pump the sludge from these depths, at these pressures and temperatures, has not yet been developed; only about a dozen ships can drill wells that deep, and no one knows for sure how much oil is down there.

While most people regard affordable and abundant supplies as an essential element of the nation’s prosperity, few realize how complex and costly the quest has become, even in the nation’s own backyard. At the same time, some experts argue that the industry is nearing the limits of what it can do to maintain a growing supply of fossil fuels.

Amen. Read the entire article.

Posted by Tom at 4:53 AM | Comments (0) |

The Best Vegas Sports Book

In late 1980, I helped my friend, prominent criminal defense lawyer David Chesnoff, move to Las Vegas. Inasmuch as it was the first trip to Vegas for either of us, Dave and I ventured on to the Strip and quickly discovered the Stardust Casino's venerable Sports Book. For a couple of single young lawyers with a little bit of money and a lifelong interest in sports and betting, Dave and I thought we had died and gone to Heaven.

Over the years, the Stardust's Sports Book has been surpassed by bigger and glitzier sports books at the newer Vegas hotels and casinos. Nevertheless, it was with a touch of sadness that I read this fine Jeff Haney/Las Vegas Sun article on the closing of the Stardust's Sports Book last week. Interestingly, the success of the Stardust's Sports Book was based on a fundamentally sound business principle -- hire the most competent people available and then let'em rip:

The secret of the Stardust's success, [Scotty Schettler, the boss of the Stardust sports book from 1983 to 1991] said, lay in the skill of its oddsmakers. They not only could create point spreads with uncanny accuracy, but also set betting limits - higher than most, but not unmanageable - with precision.

"We were a true 'book joint,' " Schettler said. "We knew the limits we could get away with that would give us the maximum amount of action laying 11-10 both ways." [. . .]

For six years in a row, the book never sustained a losing month, Schettler said.

"The other guys said the Stardust was lucky," Schettler said. "I say it was skill."

A bookmaker in his native western Pennsylvania as a teen, Schettler held others from that part of the nation in high esteem.

"I hired all guys from back East," he said. "Kansas City was the furthest west I ever hired anybody from. They were bookmakers - no suits and ties."

What a place. There is nothing quite like the feeling of nailing and collecting on a three-game parley for the first time. Thank you, Stardust. Rest in peace.

Posted by Tom at 4:34 AM | Comments (1) |

Rumblings from Aggieland

It's not been a pleasant week in Aggieland.

As noted in Monday's weekly local football report, Aggie head coach Dennis Franchione made several dubious decisions late in last Saturday night's 17-16 loss to the Oklahoma Sooners. In particular, Aggies everywhere are wondering why Coach Fran decided to have Aggie QB Stephen McGee -- who was passing poorly in the game anyway -- throw a pass on 3rd and goal at the Sooners 2 yard line late in the game down 17-10 rather than simply hand the ball to the Aggies 275 lbs RB, Javorskie Lane on 3rd down and even 4th down, if necessary. After McGee was forced to throw the ball away under heavy pressure on the 3rd down play, Coach Fran settled for one of the most unpopular field goals in the history of Aggieland on 4th down.

Well, all of that went over about like the proverbial turd in the punch bowl in Aggieland and reopened the lingering doubts that many Aggie fans have about Coach Fran from last year's disastrous season (see here and here). It was in that volatile environment that Coach Fran faced media questions on Tuesday about his decision, and this is what he had to say:

"Hindsight is always easy, and you certainly rethink everything that you do in situations. We wouldn't have called the play on third down that we called if we didn't think it was going to work."

"Well, a lot of those [short yardage plays in which Lane has been successful] are not on the 2-yard line where defenses are bunched down as close as they are. A lot of them are in the field in a little bit different situations."

Apparently, Coach Fran was unaware of the fact that Lane had previously carried the ball on 3rd & 4th downs this season 27 times, resulting in 18 first downs and 6 TD's. In other words, an 89% success rate. Moreover, Lane has not been stopped short of a 1st down on 3rd or 4th down in the Ags' last seven games, including all six of the Aggies' Big 12 conference games. On 16 of his 18 successful 1st down conversions, Lane has run for more yardage than needed to make the 1st down.

In light of these facts, the rabid Aggie fans -- who were not pleased with the call to begin with -- are livid now.

With tough games looming at home against Nebraska and at Austin against Texas, the Aggies are squarely facing a potential three game losing streak to close the regular season and a minor bowl game, which will not sit well with most of the Aggie fan base. Win one of the next two games and the Ags will finish 9-3 and probably head to San Diego's Holiday Bowl, which most Aggies would consider a reasonably successful season given last year's disastrous season. Win both games and the Ags would finish 10-2 and head to the Cotton Bowl, which no one could complain about. Regardless of whether the Aggies win either of their next two games, my sense is that Coach Fran is safe for at least one more season. However, if the Aggies get blown out in both of those games -- not likely for a team that is only five points away from being undefeated -- then all bets are off.

Posted by Tom at 4:24 AM | Comments (0) |

November 8, 2006

They play for keeps at the Country Music Awards Show

One does get the impression from the video below that country-music singer Faith Hill does not believe that former American Idol Carrie Underwood should have received the Best Female Country Singer Award at Monday Night's Country Music Awards Show in Nashville.

The Hill-McGraw public relations machine was in full gear afterward.

Posted by Tom at 5:30 AM | Comments (0) |

Checking in down at the Stros farm

The all-consuming football season in Texas tends to blot out news on virtually any other sporting front, but the fall is also an important period for development purposes in professional baseball. And with the Stros currently trolling the expensive free agent market for some desperately-needed hitting and better left-handed relief pitching, a couple of top prospects are turning heads this fall.

Baseball Prospectus' Joe Sheehan likes what he sees ($) in the Arizona Fall League from Stros pitching prospect Troy Patton, who played last season at A Lexington and AA Corpus Christi:

The Astros’ Troy Patton looked very good in two shutout innings. He has been a starter his whole career, but he looks like he could be a lefty reliever for the ‘Stros—who have struggled to find one over the years—as early as this spring. He's not just a specialist; he has four pitches, including a very effective change-up according to [Jason Grey, author of the AFL Scouting Guide] Grey. His size—a slight 6-1—and his slider may doom him to a limited role, but he’s capable of much more. Ron Villone comes to mind.

Goodness knows that it's high time that the Stros quit rolling the dice on situational lefties out of the bullpen such as Mike Gallo and Trevor Miller.

But even more importantly, Sheehan reports that one of the most impressive players in the Arizona Fall League was Stros OF prospect Hunter Pence, who tore up the Texas League last season at AA Corpus:

[Brewers No. #1 prospect Ryan] Braun was the #2 name on everyone’s lips over the weekend. The guy at #1 is Hunter Pence, the Astros’ outfield prospect who left the league just before I arrived. Even with his short stay, Pence impressed everyone who saw him, being named the top position player by Jason Grey of fantasybaseball.com in his AFL Scouting Guide. Pence is an older prospect—he was 23 last year in the Texas League—and given the Astros’ fluid corner outfield situation, he could push for a job in Houston as early as this spring. Eric Byrnes was a popular comp, but I think a right-handed Rusty Greer works better.

If Pence could perform as well as Rusty Greer (149 RCAA/.387 OBA/.478 SLG/.865 OPS), the Stros would take that in a minute and rejoice. Baseball America's Chris Kline has more on Pence ($):

"A lot of people look at the guy and have no idea this guy hit 60 home runs over the last two years," a scout from an American League said. "He's ridiculous. There are plenty of (scouts) that look at him, see his approach and break him down negatively because he's anything but textbook, but the guy gets it done . . . with big-time power."

And above-average speed as well. In addition to those 59 homers, Pence stole a career-high 17 bags in 21 attempts for the Hooks. His approach might not be prototypical, but really, there is nothing prototypical about his game.

As he waits in the on-deck circle, he swings--non-stop. But the swing itself is the interesting thing. Pence wears only one batting glove in an era when it's hip to wear both and becoming more and more rare to wear none. He croutches down in his 6-foot-4 frame and uses a low, compact swing he repeats over and over, swinging at least four times before stepping into the batter’s box.

The bottom line is Pence might look just plain strange--and even he knows it. He wears his socks high, and is slightly bowlegged. But again, he gets it done.

"Like everyone says that I choke up and it's weird--everybody makes fun of me, even my mom," Pence said. "It's comfortable for me and that's the way I've always played. I'm not Captain Cool by any means. I just try to go out and play hard, do my job, have fun and help the team win."

So far this fall, Pence is hitting .362 AVG/.403 OBA/.603 SLG with three homers and 11 RBIs in 58 at-bats for Mesa. But everyone knew he could hit--it's his defense that has opened a lot of eyes this fall.

"He's the best guy out here right now," Solar Sox manager Pat Listach said. "There is nothing that screams fundamentals as far as hitting goes, but his defense has been outstanding." [. . .]

. . . Pence is playing strictly center and right field in the Arizona Fall League, getting good jumps, taking good routes to balls and turning in the occasional highlight-reel play. [. . .]

One scout compares Pence to major league outfielder Eric Byrnes for his unorthodox approach at the plate, his speed and the way he plays from day-to-day.

"This is a guy who has that undeniable energy," the scout said. "He's got that different approach, but to me, he's a bigger, stronger version of Byrnes who will hit for more power and give you some defensive versatility in the outfield.

"For me, he can play all three spots, with enough arm strength and power to be a legitimate everyday right fielder. But he's also showed enough burst and range to play center if you need him there. He's proven he can do a little bit of everything defensively--he's no longer a liability. He's a big league quality outfielder."

Making the jump from AA to the Major Leagues is an iffy proposition (see Willy Taveras), so don't expect Pence to make the Stros' this coming season. But based on his performance in the fall league, the Stros will now give him every opportunity to make the big league club in spring training. And regardless of whether he makes it onto the Stros' roster this fall, Pence's development is a big deal for the Stros, whose farm system has not produced an above-average Major League hitter since Morgan Ensberg in 2003 and not generated a really good hitter since Lance Berkman in 2000. Trying to find good hitters on the Major League free agent market is expensive, so Pence may just be the Stros' best alternative as they try to find that elusive, hard-hitting corner outfielder who can push them back into the MLB playoffs next season.

Posted by Tom at 4:46 AM | Comments (0) |

Perverting Justice

An organization called Perverted Justice -- a so-called "Internet Watch" group -- goes around the country and induces men to correspond with what they think are minor boys via email, instant messenging and chat rooms. However, the minor boys are really Perverted Justice operatives, who then turn over the evidence of solicitation to police authorities while notifying the news media about the impending arrest of the men for soliciting sex over the Internet with people they thought were underage boys. In turn, the police enjoy the publicity and allow the news media to tag along to video the arrest for the 10 o'clock news.

This past Sunday, a well-regarded 56-year old prosecutor, Louis Conradt, Jr.. of the North Texas town of Terrell killed himself as the police were knocking on his door to arrest him in a Perverted Justice-inspired sting operation. Of course, a Dateline NBC camera crew was outside Conradt's house when Conradt killed himself.

Although there is forensic computer evidence that Conradt had communicated over the Internet with other minor boys, there is no evidence that he had ever actually met any of the boys. Conradt clearly needed help for a personal problem, but that therapy did not include having a camera crew show up on his front porch to film the most humiliating moment of his life. What Conradt did is shameful, but what Perverted Justice, the police and the Dateline NBC reporters did to Conradt is much worse than the crime that they contend that their actions are attempting to deter.

Posted by Tom at 4:09 AM | Comments (3) |

November 7, 2006

The Accidental AG

GQ interviews former Attorney General John Ashcroft and it's an interesting read. For example, the following is Ashcroft's explanation on how he got into politics:

The way my life unfolded would have required the kind of vision that could make a man rich overnight. I mean, look at my career. I started out as a teacher. After five and a half years, the congressman from my district decides he’s resigning, so I decide to go and sign up. I couldn’t even name the counties in the district, but I said, “Well, I’m going to make an American election out of this.” So I go out with more naïveté than you could get in two dump trucks and a coal train. And it turns out that there are two other kooks—I put myself in the category—who also sign up. So it becomes a four-man primary, and I lose. But little did I know that in losing, I’d get the attention of the man who was being elected governor, Kit Bond, and his election would mean he vacated his position as state auditor, so he would appoint me to replace him. Now, if I had figured that out in advance, you would think that this is a guy whose counsel I should seek, because he can see around corners. But that’s the story of my life.

In another part of the interview, Ashcroft talks about one of his weaknesses:

You mentioned public outreach as a failure. What other failures did you have?

Oh, my gosh. How much time do you have? One thing, I’m too hasty to make decisions. Sometimes I think that I’m so right that I don’t need to consider things carefully. That’s when I have to be very careful. One good thing about the Justice Department is that there are lots of bright people. I mean, where they’re used to flyspecking: “Not so fast there.” “And on the other hand.” “Have you thought about this?” I staged meetings just for that purpose—to guard against my own propensity to make a snap judgment.

H'mm. Looks as if someone missed the "have you thought this through" meeting on the Justice Department's decision to prosecute Arthur Andersen out of business.

Posted by Tom at 4:46 AM | Comments (2) |

Houston's hot real estate market

While many U.S. real estate markets are cooling off, this Wall Street Journal ($) article reports that the Houston real estate market continues to march forward:

This sprawling city missed the real-estate boom that sent home prices soaring on the East and West coasts. Now, with much of the nation's housing market in retreat, it has yet to feel even a tremor.

In September, local sales of single-family homes and condominiums were up 17.7% from a year earlier, logging their 32nd straight month of increase, according to the Houston Association of Realtors. The median price of an existing single-family home: $143,400, up 3%.

By contrast, nationwide sales of residential real estate fell 14.2% in September, according to the National Association of Realtors. Home prices nationally were down 2.2%, retreating in such former hot spots such as Washington, Boston and San Francisco. The national median sales price for September for existing single-family homes was $219,800, according to the Houston Association of Realtors.

Houston's gains are nothing like those seen in the past decade in the Northeast and California, but that may be the secret to Houston's success and the reason a bubble is unlikely to develop here. Land here is abundant, and the city has some of the least-restrictive land-use and construction rules in the nation. Those factors help supply to keep pace with demand and keep prices within reach of a broad range of potential buyers.

"We haven't had a bad year in the past decade," says Lorraine Abercrombie, chairwoman of the local Realtors group and marketing director for Greenwood King Properties.

Houston's model is in stark contrast to cities such as Boston and San Francisco, which have strict zoning, exacting building codes and laws governing historical preservation. Some economists, including Edward Glaeser of Harvard University, say excessive regulation in such cities has slowed construction to the point where demand has outstripped supply, fueling a run-up in home prices.

In the once-sizzling markets where home prices are falling, housing costs are double, triple or even quadruple those of Houston. The danger, says Dr. Glaeser, is such places have priced out today's highly skilled "knowledge workers," forcing them to live in a more affordable locale where their contribution to the economy might not be as great. "These are places where only the elite can live," Dr. Glaeser says.

Not so Houston. Confined by neither oceans nor mountains, the Houston metropolitan area has plenty of room to spread out. What is more, the city has no zoning, weak historical-preservation rules and few tools to preserve open space.

University of Houston economics professor Bart Smith is Houston's leading expert on the local economy, and he has made the point for years that Houston's energy-based economy has traditionally been countercyclical to the national economy. This characteristic has lessened over the past 20 years or so as the local economy diversified in light of the relatively low energy prices over much of that period. But the the continued strong local real estate market indicates that at least certain Houston markets remain countercyclical to U.S. markets generally even though Houston's overall economy now tends to track the national economy to a much greater extend than in the past.

Posted by Tom at 4:32 AM | Comments (1) |

To vote or not to vote

It's Election Day 2006, and Houston's foremost political Charles Kuffner passes along that the Texas Secretary of State is predicting that only 36 percent of the registered voters in Texas will cast ballots.

On first impression, such a small turnout seems pretty pathetic.

But on second thought, Greg Mankiw explains why maybe that's not such a bad thing.

Nonetheless, I hope you vote in the election.

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

November 6, 2006

Finally, a plaintiff's case that tort reformers can love

Turnabout is fair play as this Third Circuit decision holds that the plaintiffs in a settled asbestos class action can pursue a class action against their lawyers for breach of fiduciary duty. The theory of the plaintiffs' case is that their former class action attorneys did not disclose to the plaintiffs fee arrangements that the lawyers routinely made with local counsel that allegedly led to lower settlement payments for the plaintiffs. Not the greatest theory in the world, but what the heck.

At any rate, a U.S. District Court declined to certify the class and granted summary judgment for the defendant plaintiff's lawyers, but a divided Third Circuit panel reversed and remanded on the grounds that the District Court used the wrong standard in evaluating the plaintiffs' claims. Thus, under applicable Texas law, the appellate court ruled that the plaintiffs' are entitled to proceed with their claims. As a result, a legal theory based on Texas law that tort reformers probably oppose is being used to pursue taking money out of the pockets of plaintiff's lawyers, which is certainly something that the tort reformers support. This is a great state, isn't it?

Hat tip to Robert Loblaw for the link to the Third Circuit decision.

Posted by Tom at 4:46 AM | Comments (0) |

Troubles in the pulpit

It was not a good week in the church business last week.

First, as this Findlaw article reports, the Baptist General Convention of Texas is trying to figure out what happened to $1.3 million that was raised to help start hundreds of churches in the Rio Grande Valley of Texas. Apparently, three pastors reported that they had started 258 churches in the Valley over the past decade, but only "five to 10" of those churches actually exist. Yup, those things happen even in the pulpit, folks.

Meanwhile, the Ted Haggard affair moved into the mainstream of the pre-election gamesmanship while distracting most from the real issue, which is the risk of elevating personality over worship within the megachurch movement in the U.S. (Ben Witherington has insightful comments on that issue here). The Richard Dawkins interview of Haggard below reveals that Haggard is indeed wound pretty tight, but my sense is that Dawkins does not come off looking any better than Haggard. I mean really. Why should Dawkins care that Haggard or his ilk talks to people about what Dawkins considers to be myths? Nobody is forcing these folks to go to church and it's not as if Dawkins suffers from a lack of forums in which to express his views. In that regard, here are the letters that Haggard and his wife Gayle wrote to the New Life Church congregation upon his removal from the church and which were read to the congregation yesterday. Gayle's letter includes the following observation, which is pretty remarkable under the circumstances:

For those of you who have been concerned that my marriage was so perfect I could not possibly relate to the women who are facing great difficulties, know that this will never again be the case.

Finally, from a far different and more civil time, Ann Althouse brings us this very clever interview between Woody Allen and Billy Graham. I particularly enjoyed Allen's answer to the question from the audience on his worst sin. Don't miss it.

Posted by Tom at 4:40 AM | Comments (3) |

2006 Weekly local football review

Giants 14 Texans 10

In a game that set offense back to the days prior to development of the T formation, the Giants (6-2) hung on to beat the Texans (2-6) as neither team could muster 300 yards total offense. About the only good thing about Texans QB David Carr's 5.7 yds per pass was that it was better than Giants QB Eli Manning's 5.6 yds per pass. The Texans actually had a shot at winning the game late in the 4th quarter when FB Jameel Cook coughed up a fumble after catching a short pass at the Giants' 35 yard line. That was the Texans' only turnover in the game, but the margin of error is pretty thin when the offense can only muster 250 total offense. The Texans travel to Jacksonville next Sunday for what could be an ugly revenge game with the Jaguars (5-3) before returning home for a winnable game the following Sunday against the Bills (3-5).

Oklahoma 17 Texas Aggies 16

There was good news and bad news about Texas A&M's (8-2, 4-2) loss in its big game on Saturday night against the Oklahoma Sooners (7-2, 4-1). The good news is that the Aggies generated over 200 yards rushing against a solid OU defense in almost beating the Sooners.

I'll leave the bad news to Mike Finger's column about the game in the San Antonio Express-News, which begins with the following:

Bob Stoops smiled as he approached his adversary at midfield, then put his arm around Dennis Franchione and whispered a few words of encouragement into his ear.

This is what all good gamblers do.

They always make sure the suckers keep coming back for more.

If Saturday night's showdown at Kyle Field was a poker game, Stoops was the seasoned card shark who knew exactly when to take the risk that would make his opponent flinch. And Fran was the sweaty-palmed mark who came so close to going all-in before losing his nerve.

Coach Fran's teams are now 1-11 in games against key Big 12 rivals Texas, Texas Tech, Oklahoma, and Nebraska, 14-16 in Big 12 play, and 4-14 against ranked opponents (wins coming against #25 Clemson ('04), #15 Okie State ('04), #25 Texas Tech ('04), & #19 Mizzou ('06)). The Cornhuskers (7-3, 4-2) invade College Station this Saturday and, if the Ags can't figure out how to throw the ball effectively against a top flight defense, then it's likely they will be 1-12 against the above-mentioned Big 12 rivals going into their day after Thanksgiving game against the Longhorns (9-1, 6-0) in Austin.

Suffice it to say that's not what Aggie boosters thought they were buying when they bought out Coach Fran's Alabama contract back in 2003.

Houston Cougars 27 Tulsa 10

In a battle for the Conference USA West Division lead, the Cougars (7-3, 5-1) utilized their usual balanced and difficult-to-defend offense while coming up with an unusually inspired defensive performance in cruising to victory before a raucous Homecoming crowd of 23,500 at Robertson Stadium. The Coogs put this one away by taking the lead with a long scoring drive immediately before halftime and then by coming out and tacking on another TD with the opening drive of the 3rd quarter. Although not well-known because of the Cougars' somewhat neglected stature on the local sports scene, Houston's Anthony Alridge -- a 5'9", 170 lbs. WR/RB sprinter -- is currently averaging 11.2 yards per carry on his 51 carries this season and is the most exciting Cougar player that I've seen since bowling ball RB Chuck Weatherspoon averaged over 9 yards a carry during the Run 'N Shoot days of the late 1980's and early 90's. The Coogs now go on the road at SMU (4-4, 2-2) and Memphis (0-4,1-7) to finish the regular season and, if the Coogs' defense can hold together for those two games, Houston has a good chance to host the C-USA championship game in early December.

Texas Longhorns 36 Oklahoma State 10

Perfectly-named Colt McCoy threw for a career-high 346 yards and three TD's in setting a Texas single-season record for touchdown passes with 27 and keeping the Longhorns in the middle of the race to meet either Michigan or Ohio State in the BCS championship game. The Horns go on the road next Saturday night to meet Kansas State (6-4, 3-3) before taking a week off before their big game against the Aggies on the day after Thanksgiving.

Rice 37 UTEP 31

The Owls (4-5, 3-2) continue to make my early season optimism about their prospects look good as they broke out to a 30-10 halftime lead against UTEP (4-5, 2-3) and held on for another win in Head Coach Todd Graham's increasingly successful first season. The bottom line on the Owls is that QB Chase Clement, RB Quinton Smith and WR Jarett Dillard are really good and give the Owls a decent shot of winning games in which their defense is not overwhelmed by the opposition's offense. The Owls have a tough game next week at Tulsa (7-2, 4-2), and then close the season at home against East Carolina (5-4, 4-2) and SMU (5-4, 3-2).

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

November 5, 2006

The Hubble Telescope Picture Archive

After more than a decade of fascinating discoveries and pictures, the Hubble Space Telescope got some good news last week -- NASA announced a Space Shuttle mission to repair and upgrade the observatory, which will be the fifth servicing mission for the Hubble.

Take a moment to review this fascinating archive of 100 of the best Hubble pictures and marvel at this wonderful conduit to viewing the universe.

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

November 4, 2006

The 2006-07 Houston Rockets

After a rather uninspiring effort against Utah on the road to start the season, the Houston Rockets open their 2006-07 home schedule tonight at Toyota Center against the Dallas Mavericks.

As noted here and here, the Rockets have performed poorly for the better part of a decade now and have been far surpassed during that time by Texas' two other NBA teams, the San Antonio Spurs and the Dallas Mavericks. After waiting too long to do so, Rockets' owner Les Alexander finally hired some new blood earlier this year for the Rockets' front office in the person of Daryl Morey, who is effectively taking over this year for longtime Rockets GM, Carroll Dawson. As this Wall Street Journal ($) profile explains, Morey represents a new wave of NBA executives who base their player evaluations primarily on statistical analysis of a player's contributions to his team's performance.

The early indications of Morey's effect on the Rockets are positive. The roster has been re-tooled since last season's disappointing 34-48 record, and such NBA experts as the Wages of Wins bloggers believe that the Rockets are primed for a good season, albeit still below the Spurs and the Mavs. Given the Rockets' decade of deterioration, I remain skeptical that the team will be much better than a .500 club this season -- the team still has glaring holes at power forward and point guard, which will result in rebounding and turnover problems. However, there is no doubt that Yao Ming, Tracy McGrady, Bonzi Wells and Shane Battier are a solid core of key players that is capable of turning the Rockets into a playoff-caliber team once the latter two players are integrated into the team's style of play. I will take the under on the current over/under of 46 wins, but it will not be shocking if this Rockets team surpasses 50 wins if Yao and McGrady are reasonably healthy and can play for 70 games or so.

Just don't expect the Rockets to have a better record than either the Spurs or the Mavs.

Posted by Tom at 4:38 AM | Comments (2) |

November 3, 2006

Berkowitz cashes in

So, as Peter Lattman reports, most recent Enron Task Force director Sean Berkowitz is the latest in a long line of former Task Force prosecutors who parleyed prosecuting unpopular Enron executives into a more lucrative career than government work. Berkowitz led the team that obtained convictions against Jeff Skilling and Ken Lay, but his main attribute as the Task Force director is that he was not as bad as his predecessor, Andrew Weissmann, who was primarily responsible for the economic and human carnage of putting Arthur Andersen out of business and of sending four Merrill Lynch executives to prison for over a year before their utterly unjust convictions were vacated and, in one case, reversed.

However, one interesting item about Berkowitz arose shortly after the Lay-Skilling trial when the New York Magazine reported that Berkowitz was having a whirlwind romance with Bethany McLean, the co-author of the original Enron expose', Smartest Guys in the Room. Inasmuch as McLean had covered the trial for Fortune magazine, both Berkowitz and McLean were careful to state publicly that they didn't start dating until after the conclusion of the trial. However, several reporters who covered the trial confided to me after the romance became public that they had suspected something was up between the two during the trial because of how chummy they had become.

All of which reminded me of something that occurred at an early stage of the Lay-Skilling trial. Taking a page from this earlier post that criticized the Wall Street Journal's coverage of the trial, lead Skilling lawyer Daniel Petrocelli sent a letter to the Fortune editor pointing out the rather clear conflict of interest that McLean and her Smartest Guys co-author, Peter Elkind, had in covering a trial in which they had a vested interest in the outcome. As this Talk News Biz post relates (the entire letter, published by Fortune on March 2, is here, but you have to scroll down), Petrocelli noted as follows:

“It is ironic that so much of Elkind and McLean’s criticism of Enron has been based on their claimed outrage about a confict of interest at Enron. These two have an obvious financial interest in having the trial — or at least the public’s perception of the trial — turn out consistent with the one-sided and ultimately cartoonish depiction of Enron and my client in their book and in the so-called documentary to which they have lent their names and other support.”

To which the Fortune Editor -- presumably not yet aware of the budding Berkowitz-McLean relationship -- replied self-righteously as follows:

“Peter Elkind and Bethany McLean are journalists of the highest reputation, as well known for their integrity as they are for their knowledge of Enron. While they have certainly chronicled the failings of the company and its management, they have neither a rooting interest nor a financial interest in the outcome of the trial.”

Yeah, right.

Posted by Tom at 4:40 AM | Comments (2) |

Eliot Spitzer, the bully

Given this record of criminalizing business interests for political gain, it's not surprising that New York's next governor was stacking the deck to obtain convictions in a number of his prosecutions. This David Hechler/Law.com article reports the ugly news:

Like the U.S. Department of Justice, New York state Attorney General Eliot Spitzer has also pressured companies to stop paying the legal fees of employees who face criminal charges. Spitzer appears to be the only state AG who has raised fee payment as an issue. [. . .]

Most of Spitzer's targets are financial institutions swept up in his probe of mutual funds. According to a Corporate Counsel review of 17 agreements that Spitzer's office struck with companies accused of market timing, nine settlements included "no indemnification" clauses. These provisions prohibit a business from paying the legal fees of indicted employees unless its bylaws require it. In one instance, Bank of America Corp. agreed to a no-indemnification clause even though its bylaws require it to pay fees. Moreover, the bank had already begun advancing expenses in at least one case.

Spitzer's office declined to comment on the no-indemnification clauses. (Spitzer is running for governor of New York.)

And remember that case involving the Bank of America executive? That would be the Theodore Sihpol case (see also here):

One corporate defense attorney who challenged Spitzer on fee payments is C. Evan Stewart of New York's Zuckerman Spaeder. Stewart represents former Bank of America financial adviser Theodore Sihpol III, who was indicted by Spitzer's office in 2004. Though Bank of America's bylaws required it to pay its employees' legal fees, Stewart says he had to sue the company to force the issue.

According to Sihpol's complaint, filed in Delaware Chancery Court in 2003, his attorney was told by a Bank of America lawyer that it had decided to "cooperate fully" with Spitzer's office, and any "request for advancement of [legal] expenses by Mr. Sihpol would be vetted with the attorney general." After the bank's lawyers submitted a written request to Spitzer's office, they later told Sihpol that expenses would not be advanced. But shortly before the suit was scheduled to go to trial, Bank of America agreed to pay.

In Stewart's view, the denial of fees is "fundamentally a denial of due process." He explains, "You're taking away the ability of people to defend themselves." A lawyer for Bank of America did not respond to a request for comment. In July 2005 a Manhattan jury acquitted Sihpol on 29 of 33 charges, deadlocking on the others. Three months later, the AG dropped those charges too.

By the way, if you want to see what happens when the government muscles a company to breach its usual policy of paying the defense costs of one of its junior executives charged with a crime, then see the sad case of Jamie Olis.

On one hand, New York voters are going to elect Spitzer as their new governor next week. On the other hand, New York officials are already searching for answers why businesses are fleeing New York for more favorable locations elsewhere. Spitzer's shameful pandering to the public's resentment of wealthy business executives may be good for him politically, but it's poor politics generally. If he continues the same policies as governor, then Eliot Spitzer will cost New York jobs and wealth, which are two things that he has never had to worry about.

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

Hit of the Year?

When your team is getting hammered 44-0, it must feel good to lay the wood in the way that Minnesota's Dominic Jones did to Ohio State's Ray Small last Saturday (see video below). It's the hit of the year.

Posted by Tom at 4:30 AM | Comments (1) |

November 2, 2006

Professor Podgor on the trial penalty

As noted in this prior post, one of the most perverse elements of the government's criminalization of business in the post-Enron era has been the trial penalty -- that is, the substantially longer prison sentences that executives face if they elect their Constitutional right to a trial instead of copping a plea bargain.

Over the past two years, Stetson Law Professor Ellen S. Podgor has been examining the trial penalty over at the White Collar Crime Prof Blog. In this Law.com op-ed, Professor Podgor analyzes the current landscape well:

Whether it be an individual or company, it is clear that those who play in the government's sandbox will be their friends and will reap enormous benefits through a sentence reduction or deferred prosecution. In contrast to the rewards received for cooperation, availing oneself of the constitutional right to trial by jury is an incredible gamble, with the stakes raised higher than ever before, as the sentencing guidelines provide for draconian sentences in white-collar cases. [. . .]

The government needs cooperators to make their cases. Cooperators also provide a more efficient system that reduces the costs for a government prosecution. But when the risk of a conviction after trial is so distinct from that received for cooperating with the government, it diminishes the right to a trial by jury, an essential part of our constitutional democracy.

Justice Byron White, in the famed case of Duncan v. Louisiana, 391 U.S. 145 (1968) noted the importance of this right when he stated that "the right to trial by jury is granted to criminal defendants in order to prevent oppression by the government." Id. at 155.

We have to wonder whether this right is fully realized when so many individual defendants and companies are folding to government demands because of the high risk entailed in proceeding to trial.

Add in the willingness of prosecutors to scapegoat business executives and appeal to the resentment of most jurors toward wealthy executives, and you have an environment where gross injustices such as what happened to the Merrill Four in the Nigerian Barge case and the sad case of Jamie Olis, among others. Meanwhile, a serial liar such as Andy Fastow is rewarded, even when it is clear that he testified falsely (see also here) against Jeff Skilling and Ken Lay.

This is not the product of a rational criminal justice system.

Posted by Tom at 4:50 AM | Comments (0) |

Those all-important quart-sized bags

I swear, you can't make this stuff up. The Wall Street Journal's airline travel reporter Scott McCartney reports ($) (see McCartney's follow-up article here) about the Transportation Security Administration's latest campaign to make airline travel a complete and utter aggravation:

An airport security screener sat at a Dallas-Fort Worth International Airport checkpoint beside a plastic tub filled with small cans of shaving cream and tiny tubes of toothpaste.

Were they contraband items that ran afoul of safety rules?

"No, people didn't have quart-size plastic bags," the Transportation Security Administration official said.

Where's Seinfeld when you need him? In a quintessential bureaucratic bedevilment, the TSA allows small bottles and tubes of liquids to be carried aboard airplanes only if they are enclosed in a quart-size, zip-top plastic bag. No gallon bags. No fold-over sandwich bags. Even if you have only one bottle on you, it must be carried in a quart-size, zip-top plastic bag. Screeners confiscate any nonconforming items or send travelers to ticket counters to check luggage.

That's just one of the frustrations travelers have found as TSA began implementing new rules on liquids last month and, in the eyes of some travelers, seemingly prohibited common sense. [. . .]

Either frustrated or confused by the new rules, or unable to squeeze all they need into a quart-size bag, passengers continue to check baggage at elevated rates, airlines say. And TSA is encouraging that for passengers who don't want to mess with quart zip-top bags.

All of this to reassure us that airline travel is safe from terrorists? Seems more like security theater to me.

Posted by Tom at 4:23 AM | Comments (0) |

Gil Brandt on David Carr

Texans QB David Carr gets the NY Times treatment this week as the local team prepares to be hammered by the Giants this Sunday in the Meadowlands. Former Dallas Cowboy personnel director Gil Brandt, who knows a thing or two about evaluating football players, is quoted as making the following observation about Carr:

“I think maybe sometimes a guy doesn’t have the tenacity or is too nice a guy to really play to his capabilities,” Brandt said in a telephone interview. “He’s an enigma to me.”

That is football-speak for questioning whether Carr has the heart and leadership ability to be an above-average quarterback in the NFL. Based on what I saw last Sunday, Brandt is spot on in his observation about Carr. With each passing week, it is becoming clearer than Carr is not going to be as good an NFL quarterback as contemporaries such as the Saints' Drew Brees or the Bengals' Carson Palmer. Indeed, Carr is at a point where he must answer the question of whether he is a better QB than Sage Rosenfels.

Carr's defenders point to his salty NFL quarterback rating, which was 4th in the league going into last week's debacle against the Titans. However, the NFL's QB rating is about as misleading as batting average in baseball in terms of evaluating a player's true effectiveness. QB Score per play -- a far more accurate statistic for evaluating QB play developed by the folks over at the Wages of Wins blog -- reflects that Carr is nowhere near the top level of NFL QB's. When rushing, sacks, and fumbles are considered along with passing stats, then Carr was ranked only as the 19th best QB in the NFL going into the Titans game. Based on his disastrous game against the Titans last Sunday, Carr was ranked dead last in the NFL for the week in QB Score per play.

Just to underscore the misleading nature of the NFL's QB rating, after Carr’s horrific Week Eight effort, he barely dropped in the NFL QB rating -- from 4th to 6th. In comparison, QB Score per play ranks him 23rd among NFL signal-callers, which appears to be much closer to where Texans head coach Gary Kubiak is rating Carr.

I don't think that level of performance is what Bob McNair had in mind when he selected Carr as the Texans' first draft choice in 2002.

Posted by Tom at 4:03 AM | Comments (1) |

November 1, 2006

Smartest Guys in the Courtroom?

Peter Elkind of The Smartest Guys in the Room fame has now turned his sights toward class-action plaintiff's law firm, Milberg Weiss Bershad & Schulman (prior posts here). In this lengthy article (hat tip to Peter Lattman) entitled The law firm of Hubris Hypocrisy & Greed, Elkind uses his same irreverent Smartest Guys-style in telling the tale of how Milberg Weiss became a criminal defendant. For example, take Elkind's description of L.A. lawyer-entreprenuer, Seymour Lazar, who the government alleges took illegal kickbacks from Milberg Weiss:

When Lazar appeared in federal court in L.A. earlier this year after being charged with fraud, conspiracy, and obstruction of justice in the Milberg Weiss case, it seemed a miracle he was still alive. A small, wild-haired man, Lazar, now 79, sat in a wheelchair and listened to the proceedings with a hearing aid. Later court filings detailing his medical history - and asking for the charges to be dismissed because the stress of a trial was likely to kill him - reported that Lazar was suffering from congestive heart failure, diabetes, renal failure, high blood pressure, anemia, gout, strokes, a suppressed immune system, and cancer (in remission).

Yet Lazar, who had pleaded not guilty, remained combative and defiant. He'd recently protested his innocence on the front page of the Wall Street Journal, declaring, "I swear, they treat me like an absolute thug. . . Who did I cheat? Did anybody get screwed?" While Milberg Weiss was insisting that it had no idea its "referral fees" were ending up with plaintiffs, Lazar admitted that Milberg had paid him. He simply argued that no one got harmed because the money came out of the law firm's pockets.

Seymour Lazar is a Great American Eccentric - a wily wheeler-dealer who hates wearing socks. He's retired from highly profitable careers in entertainment law, finance, and real estate. But that doesn't begin to do Lazar's history justice. During the 1950s he dated poet Maya Angelou; during the 1960s he served as manager for comedian Lenny Bruce and hung out with LSD guru Timothy Leary.

In the bestselling book, Supermoney, "Adam Smith" memorialized Lazar as "Seymour the Head" - "formerly a respectable Los Angeles lawyer with a respectable wife and child, who discovered arbitrage, mind-blowing chemicals, and a new life style all at the same time." After years spent overseas, he settled in Palm Springs, where he made tens of millions speculating in desert real estate.

Lazar was litigious too. He sued his wealthy father's estate after being disinherited. He sued Donald Trump and Carl Icahn. In 1980, after Hertz charged him $11.15 for returning a rented Pontiac without filling the tank, he led class actions against rental-car companies. Whatever the motivation, this "feisty little prick," as he was described by one chronicler of the 1960s LSD scene, allegedly received $2.4 million in kickbacks for serving as a plaintiff (with his relatives) in about 70 Milberg cases dating back to 1981.

There is much more. Read the entire article.

Posted by Tom at 5:49 AM | Comments (0) |

Stros buyout Bags' contract

The Stros made official yesterday what had been expected for the past couple years -- the club did not pick up the option year on injured slugger Jeff Bagwell's contract. As noted earlier here, Bags is easily the best player in Stros franchise history and should be a shoo-in for the Baseball Hall of Fame.

Although most folks know that Bagwell was an extraordinary player, relatively few people realize that he was one of the best hitters in Major League Baseball history over the course of his career. As regular readers of this blog know, I believe that the statistic of runs created against average ("RCAA") is the best measure of a baseball player's hitting ability. RCAA is a Lee Sinins-developed statistic that focuses on the most important statistic in baseball for a hitter, which is creating runs to help the hitter's team score more than the other team. Whereas more commonly cited statistics such as batting average can be highly misleading regarding a hitter's true effectiveness, RCAA is particularly insightful in evaluating hitters because it focuses on the two most important things in winning baseball games for a hitter -- that is, creating runs and avoiding making outs.

RCAA computes the number of runs that a particular player creates for his team relative to the number of outs that he makes, and then compares that number of runs to the number (zero) that a hypothetical average hitter would create while using an equivalent number of outs. Inasmuch as the hypothetical average hitter's RCAA is always zero, a player can have either an RCAA that is a positive number -- which indicates he is an above average hitter -- or an RCAA that is a negative number, which means that he is below-average hitter.

Moreover, RCAA is also a valuable tool in evaluating hitting ability because it allows for comparison between hitters from different eras. Inasmuch as RCAA measures a player's hitting ability against that of an average player in the player's league for each particular season, a player's career RCAA measures how that hitter compared to an average hitter during the hitter's career. Thus, comparing RCAA of hitters from two different eras allows us to compare how those hitters produced relative to an average hitter in their particular era, whereas comparisons of other hitting statistics -- such as on-base average, slugging percentage, and batting average -- are often skewed between players of hitter-friendly eras (such as the past 15 year or so) versus players of pitcher-friendly eras, such as the late 1960's and early 70's.

A review of Bags' career using RCAA as a the measuring stick reflects his greatness. He has the 9th best career RCAA among National League hitters since 1900:

1 Barry Bonds 1591
2 Stan Musial 1204
3 Rogers Hornsby 1081
4 Hank Aaron 1039
5 Willie Mays 1008
6 Mel Ott 989
7 Honus Wagner 938
8 Albert Pujols 691
9 Jeff Bagwell 680
10 Joe Morgan 657

In addition to the foregoing, Bagwell holds the modern National League record for career RCAA by a 1B:

1 Jeff Bagwell 680
2 Johnny Mize 638
3 Willie McCovey 536
4 Todd Helton 521
5 Albert Pujols 485
6 Bill Terry 425
7 Stan Musial 399
8 Keith Hernandez 371
9 Dolph Camilli 353
10 Will Clark 331

Finally, as noted several times before, Bags is far and away the career-leader in RCAA among Stros players, so much so that Lance Berkman is the only player at this time who even has a remote chance of catching him:

1 Jeff Bagwell 680
2 Lance Berkman 485
3 Craig Biggio 314
4 Jose Cruz 277
5 Cesar Cedeno 249
6 Jimmy Wynn 240
7 Bob Watson 216
8 Joe Morgan 170
9 Moises Alou 128
10 Terry Puhl 114

In addition to his extraordinary hitting ability, Bags was an excellent baserunner and a superb defensive player until his shoulder injury restricted his ability to throw over the final three seasons of his career. In short, Jeff Bagwell was the entire package, and it will be a long time before the Houston Astros organization and its followers will ever enjoy a player of comparable ability. Bagwell's complete career statistics are here.

Posted by Tom at 4:59 AM | Comments (0) |

All in the Family

Based on this article, it's safe to say that the family get-togethers of New Orleans Saints and former Austin Westlake High School quarterback Drew Brees aren't the stuff of a Norman Rockwell painting:

New Orleans Saints quarterback Drew Brees has asked his mother to stop using his picture in TV commercials touting her candidacy for a Texas appeals court.

"I think the major point here is that my mother is using me in a campaign, and I've made it known many times I don't want to be involved."

In commercials running on Austin stations, Mina Brees had been using a picture of her son in the uniform of his former team, the San Diego Chargers, to emphasize her ties to football.

"I think the major point here is that my mother is using me in a campaign, and I've made it known many times I don't want to be involved," Drew Brees said Monday.

Mina Brees, an Austin attorney, is running as a Democrat for a spot on Texas' 3rd Court of Appeals. She said replacement commercials that omit any mention of her son were taped last week and sent to stations on Friday.

She said she did not anticipate upsetting her son and that "everything in the ad was true."

She said her connection to football is relevant to her campaign because her father, a successful high school coach, used sports to teach her a strong work ethic that she would bring to the judicial bench.

Drew Brees, who won a state football championship with Westlake High School in suburban Austin, said he got no response from his mother when he first heard about the ads and called her to ask that she stop using them. His agent sent her a letter Oct. 20 threatening legal action, he said.

He called his relationship with his mother "nonexistent" after it crumbled six years ago when he refused to hire her as his agent.

Mina Brees said her son's allegations were a mischaracterization and that she had no intention of becoming his agent.

"I love Drew very much, and I'm very proud of him. But sometimes when people are following a career path, they change," she said.

Sounds as if Mrs. Brees and Marc O'Hair ought to get together and compare notes on child rearing.

Posted by Tom at 4:33 AM | Comments (1) |

October 31, 2006

Sugar Land SWAT

After the questionable police conduct during the incident at Walter's, I noticed this ABC-13 news blurb from last week, but have seen no follow-up news report since the incident:

A Sugar Land woman says police went too far when they burst into her home and arrested her boyfriend and son on drug charges. The raid left her dog dead and caused thousands of dollars in damage.

"It was bang, bang, bang, then there was a boom as they broke the door in, threw the fire grenade, and then shot the dog," said homeowner Margot Allen. "This all happened in anywhere from five to fifteen seconds."

That's how Allen's son and boyfriend describe what happened that day. Sugar Land police acted on a tip. They say they found traces of marijuana and cocaine in her trash after a month-long investigation.

"There's no crack done in my house," she said. "There's occasional marijuana in my house. I don't do it because I don't happen to like it."

Based on the evidence in the trash, a regional SWAT team arrived at the home. Police say they knocked, waited 30 seconds, and then broke in with guns and a concussion grenade. The house suffered $5,000 damage and one officer shot and killed Margot's golden lab, Shadow, when police say it charged toward one of the officers. What did officers find inside?

"A joint half the size of my pinky fingernail and then one about this big," she said, showing a length on her finger. "And not anywhere near this big around."

Let's see here. A SWAT team is deployed to a citizen's house because "traces of marijuana and cocaine" were found in the trash after a month-long investigation? Then, the citizen's house is heavily damaged and the citizen's dog is killed in the process of arresting a couple of fellows who enjoy smoking a joint in their home? Although a couple of potheads do not generally evoke a great deal of sympathy, is this what the citizens of Sugar Land truly want from a new police growth industry?

Posted by Tom at 4:58 AM | Comments (2) |

Big Tuna's World

In this NY Sunday Times article, Michael Lewis of Moneyball fame profiles Dallas Cowboy Head Coach Misérables, Bill Parcells:

Right now he is living alone in what amounts to a hotel room in Irving, Tex., whose sole virtue is that it is a 10-minute drive to both the Cowboys’ practice facility and Texas Stadium. It’s just him and whatever it is that keeps him in the game. For the longest time he pretended that he didn’t need it. He walked out of two jobs without having another in hand, and he has played hard-to-get with N.F.L. owners more times than any coach in N.F.L. history. After he quit the Jets, in 1999, he said at a press conference: “I’ve coached my last football game. You can write that on your little chalkboard. This is it. It’s over.” Now, even as his job appears to be making him sick, he has abandoned the pose. “As you get older,” he says, pointing to a screen, where the play is frozen, “your needs diminish. They don’t increase. They diminish. I need less money. I need less sex. But this — this doesn’t change.”

What this is, he can’t — or won’t — specify. But when your life has been defined by the pressure of competition and your response to it, there’s a feeling you get, and it’s hard to shake. You wake up each morning knowing the next game is all that matters. If you fail in it, nothing you’ve done with your life counts. By your very nature you always have to start all over again, fresh. It’s an uncomfortable feeling, but it’s nonetheless addictive. Even if you have millions in the bank and everyone around you tells you that you’re a success, you seek out that uncomfortable place. And if you don’t, you’re on the wrong side of the thin curtain that separates Cyclone Hart from Vito Antuofermo. “It’s a cloistered, narrow existence that I’m not proud of,” says Parcells. “I don’t know what’s going on in the world. And I don’t have time to find out. All I think about is football and winning. But hey — ” He sweeps his hand over his desk and points to the office that scarcely registers his presence. “Who’s got it better than me?”

I'm convinced that a part of the fascination with Parcells is similar to the enchantment that some folks have in going to auto races in anticipation of a spectacular wreck -- they just want to be there when he finally blows his stack. Based on Lewis' article, it probably won't be too much longer until Parcells does.

Posted by Tom at 4:31 AM | Comments (1) |

Calorie restriction and longevity

All the rage these days in longevity circles is calorie restriction, so this Julian Dibbell/New Yorker article reports on Dibbell's two-month test on the the ultra-extreme Calorie Restriction Diet -- an 1,800 calorie daily diet:

I’ve been starving for the past two months, actually, and that’s precisely what the party is about: My dinner guests—five successful urban professionals who for years have subsisted on a caloric intake the average sub-Saharan African would find austere—have been at it much, much longer, and I’ve invited them here to show me how it’s done. They are master practitioners of Calorie Restriction, a diet whose central, radical premise is that the less you eat, the longer you’ll live. Having taken this diet for a nine-week test drive, I’m hoping now for an up-close glimpse of what it means to go all the way. I want to find out what it looks, feels, and tastes like to commit to the ultimate in dietary trade-offs: a lifetime lived as close to the brink of starvation as your body can stand, in exchange for the promise of a life span longer than any human has ever known.

Seat belts, vaccines, clean tap water, and other modern miracles have dramatically boosted average life expectancies, to be sure—reducing annually the percentage of people who die before reaching the maximum life span—but CR alone demonstrably raises the maximum itself. In lab studies going back to the thirties, mice on severely limited diets have consistently lived as much as 50 percent longer than the oldest of their well-fed peers—the rodent equivalent of a human life stretched past the age of 160. And it isn’t just a mouse thing: Yeast cells, spiders, vinegar worms, rhesus monkeys—by now a veritable menagerie of species has been shown to benefit from CR’s life-extending effects.

The WSJ chimes in with this article ($), which focuses on a group of scientists who are attempting to mimic calorie restriction's antiaging effects with medicines. At the same time, this NY Times article reports on a Wisconsin-based research project that indicates that rhesus monkeys on a calorie restricted diet are much healthier than their counterparts that are eating a normal diet. Meanwhile, this NY Times article reports on a researcher's work that indicates that the 65% or so of Americans who are overweight or obese got that way, in part, because they didn’t realize how much they were eating.

After all this, please excuse me while I go get a gelato. ;^)

Posted by Tom at 4:12 AM | Comments (1) |

October 30, 2006

Markets are the darndest things

Over the past two decades, feral hogs have been a hugely destructive force in rural Texas as they relentlessly tear up productive farm and ranch land. Moreover, with few predators, the hogs have multiplied exponentionally to the point where they are now commonly seen in suburban areas around Texas' large cities. So, what's the solution to controlling these feisty beasts?

According to this NY Times article, it's markets -- namely demand for feral hog meat in restaurants -- that offers the most promising solution yet:

[Feral hog meat] has also become lucrative as Europeans and an increasing number of Americans clamor for wild boar. Mr. Richardson [a hunter of hogs] said he made $28,000 last year selling live feral hogs.

“I think it’s a great health-conscious niche market,” said Dick Koehler, one of Mr. Richardson’s customers and the vice president of Frontier Meats, based in Fort Worth. “It has real potential for growth.”

Mr. Koehler said that about 60 percent of the processed hog meat from his plant ended up on the tables of fancy restaurants in Europe, but that its popularity was growing in the United States. Each year, his company ships more and more hog meat to American restaurants and specialty supermarkets to feed the demands for organic food, Mr. Koehler said.

A certain nephew of mine is going to be very interested in this news.

Posted by Tom at 4:40 AM | Comments (2) |

The insolvency of big-time college athletics

My son Cody and I enjoyed a splendid Texas autumn afternoon on Saturday while attending the University of Houston's football game against Central Florida. But only about 13,000 other folks showed up for the highly-entertaining game in an enjoyable on-campus environment, and that's sadly an all-too-common experience for UH.

UH is a member of Conference USA, which was formed a decade or so ago by about a dozen universities that were not offered membership in one of the Bowl Championship Series conferences. As a result of its creation by necessity rather than design, few of the C-USA members have natural rivalries with other members and virtually all of the members struggle to attract fans to their games. UH's situation is particularly difficult because UH competes in a market that offers NFL football and two effectively local universities (A&M and Texas) that compete in a BCS conference (the Big 12) with many traditional rivals. And that does not even include the competition represented by Texas' hugely popular high school football scene.

With that backdrop, this Vic Matheson post over at the Sports Economist is the most cogent analysis that I've seen in some time of the underlying instability of the present structure of big-time college football. Using Florida International University's recent foray into major college football as an example, Matheson concludes as follows:

Big-time college athletics is an lure that many schools find difficult to resist. The reality is, however, that even revenue sports such as football and men’s basketball are money losers for most programs. Certainly FIU must be rethinking their decision to step onto the football field.

Despite a storied history in intercollegiate athletics and excellent on-campus facilities, the University of Houston is facing the same problems as Florida International in attempting to finance a big-time intercollegiate athletic program without the infrastructure of a BCS conference affiliation. Moreover, virtually every other non-BCS conference university -- and even a number of the universities in BCS conferences -- are experiencing the same dilemma. Although a model exists for the reorganization of big-time college football and basketball into a true adjunct to the academic experience rather than minor league professional enterprises, my sense is that the current instability in the structure of college football will more likely trigger the development of three or four super conferences comprised of member institutions that are willing to pay the price -- both financially and morally -- to compete at the highest levels of minor league professional football and basketball.

Although such a development may be the natural evolution of big-time intercollegiate football and basketball, I can't help but think that something valuable -- such as the old Southwest Conference and UH's intense rivalries with UT and A&M -- is lost from the fabric of the most university communities as intercollegiate football and basketball mimic professional sports franchises.

Posted by Tom at 4:35 AM | Comments (2) |

2006 Weekly local football review

Titans 28 Texans 22

The Texans (2-5) returned to earth with a thud after last week's unlikely victory over the Jaguars as Titans and former Longhorn hero Vince Young threw and rushed for a TD in a game that the Texans could have easily won if QB David Carr had shown up to play. In a curious relapse to his play for most of the past four seasons, Carr reverted to his deer-in-the-headlights look as he coughed up a couple of fumbles (one for a Titans' TD) and an easy interception, so Coach Kubiak replaced him early in the 2nd half after the second of his fumbles. Carr's performance on the field was bad, but my sense is that his demeanor on the sideline is even more telling regarding whether the Texans should continue hitching their wagon to him as the franchise QB.

Carr essentially looked aloof and somewhat clueless on the sideline after each incident of his poor performance. There is certainly nothing wrong with not getting overly down on oneself for making demoralizing mistakes that hurt your team and Carr certainly said all the right things after the game. But appearing not to give a damn about those mistakes during the game on the sidelines -- or worse, acting as if the mistakes were not primarily his fault -- is a good way to lose your teammates' respect fast. In arguably the most important development of this game, the Texans seemed to respond to backup QB Sage Rosenfels much better than Carr, which -- as John Lopez notes -- is an ominous sign for Carr's future in Houston. The Texans really needed to win this game because they don't have much of a chance in their next two, at the Giants and at the Jaguars. Look for the Texans to be 2-7 when they have their next realistic chance for a win in Week 11 at home against the Bills.

Texas Longhorns 35 Texas Tech 31

This was the tale of two games as the Red Raiders sprinted to a 21-0 first quarter lead and then the Horns (8-1, 5-0) methodically hammered the Raiders 35-10 over the final three quarters. Although Longhorn QB Colt McCoy's 325 yds total offense (256 yds on 21-31-1 passing and 68 yds rushing on 9 carries) was the Horns' offensive star, this game was really decided by the Longhorns' defensive adjustments at halftime that allowed the Horns' defense to pitch a shutout against the high-powered Tech offense in the second half. Of course, two key 4th quarter, fourth down spot calls by the referees that went in the Longhorns' favor were huge breaks for Texas. The Horns have a good chance of continuing to climb the BCS poll (Texas remained seventh in the latest BCS standings released Sunday, but with only .023 points separating the fourth through seventh spots) as they face Oklahoma State (5-3, 2-2) at home and Kansas State (5-4, 2-3) on the road before ending the season at home against A&M (8-1, 4-1) and then either Missouri (7-2, 3-2) or Nebraska (6-3, 3-2) in Kansas City's Big 12 title game in early December.

Texas Aggies 31 Baylor 21

The surprising Aggies (8-1, 4-1; No. 21 in the BCS standings) continued their effective balanced, ball-control offense with no turnovers and threw in true freshman RB Michael Goodson's electrifying 64 yard TD run to break open a tied game in the 4th quarter. I don't think that the Ags will beat both Oklahoma (6-2, 3-1) and Nebraska (6-3, 3-2) in their next two games before their annual showdown with Texas. However, the Ags just might, particularly if they can continue their exceptional characteristic of not turning the ball over.

Houston Cougars 51 Central Florida 31

My son Cody and I enjoyed a perfect Texas autumn afternoon while taking in this game, and we certainly came away entertained. The Cougars (6-3, 4-1) play a different type of game, combining a high-powered, idiosyncratic offense with a defense that couldn't stop a hard-chargin' marching band to provide an exciting -- if at times frustrating to watch -- brand of football. In this game, the Coogs burst out of the gate to take 10-0 and 17-7 first half leads, only to take a nap in the 2nd quarter to allow UCF to take a 21-17 halftime lead. Then, in the 2nd half, Houston's offense essentially became unstoppable and, when the Cougars defense finally got a couple of stops on UCF early in the 4th quarter, the Coogs cruised to victory. Houston plays for the C-USA West Division lead next week at home against Tulsa (7-1, 4-0), and then finishes out the season against SMU (4-4,2-2) and Memphis (1-7, 0-4) on the road. One would think that the latter two games would be sure wins for the Cougars, but UH's defense is so porous that no game is a sure win.

The Rice Owls (3-5. 2-2) were off this week before hitting the road to play UTEP (4-4, 2-2) and Tulsa over the next two weekends.

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

October 29, 2006

That lovable Elk

Houston's Steve Elkington is not only an outstanding professional golfer, but he is witty and outspoken. So, it was no real surprise that this Age article contains the following observation by the acerbic Elk from this week's Chrysler Championship at Florida's venerable Innisbrook Golf Club:

"This is just a good course, one of the better ones we play," said the battle-hardened veteran, who trailed American leader Brian Gay by three strokes at demanding Innisbrook.

"Some of the crap we play on is ridiculous. As big as the tour is, you'd think we could play some better courses."

H'mm. I wonder if "some of the crap" he is referring to is this one?

Posted by Tom at 4:24 AM | Comments (0) |

October 28, 2006

Joe Niekro, R.I.P.

Former Stros pitcher Joe Niekro died yesterday at the age of 61 in Tampa, Florida, reportedly of a brain aneurysm. Niekro pitching in 22 Major league seasons from 1967 through 1988 with seven teams, including the Stros, the Cubs, the Padres, the Tigers, the Braves, the Yankees and the Twins. Neil Hohlfeld's Chronicle article on Niekro's death is here, the NY Times obituary is here and don't miss former teammate Larry Dierker's heartfelt reflections on Niekro here.

Niekro and his Hall of Fame brother Phil were two of the best knuckleball pitchers of that era and still hold the Major League record for total wins by brothers with 539 (Joe accounted for 221 of those, 144 with the Stros). Although both Niekros relied on the knuckleball as their out pitch, Joe actually threw a variety of pitches in addition to the knuckler while Phil threw the knuckleball exclusively.

For his career, Niekro ended up being a below-average National League pitcher -- he had a -42 career runs saved against average (RSAA, explained here). However, the Stros were fortunate to have Niekro playing for the club during 11 of his best seasons. Niekro pitched for the Stros from 1975-85, and he was a workhorse on the Stros pitching staffs (along with Nolan Ryan and J.R. Richard) of the first Stros teams that were serious playoff contenders in the 1979-81 seasons.

Niekro secured his place in Stros lore during the 1979 and 1980 seasons. In 1979, Niekro was named to the National League All-Star team, but was not allowed to play in the game by the NL manager, Dodgers' manager Tommy Lasorda. During the ensuing pennant race between the Stros and the Dodgers, Stros fans never let Lasorda forget his All-Star snub of Niekro.

Then, during the 1980 season, when the emerging star Richard was struck down by a tragic stroke at mid-season, Niekro stepped up and pitched brilliantly in the Stros' 7-1 win over the Dodgers in their one-game playoff after the Stros had blown a three-game lead by being swept by the Dodgers in the last series of the regular season. That win catapulted the Stros into their first post-season playoff series ever, where Niekro put together another incredible performance by pitching a record 10 shutout innings in a 1-0, 11 inning Stros victory in the third game of the classic 1980 League Championship Series against the eventual World Champion Phillies. In three postseason games with the Astros and Twins, Niekro worked 20 innings and allowed no earned runs.

Although Niekro won 21 and 20 games for the Stros in the 1979 and 1980 seasons, his best season for the Stros was actually 1982, when he was 17-12 and saved 33 more runs than an average National League pitcher that season. That was by far his best RSAA during any season in his career. Niekro has more wins than any pitcher in Stros history, but other than his career 1982 season, Niekro never had another RSAA greater than 8 while pitching for the Stros and he had a negative RSAA (reflecting below-average performance) in five of his 11 seasons with the Stros. As a result, Niekro is only 21st on the career RSAA list among Stros pitchers:

However, Niekro is a solid sixth in lowest earned run average for Stros' pitchers who have pitched at least 1,000 innings for the Stros:

Finally, as noted above, Niekro has won more games for the Stros than any other Stros pitcher:

Niekro had a colorful career, including inadvertently helping Bruce Sutter make the Hall of Fame, drawing a suspension for being caught with a nail file on the pitching mound while pitching for the Twins in the 1987 American League pennant race, and finally appearing in the 1987 World Series a Major League record 19 years' and 138 days' service (over the course of 21 seasons) after beginning his Major League Baseball career. Since retiring from Major League Baseball in 1988, Niekro has been enjoying watching the development of his son, Lance Niekro, who currently plays first base for the San Francisco Giants.

Niekro's career statistics are below (hit the time permalink below to review the all columns of the stats, a couple of which are cut off on the right below). A pdf of his stats is here and a pdf with explanations for the statistical abbreviations is here:

Posted by Tom at 4:13 AM | Comments (1) |

October 27, 2006

More trouble across the border

Following up from this post from a year ago regarding the increased drug-related violence along the Texas-Mexico border, this NY Times article reports on a particularly gruesome uptick in the violence -- beheadings of rival gang members:

An underworld war between drug gangs is raging in Mexico, medieval in its barbarity, its foot soldiers operating with little fear of interference from the police, its scope and brutality unprecedented, even in a country accustomed to high levels of drug violence.

In recent months the violence has included a total of two dozen beheadings, a raid on a local police station by men with grenades and a bazooka, and daytime kidnappings of top law enforcement officials. At least 123 law enforcement officials, among them 2 judges and 3 prosecutors, have been gunned down or tortured to death. Five police officers were among those beheaded.

In all, the violence has claimed more than 1,700 civilian lives this year, and federal officials say the killings are on course to top the estimated 1,800 underworld killings last year. Those death tolls compare with 1,304 in 2004 and 1,080 in 2001, these officials say.

By the way, a fence will not stop this particular problem from spilling over the border.

Posted by Tom at 4:49 AM | Comments (2) |

Scarcity rents and oil prices

Clear Thinkers favorite James Hamilton is thinking about oil prices again, and that's always a good thing. This time, Professor Hamilton examines the impact that scarcity rents are having on oil prices as the markets increasingly adjust for the risk of resource exhaustion:

My own view is that, for most of the past century, Dave [Cohen']s inference is exactly correct -- the resource exhaustion was judged to be sufficiently far off as to be ignored. However, unlike those whom Dave terms the Cornucopians, I do not infer that the next decade will necessarily be like the previous century. Certainly declining production from U.S. oil reservoirs set in long ago. And if one asks, why are we counting on seemingly geopolitically unreliable sources such as Iraq, Nigeria, Angola, Venezuela, and Russia for future supplies, and transferring vast sums of wealth to countries that are covertly or openly hostile to our interests, the answer appears to me to be, because we have no choice. Resource scarcity in this sense has already been with us for some time, and sooner or later the geological realities that governed U.S. oil production are also going to rule the day for the rest of the world's oil producing countries. My expectation has accordingly been that, although scarcity rents for oil were irrelevant for most of my father's lifetime, they would start to become manifest some time within mine. And I have been very interested in the question of when.

Read the entire post, and then try to resist calling your commodities broker. ;^)

Posted by Tom at 4:47 AM |

Marble Slab and the ice cream wars

Houston-based Marble Slab Creamery, a premium ice-cream franchisor, is featured along with a couple of competitors in this NY Times article that describes their battle as the fight to become ice cream's equivalent of Starbucks -- "a ubiquitous chain offering a high-priced, high-quality version of a relatively mundane product."

Marble Slab opened its first store in Houston in 1983 and now has 371 franchises in the United States, Canada and the United Arab Emirates, and another 220 under development. The company estimates this year’s sales will from $75 to $90 million, with sales at established stores increasing by 3 percent. Its main competitor is Phoenix-based Cold Stone Creamery, which has expanded to 1,400 units over the past five years, but which has suffered sales erosion both of the past two years.

By the way, Marble Slab's ice cream is better than Cold Stone's, too.

Posted by Tom at 4:46 AM | Comments (2) |

October 26, 2006

The Godfather of Microcredit

Don't miss this Connie Bruck/New Yorker article on Muhammad Yunus, the Bangladesh banker and economist who was awarded this year's Nobel Peace Prize for his development of microcredit, which is simply the extension of small loans to entrepreneurs too poor to qualify for traditional bank loans (a recent WSJ ($) op-ed by Yunus is here). Interestingly, an unexpected force is competing with microcredit:

[Microcredit promoters] say that the biggest obstacle to commercialization of the sector is philanthropic capital. They say that it distorts the market—not only by filling channels that might otherwise draw commercial investors but also by keeping unsustainable programs alive.

On the other hand, philanthropy is also a key source of capital for microcredit:

The idea of reaching billions of the poor by achieving “scale”—a word invoked ceaselessly in the microfinance community—has enticed foundations, rich individuals, even investors into channelling millions into microfinance. The $1.2-billion Michael and Susan Dell Foundation—established by the founder of one of the world’s largest computer manufacturers—has begun making grants to microfinance institutions in India, a country of 1.1 billion people, most of whom have no access to financial services. In October, 2005, Google established a philanthropic entity called Google.org, with seed money of about a billion dollars, to fight disease, global warming, and poverty; microfinance is expected to be a key component of its poverty portfolio. And last April the Bill and Melinda Gates Foundation announced that it would devote an undisclosed amount of money to expanding financial services for the poor in developing countries. Dr. Rajiv Shah, who oversees the new Gates program, said of microfinance, “This can reach hundreds of millions of people, and do so in a way that helps them move out of poverty and that sustains over time.”

Hat tip to Tyler Cowen for the link to the New Yorker article.

Posted by Tom at 4:38 AM | Comments (1) |

A Wonder of West Texas

The New York Times discovers one of the many remarkable features of Texas -- the oasis in the West Texas desert known as Balmorhea. 200 miles from El Paso near Pecos, Balmorhea has a remarkable 3.5 million gallon, spring-fed pool that supports a varied aquatic ecosystem, including tiny tetra fish, huge catfish and rare pupfish. Scuba divers say that the water clarity is unparalleled, but the remote location of the park means that the park is never crowded. Read the entire article and learn about one of Texas' treasures that even many Texans know nothing about.

Posted by Tom at 4:17 AM | Comments (0) |

Now, this is pressure

Canadian Press golf writer Doug Ferguson sets up the Chrysler Championship that begins today at Innisbrook in Florida, a mostly forgettable affair except that it incongruously generates some of the most intense pressure of the entire PGA Tour season. It's the final full-field PGA Tour event of the year and, thus, is the last chance for Tour players to earn enough money to achieve full exempt status for next year's PGA Tour events:

This week is mostly about money. The Chrysler Championship is . . . a time for players to pay more attention to dollars and cents than birdies and bogeys. The bottom 120 spots on the money list will be determined, with significant stops down the ladder at No. 30 (Tour Championship), No. 40 (Masters invitation), No. 125 (full status next year) and No. 150 (conditional status).

The top 125 can participate in any PGA Tour event that they choose. Conditional status players -- those Tour players who finish between No. 126 and No. 150 -- comes in behind those players who earn their PGA Tour cards through the PGA Qualifying School Tournament or the Nationwide Tour. Although not as secure as fully exempt status, most conditional status players can at least get into enough events to have a shot at earning enough to get into the top 125. However, if a player finishes outside the top 150, then it's either back to the second stage of Q-school, spend the following year playing in a lot of pro-ams and begging for sponsor exemptions into tournaments, or trying to eke out a living on the Nationwide Tour.

There is also competition this week to finish in the the top 40 (to qualify for The Masters) and the top 30 (to qualify for the season-ending Tour Championship tournament), but the competition for those spots is between successful players trying to become a bit more successful. On the other hand, the competition to land in either the top 125 or the top 150 is more compelling because it often involves players who are literally fighting for their livelihood. Ferguson passes along the experience of Tour veteran Paul Azinger from a couple of years ago:

In his 25 years on the PGA Tour, money and prestige are the only things that ever made Paul Azinger choke.[. . .]

Two years ago, he was No. 123 on the money list and seemingly in good shape until a bogey on his 17th hole and a three-putt bogey on his final hole that caused him to miss the cut by one shot. He screamed in disgust as he walked off the course, and the real agony set in two days later when he wound up at No. 126.

Zinger is on the brink again this season, just $22,000 ahead of the 125th player on the money list. Longtime Tour players John Cook and Mark Calcavecchia are two of the players just below the 125th place on the money list and will be among those grinding away at the tournament.

Posted by Tom at 4:04 AM | Comments (0) |

October 25, 2006

The media's mistreatment of Jeff Skilling

As noted here, here, here and several other times on this blog over the past couple of years, the mainstream media's coverage of the Enron-related criminal trials has been spotty at best, shameful at its worst, particularly as it embraced and perpetrated the Enron Myth in reporting on the trial and sentencing of Jeff Skilling. Thus, this Ayn Rand Institute press release of yesterday caught my attention:

The Media's Mistreatment of Jeff Skilling

Irvine, CA--Upon hearing the news that former Enron CEO Jeffrey Skilling was sentenced to 24 years, most Americans, trusting the newspaper articles and books they have read on Enron, think that justice has been served. But, said Alex Epstein, a junior fellow at the Ayn Rand Institute, "Jeff Skilling has not gotten justice, and the media bear a major portion of the blame.

"Few Americans know that during Skilling's trial, the prosecution came nowhere near proving its central allegation that Jeff Skilling engineered a conspiracy to defraud investors. Few know that Skilling, upon leaving Enron five months before its collapse, destroyed no documents, nor did anything else resembling a criminal cover-up. Few know that the prosecution, unable to prove a conspiracy, spent huge swaths of the trial taking pot-shots at Skilling with issues not even mentioned in the indictment, such as the failure of Skilling, a multi-millionaire many times over, to disclose a failed $50,000 investment to Enron's board.

"The media's misportrayal of the case against Skilling long predates the trial. Ever since the fall of Enron, most of the media have treated as fact every conceivable smear against Skilling made by ax-grinding prosecutors or ex-Enron employees, while treating as absurd Skilling's claim that he neither engineered a conspiracy nor lied to investors.

"There can be no doubt that the media's treatment of Skilling contributed to his conviction for a phantom conspiracy--and to the outrageous 24-year sentence that he has now received. And the mistreatment of Skilling is part of a broader trend: the trend of treating businessmen as guilty until proven innocent. Our journalists and intellectuals, accepting the idea that the pursuit of profit is morally tainted, assume that whenever anything goes wrong in business, it is the result of crooked behavior by greedy, rich CEOs--and slant their coverage accordingly. This practice is putting numerous innocent men in jail, and instilling terror throughout corporate America.

"During Skilling's appeal, let us call for the media to start treating Skilling--and all businessmen--fairly."

The mainstream media's slanted coverage of Enron in general and Skilling in particular is a subject that is ripe for examination. We have not heard the last of this issue.

Posted by Tom at 4:31 AM | Comments (3) |

A fascinating peek at the descent into Alzheimer’s

When he learned in 1995 that he had Alzheimer’s disease, William Utermohlen, an American artist based in London, began his final project -- drawing self-portraits during his descent into dementia and ultimately Alzheimer's. This NY Times article reports that Utermohlen's work is being exhibited this week by the Alzheimer's Association at the New York Academy of Medicine in Manhattan:

The paintings starkly reveal the artist’s descent into dementia, as his world began to tilt, perspectives flattened and details melted away. His wife and his doctors said he seemed aware at times that technical flaws had crept into his work, but he could not figure out how to correct them.

“The spatial sense kept slipping, and I think he knew,” Professor [Patricia] Utermohlen [William Utermohlen's wife] said. A psychoanalyst wrote that the paintings depicted sadness, anxiety, resignation and feelings of feebleness and shame. [. . .]

Mr. Utermohlen, 73, is now in a nursing home. He no longer paints.

His work has been exhibited in several cities, and more shows are planned. The interest in his paintings as a chronicle of illness is bittersweet, his wife said, because it has outstripped the recognition he received even at the height of his career.

Colleen Carroll Campbell, who has written extensively about Alzheimer's, observes that the disease "embodies everything we fear most about aging -- weakness and dependence, humiliation and oblivion." Nearly half of Americans over the age of 35 know someone personally who is at some stage of dementia, and as Americans are living longer, Alzheimer's is claiming more victims. About 4.5 million Americans suffer from Alzheimer's today, which is more than double the number who had the disease just 25 years ago. Utermohlen's paintings provide us with an important perspective on this insidious disease as we confront the difficult issues that result from it.

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

Litmus test run amok

Earlier in the week, it was the Democrats making silly. But today, this Washington Post editorial reports that a Republican senator from Kansas is one-upping the Democrats in the absurdity department:

IF YOU THOUGHT that fights over judicial nominations couldn't get any worse, consider the case of Janet T. Neff, whom President Bush has nominated to a federal district judgeship in Michigan. Judge Neff, who serves on the Michigan Court of Appeals, is part of a multi-judge deal between the White House and Michigan's two Democratic senators resolving a long-standing fight over federal court nominees from that state. Yet in reaching an accommodation with the home-state senators, Mr. Bush finds himself with another problem. For Judge Neff, it turns out, once attended a commitment ceremony for a lesbian couple -- and that has Kansas Sen. Sam Brownback (R) reaching for the smelling salts and blocking the nomination.

Mr. Brownback has said he wants to satisfy himself that the judge was not presiding over an "illegal marriage ceremony" in Pittsfield, Mass., in 2002 -- before the state legalized same-sex marriage. He has written to Judge Neff asking for an explanation, his spokesman says, and will hold up her nomination until he learns the nature of the ceremony and its legality. . . . An administration official says Judge Neff has told Mr. Brownback that she didn't preside [over the ceremony].

Blocking a long-delayed judicial nomination by your party's President because the nominee attended a commitment ceremony between a couple of gay friends? Even had the judge "presided" over the non-binding, symbolic ceremony, what difference does that make? What on earth is Brownback thinking?

President Bush has got to be thinking that his Crawford ranch is looking better every day.

Posted by Tom at 4:02 AM | Comments (0) |

October 24, 2006

What Skilling was really sentenced for

Former Enron CEO Jeff Skilling was sentenced on Monday to spend most of the rest of his life in prison for causing Enron's bankruptcy and resulting loss to investors. However, Skilling was neither prosecuted nor convicted for that crime.

Skilling began working at Enron in 1990 as the sole employee and head of a wholesale division, was made president and chief operating officer of Enron in 1997, and was eventually elevated to CEO in February 2001. During his tenure, Enron grew into an international, multi-billion dollar corporation with earnings that rose from a couple of hundred million dollars in 1990 to $1.6 billion in 1998, of which his trading division produced over half. By 2000, Enron's revenue had risen to $100 billion and, as of August 23, 2000, Enron’s stock price peaked at $90 per share. Skilling resigned about a year later, by which point the stock had declined 51% in a troubled post-bubble market for energy and broadband companies. From January 1999 until he resigned in August 2001, Skilling increased his stock holdings in Enron by over 250%

After listening to Enron’s October 23, 2001 conference call with market analysts, Skilling called Enron chairman Ken Lay and asked to return to the company. On the heels of revelations about former CFO Andy Fastow's embezzlement of millions from the company, Enron was caught in the beginning stages of losing the trust of the marketplace, and Skilling believed that his return would send a strong signal to the market of his confidence in the strength of the company. The company declined Skilling's offer, at which time Skilling attempted to arrange a liquidity infusion -- including most of his net worth -- to stem the company's death spiral. The efforts failed and Enron filed a chapter 11 case on December 2, 2001.

So, if Skilling wasn't convicted of causing Enron's failure, then what is it that he is being thrown in jail for until he is in his mid-to-late 70's? For allegedly lying about Enron's financial condition (and one throw-in count of insider trading). But even though Skilling's alleged lies may have changed the identity of the investors who ended up holding the bag when Enron failed (a group that included himself, by the way), they did not cause Enron's failure. And it goes without saying that Skilling was given no credit whatsoever during his sentencing for contributing to the creation of enormous wealth for investors in many valuable markets.

So, make no mistake about it -- Jeff Skilling was not sentenced yesterday in regard to the crime for which he was prosecuted and convicted. Rather, he was sentenced for causing Enron's failure. There is a big difference between those two crimes, and a quasi-life sentence for Skilling fails to distinguish between them.

Posted by Tom at 4:18 AM | Comments (3) |

October 23, 2006

The worst political ad of the year

I've been a tad hard on the Republican Party recently (here, here and here).

But it's not as if the Democratic Party is distinguishing itself during this political season. Take a look at the political ad below, which is surely the worst political ad of the year, courtesy of the Democratic Party.

Posted by Tom at 4:50 AM | Comments (3) |

Justice Hecht cleared in Miers flap

Texas Supreme Court Justice Nathan L. Hecht, who was the subject of a public admonition by the State Commission on Judicial Conduct for his public support of former US Supreme Court nominee Harriet Miers, was cleared by a three-judge Special Court of Review that heard Justice Hecht’s appeal of the sanction, which carries no civil or criminal penalty. The ruling, which had been expected, noted that the ethics rules under which Justice Hecht was sanctioned were impermissably vague and did not apply to his public reply to questions regarding his relationship of Ms. Miers. One of the members of the special court concluded that Justice Hecht had violated the rules, but that the rules were unconstitutional because they limited his freedom of speech. This Chronicle article on the ruling includes pdfs of the special court's opinions, but if you want them, move quickly -- the Chronicle's links do not always last long.

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

2006 Weekly local football review

Texans 27 Jaguars 7

Where on earth did that come from?

In a game in which no one gave them much of a chance of staying close, much less winning, the Texans (2-4) played the Jaguars to a standstill for the better part of three quarters and then put them away with by capitalizing on a couple of 2nd half fumbles. Rookie RB Wali Lundy gave the Texans their first presence this season in the running game with 93 yards on 19 carries and QB David Carr was efficient in the passing game while throwing TD passes (to WR Andre Johnson and rookie TE Owen Daniels) with no interceptions. With a winnable game next week at 1-5 Tennessee, the Texans could be 3-4, the first time that they have sniffed the .500 mark since the final game of the 2004 season.

The Jaguars came into this game off of a bye week after creaming the Jets 41-0. They were looking at the Texans game as being a nice scrimmage before next week's showdown with the Eagles. It didn't turn out that way. Coaching an NFL football team must be a very trying experience.

Texas Longhorns 22 Nebraska 20

On walk-on, second-string kicker Ryan Bailey's 22-yard field goal with 27 seconds to go, Texas (7-1, 4-0) turned back improving Nebraska (6-2, 3-1) and reinforced its throne atop the Big 12. Poised redshirt freshman Colt McCoy was 25 of 39 passing for 220 yards and 2 touchdowns, while his favorite target -- junior wide receiver Limas Sweed -- had 8 catches for 120 yards, including a 55-yard TD. But make no doubt about it, this was another rock'em, sock'em defensive battle that ultimately turned on the Texas defense forcing a fumble in Nebraska territory with just over two minutes to go. The Horns have now won a team-record 16 consecutive road games and 28 of their past 29. They travel to Lubbock next weekend to play the up-and-down Texas Tech Red Raiders (5-3, 2-2).

Texas Aggies 34 Oklahoma State 33

Facing a 4th and 13 situation with less than 3 minutes to go and behind 27-20, Aggie QB Stephen McGee completed a short pass to 275 lbs Aggie RF Jovorskie Lane, who lumbered 17 yards for a first down that kept A&M's tying TD drive alive. Then, McGee completed another short pass for a TD as time was expiring and massive Aggie DT Red Bryant blocked OSU's PAT kick in overtime to secure the victory for the Aggies (7-1, 3-1), who are certainly one of the most entertaining teams in college football this season. The improving McGee -- who is a redshirt sophomore -- had another solid game, completing 17-of-26 for 192 yards with 2 TDs, no interceptions to go along with 85 yards rushing on 17 carries. The Aggies face another potential close game next Saturday at Waco against Baylor (4-4, 3-1), but they finally appear to be turning the corner.

Houston Cougars 34 UTEP 17

The Cougars (5-3, 3-1) are difficult to pin down. After starting the season in promising fashion with four straight wins, they lost three straight and were down 14-3 after the first quarter of their game Saturday night against a decent UTEP (4-3, 2-1) team. Then, right when the season appeared to be teetering on the brink, the Coogs pummeled the Miners 31-3 over the final three quarters of the game to win going away. The Cougars are dinged up on the offensive line, but when QB Kevin Kolb and crew get rolling, they are a formidable unit. Nevertheless, the defense remains shaky, which means that none of the Coogs' remaining games are a lock. The Cougars play a reeling Central Florida (2-5, 1-2) team next week at home.

Rice 40 Central Florida 29

The feisty Owls (3-5, 2-2) are making my earlier predictions of success for the team look good. QB Chase Clement had another good game (16-29 for 170 yds, 2 TD's 0 INT's, 14 carries for 67 yds), but the star of this game for the Owls was RB Quinton Smith, who sliced his way through UCF's defense for 183 yards on 21 carries. Rice stays on the road against UTEP next week and then Tulsa the week after that before closing the season at home against East Carolina and SMU. The Owls could still win a couple more games, which would be a tremendous accomplishment for first year coach Todd Graham and his staff.

Posted by Tom at 4:01 AM |

October 22, 2006

The Skilling sentencing hearing

Former Enron CEO Jeff Skilling's sentencing hearing is Monday afternoon, so it's a good time to provide some links that will provide a basis for an objective evaluation of Skilling's case as a counterbalance to what the mainstream media typically serves up.

By now, we all know the myth -- Enron was merely an elaborate financial house of cards that a massive conspiracy led by the greedy and lying Skilling and the late Enron chairman Ken Lay hid from innocent and unsuspecting investors and employees. The Enron Myth is so thoroughly accepted that otherwise intelligent people reject any notion of ambiguity or fair-minded analysis in addressing facts and issues that call the morality play into question. The primary dynamics by which the myth is perpetuated are scapegoating and resentment, which are common themes of almost every mainstream media report on Skilling and Enron.

The power of the Enron Myth and the real presumption in the criminal case against Skilling are such that an objective jury probably could not have been found in Houston and the jurors who did serve dispensed with critical thinking skills when confronted with the biggest business conspiracy even alleged in the history of federal prosecutions. Given the power of the Enron Myth, the jurors were content with a prosecution that cast Skilling as a liar about Photofete and his one sale of Enron stock after he left the company, and ignored the paucity of evidence of any massive conspiracy or even the true reasons why Enron collapsed. That same view has been readily embraced by a wide-range of societal forces, such as publicity-seeking politicians who don't allow facts to get in the way of demonizing unpopular entreprenuers for political gain, government prosecutors who improperly expand the reach of criminal laws to further their careers, supposedly "objective" journalists who work literally hand-in-hand with the Enron Task Force or who simply perpetuate the myth in spite of the facts, competing businesspeople and lawyers seeking to profit from Enron's demise, and a general public that finds it easy to resent wealthy businesspeople, particularly after the bursting of a stock market bubble. The myth is so pervasive and accepted -- why bother with the truth?

The carnage of the Enron Myth is now piled high -- the destruction of Arthur Andersen, the death of Ken Lay, the outrageous prosecution and imprisonment of the four Merrill Lynch executives in the Nigerian Barge case, Richard Causey, Kevin Howard, Christopher Calger, the NatWest Three -- the list goes on and on. In the wake of such destruction of careers and lives, the public is even less willing to confront the vacuity of the myth and the destructive dynamics by which it is perpetrated. In fact, any challenge to the myth is now commonly met with derision and appeals to even more resentment over the Enron failure.

As noted originally here and in many subsequent blog posts, it is far more likely that the truth about Enron is that no massive conspiracy existed, that Skilling and Lay were not intending to mislead anyone and that the company was simply a highly-leveraged, trust-based business with a relatively low credit rating and a booming trading operation. Although there is nothing inherently wrong with such a business model, it turned out it to be the wrong one to survive amidst choppy post-bubble, post-9/11 market conditions when the markets were spooked by revelations of the embezzlement of millions of dollars by the company's CFO and his relative few minions.

That Jeff Skilling did not predict that Enron would fail under those conditions does not make him a criminal. Unlike his main accusers Andy Fastow and Ben Glisan, Skilling didn't embezzle a dime from Enron. Did he tirelessly advocate this highly-leveraged but innovative company that was dealing with difficult post-bubble market conditions during 2001? Sure, but since when is it a crime for a CEO to be optimistic -- even overly-optimistic -- about his company? Beyond the shattered lives and families, the real tragedy here is that the demonization of Skilling has distracted us from examining the tougher issues of what really caused Enron's demise and understanding the how such a company can be structured to survive in even the worst market conditions. It's a lot easier just to throw a good and decent man such as Jeff Skilling in jail and throw away the keys, but examining objectively what really occurred at Enron is far more likely to result in real justice.

Here are some links to prepare you for the Skilling sentencing hearing:

Peter Henning analyzes the Skilling sentencing issues here, while Doug Berman provides a handy archive on Enron-related sentencing issues;

The trial penalty issue in the Skilling sentencing is explained here and in this Ellen Podgor post (also here), while this post previews the Skilling appeal issues;

Larry Ribstein places the Skilling sentencing in the perspective of the government's purchase of testimony with pleas and questions the legitimacy of this policy;

Skilling's fascinating testimony during his trial is summarized here and here, and this post analyzes the immediate aftermath of the jury verdict against him; and

Finally, Skilling's legacy of beneficial risk-taking, an interesting letter to Judge Lake, and what might have been had Ken Lay made a different decision in 1997.

Posted by Tom at 4:05 AM | Comments (0) |

October 21, 2006

Boom-Boom, those feuding Jones boys and other fall golf notes

Yeah, I know it's football season in Texas and no other sport really matters, but I've been wanting to pass along a few interesting tidbits from the golf world.

John Hawkins reports that Fred Couples, a fan favorite in Houston from his playing days at the University of Houston, has had a rough year, including enduring a potentially dangerous blood clot in his arm a month ago;

Dallas-based Hank Haney, who has the good fortune to be Tiger Woods' current swing guru, isn't as lucky in a real estate deal;

Those golf course designing brothers -- Robert Trent Jones Jr. and Rees Jones, the latter of whom designed Houston's Tournament Course at Redstone Golf Club -- conduct most of their communications between each other through their lawyers. The article notes a comment from a reporter who has tracked the brothers' careers:

Bradley Klein, who has tracked the brothers' careers as Golfweek's architecture editor, said Rees and Robert Jr., who goes by Bobby, probably began trying to one-up each other "in the crib."

"They hate each other," he said. "They are rivals in every way."

By the way, did you notice who is currently 192nd on the PGA Tour money list? Oh well, he still has the best golf picture of the year; and

Finally, In more of the Ryder Cup post-mortem (earlier posts here, here and here), Jeff Rude makes the case that the top-125 all-exempt Tour has bred complacency and mediocrity among most of the young US players:

American golf has sunk to this new low: Not only can't the country come close to winning Ryder Cups and Palmer Cups and various other containers you can drink out of, but only two U.S. players under 30 have won more than one PGA Tour title: Ben Curtis, 29, once thought of as a one-shot wonder after winning the 2003 British Open out of nowhere, has three victories, and Jonathan Byrd, 28, has two, including a B.C. Open the same week the big boys were at the British. [. . .]

Chris DiMarco has never won a tournament in golf's prime season – March through August – but has made $18.7 million in official Tour earnings. There are plenty others besides three-time winner DiMarco who haven't won many tournaments and yet have broken the bank. Consider that these four-time winners have all earned more than $13.6 million: Stewart Cink ($18.4M), Scott Verplank ($17.9M), Bob Estes ($15.5M) and Tim Herron ($13.6M). And you can win only twice and bag $14.3 million, as Jerry Kelly has proved.

Not to pick on these fine players, but the point is: One could wonder about the incentive to win, grind, dig deep and dig dirt if you can live like Jed Clampett without collecting many trophies.

Posted by Tom at 4:11 AM | Comments (0) |

October 20, 2006

Great Coach tirades

By now, you have probably seen Arizona Cardinals' head coach Denny Green's meltdown after his team blew a 20 point lead to the Bears over the final 17 minutes of the Monday Night game earlier this week. Even Houston Rockets coach Jeff Van Gundy was impressed. "That was one of the best ones I've ever seen," Van Gundy told the Houston Chronicle. "I loved that. It was great. I could feel his passion. I could feel the sting, too."

Although Green's tirade was entertaining, it really wasn't one of the best coach rants of all-time. For example, Green's performance is rank amateurism in comparison to the following:

The King of Tirades, former Indiana University and current Texas Tech basketball coach Bobby Knight, has a classic halftime speech here as well this collection of ten of his best tirades. And don't miss this hilarious commercial that Coach Knight did for Minute Maid.

Not exactly a tirade, but no collection of coaching meltdowns is complete without former Ohio State football coach Woody Hayes going nuclear on a Clemson linebacker at the end of his final game as Ohio State's head coach.

Former Colts coach Jim Mora's famous tirade after his team lost a game by turning the ball over five times -- "Playoffs? Don't talk about playoffs. You kiddin' me? Playoffs? I just hope we can win a game."

This video includes a nice collection of tirades by former Raiders coach and current Nebraska coach Bill Callahan, former Jets coach Herm Edwards and former Saints coach Mike Ditka, among others.

Finally, one of the best ever, former Cubs manager Lee Elia's tirade in 1983 over his club's 5-14 start that season. Incredibly, Elia lasted several more months that season before being fired.

Posted by Tom at 4:34 AM | Comments (0) |

Big DOJ initiative against bankruptcy fraud

Peter Henning over at the White Collar Crime Prof Blog notes this Justice Department press release the other day announcing a wide-ranging crackdown on bankruptcy fraud, although none of the cases appear to have been landed in Houston:

United States Attorneys have filed criminal charges against 78 individuals in 69 separate prosecutions in 36 judicial districts on a variety of federal bankruptcy fraud and related counts, including 18 cases charged Tuesday, Deputy Attorney General Paul J. McNulty, announced today. The announcement is the culmination of “Operation Truth or Consequences,” a nationwide sweep that demonstrates the breadth of enforcement actions taken by the Department of Justice to combat bankruptcy fraud and protect the integrity of the bankruptcy system. [. . .]

Collectively, the Operation Truth or Consequences bankruptcy fraud sweep includes charges filed against nine attorneys, two bankruptcy petition preparers, and one former law enforcement officer; alleged concealment of more than $3 million in assets; use of false Social Security numbers and false identities; submission of forged documents and use of false statements; defrauding of individuals whose homes were in foreclosure; fraudulent receipt of government loans and benefits; and various other unlawful acts.

I have no idea whether the DOJ's initiative is justified. But bankruptcy is strong medicine with serious side effects, and the exposure to criminal liability in bankruptcy is often underestimated by debtors and their counsel. It shouldn't be.

Posted by Tom at 4:24 AM | Comments (0) |

Texas Children's huge expansion

Texas Children's Hospital -- already the largest pediatric hospital in the country -- announced a massive $1.5 billion expansion earlier this week that calls for 2 million square foot expansion, including construction of a maternity center, a neurological research institute and a satellite hospital in west Houston. Texas Children's is one of the largest employers in the Medical Center and expects to create an additional 2,500-3,000 jobs in connection with the expansion. The Chronicle's Todd Ackerman has story here.

Juxaposed between earlier posts here and here on the struggles of Baylor College of Medicine and the University of Texas Medical Branch to define their future in the troubled waters of America's health care system, Texas Children's bold expansion is a reminder of the strong influence that Houston's Texas Medical Center and vibrant medical community will have on this key domestic policy and economic issues facing American society.

Posted by Tom at 4:05 AM | Comments (0) |

October 19, 2006

Fifth Circuit raps the Enron Task Force's knuckles again

This news just in -- the Fifth Circuit Court of Appeals has denied the Enron Task Force's petition for en banc review of a Fifth Circuit panel's decision (previous posts here, here and here) that struck down the wire fraud and conspiracy convictions of four Merrill Lynch executives involved in the controversial Enron-related Nigerian Barge case. The docket of the case reflects that the Court has issued an order and mandate, so I will post a copy when I get ahold of one.

The Fifth Circuit's now final decision in the Nigerian Barge case calls into question a number of convictions obtained by the Task Force during its reign of terror over the past five years (see earlier posts here and here), not the least of which is the conviction of former Enron CEO Jeff Skilling (prior post here), who is scheduled to be sentenced on Monday.

Regardless of the impact of the Fifth Circuit's decision in the Nigerian Barge appeal on the other Enron-related cases, here's hoping that the Fifth Circuit's decision of today puts a nail in the coffin of the Task Force's case against the four Merrill Lynch executives, three of whom are subject to a retrial as a result of the Fifth Circuit panel's decision (one Merrill defendant, William Fuhs, had his conviction reversed and is not subject to retrial). The damage to justice and the rule of law that has resulted from the Task Force's pursuit of this abomination of a case is bad enough. But the damage that has been done to the careers and families of these men alone calls for this sordid chapter in the criminalization of business in the post-Enron era to be closed.

Posted by Tom at 2:51 PM | Comments (0) |

A big hurdle to health care finance reform

Don Boudreaux, chairman of the economics department at George Mason University and the driver of Cafe Hayek, authored this Christian Science Monitor op-ed that addresses a fundamental problem with reforming the American health care finance system -- the expectation of most Americans that health care is a basic human right and entitlement. Boudreaux explains the fallacy of that attitude:

But not everything that is highly desirable is a right. Most rights simply oblige us to respect one another's freedoms; they do not oblige us to pay for others to exercise these freedoms. Respecting rights such as freedom of speech and of worship does not impose huge demands upon taxpayers.

Healthcare, although highly desirable, differs fundamentally from these rights. Because providing healthcare takes scarce resources, offering it free at the point of delivery would raise its cost and reduce its availability. [. . ]

Medicare, Medicaid, and tax-deductibility of employer-provided health insurance created a system in which patients at the point of delivery now pay only a small fraction of their medical bills out of pocket.

This situation leads to monstrously inefficient consumption of healthcare. Some people consume too much, while many others with more pressing needs do without.

Because the wasteful consumption caused by heavily subsidized access drives up healthcare costs, taxpayers must pay more and more to fund Medicare and Medicaid, while private insurers must continually raise premiums. The sad and perverse result is that increasing numbers of people go without health insurance.

Employer-based health insurance -- which proliferated as a means to attract scarce labor during the wage and price controls of World War II -- triggered the societal shift in attitude regarding payment of health care costs. Milton Friedman summed up the basic problem during an interview several years ago:

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you're doing, and you try to get the most for your money.

Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I'm not so careful about the content of the present, but I'm very careful about the cost.

Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm sure going to have a good lunch!

Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it is, and I'm not concerned about what I get. And that's government. And that's close to 40% of our national income.

Posted by Tom at 4:45 AM | Comments (1) |

Stunning ignorance

Jeff Stein, the national security editor at Congressional Quarterly, reports on in this NY Times article some questions he has been asking folks in Washington recently:

For the past several months, I’ve been wrapping up lengthy interviews with Washington counterterrorism officials with a fundamental question: “Do you know the difference between a Sunni and a Shiite?” [. . .]

. . . so far, most American officials I’ve interviewed don’t have a clue. That includes not just intelligence and law enforcement officials, but also members of Congress who have important roles overseeing our spy agencies. How can they do their jobs without knowing the basics? [. . .]

Take Representative Terry Everett, a seven-term Alabama Republican who is vice chairman of the House intelligence subcommittee on technical and tactical intelligence.

“Do you know the difference between a Sunni and a Shiite?” I asked him a few weeks ago.

Mr. Everett responded with a low chuckle. He thought for a moment: “One’s in one location, another’s in another location. No, to be honest with you, I don’t know. I thought it was differences in their religion, different families or something.”

That's the vice-chairman of a House intelligence subcommittee? And he doesn't even make this top 10 list of the dumbest members of Congress.

God save us.

By the way, while on matters religious, don't miss this NY Times article that reports on the hardships faced by Iraq's dwindling Christian population.

Posted by Tom at 4:24 AM | Comments (1) |

HPD's Friday Night Lights

Suffice it to say that the video below of the incident first noted here will not be linked to from the Houston Chamber of Commerce website.

What on earth was Officer Rodriguez thinking? The Chronicle has a follow-up article here, focusing on the effect that publicity over the incident may have on the live-music club scene in Houston. Houstoned has more, too.

Posted by Tom at 3:56 AM | Comments (0) |

October 18, 2006

Hanging out at Rice University

Ruth Samuelson, an intern with the Houston Press, and a senior at Rice University, reports on David Jovani Vanegas, a 20-year old fellow who showed up about a year ago at Rice as a student and hung out for a year. However, it turns out that he was never actually enrolled at Rice as a student:

On September 13, Rice police arrested Vanegas for criminal trespass. Turns out he wasn't an actual Rice student but a 20-year-old impersonator. Starting last September, Vanegas began eating in Rice's dining halls, hanging out with students and attending classes. Some nights, he crashed in friends' dorm rooms when he was too tired to go home. [. . .]

. . . Within the next few weeks, campus administrators alleged that Vanegas had taken close to $3,700 worth of food from Rice cafeterias. On September 28, the district attorney's office filed felony charges for aggregate theft. Bail was set at $2,000. [. . .]

So why did Vanegas keep coming day after day for three semesters? He told police officers that he hadn't gotten into Rice, but it would have broken his mother's heart for him not to attend. Attempts to reach Vanegas were unsuccessful.

Read about the entire bizarre episode. There is a Marching Owl Band skit in this story somewhere.

Posted by Tom at 4:41 AM | Comments (2) |

Profiting from business prosecutions

So, now it's Debra Wong Yang, U.S. Attorney for California's central district, is resigning to take a job with Gibson, Dunn & Crutcher LLP where she will serve as co-chair of the firm's crisis management practice group. Sounds sort of like a legal SWAT unit, don't you think?

At any rate, Yang -- like Arthur Andersen-slayer Andrew Weissman before her -- is moving on to greener pastures after spearheading the indictment of the Milberg Weiss law firm. Larry Ribstein -- who just used Yang's pursuit of Milberg Weiss in his recent talk on arranging key witness testimony -- is wondrous about this development:

The WSJ reports that Debra Wong Yang, the U.S. Attorney in Los Angeles, has parlayed her prosecution of Milberg into a plum partnership at Gibson, Dunn & Crutcher. Bruce Kobayashi and I recently discussed Ms Yang's handiwork: the irony of an indictment alleging that Milberg bought witness cooperation supported by a government plea deal with a leading witness. Now Ms Yang will earn big bucks to defend clients against similar government tactics. Is this a great country or what?

Posted by Tom at 4:28 AM | Comments (2) |

A better ranking than the BCS?

The usual hue and cry met this week's first Bowl Championship Series rankings of the 2006 college football season. I must admit that it's pretty difficult to understand how Auburn, which was plastered at home a couple of weeks ago by 13th-ranked Arkansas, could be ranked fourth, five places ahead of Texas, which has manhandled 22nd-ranked Oklahoma and lost only to top-ranked Ohio State.

At any rate, there is a better way. Las Vegas Sports Consultants is the leading consultant for Nevada sports books and, last year, they began publishing their own OddsMakers Top 25. Inasmuch as the firm's four college football oddsmakers were already preparing ratings for all 119 Division I-A teams, they decided to submit ballots and calculate the results for use in their radio shows. They rank teams based on such criteria as injuries, performance, skill and game location, not on won-loss record and not on which teams will draw the greatest or least betting action (that's for the bookies) Their poll is gaining traction in betting markets and is now published every Monday in the Las Vegas Review-Journal.

For my money, this ranking -- which is based on the profit motive (LVSC is attempting to attract betting customers through the accuracy of its research) -- is a more accurate way to rank teams than the way in which voters of widely-varying interest rank teams in the more traditional polls. The following is this week's Oddsmakers Top 25 poll with the team record and BCS ranking in parentheses.

1. Ohio State (7-0) (1)
2. Texas (6-1) (9)
3. Michigan (7-0) (3)
4. California (6-1) (10)
5. Louisiana State (5-2) (18)
6. Southern Cal (6-0) (2)
7. Florida (6-1) (6)
8. Tennessee (5-1) (11)
9. Louisville (6-0) (7)
10. Notre Dame (5-1) (8)
11. Clemson (6-1) (12)
12. Wisconsin (6-1) (21)
13. Oregon (5-1) (14)
14. West Virginia (6-0) (5)
15. Auburn (6-1) (4)
16. Nebraska (6-1) (17)
17. Oklahoma (4-2) (22)
18. Boise State (7-0) (15)
19. Georgia Tech (5-1) (19)
20. Miami (4-2) (NR)
21. Pittsburgh (6-1) (NR)
22. Penn State (4-3) (NR)
23. Arkansas (5-1) (13)
24. Florida State (4-2) (NR)
25. Missouri (6-1) (24)

My sense is that Horns' fans are already sold on this poll over the BCS ranking.

Posted by Tom at 4:19 AM | Comments (2) |

October 17, 2006

Judge Lake dismisses the indictment against Ken Lay

US District Judge Sim Lake has overruled the Enron Task Force's dubious opposition and dismissed the indictment against the late Enron chairman, Kenneth Lay. Judge Lake's memorandum opinion is here, and his conclusion pretty well says it all:

Since the Fifth Circuit Court of Appeals has adopted the abatement rule, and since . . . the United States . . . has raised any legal basis for denying the rule’s application in this case, the court concludes that Lay’s conviction must be vacated and that this action against him must be dismissed. Accordingly, the Motion of the Estate of Kenneth L. Lay to Vacate His Conviction and Dismiss the Indictment (Docket Entry No. 1082) is GRANTED, . . . The indictment against Kenneth L. Lay is DISMISSED.

As noted earlier here, here and here, I don't believe Ken Lay was guilty of anything other than making some bad business decisions (among many good ones, too). Dismissing the charges against his legacy is not only the right thing to do legally, but also morally.

Posted by Tom at 3:07 PM | Comments (0) |

Trials and tribulations at UTMB

Baylor College of Medicine's struggle to define its future in the choppy waters of America's health care finance system has been a frequent topic on this blog. But Baylor is far from the only medical school that is struggling with such problems. This Kevin Moran/Houston Chronicle article reports on the recent troubles at Texas' oldest medical school, the University of Texas Medical Branch at Galveston. Those troubles were alluded to in this earlier post.

In a year when this island city has avoided even the threat of a major natural storm, its largest and oldest employer — the University of Texas Medical Branch — is experiencing an unprecedented financial, employment and political tempest.

Facing a $20 million deficit and aiming to cut $130 million in spending in 2007, the 13,000-employee medical center started the year by hiring a consulting firm to heavily reduce expenses.

Faculty and staff feared that any solution involved a massive layoff. Morale dropped precipitously when UTMB announced in June it would cut 1,000 jobs. Next came a storm of dissatisfaction when administrators unveiled plans to cut salaries of tenured faculty, physicians, researchers and others.

The article goes on to report on how UTMB's initiatives to generate more income is being opposed by competing physicians and how little of UTMB's professional services are compensated through proceeds of health insurance. Although somewhat different from Baylor's problems because UTMB operates its own hospital in Galveston, UTMB's difficulties are another reflection of the cascading problems that are resulting from the federal and state governments' failure to address America's broken health care finance system. The risks of that broken system are a decline in the quality of physician training and medical care, which is something that should concern us all.

Posted by Tom at 6:40 AM | Comments (2) |

Two Houston docs convicted in Medicare-wheelchair scam

Two Houston doctors -- Charles Frank Skripka Jr., 65, and Jayshree Patel, 62, -- were among four local men who were convicted by a jury this past Friday afternoon in federal court on charges related to accepting kickbacks in a scheme that allegedly defrauded Medicare of more than $21 million. The other two men convicted were James Ekiko, 43, the owner of a medical equipment supply company, and David Dennis Brown, 47, who recruited patients into the scam.The Justice Department's press release on the convictions is here.

The jury convicted all four men of health fraud in connection with a scheme to prescribe motorized wheelchairs to people who didn't need them. Skripka, Ekiko and Brown also were convicted of wire fraud and conspiracy to defraud Medicare, while Skripka and Ekiko were also convicted of money laundering. Prosecutors contended that recruiters such as Brown would pay prospective patients $50 each to see the doctors, who would then prescribe motorized wheelchairs. The medical supply company would bill Medicare $4,200 for the wheelchairs that cost $1,600, pay the doctors $200 per prescription, and then pocket the balance as profit. At the height of the scam, the doctors were writing as many as 80 prescriptions a day!

Posted by Tom at 6:03 AM | Comments (0) |

Arnie's Houston farewell

I've been remiss in not mentioning Arnold Palmer's announcement this past Friday during a round in a Champion's Tour event at Houston's Augusta Pines Golf Club that the round would be his last competitive round of golf. Steve Campbell's article is here.

That Arnie would finally call it quits at a not particularly notable Houston course in a largely-ignored Champions Tour event (it's football season in Texas, you know) seemed somewhat out of place. Arnie has actually been saying good-bye for quite awhile, first at Augusta National (his final major appearance) and then at his tournament, the Bay Hill Invitational, which was his final PGA Tour event. Suffice it to say the Augusta Pines is not anywhere near as dramatic a venue as either of those courses for Arnie to bid farewell to his fellow senior golfers. Too bad that the tournament couldn't have been played a few miles south at Champions Golf Club, a venerable championship layout where Ben Hogan played his last competitive round about 40 years ago.

Palmer's impact on golf and sports is so pervasive that it is difficult to put it in perspective. Suffice to say that there would be no Tiger Woods -- at least in the larger-than-life sense that we know him -- had not Arnold Palmer literally pulled the PGA Tour by its bootstraps into the forefront of televised sporting events around the world. Heck, Arnie even created the modern sports promotion business by hiring his old college chum, the late Mark McCormack, as the first real sports agent back in the late 1950's. Scott Michaux, a columnist for AugustaChronicle.com, does as good a job as I've seen in this article (reg. req) of conveying Palmer's special nature. Noting that Palmer withdrew from his last tournament on the fourth hole, but continued to play the remainder of the round for the benefit of his fans, Michaux observes as follows:

That's what made Palmer the most beloved player in the history of golf. He was not its greatest champion and didn't possess the finest swing, but nobody before or since has ever had the charisma that Palmer holds in spades. Whether it's on the golf course, in the clubhouse or on the dance floor, Palmer oozes with the magnetism that has drawn his Army of fans for every step of the ride.

That the ride is finally over is as traumatic to his fans as it is to him. That Palmer never won a major championship in my lifetime didn't stop him from being as giant a figure to my generation as he was to his own. That it has been 18 years since I witnessed him win his last tournament at the senior Crestar Classic in Richmond, Va., hasn't made every sighting since any less thrilling.[ . . .]

Now we can only wish that Palmer will take the stage that late greats Byron Nelson, San Snead and Gene Sarazen took before him on the first tee of the Augusta National Golf Club for an honorary start to the Masters. With no other places to get a glimpse of the King, it is our last hope.

Palmer understands that no matter how awkward it might be to stand up in front of the world trying to give it that good shot, just a fix of his radiance is all we want.

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

October 16, 2006

Spitzer: Populist Warrior or Reckless Business Foe?

In this New York Sunday Times article, Mike McIntire explores the above question regarding the true nature of future New York Governor, Eliot Spitzer.

I could have saved McIntire a lot of time. Seriously. A lot of time.

Spitzer and his ilk -- whom we have seen on display in numerous business-related prosecutions in the post-Enron era -- remind me of what Ayn Rand observed about socialists:

"[T]he truth about their souls is worse than the obscene excuse you have allowed them, the excuse that the end justifies the means and that the horrors they practice are means to nobler ends. The truth is that those horrors are their ends."

Posted by Tom at 4:50 AM | Comments (0) |

What to do about North Korea?

With last week's confirmation that North Korea had tested a nuclear device, The Atlantic Monthly has put online Robert D. Kaplan's cover article from the October print edition, When North Korea Falls, a stark analysis of the disaster that could occur when the fragile North Korean society finally collapses. Kaplan sums up the problem that North Korea's inevitable collapse presents to the US:

Middle- and upper-middle-level U.S. officers based in South Korea and Japan are planning for a meltdown of North Korea that, within days or even hours of its occurrence, could present the world—meaning, really, the American military—with the greatest stabilization operation since the end of World War II. “It could be the mother of all humanitarian relief operations,” Army Special Forces Colonel David Maxwell told me. On one day, a semi-starving population of 23 million people would be Kim Jong Il’s responsibility; on the next, it would be the U.S. military’s, which would have to work out an arrangement with the Chinese People’s Liberation Army (among others) about how to manage the crisis.

Read the entire article, which is essential reading for understanding the motivations of North Korea's current nuclear brinksmanship. Which, by the way, generated the best crack of last week, from David Letterman:

"The North Koreans are starting to gloat a little bit. The test was a big success, and to celebrate, today Kim Jong-il is wearing his hair in the shape of a mushroom cloud."

Posted by Tom at 4:40 AM | Comments (0) |

2006 Weekly local football review

Cowboys 34 Texans 6

As expected, it was men against boys as the Texans (1-4) went down without so much as a whimper against the Pokes (3-2). The Texans defense played well for a half as Houston actually led 6-3 at the half. However, the utter incompetence of the Texans' offense wore the defense down in the second half as the Texans committed all seven of their penalties and turned the ball over three times on two David Carr interceptions and a fumble by kickoff returner Edell Shepherd. With the Texans facing the Jaguars twice as well as the Giants and the Titans over the next month, the best that Houston can realistically hope for is a 2-7 record when the schedule gets a bit easier in late November and early December when the Texans play the Bills, the Jets, the Raiders and the Titans again in consecutive games. This is a brutally bad football team.

Texas Aggies 25 Missouri 19

The Aggies (6-1; 2-1) finally got their first quality win of the season, beating a Missouri (6-1; 2-1) team that has achieved a good record to date by mirroring A&M's approach of scheduling weak non-conference opponents. Nevertheless, the win was a good one for the Ags, who used a balanced attack to dominate the second half after the teams finished the first half tied at 17. The Aggies are not a real good team yet, but they can be reasonably effective when they do not turn the ball over, force a few from the other team (Mizzou had three, including one while a receiver was about to score a TD) and control time of possession (41:30 to 18:30 in this game) by hammering their one-two tailback punch of 275 lbs Javorskie Lane and burner Michael Goodson. QB Stephen McGee also had his best passing game to date, going 20-24 for about 185 yards. And it was a nice touch that the same Aggie cornerback who got torched on the late TD play in the Tech game made the play to cause the fumble by the Mizzou WR who was going into the end zone. The Ags -- who remain unranked in the first BCS rankings -- now go on the road to play Oklahoma State (4-2; 1-1) and Baylor (3-4; 2-1), both of which are capable of beating the Aggies. The Ags then close out the season against Oklahoma (4-2; 1-1) and Nebraska (3-0; 6-1) at home and Texas at Austin.

Texas 63 Baylor 31

After essentially sleep-walking through a first quarter in which they allowed Baylor to take a 10-0 lead, the Longhorns (6-1; 3-0) woke up and pounded the Bears over the next three quarters to win easily as QB Colt McCoy set a Texas record with six TD passes. The 9th-ranked BCS-rated Horns now face their toughest test of the season next week as they travel to Lincoln to face Nebraska (6-1; 3-0). Although the Horns will be favored, there is cause for concern -- they are getting dinged with injuries to several key players, something that Texas was able to avoid during last season's magical ride to the National Championship. This next game could be where the Horns stub their toe during the Big 12 season.

Rice 34 UAB 33

How 'bout them Owls (2-5; 1-2)? Given a repreive from a game-ending interception by a fumbled return, savvy Rice QB Chase Clement (over 330 yards total offense) found stud WR Jarett Dillard on a 9-yard fade route for a TD with 3 seconds left to pull the win out for the feisty Owls. Rice now has a rough road trip against Central Florida, UTEP and Tulsa before returning home to close out the season against East Carolina and SMU. But don't be surprised if the Owls win another 2-3 games down the stretch. Both Clement and Dillard are the real deal.

Southern Miss 31 Houston 27

The Cougars (4-3; 2-1) once-promising season continues to go by the wayside as another shoddy defensive effort, poor special teams play and an anemic rushing attack combined to cause the Coogs to lose their third straight game. The Cougars still have a chance of turning their season around as they play their next three, tough C-USA games at home (UTEP, Central Florida and Tulsa), but the increasingly-mediocre defensive and offensive line play indicates that the Cougars will muddle through the remainder of their season.

Posted by Tom at 4:38 AM | Comments (0) |

October 15, 2006

Crimefighting in Houston run amok

Now, let me get this straight.

Someone calls police on Friday night and complains about the noise level of the music at a local club that is well-known for featuring live bands. The club's crowd is comprised mostly of college kids.

An officer responds and, when the band doesn't reduce its noise level to the officer's satisfaction, the officer climbs onstage, shines a flashlight in the lead singer's face and yells "Stop!"

What happened next is subject to conflicting accounts. However, it appears to be undisputed that the lead singer said something and then the officer grabbed him by the neck and forced him to the ground. A melee involving the officer and several members of the audience broke out, prompting the officer to Taser the lead singer, a 14-year-old audience member and a University of Houston sociology student doing a "field paper on the music scene." At least four people were arrested, the bass player's guitar got smashed and six HPD squad cars ended up at the scene.

The lead singer, who was not one of those arrested, commented afterward to a Houston Chronicle reporter that the officer was "out of control." "He was extremely violent form the start," said the lead singer. "It was frightening."

On the other hand, a police spokesman told the Chronicle that the officer's approach "was commendable" and that it was "fortunate that he used a Taser instead of a weapon."

"Fortunate that he used a Taser instead of a weapon?" To tone down the music level at a club that is in the business of playing loud music?

Irresponsible use of force by local police is an offshoot of the growing problem that Cato Insitute fellow Radley Balko has chronicled with regard to overuse of local police SWAT units. I guess we're fortunate that HPD didn't send in its SWAT team to deal with this situation, but doesn't HPD have better things to be doing on a Friday night than Tasering a bunch of college kids who enjoy listening to loud music at a club?

Posted by Tom at 5:27 AM | Comments (3) |

October 14, 2006

The trial penalty issue in the Skilling case

One of the many troubling aspects of the Enron Task Force's prosecution of former Enron CEO Jeff Skilling is the "trial penalty" that Skilling faces in connection with his sentencing (which is next Monday, October 23rd) -- that is, the additional time that Skililng faces in prison because he chose to assert his Constitutional right to defend himself against the government's charges in comparison to similarly-situated defendants, such as former Enron CFO Andrew Fastow (six years) -- who copped a plea under a cooperation agreement with the Task Force -- or former Enron chief accountant Richard Causey (no more than seven years), whose deal with the Task Force does not include an obligation to cooperate in other cases.

Exhibiting the same professional integrity that Joseph Grundfest recently displayed in the sad case of Jamie Olis, University of Illinois law professor and criminal law expert Margareth Etienne has filed this amicus curie brief in connection with the October 23rd Skilling sentencing hearing. Professor Etienne bears down on the key issue (citations are omitted):

[A] plea discount must be differentiated from a trial penalty. A plea discount--or a limited reduction such as acceptance of responsibility that takes into account factors such as a guilty plea--have been deemed constitutional; but a trial penalty--a punishment for exercising Fifth and Sixth Amendment rights--would clearly be unconstitutional insofar as it would violate the "unconstitutional conditions" doctrine. The "unconstitutional conditions" doctrine simply states that the imposition of a penalty for exercising a constitutional right creates an unconstitutional condition. Imposing a sentence on Mr. Skilling that is several times that of the sentences faced by his co-defendants--when the only material distinction between their cases appears to be Mr. Skilling's decision to go to trial--strongly suggests that Mr. Skilling is being penalized for exercising his constitutional rights. This is particularly true in a determinate sentencing (or guideline) regime where the potential benefits bestowed on co-defendants for acceptance of responsibility (and cooperation with the government, when applicable) are easily quantifiable.

Accordingly, the question for sentencing courts is whether there is a point at which a permissible plea discount becomes an impermissible and unconstitutional trial penalty. At the very least, when the disparity in sentences between similarly situated defendants can no longer be attributed to easing the government's burden by entering a resource-saving guilty plea, such a disparity risks being an unconstitutional trial penalty. Such an unjustified disparity, when it violates norms of fundamental fairness and proportionality, may also rise to the level of a Fifth and Fourteenth Amendment violation.

Not only is the trial penalty a horrifying injustice for individuals such as Skilling, it is also a substantial factor in the great waste of the government's dubious regulation of business-through-criminalization policy.

Posted by Tom at 7:49 AM | Comments (2) |

October 13, 2006

Gender stereotyping in the executive suite

As noted earlier here, I am troubled by the recent indictment of former HP chairperson Patricia Dunn. I am equally troubled by what happened to Martha Stewart (see here and here). How much of Dunn and Stewart's troubles are attributable to the fact that they are powerful women in a male-dominated corporate world?

Well, it would appear quite a bit. Earlier this week, the WSJ's Alan Murray wrote this column ($) entitled Why Gender Plays A Role in H-P Drama in which Murray makes the rather preposterous assertion that Dunn and former HP CEO Carly Fiorina's actions at HP were the products of gender -- the column suggests that the fact that both executives are women made them less likely to resign gracefully or take responsibility for the actions of others.

What gibberish. Thankfully, Christine Hurt over at the Congomerate takes Murray down a notch or two:

Why do we have to criticize women's actions not as their individual actions but as actions that reflect badly on their gender? Did [former HP director] Tom Perkins' actions as a rogue director and mediocre romance novelist reflect badly on his gender? On the venture capital industry? Why would we expect Fiorina and Dunn to be any more supportive of each other than [HP CEO Mark] Hurd and Perkins?

A related question: Was Martha Stewart skewered in the media -- and then prosecuted for protesting her innocence about a crime that the prosecution could not prove -- at least in part because she is perceived as a hard-knuckled female executive?

Posted by Tom at 5:18 AM | Comments (0) |

How did Drayton not think of this?

The standard start time for Chicago White Sox home games next season is going to be -- you guessed it -- 7:11 pm

The price for that accomodation: $500,000.

I generally prefer earlier start times for evening games (most of the Stros' games begin at 7:05 pm, which is fine). But KTRH 740 is the Stros flagship radio station . . .

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

What happened behind closed doors in regard to the Fastow sentence?

As noted earlier here, the six-year prison sentence handed down earlier last month to former Enron CFO Andrew Fastow was surprising on several levels, not the least of which was that the Enron Task Force elicited extensive testimony from Fastow during the Lay-Skilling trial that his minimum sentence would be ten years. The purpose of that testimony was to make Fastow appear to be more credible to the Lay-Skilling jury -- he was going to do at least ten years, so he supposedly didn't have any incentive to lie in order to reduce his sentence.

Thus, it was somewhat surprising that, in the run-up to the Fastow sentencing hearing, Fastow's attorneys requested a sentence of less than ten years and there was nary a peep from the Task Force objecting to the request. Then, at the sentencing hearing, the Task Force prosecutors at least tacitly supported the less-than-ten-year sentence by not objecting to Fastow counsel's requests for leniency to U.S. District Judge Ken Hoyt and even extolling Fastow's "cooperation" with the Task Force in regard to the Lay-Skilling trial. Indeed, one of the most surprising aspects of the Fastow sentencing hearing is that neither the Task Force prosecutors nor Fastow attorneys disclosed to Judge Hoyt during the sentencing hearing about Fastow's contrary testimony during the Lay-Skilling trial.

Or did they? According to this Tom Fowler/Houston Chronicle article, Task Force prosecutors and Fastow's attorneys met with Judge Hoyt in chambers during a transcribed meeting the afternoon before Fastow's sentencing. The transcript of that meeting has not been made public and none of the participants is talking about what was discussed. The Chronicle has filed a motion to unseal the transcript (download a copy here) and neither Fastow nor the Task Force is really opposing the Chronicle's motion (Fastow has requested that matters regarding his personal medical condition be redacted from the transcript).

But what is really odd about all this is that Fowler reports that the Task Force, in a recent filing that is not yet publicly available, states that it wants to review the transcript of the closed-door meeting because "[t]he government is currently assessing whether to file a notice of appeal of the sentence imposed on Mr. Fastow, and it cannot make that determination without a copy of the transcript of the pre-sentencing hearing."

Note to Task Force -- it's hard to appeal rulings successfully when you do not object to the ruling in the first place.

Posted by Tom at 4:21 AM | Comments (0) |

October 12, 2006

Previewing the Skilling appeal

Former Enron CEO Jeff Skilling filed a motion for bail pending appeal earlier in the week (download a copy here; Carrie Johnson's WaPo article on the motion is here) and, in so doing, previews the major issues that he will emphasize in his upcoming appeal of his conviction on conspiracy, securities fraud and insider trading charges: the "deliberate ignorance" jury instruction; the Task Force's application of the "deprivation of honest services" theory upon which most of the conviction is based; failure to transfer the venue of the trial and related jury bias issues; and the Task Force's prosecutorial misconduct, particularly in effectively precluding witnesses with exculpatory testimony for Skilling from testifying during the trial by threatening those witnesses with prosecution if they were to do so. The motion is compelling, and its introduction sums up Skilling's position well:

Jeff Skilling should remain on bail pending appeal. He presents no flight risk, nor is he a threat to society; his appeal is not being pursued to delay; and his appeal will raise substantial issues of law that, if resolved in his favor, will likely result in the reversal of his convictions. See 18 U.S.C. § 3143(b) (elements defendant must establish to obtain bail pending appeal); United States v. Clark, 917 F.2d 177, 179 (5th Cir. 1990) (same). Only the last of these elements should be in dispute, and Skilling satisfies them. His appeal challenges all the counts of conviction and presents enough of a “close,” or “substantial,” question to warrant bail pending its resolution. United States v. Valera-Elizondo, 761 F.2d 1020, 1024 (5th Cir. 1985).

One of the strongest arguments Skilling will have on appeal is that a “deliberate ignorance” instruction should not have been given in this case. Whether to give such an instruction always presents a “close question.” United States v. Tunick, No. S3 98 CR 1238 (SAS), 2001 U.S. Dist Lexis 2911, at *8 n.5 (S.D.N.Y. Mar. 22, 2001). The question was especially close here for at least four reasons:

• Such instructions are disfavored, see United States v. Ojebode, 957 F.2d 1218, 1229 (5th Cir. 1992);

• Skilling never asserted an “ostrich” defense, a usual prerequisite to issuing the instruction, see United States v. Lara-Velasquez, 919 F.2d 946, 951 (5th Cir. 1990);

• Skilling never purposefully blinded himself to any allegedly criminal facts, another prerequisite, see United States v. Posada-Rios, 158 F.3d 832, 875 (5th Cir. 1998); and,

• Finally, the Task Force all but conceded that the instruction should apply only to Lay, yet the Court refused to give an instruction informing the jury that the deliberate ignorance theory could apply only to one, and not to both, defendants, cf. 2001 Fifth Circuit Criminal Jury Instruction 1.37 (approving such clarification; citing United States v. Reissig, 186 F.3d 617 (5th Cir. 1999)).

Courts in three recent, white-collar cases (one involving WorldCom CEO Bernie Ebbers) released defendants pending appeal based solely on a disputed deliberate ignorance instruction. See United States v. Kaplan, No. 02 CR. 883 (DAB), 2005 WL 3148060, at *1-2 (S.D.N.Y. Nov. 22, 2005); United States v. Ebbers, No. S4 02 Cr. 1144 (BSJ) (S.D.N.Y. Sept. 7, 2005) (attached as Ex. 1); Tunick, 2001 U.S. Dist Lexis 2911, at *8-10. In granting bail pending appeal, these courts did not endorse defendants’ arguments and, in fact, the court in Ebbers stated its strong disagreement with Ebbers’ claim that it had erred. See Ebbers, No. S4 02 Cr. 1144 (BSJ) at 4. Importantly, however, these courts recognized that “bail pending appeal is not conditioned on the [District] Court’s ‘finding that its own judgment is likely to be reversed on appeal.’” Id. As is the rule in the Fifth Circuit, for bail to be warranted, the appeal must only present a “substantial question” that likely impacts all the counts of conviction. Id.; see also United States v. Valera-Elizondo, 761 F.2d 1020, 1022 (5th Cir. 1985).

As in Ebbers, Kaplan, and Tunick, this Court need only look at this one appellate issue— deliberate ignorance—to find a substantial question exists and to grant Skilling’s motion. This instruction applied to all the counts, it was argued by the Task Force in closing, and if it were improperly given, then reversal of all of Skilling’s counts of conviction is likely. Here, we submit, is where the Court’s inquiry on this bail motion may begin and end.

If the Court is not convinced that this one appellate argument warrants granting bail pending appeal, other “substantial questions” exist. For example:

• Jury bias impacted every count of the verdict. If the appellate courts apply the correct, current, more nuanced tests to measure prejudice, reversal is likely.

• Moreover, this case, like no other recent case of note, tests the boundaries of prosecutors’ discovery obligations and defense access to witnesses. The Task Force’s approach to discovery, witnesses access, and the trial should be grounds for reversal, if not outright dismissal, as recent developments, especially in the KPMG case, establish.

Separately, but especially together, these various appellate issues warrant granting Skilling bailvpending appeal. Again, we do not expect the Court to “certify” that Skilling’s convictionsvshould be reversed. United States v. Randell, 761 F.2d 122, 125 (2d Cir. 1985). That is not the standard. The Court need only find that the appeal is not taken for delay and the issues raised are substantial, and, if decided in Skilling’s favor, likely will result in a reversal. See id.

Skilling meets this test and exceeds it. Given its track record on appeal, the Task Force will be hard pressed to argue otherwise. Appellate courts have tested two sets of convictions the Task Force secured at trial. The Supreme Court unanimously reversed the first conviction in the Arthur Andersen case. It did so because the Task Force, as here, successfully argued for mens rea instructions that allowed the jury to convict the firm for conduct that arguably was innocent, or at worst negligent. See Arthur Andersen LLP v. United States, 544 U.S. 696, 704-06 (2005). Courts in the Fifth Circuit have made clear that an improperly given deliberate ignorance instruction poses this precise risk: “[T]he deliberate ignorance instruction poses the risk that a jury might convict the defendant on a lesser negligence standard—the defendant should have been aware of the illegal conduct.” Lara-Velasquez, 919 F.2d at 951 (italics added). This risk was realized in this case, and was only compounded by the Court’s refusals to (a) sever Skilling’s and Lay’s trials, and (b) give an instruction, to which the Task Force had agreed, that the deliberate ignorance theory may not apply to both defendants, but only one.

The Task Force’s second appellate reversal further compels the relief Skilling seeks. In United States v. Brown, 459 F.3d 509, 522-23, 524 (5th Cir. 2006) (en banc petition pending), the Fifth Circuit reversed each of defendants’ conspiracy convictions either for insufficient evidence or because the Task Force’s conspiracy charge was premised on an overly expansive and improper theory of “honest services” wire fraud. Over defendants’ objections, that same honest services theory of wire fraud conspiracy was charged and instructed in this case. The Task Force relied heavily on this improper theory in cross-examining Skilling and in its closing argument to the jury. In light of Brown, Skilling’s Count One conspiracy conviction cannot stand. In addition, because the conspiracy count was the foundation of the Task Force’s case, Brown will likely require the reversal of every count on which Skilling was convicted. For example, Pinkerton instructions were given on the securities fraud counts (Counts 2, 14, 16-20, and 22-26), tying the faulty conspiracy charge to these substantive offenses. Similarly, the Task Force said both before and during trial that the conspiracy was the inside information on which Skilling traded, thereby linking the erroneous Count One to the insider trading conviction in Count 51.

Given the presence of so many appellate issues, granting Skilling bail pending appeal is appropriate.

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

So, what's the big deal about paying key witnesses?

If you're in Baltimore on Friday, you should make a point to drop in on Larry Ribstein and Bruce Kobayashi's presentation at the University of Maryland's 2006 Business Law Conference of their paper entitled What's So Bad About Paying Plaintiffs?

In this related blog post, Larry highlights the issues addressed in the paper by juxaposing the treatment of a couple of plaintiff-types who are currently signing like canaries, Enron's Andy Fastow and Howard Vogel, the main accuser of Milberg, Weiss:

We explore the basic policies at stake in the related issues of paying off plaintiffs and witnesses involved in the Milberg indictment. We ask, what's the difference between Andy Fastow and Howard Vogel? [. . .]

Both cases involve paying somebody for the effort and other costs involved in bringing facts to a court to establish claims that society thinks are worth bringing. [. . .]

As for paying witnesses, note that the law specifically allows payments to expert witnesses, recognizing the need to reward effort. But lay witnesses expend effort as well as risking social stigma and punishment. To be sure, the law has means other than payment of compelling appearance by fact witnesses. But the law has to identify relevant fact witnesses before it can compel their appearance. And while paying lay witnesses can encourage bad conduct, such as lying, the same is true for expert witnesses and for witnesses such as Fastow. Again, why distinguish these situations?

This question of how to distinguish the "payment" to somebody like Fastow and payments like those to Vogel arose in U.S. v. Singleton, 165 F.3d 1297 (10th Cir. 1999), which ultimately determined, en banc, that government lawyers weren't a "whoever" prohibited from giving "anything of value" for testimony. Why not? The least persuasive argument is that we can trust the government. Oh yeah? Anybody who thinks that should check with Judge Kaplan. [. . .]

Many people have focused on the outrage of Milberg suing for kickbacks while paying its own kickbacks to plaintiffs. There is truth in that outrage, but it's not the whole truth. While the government was prosecuting Milberg for making payments, it was making its own payoff in the form of the plea deal with Vogel. Of course the government's conduct wasn't illegal. But, again, why is one form of conduct legal while the other is not?

This is no mere technical pursuit of logical purity. Unless we can soundly distinguish between legal and illegal conduct, we risk undercutting the very conduct norms the criminal justice system is supposed to be creating.

Read the entire post and the related presentation. And then think about the prejudicial impact on defendants of the system that Ribstein and Kobayashi describe, particularly where the government also effectively precludes exculpatory testimony by threatening other witnesses with prosecution.

Posted by Tom at 4:56 AM | Comments (0) |

The Fortune Global 500

Tory Gattis over at Houston Strategies has the lowdown on this year's Fortune Global 500 corporate rankings and, as usual, Houston fares quite well, ranking 10th globally with over $326 billion in Global 500 revenues.

Interestingly, the top four cities -- Tokyo, Paris, London, and New York -- have over a trillion dollars in Global 500 revenues. Houston ranks third in the U.S. with six Global 500 companies headquartered here. A quick glance at the list indicates that the DFW metroplex has five, although both Ft. Worth and Irving have more Global 500 companies (two) than Dallas (one).

Update: Tory follows his first post up with this one about Houston leading the list of cities with the fastest-growing companies.

Posted by Tom at 4:34 AM | Comments (1) |

October 11, 2006

Criminalizing the information markets

As noted earlier here, here and here, the federal govenment's crackdown on Internet gambling is a a wasteful exercise in nanny-state futility, but also damaging to important American markets. Following up on that theme, University of Texas finance professor Paul Tetlock and Robert Hahn, director of the American Enterprise Institute-Brookings Joint Center, pen this NY Times op-ed appropriately entitled "Short Odds for Ignorance" in which they make the point that the Internet gambling ban will likely shut down important and productive information markets such as TradeSports:

The bigger economic story is how this act, by effectively prohibiting Internet betting, could unintentionally slow the emergence of new tools that have the potential to improve the productivity of the private sector and the government. Sadly, this is an aspect of the measure that both its supporters and its opponents seem to have overlooked. [. . .]

For instance, we now have markets for predicting political and economic events, where you can wager on the monthly unemployment rate or the outcome of the presidential race. (If you visit TradeSports.com, you can bet on Hillary Clinton’s chances of becoming the next president: a contract purchased for $1.91 would yield $10 if she wins — implying that the senator has about a 1 in 5 chance of winning.)

Why should we care? Because information markets, which essentially reflect the collective wisdom of savvy bettors, can help us make more accurate forecasts. Information markets have outperformed experts in a number of areas, whether it’s predicting point spreads in football games or elections or printer sales. There are more than 20 Web sites that offer information-market securities, including those run by Goldman Sachs and the University of Iowa.

These markets work for several reasons: first, almost anyone can participate; second, people think hard when they have to back up their predictions with money — buy the right presidential contract and you win, buy the wrong one and you lose; third, the profit motive encourages people to look for better information.

Many academics across the political spectrum believe that information markets could be critical in improving decision making by governments, nonprofit organizations and the private sector. Yet, because of current regulatory restrictions, the Iowa market is the only place in the United States dedicated to improving our understanding of these markets. Also, those information markets whose purpose is to make money have generally based themselves offshore, partly in reaction to existing state and federal restrictions on Internet gambling.

You may recall that, a couple of years after the 9/11 attacks, the Pentagon floated the idea of setting up information markets for predicting terrorist attacks. Those plans were scuttled because of the misdirected public outcry by those who could not bear the thought of someone profiting off of predicting something that could result in human suffering. Now, Congress is preventing Americans from access to other important information tools because of a misguided desire to impose a paternalistic law outlawing something that is not even a significant problem.

And these legislators are working for us?

Posted by Tom at 6:21 AM | Comments (6) |

They play for keeps in the SEC

Year in and year out, the Southeastern Conference is the most competitive of the major college football conferences.

Reflecting that intense competition, you may recall this item from earlier this year in which an Auburn University professor charged that another university professor and the Auburn athletic department had engaged in academic fraud for the purpose of ensuring the eligibility of a large number of Auburn football players.

Those competitive fires boiled over again a couple of weeks ago when an Auburn football team laptop containing the team's confidential playbook turned up missing the week before Auburn played South Carolina in a big game. Although Auburn initially feared that South Carolina would end up with the missing playbook, it turned out that a homeless man had lifted the computer and it was returned to the Auburn team.

All of that leads to this Onion article that reports that the playbook was actually returned in, might we say, slightly altered form.

And, just to emphasize that truth is often stranger than fiction in the SEC, this State.com article reports that South Carolina head coach Steve Spurrier dressed down one of his assistant coaches during the post-game press conference after the Gamecocks won this past week against Kentucky. Spurrier followed up that dressing-down with this apology. At least I think that's an apology.

Posted by Tom at 5:45 AM | Comments (0) |

Richard Justice goes batty again

As noted here and here earlier, Chronicle sports columnist Richard Justice comes uncorked at the darndest times.

Take Justice's recent blog post on why the Stros should not make a play for disgruntled New York Yankees star, Alex Rodriguez. Rodriguez is the same age as Stros slugger Lance Berkman and has substantially better career hitting statistics than Berkman, but Justice engages in vacuous blathering about how Rodriguez would not be a "good fit" for the Stros despite the fact that it is clear that the Stros' main need is a hitter of Rodriguez's quality.

Well, Justice's subjective analysis would normally not even merit a comment, except that he ends it with the following salvo:

A-Rod may be the kind of guy [Stros GM] Tim Purpura would want, but I'm guessing the best GMs--Billy Beane, Gerry Hunsicker, Pat Gillick, etc.--wouldn't touch him.

What a cheap shot at Purpura. Although it's fine to think that Rodriguez would not be welcome in the Stros clubhouse, it's silly to suggest that exploring a trade for a hitter of his caliber reflects poor judgment by the Stros GM. And though Justice apparently doesn't want to admit it, his old buddy Hunsicker is such a good general manager that he couldn't even land a GM job at all after leaving the Stros last year and ended up working this past season as an aide to the GM at Tampa Bay, not exactly on the upper-crust of Major League Baseball.

Richard Justice needs to remove his nose from Gerry Hunsicker's rear end.

Posted by Tom at 5:13 AM | Comments (0) |

October 10, 2006

Stros 2006 Review, Part Ten: Season Recap and Report Card

With the League Championship Series matchups now set, it's time to put the Stros 2006 season to rest. At least the Stros' late season surge was fun while it lasted, but it ended in the same manner as too many of this club's games (previous reviews here) -- with a whimper in Atlanta as the Stros failed to make the playoffs for the first time in three seasons and for the only the fourth time in the past 10 seasons. This tenth and final review of the season will provide a report card on the Stros, hopefully without the subjective blather that we endure from much of the mainstream media that covers the club.

The Stros played well down the stretch as they posted an 11-6 record in the final 1/10th of the season (including their magical nine game winning streak), which means that they were a solid 21-12 over the final 20% of the season. However, inasmuch as the Stros were 19-13 during the first 20% of the season, that means that the club was an abysmal 42-55 during the middle 60% of the season. That latter record is reflective of the club's poor hitting, while the 40-25 record during the first and final 20% segments of the season reflect the club's strong pitching. The combination of the two means that the Stros are about a National League-average team, which is proved by the club's 82-80 final record.

The Stros late-season run was fueled by outstanding pitching, which has been the foundation of the club's success throughout the Biggio-Bagwell era. After a slow start this season, the Stros pitching staff really picked it up over the second half of the season, finishing by saving an outstanding 78 more runs than a National League-average pitching staff would have saved in the same number of innings (RSAA, explained here). That was the best of any pitching staff in the National League this season.

Nevertheless, as has been the case over the past six seasons, the Stros' overall hitting declined again this season. The club's hitters generated a poor 47 runs fewer runs than a National League-average team would have created using the same number of outs (RCAA, explained here), which was only 11th among the 16 National League teams.

Thus, while this season was clearly not disastrous, my main concern is that the club's fast finish will distract management from recognizing and addressing the festering problem with the club's hitting that -- if not rectified -- will prevent the Stros from being a perennial playoff contender during the Berkman-Oswalt era. The initial management move -- firing pitching coach Jim Hickey while retaining manager Phil Garner and hitting coach Sean Berry -- is not particularly encouraging, although it must be conceded that young, back-end rotation starters Taylor Buchholz and Wandy Rodriguez struggled this season. That probably sealed Hickey's fate.

But as my grades for the Stros players reflect, the Stros have far bigger issues than their pitching coach. The club's model of emphasizing pitching remains sound, so the club doesn't need to become even an above-average National League-hitting team to return to serious playoff contention. In fact, adding merely one above-average hitting corner outfielder may be enough to do the trick so long as the pitching continues to excel. But whatever deals Stros management make, the club clearly does not need to make wholesale changes during the off-season to return to serious playoff contention in the 2007 season. Indeed, the $40 million or so in payroll that will be freed up with the expiration of the Bagwell, Clemens and Pettitte contracts will provide Stros management with some much-needed flexibility in consummating a deal or two.

My report card for the Stros follows the final season statistics below. Pdf's of the final hitting stats are here and the final pitching stats are here), courtesy of Lee Sinins' sabermetric Complete Baseball Encyclopedia. The abbreviations for the hitting stats are defined here and the same for the pitching stats are here:

Now for the grades. First, the A-team:

Lance Berkman: A+ The Big Puma, Fat Elvis, or whatever you want to call him, Berkman has developed into one of the best sluggers in Major League Baseball. His 64 RCAA was third in the National League behind only Philly's Ryan Howard (82 RCAA) and the Cards' Albert Pujols (76 RCAA), and he was also was third home runs with 45, third in on-base average, slugging percentage and OPS (on-base average + slugging percentage). As noted earlier here, he overtook Biggio as the second-best hitter in the Stros franchise history and is the only current player who has a chance of overtaking Bagwell as the best hitter in Stros history. His 2006 season was the 8th best season by any Stros player, and he now has three of the top Stros top 10 seasons:

Berkman is now solidly the second-best hitter behind Jeff Bagwell in Stros history:

Berkman's OPS (on-base average + slugging percentage) this season is fourth best in Stros history:

Berkman's 136 RBI's this season set a new Stros record:

Berkman's 45 home runs this season are the second-best in Stros history:

Berkman's 45 home runs also tied for the best ever in a season by a switch-hitter in National League history:

In addition to his superlative hitting, Berkman provided flexibility for the team by playing multiple positions and playing each one of them reasonably well. He remains an adventure every once and awhile on the basepaths, but that's small potatoes in comparison to everything else that he brings to the table. Berkman -- along with Roy O -- is now clearly the leader of the Stros and a bonafide Hall-of-Fame candidate if he can maintain his current level of productivity over the next seven seasons or so.

Roy Oswalt: A+ Already the best pitcher in Stros history, Roy O added to his legacy with another excellent season, finishing with an outstanding 2.98 ERA and a superlative 39 RSAA, good for second in the National League. His season was a personal best and tied for sixth best in Stros history:

Oswalt is already far and away the best pitcher in Stros history:

The club awarded Oswalt with the most lucrative contract in franchise history. Barring injury, Roy O is another legitimate, home-grown Hall-of-Fame candidate for the Stros franchise.

Roger Clemens: A+ What more can be said about the Rocket? He is legitimately one of the three best pitchers ever to play the game and continues to increase his career (since 1900) RSAA record. Even if the 19th century is included, only Cy Young saved more runs than Clemens over his career:

Clemens had a 29 RSAA and a 2.30 ERA in 2006 in less than half the season, which is nevertheless the 13th best season in Stros history. If he were to offer to play 40% of the season next year, the Stros would be foolish not to accomodate him. Truly, Clemens is one for the ages.

Luke Scott: A The 28 year-old journeyman minor leaguer and throw-in from Cleveland in the Jeroime Robertson trade a couple of seasons ago, Scott was one of the best hitters in Major League Baseball over the final 65 games of the season as he accumulated a 29 RCAA, 10 taters, a .426 on-base average, a .621 slugging percentage and an 1.047 OPS. His performance probably ensures him a starting berth in left field for next season, but the question remains whether Scott is simply a late-bloomer or a career AAAA-hitter who had the one-time hitting streak of his life during the final 65 games of the 2006 season.

Next are the B grades:

Dan Wheeler: B+ For the third straight season, Wheeler (2.52 ERA/16 RSAA) was a quiet and efficient reliever for the Stros and took over the closer role late in the season. Few people realize it, but Wheeler's 35 RSAA over the past three seasons is better than Lidge's 34 RSAA. Manager Garner's stubborn slowness in replacing Lidge with Wheeler as the club's closer could well have cost the Stros more than the 1.5 games that they finished behind the Cards in the NL Central standings.

Mike Lamb: B- Lamb rebounded from a subpar 2005 season with one of his most productive seasons (5 RCAA/.361 OBA/.475 SLG/.836 OPS) while contributing at several different positions. He is a handy player to have around.

As you would expect from an average team, the C grade group is larger than the above-average group:

Chris Burke: C+ Burke was average offensively (0 RCAA/.347 OBA/.418 SLG/.765 OPS), but gets a plus score because of his ability to contribute defensively at multiple positions. His development continues to be stunted by the Stros' continued reliance on the declining Biggio, one of the substantial costs of that indulgence.

Chad Qualls C+ Qualls' season (3.76 ERA/8 RSAA) mirrored that of the pitching staff overall -- started slow over the first half of the season, but was increasingly effective as the season wore on. Likely to be Wheeler's setup man next season.

Trever Miller C+ Miller has a career 4.41 ERA. Somehow, he patched together a 3.02 ERA/9 RSAA season as the Stros lefthanded specialist out of the bullpen. Just don't count on it happening again.

Russ Springer C+ Career 4.94 ERA reliever has a 3.47 ERA/7 RSAA season. See Miller analysis above.

Morgan Ensberg C Ensberg had a great 2005 season, then got hurt and faded at the end of the season. He started off like a house afire this season (20 RSAA/.403 OBA/.627 SLG/1.030 OPS as of May 26), then hurt his shoulder and was slightly below-average over the rest of the season (16/.396/.463/.859). Despite that, he was still the third most-productive hitter on the Stros after Berkman and Scott. My sense is that Ensberg just needs to be left alone at third base and that he has been mishandled by Garner and, before him, even more so by Jimy Williams. Inasmuch as the Stros have far larger problems than Ensberg, here's hoping that he has an injury-free 2007 season.

Andy Pettitte: C After having the best season of his career in 2005, Pettitte had a miserable first 2/3rd's of the season before pulling it together in the final two months to salvage an average season (4.20 ERA/9 RSAA). All in all, the Stros did not get their money's worth from Pettitte in regard to the high-priced three-year contract the club gave him. However, the deal was worth it if it helped draw Clemens into the fold. Pettitte's left elbow is chronically sore these days, so there's no telling whether he'll even play next season. If he does, then it will be for much less than the $16.5 million he received for this past season.

Fernando Nieve: C One of the Stros contingent of promising young pitchers, Nieve (4.20 ERA/4 RSAA) began the season as a starter, but moved to the bullpen in the middle of the season and was reasonably effective. A decent bet to assume Qualls' spot as the setup man for Qualls and Wheeler next season.

Aubrey Huff: C Huff (O RSAA/.341 OBA/.478 SLG/.819 OPS) was a decent mid-season acquisition, but really proved to be basically Mike Lamb with a tad more power but less defensive acumen (which is not good because Lamb is no magician with the glove). The Stros gave up a promising minor league pitcher (Mitch Talbot) and a speculative shortstop prospect (Ben Zobrist) to get Huff, so the club probably came out ahead on the trade. Because Lamb already provides basically what Huff brings to the table, my sense is that the free agent Huff is a longshot to stay with the Stros.

Jason Hirsh, Matt Albers and Chris Sampson: C- None of these rookie pitchers set the league on fire, but Hirsh (6.04 ERA/-7 RSAA) and Albers (6.00 ERA/-4 RSAA) are young and showed flashes of MLB-starter ability, and the older Sampson (2.12 ERA/9 RSAA) looks as if he could be effective as a long reliever and spot starter.

Finally, the below-average, of which there are quite a few:

Willy Taveras: D But for his continued improvement as a defensive player and his speed, Taveras' (-17 RCAA/.333 OBA/.338 SLG/.671 OPS) grade would be an F. Taveras should be trade bait this off-season for an MLB team that is willing to sacrifice offense for defense in centerfield. Taveras is not a good fit for the hitting-deprived Stros.

Adam Everett: D Although one of the best defensive shortstops in Major League Baseball, Everett's offensive limitations (-31 RSAA/.290 OBA/.352 SLG/.642 OPS) render him a below-average National League player. Nevertheless, he is less expendable than Taveras because the Stros do not have any replacement for him within the organization at this time.

Jason Lane: D Lane was a big disappointment for the Stros this season. After a promising 2005 season as a first-time starter, Lane regressed this season (-12 RSAA/.318 OBA/.392 SLG/.710 OPS). Even as bad as Lane was, what's frightening is that the Stros might just have won the NL Central had Garner given a substantial number of Taveras and Preston Wilson's at-bats to Lane.

Eric Bruntlett: D Bruntlett (-3 RCAA/.351 OBA/.345 SLG/.696 OPS) fulfilled his role of being a useful utilityman who can play most any position. But a .345 slugging percentage?

Orlando Palmeiro: D- As with Pettitte, Palmeiro (-8 RSAA/.294 OBA/.319 SLG/ .613 OPS) was poor for most of the season before catching fire down the stretch and contributing to the Stros' late season surge. But a .613 OPS is not going to cut it as a club's prime pinch-hitter.

Manager Phil Garner: D- Baseball managers have far less of an effect on games than either football or basketball coaches. However, a manager can make a difference in a close race, and Garner most certainly cost the Stros more than the 1.5 games that the club finished behind the Cardinals for the NL Central title. From his stubborn insistence on keeping the ineffective Lidge in the closer role far too long, to his cluelessness in giving Biggio, Taveras, Preston Wilson and Ausmus extra at-bats when better alternatives existed, to stupid moves such as this, Garner's limitations as a manager were exposed this season. The past two seasons may have given Garner a pass for this season, but his poor performance this season certainly did not deserve the extension of his contract that Stros management gave him after the season. That Stros management rewards such a dubious performance is somewhat worrisome.

Craig Biggio: F The bottom fell out this season for the 40 year-old Stros icon (-20 RCAA/.306 OBA/.422 SLG/.728 OPS). In addition to having by far his worst season at the plate, Bidg has become a severe defensive liability to boot. Bidg will require between 350-400 plate appearances next season to generate the 70 hits he needs to reach 3,000. In the meantime, Burke's development will continue to be stunted, as was Lane's before him during the Biggio outfield experiment. Owner Drayton McLane will indulge Bidg's quest for 3,000 hits by bringing him back next season, but it would be better for the Stros if Bidg were to call it a career and retire. Electing to help his team by quitting just short of reaching 3,000 hits won't affect his certain Hall-of-Fame credentials one bit.

Brad Lidge: F Lidge (5.28 ERA/-6 RSAA) was one of the worst pitchers on the Stros pitching staff this season. It's not difficult to understand why -- he simply has lost his ability to throw his devastating slider for strikes consistently. As a result, hitters are laying off Lidge's slider and laying into his fastball, which Lidge does not locate well. Ever since his breakout performance in 2004 (26 RSAA), Lidge has been trending steadily downward (only an 8 RSAA over the past two seasons). The more consistent Wheeler now has a better RSAA than Lidge over the past three seasons and should be the closer going into the 2007 season. Although his trade value has plummeted over the past year, the Stros should definitely listen to reasonable offers for Lidge. It is looking less likely with each passing season that he will ever regain his dominating 2004 level of performance.

Taylor Buchholz: F Another big disappointment, Buchholz (5.89 ERA/-17 RSAA) had a couple of good outings early in the season, wilted as the season wore on and then regressed even further when he was demoted to AAA Round Rock. The kid has good stuff, but he still needs to figure out how to pitch. Probably begins next season behind Hirsh and Albers.

Wandy Rodriguez F One of the worst Major League starters over the past two seasons, it will not be a good sign for 2007 if Rodriguez (5.64 ERA/-16 RSAA) is on the Stros' staff.

Brad Ausmus: F Ausmus (-38 RCAA/.308 OBA/.285 SLG/.593 OPS) took his level of poor play to new depths during the 2006 season as he had the worst season of hitting in Stros history:

Ausmus is far and away the worst hitter in Stros history:

Given that Ausmus is not even a particularly good defensive player anymore (his arm is no longer strong enough to throw out basestealers consistently), there is no justification for Ausmus remaining a regular Major League player. The only reason he received an F rather than an F- is that he blocks pitches well.

Brandon Backe: Incomplete. Here's hoping that the quintessential battler is able to overcome Tommy John surgery and return to the Stros rotation. See you in 2008, Brandon!

So, that's it for the 2006 season. Certainly a disappointment after the successful playoff runs of the past two seasons, but there is hope on the horizon -- this is not a club that needs radical changes to return to serious playoff contender status. Although GM Purpura's moves this past off-season (remember Preston Wilson?) were uninspiring, missing the playoffs this season and more payroll flexibility should motivate him to make the changes during this off-season that are necessary to reverse the Stros' downward hitting trend. Stay tuned, because my sense is that this off-season is going to be quite interesting.

Posted by Tom at 4:48 AM | Comments (0) |

The Amish Way

The first two paragraphs of Rod Dreher's op-ed in the Dallas Morning News says it all:

Is there any place on earth that more bespeaks peace, restfulness and sanctuary from the demons of modern life than a one-room Amish schoolhouse? That fact is no doubt why so many of us felt so defiled – there is no more precise word – by news of the mass murders that took place there this week. If you're not safe in an Amish schoolhouse ... And yet, as unspeakable as those killings were, they were not the most shocking news to come out of Lancaster County this week.

No, that would be the revelation that the Amish community, which buried five of its little girls this week, is collecting money to help the widow and children of Charles Carl Roberts IV, the man who executed their own children before taking his own life. A serene Amish midwife told NBC News on Tuesday that this is normal for them. It's what Jesus would have them do.

Read the entire piece. What a magnificent expression of true faith.

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

Project Posner

Not just any judge has one of these. But it's a darn good idea. The following is the website's description:

The purpose of this site is to make freely and easily available to the public Richard Posner's largest and greatest body of work — his judicial opinions. The database contains opinions from 1981 to 2006. It will not contain the most recent opinions.

Why this site? While Posner's books and popular writings are easily available to the public, his opinions are difficult or expensive for the public to access, let alone search. This site, for the first time, collects almost all of his opinions in a single searchable and easily readable database.

For lawyers and those interested in law, Posner's opinions have a particular substantive value. One thing that distinguishes the opinions is the effort to try and get at why a given law actually exists, and an effort to try and make sense of the law. That can make them more useful than most case reports.

In addition, the opinions often develop the American general and state common law. Posner is among the judges who feels free to take the rule of Erie as more suggestion than injunction.

Finally, some of the opinions are funny.

I wonder whether Judge Easterbrook will get one, too?

Posted by Tom at 4:32 AM | Comments (0) |

October 9, 2006

The talented Mr. Munitz skates free

Almost lost amidst the media firestorm over California Attorney General Bill Lochyer's decision to prosecute former Hewlett Packard board chairperson Patricia Dunn was this news item that Lochyer's office has decided not to sue or prosecute former Getty Trust president and former University of Houston president Barry Munitz (prior posts here).

Lochyer's office had been investigating Munitz over misuse of trust money for his wife’s travel, using employees for personal errands and making improper payments to a graduate student from trust funds. Lochyer's office concluded that no legal action was advisable because Munitz's actions were authorized by the Getty board and that his settlement with the Getty Trust when he resigned exceeded the value of what the state could recover from Munitz in a civil action or a prosecution.

In other words, Lochyer concluded that there was no need to prosecute Munitz because he had done the right thing in settling up with the Getty Trust. That decision in regard to Munitz makes his decision to prosecute Ms. Dunn all the more curious. Perhaps Ms. Dunn should have done lunch with Lochyer?

Posted by Tom at 5:35 AM | Comments (0) |

The NY Times on James Baker's new book

Former White House Chief of Staff, Secretary of State and Secretary of Treasury James Baker, III, who spends his time these days at the Baker Institute at Rice University, has written a new book entitled “Work Hard, Study . . . and Keep Out of Politics!” Adventures and Lessons From an Unexpected Public Life." The title of the book is the legendary advice of Baker's grandfather, James Addison Baker, who was one of the founders of the venerable Houston law firm, Baker & Botts.

This NY Times review of Baker's new book belittles the current Bush Administration, even though the book does no such thing. That passes for a book review in the NY Times these days.

Posted by Tom at 5:03 AM | Comments (2) |

More on that energy price conspiracy

A couple of weeks ago, this post noted the news stories about some pundits were floating the theory that the recent slide in energy prices was a dark conspiracy of powerful political forces that were attempting to ensure the victory of the evil capitalist roaders in the upcoming mid-term elections. Bill O'Reilly was probably pleased with these reports.

Subsequently, a week or so ago, Clear Thinkers favorite James Hamilton shot down a similar report that Goldman Sachs was really behind the price decline.

But absurd conspiracy theories do not die easily in American society. Last Friday, this Washington Post article again channels the conspiracy theory, this time pointing toward a new bogeyman, Saudi Arabia:

According to this theory, the Saudi government is doing Bush a favor by trying to bring down prices before the election. The evidence? Some say the Saudi government has a long-standing relationship with the Bush family. They also cite the 2004 book by author and Washington Post assistant managing editor Bob Woodward, "Plan of Attack," which said that then-Saudi ambassador to the United States, Prince Bandar bin Sultan, promised to keep oil production high enough to moderate fuel prices and bolster the U.S. economy during the presidential election year.

Professor Hamilton dutifully tries to keep up with the latest conspiracy theories:

So let me see if I've got this straight-- the evidence is that (1) Bob Woodward says that somebody told him that the Saudis made a promise in 2004 and (2) the Saudis could have reduced production by even more than they already have, if they really wanted to keep prices from falling. As for (1), the Saudis have made plenty of promises -- publicly, for all the world to see-- that came to nothing. And as for (2), what sort of economic theory is this? That the Saudis have been decreasing production over the last year is indisputable. If an even bigger production cut than the Saudis have already made would have been necessary in order to keep prices from falling, doesn't that prove rather conclusively that the cause of the price drop must be something other than what the Saudis have done?

Meanwhile, following up on a thought from this earlier post, Don Boudreaux over at Cafe Hayek chimes in with the following letter to the editor that responds to an earlier letter by an advocate of the energy price conspiracy:

Dear Editor:

Alleging that today's falling gasoline prices result from a fiendish plot to keep the GOP in power, Kenneth Jones is certain that "gasoline prices will go right back up to $2.75-plus after the [November] election" (Letters, October 2).

If Mr. Jones is correct, he can make a financial killing. All he need do is to invest all of his assets going long in gasoline futures (which are today about 30 percent lower than they were in late July). Indeed, he ought even to cash out all the equity in his house, max out on his credit cards, and borrow heavily from his brother-in-law so that he can invest as much as possible in these futures.

He can then contribute his post-election financial bounty to the Democratic National Committee.

Sincerely,
Donald J. Boudreaux

Keeping up with nutty conspiracy theories regarding fluctuation in energy prices is a full-time job.

Posted by Tom at 4:40 AM | Comments (0) |

October 8, 2006

2006 Weekly local football review

Texas Longhorns 28 Oklahoma 10

As noted in last week's review, my recent up-close exposure to this Texas team led me to conclude that the Sooners would have their hands full with the Longhorns (5-1, 2-0), and that was certainly the case during the second half of the annual Red River Shootout in Dallas on Saturday. The Horns dominated the Sooners 21-0 in the second half on their way to a convincing 28-10 victory in what really amounted to a rock'em, sock'em defensive battle that was won by the team with the fewer turnovers. Texas QB Colt McCoy had a couple of nice TD passes during that second half and Longhorn CB Aaron Ross was all over the field, icing the game with an alert scoop-up of a lateral pass in the 4th quarter. Texas' current 17-game winning streak in Big 12 games is the longest in conference history, surpassing Kansas State's 15-game winning streak from 1997-98. The Longhorns have surprising Baylor (3-3, 2-0) at home next week before facing the toughest part of their schedule -- consecutive road games at Nebraska (5-1, 2-0) and Texas Tech (4-2, 1-1).

Texas Aggies 21 Kansas 18

About the time late in the 4th quarter that the Aggie faithful were ready to go Emory Bellard on current Aggie coach Dennis Franchione, the Ags (5-1, 1-1) dug deep and drove 80 yards for the game-winning TD. Although the Aggie defense pretty well shut down KU's offense in the second half, the Aggie offense is still not hitting on all cylinders under QB Stephen McGee. The Ags have surprising Missouri (6-0, 2-0) at home next week and then travel to Baylor and Oklahoma State before facing their crushing final month of the season against OU, Nebraska and Texas.

Louisiana-Lafayette 31 Houston 28

Note to Coogs (4-2, 2-0) -- when you are trying to build credibility on the national scene and within your community, it's a good thing not to lose to a team called "La-La," particularly after building a 21-0 first half lead. The Cougars' once-promising season now hangs in the balance as it faces tough games at Southern Miss and at home against UTEP, Central Florida and Tulsa in their next four games.

Tulane 38 Rice 24

The Owls (1-5, 0-2) struggled on defense all day as a mediocre Tulane team ran up almost 500 yards total offense. The Owls play UAB at home next week before taking on a tough stretch of their season on the road against Central Florida, UTEP, and Tulsa.

The Texans (1-3) are off this week before going to Dallas next week to be hammered by the Cowboys.

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

October 7, 2006

M.D. Andersen patients get a nice Friday surprise

The University of Texas M.D. Andersen Cancer Center in Houston's Texas Medical Center is one of the nation's leading cancer hospitals and research centers. It is a place where difficult issues relating to life and death are confronted on a daily basis, yet the M.D. Andersen professionals work hard to encourage a culture of hope and optimism. It is truly one of Houston's most remarkable places.

Consistent with that remarkable nature, look at who M.D. Andersen patients and workers were able to stumble across yesterday over the lunch hour:

On her way to Friday night's concert in The Woodlands, Sheryl Crow made a detour for a smaller, kindred audience: women with breast cancer.

Six months after her own breast cancer made headlines, the Grammy-winning rocker stopped by the University of Texas M.D. Anderson Cancer Center to mingle with and play for patients and survivors of the disease.

"After I was diagnosed Feb. 22, everything screeched to a halt," Crow told about 200 women who gathered at the hospital's Nellie B. Connally Breast Center for the intimate mini-concert. "I'm on a new path now: I don't want to spend any time doing anything I don't want to do."

Crow, 44, who had surgery and then reconstruction, joked that "breasts are everything" in her business. She said she's been given a clean bill of health, and called her bout with cancer as "life-changing" for her mostly male crew as for her.

Introduced as a "self-described schoolteacher from Missouri who's built a second career as a singer-songwriter," Crow didn't grant media interviews.

An M.D. Anderson spokesperson said her staff had contacted the center to say that Crow wanted to visit and play a few songs for patients.

Wearing jeans, a white vest and heels, Crow sang Soak Up the Sun and Every Day Is A Winding Road to an appreciative audience that packed the center's lobby even though M.D. Anderson gave no official notice of the event. Cell phone cameras clicked away as she played. [. . .]

Crow made the M.D. Anderson appearance as she winds down a national tour with John Mayer.

The tour had been postponed after surgery she's described as "minimally invasive" and follow-up radiation treatment. . .

She made no in-depth references to the ordeal Friday, sticking to music and intimate conversations with patients.

"This brightened everyone's spirits," said Cory Hanson, a Richmond woman with Stage 3 breast cancer. "I'd been a little upset because I'd wanted to get tickets to The Woodlands show, but decided not to because I wouldn't have the energy after today's treatment. But this was a pretty good substitute. At The Woodlands, I wouldn't have sat up front or gotten a hug."

By the way, my teenage daughter reports that the Crow-Mayer concert at The Woodlands Cynthia Mitchell Pavilion was a "10."

Posted by Tom at 7:58 AM | Comments (0) |

October 6, 2006

Scorsese scores again

It's always worth noting when Martin Scorsese produces a film, and his newest one -- The Departed -- with Jack Nicholson, Leanardo DiCaprio, Matt Damon and an outstanding supporting cast opens today. The initial reviews indicate that it's another Scorsese masterpiece:

NY Times;

Richard Roeper (Chicago Sun-Times);

Joe Morgenstern (WSJ $); and

reviews via Google.

Posted by Tom at 6:37 AM | Comments (1) |

The tax ruse of big-time college sports

As the Universities of Texas and Oklahoma prepare to reap millions this weekend during their annual shootout in Dallas, the National Collegiate Athletic Administration is preparing a response to a possible federal challenge to the tax policy that facilitates the universities' financial windfall.

This Indy Star.com article reports that the House Ways and Means Committee has delivered an eight-page letter to NCAA President Myles Brand demanding that the NCAA justify why the multi-billion dollar business of big-time college sports deserves its education-based tax exemption (related Miami Hawk Talk post here; also see this Sports Law Blog post). The letter observes in part:

"Educational organizations comprise one of the largest segments of the tax-exempt sector, and most of the activities undertaken by educational organizations clearly further their exempt purpose. The exempt purpose of intercollegiate athletics, however, is less apparent, particularly in the context of major college football and men's basketball programs." [. . .]

"To be tax-exempt . . . the activity itself must contribute to the accomplishment of the university's educational purpose (other than through the production of income). How does playing major college football or men's basketball in a highly commercialized, profit-seeking, entertainment environment further the educational purpose of your member institutions?"

As noted here (see also here and here), NCAA member institutions sold out long ago to the owners of professional sports franchises by effectively agreeing to subsidize minor league systems in football and basketball for the owners. The education-based tax break fuels the raising of funds necessary to capitalize that system, and directly benefits the owners of professional sports franchises who do not need to allocate capital to development of minor league systems because of the NCAA members' cooperation in doing it for them. The contrast between college baseball -- a thriving but relatively small economic model that competes for players with a well-developed minor league professional system -- and college football -- a booming industry (at least for a relative few universities) that does not compete with a minor league for players -- reflects the high stakes involved for everyone involved in the current system.

My sense is that nothing will come of this current Congressional inquiry because -- as one of Larry Ribstein's colleagues points out in the article -- politicians from states that thrive on big-time college sports would probably never allow the gravy train to end. Moreover, foreign professional leagues in basketball are creating a minor-league system in that sport that is changing the nature of college basketball for the better, so arguably markets will eventually work to mitigate the hypocrisy of the current system, anyway. But given the extraordinary run-up in the value of National Football League franchises over the past couple of decades, don't you think it's about time that universities quit subsidizing a part of that growth?

Posted by Tom at 5:15 AM | Comments (1) |

Garrison Keillor's Dallas adventure

Well, it doesn't look as if Garrison Keillor will be placing Dallas on his travel itinerary again anytime soon.

According to this Jacquielynn Floyd/Dallas Morning News column, the author, humorist, syndicated columnist and creator of National Public Radio's venerable Prairie Home Companion show visited Dallas a week ago to promote his latest book, Homegrown Democrat. Highland Park United Methodist Church near the Southern Methodist University campus sponsored Keillor's visit, and over 1,000 of Keillor's adoring fans showed up for his hour-long lecture. The evening apparently went quite well -- the audience laughed and applauded throughout Keillor's talk and he even stuck around afterward to chat and sign a few copies of his book.

But Keillor apparently had a different view of how his trip to Dallas went. The following is what he wrote at the end of his Chicago Tribune column this week:

. . . our country has taken a step toward totalitarianism. If the government can round up someone and never be required to explain why, then it's no longer the United States as you and I always understood it. Our enemies have succeeded beyond their wildest dreams. They have made us become like them.

I got some insight last week into who supports torture when I went down to Dallas to speak at Highland Park Methodist Church. It was spooky. I walked in, was met by two burly security men with walkie-talkies, and within 10 minutes was told by three people that this was the Bushes' church and that it would be better if I didn't talk about politics. I was there on a book tour for "Homegrown Democrat," but they thought it better if I didn't mention it. So I tried to make light of it: I told the audience, "I don't need to talk politics. I have no need even to be interested in politics--I'm a citizen, I have plenty of money and my grandsons are at least 12 years away from being eligible for military service." And the audience applauded! Those were their sentiments exactly. We've got ours, and who cares?

The Methodists of Dallas can be fairly sure that none of them will be snatched off the streets, flown to Guantanamo Bay, stripped naked, forced to stand for 48 hours in a freezing room with deafening noise. So why should they worry? It's only the Jews who are in danger, and the homosexuals and gypsies. The Christians are doing fine. If you can't trust a Methodist with absolute power to arrest people and not have to say why, then whom can you trust?

Dallas Methodists are the same as German appeasers of Nazi genocide? As Floyd's column relates, Keillor is probably at least exaggerating about what occurred during his visit.

Posted by Tom at 4:35 AM | Comments (3) |

October 5, 2006

Runnin' with the Dogs at Texas-OU Weekend

The greatest annual rivalry game in college football is renewed this Saturday in Dallas as the Texas Longhorns and the Oklahoma Sooners strap it on at the Cotton Bowl, and this year's game is highlighted by a new book about the game, Mike Shropshire's Runnin' with the Big Dogs: The True, Unvarnished Story of the Texas-Oklahoma Football Wars (William Morrow 2006).

Shropshire's book is rollicking fun, focusing on the classic 1967 game, which is the first game of the series that he covered. However, the author also vividly develops the culture of the game, which involves a blow-out weekend in Dallas each year during which wild-eyed fans of each team continually confront one another. Legendary coaches such as Darrell Royal, Bud Wilkinson and Barry Switzer are a big part of the book, as are current stellar coaches, OU's Bob Stoops and UT's Mack Brown. In this recent Wall Street Journal ($) review of the book, Texas Monthly's Skip Hollandsworth observes the following about the game's unique setting:

[T]he atmosphere is so combustible that it really makes no sense to play the game in the hometown of either team. So it's played at a neutral site: the Cotton Bowl in Dallas. Which means that on the Friday before the game, Interstate 35 coming south from Oklahoma and north from Austin is jammed with frenzied fans, their cars, SUVs and pickups decorated with either red Boomer Sooner or orange Longhorn flags and their back windows covered with semi-obscene slogans decrying their rival's ineptitude and lack of -- how to put it? -- manhood and legitimate parentage.

By the time these fans hit the city limits, horns are blowing and beer cans are flying out the windows. The fans either check into hotels (which are booked months in advance) or they barge into the homes of friends and relatives who have ill-advisedly agreed to let them stay. Soon they're out again on Dallas's streets, resuming the horn-blowing and can-tossing. I have some Dallas friends who are so determined to avoid the Texas-OU madness that they don't just leave town; they leave the state.

When the game finally begins, few of these fans have had any sleep. They're bellowing at the enemy and clutching the flasks of margaritas that they smuggled into the stadium -- and those are just the grandparents. As Mr. Shropshire writes in his very entertaining history of the rivalry: "You'll find audiences more genteel and reserved at cock fights."

And Hollandsworth passes along one of his favorite anecdotes about the annual rivalry:

In 1976, Oklahoma coach Barry Switzer and Texas coach Darrell Royal were standing with President Gerald Ford right before the pre-game coin toss. An Oklahoma fan, standing nearby, suddenly yelled: "Hey, who are those assholes with Switzer?"

Who can't love a game that has included players named Wahoo McDaniel (who later became popular on the pro wrestling circuit), the appropriately-named Joe Don Looney (what was the name of that remote island where he ended up?) and the majestically-named Duke Carlisle? Kick-off is at 2:30 p.m. on Saturday.

Posted by Tom at 5:05 AM | Comments (6) |

Getting off cheap

The Houston Rockets are off to Austin for pre-season training camp and, although the basketball team hasn't achieved much lately, Rockets owner Les Alexander recently joined for the first time fellow Houston professional sports franchise owners Bob McNair (the Texans) and Drayton McLane (the Stros) on the Forbes 400 Richest Americans list. Alexander came in at no. 322 on the list with an estimated net worth of $750 mil.

Thus, some eyebrows were raised recently when this Palm Beach Post article revealed that Alexander had gotten out of his 30-year plus marriage to former wife Nanci in 2003 for a mere $150 million. That information is just now coming to light because Alexander had his attorneys obtain an improper sealing of the court records at the time of the divorce settlement.

Looks as if Alexander has done quite a bit better than the Rockets over the past few years.

Posted by Tom at 4:38 AM | Comments (0) |

The Dunn indictment

So, let's see if I've got this straight.

Patricia Dunn, who was probably a bit over her head in her role as chairperson of the Hewlett-Packard board of directors, uses bad judgment in authorizing an investigation into fellow board members over leaks of confidential company information. Although dubious, her judgment to proceed with the investigation is ratified by both in-house and outside counsel of the company, as well as the CEO of the company.

After it is revealed that the investigation went over-the-top in examining phone records of various folks who may have been involved in the leaks, Dunn does the right thing by owning up in public statements and before Congress regarding her role in the matter, apologizes for her lapse in judgment and resigns from the board.

Subsequently, Dunn is indicted on felony charges stemming from the affair by this bird, whose judgment is questionable, to say the least. By the way, Dunn is scheduled to start six months of chemotherapy for recurrent ovarian cancer tomorrow.

Meanwhile, with the exception of a few bloggers, the key corporate issues driving the HP affair -- such as preservation of confidential company information in board deliberations and the impact of a dysfunctional board on a company -- are largely ignored.

So, a question for you. Based on the foregoing, why should any businessperson in the future, who gets embroiled in a similar lapse in judgment as Dunn here, try to do the right thing or be particularly concerned about the leaking of confidential company information? What policies are the Dunn indictment supposed to encourage? Not having lapses in judgment? Not much chance of that. Perhaps it would be better to encourage people to do the right thing, such as Dunn did. But then, we wouldn't have a need for an indictment, would we?

Posted by Tom at 3:51 AM | Comments (1) |

October 4, 2006

Faldo in, Wadkins out

Three-time Masters champ and former co-lead ABC golf analyst Nick Faldo will replace Lanny Wadkins next year as the lead golf analyst on CBS (SI story here). Wadkins declined to accept a lesser role with the network and will thus play more on the Champions Tour next season, as well as see more of his family.

Peter McCleery thinks its a good move for CBS:

Faldo trades places with Lanny Wadkins, who replaced the "legendary" Ken Venturi four years ago. While I initially welcomed a change after 29 years of Kenny and his well-worn repertoire, Wadkins ultimately disappointed us. He was, quite simply, too repetitve with his own overused and unnecessary phrases, like "that is well done!" and "at this point in time," among others, all of which he should have been told to retire before they grated on so many viewers' nerves and ears.

When Wadkins joined CBS a well-versed TV person predicted there was little room for improvement there. What you saw is what you were gonna get. This is also, largely the fault of the producers and directors he worked with for not properly "coaching" their people on how to get better, something any armchair critic could have done with Wadkins.[. . .]

CBS' golf became duller with [Wadkins] as its lead voice.

McCleery also notes the rather amazing transformation of Faldo from his days as a PGA Tour player:

Faldo's hire and emergence as Mr. Golf on TV continues his amazing transformation from an aloof/loner/player who was famous for saying NOTHING to his fellow competitors before or during his rounds, making more enemies than friends along the way. Now, it's as if a totally different person has come out--funny, likable, a little unpredictable at times but rarely dull. He seems to recognize the power and value of the ole telly as few players have. He dresses very well, too.

Posted by Tom at 5:52 AM | Comments (0) |

A Democratic Party statesman?

This post from yesterday noted the failed leadership of the Republican Party as we approach this fall's elections. In the interests of balance, however, I pass along this delicious post from Victor Davis Hanson in which he takes stock of the current state of the Democratic Party, including one of its standard-bearers, former President Jimmy Carter (earlier post here):

Jimmy Carter . . . almost immediately was back in the news claiming that the United States was one of the world’s great abusers of civil rights (I wonder how our internecine body count in Plains, Georgia stacks up with that in Rwanda, Kosovo, or Dafur?). He adds that all Presidents—except the current one—have been supporters of human rights.

In his dotage, Carter is proving once again that he is as malicious and mean-spirited a public figure as he is historically ignorant. And for all his sanctimonious Christian veneer, and fly-fishing, ‘aw shucks' blue-jeans image, he can’t hide an essentially ungracious and unkind soul.

Does he have any idea of Lincoln and Andrew Johnson suspending habeas corpus and shutting down newspapers, Woodrow Wilson jailing political dissidents, FDR interning American citizens and executing German agents in secret military tribunals? Do we have currently a Nixon’s enemies list? And can Carter point to just one aspect of current American life where civil liberties are materially curtailed, in which an American can’t do what he wants? Getting on a plane without shampoo doesn’t count—or not having your family at the gate when you land either: all thanks to al Qaeda, not George Bush. [. . .]

There is another disturbing element to Cartesian maliciousness. He asks us to forget all the dilemmas of being President, the necessity of making bad choices when the alternative is usually worse. And, of course, he seems to have amnesia about his own failings that put this country in grave jeopardy. He sanctimoniously lectured us on our Cold War fixation on communism—and got a murderous Soviet invasion of Afghanistan. He talked of a post-Vietnam reappraisal in the midst of the Cambodian Holocaust. “Human Rights” was an admirable banner, but did not include any such audit of Sandinista Communists.

He wept for the middle class, but adopted policies that led to double-digit interest rates and inflation, ensuring that only the upscale could borrow for a house or ensure their salaries would keep up with the cost of living. No need to mention his energy policy or gas lines.

Carter’s Waterloo, of course was the Iranian hostage crisis. It was not just that his gutting of the military helped to explain the rescue disaster. Far more importantly, we can chart the rise of radical political Islam with the storming of the American embassy in Teheran and the impotent response of Jimmy Carter.

Long before George Bush was elected to anything, crowds in Teheran gave us the genesis of the Great Satan and “Death to Carter”. Does he remember that so great was the Iranian Islamist hatred of him, that Iran deliberately delayed the brokered release of the hostages until he was out of office—a lesson that appeasement wins contempt as the additional wage of its failure.

There's more, so read the whole thing. Then try to figure out the lesser of two bad choices.

Posted by Tom at 5:24 AM | Comments (2) |

Part of the problem

From time to time, most recently here, I've noted the abysmal condition and chronically overcrowded nature of the Harris County Jail. It is shameful that we allow the Harris County Commissioners to continue to tolerate this mess.

As Scott Henson has noted on his fine series on the problems with the Harris County Jail, one of the main reasons why the jail is overcrowded is that local judges assess jail time to low-risk persons who have been convicted of victimless or petty crimes.

With that backdrop, this Chronicle article reports that State District Judge Brian Rains of the 176th District Criminal Court was recently recused from the case of a teenager accused of possessing a small amount of cocaine and marijuana because Rains requires jail time for any defendant convicted of a drug offense, no matter how inconsequential. Rains' stance is so far out of kilter that the district attorney's prosecutor did not even bother to oppose the recusal. The vice president of the Harris County Criminal Lawyers Association speculates in the article that the recusal of Rains in this case will prompt many similar recusal motions.

I'm sure Rains' "tough" stance on requiring jail time for all drug offenders plays well on the campaign trail. But it sure stinks as a matter of justice and Harris County jail administration. Here's hoping that the local criminal defense bar continues to recuse him in drug cases and that a political opponent emerges to call him out on the short-sighted nature of his policy.

Posted by Tom at 4:55 AM | Comments (0) |

October 3, 2006

Surviving a collision at 37,000 feet

Don't miss this extraordinary report by NY Times columnist Joe Sharkey of his experience on the Embraer Legacy 600 corporate jet that collided with a Brazilian Boeing 737 airliner at 37,000 feet this past weekend. The airliner crashed in the Amazon jungle, killing all 155 people on board. Miraculously, the corporate jet -- although heavily damaged -- was able to make an emergency landing on a military base runway in the jungle, allowing Sharkey and his fellow travelers to survive.

Update: The two American pilots of the corporate jet have been detained in Brazil in connection with the investigation into the crash.

Posted by Tom at 7:11 AM | Comments (0) |

The story of Skidboot

Texas is a land of many different cultures, one of the most endearing of which is that of West Texas. Many of the qualities that make West Texas such a special place shine through in this nine-minute video about a remarkable dog and his master. When you have ten minutes, watch the video and appreciate a wonderful part of this always intriguing state.

Posted by Tom at 4:20 AM | Comments (0) |

GOP cruising for a bruising?

I'm certainly no political prognosticator, but a couple of matters caught my eye over the past week or so that indicate to me that the Republican Party has become dangerously concerned with maintaining power rather than providing leadership.

The first thing that caught my attention was the political wrangling that occurred in regard to the silly GOP initiative to ban Internet gambling, a ban that leads to absurd abuses of power such as this. Senate Republican Leader Bill Frist was criticized last month for attempting to attach the Internet gambling ban on to a defense appropriations bill, so what does he do? Senator Frist attaches the Internet gambling ban to a port security bill at the last minute to ensure that there would be no debate over the ban and also to make sure that anyone who voted against the port security bill because of such shenanigans would be labeled as being soft on port security. In short, Frist crammed a needless and paternalistic law down our throats while stifling debate on the measure and not allowing for an honest and straightforward vote on the ban.

Elsewhere, over in the scandal sheets, it was bad enough that Florida Republican House member Mark Foley liked to send salacious emails to 16-year old House pages, now it appears that House Republican leadership hoped Foley’s indiscretions could be covered up until after the upcoming election. John Miller at The Corner sums the lurid affair up pretty well:

Foley could become the new Jack Abramoff. Except that whereas the details of Abramoff’s were always a bit complicated for the public to follow closely, the accusations now leveled at Foley are much simpler and more appalling. Foley is on the verge of becoming the poster child of a party that is concerned about little more than preserving its power.

By the way, Foley championed child predator laws as a representative, so there is at least a reasonable chance that he will be prosecuted under the same law that he sponsored. Meanwhile, the NY Times' John Tierney also chimes in ($) on the affair with a sound understanding of the economics of political power:

The justification for the page program is that it gives teenagers an insider’s glimpse of how Congress works. But why disillusion them at such a tender age? If they stayed in school, they could maintain their innocence by reading the old step-by-step textbook version of how a bill becomes law. By going to Capitol Hill, they see how the process has changed:

1. A bill is introduced to build highways.

2. A congressman receives a donation from a constituent who wants to open a go-kart track.

3. The congressman persuades his committee chairman to slip in a $350 million “earmark” for an “alternative sustainable transportation research facility” in his district.

4. The chairman quietly adds similar earmarks for all members of the committee.

5. The bill is passed unanimously.

6. The president complains about the “wasteful spending” but signs it into law anyway.

7. The congressman attends a fund-raiser at the new go-kart track.

What lesson has the page learned? That Congress is the closest thing in modern America to a medieval court: an enclave governed by arcane ancient rules of seniority, a gathering of nobles who spend their days accepting praise and dispensing favors to supplicants.

They’re so secure in their jobs, and so used to being surrounded by groveling minions, that they assume the privileges of feudal lords when dealing with pages and other lieges. Which is why, on occasion, they try to exercise the droit du seigneur.

And the foregoing doesn't even include the Bush Administration's failure to put a stop to the Justice Department's policy of criminalizing unpopular business interests during the post-Enron era, an unsupervised regulatory scheme that has cost U.S. communities billions of dollars in losses and tens of thousands of jobs. Not to mention that badly-needed health care finance reform has been largely ignored, nothing has been done about income tax simplification, wasteful farm subsidies have been increased, inefficient tariffs have been placed on various products (including steel, lumber, and even shrimp), a massive new prescription drug governmental subsidy has been created, poorly-conceived amendments to the U.S. Bankruptcy Code were touted and then enacted, and airline security was nationalized into a huge and ineffectual bureaucracy.

Frankly, the most troubling thing about all this is that the Democratic Party is so unfocused that they are not routing these guys.

Posted by Tom at 4:10 AM | Comments (5) |

Ryder Cup redux

Following on his earlier comments about the abysmal American Ryder Cup team's performance noted here, Golf Digest and Golf World European correspondent John Huggan is continuing to have a lot of fun at the expense of the American squad members. Among Huggan's ten ways to give the American squad a chance in the next Ryder Cup matches are the following:

5) COMPULSORY YEAR ON THE EUROPEAN TOUR

The sea of sameness that is the PGA Tour is producing - apart from Tiger and maybe Furyk - wave after wave of players who are basically indistinguishable. Yes, they can all hit good shots. But those shots are the same good shots, time after tedious time.

And why is this? Week after week, the courses in the US are presented in the same unimaginative way, making a wide range of shot-making unnecessary and, increasingly, obsolete. A year spent experiencing a wider variety of conditions, food and travel would do the likes of Zach Johnson the world of good and, by extension, help out the Ryder Cup. He might even learn some good jokes.

Then there is the amount of money involved in the PGA Tour. The American side arrived at the K Club having picked up close to $38m among them this year. Mostly for finishing tied for seventh. No wonder they, Woods apart, can't handle it when they are suddenly asked to beat someone. That's a foreign concept or, in this case, a concept embraced only by foreigners.

6) COMPULSORY MATCH-PLAY RULES/ ETIQUETTE SEMINAR FOR ALL US PLAYERS

Hey, DiMarco! Yes, this one is for you. Next time you hole a putt from 20 feet to keep a completely-meaningless match alive, let's make do without the obnoxious fist-pumping, okay? And, on the 18th, with your opponent one up and on the green for two shots and you about to play four from the edge of a lake into which you have just deposited a shiny new ball, walk over and shake hands like a proper golfer - one who has mastered simple arithmetic.

8) STOP YAKKING ON ABOUT THE IMPORTANCE OF CAPTAINCY

Let's face it, this is a job anyone can do. Look at the captains: one team were skippered by a man who seemed to have every eventuality covered; the other side had a leader whose next coherent thought will be his first. And guess who won?

10) GIVE THE US TEAM A SIX-POINT START

Hey, at least that would keep things pretty close beyond the end of the second day.

Ouch! I don't know about you, but I really hope the 2008 American squad kicks the Euro team's ass. This is really getting old.

Posted by Tom at 4:00 AM | Comments (0) |

October 2, 2006

More ripples from the Fifth Circuit's Nigerian Barge decision

Amidst the publicity on the Andy Fastow sentence and the upcoming sentencing hearing of Jeff Skilling, the legal wrangling related to the conviction of former Enron Broadband executive Kevin Howard (previous posts here) has been flying somewhat under the radar screen. Howard is currently scheduled to be sentenced by U.S. District Judge Vanessa Gilmore on October 30.

You will recall that Judge Gilmore inexplicably decided to try Howard and his fellow former Enron Broadband executive Michael Krautz on wire fraud, falsifying books and records and conspiracy charges just down the hall from the intensive media glare of the final weeks of the Lay-Skilling criminal trial (previous posts on the case are here, including this one on the closing arguments of the Howard trial). As noted in this prior post, the jury in the Howard case deliberated at the same time as the Lay-Skilling jury was deliberating in an adjacent conference room! Not only that, the Howard jurors saw first hand the media firestorm at the federal courthouse on the Thursday before the Memorial Day weekend when the Lay-Skilling verdict was announced and, not surprisingly, the Howard jury returned a split verdict the following Tuesday convicting the "boss" Howard and acquitting the subordinate Krautz.

Now, however, it appears that the Fifth Circuit's recent decision in the Enron-related Nigerian Barge appeal (see also here) may be Howard's ticket to reversing the outrage represented by his conviction. Based on this motion filed late last week, Howard's attorneys persuasively argue that the Fifth Circuit's decision in the Nigerian Barge appeal requires that Howard's conviction be vacated because -- just as with the convictions of the four Merrill Lynch executives in the Barge case -- the Task Force improperly placed the round peg of Howard's actions on behalf of Enron Broadband into the square hole of depriving an employer of "honest services" under 18 U.S.C. § 1346:

The [Fifth Circuit's Nigerian Barge decision] holds that an employee deprives his employer of "honest services" under 18 U.S.C. § 1346 only when the employee seeks to promote his own interests instead of the interests of the employer. Conversely, conduct -- even otherwise illegal conduct -- does not violate Seciton 1346 where it is "associated with and concomitant to the employer's own immediate interest." . . . The Government's allegations against Mr. Howard describe this exact scenario. . . . Whatever elese one may say about the Braveheart transation, it was designed, in whole or in part, to promote the interests of Enron Broadband Services and not purely the interests of Kevin Howard. Under [the Fifth Circuit's Nigerian Barge decision], such conduct does not fun afoul of Section 1346.

Howard's lawyers go on to explain that the Enron Task Force's case against Howard was precisely the same as the Task Force's odious case against the four Merrill Lynch executives -- taking a risky but legitimate transaction and criminalizing it through assertion of a "deprivation of honest services" violation that is meant to apply in cases involving bribes, kickbacks or related self-dealing between a corporate employee and a third party. This is precisely the point that U.S. District Judge Lynn Hughes made during the hearing over a year ago to accept the plea bargain of former Enron executive Christopher Calger, a plea bargain that Calger is now attempting to disavow.

In short, Howard's motion reiterates the reality that the true criminal activity in regard to the Enron -- such as the embezzlement of funds by Fastow and a few of his close associates, such as Ben Glisan and Michael Kopper -- was actually limited to a few individuals. The Task Force has obtained the convictions of many others largely through bludgeoning of plea bargains or appealing to jurors' resentment of wealthy businesspersons while asserting dubious applications of criminal law, such as the "honest services" violations alleged against Howard.

A mainstream media and general public largely satisfied with demonizing Enron executives are not concerned that the awesome force of the government's prosecutorial power is being wielded irresponsibly against Howard, the four Merrill Lynch executives, Calger, Jeff Skilling and many other former Enron executives who have copped pleas out of fear of long prison sentences. Here's hoping that the judiciary -- the most important check on the Executive Branch's prosecutorial power -- is not as comfortable with the Task Force's abuse of that power.

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

Have we got a bomb shelter for you

This Wall Street Journal article reports on the decision of Continental Airlines and several other local companies to lease as an emergency control center one of the most bizarre sites in the Houston area -- a 38,000 square foot, 70-foot deep bomb shelter designed to house 1,500 people for 90 days in the case of a nuclear attack.

The shelter -- which has been a topic of conversation for years in these parts -- is located adjacent to a four-story office building just up the road on Highway 105 in Montgomery near Conroe on Houston's far north side. The office building and bomb shelter were built during the early 1980s by a Ling-Chieh "Louis" Kung, the nephew of Madame Chiang Kai-Shek, the former first lady of Taiwan and the wife of Mao Tse Tung's foremost domestic enemy during the Communist revolution in China. Kung died in Houston in 1996 also claimed to be a direct descendant of Confucius, so he seemed to be pretty well-connected.

The shelter is an absurdly over-the-top facility. It contains a 27-inch concrete roof with rebar for protection and has gun turrets that line its pagoda entrances. When Kung finally lost control of the property, the new owners found information on nuclear weapons and procedures that indicated that Kung suspected China or Russia would bomb the United States in the early 1980s. The bunker contained chemical showers that would ensure a person was not contaminated before being allowed to enter, and was equipped with a full hospital, complete with medical supplies, an X-ray machine, an operating room and a morgue. Not leaving anything to chance, the bunker also contained 14 sound-proofed conjugal rooms.

The bunker had been mostly vacant over the past fifteen years or so until an outfit named Westlin Technology bought it and retrofitted it as a data center. That was a relief to curious local residents, who had to endure constant rumors about various eccentrics buying the property. About ten years or so ago, Republic of Texas separatists -- whose members contend that Texas was never legally annexed by the United States -- reportedly were interested in making it the new Capitol of Texas if they ever achieved their goal of overthrowing the Texas state government.

Here is a bit more information on the bunker, including diagrams of the bunker's layout here and here.

Posted by Tom at 4:10 AM | Comments (0) |

2006 Weekly local football review

Texans 17 Dolphins 15

Well now, that's a relief!

In an entertaining but not particularly well-played game, the Texans (1-3) won for only the third time in the past 21 games as the Dolphins (1-3) could not convert a questionable play call on a two-point conversion attempt late in the 4th quarter. The Texans defense finally showed a long-awaited pass rush, sacking the immobile Dolphin QB Dante Culpepper five times and hurrying him at least another dozen times or so. The Texans offense was mediocre, but QB David Carr and WR Andre Johnson were able to put the Texans in a position to score a couple of TD's, which was enough to get the job done against a Dolphins team that is dragged down by a rather pedestrian offense. The Texans have a bye in Week Five and then go to Dallas to be smoked by the Cowboys (2-1) in Week Six before returning home to face the Jaguars (3-1) in Week Seven. Although the win against the Dolphins was refreshing, this team has no NFL-average running back, is soft in the defensive secondary, tackles poorly overall and continues to have problems protecting the QB. Thus, my sense is that the Texans will be 1-5 when they have their next realistic chance for a victory in Week Eight against the Titans in Nashville.

Tech 31 Texas Aggies 27

"We may have lost, but I got'em with the strawberries . . ."

Whether A&M Coach Franchione is currently doing his best imitation of Capt. Queeg in The Caine Mutiny is anyone's guess. However, the heat in the Texas A&M football kitchen increased considerably over the weekend as the Ags (4-1; 0-1) lost in the last minute to Texas Tech (4-1; 1-0) in both teams' Big 12 Conference opener. Tech should have put the game away in the first half, but led by only 24-14 after giving A&M a kickoff return TD and fumbling away another TD at the goal line. Then, in the second half, the Aggies mounted a comeback by controlling the clock (the Ags had the ball over 20 of the 30 second half minutes) and keeping the potent Tech offense off the field. Alas, after taking the a 27-24 lead with just over two minutes left, the Aggies gave up a perfectly-thrown bomb for a Tech TD to allow the Raiders to pull out the win. As I've been harping all season, A&M's cupcake non-conference schedule ill-prepared the Ags for Big 12-caliber competition and it doesn't get much easier for the Ags next week as they travel to Lawrence to take on a 3-2 Kansas team that lost to Nebraska in overtime at Lincoln on Saturday. Get it goin' quickly, Coach Fran, or start calling the real estate agents.

Miami 14 Houston Cougars 13

The Coogs (4-1), who were 16-point underdogs, played the Hurricanes (2-2) off their feet in Miami and probably would have won the game but for a second half fumble on the Miami 10-yard line and an awful first half call nullifying a Houston fumble recovery deep in Miami territory. This is the worst Miami team in recent memory, but the Hurricanes still have excellent talent and the Coogs' effort in almost pulling off the win in the Orange Bowl is probably the Coogs' second most-impressive performance of the season to date (the win over Oklahoma State being the most impressive). The Coogs have 2-2 La-La (a/k/a University of Louisiana-Lafayette) at home before taking on tough Southern Miss (3-1) on the road and high-scoring UTEP (2-2) at home the following week, so there is no rest for the weary at UH.

Rice 48 Army 14

Let's see here. A&M barely beat Army with a home field advantage, Baylor lost to Army with on its home field, and Rice routed the Cadets at West Point. So, how would Rice fare against A&M and Baylor?

Comparing scores is risky undertaking, but this was still an impressive win for a Rice team that was playing with extra emotion after the sudden death last week of one of their freshman players, Dale Lloyd, a former Houston high school star. The Owls dominated Army behind first team QB Chase Clement, who had to sit out the past three games with a thumb injury suffered in the closing minutes of Rice's first game this season against Houston. The Owls have no one who can operate their spread offense even close to as efficiently as Clement does, so losing him for the past three games was a real blow to the Owls. However, it may have been a blessing in disguise because the Owls really didn't have a chance of winning any of those three games and Clement avoided being injured even more severely. As I've noted earlier, this Rice team is capable of winning several games this season with Clement at the controls. Next up for the Owls is Tulane (1-3) at New Orleans before returning home to face Alabama-Birmingham the following Saturday.

Texas Longhorns 56 Sam Houston State 3

The Longhorns (4-1) warmed up for Texas-OU Weekend next Saturday in Dallas by participating in what amounted to a scrimmage against a team comprised of players who probably could not bust the Longhorn three-deep roster. OU (3-1) had a bye this week, so it will be interesting to see which team is sharper next Saturday. As I noted earlier here, this Longhorn team is big, strong, fast and deep, and very well could be better overall than last season's national championship team except for the QB position. Thus, OU will have its hands full on Saturday at the Cotton Bowl.

Posted by Tom at 4:00 AM | Comments (1) |

October 1, 2006

Ripples from the Grimsley Affair reach the Stros

Now that it looks as if the Stros late-season push for the playoffs is all for naught, it appears that the Stros may well be dealing with more than just the disappointment of missing the playoffs for the first time in three seasons.

Remember the Jason Grimsley Affair that broke this past June?

Then, remember that Cardinals' slugger, Albert Pujols, was was one of the first Major League Baseball players implicated in the affair?

Well now, the ripples of the affair have reached the Stros, as the names of both Roger Clemens and Andy Pettitte have been implicated in the affair (LA Times story here). Clemens and Pettitte deny any involvement with Grimsley or in using performance-enhancing drugs. Lawyers are being consulted.

As predicted earlier, this is going to get rather ugly. Unfortunately, the level of discussion will probably descend into scapegoating rather than a productive debate regarding the use of performence-enhancing drugs in professional sports.

Posted by Tom at 7:28 AM | Comments (0) |

September 30, 2006

Baylor Med decides to go it alone

The Houston professional community and the Medical Center was abuzz yesterday with Baylor College of Medicine's announcement late this week that the school will construct a new teaching hospital in the Texas Medical Center and end its recent affiliation with St. Luke's Episcopal Hospital as its primary teaching hospital. This move comes only a couple of years after Baylor (which has no affiliation with Baylor University in Waco) terminated its longstanding with the Methodist Hospital as its primary teaching facility (previous posts here), a relationship that was as storied as the Medical Center itself. As usual, the Chronicle's Todd Ackerman -- who has done a superlative job in covering the Baylor-Methodist split and the changing nature of Baylor within the Medical Center -- has this excellent report on the development.

Baylor's new hospital will resolve Baylor's increasing concern over being the nation's only top-20 medical school that does not own a hospital or whose department chairs do not head the key medical departments at an affiliated teaching hospital. The announcement is really not a surprise as there have been rumors for the past six months or so that Baylor-St. Luke's partnership was on the rocks. Although the two institutions entered into merger negotiations shortly after they entered into the teaching hospital affiliation, those negotiations didn't go anywhere as St. Luke's staked a vision of providing medical services in new hospitals throughout the far-flung Houston metropolitan area. The straw that broke the camel's back was St. Luke's dragging its feet in making Baylor department chairs the head of the hospital's parallel medical departments.

The demise of Baylor's relationships with both Methodist and St. Luke's is a reflection of the difficulties involved in sustaining long-term business and professional relationships in the face of the fast-changing world of American health care finance. When those pressures overwhelm a productive relationship such as the one that Baylor and Methodist long-enjoyed, the risk increases that a decline in the quality of medical care will be the ultimate result, which is a risk that should concern all of us. On the other hand, Baylor is presenting an ambitious plan for maintaining its position as one of the top medical schools in the country, and more competition between outstanding hospital facilities in one of the nation's top medical centers could well generate even better medical care and research. How it turns out will reflect much in regard to the direction of the American health-care finance system and the challenges of training physicians within that changing system.

Posted by Tom at 8:00 AM | Comments (0) |

September 29, 2006

One of the risks of the modern church

It's trendy these days for megachurches to provide all sorts of special services for their members. One of the most popular of such services is marriage counseling, which this NY Times article reports placed a Texas church squarely in the crosshairs of a defamation lawsuit when the minister providing the service went and blabbed confidential information about one of the church members to the church elders.

The leaders of the churches providing these services better recognize that such lawsuits are part of the risk of providing such a service and that it is not at all clear that the traditional separation between church and state is going to insulate the church from liability. Pastors who are leading their churches down this course need to ask themselves how their flocks will react when the church must raise money to pay a damages award from such a lawsuit or even just to pay the considerable cost of defending one. That's not the type of sacrificial atonement that Christ had in mind.

Speaking of risks for megachurches, Victoria Osteen -- wife of Lakewood Church's Joel Osteen -- has resolved her little Christmas season snit with the FAA, but that apparently is not the end of the story:

The Federal Aviation Administration has fined Victoria Osteen, wife of Lakewood pastor Joel Osteen, $3,000 after determining she had interfered with a Continental Airlines crew member aboard a flight late last year.

And this week, a flight attendant filed suit claiming she was assaulted by Victoria Osteen during that flight to Vail, Colo., for the Christmas holidays.

Osteen has paid the penalty, which is not an admission of guilt

Mrs. Osteen is well-represented by none other than the ubiquitous Rusty Hardin.

Posted by Tom at 4:55 AM | Comments (1) |

The most uncomfortable place right now in the United States?

Answer: The St. Louis Cardinals clubhouse.

Let's put this in perspective. 10 days ago, the Cardinals won their game that day and the Stros lost theirs. At that time, the Cards were 79-69 and the Stros were 72-77. The Stros were trailing the Redbirds by a seemingly insurmountable 8.5 games.

After completing a sweep of the Pirates yesterday afternoon, the Stros are now 81-78 and a mere half game behind the 81- 77 Cards, who got creamed by the Brewers last night. So, in a week and a half, the Stros have gone from less than a five percent chance of making the playoffs to being a legitimate contender. You gotta love baseball.

Although there is a element of luck in what has happened, it's really not that surprising when you look at the statistics. The Stros stellar pitching has continued to improve -- as it usually does over the 2nd half of the season -- and the hitting, although still well below Naitional League average, has improved enough so as not to undermine the excellent pitching. On the other hand, the Cardinals' pitching -- which has been deteriorating for over a season now -- has gone into the tank while their hitting has been pretty much relegated to an occasional Pujols tater.

The Stros have three games against the Braves in Atlanta and the Cards have three more games at home against the Brewers and a make-up game, if necessary, against the Giants on Monday in St. Louis. If the Stros and Cards tie, the one-game playoff is on Tuesday at Minute Maid Park in Houston.

Posted by Tom at 4:46 AM | Comments (0) |

September 28, 2006

Ryder Cup post-mortem

John Huggan is the European correspondent for both Golf Digest and Golf World magazines, and his thoughts on the just-concluded Ryder Cup matches addresses the rather embarrassing question of whether the U.S. team has fallen so far behind the European squad that the U.S. should consider making their team "the Americas" team:

[O]ne has to wonder what Jack Nicklaus was thinking as he surveyed from afar the carnage that was America's Team. Was he musing the possibility of the hapless US side being bolstered by the likes of Canada's Mike Weir, Angel Cabrera of Argentina and Columbian Camilio Villegas in a newly constituted 'Americas' team? To even suggest such a thing can no longer be dismissed as frivolous or mere mischief making. After two successive nine-point shellackings that hardly bode well for the new world's prospects at Valhalla two years hence, it is a question that brings with it a growing legitimacy.

Then, Huggan takes off on Phil Mickelson, he of the abysmal 1-7-1 record in the past two Ryder Cup matches:

The question is simple: Is he willing to take golf even remotely seriously after the PGA Championship in August? If not, Mickelson should forfeit his place in all future US sides. That he should pitch up in Ireland not having played competitively for a month was a disgrace, an insult to his teammates and indicative of his less than enthusiastic approach to representing his country in golf's most compelling event. Instead of being on the course these past few days, the 36-year old Californian should have taken the advice offered by a wonderfully 'Irish' sign at the K Club: "Lost people should go to the information centre in the tented village."

Finally, Huggan can't resist relishing in the misfortune of golf's most visible bodyguard . . er, I mean, . . caddie, Steve Williams, who carries Tiger Woods' bag:

Finally, on a personal note, your correspondent is sure he is hardly alone in taking an enormous amount of pleasure from the delicious last day moment that saw Woods' caddie, the despicable Steve Williams, slip on a rock left of the 7th green and drop his boss's 9-iron into the drink. The only pity was that the endlessly boorish New Zealander did not do likewise.

That would have been the perfect end to a memorable week. Well done Darren [Clarke]. Well done Ireland. Get a grip America.

Meanwhile, this GolfonLine piece indicates that the off-air comments of NBC golf analyst Johnny Miller were inadvertantly picked up in the media center and in the U.S. team locker room, and apparently those comments were doozies:

While chatting off-air with his colleagues, Miller said Tiger Woods was "playing like crap" and that he hit one shot like a "cripple."

Only Miller wasn't entirely off the air.

Unbeknownst to the NBC crew, its off-air banter had actually been piped into the U.S. team's locker room (as well as the media center).

While expressing continued exasperation with the U.S. team's performance, Miller also referred to Scott Verplank as a lead weight and said that U.S. Captain Tom Lehman should have benched Tiger Woods and Phil Mickelson in the afternoon's foursome matches, but that he didn't because Lehman was afraid to "take the heat" he would face for shelving the world's No. 1 and 3 ranked players.

The NBC team learned about the locker room feed when David Toms alerted on-course reporter Mark Rolfing. Rolfing immediately told his colleagues, and an awkward silence ensued. Miller, seemingly unfazed, then sent greetings to the U.S. team.

Within minutes, the NBC feed to the media center went silent.

Finally, Golf World's Brett Avery gives out this report card on the American Ryder Cup team members' performance, and it is not a pretty picture. My favorite is the comment on Chris DiMarco (0-3-1):

Grade: F. Go to the chalkboard and write 100 times: "I am the no. 15 player in the world and should have played like it." And when you're done, hand the chalk to Mickelson.

Posted by Tom at 5:37 AM | Comments (1) |

The surprising Fastow sentence

This Kristin Hays-Tom Fowler/Chronicle article picks up on an aspect of the six-year sentence assessed to former Enron CFO Andrew Fastow earlier this week that has largely been ignored in the media but noted earlier here -- the Enron Task Force eliciting testimony from Fastow during the Lay-Skilling trial that represented to the jury that Fastow was a more credible witness because he had agreed to a minimum ten-year prison sentence and, thus, had no incentive to lie. As we know now, Fastow had not really agreed to anything of the sort and, in fact, successfully petitioned U.S. District Judge Ken Hoyt for a lighter sentence. The article quotes several experts -- including former Enron Task Force director Andrew Weissmann -- who express surprise that the Task Force did not attempt to require Fastow to serve a minimum of ten years.

Although interesting, the article fails to address the most troubling aspect of the Fastow sentencing hearing -- that is, the apparent failure of any of the attorneys involved to inform Judge Hoyt about how the Lay-Skilling jury was misled by Fastow's testimony. When Judge Hoyt finds out about that he was not informed about that, my sense is that he is not going to be pleased.

The public reaction to the Fastow sentence has been fascinating and reflects the dubious nature of the Justice Department's regulation of business-through-criminalization policy. Viewed in a vacuum, the Fastow sentence is reasonably fair. Fastow effectively embezzled millions from Enron and ruined the careers of several other Enron executives who he induced to participate in the embezzlement. Six years is a harsh sentence, so Fastow is certainly not getting off lightly.

However, the Fastow sentence was not handed down in a vacuum. Not only did Fastow and the Task Force prosecutors mislead the jury in order to convict Lay and Skilling, they trampled justice by needlessly ruining the careers of the four Merrill Lynch executives in the Nigerian Barge case and they are currently doing the same thing to the three U.K. bankers in the NatWest Three case. There is simply no way to reconcile Fastow's sentence with the six-year sentence handed down to Jamie Olis -- who did not steal anything and refused to tell lies about others -- or the seven-year sentence of former Enron chief accountant Richard Causey, who also did not steal anything and who has not testified against anybody. The death of Ken Lay from defending himself against a weak and unjust case, as well as the effective life sentence likely faced by Jeff Skilling, further underscore the confusing message conveyed by the Fastow sentence.

As Larry Ribstein has repeatedly observed, criminal cases involving business executives have become a sort of lottery, incrementally undermining the principles of justice and respect for the rule of law upon which the success of American society is largely based. If we lose respect for those principles, then "do you really think you could stand upright in the winds [of abusive state power] that would blow then?

Posted by Tom at 4:30 AM | Comments (6) |

Stros' streak continues; Cards' streak ends

As noted earlier here and here, the past week and a half has been fun for the Stros as an improbable series of events has catapulted the club back into playoff contention. The Stros won again in Pittsburgh last night, using nine pitchers for the second time in three games and overcoming a 6-1 deficit. The Stros (80-78) have now won eight straight games.

Unfortunately, the Cardinals (81-76) finally broke their seven game losing streak, which is what really got the Stros back in the race for a playoff spot. Accordingly, the Cards' magic number to win the NL Central title is now four -- that is, any combination of further Cardinal wins (they have five games left) and Stros losses (they have four games left) equaling four means that the Cardinals win the title.

Roy O and the Stros go for the sweep this afternoon against the Pirates while the Cardinals open up a four game series at home tonight against the Brewers.

Posted by Tom at 4:00 AM | Comments (0) |

September 27, 2006

Mayor Bloomberg, save your money

This short WSJ ($) article left me shaking my head:

New York City Mayor Michael Bloomberg appointed consulting firm McKinsey & Co. yesterday to examine why more international companies are choosing to raise money outside of New York.

The two-month, $600,000 study comes as many of the largest initial stock offerings bypass a listing with NYSE Group Inc. and Nasdaq Stock Market Inc. for listings in London or in their home markets. Mr. Bloomberg and Sen. Charles Schumer (D., N.Y.) will review the results in an effort to improve New York's position as a financial center.

Many big international IPOs no longer want to have their shares listed on a Western stock market, in part because they want local investors or because big international investment firms can often buy the stock even if its not listed in New York. Out of the top 25 global IPOs in each of the last two years, London snagged 11 listings, Hong Kong picked up six and New York received four, according to recent data.

Regulation costs, legal risks and increased white-collar-crime enforcement also get a lot of attention. The four-year-old U.S. Sarbanes-Oxley accounting-and-governance law has made it more expensive for companies, especially smaller ones, to list.

Investment-bank underwriting fees are also substantially lower in London -- 3% to 4% of IPO receipts, compared with 6.5% to 7% in the U.S., according to a June report commissioned by the City of London.

Yesterday, at a private-equity conference in New York sponsored by Dow Jones & Co., Nasdaq Chief Executive Bob Greifeld said he couldn't think of a reason for the difference in the IPO fees and predicted that there would be more pricing pressure on U.S. underwriting fees in coming years.

Mayor Bloomberg should save his city's money. For the answer to the question posed, all the Mayor needs to do is talk to his state's future governor and examine this mindset, which the future governor embraces. That mindset leads to abominations such as this and this, which business owners tend to notice after awhile. Indeed, the proponents of such dubious policies are widely-publicizing them to the international business community.

All of this has already contributed greatly to U.S. public companies and executive talent fleeing in droves to private equity. Why on earth would any international company choose to raise public money in such an environment?

Posted by Tom at 4:59 AM | Comments (0) |

Byron Nelson, R.I.P.

Golf's quintessential gentleman -- Byron Nelson -- died yesterday in his home near Dallas at the age of 94. Here are the Dallas Morning News, the NY Times, and the LA Times obituaries, along with a PGATour.com timeline of Nelson's life, a list of his records, and a handy summary of his career.

Nelson -- who was affectionately known as "Lord Byron" -- was a contemporary of his fellow Texan Ben Hogan, and was more successful on the PGA Tour than Hogan during the time that Nelson played (Hogan struggled on the Tour until he perfected his swing in his mid-30's, by which time Nelson had retired). Nelson established one of the most remarkable records in sports history when he won 11 consecutive pro golf tournaments in 1945 (Dan Jenkins contends that it was actually 13 straight), a record -- similar to Joe DiMaggio's 56-game hitting streak in baseball -- that will likely never be broken. Nelson won an incredible 18 tournaments that year and 52 (including five major tournaments) over his relatively short 16 year career on the Tour. He retired in 1946 from full-time competitive golf at the age of 34 after achieving his goal of earning enough money to buy a ranch in his beloved Texas.

Nelson was a kind and gentle man who remained active until his death. He set a wonderful example for all of us and represented much of what makes golf such an endearing pastime. He will be sorely missed (particularly by Dallas' PGA Tour event) for many reasons, not the least of which was his perspective on how fortunate the modern PGA Tour players are:

"I only won $182,000 in my whole life," said Nelson in a 1997 interview. "In 1937, I got fifth-place money at the British Open -- $187 -- and it cost me $3,000 to play because I had to take a one-month leave of absence from my club job to go."

Posted by Tom at 4:10 AM | Comments (0) |

This is getting very interesting

The Stros beat the Pirates last night while the Cardinals behind their ace Carpenter lost again to the Padres. The Stros' (79-78) winning streak is now seven, the Cardinals' (80-76) losing streak is seven, and the Stros have pulled to within 1.5 games of the NL Central lead with five games to go.

If the Stros win three of those five games (two more against the Pirates and three against the Braves), then the Cardinals can still pull it out by winning just 3 of their final six games (one more against the Pads, four against the Brewers, and a make-up game against the Giants, if necessary). So, the Stros are still a longshot to win the division (the Stros are out of the race for the NL Wildcard playoff spot). But it's sure refreshing to watch the Cardinals sweating this one out. The ghost of the 1964 Phillies -- who blew a 6.5 game lead for the National League title by losing 10 of their final 12 games -- is looming large over the Redbirds right now.

If the Stros and Cards end up tied for the NL Central title, then there will be a one-game playoff at Minute Maid Park next Tuesday.

Posted by Tom at 4:00 AM | Comments (1) |

September 26, 2006

More on the Fastow sentence

It's a good thing that Andy Fastow's counsel did not mention Fastow's following testimony on March 8 in the Lay-Skilling trial during Fastow's sentencing hearing today in front of U.S. District Judge Kenneth Hoyt:

Q. Does the government decide your sentence?

A. My Judge decides the sentence.

Q. And who is your Judge?

A. Judge Hoyt.

Q. Is that right here in Houston, in this courthouse?

A. Yes.

Q. Do you recall the maximum sentence that you could be sentenced to for these crimes?

A. For the crimes I've pled guilty to?

Q. Yes.

A. Yes. Ten years.

Q. And was there a minimum sentence that you pleaded guilty to?

A. My plea agreement states that I agree to a sentence of 10 years. [. . .]

Q. And in agreeing -- in addition to agreeing to serving 10 years in prison, did you also have to forfeit moneys?

A. Yes.

The foregoing testimony was elicted on direct examination of Fastow by Enron Task Force prosecutor John Hueston for the purpose of representing to the Lay-Skilling jury that Fastow's testimony was credible because he had agreed to a floor of ten years of prison time. On March 8th, Skilling counsel Daniel Petrocelli followed up by asking Fastow during cross-examination about the sentence that he had agreed to under his plea deal:

Q. Okay. And you said you have to go to jail for 10 years; right?

A. Well, my sentence is for 10 years. I could potentially have time off for good behavior. [. . .]

23 Q. Okay. And the reason why you just answered my question in the way you did is because you want to communicate to the jury that Mr. Skilling is a criminal along with you, correct?

A. No, Mr. Petrocelli. I'm just trying to answer the questions honestly. My outcome is already determined.

Q. Well, not --

A. I'll be sentenced to ten years as far as I understand. It doesn't matter -- my sentence isn't affected by whether
Mr. Skilling is convicted or not.

Then, on re-direct examination by Hueston on March 13th, Fastow testified as follows:

Q. And as a result of your pledge to cooperate, did you agree to plead guilty to a 10-year minimum sentence of imprisonment?

A. A 10-year maximum imprisonment.

Q. And what is the minimum amount of time that that plea agreement calls for?

A. It calls for a 10-year sentence.

Q. So after January 14th, can your cooperation lower that 10 years?

A. My understanding is that I will be sentenced to 10 years. The Judge ultimately has a discretion; but in my plea agreement, I agreed to the 10-year sentence.

Later that same day, Hueston asked Fastow about the suggestion made during cross-examination that Fastow had forged the key Global Galactic agreement between Fastow and former Enron chief accountant, Richard Causey:

Q. And after all this time, you found and turned over the document to the FBI, you remembered, late May or June; is that right?

A. I believe that's correct, yes.

Q. And you turned it over because you were cooperating?

A. Yes, sir.

Q. And this is months after, six months after, you enter your plea of guilty; is that right?

A. Approximately, yes, sir.

Q. And can this document lower your sentence now, under your understanding?

A. My understanding is, no.

Q. And if, as the defense was suggesting, you were just falsely creating this document, wouldn't it have been better to do so before you entered a plea of guilty, when you were bargaining with the government?

A. Well, one could argue that. [. . .]

Q. Mr. Fastow, if as the defense suggests, you're on some sort of mission to say or do anything to convict Jeff Skilling, might you have been tempted to just add a couple more initials to that Global Galactic document?

A. Sir, I have no incentive to add any initials. My incentive is to be truthful. If I'm not truthful, I could go to prison for life. By making a document more compelling, I can't lower my sentence.

Q. By trying to do that, there's only one thing you're sentence would do; right?

A. I'm sorry?

Q. If you tried to alter a document or tell a lie, there's only one direction that sentence can go?

A. That's correct. That would be a lie. That means my sentence would go up, potentially, to a life sentence.

Want to make a bet that the Task Force prosecutors did not inform Judge Hoyt today during Fastow's sentencing hearing that Fastow and the Task Force had previously represented to the Lay-Skilling jury that Fastow's testimony was more credible because he had agreed to a minimum ten-year sentence?

Posted by Tom at 1:35 PM | Comments (0) |

Try to make sense of this

Let's see if I get this straight.

On one hand, Andrew Fastow -- who served up his wife as a sacrifical lamb for his embezzlement of millions from Enron that triggered one of the largest bankruptcy cases in U.S. history, who used the NatWest Three to hide his embezzlement of millions more and then turned on the U.K. bankers to save his skin, who very well may have forged Richard Causey's initials on the Global Galatic "agreement," whose bizarre testimony during the Lay-Skilling trial was largely discounted by jurors and who had a large hand in ruining the careers of four innocent Merrill Lynch executives in order to lessen his prison sentence -- is sentenced to six years in prison.

On the other hand, Jamie Olis -- who worked on a transaction to improve his company's earnings, did as he was told by his superiors, did not profit from the transaction, defended his company and himself against allegations of wrongdoing with regard to the transaction and did not trigger any type of insolvency case by his company -- is sentenced to six years in prison.

These results are not the product of a rational application of our criminal justice system. Ellen Podgor has additional thoughts, particularly how the Fastow sentence may bear on the anticipated life sentence that former Enron CEO Jeff Skilling faces.

Posted by Tom at 12:45 PM | Comments (4) |

An interesting letter to Judge Lake

The day before one of the relatively few real Enron criminals is scheduled to be sentenced, an interesting letter to U.S. District Judge Sim Lake became public in regard to the sentencing of former Enron CEO Jeff Skilling.

During and after the Lay-Skilling trial, Heartland Institute economists Paul Fisher and Jim Johnston authored several articles (previous posts here) that challenged the myth that Enron was merely a house of cards propped up through the fraud of its leaders (that myth has been a recurring theme on this blog, see here, here, here, here, here, and here, to cite just a few posts).

Now, in this letter to U.S. District Judge Sim Lake, Fisher and Johnston urge Judge Lake -- in connection with the sentencing of Skilling -- to take into consideration the huge beneficial impact that Enron had on various important markets. In so doing, Fisher and Johnston remind us once again of the vacuous nature of the real presumption in the Lay-Skilling trial -- that is, that Skilling and Lay were rich and Enron collapsed, so they must be guilty of something in connection with Enron's descent into bankruptcy:

From an economic perspective, the harm [that Skilling and Lay caused] is difficult to calculate. For sure, the collapse caused a huge notional loss to investors and employees in the form of pension and savings plans. However, Ken Lay and Jeff Skilling were not convicted of causing the collapse. They were convicted of lying about Enron's financial condition (and one count of insider trading [against Skilling]). If the misrepresentation of Enron's financial condition in 2001 as alleged in the indictment had not occurred, presumably the bad news would have been known earlier. That in turn would have caused the Enron share price to collapse sooner and even less time would have been available for investors and employees to liquidate their holdings.

The implication of this reality is that there was no additional harm done to the investors and employees from the alleged hiding of Enron's profits and losses. While it may have changed the identity of the losers it did not increase the totality of the losses.

On balance, the benefits created by Ken Lay and Jeffrey Skilling in building Enron seem to us to far outweigh any incremental harm done to investors from the alleged fraud. The economists we know who have carefully studied the risk management practices and techniques developed by Enron agree that they were beneficial and will continue to be so. Not giving this reasonable weight will send a potentially harmful message. That is not to excuse any fraud, but rather to recognize the context of the decision.

Meanwhile, this Carrie Johnson-Brooke Masters/WaPo article explores the dubious reasoning behind prison sentences for businesspersons convicted of fraud that are harsher than those handed down for first-degree murder or treason.

Posted by Tom at 4:16 AM | Comments (1) |

Visiting the Longhorns

This past Saturday, I traveled to Austin for the day with my buddy Jerry Sagehorn to meet my brothers Bud and Mike, and my brother-in-law Gene Acuna to watch the 7th-ranked Texas Longhorns play their Big 12 Conference opener against the Iowa State Cyclones, who are coached by my longtime friend, Dan McCarney.

McCarney -- or "Coach Mac" as most everyone calls him -- 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 that Iowa State plays in Texas since Coach Mac became head coach at ISU in 1994. Coach Mac graciously comes through with a few sideline passes for me to use, and it's always a great experience attending a game in Austin and College Station.

The Longhorns really have it going these days. After winning their first National Championship last season since 1970, the Horns are re-loading this season with a talented and deep group of players who are not only fast and strong, but also well-motivated. Mac's Cyclones battled hard and, had a couple of plays turned out differently, could have been in a position to pull an upset over the 24 point-favored Horns at the end. However, the Horns dominated both lines of scrimmage over the final two-thirds of the game and methodically pulled away for a 37-14 victory.

The FilmLoop below contains some of the photographs that I took from the sideline during the game along with my comments about attending a game on the sidelines at D.K. Royal-Texas Memorial Stadium. As with College Station, Austin is one of the great college football venues in the country. I am blessed to have the opportunity to experience it up close and personal, and I am grateful to be able to pass along the experience to you.

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

They couldn't pull this off, could they?

After I wrote off the Stros in my two previous periodic reviews of the club's season (here and here), the hometown team is making things interesting.

First, the Stros swept the Cardinals in a four-game series over this past weekend (including three straight games in which they won in their last at bat). Then, last night, the club used 25 players -- including a franchise record-tying nine pitchers and seven pinch hitters -- to nip the Phillies 5-4 in Philadelphia and reach the .500 mark (78-78) for the first time since July 6. The Stros have now won six straight, the Cards have lost six straight and the Stros find themselves only 2.5 games behind the Cards in the National League Central with six games to play (three at Pittsburgh and three at Atlanta). The Cards have seven games remaining at home (two against the Padres, four against the Brewers and a makeup game against the Giants, if necessary). Even if the Stros go 4-2 over the final six games, the Cards only have to win three of their remaining games to win the title outright, so the Stros are still a longshot. However, it's fun to watch the Cardinals gripping -- that's usually the position that the Stros are in.

By the way, Tory Gattis passes along this hilarious Onion article that places Roger Clemens' seemingly endless string of final games in the perspective of many opposing baseball fans, particularly those in Boston who thought that Clemens' last game was going to occur over a decade ago.

Meanwhile, my friend Jim Bob Baker, a University of Oklahoma diehard, passes along the following observation about the lingering effects on the OU fan base of the Oklahoma Sooners' controversial loss last week at Oregon:

The only phrase that makes people in Oklahoma more nervous these days than "tornado warning" is when they hear "the play is under review . . ."

Posted by Tom at 3:59 AM | Comments (0) |

September 25, 2006

Demagoging Amaranth

Following on this earlier cue, NY Times business columnist Gretchen Morgenson contends in this column (Times Select, registration required) that Amaranth Advisors, LLP's loss of $6 billion or so last week on the natural gas trading market is conclusive proof that energy markets are in need of more government regulation:

Many of Amaranth’s monster trades in the natural gas markets were conducted on over-the-counter markets or with so-called voice brokers and so were not on regulators’ radar screens.

It is too soon to tell what role Amaranth’s gamble had on natural gas prices. But speculators played a significant role in the astonishing rise in energy prices in recent years.

Such is the conclusion of a compelling Congressional report produced in June by the Senate’s Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs. The 49-page report detailed the explosion in energy speculation on unregulated trading markets and recommended eliminating the so-called Enron loophole that put electronic energy trading off the regulatory reservation.

See how easy that was? Just associate "Enron" with a company that suddenly lost about 2/3rd's of its assets and, presto! -- you have the need for more government regulation of trading markets without any analysis whatsoever of whether such regulation would ultimately be more expensive than the cost of the allowing markets to allocate loss. Indeed, how one earth would it have helped had Amaranth made filings with the CFTC? Does anyone really think that such a requirement would have prompted Amaranth to modify its trading practices?

As noted earlier here and here, allowing investors to make bets in energy trading markets -- although not widely understood by the general public -- is tremendously beneficial in forecasting energy prices. Not only will greater regulation of those markets likely undermine those benefits, Morgenson's dubious assertion that speculation in energy markets has caused an increase in natural gas prices is based upon a Senate report that, as noted earlier here, is a sham that was essentially produced by the regulators to feather their nest.

Although I could go on and on about the irresponsible nature of Morgenson's analysis, but Larry Ribstein's weekly evisceration of Morgenson does it much better than I ever could:

As in any free market, the natural gas market aggregates many right and wrong trader bets into a collective judgment about reality that is usually more accurate than a single mind can come up with. This judgment assists society in allocating resources, thereby making us all better off. We may not like what the market is telling us – i.e., that prices are going up -- but that doesn't mean we should regulate it. If we're going to constrain the operation of these markets we ought to be very sure that this regulation helps them be more accurate.

Even if there is a case for regulation (which I doubt), nothing about the problems at Amaranth suggests that such regulation will get us more accurate energy prices. Amaranth made a bad bet and its rich investors suffered. Perhaps Amaranth misled its investors about its trading strategies. But as far as I've seen, there was no manipulation of energy markets.

That doesn't stop Morgenson from linking Amaranth, with absolutely no justification, to BP traders' manipulation of propane prices and, of course, to Enron. Morgenson ends her story by saying that "as last week's implosion of Amaranth shows, Enron's' troubling legacy lives on." Morgenson wants to talk about regulating markets, and Amaranth happens to be the most visible anecdote right now connected with those markets, and so she's damn well going to use it for her purposes, relevant or not.

This is irresponsible. The task of a financial columnist with millions of readers should be to enlighten readers, not mislead them with a magician's sleight of hand (Amaranth = BP/Enron). Sadly, we have come to expect this sort of thing from Morgenson. No doubt Morgenson's column will be fodder for equally disingenuous lawmakers who are working on regulating energy markets as we write, and she will play her part in the manufacture of misguided regulation. In the end, Morgenson will get the attention for her writing she craves, while doing more harm than any of the targets of her weekly indignation.

Posted by Tom at 5:24 AM | Comments (1) |

Well, at least we were good sports

After losing the Ryder Cup over the weekend for the fifth time in the last six competitions, the United States team is certainly an easy target for criticism and the golf writers are taking dead aim:

The Houston Chronicle's golf columnist Steve Campbell channels Dan Jenkins and Jack Burke in this tongue-in-cheek column that preceded the final day's matches. Campbell follows that column with this fine article on the emotional performance of Euro team member, Darren Clarke.

Lawrence Donegan of the Guardian pretty well summed up the U.S. squad's effort:

[S]o one-sided was the contest that at times during yesterday's session of 12 singles matches it seemed the impossible was on the cards - a Ryder Cup without drama.

Scott Michaux in the Augusta Chronicle is not particularly happy (registration required) with Chris DiMarco, who contributed all of 1/2 point to the U.S. team's score during the matches:

The only thing more embarrassing than the final result was DiMarco fist-pumping his birdie on the 17th hole that extended his match with Lee Westwood. His comeback effort from five down with seven to go against a player who was ill overnight and carrying a fever on the course was meaningful only to himself. It was like doing a dance after a sack with your team trailing by seven touchdowns. Hitting two balls in the water on the 18th was his just reward.

The Golf Gazette's Ken Carpenter recommends an easy way to improve the U.S. team next time around -- ditch Phil Mickelson (1/2 point in this Ryder Cup):

If Phil Mickelson wants to “shut it down” after the PGA Championship every year, then he should give up his spot on the team and go to the beach. In the last two Ryder Cups he’s 1-7-1; in the last two Presidents Cups he’s 3-5-2 — that’s an abysmal 4-12-3 record, totally unacceptable for someone annually ranked in the top three in the world. In 2008, Mickelson needs to play his way into shape prior to the event — assuming he isn’t fully retired by that point.

By the way, just to put Mickelson's Ryder Cup futility in perspective, Arnold Palmer was 22-8-2, Jack Nicklaus 17-8-3 and Lee Trevino 17-7-6 in Ryder Cup competition.

Martin Johnson of the Daily Telegraph describes the victory toast of European captain Ian Woosnam, a fellow who has been known to knock back a few:

After spending months practising his speeches in front of the bedroom mirror, one of golf's great bon viveurs had promised himself a small libation at the end of it all, but we didn't think this would involve an attempt to down an entire jeroboam of champagne in one herculean swig. The end result was a blowback of such Vesuvian proportions that the eruption of escaping champagne flew out of every visible orifice bar Woosie's ears.

And the Chicago Tribune's Ed Sherman projects the U.S. roster for the 2012 matches at the Chicago-area course Medinah, and includes the following jab:

Michelle Wie: She couldn't do any worse than her predecessors.

Posted by Tom at 4:20 AM | Comments (4) |

2006 Weekly local football review

Redskins 31 Texans 15

Oh, my.

It's only been three games, but let's face it -- the Kubiak Era is looking like an utter disaster. As noted in this earlier post, when Bob McNair replaced former general manager Charley Casserly and head coach Dom Capers, he changed the model of the football operation from a strong GM-field coach model to the strong coach-support GM model. Thus, Kubiak -- who had never been a head coach -- was a somewhat unusual choice to replace Capers.

Through three games, Kubiak looks like a marginal improvement over the Texans' previous offensive coordinators, but a fairly disastrous choice as a head coach. Indeed, there is precious little that has occurred in the first three games that indicates that this team is any better overall than the 2-14 team of last season. Although the Texans' offense has been dreadful in large parts of each of the first three games, the Texans defense is in complete disarray after giving up almost 500 yards for the third straight game and making 36-year old Redskins QB Mark Brunell look like Hall-of-Famer Steve Young. But what's most distressing is that the Texan defenders don't even look as if they have ever seen a screen pass or draw play, and don't appear to have a clue as to situations in the game when those plays are likely to be called. Talent limitations aside, such lack of preparation is a sure sign of bad coaching.

Absent a win next week against a Miami team that has a feckless offense but strong defense, the Texans will likely be 0-6 because, after their bye in Week Five, they play at Dallas and at home against Jacksonville. Thus, the next realistic chance for a victory would be in Week Eight against the Titans. Moreover, based on their performance in the first three games, the Texans appear to have a realistic chance of winning only three or four of their remaining games -- my pre-season prediction of six wins is a pipe dream at this point. Bob McNair does not deserve this.

Houston Cougars 34 Oklahoma State 25

The red-hot Coogs (4-0) rode a superlative performance from senior QB Kevin Kolb to an impressive victory over Oklahoma State (3-1) before a near-capacity crowd on the UH campus. The Cougars are looking as if they are a bonafide Conference USA title contender this season, although they have a difficult next month as they play a well-rested and hungry Miami Hurricane team at the Orange Bowl next Saturday, then always-tough Southern Miss at Hattiesburg two weeks after that game, and then explosive UTEP at home the week after that.

Texas Longhorns 37 Iowa State 14

In their first Big 12 Conference game of the season, the Horns (3-1) methodically hammered a solid Iowa State (2-2) team, although this game would have been closer had the Cyclones not sustained a Longhorn scoring drive with a penalty while trailing 16-14 and later failed to execute an easy interception that resulted in a Texas touchdown. The Horns have an impressive blend of speed, size and strength, particularly on defense where their lock-down cornerbacks allow the front seven to bring withering pressure on the opposing team's QB on virtually every pass play. The Horns have another scrimmage next Saturday in Austin against Sam Houston State (a Division I-AA team), but then it's OU weekend in Dallas the weekend after. My sense is that the Sooners are going to have their hands full with this Texas squad.

Texas Aggies 45 Louisiana Tech 14

H'mm. After last week's debacle against Army, the Aggie fans had to endure a two-hour weather delay before this game and then a first quarter in which the Aggie offense had two three-and-outs and a fumble that led to a La Tech TD. Thankfully for Coach Fran, the 4-0 Ags turned it on and cruised to an easy victory over a mediocre and outmanned La Tech (1-2) team. After completion of the cupcake portion of their schedule, the Aggies next face a battle-tested 3-1 Texas Tech team that has largely owned the Aggies over the past decade. My sense is that the Aggies have made a big mistake in not playing a more challenging schedule before facing Tech.

Florida State 55 Rice 7

Now that 0-4 Rice is through with the brutal part of its schedule, here's hoping the Owls get back starting QB Chase Clement (injured since the end of the Owls' first game against Houston) back this week in time to play against Army this week in West Point. The Owls can't compete against such teams as Texas and FSU, but they are capable of pulling out at least a couple of wins in their remaining games if Clement returns and the Owls can avoid injuries that deplete their fragile depth.

Posted by Tom at 4:19 AM | Comments (4) |

September 24, 2006

Declining Texas medical malpractice premiums

This Ft. Worth Star-Telegram article from about a month ago reports that, since enactment of the Texas Medical Malpractice and Tort Reform Act of 2003, medical malpractice lawsuits in Tarrant and Dallas Counties have been reduced by as much as 60%. A couple of weeks later, this Austin Business Journal article and this PIAA press release report that Texas doctors are enjoying one of the steepest declines in malpractice insurance premiums rates in recent history -- almost 30% over the past four years.

Pretty hard to argue that the parallel reduction in lawsuits and insurance premiums are a coincidence.

Posted by Tom at 8:27 AM | Comments (11) |

September 23, 2006

It's not Austin, but . . .

Even when the New York Times provides a generally favorable review of the College Station, Texas -- about 100 miles northwest of downtown Houston and the home of Texas A&M University -- the newspaper cannot resist making a snarky comment about one of A&M's most hallowed institutions -- the magnificent Fightin' Texas Aggie Band. In commenting on the experience of attending a football game in College Station, the Times article makes the following observation:

"Don’t miss halftime; you’d have to go to North Korea to match the choreographed pageantry of A&M’s band and corps of cadets."

Posted by Tom at 5:35 AM | Comments (4) |

September 22, 2006

Jamie Olis resentenced to six years

U.S. District Judge Sim Lake resentenced Jamie Olis to six years in prison this afternoon (Olis has already served about 2.5 years in prison) in the latest chapter of the three year saga that has become arguably the starkest example government's dubious criminalization of business during the post-Enron era.

During the hearing, Judge Lake read portions of a lengthy opinion that he has written on the Olis resentencing. Although Judge Lake found that a sentencing guidelines sentence for Olis would be in a range of 151-188 months based on an estimated $79 million damage amount (the intended tax benefit to Dynegy from Project Alpha), he concluded that Olis deserved a non-guidelines sentence because of Olis' exemplary character, the fact that Olis did not personally gain from Project Alpha, and that Dynegy did not fail as a going concern as a result of the transaction. Judge Lake also concluded that the extensive publicity relating to Olis' case and other recent white collar business cases has sufficiently informed the business world of the severity of fraudulent business conduct that principles of general deterrence do not require a guidelines sentence.

Although six years is a harsh sentence, my initial reaction to Judge Lake's decision (before reading it) is that it would be very difficult to mount an effective appeal on Olis' behalf to reduce the sentence. On the other hand, the prosecution -- exhibiting a lack of judgment that has become routine during this era of criminalizing business -- announced at the end of the hearing that it intends to appeal Judge Lake's opinion to the Fifth Circuit.

Frankly, I hope the government does appeal the sentence. That utter lack of prosecutorial discretion might be the only way to prompt the Fifth Circuit to take a whack at reducing Olis' sentence further.

Update: Doug Berman, Ellen Podgor and Larry Ribstein, all of whom have blogged extensively on the Olis case, add their initial thoughts. Professor Podgor's point about the disparity between Olis' sentence and the sentences of his co-defendants who copped pleas is particularly insightful. Judge Lake notes in this opinion that this disparity in treatment between cooperating defendants and defendants who assert their innocence is a mechanism that Congress has adopted to facilitate cooperation in federal criminal investigations. But what looks good in theory has become ugly in practice. Given the government's overwhelming resource advantage and the willingness of prosecutors to appeal to jurors' resentment to obtain convictions, asserting innocence in white collar criminal cases has become a risk that is too huge to take.

Posted by Tom at 2:30 PM | Comments (4) |

Why rich folks go broke

Houstonian, former heavyweight boxing champ and now successful businessman George Foreman is featured in this Timothy O'Brien/New York Sunday Times article from last weekend that explores the question of why many prominent people are incapable of maintaining their wealth and end up wrestling with insolvency.

Foreman, who is a remarkable and fascinating fellow, tells the story in the article of how he blew his first fortune from winning the heavyweight championship the first time around and how that experience drove him to make the attempt to win it again at the age of 45. Big George rebounded from his insolvency experience by earning several multimillion-dollar purses during his brief return to boxing in the early-1990’s and then making millions more by reinventing himself as a good-natured entrepreneur and pitchman, cleverly peddling the popular hamburger grills that bear his name.

Interestingly, Foreman's flirtation with insolvency did not involve the usual story of corrupt managers taking advantage of a young, uneducated and unsophisticated boxer. Rather, Foreman experienced insolvency the right way, taking risks and learning from them:

Mr. Foreman, unlike most entertainers and athletes, had homegrown financial antennae, and his budgetary acumen surfaced at a relatively early age. He slugged his way into prominence by winning a gold medal at the 1968 Olympics, and a year later, when he was 20, he turned pro. Schooled, he said, in the perils of errant spending by the financial predicament of the boxing legend Joe Louis, he decided to form the George Foreman Development Corporation in 1971.

“I had so much time alone,” he recalls. “Not many people thought I would be champ of the world. Didn’t have any friends at all. And what I would do is walk to the bookstore, and I’d buy books. And they were books on taxes, accrual taxes, estimated taxes, and you better make a corporation.”

Mr. Foreman says his homework persuaded him to put about 25 percent of what he earned at every bout into a pension and profit-sharing plan controlled by his corporation. “I had all this time dreaming of this, so that when money came upon me I was already prepared,” he says.

Despite how closely Mr. Foreman tended his nest egg, most of his assets remained exposed. He describes the way he invested his unencumbered cash, about $5 million, as a series of blunders: “Oil wells, gas wells, banks, flop, flop, flop.”

Despite a present net worth of several hundred-million dollars, Foreman is not complacent:

“I will never feel secure again,” he says. “I’ve got to earn, earn, earn, earn.”

Respect every dollar, Mr. Foreman reiterated, respect every dollar.

“You can become complacent,” he says. “You can say, ‘I’m successful,’ which is the kiss of death. In America it’s hard to wake up hungry. It’s frightening. You can become complacent and wake up tomorrow totally homeless.”

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

Steven D. Levitt on gangs and crack cocaine

In this clever and lively lecture, University of Chicago Economics Professor Steven D. Levitt of Freakonomics (Morrow 2005) fame explores his research into the economics of gang members selling crack cocaine. Levitt's description of the way in which some gang members added the correct answer to the initial multiple choice question that the field researcher posed to them is priceless.

Hat tip to Greg Mankiw for the link to Levitt's lecture.

Posted by Tom at 4:44 AM | Comments (0) |

Duck Soup

To say that college football is a passion in Oklahoma is an understatement, which has been reflected this week as many supporters of the University of Oklahoma football team are undergoing psychotherapy over a blown call by a replay official on an onsides kick that allowed the University of Oregon Ducks to nip the Sooners at the end of their game last Saturday in Eugene, Oregon.

Well, Oregon apparently has had enough of the OU criticism over the blown call and is now fighting back. Don't miss this hilarious news conference as the Oregon Duck explains with White House Press Secretary-style clarity that the replay official's call was actually the correct one.

Posted by Tom at 4:21 AM | Comments (1) |

September 21, 2006

The Fastow sentencing memorandum

As Jamie Olis awaits his resentencing for working on a transaction for which he did not profit, Andrew Fastow's lawyers (one of whom is Olis' attorney -- small world, isn't it?) filed a sentencing memorandum earlier this week that claims that Fastow has "stepped up to take responsibility," has expressed "full remorse" for his role in Enron's demise and "is a changed man." WaPo's Carrie Johnson reports on the memorandum here and a copy of the Fastow sentencing memo can be downloaded here.

Before you become convinced that Fastow has turned his back on his evil ways and become a paragon of virtue, take a moment to review the following:

How Fastow served up his wife as a sacrifical lamb for his effective embezzlement of funds from Enron;

How Fastow used the NatWest Three to hide his embezzlement of funds from Enron and then turned on the bankers to save his skin;

How Fastow may have forged Richard Causey's initials on the Global Galatic "agreement";

Fastow's bizarre testimony in the Lay-Skilling trial; and

Fastow's involvement in ruining the careers of four innocent Merrill Lynch executives in order to lessen his prison sentence.

Changed man? Heck, it looks to me as if Fastow has manipulated the Enron Task Force in the same manner as he manipulated many of his colleagues at Enron.

Posted by Tom at 6:54 AM | Comments (3) |

The resentencing of Jamie Olis

US District Judge Sim Lake announced yesterday that Jamie Olis will be resentenced on Friday at 2 p.m., almost a year after the Fifth Circuit Court of Appeals reversed Judge Lake's previous 24+ year sentence. As we await another chapter in what has emerged as one of the most egregious injustices of the government's criminalization of business interests during the post-Enron era, the following are a sampling of my posts on the Olis saga since I began following the case two and a half years ago:

My first post on the sad case of Jamie Olis (March 24, 2004), a little over a month after the beginning of this blog;

The WSJ's Holman Jenkins notices the sad case of Jamie Olis (March 31, 2004);

Larry Ribstein addresses the Olis case for the first time, marking the beginning of this fine scholar's writings in the blawgosphere on the dubious nature of the government's regulation-of-business-through-criminalization policy (April 7, 2004);

Olis is ordered to report to prison on May 20, 2004 (May 5, 2004);

The Wall Street Journal runs its first thorough article on the Olis case (May 20, 2004);

Novelist and former prosecutor Mark Costello decries the Olis sentence and the increasing criminalization of business interests in the New York Times (June 7, 2004);

The Los Angeles Times weighs in with a thorough article on the Olis case (July 12, 2004);

Sentencing scholar Douglas Berman takes up the Olis case, beginning his excellent blawgosphere analysis of the unjust nature of the sentence (July 16, 2004);

The sad case of Olis gets even sadder as he is transferred to a prison far away from his wife and young daughter (January 31, 2005);

The government's misrepresentation of the market losses in the Enron Nigerian Barge trial mirrors the prosecution's misrepresentation of the market loss involved in the Olis case (April 20, 2005);

Would Olis have fared better had he been tried and sentenced in Russia? (June 1, 2005);

While Theodore Siphol goes home, Bill Fuhs and Jamie Olis go to jail (June 24, 2005);

The Olis case is lost amidst the myopia of the NY Times (September 16, 2005);

Embezzling $43 million and copping a plea is better than embezzling nothing and asserting one's innocence at trial (October 16, 2005);

Finally, some justice for Jamie Olis as the Fifth Circuit reverses his 24+ year sentence (November 1, 2005);

The Chronicle's business columnist Loren Steffy -- who generally supports the government's regulation-of-business-through-criminalization policy -- says that the government has gone too far in the Olis case (November 24, 2005);

The Justice Department's initial reaction to the reversal of Olis' sentence is that he should be resentenced to "only" 15 years (December 21, 2005);

The Justice Department drags its feet in regard to the Olis resentencing (January 18, 2006);

Short-selling and the genesis of the case against Olis (February 4, 2006);

Hope for Olis on the key market loss issue (February 27, 2006);

Martin Frankel's sentence exposes the absurdity of Olis' original sentence (March 24, 2006);

"Prison time is slow time" (June 22, 2006);

More hope for sanity in the resentencing of Olis (August 1, 2006);

Professor Grundfest takes on the market loss issue in the Olis case (August 22, 2206);

The Justice Department continues misrepresenting the market losses in the Olis case (September 6, 2006) while The Economist weighs in on the market loss issue (September 19, 2006);

The prosecution asked Professor Grundfest what? (September 13, 2006); and

The Olis resentencing hearing concludes (September 14, 2006).

Update: As usual, Larry Ribstein has a most insightful observation about the Olis resentencing:

The government has built much of its scheme for putting business in jail on this unfortunate young father. For more than two years, prosecutors could use the Olis example to soften up defendants for pleas and cooperation, sort of like a murdering despot pointing to his display of his enemies' spiked heads. A significant reduction in Olis's sentence would not only be a welcome bit of justice for Jamie Olis, but an important symbolic turn in the government's questionable campaign.

Update 2: Olis was resentenced to six years.

Update 3: Olis' ordeal continues (December 10, 2006).

Update 4: Did the Bureau of Prisons forget about Olis (February 1, 2007)? And Olis finally receives a ticket to Bastrop (February 11, 2007).

Update 5: Troubling information is revealed regarding the DOJ's interference with the Olis defense (May 28, 2007).

Update 6: The Olis connection to the KPMG criminal case (June 13, 2007).

Update 7: Information on what really happened during Olis' criminal trial finally starts to come out (October 9, 2007).

Update 8: Did the prosecution violate its Brady obligation to turnover exculpatory evidence to the Olis defense (December 4, 2007)?

Update 9: Why is the United States imprisoning people such as Jamie Olis (April 27, 2008)?

Update 10: This is criminal justice (Aug 9, 2008)?

Update 11: People who live in glass houses . . . (Aug 26, 2008).

Update 12: But what about he case in which the threat worked? (December 5, 2008).

Update 13:Olis as a casualty of the criminalization-of-business lottery (January 13, 2009).

Update 14: Reflecting on astonishing abuses of power (August 10, 2009).

Update 15: Jamie Olis and the trial penalty (October 27, 2009).

Update 16: The incalculable cost of a misguided criminal prosecution (January 5, 2010).

Posted by Tom at 5:18 AM | Comments (1) |

Wasting talent

So, a tortured Jeff Skilling is back in the news as a result of being cited for public intoxication while visiting Dallas a week or so ago.

While many await with anxious anticipation the imposition of the harsh prison sentence that Skilling will almost certainly receive, I continue to think about the great waste that results from the government's criminalization policy toward risk-taking businesspersons and Skilling's legacy of beneficial risk-taking.

This is not the product of a rational criminal justice system.

Posted by Tom at 4:46 AM | Comments (1) |

September 20, 2006

You just knew this was coming

The business news was awash with articles over the past couple of days about how Amaranth Advisors, LLP lost $5 billion or so by making wrong bets that natural gas prices would rise. Inasmuch as Monday morning quarterbacking is much easier than actually making money in placing such bets, it's fairly clear what happened. As gas prices fell precipitously because of a storage glut, Amaranth increased bets that would pay off exponentially only if natural-gas prices rebounded in anticipation of a cold winter or as a result of a hurricane hammering natural-gas facilities. That hasn't happened and so prices have continued to erode.

Meanwhile, Amaranth's risk management systems apparently did not accurately measure how much downside risk the company faced and did not provide an effective mechanism for hedging that risk. Amaranth's bets went bad because the company misjudged the spread, which is the movement of the difference between prices for different month contracts. The institutions and wealthy investors that invested with Amaranth knew about that risk, but they took it because of the potential for big gains if Amaranth bet right. Nothing too unusual about that.

So, with that backdrop, why is this necessary?:

Connecticut Attorney General Richard Blumenthal said on Tuesday he is investigating apparent large losses at Amaranth Advisors LLC, the Greenwich-based hedge fund manager, and stepped up calls for more industry oversight.

In a statement, Blumenthal said "particularly problematic are alleged representations made to investors in recent weeks by the management of Amaranth that may be contrary to apparent facts." [. . .]

Blumenthal last year said he was investigating ways to make hedge funds safer for investors in the wake of the fallout from Stamford, Connecticut-based Bayou Management, which collapsed in the wake of a trading scandal. Two top Bayou managers pleaded guilty to federal fraud charges and are awaiting sentencing.

"The facts about mammoth losses by Amaranth offer additional powerful and compelling evidence about the need to reform disclosure and oversight requirements," said Blumenthal.

As if those reformed disclosure and oversight requirements will -- or even should -- prevent the next Amaranth. Indeed, the fact that several Amaranth investors investigated Amaranth's books personally and determined the extent of their exposure is an indication that the hedge fund market is working, not that it needs to be dipped into the criminal justice or governmental regulatory system.

By the way, this Ann Davis/WSJ article (no subscription needed) profiles Brian Hunter, the 32 year-old Amaranth trader who is largely responsible for placing the bad bets.

Posted by Tom at 5:53 AM | Comments (0) |

A story that Bill O'Reilly would love

Oil prices kept falling yesterday as the October crude contract on the New York Mercantile Exchange dropped $2.14 to settle at $61.66 a barrel, which is the lowest price for a front-month crude contract in six months. A couple of weeks ago, Pejman Yousefzadeh wrote this TCS Daily op-ed in which he observed that, despite such declining prices, the Bill O'Reilly-type claims of manipulation of oil markets continue to persist.

As if on cue, this NewsBusters post reports on a recent installment of the CNN show, "The Situation Room," in which CNN reporter Bill Schneider speculated ominously that the current decrease in energy prices has been timed to help Republicans in the midterm elections:

"The drop in prices may last a couple of months, long enough to get through the November election. Could that be what the oil companies want?"

Schneider's observation was then "buttressed" with the insight of one Tyson Slocum, a "consumer advocate:"

"Eighty-one percent of their money goes to members of the Republican Party. I cannot say for sure whether or not they are influencing prices to assure that outcome, but it is, I think, more than just a coincidence that we're seeing an easing of prices at a time of running up to a very, very important election."

That's a helluva consumer advocate who argues that lower prices for consumers is a dark conspiracy of the Republican Party and big energy companies. Does that mean that the far lower energy prices that existed in the run-up to the 2000 election were the result of an equally dark conspiracy of the Democratic Party and big energy companies?

Posted by Tom at 5:07 AM | Comments (0) |

KPMG continues to play rough with its former partners

In this earlier post, I noted that KPMG's resistance to paying its former employees' defense costs in the KPMG tax shelter criminal case could end up being an element in prompting US District Judge Lewis Kaplan to dismiss the charges because of the government's prosecutorial misconduct in coercing the firm into that position.

Now, it looks as if KPMG has gone one step further. According to this Lynnlee Browning/NY Times article, KPMG is now suing several of its former employees who are also defendants in the criminal case for damages resulting from their alleged embezzlement from the firm and breach of fiduciary duty to the firm in regard to their involvement with the tax shelters.

That lawsuit -- along with the firm's continued refusal to pay their employees' defense costs in the criminal case -- must be giving current KPMG partners a warm and fuzzy feeling, don't you think? Also, a note to KPMG -- such civil suits have a little process called "discovery," which often leads to the publication of embarrassing information. As if the firm needs any more bad publicity from this seemingly endless debacle.

Meanwhile, this Wall Street Journal editorial ($) reports that two previously undisclosed IRS memos to KPMG from 2003 and 2004 confirm that the Service didn't think there was anything wrong with the shelters. The defendants in the criminal case are understandably demanding all government documents relating to such memos, and the prosecution -- as is typical in this era of criminalizing business -- is resisting those demands. In short, the legality of the KPMG tax shelters was a subject of debate within the IRS, but the Justice Department brought the criminal case anyway before the IRS had even won a court ruling declaring the shelters to be illegal.

So much for due process, eh?

Posted by Tom at 4:16 AM | Comments (1) |

September 19, 2006

Awaiting the Jamie Olis sentence

As we await U.S. District Judge Sim Lake's decision on the resentencing of Jamie Olis later this week, this Economist article does an excellent job of summarizing the issues that are at play in determining the all-important market loss issue with regard to Olis resentencing. I particularly enjoyed the last sentence of the article:

"If Judge Lake has been spending the summer getting up to date on economics, perhaps Mr Olis will be out of prison much sooner than he must once have feared."

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

Why aren't the U.S. teams winning the Ryder Cup?

Damon Hack of the NY Times reports on the boys' road trip of the U.S. Ryder Cup team a couple of weeks ago "to bond" before this week's matches (and to try and figure out why the U.S. has gotten creamed four out of the last five matches). However, as Hack (what a great name for a golf writer!) notes in the article, Houston's Jack Burke, a former Ryder Cup member and one of Hal Sutton's assistant captains on the U.S. Ryder Cup that got scorched two years ago, suggested in his recent book It’s Only a Game that the reason the U.S squad is getting beaten so regularly is really quite simple -- the U.S. team members have made so much money through the years that they have become soft.

In this GolfforWoman.com article, Clear Thinkers favorite Dan Jenkins expands on Burke's thought in explaining why so many PGA Tour sponsors want Michelle Wie to play in their tournament:

As a sponsor, the tour says, it's okay if I sell tickets, but my main job is to help 200 guys I've never heard of make a lot of money. They need to make all this money so they can live in one of those tract mansions, probably on the water hole of a golf course in a gated community where it'll be safe to let their urchins run loose and annoy people.

Near as I can tell, they deserve to be rich because they know how to hit a golf ball. Doesn't matter that they've never read a book that didn't have a cure for the slice in it, and they resist thinking about anything beyond the next Marriott.

I'm talking about a guy like--I've looked it up--one of the 47 PGA Tour players who made more than a million bucks in prize money last year, although he didn't win a golf tournament.

Or like one of the 10 guys out there who won more than two million dollars last year but didn't win a tournament.

Did you hear me? Ten guys go squat, diddly, Circle O Ranch, the Big Empty, but they're allowed to scoop two mil.

Is this a great country or what?--as people used to say before the saying got worn out.

Some people might want to come back in the next life as Chris DiMarco. Here's a guy who clipped the sponsors for a little more than $3.5 million last year while not winning a golf tournament. Uh-huh. Three point five and oh-for-trophy.

You might wonder how many fans he lured into the 24 tournaments he entered in 2005 while he was not winning but banking all that coin. My educated guess is none. His wife would be a comp, as would the two Florida Gators pals who might happen to be in town.

Nothing against DiMarco, a perfectly charming fellow and capable golfer. It's the system. Tyranny from the bottom. That's what I've been calling it for years. DiMarco and those other winless guys are merely taking advantage of it. The fact is, Phil and Tiger are the only golfers who sell tickets these days. The spectacle sells the rest. The tournament comes to town, and it's a social event, a happening, a picnic, a kegger, a few days loafing around on the rich guy's lawn.

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

Former EES CEO gets 2.5 years in prison

David Delainey, former CEO of Enron Energy Services, was sentenced on Monday to 2 and a half year in the pokey in connection with his plea deal in which he pled guilty to insider trading charges and sang like a canary for the prosecution during the criminal trial of former key Enron executives Ken Lay and Jeff Skilling.

Delainey went over-the-top in his testimony against Lay and Skilling, so the Enron Task Force didn't oppose a lenient sentence for him. Moreover, Delainey's counsel requested a probated sentence from US District Judge Kenneth Hoyt, who is generally considered a relatively light sentencing judge. As a result, it was expected in the local legal community that Delainey would probably receive a similar sentence to that of Timothy DeSpain.

However, Delainey's desire to placate prosecutors appears to have backfired as Judge Hoyt commented during the sentencing hearing that his criminal conduct was "a lot deeper and a lot wider, . . . than is expressed in this charge." Thus, the length of the sentence -- and particularly the fact that Delainey was hauled off to jail straight from the courtroom -- is mildly surprising. It is also tragic in that Delainey's testimony during the Lay-Skilling trial was not particularly credible. My sense is that he agreed to the plea bargain solely to hedge the risk of a longer prison sentence on the charges.

By the way, this Kristen Hays/Chronicle article outlines the sentencing schedule for former Enron executives in the upcoming months.

Posted by Tom at 4:00 AM | Comments (1) |

September 18, 2006

The untenable corporate crime liability standard

John Hasnas is a professor of ethics and law at Georgetown University's McDonough School of Business and is the author of the book, Trapped: When Acting Ethically is Against the Law (Cato 2006), which is an adaptation of Professor Hasnas' article Ethics and the Problem of White Collar Crime. This previous post discussed one of Professor Hasnas' articles on the perverse effect that implementation of the Department of Justice's Thompson Memo has had on companies serving up their employees as sacrificial lambs to avoid an Arthur Andersen-like meltdown.

Following on that article, Professor Hasnas authored this WSJ ($) op-ed over the weekend on the real problem that underlies such policies as those implemented under the Thompson Memo:

DOJ policy is merely a symptom of the underlying disease: the untenable standard of corporate criminal liability embodied in federal law. Attempting to reform DOJ policy without changing the law is a bit like treating a lung-cancer patient's cough. It won't hurt, but it won't help that much either.

When should corporations be subject to criminal punishment? Perhaps never. These entities cannot be imprisoned, only fined; and the fines are paid by the corporations' shareholders. The defining characteristic of the modern publicly traded corporation is the separation of ownership and control: Shareholders do not control the actions of corporate employees. Thus, imposing criminal punishment on a corporation, rather than on the employees who committed the offense, punishes shareholders who are innocent of wrongdoing.

And what should the standard be?:

A highly restrictive standard would require the prosecution to demonstrate some positive step taken by corporate policy makers to facilitate the employees' criminal conduct. A less restrictive standard would require only that upper management be willfully blind or perhaps merely negligent with regard to employee misconduct. An even less restrictive standard would presume corporate involvement in employee criminal activity, but allow corporations to raise their good faith efforts to discourage employee wrongdoing as an affirmative defense. But even the least restrictive standard would be sufficient to break DOJ's stranglehold on corporations.

Read the entire piece. Changing the standard of corporate criminal liability would not interfere in the slightest with the government's ability to prosecute corporate employees and would preserve jobs and wealth for those who not involved in any corporate criminal activity. Moreover, it would prevent the government from coercing companies into becoming quasi-law enforcement agencies or risk being prosecuted out of business. That would provide at least a modest (and long overdue) balancing of the playing field in corporate criminal matters.

Posted by Tom at 4:20 AM | Comments (2) |

This is "exceptional service?"

Apparently, "service" such as that described here, here and here will get you an exceptional service award from the U.S. Department of Justice.

Trampling justice and the rule of law while destroying careers, jobs and wealth is "exceptional" governmental service?

God help us all.

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

2006 Weekly local football review

Colts 43 Texans 24

It was not as "close" as the score indicates. Behind 17-0 before they appeared to look up, the Texans (0-2) could not force the Colts (2-0) to punt until it was 30-10 midway through the fourth quarter. The only way that the local team ended up with 24 points was by scoring three largely meaningless TD's in garbage time when the Colt defenders were merely attempting to avoid injury. After two games, the replacement of the Casserly-Capers regime with the Kubiak crew looks like the quintessential rearranging of the deck chairs on the Titanic, particularly on defense. The Texans have winnable games the next two Sundays at home against the Redskins and the Dolphins, so they better get a win or two in those games or this season could quickly deteriorate into a repeat of the 2005 nightmare. With each passing week, this Texans team is looking more like the inept early 1970's Oilers teams. Where are Sid Gillman and Bum Phillips when you really need them?

Texas Longhorns 52 Rice 7

In what amounted to an exhibition scrimmage in Houston before next weekend's Big 12 Conference opener against Iowa State (2-1) in Austin, the (2-1) Horns trampled the undermanned Owls (0-3) at Reliant Stadium in an indictment of the current structure of NCAA Division I college football. In the next absurdity on their schedule, the Owls go to Florida State next weekend to be served up to the nationally-ranked Seminoles. Sigh.

Texas Aggies 28 Army 24

Inasmuch as the Ags (3-0) had to put up a goal line stand at the end to pull out a game by 4 that they were favored to win by 27.5, let's put A&M's "victory" in perspective:

Combined points scored by Army (1-2) against previous opponents, Arkansas State and Kent State: 23

Arkansas State's margin of victory vs. Army: 8

Army's Total Offense:
vs. Arkansas State - 164
vs. Kent State - 275
vs. Texas A&M - 322

Army's Total Yards Rushing:
vs. Arkansas State - 95
vs. Kent State - 104
vs. Texas A&M - 136

Army's Total Yards Passing:
vs. Arkansas State - 69
vs. Kent State - 171
vs. Texas A&M - 186

Quotes from Coach Fran:

"We attacked and had tremendous pursuit and that paid off."

"I felt like if we make it, the game is pretty much in our hands. I wish I'd have punted now [rather than going for it on 4th and 1 and failing to get a first down before Army's final drive], I guess, but it all worked out."

"Our defense really rose up on that [final] series. I think we grew up a lot on that series."

"We didn't have a lot of miscues, but every one of them we had was costly."

Buck Harvey's analysis of the game: "Dennis Franchione didn't lose a game or his job Saturday night. But he's on his way to doing both." The Ags conclude the cupcake portion of their schedule next week at home against Louisiana Tech (1-1) before beginning Big 12 Conference play the following week against Texas Tech (2-1) in College Station.

Houston 42 Grambling State 22

In their second straight impressive offensive performance, the 3-0 Cougars chewed up Grambling and led 42-7 early in the third quarter before calling the dogs off. The Coogs have "show me" games upcoming at home against Oklahoma State and at Miami over the next two weeks, so we'll get a better idication in those two games of whether the Cougars have really arrived than we have gotten in their first three.

Posted by Tom at 4:00 AM | Comments (0) |

September 17, 2006

A Houstonian is the top CEO-golfer

Houston has a rich tradition in both golf and business, so it's no surprise that a Houston resident has been named the best CEO-golfer by Golf Digest magazine. In its October print edition (no web link available), Golf Digest rates the top 200 CEO-golfers of all the Fortune 1000 companies and Jim Crane, CEO of Houston-based air freight and logistics company, EGL ("Eagle Global Logistics"), comes away with the no. 1 rating. As the article notes:

Crane, who grew up caddieing at Norwood Hills Country Club in St. Louis, gratefully recalls getting to play for free on caddie day. Price isn't an issue for him now. With homes in Houston, Nantucket and Pebble Beach, and with 400 offices in locations from Shanghai to Istanbul to Santiago, he admits to having two identical sets of clubs -- one that he keeps in Houston, where he plays near his office at Lochinvar Golf Club, and the other -- "Oh, this will sound bad," he says, "but it's a personal one, not the company's" -- on his plane. "It makes it easy to get from Point A to Point B," he says.

When working at his London office, Crane stays at Queenswood . . . because it's convenient, and he can sometimes hit balls after work. Even though Crane enjoys tournaments and plays in many fund-raisers, more of his golf is business than social. "If you can't close in four hours, you can't sell," he says of opportunites offered by the game.

Posted by Tom at 8:06 AM | Comments (1) |

September 16, 2006

Three Houston businessmen arraigned in the Premiere Holdings criminal case

In a case that has been swirling around Houston legal and business circles for the past five years, the three former owners of Houston-based Premiere Holdings of Texas -- which promoted itself as a high-yield investment fund to prominent Houstonian investors but spiraled into bankuptcy in late 2001 amid allegations of Ponzi scheme-type activity -- pled not guilty yesterday in connection with their arraignment in federal court in Houston on securities fraud and money laundering charges in a 24-count indictment (you can download a pdf of the indictment here).

Attorney Ted Murray, securities broker David Lapin, and securities broker Jeffrey Wigginton are charged in the indictment for their roles in the promotion and sale of unregistered security interests to investors through Premiere Holdings between 1999 and late 2001. Although the case has been preliminarity scheduled for trial trial on October 30, 2006, my sense is that a case of this nature will not go to trial that quickly after indictment.

Premiere Holdings has been an item of local interest for quite some time for a couple of reasons. First, the company promoted itself as a high-yield investment fund to mainly wealthy and conservative Houstonians, and often advertised itself through several of the talk show hosts on the Houston conservative radio station KSEV. Moreover, Premiere's business unraveled soon after the September 11, 2001 attacks on New York and Washington, but that story flew somewhat under the radar screen of the local business media that was preoccupied with the demise of Enron, which was taking place at the same time. Finally, one of the defendants -- David Lapin -- is related to prominent Houston attorneys Jack Lapin (father) and Bobby Lapin (brother).

The Justice Department's press release on the indictment is here and a previous press release on an SEC action against the three owners is here. A couple of Houston Business Journal articles on the Premiere Holdings case from late 2001 are here and here.

Posted by Tom at 7:38 AM | Comments (0) |

September 15, 2006

Former Enron Assistant Treasurer gets four years probation

In the first of many sentencing hearings that will take place this fall n connection with various Enron-related criminal cases, Timothy DeSpain, a 41-year old former assistant treasurer of Enron from 1999 to 2002, was sentenced this morning by U.S. District Judge Ewing Werlein to four years probation in connection with a 2004 plea agreement in which he pled guilty to a single count of securities fraud. Here is an earlier blog post with background on DeSpain's role at Enron and his plea deal. The Chronicle's Tom Fowler files a report on the sentencing here.

Posted by Tom at 10:18 AM | Comments (0) |

Milton Friedman on limited government

Russell Roberts over at Cafe Hayek points us to a remarkable Open Mind video from over 30 years ago of Milton Friedman discussing principles of economics and limited government. The entire video is about a half hour, but if you watch nothing else, take a moment to marvel at Professor Friedman brilliantly responding to an inflammatory opening question that suggests he lacks compassion for his fellow man. Professor Friedman calmly refuses to take the bait and turns the issue around to question the motives of those who advocate the cure-all of government intervention:

INTERVIEWER: Professor Friedman, I wonder if I might begin the program by saying that you're a kind gentleman, yet you're identified by many with those who seem -- to those who make that identification to want us not to do kind and gentle things -- perhaps not provide for the poor, perhaps not provide for the aged -- and I wonder how you'd reconcile these phenomena and whether you feel it's fair to characterize you as a conservative economist.

FRIEDMAN: Well, let me start at the end of that first. I never characterize myself as a conservative economist. As I understand the English language, conservative means conserving, keeping things as they are. I don't want to keep things as they are. The true conservatives today are the people who are in favor of ever bigger government. The people who call themselves liberals today -- the New Dealers -- they are the true conservatives, because they want to keep going on the same path we're going on. I would like to dismantle that. I call myself a liberal in the true sense of liberal, in the sense in which it means (inaudible) and pertaining to freedom.

Now, that brings me to your second point. One of the great mistakes is to judge policies and programs by their intentions rather than their results. We all know a famous road that is paved with good intentions. The people who go around talking about their soft heart -- I share their -- I admire them for the softness of their heart, but unfortunately, it very often extends to their head as well, because the fact is that the programs that are labeled as being for the poor, for the needy, almost always have effects exactly the opposite of those which their well-intentioned sponsors intend them to have.

INTERVIEWER: As an example, what are you referring to?

FRIEDMAN: Let me give you a very simple example. Take the minimum wage law. Its well-meaning sponsors -- there are always in these cases two groups of sponsors. There are the well-meaning sponsors and there are the special interests who are using the well-meaning sponsors as front men. You almost always when you have bad programs have an unholy coalition of the do-gooders on the one hand and the special interests on the other. The minimum wage law is as clear a case as you could want. [. . .]

[T]he minimum wage law is most properly described as a law saying employers must discriminate against people who have low skills. That's what the law says. The law says here's a man who would -- has a skill which would justify a wage rate of $1.50, $2.00 an hour. You can't, you may not employ him. It's illegal. Because if you employ him you have to pay him $2.50. Well, what's the result? To employ him at $2.50 is to engage in charity.

Now there's nothing wrong with charity. But most employers are not in a position where they can engage in that kind of charity. Thus the consequences of minimum wage rates have been almost wholly bad, to increase unemployment and to increase poverty. Moreover, the effects have been concentrated on the groups that the do-gooders would most like to help. The people who have been hurt most by minimum wage laws are the blacks. I've often said that the most anti-Negro law on the books of this land is the minimum wage rate. And so I think the real answer to your question is that you must not judge a bottle solely by its label. You have to look at what's inside and see what the law or the measure produces.

Indeed, Professor Friedman's analysis with regard to the minimum wage applies equally well to eviscerate this local government boondoggle.

Posted by Tom at 6:34 AM | Comments (1) |

More gripping for the Ryder Cup matches

As noted here earlier, there is something about the upcoming Ryder Cup matches next week in Ireland (perhaps that the American squad has lost four of the last five matches?) that provokes some entertaining reactions.

In this IdahoStatesman.com article, NBC golf color man and former PGA Tour player Johnny Miller rips the American Ryder Cup team:

"This is probably on paper the worst Ryder Cup team we've ever fielded," Miller said during [a] press conference . . .

Miller also expressed reservations about captain Tom Lehman, who will decide how to use his 12 players. He will create four two-man teams for each of the first four rounds.

Miller says it's imperative that Lehman pair Tiger Woods with Jim Furyk, and Phil Mickelson with Chris DiMarco, because those pairings have worked in the past.

That could leave the team's inexperienced players, including four Ryder Cup rookies, paired together.

"I believe if he divides those up we're going to get creamed," Miller said of the Woods-Furyk and Mickelson-DiMarco teams. "I'm really concerned that Lehman uses the theory that we've got to use a good player with a not-so-experienced player." [. . .]

Miller, a former Ryder Cup player, will call the action for NBC.

"It's going to be tough to win with the team (Europe has) got," he said.

I don't think Miller will be the one pursuing interviews from the American squad members for NBC during the matches. Meanwhile, this blog post of senior GolfWorld writer John Hawkins, an excellent golfer himself, provides a more balanced analysis of the American squad's prospects.

And just to make sure that the gripping regarding the matches is taking place on both sides of the Atlantic, former three-time European Ryder Cup captain Bernard Gallacher heaped additional criticism (see previous post here) on current Euro team captain Ian Woosnam for failing to tell Euro captain's choice Lee Westwood that he was on the team before Woosnam made his decision to select him public and said that Woosnam had taken "a massive gamble" by selecting Irishman Darren Clarke, whose wife died last month after a long battle with cancer.

Finally, check out Nike's new commercial below touting Michelle Wie's ability to compete against male professional golfers. H'mm, note to Nike -- image really isn't everything!

Posted by Tom at 5:49 AM | Comments (2) |

More rumblings in the Nigerian Barge appeal

In a move that may backfire, the Enron Task Force filed this petition requesting that the entire Fifth Circuit Court of Appeals consider and reject the decision of a Fifth Circuit three-judge panel from last month (previous posts here and here) that struck down the wire fraud and conspiracy convictions of four Merrill Lynch executives involved in the controversial Enron-related Nigerian Barge case. The Chronicle's Kristen Hays reports on the Task Force's motion here and this post from a year ago provides an extensive thread of posts discussing the case.

The Task Force's petition -- which is focused on the "honest services" issue in the appeal -- is somewhat odd, which may reflect the Task Force's reservations about filing it at all given the considerable risk that a majority of the Fifth Circuit could adopt Judge Harold DeMoss' dissent in the panel decision. On a threshold basis, the motion does not even mention that the Fifth Circuit panel's decision reversed and rendered the convictions of Merrill Lynch executive William Fuhs on all counts and then makes the ludicrous suggestion in a footnote that former Enron CEO Jeff Skilling's anticipated appeal of his conviction and former Enron executive Chris Calger's recent motion to withdraw his plea agreement are somehow valid reasons for reconsidering the panel's decision ("we can't allow those evil former Enron executives be protected by the law!"). Beyond that, the Task Force's short pleading mischaracterizes the panel's decision and fails to address the Task Force's seminal problem with the entire Nigerian Barge prosecution -- that the Task Force prosecuted the Merrill Lynch executives for doing their jobs in connection with Enron's sale of an asset to Merrill for which Enron, not Merrill, may have improperly accounted, although even that issue was never proven by the Task Force during the trial.

Meanwhile, in another interesting development, two of the former Merrill executives involved in the Nigerian Barge appeal, Dan Bayly and Robert Furst, who face the possibility of a retrial as a result of the Fifth Circuit panel's decision -- filed this motion for rehearing in which they request the Fifth Circuit panel to address a key evidentiary issue -- the trial court's decision to allow the Task Force to introduce an email of Brown that was prepared over a year after the barge transaction took place -- that the panel did not address in its original decision because of its reversal of the convictions on other grounds. Bayly and Furst argue in the motion that the panel's ruling on that evidentiary issue will resolve the issue in any re-trial of the case and should be known to the entire Fifth Circuit before it decides whether to grant en banc review of the panel's decision (if Bayly and Furst are right that the trial court erred in admitting the Brown email, then even an en banc reversal of the panel's decision on the honest services issue would not alter the reversal of the convictions).

Posted by Tom at 4:44 AM | Comments (0) |

September 14, 2006

Stros 2006 Review, Part Nine

As I've noted before, it's funny how our expectations for the Stros color the way in which we view the team at a particular stage of the season.

After essentially playing themselves out of the National League playoff race in the eighth 1/10th segment of the season, the Stros (71-74) have actually played quite well over their ninth segment of the season, going 10-6 and completing a segment with a winning record for just the third time this season. However, as the Stros enter their final 17 games of the season, the general consensus in the local media is that the Stros have not been playing well and certainly not as well as last season at this time when they were also contending for the NL wildcard playoff spot.

Indeed, taking a look at where the Stros stood last season at this time is instructive as to where the Stros find themselves this season. After 145 games last season, the Stros were 77-71, which means that the team had won only six more games than the current club at the same stage of the season. That 2005 team was plagued by the same chronic hitting woes that the current Stros team is experiencing -- that club's team runs created against average ("RCAA," explained here) after 145 games was within a run or two of being the same as this season's club (-38).

Meanwhile, the 2005 club's pitching staff -- led by the extraordinary starting trio of Clemens, Pettitte and Oswalt -- had an outstanding 97 runs saved against average ("RSAA," explained here) after 145 games. This year's staff currently has a very respectable 54 RSAA (third in the NL), but that performance is only about half as good as last season's pitching staff's incredible performance after 145 games.

Thus, expectations aside, the reality is that this season's club has not improved in hitting from last season's club and thus, the roughly 43 fewer runs saved by the 2006 pitching staff in comparison to the 2005 staff is the difference between the 2005 club winning six more games than the 2006 club at the same stage of the season. That difference -- as well as a couple of nagging injuries to Pettitte and Clemens down the stretch of this season -- is more than enough to prevent this fragile Stros club from making the push necessary to contend seriously for a playoff spot.

Despite the disappointment of missing the playoffs after the past two magical seasons and flirting with a sub-.500 season for only the second time in the past 14 seasons, the Stros did have a couple of good things happen since the review of the club's 8th segment of the season:

The Stros locked up Roy Oswalt (3.06 ERA/33 RSAA (tied for 4th in RSAA in Major League Baseball); and

Lance Berkman (57 RCAA (tied for 4th in Major League Baseball)/.414 OBA/.616 SLG/1.030 OPS) officially became the 2nd best hitter in Stros history and, with his tater in yesterday's win against the Cardinals, became the first Major League Baseball switch-hitter since the late Mickey Mantle to hit 40 or more home runs in multiple seasons (Mantle's stats for his 18-year career were 1099 RCAA/.421 OBA/.557 SLG/.977 OPS).

The club's hitting and pitching statistics to date are set forth below, and pdf's of the current hitting stats are here and the current pitching stats are here, courtesy of Lee Sinins' sabermetric Complete Baseball Encyclopedia. The abbreviations for the hitting stats are defined here and the same for the pitching stats are here:

As noted in the earlier segments, the Stros' main problems are easy to identify. A lineup that includes Ausmus (-35 RCAA/.306 OBA/.282 SLG/.588 OPS), Everett (-27 /.288/.352/.640), Taveras (-15 /.333/.343/.676), and now Biggio (-14 /.310/.424/.734) is destined to be a far below-average National League hitting lineup. Those four players have created an astounding 91 fewer runs than merely average National League hitters would have generated in those five spots in the lineup. In fact, had those five players been just half as bad in hitting as they have been this season, the Stros would have gained back almost all of the 43 runs that this club's pitching staff has failed to save in comparison with last season's staff. If that had occurred, then this club likely would have won at least the six more games that the 2005 club had won at this time of the season and certainly would be right in the middle of -- if not leading -- this year's race for a playoff spot.

Which brings us to the Stros' biggest problem, which is the club's icon and its probable first Hall-of-Famer, Bidg. Although Bidg was able to push his freak-of-nature, 40-year old physique to solidly above-average hitting seasons during the 2004 and 2005 seasons, the bottom has fallen out this season as he has generated a -15 RCAA over the past three months. Moreover, unlike light-hitting teammates Taveras and Everett who at least field their positions in an above-average manner, Bidg is now a serious defensive liability, and the club's indulgence of Bidg's below-average performance has had the serious side-effect of stunting the development of such younger players as Chris Burke (5/.359/.443/.802), Jason Lane (-8/.328/.404/.732) and even 2B Brooks Conrad (.334 OBA/.534 SLG/.868 OPS/24 HR's) at AAA Round Rock. None of those players will ever be good as Bidg was during his prime, but each of them would probably produce at a superior level to Bidg at this stage of their respective careers.

Nevertheless, as the Chronicle's John Lopez pointed out earlier in the week (and Larry Dierker chimes in today), the Stros are unlikely to let Bidg go after this season when he will be only 80 hits or so shy of 3,000 hits. That's understandable given Bidg's stature on the team and in the community, but everyone should understand that there is a real cost to the Stros indulging yet another below National League-average hitter in the club's lineup. Not only is there the impact of blocking younger players' development, the Stros will have to allocate Bidg at least 375-425 plate appearances next season for him to reach 3,000 hits, assuming that he continues hitting at the same level that he is currently hitting. That's more plate appearances than a part-time starter would receive, so the Stros appear to be locked into having yet another position manned by a below average National League-hitter next season.

Meanwhile, next season's pitching staff will likely lose Clemens (2.27 ERA/23 RSAA) and Pettitte (4.37 ERA/3 RSAA), and will not have the rehabbing Backe (3.77 ERA/4 RSAA), but the Stros appear to be better prepared to rebound from those losses internally than in the hitting department. Young pitchers Hirsh (6.10 ERA/-5 RSAA), Albers (4.35 ERA/0 RSAA), Nieve (4.06/5 RSAA) and Buchholz (5.95 ERA/-18 RSAA) all appear to have the potential to be at least average National League pitchers, and the minor league system contains several other pitchers who will be maturing into MLB-grade over the next couple of seasons. Although Lidge's (5.21 ERA/-5 RSAA) deterioration this season has been troubling, Wheeler (2.51 ERA/14 RSAA), Qualls (4.10 ERA/4 RSAA) and the rest of the bullpen have performed at an above-average National League-level this season and will form a sound core for the bullpen next season. Thus, despite the Stros' chronic hitting woes, the club's pitching remains in reasonably good shape and will likely continue to be the focal point of the club as it attempts to continue the success of the Biggio-Bagwell era during the Berkman-Oswalt era.

So, what should the Stros do? Clearly, going forward with Ausmus, Everett, Taveras and Bidg in the lineup next season is a sure sign of surrender, so let's hope that doesn't happen. Taveras and Lidge probably have the most trade value and both of them should definitely be offered in trade this upcoming off-season for more hitting, probably a hard-hitting corner outfielder. Other than Berkman, Oswalt and most of the pitching staff, almost everyone else on the Stros roster should be expendable for the right price, but the problem is that light-hitting players such as Ausmus and Everett -- and inconsistent ones such as Ensberg (12/.389/.458/.847), Huff (-6/.332./455/.787), Lamb (6/.359/.485/.844) and Lane -- are hard to move in trade. However, given the $40+ million in payroll that will be freed by the expiration of the Bagwell, Clemens, Pettitte and Preston Wilson contracts, the Stros also have the financial flexibility to be in play for a free agent acquisition or two, which may be a more practical alternative than attempting to parley their below average-hitters into a productive trade. Although free agents are usually overpriced in comparison to home-grown talent and thus, tend to be riskier, the Stros appear to have little choice at this point than to take those risks to bolster a hitting attack that has now been in decline for the sixth straight season.

The Stros have an interesting schedule over their final 1/10th segment of the season as they meet the playoff-contending Phillies, Reds and Cardinals in 11 of their final 17 games. That should give Stros GM Tim Purpura and his staff a glimpse of how the club stacks up against the current National League playoff clubs, which should help Stros management finalize their plan on retrofitting the Stros to regain playoff status for next season. Look for my final Stros review of the season shortly after the end of the regular season, at which time I will grade each of the Stros players based on primarily objective critieria, rather than the subjective criteria preferred by some members of the local media.

Posted by Tom at 8:45 AM | Comments (0) |

Houston's nature trail

One of the things about Houston that has surprised many guests of mine over the years are the beautiful nature areas that have been preserved in city's core. One of the best of such areas is the Memorial Park area, which includes the Houston Arboretum & Nature Center, the 155-acre nature sanctuary on the banks of Buffalo Bayou literally within the shadows of the West Loop skyscrapers. Chronicle columnist Doug Pike, who is one of the local newspaper's fine contingent of writers on hunting, fishing and other outdoor activities, provides this column today in which he reviews the types of wildlife that visitors can see while hiking through the arboretum. If you have never visited th arboretum (and even many longtime Houstonians have not), I highly recommend it. Just watch out for the snakes and the feral hogs!

Posted by Tom at 6:01 AM | Comments (0) |

Olis resentencing hearing concludes

After a hearing in state court yesterday concluded, I was able to attend the conclusion of the resentencing hearing for Jamie Olis in U.S. District Judge Sim Lake's court (Tom Fowler's Chronicle article on the hearing is here). My sense is that the hearing went reasonably well for Olis.

Judge Lake allowed Olis to make a personal statement to him during the hearing, and Olis' statement was equally heartfelt and heart-wrenching. Olis, who was not allowed even to look at his delightful and dedicated family in the courtroom during the two-day hearing, choked back tears as he told Judge Lake that he was sorry that he did not -- as a young, mid-level executive at a big, publicly-owned company -- question the judgment of proceeding with a transaction (Project Alpha) for which he was convicted, and that he was hugely frustrated that he could not do anything about it now. Although Judge Lake is notoriously hard to read, he was clearly moved by Olis' statement.

In questioning the attorneys during final argument, Judge Lake was primarily interested in the general deterrent effect of the sentence. Olis defense attorney David Gerger contended that the prison time that Olis has already served and the other ramifications from his conviction (fines, enjoined from serving as an officer of a public company, public humilation, etc) are more than a sufficient general deterrent for other mid-level executives at publicly-owned companies from engaging in wrongdoing, and that the lengthy sentence being proposed by the prosecution is really just a thinly-veiled deterrent for business executives from exercising their right to assert their innocence at trial. Unfortunately, not mentioned during the hearing was the hugely detrimental effect that the Olis sentence could have on beneficial risk-taking that creates jobs for communities and wealth for shareholders.

Meanwhile, Judge Lake -- who clearly has a sound understanding of the sentencing issues -- zeroed in on the prosecution by asking why the government was asking for a sentence of a mid-level company executive who did not personally profit from the transaction for which he was convicted that is equal to or harsher than the recent sentences levied on several more senior executives who actually looted their companies while committing wrongdoing. In what I thought was the defining moment of the portion of the hearing that I attended, the lead prosecutor could not answer Judge Lake's pointed question and blathered on about how it was important to make Olis a poster boy for what can happen to a business executive who engages in corporate crime. There is no question that Judge Lake noticed the evasiveness of the prosecution on that key point.

So, what will Judge Lake do? Given that he originally levied the 24+ year sentence on Olis and generally has a reputation of levying stiff sentences, a couple of fellow courtroom spectators predicted afterward that Judge Lake would come back with a 10-12 year sentence. However, I know that Judge Lake is a man of compassion and grace, and the circumstances of Olis' case simply do not call for a sentence of that length. Thus, I'm betting that the sentence lands in the 4-7 year range, with the hope that it will fall into the lower part of that range and that Judge Lake will allow a portion of the sentence to be served in home detention or at least near Olis' wife and young daughter. Judge Lake stated at the end of the hearing that he will likely issue his ruling late next week, so stay tuned.

Posted by Tom at 4:42 AM | Comments (1) |

September 13, 2006

Would you want to march at a Texans game?

Although not as bad a public relations blunder as last year's decision to roast their fans during their first home game, the Texans were not particularly hospitable to the high school band that performed at this past Sunday's opening game of the 2006 season. In addition to being subjected to NFL-mandated pat downs before entering the stadium, Houston-based public relations expert John Wagner reports that the band members were not even allowed to watch one play of the game!

Of course, based on the way the game went after the Texans' first drive, the kids didn't miss much as a result of the Texans' lack of hospitality.

Posted by Tom at 6:43 AM | Comments (3) |

The Olis market loss hearing

The hearing phase of the re-sentencing of former Dynegy executive Jamie Olis involving the key market loss issue is taking place yesterday and today before U.S. District Judge Sim Lake, and the Chronicle's Tom Fowler files this report on yesterday's proceedings. The hearing is expected to conclude today and Judge Lake -- who is usually quite prompt in rendering rulings -- is expected to issue his decision on the market loss issue shortly.

By the way, according to the Chronicle article, the prosecutor in the Olis case used the same "deep" line of questioning in attempting to impeach the testimony of Olis expert Joseph Grundfest that the Enron Task Force prosecutors used during the Lay-Skilling trial:

During cross examination, Assistant U.S. Attorney Jimmy Sledge challenged Grundfest's motive for getting involved in the case, noting a number of news articles that mentioned he is doing this pro bono.

"Does it warm your heart to read nice things about yourself?" Sledge asked.

That a prosecutor stoops to that level of questioning (in front of a sophisticated judge rather than a jury, no less!) in an attempt to impeach the testimony of a noted expert who is donating his time to address a gross injustice is an appalling reminder of the lack of adult supervision that presently plagues the Department of Justice.

Posted by Tom at 6:11 AM | Comments (1) |

The insidious nature of criminalizing business

Under mounting criticism over its dubious tactics in regard to threatening to go Arthur Andersen on KPMG in the prosecution of the firm's promotion of questionable tax shelters, the Justice Department is now making nice in Congress. Yesterday, deputy attorney general, Paul J. McNulty testified during a hearing of the Senate Judiciary Committee and, while defending such dubious tactics as criminalizing a potential defendant's rights to counsel and to assert the privilege against self-incrimination, suggested that the DOJ might consider some changes on the margin to its corporate crime guidelines such as the odious Thompson Memo. Here is a link to McNulty's testimony and to that of other witnesses at the hearing.

But McNulty's arrogance in defending the Justice Department's campaign to criminalize business in the post-Enron era was not even the most appalling part of the hearing. That occurred when Andrew Weissmann, the former chief of the Enron Task Force, presented this written statement in which he calls for revision of the Thompson memo and a “rethinking of corporate criminal liability.” According to the Weissmann, who parleyed his Enron Task Force job into a partnership at Jenner & Block, the Thompson memo “should be revised so that it no longer encourages an environment where employees risk losing their jobs or legal defense merely for exercising their constitutional right not to speak to the government . . . ” He went on to observe the following:

In determining whether to indict a company, the Department of Justice should not permit consideration of the company’s treatment of an employee who has asserted her Fifth Amendment right. This factor should simply not come into play in the analysis of whether a corporation has or has not cooperated. Although a company itself can properly fire an employee or cut off legal fees based on whether she cooperates with an investigation, the Department of Justice should not weigh in on this determination – and not because a court may ultimately deem the company’s actions as government conduct. Rather, for policy reasons, the Department of Justice should simply not base its decision to prosecute a company on whether a person has been punished by her employer for asserting a constitutionally guaranteed right.

But then Weissmann -- appearing to be far more open-minded than he was during his prosecutor days -- calls for a “rethinking of corporate criminal liability:”

Although the Thompson Memorandum has recently received significant negative attention, and is in some ways an easy target, it is not the real source of the problem. The root cause that renders the Thompson Memorandum such a sharp weapon is the standard for criminal corporate liability and the absence of systemic checks to restrict the government’s power to charge corporations whenever an employee strays. The current standard for corporate criminal responsibility affords prosecutors enormous – and unduly disproportionate – leverage and power. In this climate, a corporation has little choice but to conform its conduct to the Thompson Memorandum factors, even in the absence of a prosecutor’s overt threats.

Of course, Weissmann then proposes a feckless change for the standard for corporate criminal liability in which the government would be required to take into account “a company’s attempts to deter the criminal conduct of its employees:”

Holding the government to the additional burden of establishing that a company did not implement reasonably effective policies and procedures to prevent misconduct would both dull the threat inherent in the Thompson Memorandum as well as help correct the imbalance in power between the government and the corporation facing possible prosecution for the acts of an errant employee. A more stringent criminal standard, one that ties criminal liability to a company’s lack of an effective compliance program, would have the added benefit of maximizing the chances that criminality will not take root in the first place – since corporations will be greatly incentivized to create and monitor a strong and effective compliance program. The objectives of law-abiding society, the criminal law, and even of the Department of Justice’s Thompson Memorandum itself, would then be well served.

So, in short, unless a company has what the DOJ deems as a satisfactory compliance program to deter bad conduct, Weissmann contends that it is acceptable for the government to go Arthur Andersen on companies that pay for the defense costs of employees who assert such fundamental rights as the privilege against self-incrimination. Neither mentioned nor challenged is Weissmann's dubious judgment in contributing to billions of dollars in economic loss and inestimable human hardship from pre-emptively prosecuting Arthur Andersen out of business, Weissmann's continual threats to go Arthur Andersen on Merrill Lynch because of its payment of defense costs for the four former Merrill executives involved in the equally reprehensible Nigerian Barge prosecution and the long line of serious prosecutorial abuses that Weissmann was involved in with regard to the Enron criminal cases.

That the Senate Judiciary Committee is seeking guidance from someone such as Weissmann with a questionable background in abusing fundamental principles of our justice system speaks volumes regarding the unlevel playing field that business interests face in defending against the government's increasing regulation-through-criminalization policy. As Geoffrey Manne appropriately asked awhile back, "Where's the outrage?"

Posted by Tom at 4:38 AM | Comments (3) |

September 12, 2006

Thinking about global climate change

Andrew Dessler is an associate professor in the Texas A&M University Department of Atmospheric Sciences. A couple of months ago, I came across his interesting new blog that focuses on the science and politics of climate change. In this Chronicle article, the Chronicle's science reporter, Eric Berger, interviews Professor Dessler, who makes the following common sense observation about the climate change debate:

[T]here are a lot of really legitimate uncertainties [about global climate change] that people don't seem to argue about. It's a little bit disappointing that people are still arguing over whether the Earth is round or not. Whether humans are causing the increase in CO2 is really like arguing whether the Earth is round. We know it is. There's no question. We've got lots of evidence. The debate isn't really where it should be at this point: We need to view climate change as a risk. It's a somewhat uncertain risk, but it's a risk nonetheless. The question really becomes, as a policy, how do we address this risk?

Eric has a podcast of his entire interview with Professor Dessler over at his SciGuy blog.

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

Dell in the crosshairs

Despite Hewlett-Packard's current problems with its board of directors, my sense is that Dell, Inc. would prefer to have H-P's problems rather than the ones that the Round Rock-based computer manufacturer faces (previous posts here and here).

This NY Times article reports that Dell will delay filing its fiscal second-quarter reports because of a widening Securities and Exchange Commission investigation and an internal company probe into its financial accounting. To make matters worse, Dell also reported that the U.S. attorney for the Southern District of New York has subpoenaed records in regard to an investigation of the company's financial reporting from 2002 to present. Continuing a trend that has knocked 30% of the value of Dell's stock this year, Dell shares declined over 2% yesterday to $21.19.

Dell was already being investigated by the SEC for the timing of its revenue recording, but yesterday's announcement stated that the investigations have branched into areas "relating to accruals, reserves and other balance sheet items."

Translation: "We many need to restate prior earnings."

Posted by Tom at 6:32 AM | Comments (1) |

The Enronesque prosecution of Conrad Black

Washington attorney Alykhan Velshi writing in this New English Review op-ed examines the Conrad Black indictment and doesn't like what he sees:

The trial by attrition of Conrad Black has exposed the dark underbelly of the legal system, where the government can ruin a man, take his property, his means of livelihood, and make him a social pariah – all without the hassle of securing a conviction. There is an insidious little worm that has crept into the legal system, an iconoclastic mentality that is distorting the rule of law. Focused less on securing justice than on bringing down the high and mighty, all the while pandering to the politics of envy, it affects the entire system of corporate governance.

This is highlighted by three developments in the law of corporate governance: the concentration of power in the hands of minority shareholders, the criminalization of technical regulatory violations, the abandonment of the rule of law in favor of aggressive prosecutorial tactics, and the entrenchment of a culture that penalizes success.

Velshi doesn't get everything right, but his piece is nevertheless worth reading for his analysis of the troubling (and all-too-common) characteristics of the Black prosecution. Check it out.

Posted by Tom at 3:46 AM | Comments (0) |

September 11, 2006

The art of predicting energy prices

Oil prices continued a steady slide last week, ending the week at a five-month low as concerns about possible shortages that fueled this summer's rally ebbed. The October crude contract on the New York Mercantile Exchange settled at $66.25, the lowest level for a front-month contract since April 5. The contract has lost more than $11 in the past month. Previous posts on the energy markets are here.

Meanwhile, James Hamilton posted this typically astute analysis of the big discovery in the Gulf of Mexico last week and explains why it may not have as big an effect on energy markets as big discoveries of the past. Also, the Chronicle's David Kaplan provides this interesting article on Houston-based chemical engineer Henry Groppe, who has long been one of the most respected behind-the-scenes experts in the Houston business community for predicting energy prices. As noted in this Resource Investor piece from last year, the 80-year old Groppe is the forerunner of such younger experts as Matt Simmons, who have carved-out careers in advising businesses on risks relating to energy prices.

Finally, this recent Economist article reminds us the silliness of bashing big U.S. oil companies for supposedly controlling energy prices. Turns out that the thirteen largest oil companies in the world are all state-owned and control about 90 percent of the world's oil reserves. The biggest U.S. major -- Exxon Mobil -- is a measly 14th and controls only a fraction of the world's reserves.

Pass that information along to Bill O'Reilly if you have a chance.

Posted by Tom at 7:00 AM | Comments (0) |

The best and worst of the Stros

As the Stros play out the string of the 2006 season amidst the beginning of the football season, the Stros' lone slugger -- Lance Berkman -- quietly reached another milestone in his quest to become the best hitter in Stros history.

Over the weekend against the Brewers, Berkman overtook future Hall of Famer Craig Biggio for second place in career runs scored against average ("RCAA") among Stros players. As regular readers of this blog know, RCAA is a Lee Sinins-developed statistic that is among the best in reflecting the effectiveness of a hitter. The reason for this is that it focuses on the most important statistic in baseball for a hitter -- creating runs. Whereas more commonly cited statistics such as batting average can be very misleading (for example, some local media commentators misconstrue Willy Taveras' .284 batting average as meaning that he is having a good hitting season), RCAA is particularly valuable in evaluating hitters because it focuses on the two most important things in winning baseball games -- that is, creating runs and avoiding making outs.

RCAA computes the number of runs that a particular player creates for his team relative to the number of outs that he makes while creating those runs, and then compares that number of runs to the number that a hypothetical average player in the league would create while using an equivalent number of outs. Inasmuch as the hypothetical average player's RCAA is always zero, a player can have either an RCAA that is a positive number -- which indicates he is an above average hitter -- or an RCAA that is a negative number, which means that he is below-average hitter.

Moreover, RCAA is also a valuable tool to evaluate hitting ability because it provides a good measure for comparing hitters who played during different eras. Inasmuch as RCAA measures a player's hitting ability against that of an average player in the player's league for each particular season, a player's career RCAA measures how a hitter compared to an average hitter during that hitter's career. Thus, comparing RCAA of hitters from two different eras allows us to compare how those hitters produced relative to an average hitter in their particular era, whereas comparisons of other hitting statistics -- such as on-base average, slugging percentage, and batting average -- are often skewed between players of hitter-friendly eras (such as the past 15 year or so) versus players of pitcher-friendly eras, such as the late 1960's and early 70's.

With Berkman passing Bidg in career RCAA over the weekend, the following is the revised Stros top-10 career RCAA list:

In fact, Berkman's current season is now among the top 10 hitting seasons in Stros history, a category that Berkman and Jeff Bagwell dominate:

Berkman is also 4th in the National League in RCAA since 2000, the year in which he became a regular MLB player:

And he is 8th among all Major League Baseball players in RCAA since 2000:

By the way, on the other side of the RCAA ledger, Stros catcher Brad Ausmus is very quietly putting together one of the worst hitting seasons in Stros history, and is closing in on Roger Metzger's record worst -37 RCAA for one season. Here are the top 10 worst seasons for a Stros hitter, a category that Ausmus dominates:

Moreover, Ausmus is easily the worst hitter in Stros history:

And Ausmus is the 4th worst hitter in Major League Baseball since 1994, the year in which he became a regular MLB player:

Thus, in Berkman and Ausmus, the Stros have among the best and the worst of hitters. Whether the club during this off-season attracts a couple of hitters with positive RCAA -- while foregoing hitters such as Preston Wilson who have negative RCAA -- will largely determine whether the Stros will compete for a playoff spot in the 2007 season and beyond.

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

2006 Weekly local football review

Ohio State 24 Texas Longhorns 7

Ohio State came into Austin on Saturday night and won the season's first big game by playing as exceptionally as Texas did last year in Columbus. The Horns did not play badly and would have been threatening to take the lead deep in Ohio State territory midway through the 4th quarter had Michael Pittman not fumbled away a Longhorn TD in the first half. Although the Horns ran the ball reasonably well against an always rugged Buckeye defense, none of the Horns' receivers were able to break a big play, which is going to be an important element for the Longhorns to win big games in the post-Vince era. And what on earth is UT doing allowing Matthew McConaughey to act like an idiot on national TV while on the Longhorns sideline? The Horns have a nice scrimmage against Rice this weekend in Houston at Reliant Stadium before beginning the Big 12 schedule the following weekend in Austin against Iowa State.

Eagles 24 Texans 10

What was that I said in the pre-season review of the Texans of not being able to protect their QB and not being able to pressure the opposition's QB? Eagles QB Donovan McNabb carved up the mediocre Texans secondary like a Thanksgiving turkey as he could have checked stock quotes on most of his pass drops against the ineffectual Texan pass rush. Meanwhile, Texans QB David Carr was, as usual, running for his life while being sacked five times, usually on jailbreak blitzes by the Eagles that Carr may not have recognized properly. And on one of the sacks, Texans RB Vernand Morency completely whiffed on his blocking assignment. The more things change with the Texans, the more things remain the same. The Chronicle's John McClain has a good blog post on the game, and mentions that things don't get any easier as the Texans go to Indianapolis next week to help Peyton Manning pad his career passing statistics.

Houston Cougars 45 Tulane 7

That's more like it. After an unimpressive first game against Rice, the Cougars plastered a veteran Tulane team in running up 621 yards of total offense, almost perfected balanced between rushing and passing. More importantly, however, is that the Cougar defense put in its second impressive preformance by holding the Green Wave to 244 yards of total offense while dominating the line of scrimmage. The Coogs take on Grambling next week at home before returning home the following weekend for Okie State. Stay tuned to the Cougars -- they have the tools to become something special.

UCLA 26 Rice 13

The 0-2 Owls made a game of it again versus the Bruins, but ultimately UCLA cruised to the victory. As with last week's game against Houston, the Owls struggled again on offense, gaining less than 200 yards total offense as starting QB Chase Clement was out with a broken finger. The Owls have now lost 18 of their last 19 games and are 0-13 on the road since closing the 2003 season with a win at Louisiana Tech. With Texas looming next week and Florida State the week after, the Owls do not have a realistic chance of winning a game until they travel to West Point to meet Army on September 30.

Texas Aggies 51 Louisiana Lafeyette 7

The Ags continued the cupcake portion of their schedule as they trounced La-La. It's not a good indication of the quality of a program's non-conference schedule when the premier opponent is Army, which the Ags take on next week at the Alamodome in San Antonio. As noted before, none of these glorified scrimmages are doing much to prepare the Aggies for a well-seasoned Texas Tech team, which beat a good UTEP team in overtime over the weekend and will be the Aggies first real opponent when they invade Kyle Field on September 30.

Posted by Tom at 4:14 AM | Comments (2) |

September 10, 2006

The silicosis-asbestos web

Don't miss this Matt Tolson/Houston Chronicle investigative piece on the cooperation between several Houston plaintiff's attorneys -- including prominently John O'Quinn -- regarding the prosecution of dubious silicosis and asbestos claims, sometimes based on the same plaintiff (see related earlier post here). This part of the article is particularly interesting:

From the moment in late 2004 that silicosis litigation began to unravel under [U.S. District Judge Janis] Jack's scrutiny, [former O'Quinn partner Richard] Laminack has denied any wrongdoing. The O'Quinn firm did not do asbestos work, he said, so it should not be lumped in with other firms who recycled their old clients, a practice that Jack saw as presumptive evidence of fraud.

"We never, never represented an asbestos claimant and then turned around and retreaded it as a silicosis claimant," Laminack told the judge, an assertion he repeated to the congressional committee. "We never, ever did that."

In a hearing in Jack's Corpus Christi courtroom last August, Laminack — who did not return calls from the Houston Chronicle — insisted that neither he nor his firm should bear much of the blame for that sort of overreaching because they had no asbestos history. Unlike the Waco firm of Campbell Cherry, which had mined thousands of its previous asbestos clients as a source for new silicosis claims, he said, the O'Quinn firm was getting its clients mostly by referral from other firms.

Defense lawyers at that hearing pointed out that a significant percentage of Laminack's silicosis clients in fact did have asbestos claims — notwithstanding which lawyer represented them — which prompted Jack to warn that the presence of those old lawsuits "stretches credibility" for their silicosis claims.

"I don't like it, either," Laminack replied. "I don't want to represent people that don't have legitimate cases."

On its face, Laminack's indignation appeared credible. Defense attorneys who had combed records of the Manville Trust, the nation's largest asbestos trust fund set up in 1988 to settle personal injury claims to victims of asbestos exposure, turned up no claimants who had been represented by the O'Quinn firm.

What they did find, however, was an arrangement that Laminack did not mention. Hundreds of silicosis claimants had been represented in their asbestos lawsuits by Foster. Though nominally head of his own firm, Foster was tightly connected to the O'Quinn operation, according to documents produced by the congressional committee.

O'Quinn's firm had bankrolled Foster's in 2001 and set it up in offices just down the hall from its own. Two of the three Foster firm managers were O'Quinn partners, according to annual filings with the Secretary of State's Office. Laminack told the committee that this was to keep Foster from borrowing money without O'Quinn's approval. The two firms shared conference rooms and receptionists, as well as screening companies and diagnosing physicians.

Foster did not return a phone call from the Chronicle seeking comment.

"There was the facade of two separate firms, one to handle asbestos, one to handle silicosis," said an investigator for the committee, speaking on condition he not be identified. "It's pretty obvious they were a wholly owned subsidiary."

Posted by Tom at 8:45 AM | Comments (1) |

September 9, 2006

Institutionalized scapegoating

Two news items at the end of this week reflect the festering cauldron of resentment toward business in American society that government is manipulating to advance its troubling regulation-through-criminalization policy.

First, there was the news that New York's Attorney General Eliot Spitzer -- after defaming former AIG chairman and CEO Hank Greenberg in the media (see also here) and strong-arming the company to show Greenberg the door -- dropped virtually all the substantive charges of wrongdoing in his lawsuit against Greenberg. All that is left in the lawsuit is what amounts to an arcane accounting dispute over about $25 million in the context of a $150-200 billion company.

So, over this relative pittance, Spitzer blemished the reputation and career of a man who generated enormous wealth for millions of AIG shareholders, while extracting a $1.64 billion fine from AIG by threatening to cause the company to endure an Enronesque meltdown (see also here). For this and other anti-business crusades, Spitzer will soon be rewarded with the governorship of New York. Larry Ribstein adds additional perspective.

And lest you think that Spitzer's manipulation of AIG and Greenberg is an isolated incident, just review what happened to the Merrill Lynch executives in the Enron-related Nigerian Barge case and the prosecutor who caused that outrage.

Meanwhile, a day after Spitzer dropped his lawsuit, New York authorities arrested Peter Dicks, the chairman of the English publicly-owned gambling company, Sportingbet. Dicks was detained under an outstanding warrant issued by Louisiana gaming authorities and the arrest comes just a couple of months after federal authorities arrested David Carruthers, the former CEO of BetOnSports, another British publicly-owned gaming company.

By the way, while Dicks sits in jail today, gamblers will place billions of dollars worth of bets in Louisiana casinos.

As Geoffrey Manne aptly asks, "Where's the outrage?"

Posted by Tom at 7:32 AM | Comments (1) |

September 8, 2006

Academic wrangling

Turns out that former Texas Southern University president Priscilla Slade's decision to teach accounting at the school -- while under indictment for accounting irregularities -- was not a good idea. The school announced yesterday that Ms. Slade has been put on leave from her teaching duties and that a proceeding is being commenced to attempt to revoke her tenure at the school. The proceeding to revoke tenure will almost certainly be postponed pending disposition of the criminal charges against Ms. Slade.

Meanwhile, up in always-interesting Austin, University of Texas law professor Loftus Carson's lawsuit against the University of Texas and related parties hasn't received much publicity. However, that all changed when Professor Loftus filed a motion to recuse U.S. District Judge Sam Sparks from his case after the Austin American-Statesman listed Judge Sparks as one of 30 judges who have received complementary Longhorn football tickets and attended exclusive receptions while at UT football games. Judge Sparks recused himself from Professor Loftus' case yesterday and appointed a judge who is not a Longhorns fan (a rare jurist in Austin) to handle the case. I mean, what else could Judge Sparks have done given that the no. 2 Longhorns are playing no. 1 Ohio State on Saturday night in Austin?

By the way, the Statesman article on the Loftus case reports that Judge Sparks observed during the recusal hearing that he considered the tickets and receptions "a small favor" from UT for the time that he serves on panels at the UT Law School. Longhorn football tickets "a small favor?" Judge Sparks has obviously not purchased any UT football tickets lately. ;^)

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

James deAnda, R.I.P.

Former U.S. District Judge James deAnda, former chief judge of the U.S. District Court for the Southern District of Texas, died yesterday at the age of 81 at his summer home in Traverse City, Mich. after a short bout with prostrate cancer.

Judge deAnda was the last surviving member of a four-man legal team that handled the appeal in Hernandez v. Texas, the landmark 1954 Supreme Court case that overturned an all-white jury's murder conviction of a Texas man because Hispanics had been systematically excluded from the jury pool in the case. The Supreme Court ruled for the first time in Hernandez that Hispanics were a separate group deserving of the same Constitutional protections as other minorities.

Judge deAnda was a native Houstonian who graduated from Davis High School before obtaining an undergraduate degree from Texas A&M and a law degree from the University of Texas. He practiced law in Houston for almost 30 years before President Carter appointed him to the U.S. District Court bench in 1979, where he served with grace and wit until he resigned in 1992 to return to private practice. Judge deAnda continued to practice law ably until shortly before his death.

A funeral Mass will be celebrated for Judge deAnda at 11 a.m. Wednesday, September 13th at St. Michael's Catholic Church on Sage Rd. near the Galleria.

Posted by Tom at 5:28 AM | Comments (0) |

Houston Texans, Year Five

Has it really been only a year since the pre-season review of the Texans' 2005 season? Look at all that has transpired over the past year:

The Texans had a disastrous start to what was considered a promising 2005 season, which included a first home game roasting of some understandably upset season-ticket holders;

A previously-fawning media bailed out quickly as the Texans ship was sinking, even though some reporters remained quite confused over the Texans seemingly inexplicable decline;

Former Texans general manager Charlie Casserly was initially in disbelief over the season, but then became increasingly defensive over criticism of his personnel management, which -- at least in regard to drafting players -- turned out not to be as bad as most folks assumed, although it became apparent that selecting QB David Carr with the first pick of the 2002 NFL draft was a mistake;

As the Texans' fortunes faded, hope sprang anew that the team would be revived by a once-in-a-decade-type running back, only to have those hopes dashed by intrigue and then the selection of what may end up being a more prudent choice in the long run, even though John McClain contended that it is impossible (except for him) to evaluate NFL drafts accurately in the short term;

Coach Dom Capers graciously accepted being cut loose at the end of the horrifying season, but then worked his new job to scam Texans owner Bob McNair for more salary. Meanwhile, despite strong denials from Casserly and McClain that Casserly was being shown the door, Casserly was fired after the NFL draft even while denying that he was being fired, and then confirmed that he was indeed fired a couple of months later;

After three seemingly successful seasons and a fourth disastrous season in the team's first four years, Texans owner Bob McNair changed the management model for the Texans going into the team's fifth season;

Increasingly sophisticated statistical analysis of professional football generated some underappreciated factors for determining the outcome of NFL games; and

Although more circumspect about the Texans' prospects in comparison with the pre-season last year, the local media's pre-season coverage of the team and its players frequently continues to lack any objective analysis.

Whew! So where does that leave the Texans coming into the 2006 season? Well, certainly not in great shape but, somewhat surprisingly, in better shape than would normally be the case of team coming off a 2-14 season. Indeed, a reasonable case can be made that the Texas are finally moving in the right direction.

To understand where the Texans are at this point, it's helpful to review briefly where the team has been. The Texans were the toast of the town for their first three seasons of existence in which the team and the local media trumpeted the party line that the organization was building a playoff contender "the right way" -- i.e., through prudent drafting and development of young players while eschewing the temptation of the short-term rewards of relying on generally over-priced veterans who were in the downside of their careers. The progressively better won-loss records in the first three seasons (4-12, 5-11, and 7-9) -- plus the drafting of young stars such as WR Andre Johnson, RB Dominack Davis and CB Dunta Robinson -- seemed to indicate that the Texans' plan was working.

Unfortunately, those won-loss records camouflaged some big problems. As noted in the pre-season review before last season, the tip-off that the Texans were primed to crater during the 2006 season was that the Texans entered each of their first four seasons with the same two core problems -- the Texans' offensive line could not protect QB Carr and the Texans' defensive front could not apply adequate pressure on the opposing team's QB. Although former GM Casserly tried (remember the Texans' flirtation with Orlando Pace two years ago?), he was never able to address those problem areas effectively, and ultimately that failure was the primary reason that both Casserly and Capers lost their jobs with the Texans.

That's not to suggest that there weren't other big problems. In retrospect, Capers' decision before last season to convert the defense from a relatively successful 4-3 alignment to the 3-4 because that latter alignment tends to give Peyton Manning and the Colts more problems than the 4-3 completely overestimated where the Texans stood relative to such premier teams as the Colts. The Texan players never took to the 3-4 alignment and, as a result, the defense was actually worse than the offense last season, which is really saying something given how abysmal the Texans' passing offense was last season. In that regard, the offensive line in 2005 continued its contribution to QB Carr's anxiety-in-the-pocket syndrome as Football Prospectus 2006 concluded that the group was responsible for blowing blocks than resulted in an incredible 36 sacks of Carr. No other NFL offensive team had more than 30.

Which brings us to Carr, who has proven primarily in his NFL career to date that he is not good enough for the Texans to have used the franchise's first draft pick on him. Nevertheless, that does not mean that he cannot still develop into a productive NFL quarterback. Carr has been treated somewhat unfairly in that he has been hammered physically more than any other NFL QB over the first four years of his career. As a result, Carr has developed understandable anxiety-in-the-pocket syndrome (sometimes called "happy feet"), which has resulted in even more sacks than what the offensive line already gave up through blown blocks. That pocket anxiety, combined with a below-average ability to pick-up secondary receivers and a somewhat side-arm delivery, has made Carr a relatively poor pocket passer during his four-year NFL career. How many top-flight NFL QB's can you name who have been poor pocket passers?

Nevertheless, Carr is new Coach Gary Kubiak's reclamation project and a big part of the storyline for this season will be whether Carr becomes a viable starting NFL QB. One of Carr's contemporaries, Drew Brees, emerged seemingly out of nowhere to become an effective NFL QB in the fourth season of his career, so it would not be unheard of for Carr to show the same type of improvement in his fifth season. However, to hedge the risk that Carr does not develop, the Texans picked up QB Sage Rosenfels from the Dolphins in the off-season to back-up Carr, and he clearly is the best backup QB that the Texans have ever had. So, even if Carr does not improve this season, the Texans QB position has been upgraded.

The primary reason that the Texans' prospects are looking brighter this season is that the team finally addressed during this past off-season both of the team's core problems that have bedeviled the team from inception. On the offensive line, the Texans used two third round draft picks on Pitt tackle Charles Spencer and Miami tackle Eric Winston, and both of them are expected to contribute this season -- indeed, Spencer will start at one of the Texans' chronic trouble spots, left tackle (in addition to the flirtation with Pace, remember Tony Boselli?). Veteran center Mike Flanagan and veteran tackle Ephraim Salaam were also brought in from Green Bay and Jacksonville respectively, while veterans Chester Pitts, Zach Weigert, Fred Weary, Steve McKinney and a talented group of tight ends round out what is clearly the deepest and most talented offensive line in the Texans' short history. That new-found depth is a big part of the reason why the Texans let underachiever OT Todd Wade go during the off-season and waived unsuccessful small college project OT Seth Wand in the final pre-season roster cut.

By the way, despite the fact that the Texans offensive line has not been able to protect Carr adequately, it should be noted that the unit actually has improved steadily over the past two seasons in run blocking. Inasmuch as the zone blocking scheme that the line used last season is similar to the one that Coach Kubiak uses in his system, there is a reasonable probability that the Texans' running attack will continue to improve this season, despite the fact that the Texans -- due to the season-ending injury to Davis -- will be depending on a couple of relatively inexperienced running backs this season along with the uninspiring Ron Dayne. Morevoer, even though the loss of Davis is unfortunate, it will likely help the Texans' offense in the critical area of pass blocking. Davis was an atrocious pass-blocker (he led all non-lineman NFL players last season in blown blocks that led to QB sacks), so it's hard to imagine any of Davis' replacements this season being as bad as Davis was in that department.

Similar to the restocking of the offensive line, the Texans also upgraded their defensive front during the off-season. Everyone knows about the first pick in the 2006 NFL Draft, DE Mario Williams, but equally important was the off-season acquisition of DE Anthony Weaver from Baltimore, who is a legitimate run-stuffer to complement DT Seth Payne. With the Texans going back to the 4-3 alignment, last season's first-round draft choice DT Travis Johnson has emerged as a starter during training camp (allowing the Texans to dump high-salaried DT Robaire Smith) and speedy former LB's Jason Babin and Antwan Peek were effective pass rushers off the edge in passing situations during the pre-season. Moreover, second-round draft pick MLB DeMeco Ryans looks like a potential star, which is a badly-needed dose of talent in an otherwise mediocre linebacking corps. Thus, the front seven of this year's Texans' squad appears to be the first group in Texans history that has the legitimate potential to generate much-needed pressure on the opposition's QB.

One additional point about Williams. Yes, it's unlikely that he will be as good an NFL rookie as Reggie Bush. However, it's easier for a star at the running back position to excel in his rookie NFL season than it is for a defensive lineman. If Williams develops properly, then he should be a solid contributor to the Texans defense for a long time, which will justify the Texans' use of the first draft pick on him over Bush. To use an Oilers analogy, the Texans -- at this stage of their development -- need an Elvin Bethea more than they need an Earl Campbell.

Despite the apparent improvement in those two chronic problem areas, the Texans -- as you would expect from a team coming off a 2-14 season -- still have a myriad of problems. The left offensive tackle, running back and QB situations have already been mentioned, but the defensive secondary beyond star CB Robinson is certainly not top-level NFL quality. Until All-Pro kick returner Jerome Mathis returns from injury rehab, the Texans are relying on cast-offs for their kickoff return men, while kicker Kris Brown has been a below-NFL average kicker during his tenure with the team. WR Eric Moulds is on the downside of productivity in his NFL career and it remains to be seen whether he will be an effective complement to star WR Johnson, although it should be noted that third WR Kevin Walters appears to be a big upgrade over the personnel that the Texans have had in that third wideout position in previous seasons. Finally, by my count, the Texans have at least 12 new starters (seven on offense; five on defense), including five rookies, so it would not be surprising if it takes a few games for those units to begin hitting on all cylinders.

What does all of this mean? Well, not much at this point, but it does appear that the Texans have a reasonable chance of showing dramatic improvement this season. Scanning the 16-game schedule, there are only 3-4 games where it appears at this time that the Texans don't have a realistic chance of winning the game, so that leaves 12-13 games where the Texans have a legitimate shot of winning. My sense is that winning a third of those games would be a disappointment for this team, although still a significant improvement over last season. Most reasonable people would consider winning half of those winnable games as a successful first season of the Kubiak era, so that means that five is the over/under for the number of Texan wins this season.

Although I won a steak dinner from a friend by taking the under bet on Texan wins last season, I'm taking the over bet this season. That bet is probably not justified by the team's prospects, so I'm counting on the karma that It's high time for something good to happen for the football team of Bob McNair, who is one of the classiest professional sports franchise owners in Houston's history. Let'er rip Texans, and let the chips fall where they may.

By the way, several good local resources for information on the Texans and the NFL have developed over the post year, and I recommend that you check them out:

As noted in an earlier post, Stephanie Stradley a/k/a Texans Chick has been doing a good job of covering the team over the past several months and is preparing for her first season of blogging the team;

Chronicle senior NFL writer John McClain has recently started a blog. Although McClain tends to shoot from the hip more than I prefer, there is no question that he has a wealth of knowledgeable about the NFL; and

Although not technically a blog, Warren DeLuca's HoustonProFootball.com is "your-balls-to-the-wall source of Houston Texan news, information and wild-ass opinion."

Posted by Tom at 5:27 AM | Comments (5) |

September 7, 2006

Appreciating Agassi

Don't miss this superb Jay Winick/Opinion Journal op-ed on tennis icon, Andre Agassi, who retired gracefully this past weekend after after putting on a stirring performance during the first three rounds of the U.S. Open tournament in New York.

I've never met Agassi, but I have followed his career with interest because of our mutual friendship with prominent Las Vegas attorney, David Chesnoff. Several years ago, I had the pleasure of spending a morning with Agassi's parents while Andre's father gave David's son a tennis lesson at the Agassi's Las Vegas home where they have lived for several decades. Andre's parents are wonderfully down-to-earth folks who are a joy to be around, so it's no surprise to me that their son has matured into a fine man.

By the way, although probably not the greatest tennis player of his generation, Agassi nevertheless is one of the most remarkable athletes of this era. A case in point is a golf game that he played several years ago with David in which Agassi faced a daunting recovery shot around trees to a small green protected by a lake. Agassi grabbed a 3-iron, sized up the situation and then hammered a 200 yard shot that sliced around the trees on to the green, stopping 15 feet from the cup. Agassi calmly put the club back in his bag, jumped into the golf cart, looked at David and asked with a wink:

"So, David. What's so tough about this game again?"

Posted by Tom at 5:43 AM | Comments (0) |

Is the backdating options scandal "the Enron of 2006?"

Yes, in an observation made yesterday during a Senate committee hearing that should send shivers up the spine of anyone concerned about the increasing criminalization of business in the United States, that's how Senator Robert Menendez (N.J. Dem) characterized the widespread practice of backdating options as a means of compensating corporate executives (previous posts here).

That Senate hearing follows on a recent and far more reasoned discussion of the issues involved in backdating options that Matthew Bodie began here. Larry Ribstein returned Bodie's serve here and Bodie volleyed back here. Geoffrey Manne and Josh Wright got into the game with this post, which Bodie responded to here. Finally, Professor Ribstein ripped this winner to close the discussion, at least for now.

Compare the depth of the foregoing discussion with the superficial platitudes described in the article about the Senate hearing yesterday. Then consider the damages to lives, communities and careers that occurred as a result of the criminalization of business that occurred as a result of the Enron meltdown. Is the allegedly wrongful conduct in regard to the practice of backdating options so clear that it should be handled with the blunt instrument of the criminal justice system? If you really think so, then consider this.

Posted by Tom at 5:09 AM | Comments (0) |

Wanted: Adult supervision at the Enron Task Force

This one takes the cake.

After trampling justice and the rule of law for five years while damaging lives, families and careers of former Enron executives and a selected few who did nothing other than have the misfortune of engaging in transactions with Enron, the Enron Task Force outdid itself yesterday in responding to the Ken Lay Estate's motion to vacate the jury verdict against the late Mr. Lay. In its response, the Task Force requests U.S. District Judge Sim Lake to postpone ruling on the Lay Estate motion until the Task Force has had an opportunity to lobby Congress to change the law that mercifully provides for the dismissal of charges against individuals such as Lay who die during the criminal proceedings. The Chronicle's Tom Fowler reports on the Task Force pleading here, Chronicle business columnist Loren Steffy comments here and the NY Times' Alexei Barrionuevo reports here.

Given the Task Force's lengthy track record of exhibiting dubious judgment, its over-the-top response to the Lay Estate motion is really not surprising. However, it is a stark reminder that the use of the overwhelming power of government to criminalize business executives -- now even in death -- is seriously out of hand, as even some prominent former Justice Department officials are now acknowledging publicly. As Sir Thomas More reminds us, we better address the difficult task of curtailing use of that power, lest it be used on us.

Posted by Tom at 3:59 AM | Comments (3) |

September 6, 2006

HP's board under the microscope

The Wall Street Journal's Alan Murray reports in this article ($) (related NYT article here and Newsweek article here) about the internal investigation that ensued of the Hewlett-Packard board of directors after former HP CEO Carly Fiorina (previous posts here) was forced out early last year. The subject of the investigation was the leaking of confidential information to a Wall Street Journal reporter regarding board deliberations and ultimately led to the resignation of one board member -- venture capitalist Tom Perkins -- and the board's decision not to nominate a second board member -- George Keyworth, the alleged leaker -- for another term on the company's board.

The article is interesting and all, and certainly maintaining the confidentiality of board deliberations is important. However, if I were an HP investor, I would feel a whole lot better about the company if I was not left with the impression that the company's board members behaved in a manner not quite as mature as my 16 year-old daughter's social circle of friends.

Update: Professor Bainbridge predicts that HP's directors are not going to react kindly in regard to the way in which the HP board chairperson handled the investigation, and Larry Ribstein is about as impressed with the HP's corporate governance as I am.

Posted by Tom at 6:22 AM | Comments (0) |

McClain leads more cheerleading for the Texans

As noted earlier here and here earlier, even his hyprocrisy in turning on the Texans during their disastrous 2005 season after predicting in the pre-season that the team was a playoff contender does not deter Chronicle NFL sportswriter John McClain from engaging in more cheerleading for the Texans with this puff-piece regarding the team's recent acquisition of journeyman running back, Ron Dayne (for a positive, but more realistic, view of Dayne, see John Lopez's column here). The article even includes a chart noting that Dayne is the fifth Heisman Trophy winning running back to have played for a Houston professional football team, the others being former Oilers Billy Cannon, Earl Campbell, Mike Rozier and Eddie George.

Not mentioned in McClain's article is that Dayne is overweight and slow, and is unlikely to have any meaningful impact on the Texans' performance this season. Football Prospectus, which uses objective criteria to rank Dayne as a below-NFL average running back for his career, observes that "Dayne's problem has always been finding the hole to run through. You literally have to stick the hole in front of him, slap him across the face, point, and yell 'HOLE!'"

Now, this all may work out just fine for the Texans, but don't you think that such a counter-analysis of Dayne might creep into at least a part of an article by the Chronicle's lead NFL writer? Stay tuned for my pre-season evaluation of the Texans coming this Friday.

Posted by Tom at 5:19 AM | Comments (8) |

Prosecution continues bidding in the Olis sentencing case

Let's see here. First, the Justice Department misleads U.S. District Judge Sim Lake in regard to the true amount of the market loss resulting from the transaction that forms the basis of former mid-level executive Jamie Olis' conviction, which in turn resulted in the imposition of an over-the-top 24+ year sentence.

Then, after the Fifth Circuit reversed that abomination, the prosecution -- while dragging its feet in regard to the re-sentencing of Olis -- recommended to Judge Lake in December of last year that the Olis should be re-sentenced to "only" 15 years in the slammer.

Now, after U.S. District Judge Jed Rakoff provided a much needed dose of sanity in regard to sentencing of business executives and Stanford University law professor Joseph Grundfest eviscerated the Olis prosecution's market loss arguments, the Chronicle's Tom Fowler reports that the Olis prosecution is now contending that Olis should be re-sentenced to "only" 12 1/2 years.

At this rate, I figure the prosecution will finally reduce their demands for the length of Olis' sentence to an appropriate level by, say, 2009 or so.

The hearing on the market loss issue in the Olis case is scheduled for next Tuesday. Inasmuch as it is going on 11 months since the Fifth Circuit reversed Olis' original sentence, Judge Lake will likely re-sentence Olis shortly after Tuesday's hearing.

Posted by Tom at 4:34 AM | Comments (0) |

September 5, 2006

Big news from the oil patch

Chevron Corp. and partners Devon Energy Corp. and Norway's Statoil ASA are expected to announce today (WSJ ($) article here and NYT article here) the first successful oil production from a deep-water region in the Gulf of Mexico called the Jack Field that could become the biggest domestic source of oil since the discovery of Alaska's North Slope over 30 years ago.

Meanwhile, the Wall Street Journal ($) is reporting that Paris-based Compagnie Generale de Geophysique has agreed to acquire Houston-based geophysical seismic company Veritas DGC Inc. for about $3.1 billion in cash and stock.

And Clear Thinkers favorite James Hamilton notes a drop in gasoline prices, which is good news. Or is it?

Posted by Tom at 6:10 AM | Comments (0) |

Costly assumptions

Tory Gattis over at Houston Strategies continues to do a great job of analyzing Houston Metro's proposed Richmond (or is that Westpark?) rail line (see here and here). However, I continue to be amazed by the Houston mainstream media's myopia in failing to take a look at the rail experience of Los Angeles, an area that shares many characteristics with the Houston metro area, but is much more densely-populated, which is normally a requirement for making an urban rail line successful.

That myopia is leading to a dangerous dynamic in the rail transit debate that USC urban economics professor Peter Gordon notes in commenting on this LA Times story regarding extension of the LA region's rail system. Professor Gordon observes that, despite irrefutable evidence that the LA rail system has been a boondoggle of massive proportions, the LA Times article does not even bother to address the threshold issue of whether more money should be dumped into the black hole rail transit system in the first place. Rather, the article assumes that the money will be spent and then simply addresses the issue of where it will go. Professor Gordon notes the incongruity of it all:

Three light-rail lines have been added to L.A. county's transit system in the last 20 years. Together, these cost $2.5 billion in capital costs, they serve about 125,000 passengers per day and account for a fiscal loss of approximately $252 million per year -- if one acknowledges that capital costs are real, something that transit operators and boosters often neglect.

If one wants to believe that there are external benefits, a variety of optimistic assumptions on auto trips replaced, cuts the loss to "only" $245 million/year. These are simple spreadsheet calculations that anyone can do. Further, no one alleges that the three lines have had any impact on L.A. area traffic conditions. In fact, complaints about "gridlock" are a staple -- and the pricing cure is still deemed too esoteric and/or sinister. In fact, there are no correlations known to man or woman to show that projects like this relieve traffic.

None of these simple facts made it into [the LA Times article] . . . Billions of dollars are at stake and a know-nothing debate is respectfully cited -- when it is simply about which part of town and which politician gets first run at the trough.

The recent LA Time article follows another one from a couple of months ago that declares that "California's highways, once the gold standard of the interstate system, are today some of the busiest, most dilapidated and under-financed roads in the country." That article then goes on to describe the failing highway system without even mentioning the fact that diversion of billions from that formerly great highway system to an unsuccessful rail transit system largely explains the mess.

As noted here and here over a year ago, Houston is at the stage of spending "merely" hundreds of millions on its dubious light rail system, but we can already see the same dynamic developing here that has been so costly for the Los Angeles region -- huge investment of public funds in an inflexible rail transit system, poor return on that investment, unwillingness to admit mistakes with regard to that investment and continuation of expensive mass transit policies that only get worse over time. Here's hoping that a few statesmen emerge among City of Houston elected officials who take a look at the evidence from the LA experiment and move the Metropolitan Transit Authority toward a more realistic and productive public transit system that is tailored for the Houston metro area. However, given the typical quality of the City of Houston's investment decisions, count me as pessimistic that any such re-evaluation will occur.

Posted by Tom at 5:17 AM | Comments (3) |

It's football season, so let's talk golf

The start of the college football season over the Labor Day weekend tends to overwhelm all other sports news, but it's hard to overlook the fact that Tiger Woods shot a 63 yesterday to win his fifth straight golf tournament, a streak that includes two major championships. Doug Ferguson puts it in perspective:

Byron Nelson won 11 straight tournaments in 1945, a streak regarded as one of the most untouchable in sports. Woods won six straight at the end of 1999 and the start of 2000, and Ben Hogan won six in a row in 1948.

Woods now takes a week off before heading to England for the HSBC World Match Play Championship, followed by the Ryder Cup. His next PGA Tour start will be the American Express Championship outside London at the end of September.

He still isn’t even halfway home to Nelson’s hallowed mark, but he surpassed Lord Byron in one category with his 53rd victory, moving into fifth place alone on the career list. Woods, who finished at 16-under 268, won for the seventh time this year. No other player has won more than twice.

By the way, only Hogan has had a streak similar to Woods' current one where more than one major was involved. Hogan won four straight in 1953, including three majors.

Meanwhile, European Ryder Cup team captain Ian Woosnam finalized the European team over the weekend by picking Darren Clarke of Northern Ireland and Lee Westwood of England as his captain's picks (see PGATour.com overview of the Euro squad here). Those selections prompted the following outburst from Sweden's Thomas Björn, who labeled Woosnam the worst Ryder Cup captain ever:

“So far his captaincy has been the most pathetic I have ever seen,” Björn said. “I haven’t spoken to him for six months and now I find that I’m not in the team watching television. How can that be right? He has put a lot of players through misery because he just hasn’t done the right thing.

“I have nothing against Lee Westwood. But if you can find one category in which he has beaten me then I would like to see it. I have played better than him in the qualifying phase — and then Woosnam bases his decision on results which are more than five years old. I don’t understand the way he is handling the whole situation. It doesn’t look like he is burdened by leadership qualities.

“He came into the bar at the hotel and gave me 20 seconds about Lee having won twice at the K Club. In a bar — that kind of sums it up. He can’t walk up to me, tell me in 20 seconds and expect me to be happy. I’m very disappointed. I think he’s been very poor in the way he’s handled the players.”

Woosnam cited Westwood’s two victories at the K Club as being among the factors that influenced him, leaving unsaid that Björn ran up an 11 on the 17th in the final round of last year’s Smurfit European Open when he had begun the day four strokes clear of the field.

“If that’s what it’s come down to then why didn’t he tell me I don’t think you’ve got the bottle to stand on the 17th tee?” Björn asked. “Yes, Lee’s won twice there. But Nick Faldo and Seve Ballesteros won at Augusta and I don’t think they’d be picked if this Ryder Cup was being played there.

“Woosie played with me when I finished second at the K Club (in 2001) by finishing three-four-three (an eagle and two birdies). So I’ve had good experiences there, too. But if it’s come down to one bad one then why didn’t he tell me?”

And just for good measure, Woosnam can't understand why former Euro Ryder Cup team captain Bernhard Langer is advising his friend -- current US team captain Tom Lehman -- on the upcoming matches, while Langer can't understand why Woosnam hasn't bothered calling him for advice.

This Ryder Cup is serious business, eh? ;^)

Posted by Tom at 4:37 AM | Comments (0) |

September 4, 2006

2006 Weekly local football review

The Labor Day weekend marks the beginning of the football season and HCT's weekly local football reviews, so here's the first weekly review of the 2006 season:

Houston 31 Rice 30

The only real game of the weekend occurred at Rice Stadium on Saturday night as the Cougars pulled one out that they should not have won against the feisty Owls playing their first game under new head coach Todd Graham. The Coogs looked to be preparing for a blowout by taking a 14-0 lead in the first quarter, but then the Ows scored 30 straight points behind clever QB Chase Clement over the next quarter and a half to take a 16 point lead, only to have UH score the final 17 points of the game to nab the victory.

Despite the win, Cougar supporters were not thrilled. The Cougars under head coach Art Briles frequently engage in an untraditional, discombobulated sort of game that leaves UH supporters scratching their heads. Briles runs an unconventional offense -- sort of a combination of the Wing-T, Single Wing, Run 'N Shoot, and Spread offenses, if you can imagine that -- which, when it is clicking, is very difficult to defense. Unfortunately, the offense is also based largely on timing and, when a defense figures out how to disrupt that timing, the UH offense struggles. And when Houston's offense stuggles, it tends to affect the other components of the UH football team.

That's precisely what happened on Saturday night. In the first quarter, the Cougar offense was clicking and it looked as if it would dominate the game. Then, in the second quarter, Rice's defense made a couple of adjustments and began disrupting the timing of the UH offense, UH senior QB Kevin Kolb started looking like a freshman starting his first game, the Cougars dispensed with what had been an effective running game in the first quarter, the UH punting and kickoff return teams made several atrocious plays, the Owls hit a couple of big plays and presto, the Cougars found themselves down by 16 points. The Cougar booster club was not happy.

At least UH showed the moxie to turn things around enough to pull out the win. And there were certainly some bright spots for the Cougars -- Rice's offense got over 130 yards of their 280 total yards on two plays in the 2nd quarter, so the Houston defense shut down Rice for most of the game. Moreover, UH has a group of fleet receivers and an explosive running back in Roshawn Pope. But the bottom line on this first game is that either the Cougars took Rice lightly or the Cougar players are not much better than the Rice players. Either way, that does not bode well for the Cougars' prospects over the remainder of the season.

By the way, former Rice athletic director Bobby May is probably not a popular man right now around the Rice football office. The Owls' next three games are at UCLA, Texas at Reliant Stadium, and at Florida State. If the Owls can survive those games with a minimum of injuries, then my sense is that this plucky bunch can win a game or two in Graham's initial season. Despite that dire forecast, based on what I saw Saturday night, the Owls appear to be moving in the right direction.

Texas Longhorns 56 North Texas 7

The Longhorns dispensed with one of three non-conference cupcakes on their 2006 schedule as perfectly-named Longhorn QB Colt McKoy had a smashing debut. However, a question for you: How does playing a team that has players that are not as good as Texas' second team do any good in preparing the Horns for their next game against No. 1-rated Ohio State?

Texas Aggies 35 The Citadel 3

The Aggies easily won their first game by holding The Citadel to under 245 yards of total offense, but how does defending offenses such as those of The Citadel and the next three Aggie opponents -- La-La (a/k/a Louisiana-Lafayette), Army and La Tech (Louisiana Tech) -- prepare the Aggies for defending on September 30th the explosive offense of their nemesis of the past several seasons, the Texas Tech Red Raiders?

Posted by Tom at 7:23 AM | Comments (0) |

September 3, 2006

They never really had a chance

As noted in this post at the conclusion of the Lay-Skilling trial, my sense is that the trial was over before it began because the jury -- particularly its leaders -- was predisposed to convict. According to this Brenda Sandburg/American Lawyer article, the jury consultants working the Lay-Skilling case thought the same thing. In fact, they gave little hope that any jury anywhere could be empaneled that would view the case without a strong predisposition to convict.

Remember that the next time you read and hear the prosecution in a criminal case undertaking a propaganda campaign to fan the flames of resentment and scapegoating in the jury pool. As Sir Thomas More reminds us, do any of us really think that we could "stand upright in the winds that would blow" if that power were applied to us?

Posted by Tom at 8:20 AM | Comments (2) |

September 2, 2006

Lay and Skilling's legacy of beneficial risk-taking

During the criminal trial of Ken Lay and Jeff Skilling, attorney Paul Fisher and economist Jim Johnston of the Heartland Institute authored this piece (see also here) regarding the unjust prosecution Lay and Skilling that echos a common theme of this blog (see here, here, here, here, here and here) regarding almost all of the Enron-related criminal prosecutions -- that the prosecutions were fundamentally weak criminal cases that were really a smokescreen to promote an underlying political agenda of regulating beneficial risk-taking that generates robust markets and creation of wealth and jobs.

Following up on their earlier piece, Fisher and Johnston have written this excellent article that speculates on what the business legacy of Lay and Skilling should be. In so doing, Fisher and Johnston note another common theme of this blog (most recently here) -- the intrinsic weakness of the convictions against the two executives:

We are left with two convictions that are devoid of any gain to the perpetrators and illogical to the extreme. The real culprit, in our opinion, is the political establishment in California, primarily Democrats, who were intent on punishing a friend of President George W. Bush and his father. While the California Democrats have escaped unscathed, except for ex-governor Davis, the energy trading system is impaired and corporate accounting is now in chaos. It remains to be seen if these institutions will recover any time soon.

However, even more importantly, Fisher and Johnston note the extraordinary wealth creation that resulted from Lay and Skilling's risk-taking at Enron, and lament how the understanding of the beneficial nature of that risk-taking is now largely lost amidst the media and government-hyped societal condemnation of Lay, Skilling and Enron:

At the end of the day, when the successes and mistakes are tallied for Ken Lay and Jeffrey Skilling, we predict the result on balance will be positive. Perhaps the biggest contribution was to provide risk management of natural gas prices for producers and industrial consumers. Enron operated the over-the-counter market for a year until the exchange-traded futures and options contracts were offered on the New York Mercantile Exchange in 1990. Those futures contracts are now among the most liquid in the world.

The electricity markets established for California are no longer traded. However, there is a market in the PJM (Pennsylvania, New Jersey, Maryland) region and an auction is to be established soon in Illinois. In the meantime, natural gas contracts serve as a hedging vehicle because gas is the fuel used at the margin to generate electricity.

Enron's failed broadband joint venture with Blockbuster was intended to bring video on demand. This now exists on cable and is similar to the iPod offered by Apple Computer. This latter system is a masterful accommodation to copyrighted music and video programming where artists are compensated.

Weather derivatives started by Enron and Koch Industries in 1996 for a swap in the following year have evolved into an exchange-traded contract offered by the Chicago Mercantile Exchange. Futures and options contracts based on temperatures in 18 U.S., nine European, and two Asia-Pacific cities are now traded in this market.

Finally, the establishment of a robust water market by Enron failed. However, much was learned from the effort and there is optimism about another try.

We fervently hope that Ken Lay and Jeffrey Skilling will be remembered for their extraordinary contributions, rather than their politically-inspired prosecution.

Amen. As noted in my posts on the Lay-Skilling trial and the Nigerian Barge case, the Enron Task Force turned the Enron-related criminal cases into morality plays that appealed to the dynamics of resentment and scapegoating in disingenously portraying legitimate and productive business transactions as complex frauds. The result has been a dangerous misuse of the government's overwhelming prosecutorial power to impose burdensome regulatory costs on valuable markets. In reality, a far more progressive government policy would be to encourage precisely the type of risk-taking that Lay and Skilling promoted at Enron to facilitate productive markets, employment growth and wealth creation.

Posted by Tom at 8:18 AM | Comments (0) |

September 1, 2006

An attempt to withdraw a guilty plea exposes a dirty secret of the Enron criminal cases

As noted in this previous post about the typical mainstream media view toward the Enron criminal prosecutions, most media accounts of the case have perpetuated the myth (see also here) that the Enron Task Force has done a good job in handling the criminal cases, partly because the Task Force has obtained plea bargains from 16 former Enron executives. Inasmuch as those former executives pled guilty, the media's reasoning goes, that is proof that Enron really was just a den of thieves that needed to be eradicated.

However, the truth is far more nuanced. At least several of those 16 plea bargains were the result of the Enron Task Force bludgeoning a former Enron executive who had not committed a crime into a plea deal to avoid the high risk of asserting innocence in a venue that is highly adverse to anyone that worked for the social pariah, Enron. Indeed, any former Enron executive only needed to review the ordeals that Jamie Olis and the four former Merrill Lynch executives in the Nigerian Barge case -- much less that of Ken Lay and Jeff Skilling -- to be reminded that attempting to assert innocence in the face of weak criminal charges was a losing proposition.

Well, at least one former Enron executive who the Task Force bludgeoned into a plea deal is attempting to withdraw it. Chris Calger, a former executive with Enron North America who pled guilty a year ago to a single criminal conspiracy count, has replaced the attorney who advised him in connection with that plea deal and hired Philip Hilder, Sherron Watkins' counsel (it's a small world, isn't it?) to file a motion (download site here) requesting that he be allowed to withdraw his guilty plea. As noted in this Tom Fowler/Houston Chronicle article on the motion, Calger argues that he should be allowed to withdraw his guilty plea because it was based on the Task Force's malleable theory that any remotely questionable business judgment of a business executive is a criminal act of depriving the executive's company (or, in the case of the Merrill Lynch executives in the Nigerian Barge case, of another company) of that executive's duty to provide the company with the executive's "honest services." Inasmuch as the Fifth Circuit eviscerated that theory in its recent decision in the Nigerian Barge case, Calger reasons that he should be allowed to withdraw his guilty plea.

As noted in this post at the time, the Calger plea deal was obtained under particularly egregious circumstances. In an extraordinary exchange with an Enron Task Force prosecutor during the Calger plea bargain hearing (the post highlight in the previous sentence contains the transcript of the hearing), U.S. District Judge Lynn Hughes makes clear that the Task Force prosecutor neither understood the underlying transaction involved in the indictment nor could articulate precisely what crime Calger had committed. At the end of the hearing, a Judge Hughes accepted Calger's guilty plea, although it is clear from the transcript that he was troubled in doing so.

Calger's guilty plea is only one of several (see here, here, here, here and here) that were obtained by the Enron Task Force under questionable circumstances. As with the Task Force's equally dubious tactic of fingering dozens of former Enron executives as unindicted co-conspirators to induce them from testifying for Lay and Skilling (as well as for the Merrill Lynch executives and other Enron-related defendants), the Task Force's bludgeoning of guilty pleas out of overwhelmed individuals is a serious affront to justice and the rule of law that the media has largely ignored. Yale Law Professor John Langbien, who has written extensively on prosecutorial abuse in the American criminal justice system, puts the tactic of bludgeoning guilty pleas into perspective:

Plea bargaining concentrates effective control of criminal procedure in the hands of a single officer. Our formal law of trial envisages a division of responsibility. We expect the prosecutor to make the charging decision, the judge and especially the jury to adjudicate, and the judge to set the sentence. Plea bargaining merges these accusatory, determinative, and sanctional phases of procedure in the hands of the prosecutor.

Students of the history of the law of torture are reminded that the great psychological fallacy of the European inquisitorial procedure of that time was that it concentrated in the investigating magistrate the powers of accusation, investigation, torture and condemnation. The single inquisitor who wielded those powers needed to have what one recent historian has called 'superhuman capabilities [in order to] . . . keep himself in his decisional function free from the predisposing influences of his own instigating and investigating activity.'"

I cannot emphasize too strongly how dangerous this concentration of prosecutorial power can be. The modern prosecutor commands the vast resources of the state for gathering and generating accusing evidence. We allowed him this power in large part because the criminal trial interpose the safeguard of adjudication against the danger that he might bring those resources to bear against an innocent citizen -- whether on account of honest error, arbitrariness, or worse.

As noted here and here, the pressure is overwhelming for individuals caught in the crossfire of a highly-publicized criminal investigation such as the one involving Enron. So, I ask again -- who is the greater threat to justice and the rule of law? The Chris Calgers of the world? Or out-of-control prosecutors who place businesspeople in the untenable position of risking a long prison sentence for merely asserting their innocence? Or a pliable media that largely ignores this injustice to fan the flames of the latest juicy story? My answer is here, here, here, here and here.

Posted by Tom at 4:51 AM | Comments (1) |

August 31, 2006

Merck's good day

As noted earlier here, the occasional bad day that Merck experienced recently in regard to a couple of its Vioxx cases is inevitable when defending tens of thousands of such cases.

However, it's also inevitable that Merck will experience some good days during the Vioxx trial marathon. One of those occurred yesterday as the federal judge in the recent New Orleans trial that concluded with a $51 million jury verdict against Merck threw out the verdict on the basis that the jury's award was clearly excessive.

Meanwhile, according to this Heather Won Tesoriero/WSJ ($) article, a juror involved in awarding a plaintiff a $32 million verdict against Merck in a Vioxx trial that took place earlier this year in Texas' Rio Grande Valley had borrowed money from the plaintiff prior to the trial, a small detail that the juror did not disclose during pre-trial questioning. As noted in this prior post, the Rio Grande Valley was rated by the American Tort Reform Association as the number one "judicial hell-hole" for 2005. The ATRA describes a judicial hell-hole as a venue of "disproportionately harmful impact on civil litigation. Litigation tourists, guided by their personal injury lawyers, seek out these places because they know they will produce a positive outcome - an excessive verdict or settlement, a favorable precedent, or both."

Looks to me as if Merck needs to compare notes with Ford Motor Company over this one.

Posted by Tom at 5:55 AM | Comments (0) |

Amazing arrogance

Virginia Republican Senator George Allen is in a fight for his political life, which is not what one would normally expect from a candidate who was recently mentioned as Presidential timber. Senator Allen has been hammered in the media for some apparently patronizing remarks that he made to a minority student, but my sense is that the attitude reflected in this Washington Post article is a far bigger problem for Allen with voters than his impolite remarks to a student.

The article reports that last week “the Secret Service asked Virginia officials if they would be kind enough to shut down all of the HOV lanes on I-395 from 1 to 7 p.m. the next day so President Bush could get where he needed to be,” which was a fundraiser for Senator Allen. State traffic experts explained the likely results of closing the HOV lane to accomodate President Bush and Senator Allen:

There will be approximately 8,600 cars using the HOV lanes over a three hour period (4 to 7 pm). This equates to approximately 20,000 to 22,000 people. If the HOV lanes are closed, according to the District’s estimate the back up of traffic in the general purpose lanes will not be cleared until 10 p.m.

Despite that effect, local officials apparently had quite a time talking the Secret Service out of the plan.

When a couple of politicians expose an attitude that they could not care less about how much they inconvenience 20,000 of their citizens so long as one of the politicians can get to a rubber-chicken fundraiser for the other one on time, that's a pretty good signal that it's time for a change.

Hat tip to Gene Healy for the link to the WaPo article.

Posted by Tom at 5:18 AM | Comments (4) |

Understanding contango in the oil markets

As noted in this earlier post, the recent run-up in energy prices and the lingering "contango" in the crude oil trading markets -- that is, futures contracts for a given product priced substantially higher than that same product for near-term delivery -- has prompted the usual conspiracy claims from demagogues who seek more power through damaging regulation of the beneficial trading markets. As if on cue, the U.S. Senate Permanent Subcommittee on Investigations recently issued a report asserting that traditional supply and demand conditions cannot adequately explain current high oil prices and contending that evil capitalist roaders in the trading markets are to blame for a substantial portion of the lingering high prices.

Thankfully, the blogosphere provides a counterbalance to such demagogic appeals. In this post, University of Houston business professor Craig Pirrong disassembles the Senate report, observing at the outset:

Where to begin? The report is a farrago of facts, factoids, and falsehoods stitched together to arrive at a conclusion that is miles beyond what the evidence actually supports. Moreover, although I concur that manipulation is a potential problem in energy markets–as it is in all commodity and even financial markets–the report does not even make the effort to show that current price levels are the effect of manipulation. Nonetheless, it sternly recommends a variety of new regulatory initiatives to combat manipulation, suggesting (by implication) that manipulation is the cause of high oil prices. This is a flagrant example of bait-and-switch of a variety that I imagine that the Subcommittee members would vigorously condemn if committed by your local used car salesman.

The report (and most of the other criticisms of speculation) fails on only two points: logic and evidence. Other than these shortcomings, it’s great.

Read the entire post.

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

August 30, 2006

A few good reads

The following are several reading recommendations for a busy Wednesday:

In this TCS Daily article, Hoover Institute fellow David R. Henderson examines the media coverage of the criminal trials of Frank Quattrone and concludes that it left much to be desired:

The evidence seems to suggest that [Quattrone] was innocent. And even in the unlikely case that he was guilty, the prosecutor never made the case beyond a reasonable doubt, the standard for conviction for a crime. What wasn't a victory, though, was the media's role in this. Many reporters pandered to their audiences' desire to see a wealthy man take the fall because of the dotcom bust.

Meanwhile, the always insightful Stephen Bainbridge posts this interesting TCS Daily article on New York's next governor, the Lord of Regulation, Eliot Spitzer, in which the Professor makes the following observation:

A fair reading of Eliot Spitzer's record as presented by [Brooke Masters's biography of Spitzer] suggests that he is both a genuine cause crusader and a career political hack. Spitzer has consistently used -- and abused -- his authority as New York attorney general to level sweeping accusations against a wide swath of American business. In some cases, like the proverbial stopped clock, he got it right. In a lot of cases, however, the much ballyhooed charges got a lot of press attention but then quietly went away. Indeed, on the few occasions he's taken one of these high profile business cases to trial, he's lost at least as often as he's won. Instead, his record consists mainly of using media pressure to extort settlements from frightened executives.

Finally, I've not addressed the sad case of the the Duke University Lacrosse team members accused of rape, but this recent NY Times article provides a comprehensive review of the case. Perhaps not surprisingly, the two NY Times reporters who reviewed the public documents in the case concluded that the evidence against the three students is neither as strong as prosecutors have publicly claimed nor as weak as defense attorneys have asserted. However, where the standard of proof is beyond a reasonable doubt, this would appear to be a case where prosecutors should have concluded on the front end that the allegations are better left for resolution in the civil justice system rather than the criminal justice system. It's an ugly case that promises only to get uglier as the criminal trial nears.

Posted by Tom at 5:55 AM | Comments (0) |

Stros lock up Roy O

In my most recent periodic review of the Stros 2006 season, I observed that the personnel moves that Stros General Manager Tim Purpura made this past off-season do not inspire much confidence that he knows what to do in turning the Stros back into a legitimate playoff contender. However, it's comforting to know that when it comes to the best pitcher in the history of the Stros franchise -- Roy Oswalt -- that Purpura and Stros owner Drayton McLane know exactly what to do.

In the richest contract ever given to a Stros pitcher, the Stros announced last night that they had signed Roy O to a five year extension worth $73 million, but which could be worth as much as $87 million should the club pick up a $16 million option for the 2012 season. Oswalt will be paid $13 million in 2007 and '08, $14 million in '09, $15 million in 2010 and $16 million in 2011. The club can either exercise a $2 million buyout after 2011 or pick up the $16 million club option for 2012. The contract will include a no-trade clause.

While the Stros normally do not do deals for over three years with pitchers because of the high injury risk, Roy O is a special case. Drafted by the Stros ten years ago and developed within the Stros' heralded (at the time) minor league pitching program, Oswalt jumped from AA ball to the Stros in 2001 and quickly became one of the best pitchers in the National League. Remarkably durable throughout his career to date, Oswalt pitched the key win that vaulted the Stros into their first World Series last season and has developed into one of the best pitchers in MLB history at this stage of his career. Oswalt, who turned 29 yesterday, is tenth in the history of the National League in runs saved against average ("RSAA," defined here) for pitchers through the age of 28:

1 Christy Mathewson 279
2 Tom Seaver 234
3 Robin Roberts 229
4 Don Drysdale 219
5 Dizzy Dean 207
6 Ferguson Jenkins 196
7 Greg Maddux 189
8 Juan Marichal 177
9 Grover C Alexander 176
10 Roy Oswalt 163

Roy O is also comfortably the Stros' career leader in RSAA:

1 Roy Oswalt 163
2 Roger Clemens 103
3 Billy Wagner 99
4 Mike Hampton 76
5 Dave Smith 75
6 Octavio Dotel 67
7 Nolan Ryan 60
8 Wade Miller 56
9 Don Wilson 55
10 Joe Sambito 53

Finally, Oswalt's career 3.09 ERA compares to a league average of 4.29 during the time that he has pitched in the National League.

Thus, although there is substantial risk that this deal could ultimately turn out as badly as the Bagwell contract played out for the Stros, my sense is that locking up Oswalt is a calculated risk that the Stros are smart to take. Roy O is a Stros icon, has shown unusual durability, stays in shape and has that remarkable presence that only big-time players have when it comes to performing brilliantly in high-pressure situtations. Barring injury, Oswalt is well on his way to the Baseball Hall of Fame, along with Bagwell, Craig Biggio, Roger Clemens and perhaps even Lance Berkman, among current Stros players. It's rarely a bad idea to pay top dollar for that type of talent.

Roy O's career statistics are below.

The abbreviations for the statistics above are defined here

Posted by Tom at 4:52 AM | Comments (0) |

Priscilla Slade is doing what?

Former Texas Southern University President Priscilla Slade, who is currently under indictment on charges relating to alleged use of as much as $1.9 million of school property for her personal benefit, and who is currently suing TSU over her firing to boot, is teaching accounting at the school this semester.

H'mm. I recognize that Slade is innocent until proven guilty and is certainly entitled to earn a living while awaiting her various trials. But she is teaching accounting at TSU while facing an indictment that effectively charges her with improperly accounting for expenses while TSU president?

If she does not resolve the criminal charges by copping a plea bargain, then Slade and her defense team better be prepared to hear from prosecutors about that little incongruity during her upcoming criminal trial.

Posted by Tom at 4:28 AM | Comments (0) |

August 29, 2006

Clarifying the risk of insolvency in China

One of the biggest deterrents to free-market investment in state-controlled economies such as China or Russia is consistent application of the rule of law, and few rules of law are more important to an investment decision than those that bear on the risk of insolvency. So, the news that a long-awaited amendment to China's bankruptcy laws was approved by a powerful government committee and is scheduled to go into effect on June 1, 2007 is an important milestone in the Chinese government's continuing -- but sometimes ineffectual -- attempts to attract greater foreign investment capital in China's economy. A key provision in the new law introduces a mechanism for corporate reorganizations, something that has been alien to the Chinese Communist legal system, but a concept that has preserved massive amounts of employment and going concern value in the U.S. and other Western market-based legal systems.

Investment of foreign capital in China has traditionally been high risk, but the new bankruptcy law reflects that the Chinese government is serious about passing reforms that addresses that risk. Compare that to Russia, where investors still face daunting risk in an economy controlled by a volatile combination of government officials and oligarchs.

By the way, I hope the amendment to the Chinese bankruptcy law corrects this type of problem that arose under the old law. In the meantime, the Chinese government is also attempting to reform the market for funeral attendees in that country.

Posted by Tom at 5:22 AM | Comments (0) |

What was that about Casserly not being fired?

As noted in this earlier post, Texans owner Bob McNair allowed former Texans General Manager Charlie Casserly to resign under the pretense that he would be pursuing a job with the National Football League's main office, which Casserly subsequently failed to land. Some Houston media reporters -- such as the Chronicle's John McClain -- actually swallowed the "Casserly resigned" charade.

Thus, my eyebrow raised a bit when I read the following blurb from John Czarnecki's blog over at FoxSports:

How is that?

You would be amazed how many NFL general managers know Matt Millen’s won-loss record in Detroit since he became the team’s general manager.

“How in the hell does someone with a 21-59 record get named to the Competition Committee?” one GM asked me. “How does he keep his job and also get a new contract?”

Said a former member of the committee: “Matt is the wrong kind of person to be on that committee. I just can’t figure out what they are doing, but I’m glad I’m not dealing with it anymore.”

Millen replaced former Houston GM Charley Casserly, who is now working for CBS Sports. By the way, Casserly wasn’t happy with his settlement pay from Texans owner Bob McNair after being fired.

Gosh, I wonder who that "former member of the committee" is (hint - Casserly was formerly a member of the Competition Committee while he was Texans GM)? And then, after dumping on Millen, Casserly goes off on the eminently classy McNair for supposedly being cheap in buying out Casserly's contract.

But John McClain says Casserly resigned. Yeah, right.

Posted by Tom at 4:56 AM | Comments (2) |

Everything really is bigger in Texas

Although the big news on the University of Texas campus yesterday was that freshman cowboy Colt McCoy will be replacing Vince Young as the Longhorn starting quarterback in the Longhorn's first game this Saturday against sacrificial lamb North Texas, the bigger news is the new Jumbotron video screen that has been installed at Royal-Memorial Stadium. Check out the the specs on this thing:

The screen is 55 feet tall by 134 feet wide;

The university had to upgrade its utilities capacity to accommodate its power needs;

Forty 5-ton air conditioning units are required to cool it;

The heads of the gounding bolts are 5 inches wide; and

At least for a few months, it will be the world's largest HDTV in existence.

The Yankees have the house that Ruth built. The Longhorns have the video screen that Vince built.

Posted by Tom at 4:38 AM | Comments (4) |

August 28, 2006

The Coen Brothers do Marfa

This NY Times story reports on the culture shock that film directors Joel and Ethan Coen ("Raising Arizona," “Fargo,” “The Big Lebowski” and “O Brother, Where Art Thou?”) and their Hollywood cast are experiencing in the far west Texas tourist enclave of Marfa while filming the Coen Brothers' adaptation of Cormac McCarthy’s 2005 novel No Country for Old Men. The Coen Brothers movie is one of two films currently being shot in Marfa, which is not exactly Palm Springs, if you know what I mean. The moviemakers are also discovering that folks in West Texas are not inclined to change their ways to accomodate a couple of film crews:

[I]n some ways Marfa’s shrugging attitude baffled the film crews. There are only a handful of restaurants in town, and if you’re hungry past 9 p.m., you have to settle for the local gas stations’ dizzying array of fried food. Both crews asked local restaurants to either open earlier or stay open later, and most declined. “That’s frustrating,” [one of the producers] acknowledged. “We’ve been working six-day weeks, and on our one day off — Sunday — nothing’s open. Everybody’s been very welcoming, but they’re like, ‘We’re not going to change our ways.’ ”

Even though both crews brought in hundreds of people, many local business owners found their stay to be prohibitive to their businesses, since Marfa’s economy is based on tourism. “The movies filled up all the hotels, and they work late and are fed through their caterer,” said Ms. [Maiya] Keck, [a Marfa] restaurateur. “This is the first week the hotels haven’t been full of movie people, and we’ve been so busy. I’m so glad it’s back to normal. Now we can go to our coffee shop and not have to wait 45 minutes to get our cappuccino.”

Posted by Tom at 5:55 AM | Comments (0) |

A disturbing growth industry

This Newspaper.com story summarizes several articles and resources that examine a troubling growth industry among Texas municipalities:

Red light cameras and cash seizures are taking money from motorists and funding uncontrolled spending sprees in small Texas cities. . . . In the South Texas city of San Juan, population 26,200, police have begun seizing ever greater amounts by taking both cash and vehicles from motorists. In 2005, officers collected $4400. This year, however, the force has collected $67,000. Pharr, with a population of 47,000, collected $422,000 last year. McAllen, a bigger city with 106,000 residents, collected $484,000. A federal appeals court ruling this week concluded that driving with a large amount of cash is sufficient justification for police to confiscate it, even if there is no evidence that a crime has been committed.

Each South Texas city has said its priority is to use the money to fund or expand a SWAT team, . . .

As Cato Institute policy analyst Radley Balko shows in this Cato study, small municipalities frequently misuse SWAT squads for routine police work, which has led to an increasing number of botched raids resulting in injury or even death to innocent citizens. And local politicians of small Texas cities are encouraging liberal confiscation policies by police as a convenient means to funding this type of questionable activity?

Posted by Tom at 5:30 AM | Comments (3) |

Muddling the understanding of insider trading

The NY Times business columnist Gretchen Morgenson -- who regularly writes with a curious anti-business agenda -- weighs in again in the Sunday Times with this frontpage article about trading in anticipation of merger announcements that begins with this proclamation:

"The boom in corporate mergers is creating concern that illicit trading ahead of deal announcements is becoming a systemic problem."

Morgenson then goes on to report on a recent study that confirms the particularly unsurprising news that trading frequently increases in the stock of companies immediately before public announcements concerning deals involving the companies.

Morgenson's article is so disingenuous I struggled to know where to start. She doesn't explain cogently why insider trading is illegal -- just that honest investors are victims of the practice -- but even her argument in that regard makes little sense. She contends that sellers of stock are injured by insider trading because they could have held their stock until after the merger announcement and received more value, but that argument assumes that the seller would only sell at the higher price generated by the insider trading and not at the lower price that existed before the insider sales. This is strained, to say the least, as sellers generally sell at the market price (whatever it is at the time of the sale) and take the risk that they are selling the bird in the hand instead of the potentially more valuable one in the bush if they were to wait and sell later.

With such basic flaws in Morgenson's analysis of insider trading, I was shuddering at the thought of how long it would take me to critique Morgenson entire piece. Thus, I was heartened to discover that Larry Ribstein had already done so, in which he concludes with the following observation:

In sum, this page 1 story on one of America's leading papers is a particularly egregious example of shoddy and slanted reporting by, perhaps, America's leading practitioner of shoddy and slanted reporting. No doubt Morgenson's influence will lead to misguided regulatory and legislative activity, which will impose additional costs on American business. Shame on Morgenson, and even more importantly, shame on her editors for failing to see the dangers of mixing news and commentary, for propogating these phony scandals to sell newspapers.

Posted by Tom at 4:42 AM | Comments (0) |

August 27, 2006

Taking stock in New Orleans

The NY Times continues today with another installment in its excellent The Katrina Year series focusing on the status of the rebuilding of New Orleans. To the surprise of no one who has ever been involved in the interplay of business development nad government bureaucracy, the re-development of areas of the city that are most attractive for investment has actually gone reasonably well, while the areas in which government subsidies are necessary to induce private capital to invest have lagged. Also not surprising is the fact that local governmental entities still have not been able to put together a plan for providing basic governmental services for redevelopment. So it goes.

As noted in posts here and here last year in the immediate aftermath of Hurricane Katrina, one of the biggest problems confronting redevelopment of the New Orleans area was the storm's destruction of small businesses, which on an aggregate basis was the largest provider of jobs in the New Orleans area. This NY Times article reports on the struggles that small businesses in New Orleans have confronted in attempting to stay afloat in the year after Katrina and how many of the pre-Katrina small businesses have little hope of coming back.

Update: In this Opinion Journal editorial, the Wall Street Journal editorial board eviscerates the federal government's handling of the enormous amount of federal aid thrown at New Orleans in the year since Katrina.

Posted by Tom at 8:16 AM | Comments (0) |

August 26, 2006

Stros 2006 Review, Part Eight

When we last checked in on the Stros at the 7/10's pole, the club had shown signs that it was going to climb back into legitimate contender status in the National League playoff race. Unfortunately, those signs of a playoff run were as illusory as Brad Ausmus' swing and the Stros promptly turned in a 6-10 record in their eighth 1/10th segment of the season. In so doing, the Stros (61-68) effectively took themselves out of the race for a playoff spot.

As regular readers of this blog recognize, it's not surprising that this Stros club is continuing to struggle. It has been a mediocre club almost all season, reflected by the team's record in each of its 1/10th segments of the season (previous 10% segment summaries are here):

1. 11-5
2. 8-8
3. 6-10
4. 7-9
5. 7-10 (halfway mark)
6. 7-9
7. 9-7
8. 6-10

As noted in the each of the pre-season reviews of the club over the past three seasons (here, here and here), the Stros' overall hitting has been declining steadily for six straight seasons and that lack of punch has finally caught up with the club. Superior pitching and playoff appearances over the past two seasons tended to camouflage the club's abysmal hitting, but merely better-than-National League-average pitching this season has exposed the Stros' imbalance -- it is now a club with better-than-average pitching, one legitimate slugger, a few average or slightly-above average hitters, and a troubling number of regular players who are among the worst hitters in the National League.

The Stros hitting woes continued in the most recent 1/10th segment of the season as the club's aggregate runs scored against average ("RCAA," explained here) declined to -42, which is 13th among the 16 National League teams. While the pitching staff's overall improvement during the second half of the season increased the staff's runs saved against average ("RSAA," explained here) to 35 (4th in the NL) midway through this current segment, a couple of rocky starts by the back-end of the staff lowered the staff's RSAA to 30, which is currently 5th among National League teams.

The club's hitting and pitching statistics to date are set forth below, and pdf's of the current hitting stats are here and the current pitching stats are here, courtesy of Lee Sinins' sabermetric Complete Baseball Encyclopedia. The abbreviations for the hitting stats are defined here and the same for the pitching stats are here:

Thank goodness for 1B/OF Lance Berkman (46 RCAA/.413 OBA/.609 SLG/1.022 OPS/35 HR's), who is simply one of the best hitters in MLB and the only hitter separating the Stros from becoming as bad a hitting club as the Cubs or Pirates. Of the remaining Stros players, only 1B Mike Lamb (4/.353/.477/.830) 2B/OF Chris Burke 6/.361/.455/.816), 3B Morgan Ensberg (13/.395/.467/.862) and OF Luke Scott (20/.463/.620/1.083) have hit above National League-average this season, although mid-season acquisition 3B/OF Aubrey Huff (-1/.340/.477/.817) is also close.

On the surface, that would seem like a reasonable nucleus of above-average hitters to work with, but that is only true if the club is managed in a savvy manner, which this one is not. As noted several times on this blog (most recently here), Stros Manager Phil Garner is not a particularly good manager and his mishandling of the Stros' best hitters this season is a case in point. Rarely does Garner ever play Berkman, Lamb, Burke, Scott, Ensberg, and Huff in the same lineup. Although a lineup with Berkman at 1B, Huff and Scott in the corner OF positions, Burke at CF or 2B, Lamb at 2B or 1B and Ensberg at 3B is not going to remind anyone of the Yankees lineup, it certainly has a better chance of generating runs than Garner's typical lineup.

As has been the case all-season, SS Adam Everett (-25/.287/.343/.630), CF Taveras (-14/.334/.341/.675), C Ausmus (-31/.302/.288/.590; hit into 19 double-plays!) continue to be a huge drag on the Stros' every day lineup. At least Stros management had the good sense to dispense with LF Preston "Double-Play" Wilson (-19/.309/.405/.714); hit into 18 double plays!), but now even future Hall-of-Famer Bidg is giving indications that he is finally washed up (-10/.318/.433/.751). Although Everett, Taveras, Ausmus and Biggio should rarely be in the same lineup, Garner has played them together in the lineup more often than not during this season.

By the way, as noted in this earlier post, don't allow the largely meaningless Taveras 28-game hitting streak mislead you. Taveras is far below a National League-average hitter and, given his lack of plate discipline and power, I have my doubts that he will ever develop into even an average hitter, much less a good one. Although the media touts the hitting streak and Taveras' .350 batting average (also one of baseball's most misleading statistics) during the streak, the reality is that Taveras' RCAA -- the runs that he has created compared to what an average National League hitter would have generated using the same number of outs as Taveras -- has actually decreased from -11 to -14 during his hitting streak.

Meanwhile, the pitching staff's best pitchers continue to improve as Roy O (3.23 ERA/25 RSAA) and the Rocket (2.50 ERA/18 RSAA) remain two of the best starters in the National League, and Andy Pettitte (4.51 ERA/1 RSAA) continued his considerable improvement since the All-Star break. However, the loss of Brandon Backe (3.77 ERA/4 RSAA) to an elbow injury forced the Stros to call up AAA-sensation Jason Hirsch (12.75 ERA/-11 RSAA) and the brutal Wandy Rodriguez (5.51 ERA/-13 RSAA), so that has hurt the pitching staff's overall RSAA. The bullpen continues to be steady, if not spectacular, with troubled closer Brad Lidge (5.34 ERA/-5 RSAA) being the only bullpen pitcher who is currently pitching at a below National League-average level. The current closer, Wheeler (2.68 ERA/12 RSAA), is doing just fine.

Inasmuch as the current flawed makeup of the Stros club has been developing over the past five seasons, it's unfair to blame current Stros GM Tim Purpura -- who has been on the job for less than two years -- entirely for the situation. However, Purpura was an assistant GM with the club during the time that the club's hitting needs have gone unaddressed and his moves this past off-season -- signing the woeful Wilson and re-signing Ausmus along with mediocre pinch-hitter Orlando Palmeiro -8/.278/.289/.567) to over-priced, guaranteed two-year deals -- do not inspire much confidence that he understands the Stros' problem, much less the ability to fix it.

Nevertheless, the situation for the Stros is certainly not dire. The club will free up over $50 million (almost half the club's current payroll) after this season as Bagwell, Pettitte and Clemens' contracts end. Extending Oswalt's contract before he reaches free agency after the 2007 season is a first priority, and Berkman, Ensberg, Lamb, Huff, Burke, Scott and even the much-maligned Jason Lane (-6/.336/.409/.745) constitute a decent -- albeit not imposing -- hitting nucleus. The weak-hitting Everett remains an extraordinary talent in the field and Taveras is still young enough that he could develop the plate discipline necessary for him to become at least an average National League hitter, which -- with his above-average fielding skills -- would make him a valuable MLB player. With money to spend and several good pitching prospects on the MLB roster and in the upper minor league pipeline, the Stros appear to be in a good position to pick up a couple of productive hitters in the upcoming off-season who could vault the club right back into playoff contention. Although the 2006 season has been a disappointment for a club that has had a winning record in the five previous seasons and 12 of 13 since 1993 while making the playoffs six times in the past ten seasons, the Stros remain a basically solid club that, with a few tweaks here and there, could make the Berkman-Oswalt era every bit as successful as the Biggio-Bagwell era has been.

After finishing their current weekend series against the Pirates, the Stros schedule down the stretch is actually quite interesting, as they play 16 home games through September 24 against the NL East champ Mets (76-51) and playoff contending teams such as the Cardinals (67-60), the Reds (67-62) and the Phillies (65-63). Look for the next review -- which will take us to the 9/10's pole of the season -- on September 13.

Posted by Tom at 6:41 AM | Comments (0) |

August 25, 2006

The real issue in the Grasso case

Eliot Spitzer's long-running propaganda campaign and lawsuit against former New York Stock Exchange chairman and CEO Richard Grasso has been a frequent topic on this blog, so I couldn't help but notice this NY Post article (hat tip to Peter Lattman) in which Grasso is derided for defending his lucrative pay package during a recent television interview. I mean, why should anyone make that much money, right?

Meanwhile, for a much more lucid analysis of the true issues should be in the Grasso lawsuit, check out this Larry Ribstein post:

[T]he main thing to keep in mind is that [Grasso's] pay was approved by a highly sophisticated board. The only issue should be whether that board was informed. This is the way it should and would be in a standard fiduciary duty case (e.g, Disney). There is significant reason to believe it was, . . .

Alas, this isn't the end of the matter because the NYSE was a non-profit that comes under Eliot Spitzer's tender care. Grasso's trial has been broken into two parts, so that the trial judge first rules on reasonableness separate from board process. In the first part, . . . Spitzer will try to prove "that the pay judgments of executives who worked in the highest echelons of the business community were not 'reasonable.'" In other words, a NY trial judge may end up substituting his judgment for that of a board that included the likes of the Treasury Secretary and former head of Goldman Sachs.

Thus, while the only issue should be whether the board was properly informed, that rather dry issue does not allow Spitzer to appeal to the dynamic that might win him the case (and, presumably, some votes) -- the resentment of large pay packages to allegedly greedy businesspersons. So, what should be a reasonably straightforward case regarding the NYSE's review of Grasso's pay package is turned into a morality play where the scapegoat is a greedy executive who allegedly plundered the defenseless non-profit. At least a judge will determine the reasonableness issue in regard to Grasso's pay package, which probably gives Grasso a better chance than if that issue were tried to a jury.

But the main point here is that the Grasso case -- as in dubious criminal prosecutions such as Lay-Skilling, Arthur Andersen, the Nigerian Barge case and many others -- is not about the true legal and business issues involved, but whether the government can frame an issue or two in a manner that appeals to the resentment of the jury. Thus, in Grasso's case, the issue isn't whether the board was informed, but that Grasso's compensation violates the "too good to be true rule" and must be the product of cronyism. In Lay-Skilling, don't get bogged down in the facts of what really happened, just focus on Photofete and Lay's lucrative company credit line. In Arthur Andersen, don't worry about whether Andersen actually destroyed any document that was material to the Enron investigation, the firm must have had something to cover up because it was making big bucks from the social pariah Enron. In the barge case, who cares what the documents say about the transaction in question, it's far more important what an admitted felon said that another admitted felon told him about the deal that really counts. The syndrome goes on and on.

So, what is the greater threat to justice and the rule of law -- the greedy businesspersons who are being pursued in these cases or the government officials who are doing the pursuing? My answer is here and here.

Posted by Tom at 6:21 AM | Comments (1) |

Gripping already for the Ryder Cup

The United States has lost four out of the last five Ryder Cup competitions, so it's not particularly surprising that some U.S. golf fans are viewing the 2006 Ryder Cup competition next month at the K Club in Ireland with some trepidation. However, former Houstonian and noted teaching professional Butch Harmon is already gripping particularly hard in anticipation of the competition, and Brett Wetterich -- who will be playing in his first Ryder Cup competition for the American team -- is the target of Harmon's nervousness:

Brett Wetterich, who squeezed into the US Ryder Cup team in the last available qualifying spot, will have to greatly improve his attitude at next month's Ryder Cup match at the K Club.

At least that's the way widely-respected US swing coach and Sky Sports analyst Butch Harmon sees it.

Harmon told Sky Sports he was "appalled" by what he saw on day two at the 9th hole at last week's PGA Championship where Wetterich, destined to miss the cut by nine shots after shooting a 2nd-round 77, took four shots to get out of some greenside rough.

Harmon says he was infuriated by Wetterich's attitude.

"I was appalled by what I saw with Brett Wetterich," he told Sky Sports. [. . .]

"This isn't the kind of guy you want on your Ryder Cup team," Harmon said of Wetterich.

H'mm. I guess Wetterich will at least have something to talk about with Tiger Woods during the Ryder Cup competition.

Meanwhile, Rick Reilly at Sports Illustrated.com weighs in with this article ($) in which he predicts another disaster for the 2006 U.S. Ryder Cup team:

Have you seen the U.S. team? It has all the intimidation power of the Liechtenstein navy. It would have a hard time beating the Winnetka Country Club ladies' B team. It's the single worst squad we've ever taken to a Ryder Cup, and that's saying something, considering the last batch got pummeled 18.5 - 9.5. . . .

This outfit would be the underdog to a stiff breeze. Or do Brett Wetterich, Zach Johnson, J.J. Henry and Vaughn Taylor make your timbers shiver? It sounds like somebody's Webelos troop. None of those four have ever played in a Ryder Cup before. Three of them missed the cut at last week's PGA, and Henry finished 41st.

Wetterich has missed five cuts in his last eight starts. You look at him and think, Was he my waiter at Olive Garden last night? If he wasn't, he will be soon.

Won't Tiger be psyched to be paired with him?

That's the other thing: Tiger. He's the No. 1 player in the world by a light year, the Golfing Gladiator. Until he goes to Ryder Cups, and then he suddenly becomes Dead Man Walking.

He mopes around like a husband in couples therapy, only he talks to his partner less. It may the only thing he sucks at. His Ryder record is 7-11-2, and no wonder. He wasn't wired for team play. He trusts nobody. Why should he buddy up with people he's been trained to swallow in two bites or less? The hangman doesn't play on the prison softball team. Lions don't room with lambs.

Sheesh! These folks need to get a grip. What many reasonably informed people often misjudge in golf and other sporting events is the substantial role of luck in determining the outcome. A good case can be made that bad luck has been the biggest factor in the American squad's failure in recent Ryder Cup competitions, as certain members of the American team simply have not been playing as well as their European counterparts at the time of the competitions. That happens to everyone in golf -- just ask British Open and PGA champ Tiger Woods, who missed the cut in this year's US Open. In a perfect world, the Ryder Cup teams would be comprised of players who were playing the best at the time of the competition, but that wouldn't be fair to the players who earned their way on to the team by playing at a consistently high level during the previous two seasons.

So, yes, this US Ryder Cup team is comprised of a relatively large percentage of first time players. But that will likely have very little to do with the success or failure of the American team. If most of the players happen to be playing better than their European counterparts during the third week of September, then the Americans will win. If not, they won't. Whether the players are well-known to the general public has nothing to do with it, and even prior Ryder Cup experience doesn't won't make much of a difference. All of these players have played under intense pressure before and the key is going to be how well they are striking the ball and putting at the time of next month's competition. My bet is that this American team will do quite well.

Posted by Tom at 5:26 AM | Comments (1) |

The drift of the Nacchio prosecution

This Denver Post article reports on the appointment of former Enron Task Force prosecutor Cliff Stricklin as the lead prosecutor in the Justice Department's criminal case against former Qwest CEO Joe Nacchio on insider trading charges. Stricklin was a member of the Task Force's team that handled the Lay-Skilling trial, although he sat about fourth chair and did very little in the courtroom during the trial.

However, neither the fawning Post article nor the other media accounts of Stricklin's appointment that I have seen mention Stricklin's dubious conduct in the first Enron Broadband trial, which did not turn out quite so "successfully" for the Task Force as the Lay-Skilling trial. As noted in this earlier post, Stricklin was one of the lead prosecutors during that debacle in which the prosecution was caught eliciting false testimony from one of the Task Force's main witnesses and threatening two defense-friendly witnesses (Beth Stier and Lawrence Ciscon). Then, to top it off, U.S. District Judge Vanessa Gilmore cut off Stricklin from further cross-examination of one of the defendants and rebuked him in open court during the latter stages of that trial when Stricklin violated one of the court's limine orders. That trial -- which appeared to be a tap-in for the Task Force at the outset -- ended in a crushing defeat for the Task Force.

In the Post article noted above, Colorado U.S. Attorney Troy Eid issued the following statement about Stricklin:

"Cliff's extraordinary background, including his work on the Enron Task Force, makes him the ideal leader to handle the Joseph Nacchio case while serving Colorado as first assistant U.S. attorney."

Yeah, right.

Posted by Tom at 4:43 AM | Comments (0) |

August 24, 2006

Hoop Nazis

I recognize that the University Park area of Dallas is a nice place to live and all, and I also concede that the residents there are rightly attentive to maintaining property values and the decorum of the area. But this recent Dallas Morning News article reports on an initiative that establishes fairly convincingly that a number of the UP residents simply do not have enough to do:

Hoops could be shot down in this wealthy community thanks to a proposed ordinance banning basketball goals in front yards. The reason? To some city officials, they don't look too good.

That's the basis of a proposed University Park ordinance prohibiting portable and permanent basketball hoops. On Tuesday, council members postponed a decision on the ordinance until their Aug. 22 meeting so revisions could be made, . . .

Under the proposal, violators could be fined up to $2,000 a day. [. . .]

The ordinance the Planning and Zoning Commission and city staff originally recommended would have allowed residents to keep portable basketball goals in their front yards for up to 30 days a year. Council members wanted none of that, though.

They went back and forth for about 15 minutes at their Tuesday meeting on whether to allow swings, soccer goals and basketball goals in front yards at all. Some wanted to allow them certain months of the year, others only during daylight hours.

Portable soccer goals and badminton nets were deemed allowable because they could be moved inside every night. So were one-seat swings, provided they don't swing into the street.

Trampolines and basketball goals weren't as lucky.

"It's just not as pleasing to the eye," [the] Mayor . . . said about the goals.

Posted by Tom at 6:05 AM | Comments (4) |

The sinking Milberg Weiss ship

Class action securities powerhouse Milberg Weiss Bershad & Schulman has been attempting to keep a stiff upper lip in the face of the Justice Department's decision to go Arthur Andersen on the firm earlier this year (previous posts here), but this New York Observer article (related NY Times article here) reports that the firm's demise is imminent, well before the criminal trial of the firm:

A lawyer for a competing firm, who asked to remain anonymous, said that he had interviewed several Milberg Weiss employees seeking a position with his firm. He said they have the same sense of the mood at the firm. “That it’s sad, it’s a sinking ship, it’s like a funeral home. It’s extremely upsetting,” he said. “It’s like waiting for them to turn out the lights and close the door; they’re running for the exits.”

Published reports have documented the departure of about two dozen attorneys since the indictments were handed down. That’s a lot in a firm of 125 lawyers.

And of the offices once listed on the company’s Web site—Los Angeles; Boca Raton, Fla.; and Manhattan—only the New York and California branches remain.

The firm once employed close to 500 people, including paralegals, investigators, messengers, secretaries, forensic experts and lawyers. [ . . .]

The “experience with Arthur Andersen indicated that partnerships are fragile entities,” said [New York University law professor and Milberg Weiss advisor Samuel] Issacharoff. “That’s the reality.”

The government's prosecution of Milberg Weiss out of business will have nowhere near the economic impact that the government's effective shuttering of Arthur Andersen had. And certainly a plaintiff's firm is not the type of victim that elicits much sympathy. However, that does not make any less outrageous what the government is doing here -- effectively killing the accused after investigating it for over five years and before it is determined whether it has committed a crime. That there is not more of an outcry over this injustice reflects a troubling deference that even the legal community is now giving to the abuse of the criminal justice system by federal prosecutors. As Sir Thomas More reminds us "do you really think you could stand upright in the winds [of abusive prosecutorial power] that would blow" if that power were applied to you?

Posted by Tom at 5:20 AM | Comments (2) |

The risk of supporting a former girlfriend

It's reasonably clear that Texas Supreme Court Justice Nathan Hecht didn't think anything of it when he gave dozens of media interviews last year supporting President Bush's nomination to the US Supreme Court of his former girlfriend and fellow parishoner, trusted Bush White House advisor Harriet Miers.

But the Texas Commission on Judicial Conduct didn't view Justice Hecht's politicking on behalf of Miers in the same way. In May, the Commission issued an ethics rebuke to Justice Hecht, determining that he had improperly used the prestige of his office to support the nomination of Miers. Earlier this week, Justice Hecht appealed that decision to a three-judge panel during a hearing in Ft. Worth (hat tip to Peter Lattman for the link).

The Commission accused Justice Hecht of going “on a specific mission, a campaign, in connection with certain parties in the White House and their operatives” and, in so doing, violated two canons of the Texas Code of Judicial Conduct:

“A judge shall not lend the prestige of judicial office to advance the private interests of the judge or others;” and

“A judge . . . shall not authorize the public use of his or her name endorsing another candidate for any public office.”

In response, Justice Hecht contends that the Commission misapplied the canons because Miers was not a political candidate, was not involved in a political election race and had no election opponent. Moreover, Justice Hecht observed that reporters were interested in his views about Miers because of his three-decade friendship with her, not because of his status as a Texas Supreme Court Justice.

The three-judge panel has 60 days in which to issue a ruling. The panel's decision may be appealed directly to the US Supreme Court, which Hecht lawyer Chip Babcock contends that he will if the Commission's rebuke of Justice Hecht is upheld.

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

August 23, 2006

The lucrative sacrificial lamb market in college football

Although I enjoy most college sporting events, I have long maintained that the structure of major-college football in the US is fundamentally flawed (related post here). Along those lines, this NY Times article reports on a lucrative market that has evolved from the NCAA's regulation of major college football -- less successful football programs selling the opportunity to be a sacrificial lamb to the more successful programs:

The University at Buffalo football team went 1-10 last season and did not score a touchdown until the fourth game. For nearly a decade, it has been considered one of the worst teams in college football.

Buffalo is just the kind of opponent some of the nation’s top-ranked teams are looking for — and are paying rapidly rising prices to play this season. The Bulls will travel this coming season to play Auburn, a national title contender, and Wisconsin, a perennial Big Ten Conference power. Although Buffalo appears destined to be humiliated, the university will receive a $600,000 appearance check for each game.

Scheduling easy victories is a tradition as timeless in college football as fight songs and homecoming. But after the National Collegiate Athletic Association approved the addition of a 12th regular-season game for the coming season, the appearance fees began climbing in a bidding war for games against college football’s flotsam and jetsam.

Buffalo became such a hot commodity in the off-season that it broke contracts with West Virginia and Rutgers because Auburn and Wisconsin were offering at least double the money. Troy State of Alabama will receive $750,000 from Nebraska to play in Lincoln this season. Louisiana-Lafayette will get the same amount from Tennessee next year.

In fact, demand for sacrificial lambs has become so great that the supply of lambs is running out:

With the weakest teams in Division I-A becoming more expensive, top programs are stooping lower for competition. Iowa, a Big Ten favorite this year, wooed Montana, a Division I-AA program, for $650,000.

Texas A&M and Texas have bought into the sacrificial lamb market big-time. Get a load of A&M's non-conference schedule: Citadel, Louisiana-Lafeyette, Army and Louisana Tech. Other than the Ohio State game, Texas' non-conference schedule is about as bad -- North Texas, Rice and Sam Houston State.

Interestingly, in the structure of the major college sport that football should be emulating -- baseball -- there is little incentive to play sacrificial lambs because playing better competition enhances a team's post-season tournament prospects and seeding. Would such a structure work in major college football? Sure, but it's going to take courageous and creative leadership from the university presidents of the top major college football programs to effectuate such a change, and that type of leadership in academia is in short supply these days.

Posted by Tom at 6:30 AM | Comments (5) |

Barbaro continues to beat the odds

This NY Times article continues its excellent coverage of the recovery of Kentucky Derby champion Barbaro from a life-threatening injury suffered in the Preakness Stakes (previous posts here). The article does a good job of explaining the tremendous resources that are being deployed to attempt to save the horse's life, which could still have great financial value if the horse can recover sufficiently to be leased as a stallion for breeding purposes.

Although Barbaro's health is still at great risk, the thoroughbred no longer needs the sling that was used immediately after surgery to keep weight off the horse's legs and the epidurals that he required for pain have not been necessary for several weeks. Moreover, Barbaro is now being walked outside each day in a field and being allowed to graze. As a result, the horse is appearing to become stronger by the day. Stay tuned.

Posted by Tom at 5:59 AM | Comments (0) |

Quattrone walks, but what about Andersen?

As noted earlier here, former CSFB investment banker Frank Quattrone's ordeal (previous posts here) came to a close yesterday as the Court in the criminal case against him approved a a deferred-prosecution agreement under which the charges will be dropped in a year and Mr. Quattrone was not required to pay a fine or admit any wrongdoing. Thus, apart from the enormous cost of the prior litigation and having this talented businessman out of work for the past five years, at least Quattrone can now get back to his career and, as Peter Lattman notes, recover $120 million that he has coming to him.

But the same cannot be said for Arthur Andersen, which was prosecuted out of business under similar circumstances as Quattrone. Just as Mr. Quattrone was never charged any criminal offense related to investment banking, Andersen was not prosecuted for providing fraudulent accounting services to its client, Enron. Rather, appealing to the dynamics of resentment of wealthy and powerful business interests in the aftermath of Enron's demise, Quattrone and Andersen were both indicted for obstruction of justice and witness-tampering related almost entirely to a single email that Quattrone and Andersen in-house counsel Nancy Temple sent reminding employees of each organization to clean up there files in accordance with each company's document retention policy. Instead of undertaking the difficult task of proving that either Quattrone or Andersen were really involved in any fraudulent acts, prosecutors in both cases portrayed the emails as a criminal coverup and then liberally "suggested" in inflammatory public statements and during trial that Quattrone and Andersen were involved in fraud.

The prosecution of Quattrone was costly, but that cost pales in comparison to the economic damage that the Justice Department caused in prosecuting an American accounting institution and its 30,000 employees out of business. Despite that, similar misguided prosecutions continue. This is simply not a rational deployment of the prosecutorial resources of our criminal justice system.

Posted by Tom at 5:13 AM | Comments (0) |

August 22, 2006

John McClain can't help himself

Given the largely meaningless nature of NFL pre-season football, I'm holding off on posting my annual pre-season blog post on the Texans until the first regular season game is close at hand. But given the Chronicle's blanket coverage of the Texans' training camp, it's a bit hard to overlook the cheerleading doozies that the Chronicle writers generate almost daily about their hometown heroes.

With the exception of a couple of comments such as this one last week, Chronicle NFL columnist John McClain has generally been more careful this pre-season than he was last pre-season when he was predicting that the Texans were primed to make a playoff run. However, McClain simply cannot contain his cheerleading for the Texans at times, such as the following comment about Texans guard Chester Pitts, who is competing for a job in the area of one of the Texans' traditionally weakest areas, the offensive line:

"It seems strange that Pitts is having to compete for a starting job, considering he's never missed a play in four seasons while moving between left tackle and left guard."

Pitts has been a member of the Texans offensive line that has been the worst pass-blocking line in the NFL for the past four seasons. Last season, Football Prospectus attributed 40 of the quarterback sacks that QB David Carr endured directly to blown blocks of the offensive line, which was the highest number in the NFL among offensive lines. Pitts had six of those blown blocks for sacks, which was the second-most on the line (Todd Wade, who is no longer with the team, was the leader with eight). Pitts has also been one of the most-penalized offensive linemen in the NFL during his four years in the league.

Thus, from my vantage point, it does not seem strange at all that Pitts is competing for a starting job. In fact, it reflects progress that he is.

Posted by Tom at 6:20 AM | Comments (0) |

What's really behind the Andrew Young-Wal-Mart flap

This NY Times article reports on the flap over the recent remarks of Andrew Young, the colleague of Martin Luther King who went on to become the first black congressman from Georgia since Reconstruction and one of Atlanta's most prominent politicians.

Young had recently become a consultant for Wal-Mart, but that particular job didn't last long after Young was quoted during a recent interview "defending" Wal-Mart as not being so bad for black people because Jewish, Arab and Korean store owners had traditionally “ripped off” black neighborhoods by “selling us stale bread and bad meat and wilted vegetables.” Concluding that Young's defense of the company was faint praise, Wal-Mart understandably let him go.

As would be expected, the Times article focuses on the angst that Young's remarks has generated among the folks who are preoccupied with race relations, but Larry Ribstein observes the much more troubling dynamic that is truly behind Young's remarks:

I don't believe civil rights hero Young is a bigot. But unfortunately the bigoted nature of his remarks will draw attention from the real prejudice here -- against capitalism. It's really all about people who want to make a profit, and those who insist that this is a zero sum game that has to be ripping off the customers.

The result of this attitude is anti-Wal-Mart laws like the one coming up in Chicago that hurt the very people Young fought to defend. Even when hired to defend Wal-Mart, Young couldn't resist bashing it, and others who tried to make a buck.

Meanwhile, along the same lines, Jeff Matthews analyzes Senator Joe Biden's recent anti-Wal-Mart remarks and how they reveal the leadership void within the Democratic Party. Check it out.

Update: The always-insightful Holman Jenkins of the Wall Street Journal chimes in with this column ($) echoing the same thoughts and more.

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

Grundfest takes on the sad case of Jamie Olis

A heavyweight has entered the ring on behalf of Jamie Olis.

The WSJ's Peter Lattman reports that Joseph A. Grundfest, W.A. Franke Professor of Law at Stanford University and one of the leading securities law experts in the US, is donating his services to Olis on a pro bono basis in regard to the key issue of market loss in Olis' upcoming September 12th resentencing hearing. Olis' case is arguably the most egregious product of the government's increasing criminalization of business interests in this particular post-bubble era.

In Olis' most recent sentencing memorandum (a bookmarked version of the memo is available for download here), Grundfest and Olis appellate attorney David Gerger expand on many of the points that have been raised over the past two and a half years on this blog regarding the flimsly basis of the government's position that Olis should be imprisoned for at least the next two decades, particularly the government's disingenuous market loss theory. As noted in this previous post relating to the Enron-related Nigerian Barge trial, the prosecution misled U.S. District Judge Sim Lake regarding the proper method for calculating the market loss in connection with the original sentencing of Olis, and then has ignored subsequent decisions (see also here) that have undermined the spurious market loss theory that it has employed in the Olis case.

The prosecution in the Olis case won't be able to dodge facing the misleading nature of its market loss theory any longer. In a devastating analysis of the government's market loss theory, Professor Grundfest's declaration attached to the Olis' sentencing memo disassembles the work of the prosecution's market loss expert, Frank Graves. Professor Grundfest summarizes his critique in the following manner:

The Graves Declaration fails to establish that Project Alpha inflated Dynegy's stock price on any date by any amount. It also fails to establish that any portion of Dynegy's stock price decline on April 25, 26, or May 8, 2002 is attributable to Project Alpha. the Graves Declaration's methodology for measuring price declines caused by Project Alpha is also internally inconsistent with Graves' prior report in another matter. It also fails to recognize that Dynegy's stock price rebounded significantly on April 30 (the second trading day following April 26) when the market was informed that concerns regarding Project Alpha had been exaggerated. It further fails to adjust for the presence of confounding information that entered the market on May 8, 2002. The Graves Declaration also relies on methodologies that are broadly criticized in the scholarly literature, and repeatedly commits logical errors. The Government has therefore failed to demonstrate through the Graves Declaration that Project Alpha has caused any loss whatsoever to any investor at any time. . . .

The methodologies relied upon by the Graves Declaration to calculate the number of damaged shares have been broadly criticized in the academic literature and have been rejected by several courts. The damage measure relied upon by the Graves Declaration has also been broadly criticized int eh academic literature because, even if perfectly applied, it fails to measure the economic loss caused by aftermarket frauds such as Project Alpha. This well-established literature helps explain the Second Circuit's observation that the methodology applied by the Graves Declaration can lead to "Draconian, exorbitant damages, out of all proportion to the wrong committed . . ." [citation deleted]

Finally, . . . the magnitude of a settlement paid to resolve a private class action lawsuit is not a reliable measure of the loss caused by a fraud.

Other than that, Professor Grundfest would presumably conclude that the Graves analysis is just fine. ;^) Professor Grundfest's declaration is one of the most thorough and well-reasoned analyses that I have read regarding the vagaries of attempting to attribute huge market losses in a company's stock to one of a plethora of events that affect that company's stock price. I recommend reading the entire declaration.

Although the focus of the Olis sentencing memo is market loss, one other part of the memo jumped out at me. On pp. 5-6, the memo outlines over a dozen company executives, Arthur Andersen accountants, and outside lawyers -- almost all of whom were senior in status to Olis -- who participated in devising and analyzing the transaction for which Olis was prosecuted. Nevertheless, only Olis and his two immediate supervisors (who copped pleas and testified against Olis) were prosecuted. As Larry Ribstein has eloquently contended over the past two years on his blog and most recently in his paper The Perils of Criminalizing Corporate Agency Costs, are we really prepared to throw all corporate actors in prison for participating in the type of risk-taking involved in Project Alpha?:

Disciplining agents also requires pinning responsibility for corporate failure on particular people in the organization. If someone should be criminally responsible for obscuring Enron's financial condition, who should it be – the midlevel executives who designed the misleading structures, the executive officers who signed off on them, the independent directors who failed to object, the lawyers, accountants, banks and other executives who enabled them, anybody who knew about them and didn’t speak up, the whistleblower who told only those within the organization, or all of the above?

Unfortunately, in Olis' case, it turned out to be the junior executive taking directions from superiors who had the audacity to assert his innocence at trial. Chalk it up to the increasingly high price of asserting innocence in business-related prosecutions.

Although Professor Grundfest's salutary effort on behalf of Olis is heartening and one that should buttress his already exemplary reputation, Olis still faces daunting hurdles to having a just sentence assessed in his case. Professor Grundfest's analysis of Graves' market loss opinion reveals its essential lack of objectivity, so Graves will literally be fighting for his expert witness life in this case. Thus, it should be expected that he will respond to the Grundfest declaration by attempting to bolster his earlier opinion.

Similarly, Judge Lake, who levied the original 24 year sentence against Olis, will be resentencing Olis. Inasmuch as no judge -- particularly one as competent as Judge Lake -- enjoys being reversed by an appellate court, Olis faces the risk that Judge Lake will attempt to justify his original harsh sentence during the resentencing. However, similar to his colleague Ewing Werlein, Judge Lake is a man of unusual depth, so my bet is that he will recognize that the prosecution misled him regarding the market loss issue during Olis' original sentencing and will correct the stark injustice of that sentence. As Professor Ribstein points out in his post on the Grundfest declaration, "Olis' sentence has become an important symbol of the excesses of criminal prosecutions in the wake of Enron. Freeing Olis would be a start toward correcting these injustices."

Posted by Tom at 4:11 AM | Comments (0) |

August 21, 2006

An Enronesque public scam

This NY Times article reveals a scam that New York AG ("attorney general" or "aspiring governor," take your pick) Eliot Spitzer won't touch with a ten-foot pole:

Every year since 1999, New York City has reported that it has all the money it needs to pay for the pensions that have been promised to city workers.

With the retirement plans said to be financially sound, state politicians have happily showered city employees with generous pension enhancements — annual cost-of-living increases, holiday bonus payments, early retirement with full benefits — that are the envy of private-sector workers, whose pension benefits have eroded.

But a close inspection of city pension records shows that the funds committed to the plans may fall well short of the city’s promises to hundreds of thousands of current and retired workers. They look fully funded chiefly because the city has been using an unusual pension calculation that does not comply with accepted government accounting rules. Even the city’s chief actuary, who helps produce the annual reports, says the official numbers are “meaningless” when it comes to showing the plans’ financial health.

The chief actuary, Robert C. North, has prepared a little-noticed set of alternative calculations showing that the gap in the pension funds could be as wide as $49 billion. That is nearly the size of the city’s entire annual budget and the equivalent of the city’s publicly disclosed outstanding debt.[ . . .]

Senior New York City officials bristled at the suggestion that their annual reports were flawed and strongly disagreed with any suggestion that the pension plans might be under-funded.

“The city’s pension funds are 99.6 percent funded by acceptable methods for evaluating and disclosing pension fund assets and liabilities,” said Martha Stark, the New York City finance commissioner. . . .

Ms. Stark said that she was sure of the pension funds’ health because the city was contributing responsibly to them every year, and because she was confident that the investments in the funds would meet their targets of 8 percent average annual returns over the long haul. Many other public plans have investments targets in this range. [. . .]

Asked why the pension funds appeared to be fully funded back in 1999, when they were swollen with gains from the stock market boom, and still appear to be almost fully funded now — after losing billions of dollars in the stock market and granting billions of dollars worth of new benefits — she said that the numbers were “smoothed” to avoid short-term fluctuations. She also noted that the city had been increasing its annual contributions in recent years.

Arnold Kling observes that "if you assume 8 percent annual returns, many things are possible. Until the actual returns come in." As noted in this earlier post regarding accounting for other government liabilities, the government bears the entire risk of a shortfall in regard to these public pension plans and, thus, the only way they remain viable is through the same type of alleged accounting gimmicks and deficient disclosure for which the Justice Department prosecuted Arthur Andersen out of business, Ken Lay to death and Jeff Skilling to prison, probably for much of his remaining life.

So, what is Spitzer or the Justice Department going to do about the same type of activity in regard to public pensions?

Posted by Tom at 6:59 AM | Comments (0) |

Judge Jack v. AG Abbott

Based on this NY Sun article, it sure doesn't appear as if U.S. District Judge Janis Jack of Corpus Christi is going to be exchanging holiday greeting cards with Texas Attorney General Greg Abbott this year.

Judge Jack publicly rebuked Abbott last week when she learned that evidence in the investigation into potentially fraudulent silicosis claims in her court had disappeared after Abbott's office sent four armed agents on June 23 to seize thousands of x-rays from a Corpus Christi storage facility that was maintaining the documents for the federal court. After Judge Jack learned about the seizure on July 5 and ordered Abbott's office to return the documents by high noon the following day and Abbott's office returned about 40 boxes, the records custodian reported to Judge Jack that 152 X-rays had disappeared. After an assistant attorney general informed Judge Jack during a conference call between the court and attorneys involved in the cases last week that Abbott's office does not have the missing x-rays, Judge Jack blasted Abbott:

"The arrogance of taking those documents from a federal court-supervised depository is astounding. The attorney general of the state of Texas has exhibited a total disregard for the rule of law by doing this."

Judge Jack made waves last year when she recommended throwing out all but one of about 10,000 silicosis lawsuits because the diagnoses appeared to be "manufactured for money." Her ruling has generated a number of investigations, including by a congressional committee, federal prosecutors and Abbott's office.

Hat tip to Walter Olsen for the link to the NY Sun article.

Posted by Tom at 5:15 AM | Comments (0) |

The PGA channels the Ryder Cup

As Tiger Woods strolled to his 12th victory in a major golf championship yesterday (second now only to Jack Nicklaus' 18 major wins), the big news out of Medinah was the confirmation of the ten players who earned a spot on this year's American Ryder Cup team, which will compete against the European team on September 22-24 at the K Club in Straffan, Ireland, about 25 miles west of Dublin:

1. Tiger Woods
2. Phil Mickelson
3. Jim Furyk
4. Chad Campbell
5. David Toms
6. Chris DiMarco
7. Vaughn Taylor
8. J.J. Henry
9. Zach Johnson
10. Brett Wetterich

American Ryder Cup captain Tom Lehman will announce his two captain's choices this morning. Davis Love and Stewart Cink appear to be the likely choices, although a resurgent Corey Pavin appears to have a real chance. Meanwhile, Lawrence Donegan of the Guardian reports that European team captain Ian Woosnam has asked Ireland's Darren Clarke, whose wife died of cancer last week, to accept one of the European captain's choices and then makes the following observation about Lehman's options and the American team:

If Woosnam faces difficult decisions ahead, however, they are nothing to the selection worries of his American counterpart. Tom Lehman, who will announce his team later today, has been hidebound by a selection process that has given too much weight to victories in weaker PGA Tour events, with the upshot that many on the fringes of his team are rookies or players whose records suggest that they may be capable winning a tournament in Albuquerque but might crumble under the pressure of the Ryder Cup.

By the way, of the four American rookies who made the team (Taylor, Johnson, Henry and Wetterich), only Henry made the cut in the PGA and he played the final three rounds in 4 over to finish at even par 288 for the week, tied for 41st. The European team -- which has won the last the last two Ryder Cup competitions -- will be finalized on Sept. 3. Five European players have qualified so far -- David Howell, Colin Montgomerie, Jose Maria Olazabal, Henrik Stenson and Luke Donald, who clinched his position with a tie for third in the PGA.

Meanwhile, Woods was every bit as dominant and in control in winning the PGA as he was last month in winning the British Open, and Donegan's European perspective on Woods' performance is one of the best. Although Woods played brilliantly on the front nine, Woods put this one away from my perspective on the 11th hole when, after hitting a poor tee-shot into heavy fairway rough, Woods hammered his approach shot out of the mess to eight feet and then holed the birdie putt. Inasmuch as virtually every other competitor would have been scrambling for a par under the same circumstances, Woods' birdie signaled decisively to the field that the only competition yesterday was for second place and Ryder Cup points.

Posted by Tom at 4:31 AM | Comments (0) |

August 20, 2006

Jose de Jesus Ortiz said what?

As the Stros playoff hopes fade with each passing loss, the Chronicle's Stros beat writer -- Jose de Jesus Ortiz -- continues to show that he does not truly understand baseball and, as a result, has become a conduit of Stros propaganda to the public.

Fresh off his woeful analysis of Preston Wilson, de Jesus Ortiz blows it again with this fawning column entitled Patience, coaching help turn Taveras around in which he contends that good coaching from the Stros coaching staff has helped Taveras generate his current 22-game hitting streak and make him a good player again. In so doing, de la Ortiz shows that -- despite covering baseball on a daily basis -- he is incapable of properly analyzing the subject that he covers. For example, de la Ortiz observes as follows:

"As a rookie in 2005, Taveras was the Astros' most pleasant surprise while finishing second in the voting for National League Rookie of the Year honors. He steadily improved his defense and used his near world-class speed to leg out infield singles.

[Stros Manager] Phil Garner opted to sacrifice offense for defense at shortstop, but somehow Taveras' solid offense wasn't deemed strong enough to keep his strong defense on the field as Chris Burke got hot in late May."

As noted last season here, Taveras had a below National League-average season in 2005 and had no business being considered for Rookie-of-the-Year honors. Although Taveras' defense did improve over the course of last season, Taveras was one of the worst hitters among regular players in the National League last season. His slugging percentage (.341), on-base average (.325), extra-base hits (20 in 635 plate appearances), walks (25) and runs created against average (-13) were all far below an average National League hitter. Moreover, Taveras is even worse this year with a .329 slugging percentage, .324 on-base average and an RCAA of -17, meaning that Taveras has generated 17 fewer runs this season than an average National League hitter would have generated making the same number of outs that Taveras has made. Even Taveras stolen base rate (34 out of 45 or 75%) is not all that great considering his speed. In short, Taveras is not a good offensive player and, as noted in this earlier post, has absolutely no business batting lead-off in the relatively rare occasions that he should be playing.

de la Ortiz goes on to extol Taveras' current 22-game hitting streak, which is one of those misconstrued statistics that is often used to suggest a ballplayer is better than he really is. In truth, Taveras has hit mostly singles during his streak and, thus, has still been a below National League-average hitter during those 22 games. Although that performance has been marginally better than Taveras usually would provide over a 22-game span, it still does not make Taveras even an average National League hitter and certainly does not mean that Taveras "has turned his season around."

Taveras is fast and fun to watch run. And yes, he is an above-average centerfielder defensively and will have an occasional good game where his speed will make a difference. But that does not change the fact that Taveras is a below National League-average hitter and is not having a good season. The real story here is that the Stros' reliance on below National League-average hitters such as Taveras, Wilson, Ausmus, and Everett is one of the primary reasons that the club is now playing like a below National League-average team, is unlikely to make the playoffs this season and will likely trend downward in coming seasons unless that reliance is lessened. Indeed, about the only positive thing that can be said about Taveras' play is that at least he is playing better than Jose de la Ortiz is thinking or writing.

Taveras' career batting statistics are below.

Update: Kevin Whited catches de la Ortiz in yet another embarrassing column.

The hitting statistics are defined here

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

August 19, 2006

Quattrone's ordeal is coming to a close

After five years, two trials, an appeal, two regulatory investigations, thousands of hours of tedious legal work, multi-millions of dollars in legal cost and untold damage to the attorney-client privilege, the Justice Department has finally decided to cut its losses with regard to its misguided harassment of former Credit Suisse investment banker Frank Quattrone (previous posts here). This NY Times article reports that Mr. Quattrone has entered into a deferred-prosecution agreement with the Justice Department that will impose no penalty and will not require Quattrone to admit any wrongdoing. The deal is scheduled for court approval this coming Tuesday in New York City.

So, yet another chapter closes in the story of the Great Waste of the federal government's dubious criminalization of business in this post-bubble era.

Posted by Tom at 8:09 AM | Comments (0) |

Not enough choices?

This NY Times article passes along the news that the last remaining area-wide radio station in the Los Angeles market playing country music has changed its format, so the second-largest radio market in the country joins New York (the largest radio market) and San Francisco (the fourth largest) as big markets that no longer host a radio station with a country music format. Inasmuch as such a development seems unthinkable in a country-music hotbed such as Houston, the Times article provides the following explanation:

“Country is a tough format to do in a market that is an ethnic melting pot,” said Rick Cummings, Emmis’s president of radio. “The appeal of the format is fairly limited when it comes to ethnicity.” In Los Angeles, he said, stations that cater mostly to white listeners are “playing for less than 25 percent of the marketplace on a good day.”

And while country music may draw a more diverse audience in cities like Houston, he added, it simply does not in Los Angeles, where Latino listeners have a wealth of choices for entertainment in both English and Spanish.

So, Latinos are forced to listen to country music more in Houston than in L.A. because they lack the variety of entertainment choices of the Los Angeles area?

My sense is that the Times reporter has not checked out the Houston radio market recently.

Posted by Tom at 4:51 AM | Comments (0) |

August 18, 2006

Now, let me get this straight

I am not astute politically, so I usually leave analysis of such matters to more politically savvy bloggers, such as local pundits Charles Kuffner at Off the Kuff, as well as Kevin Whited and Anne Linehan over at blogHouston.net.

And I also certainly don't condone public officials using their clout to obtain favorable treatment for their family members and friends who mess up and find themselves embroiled in the criminal justice system.

However, after reading this article, it occurs to me that the attorney general of New Jersey was forced to resign earlier this week essentially because she forgot some some items in her boyfriend's car and the boyfriend wasn't wearing a seatbelt.

What am I missing?

Posted by Tom at 6:47 AM | Comments (1) |

More on the benefits of oil and gas trading

Following on this post from earlier in the week on the benfits of speculation in the oil and gas commodities markets, Chronicle business columnist Loren Steffy pens this column (related podcast here) along the same lines that includes an interview with Craig Pirrong, the director of energy markets for the Global Energy Management Institute at the University of Houston's C.T. Bauer Business School. As Pirrong notes, the current criticism of speculators in the oil and gas markets is simply the latest salvo in a long and misguided American tradition of scapegoating speculators:

Investors [in oil and gas commodities markets] . . . make bets on what the price of oil will be. If they're right, they make money. If they're wrong, they lose.

That, Pirrong says, allows producers to share the risk that comes with volatile prices. Speculators, using derivatives and other financial tools, can offer producers more stable price contracts. The stability makes it easier for oil companies to invest in new production or new technology, he says.

"We'd be worse off if they hadn't come in," Pirrong says.

Historically, though, speculators have been blamed when markets have gone awry. When Congress attempted to regulate agriculture markets in the 1880s and 1890s, speculators were cited as a threat to price stability, Pirrong says. The same was true in the 1920s, when regulation was enacted amid slumping commodity prices that were again blamed on speculators.

"This is just the latest chapter in a very old story," Pirrong says.

Posted by Tom at 6:17 AM | Comments (0) |

Merck's bad day

As with the baseball season, Merck & Co.'s defense of the Vioxx litigation is a marathon and not a sprint (previous posts here). Yesterday's sprint was not good for Merck, but my sense is that it's still way too early to write off Merck's defense strategy as a failure at this point.

The bad news for Merck was that a federal jury in New Orleans awarded $51 million to a former FBI agent who was taking Vioxx when he suffered a heart attack, while a New Jersey judge threw out a verdict in Merck's favor from a trial there last fall. The NJ judge has a reputation of being plaintiffs-friendly, so that ruling was not all that much of a surprise and, despite the federal venue of the New Orleans trial, New Orleans is still a plaintiffs-friendly environment. After a year of Vioxx trials, the scorecard reflects that Merck and the plaintiffs each have four victories, and there are at least another eight or so Vioxx trials scheduled in both state and federal court through the end of this year.

Ted Frank, who has been following the Vioxx litigation closely, has the best analysis of yesterday's developments in the overall context of the Vioxx litigation (see also here and here). Peter Lattman also has an interesting post in which he includes an email exchange with Houston plaintiff's lawyer, Mark Lanier, who was the first lawyer to hammer Merck in a Vioxx trial.

Posted by Tom at 5:35 AM | Comments (0) |

August 17, 2006

Conn Gen fires back in the Bagwell disability claim lawsuit

This earlier post examined the initial exchange between the parties in the Houston Astros' lawsuit against Connecticut General Insurance Co. over the insurer's denial of the Stros' claim under the disability insurance contract that the Stros bought from the insurer on their injured slugger, Jeff Bagwell (previous posts here).

Now, Conn Gen has fired back with a response (download link here) to the Stros' argument that the club's extra-contractual claims (juicier from an evidentiary and damages standpoint) should be tried along with the club's more pedestrian breach of contract claim under the policy. In short, the insurer argues that there is little legal precedent for the Stros' desire to have all of the claims adjudicated in one lawsuit and that the risk of prejudice to the insurer in having the claims tried together strongly mitigates in favor of severance of the claims for seperate trials.

I will be surprised if Connecticut General does not win this initial skirmish over severance of the Stros' claims.

Posted by Tom at 6:44 AM | Comments (0) |

Politics of academia run amok

My late father treasured his career in academic medicine, but he did concede that the politics of academia were rather byzantine at times. However, even my father didn't expect those politics to get this brutal:

The dean of medicine at the University of Texas Medical Branch at Galveston has temporarily stepped down, three weeks after her husband was mugged in the aftermath of announced layoffs at the school.

Dr. Valerie Parisi will "focus her attention on personal and family members" until Oct. 1, said a news release on UTMB's Web site Wednesday.

Parisi had led reorganization efforts that include layoffs of about 1,000 employees and a change in professors' salary structure — moves that have roiled the campus.

Soon thereafter, on July 27, Parisi's husband, Gary Strong, was attacked by three masked men while walking his dog. One of the men told Strong his wife "doesn't know who she's (expletive) with," leading police to believe the attack may have been related to the layoffs.

Sheesh!

Posted by Tom at 5:27 AM | Comments (0) |

The best major?

The fourth and final major professional golf tournament of the year begins today in the western suburbs of Chicago as the PGA Championship returns to Medinah Country Club. Golf World's Tim Rosaforte provides ten reasons why the PGA is not only the most improved major golf championship, but in some ways the best. Geoff Shackelford has the scoop on Medinah.

This year's PGA Championship has the additional intrigue of the game within the game -- the competition for a spot on the US Ryder Cup team -- and that pairing for the first two rounds of Master's champ Phil Mickelson, US Open champ Geoff Ogilvy and British Open champ Tiger Woods doesn't hurt the marquee value of the tournament, either.

Finally, don't miss this entertaining Boston Globe story on Houstonian and Champions Golf Club owner Jack Burke's victory at the 1956 PGA Championship. At that very different time and during a much less lucrative stage of professional golf, Burke played 155 holes over five days to beat seven opponents (the PGA Championship was match play back in those days) and win the 38th PGA Championship. For his trouble, Burke received a check for $5,000, which turned out to be hot. By the way, the article passes along Burke's following analysis of why Woods is the top professional golfer in the world right now:

"He's the only one who understands how to play the game, how to make shots. The other guys? They're all out there plumb-bobbing the world, worrying about their launch angle and their ball speed. But Woods is like the great pool player -- he doesn't see the cue, doesn't see the ball, he just sees the whole game."

Posted by Tom at 4:52 AM | Comments (0) |

August 16, 2006

Do as I say? Or as I do?

According to this report, Illinois senator Barack Obama warned citizens at his 50th Town Hall meeting about gas guzzling vehicles and proclaimed that such vehicles are a big part of the blame for the world's higher temperatures. In urging citizens to switch to higher mileage hybrids, Obama observed that "it would save more energy, do more for the environment and create better world security than all the drilling we could do in Alaska."

After the meeting, Obama proceeded to leave in his SUV, a GMC Envoy.

But it's not finished. When Obama's staff saw the news report, they sent the following email to the station that published the report:

A story your station ran seems to imply that my boss Senator Obama was being hypocritical when he said Americans should drive more fuel-efficient vehicles though he was himself traveling in an SUV.

The SUV in question, though, is a Flexible Fuel Vehicle that can run on E85, which the Senator fills it with wherever its available (and in fact he's worked very hard to provide tax credits to increase availability and access to e85). I believe in light of these facts the story is misleading and warrants a correction.

Let's get this straight. Don't drive an energy guzzling SUV. But it's o.k. to do so if your SUV can guzzle primarily ethanol, for which the Senator promotes tax breaks because it is uneconomic to produce otherwise, partly because of the energy cost involved in such production.

Something tells me that Senator Obama and his staff should shut up on this particular issue. Hat tip to Steven Hayward.

Posted by Tom at 7:39 AM | Comments (1) |

Christine Hurt is working on an interesting paper

Christine Hurt, Conglomerate blogger, former Houstonian and currently the Richard W. and Marie L. Corman Scholar in the University of Illinois College of Law, is working on an interesting paper that she describes here:

The prosecutorial response to white collar crime post-Enron has had some setbacks. In both the Arthur Andersen case and the Enron Nigerian Barge case, appellate courts eventually said that the fact pattern did not constitute the crime in question. However, as welcomed as these decisions are, they cannot turn back time. Arthur Andersen was destroyed by the investigation and conviction and, like a corpse after an autopsy, cannot be brought back to life. The defendants in the Nigerian barge case will never get back the years they spent defending themselves and actually living in prison, not to mention the untold defense costs. I am writing a paper on the relative burdens on the various parties in criminal and civil corporate misconduct cases, and I find it interesting that we have so many requirements and presumptions to save corporate civil defendants from vexatious litigation and exorbitant discovery costs, but we seem not to care about the corporate criminal defendant who must wait until a jury verdict or an appellate ruling to determine whether the prosecution was without merit.

Music to my ears! ;^)

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

On the Iraqi counterinsurgency and radical Islam

In this short review of Thomas Ricks' new book, Fiasco (Penguin July, 2006), renowned British military historian and author Sir John Keegan (previous posts here) provides a typically lucid explanation of "how a brilliantly executed invasion turned into a messy counterinsurgency struggle." Keegan concludes with the following observation:

[W]hat may underlie the whole insurgency, . . . is the rise of Islamic militancy across the Muslim world.

America was so certain that what it had to offer--modern government in an incorrupt and democratic form--was so obviously desirable that it failed altogether to understand that the Iraqis wanted something else, which is self-government in an Islamic form. It is too late now to start again.

All that can be hoped is that the U.S. Army will prevail in its counterinsurgency and, as Mr. Ricks's gripping accounts of the troops in action suggest, it may still. His description of Marines "attacking into an ambush" leaves one in no doubt that American soldiers know combat secrets that their enemies do not and cannot match. Whether pure military skills will win the war, however, cannot be predicted.

Meanwhile, in this NY Times op-ed, Yale fellow Irshad Manji, author of The Trouble with Islam Today: A Muslim’s Call for Reform in Her Faith (St. Martin's 2004) reminds us that radical Islamic jihadists do not require foreign policy grievances to justify their violence, and that support of responsible Islamic leadership is the key to success in the Middle East:

Whether in Britain or America, those who claim to speak for Muslims have a responsibility to the majority, which wants to reconcile Islam with pluralism. Whatever their imperial urges, it is not for Tony Blair or George W. Bush to restore Islam’s better angels. That duty — and glory — goes to Muslims.

And finally, Will Wilkinson points to this wonderful, short Bertrand Russell essay that identifies one of the key human dynamics underlying not only radical Muslin jihadists, but demagogues in any culture:

Ignore fact and reason, live entirely in the world of your own fantastic and myth-producing passions; do this whole-heartedly and with conviction, and you will become one of the prophets of your age.

Posted by Tom at 5:08 AM | Comments (1) |

August 15, 2006

An underappreciated factor in NFL games

Aaron Schatz is the lead author of Pro Football Prospectus 2006 (prior post here), which is an innovative effort to develop the same type of objective statistical framework for evaluating professional football players that Bill James and other sabermetricians have made standard in evaluating Major League Baseball players. I have read much of the first two Football Prospectus editions that have been published, and I recommend that you pick up this season's edition if you are interested in the NFL and the evaluation of football players.

In this interesting NY Times article, Schatz takes on an issue in regard to NFL games that the NFL hierarchy does not enjoy talking about -- that is, the wide discrepancy in the number of penalties called in NFL games between the various referee crews that call such games.

As Schatz notes, one of the Super Bowl participants could well have been determined by that factor last season as the Seattle Seahawks barely survived their November game against the New York Giants even though the officiating crew called an astounding 19 penalties against the Giants (the average NFL team was penalized 8.5 times a game last year). Not surprisingly, the crew that officiated that game called more penalties than any other NFL referee crew last season. Schatz goes on to observe that certain crews tend to call substantially more of certain types of penalties -- such as false starts and pass interference -- than other crews.

The NFL promotes the image that its games are decided on the field by the players and their coaches. But Schatz's research is indicating that who referees a particular game may be as big a factor as the participants.

Posted by Tom at 7:22 AM | Comments (3) |

Update on Barbaro's condition

This NY Times article provides an update on the rehabilitation of Kentucky Derby champion Barbaro's injured leg and related complications. Previous posts on Barbaro are here. The bottom line is that Barbaro is not out of the woods by any means, but is showing progress. Interestingly, the biggest problem that the horse faces in his fight for survival is not the original injury, but an infection to the hoof that often occurs after such an injury.

Posted by Tom at 7:06 AM | Comments (0) |

The WSJ said what about the Enron Task Force?

The Wall Street Journal has had a spotty record in covering the corporate scandals that emanated from the stock market bubble of the late 1990's, as noted earlier here, here and here in regard to its coverage of the Enron case. In the better-late-than-never department (Larry Ribstein notes that the WSJ seems to have changed its tune), the WSJ Editorial Board published this editorial ($) today entitled Enron Overkill that decries the Enron Task Force's hyper-aggressive use of the honest services statute to obtain unjust convictions of the four Merrill Lynch executives in the Nigerian Barge case, which resulted in a severe rebuke of the Task Force's tactics from the Fifth Circuit Court of Appeals. The WSJ editorial criticizes the federal government's broad use of the vague honest services statute as a trump card in white-collar criminal prosecutions.

But after failing to place the issue in the context of the more troubling trend of the government wrongfully prosecuting business interests, the WSJ editorial ends with this doozy of an observation about the Enron Task Force:

[The] Enron Task Force has a good record overall, bringing solid fraud cases and winning some 30 convictions. In the Merrill case, however, it stretched the law to send a political message -- and has now received a well deserved rebuke.

In short, the WSJ lauds the Task Force for doing a good job overall, but notes that they messed up in this one particular case and got caught.

In what parallel universe is America's leading business newspaper living? Does the WSJ Editorial Board really believe that the following amounts to "a good record overall?":

The Task Force's inflammatory public relations campaign demonizing anything having to do with Enron;

The Task Force's poor trial record involving former Enron executives (four convictions out of nine Enron executives tried to date) in a venue severely-biased against such executives;

The Task Force's questionable tactic of bludgeoning former Enron executives into plea bargains;

The Task Force's disingenuous market loss arguments in connection with the sentencings of the four Merrill Lynch executives in the Nigerian Barge case, which argument contradicted the Justice Department's position in a case pending before the U.S. Supreme Court at the time;

The overreaching nature of the Task Force's decision to prosecute Arthur Andersen out of business, which the Supreme Court noted in its unanimous reversal of that conviction, and the incalculable cost of such prosecutions;

The Task Force's elicitation of false testimony from former Enron executive Ken Rice, its key witness in the Task Force's miserably failed first Enron Broadband prosecution;

The Task Force threats toward two witnesses in the Broadband trial -- Beth Stier and Lawrence Ciscon -- who testified favorably for the defense in the first Enron Broadband trial and a Task Force prosecutor's violation of the judge's instruction not to question witnesses on certain subjects during that trial;

The Task Force's dubious policy of fingering potential defense witnesses as either unindicted co-conspirators or targets of the Enron criminal investigation to deter such witnesses from testifying for defendants in the Enron criminal trials, including the strong evidence that the Task Force threatened witnesses (see also here and here) favorable for the defense in the Lay-Skilling trial;

After bagging the conviction of Ken Lay, the Task Force prosecutors bragging to the NY Times that they had trumped up a weak case against Lay in order to get a conviction of the former Enron chairman;

The Task Force's characterization of "harmless error" in regard to strong evidence of jury misconduct in the trial of former Enron Broadband executive Kevin Howard;

The appallingly arrogant "end justifies the means" attitude expressed by the former head of the Enron Task Force in regard to the prosecution of Arthur Andersen and other Enron-related cases;

The negative effect that the Justice Department's criminalization of business mindset is having on how foreigners perceive the risk of investment in American business markets; and

The negative ripple effect (see also here) that the Task Force's tactics have had on such fundamental rights as the attorney-client privilege and the presumption of innocence in prosecutions of business executives.

If the WSJ editorial board considers the foregoing "a good record overall," then I shudder to think about the carnage to justice and the rule of law that would result from a record in such matters that the WSJ would consider poor. In reality, the WSJ has fumbled the ball badly in defending business from the federal government's increasing criminalization of corporate agency costs in the post-Enron era. A few editorials sniping at isolated issues relating to that criminalization is not going to change the WSJ's abject failure in that regard.

Posted by Tom at 4:38 AM | Comments (1) |

August 14, 2006

Nice gig if you can get it

Cato Institute tax director Chris Edwards -- author of Downsizing the Federal Government (Cato 2005) -- addresses in this Washington Post article the myth that a job in the federal government involves much of a sacrifice of what the "servant" could earn in the private sector:

The Bureau of Economic Analysis released data this month showing that the average compensation for the 1.8 million federal civilian workers in 2005 was $106,579 -- exactly twice the average compensation paid in the U.S. private sector: $53,289. If you consider wages without benefits, the average federal civilian worker earned $71,114, [which is] 62 percent more than the average private-sector worker, who made $43,917.

The high level of federal pay is problematic in and of itself, but so is its rapid growth. Since 1990 average compensation for federal workers has increased by 129 percent, the BEA data show, compared with 74 percent for private-sector workers.

Why is federal compensation growing so quickly? For one thing, federal pay schedules increase every year regardless of how well the economy is doing. Thus in recession years, private pay stagnates while government pay continues to rise. Another factor is the steadily increasing "locality" payments given to federal workers in higher-cost cities.

Rapid growth in federal pay also results from regular promotions that move workers into higher salary brackets regardless of performance and from redefining jobs upward into higher pay ranges. [. . .]

According to Bureau of Labor Statistics data, the rate of layoffs and firings in the federal workforce is just one-quarter the rate in the private sector. [. . .]

One sign that federal workers have a sweeter deal than they acknowledge is the rate of voluntary resignation from government positions: just one-quarter the rate in the private sector, the BLS data show. Long job tenure has its pros and cons, but the fact that many federal workers burrow in and never leave suggests that they are doing pretty well for themselves.

And that's not even considering the enormous cost to businesses and lives resulting from the misguided work of some of those well-paid federal employees.

Posted by Tom at 6:17 AM | Comments (1) |

So, what's the problem again?

This Norm Alstar/NY Sunday Times article notes a recent analyst report suggesting that a stampede of institutional investors, mainly pension funds, into the commodities futures markets is actually the chief cause of the rise in oil prices, which the report characterizes as “a bubble.” Maybe so, but as James Hamilton noted in regard to the contango situation in such markets awhile back, this is a good thing and not an ominous one as the Times article suggests.

If the speculators turn out to be right that prices will be higher in the future, then they will earn a profit and provide a benefit for consumers. By bidding up the price of oil today, oil inventories rise as owners save for the higher future price and consumers conserve so that more oil is available in case there is a shortfall in the future.

However, if the speculators bet wrong, then they will have bought high and sold low. That results in consumers paying more now for oil products than would be necessary if the future price of oil could be predicted with certainty. But consumers' increased payments for oil products will pale in comparison to the money that the speculators will lose on their bets of higher prices in the future. Consequently, the only reason to be worried about all this is if you are concerned about the speculators losing huge amounts of money when the bubble bursts.

In short, as former Exxon CEO Lee Raymond reminds us about oil prices when he was asked recently whether he thinks that they will continue to go up:

"Maybe. But I'll bet they'll be lower at some point."

Posted by Tom at 5:43 AM | Comments (0) |

Missing the point on Preston Wilson

The Stros mercifully waived Preston Wilson over the weekend, who has been one of the worst-producing regularly-playing outfielders in the National League this season (Wilson's .714 OPS was 79th in the National League among regular players). The news would not normally justify even a blog post, except for the fact that Wilson's exit exposed the vacuous nature of the analysis that the Houston Chronicle serves its readers on almost a daily basis from two of its sportswriters, columnist Richard Justice and Stros beat writer Jose de Jesus Ortiz.

As regular readers of this blog know, I sized up the Stros decision to acquire Wilson accurately when the club picked him up as a free agent in January and questioned de Jesus Ortiz's fawning praise of the acquisition at the time. Not that such a prediction was particularly difficult. If one took the time to analyze Wilson's career statistics objectively, then it was easy to conclude that he wasn't a very good player and was a longshot to help the Stros much. Neither de Jesus Ortiz nor Justice bothered to undertake such an analysis of Wilson.

For example, the following is Justice's take on the Stros decision to acquire Wilson at the time the club acquired him in January:

Preston Wilson is a good addition. Period. Don't nitpick it. Don't try to figure out where he's going to play.

He can play any outfield spot, he didn't cost much money and he's a big league hitter.

I have no idea how he'll be used. Phil Garner probably doesn't know either. But he's a player. You can't get too many of them.

But Justice's original support of the Stros' decision to acquire Wilson does not stop Justice in his column today from using the decision to let Wilson go to engage in one of his favorite pastimes -- taking childish potshots at Stros owner Drayton McLane and GM Tim Purpura:

Preston Wilson's departure in the middle of a pennant race came at an odd time. Even odder is why he was signed in the first place. [. . .]

His signing made sense only from the narrow window through which Purpura was viewing his team. He had just seen the Astros hit .203 in the World Series and wanted to add a veteran bat.

So he went for one of the few Uncle Drayton would spring for. He compounded the mistake by guaranteeing Wilson playing time.

Bad idea. The problem with players like Wilson is they're not good enough to carry a team through tough times. And when they're not hitting, they don't do enough other things to merit being on the field. The Astros already had too many high-strikeout players on their roster. They shouldn't have added another.

Unlike Justice, de Jesus Ortiz at least admits in this column that he was wrong in originally supporting the Stros' decision to acquire Wilson. But that candor doesn't lead to any better analysis of the decision to let him go:

"When Astros general manager Tim Purpura gave Wilson a one-year, $4 million deal in January, the contract was praised throughout Houston."

Oh, really?

"[H]e's a far superior player than Jason Lane, but Lane's contract is cheap enough that the Astros would have lost him to another team through waivers. . . . Wilson is far more accomplished [than Lane], so the Astros should be praised for letting him go instead of making him sit on the bench with no chance of starting."

Wilson is far more accomplished than Lane? Wrong.

Covering the local baseball team is not a big deal, so maybe none of this matters. But many casual followers of Major League Baseball read the Chronicle's articles on the Stros, and one would think that the newspaper's editors would want to provide them a better quality of analysis than that provided by Justice and de Jesus Ortiz. It would seem likely that indulgence of such mediocrity could easily drift into more important areas of the newspaper.

Posted by Tom at 4:37 AM | Comments (0) |

August 13, 2006

Be careful replacing that divot

Larry Dierker thinks that some of baseball's rules are absurd, but even the most arcane of baseball's rules don't hold a candle to several of golf's rules. This James Achenbach/Golf Week column describes the byzantine manner in which U.S. Golf Association officials penalized 17-year old Esther Choe of the Scottsdale, Arizona in her recent third-round match during the U.S. Women's Amateur over -- you guessed it -- a divot:

After winning her first two matches over the Witch Hollow course at Pumpkin Ridge, Choe was bidding for a third-round victory and a spot in the quarterfinal round. Suddenly and decisively, she was derailed by a divot.

A what? Yes, that's right – a divot. Choe lost the 18th hole as well as the match, against 26-year-old Katarina Schallenberg of Germany, because she replaced a divot. [. . .]

As Choe took her stance to hit a shot to the 18th green, an old dried-up divot stuck to her right shoe. She instinctively shook the divot off her shoe and replaced it in its original position. She again assumed her stance, hitting her ball onto the green.

Oh, the heavens sometimes unleash such terrible fury on the innocents among us.

USGA officials immediately surrounded Choe. They didn't beat her with sticks, or anything like that, but they did rule that she lost the 18th hole because she was guilty of improving her stance.

Whattt?

That's right – improving her stance. The official reasoning went like this: When the divot came out of its resting place, she had worsened her stance (no penalty). When she replaced it, she thus had improved her stance (from worse to better, as it were).

What Choe should have done was simply kick the divot aside without replacing it. There would have been no penalty.

However, replacing it was a violation. In match play, the penalty was loss of hole. In stroke play, it would have been two strokes.

"Well, it doesn't make much sense to me," Choe said, "but I guess I understand what they are saying. I shouldn't have put it back."

All our golfing lives, beginning when we are junior golfers, we are told to replace divots. We are told to keep the course neat and tidy. We are told that we can be a golf course superintendent's best friend.

And what happened here? Choe was penalized for doing exactly what we are always instructed to do. There is something very wrong. This rule (13-2) needs a little finetuning.

Note to my golfing buddies -- Be careful replacing those divots. I'm watching you.

Posted by Tom at 8:34 AM | Comments (0) |

August 12, 2006

The political implications of the NatWest Three case

This earlier post focused on the political controversy that arose in the UK over the case of the NatWest Three, the three former London-based National Westminster Bank PLC bankers who are charged in Houston with bilking their former employer of $7.3 million in one of the schemes allegedly engineered by former Enron CFO Andrew Fastow and his right hand man, Michael Kopper. After the intervention of British Prime Minister Tony Blair, the British Parliament declined to block the extradition of the three former bankers, who are now living in Houston while awaiting trial on the charges.

However, one question that arose immediately after the NatWest Three arrived in Houston was why the three former bankers were not required like other defendants in Enron-related criminal cases to undergo a "perp walk" -- i.e., the process by which federal authorities parade white-collar criminal defendants in handcuffs and sometimes leg chains in front of the media as they enter the federal courthouse for their initial appearance in court. Well, according to this Telegraph.co.UK article, Attorney General Alberto Gonzales telephoned the US Marshals Service in Houston on the afternoon the three arrived in Houston and instructed the marshals to remove their hand and leg chains. So much for the ruse that Enron-related criminal cases are not subject to political pressure, wouldn't you say?

Meanwhile, in another interesting development, the entertainment value of the NatWest Three case increased last this week with the news that famed Houston criminal defense attorney Dick DeGuerin -- he of Joseph Durst fame -- has been hired by Giles Darby, one of the NatWest Three. With colorful Houston-based criminal defense lawyer Dan Cogdell already representing NatWest Three defendant David Bermingham, the defendants are preparing a formidable legal team and signaling an aggressive defense of the Enron Task Force's charges.

Posted by Tom at 6:55 AM | Comments (0) |

August 11, 2006

More Chronicle Cheerleading for the Texans

After Richard Justice's fawning column yesterday on new Texans' receiver Eric Moulds, Chronicle columnist John McClain gets into the cheerleading act today as he states the following regarding Texans placekicker Kris Brown in his daily report on the Texans' practice:

Despite the uncertainties in the return game, Marciano has no concern about three members of his special teams — kicker Kris Brown, punter Chad Stanley and long snapper Bryan Pittman. All are solid veterans whose consistency helps a coach sleep better.

"I don't know what I'd do without those guys," Marciano said.

McClain might have a point about Stanley and Pittman, but it's ludicrous to characterize Brown as a consistently good kicker. Last season, Brown blew at least a couple of games by missing quite makeable field goals and only two kickers in the entire NFL (Ryan Longwell and Paul Edinger) made a lower percentage of field goal attempts between 30 - 39 yards than Brown. And just to show that last season was not an aberration, Brown has been in the lower third of NFL kickers in overall accuracy for the past five consecutive seasons.

Thus, rather than "a solid veteran whose consistency helps a coach sleep better" and who draws $1.2 million in base salary, Brown actually ought to be fighting for his job during training camp. But the Chronicle never has let objective criteria get in the way of cheerleading for the Texans in the optimistic glow of the pre-season.

Posted by Tom at 7:02 AM | Comments (6) |

James Fallows - "We've won the War on Terror"

One of the unfortunate results of the news regarding the latest foiled terrorist attack in London is that it will inevitably distract from a point that James Fallows (previous posts here) makes in this excellent Atlantic Monthly article -- we've won the War on Terror.

In preparing the AM article, Fallows -- who is of America's most gifted investigative reporters on foreign policy and military issues -- interviewed over 60 leading terrorism analysts and concludes that terrorists, through their own efforts, can damage, but not destroy us. Their real destructive power lies in what they can provoke us to do. Fallows goes on to observe that if we allow fear rather than reason to control our reaction to terrorism, then groups such as Al Qaeda can provoke the US into launching unnecessary wars that are far more damaging to our ultimate cause than the terrorist attack that provoked the war in the first place. Accordingly, Fallows urges in the article that the US drop the war metaphor in continuing its fight against groups such as Al Qaeda.

As we assess further information regarding the London airline terrorist plot, Fallows' cogent optimism reminds us that fear is the fuel for demagogic threats to the freedom that we most cherish. Check it out.

Update: Stratfor echos Fallows' optimism in his pre-London terrorist plot article with this post-plot analysis:

There are four takeaway lessons from this incident:

First, while there obviously remains a threat from those not only sympathetic to al Qaeda, but actually participating in planning with those in the al Qaeda apex leadership, their ability to launch successful attacks outside of the Middle East is severely degraded.

Second, if the cell truly does have 50 people and 21 have already been detained, then al Qaeda might have lost its ability to operate below the radar of Western -- or at least U.K. -- intelligence agencies. Al Qaeda's defining characteristic has always been its ability to maintain operational security. If that has been compromised, then al Qaeda's importance as a force has diminished greatly.

Third, though further attacks could occur, it appears al Qaeda has lost the ability to alter the political decision-making of its targets. The Sept. 11 attack changed the world. The Madrid train attacks changed a government. This failed airliner attack only succeeded in closing an airport temporarily.

Fourth, the vanguard of militant Islamism appears to have passed from Sunni/Wahhabi al Qaeda to Shiite Iran and Hezbollah. It is Iran that is shaping Western policies on the Middle East, and Hezbollah who is directly engaged with Israel. Al Qaeda, in contrast, appears unable to do significantly more than issue snazzy videos.

Will Wilkinson agrees and notes that the response in terms of airline security needs to be proportionate to the true risk.

Posted by Tom at 6:38 AM | Comments (2) |

Throw them all in the clink

As noted earlier here and here, the practice of backdating stock options is fundamentally a disclosure issue. However, that has not stopped federal prosecutors from criminalizing the practice as new indictments are now announced almost daily.

In this typically lucid post, Larry Ribstein wonders where this current spike in criminalizing a perhaps unfortunate but nevertheless common corporate practice will end:

The question is where to draw the line between criminal and civil liability for these violations. Are we going to throw a significant fraction of corporate America in jail? . . . backdating could become the Rubicon of criminalizing agency costs.[. . .]

The line-drawing problem becomes particularly clear in light of the news just yesterday that the vaunted Pixar apparently had its own backdating problem, and that one of the grants was to its guiding creative spirit, John Lasseter. So, again, how far are we going to go? Should we say that it’s ok to jail the heretofore little known Kobi Alexander, but draw the line at the famous John Lasseter, or Steve Jobs, Pixar’s co-founder and board chair?

Or is the key that Jobs himself didn’t receive options but Alexander did? But, then, how distinguish Brocade, discussed in my first post on criminalizing backdating, where the indicted ceo apparently also did not gain?

Or is the distinction that the board may have authorized the options in Pixar, but the indicted Comverse agents apparently tricked their board? But the board apparently approved the Brocade options.

Also, the evidence of who did, and knew, what may get a little tricky. A member of the Comverse board’s compensation committee was Alexander’s sister. And note that a lot of this evidence of a coverup is based on affidavits by Comverse board members, who appointed the internal review committee.[ . . .]

In the Pixar case, the WSJ story implies but doesn’t say that the board was in on the scheme. It notes that one compensation committee member was Jill Barad, former Mattel ceo, who also served on Microsoft’s compensation committee while Microsoft was backdating. Another director was famed lawyer Larry Sonsini, who was also on the Brocade board and had long advised Apple and Jobs. . .

But what difference should it make whether the insiders fooled the board, and therefore the shareholders, or the board was in on the scheme? Is it, again, just that we don’t want to send the likes of Barad and Sonsini to jail, but it’s ok to catch the small fry? And can we be sure who was in on what?

Or should the key distinction as to criminalization be whether the insiders lied to the auditors, as may have happened in Comverse? If so, why is it worse to lie to the auditors than to your board?

This whole business of fixing responsibility within large organizations, or even not so large, is part of the problem of criminalizing agency costs. As I’ve said in my short paper The Perils of Criminalizing Agency Costs:

Disciplining agents also requires pinning responsibility for corporate failure on particular people in the organization. If someone should be criminally responsible for obscuring Enron's financial condition, who should it be – the midlevel executives who designed the misleading structures, the executive officers who signed off on them, the independent directors who failed to object, the lawyers, accountants, banks and other executives who enabled them, anybody who knew about them and didn’t speak up, the whistleblower who told only those within the organization, or all of the above?

Elsewhere on the criminalization of business front, the publicly-owned company BetOnSports -- whose CEO David Carruthers was yanked off a plane while changing planes and arrested a couple of weeks ago (previous posts here) and which has provided a recreational service enjoyed by millions of Americans (online betting) -- announced yesterday that it was shutting its operations down and "refocusing" its business on the Asian markets. The development represents the first time that I can recall that a publicly-traded company on the London Stock Exchange has shut down its operations under pressure from United States prosecutors.

So, what's next? Shut down all the popular online Fantasy Football operations? That would be absurd, you say. Well, maybe not. At least the statistics don't appear to be the property of the professional sports leagues.

Federal prosecutors assert that offshore Internet casinos such as BetOnSports violate the Federal Wire Act of 1961, but that legal theory is wholly untested except arguably in the area of sports betting. BetOnSports raised over $100 million when it went public on the London Exchange in July 2004 and its market cap immediately before the arrest of Carruthers was about $235 million. Some of the company's largest institutional shareholders are funds controlled by major American investment houses, such as Goldman Sachs, Merrill Lynch and Morgan Stanley.

So, if BetOnSports is truly guilty of racketeering, then does that mean that Goldman Sachs, Merrill Lynch and Morgan Stanley are also criminally responsible for helping to finance that racketeering?

Don't bet against it.

Update: Christine Hurt over at the Conglomerate provides these related insights into the enormous cost of prosecutorial overreaching.

Posted by Tom at 5:19 AM | Comments (0) |

August 10, 2006

Stros 2006 Review, Part Seven

As the Stros pass the 7/10's pole and turn on to the stretch run of the 2006 National League regular season (previous 10% segment summaries are here), there is good news and bad news.

First, the good news. For the first time since the first 10% segment of the season, the Stros actually finished their most recent 10% segment -- their seventh of the season -- with a winning record.

The bad news is that the Stros' record for that seventh segment (9-7) is not indicative of the type of rally that the this year's club needs to become a realistic contender for the National League wild-card playoff berth for the third season in a row.

Nevertheless, the Stros continue to muddle along on the fringes of the NL playoff race. Due to the fact that there are not any really good NL teams this season except for the Mets, the 55-58 Stros remain only 3.5 games behind the Reds in the NL wild-card playoff race and only six games behind the slumping Cardinals in the NL Central race (the 59-55 Reds have pulled to within 2.5 games of the 61-52 Cards in that race). So, the Stros are still within striking distance in the NL wild-card race and could even contend for the NL Central lead if the Cards and Reds both collapse down the stretch. But that latter scenario is highly unlikely and even getting to 85 wins on the season -- which will probably be the minimum wins necessary to win the wild-card playoff berth -- would require that the Stros go 29-19 over the remainder of the season. Given the Stros' traditionally strong pitching, that type of finish is certainly not impossible, but there has been little indication during this season to date that this particular Stros club is going to be able to pull it together sufficiently to make that kind of run.

As predicted in the previous post in this series, the return of Clemens (2.32 ERA/14 RSAA) and Brandon Backe (3.69 ERA/3 RSAA) -- as well as the banishment of Buchholz (5.96 ERA/ -16 RSAA) and Rodriguez (5.22 ERA/-7 RSAA) to AAA Round Rock -- has improved the Stros pitching staff's aggregate runs saved against average ("RSAA," explained here) to 32, which has vaulted the Stros to 6th from 13th among the 16 NL pitching staffs.

Unfortunately, despite the explosion in last night's game, the Stros' chronic hitting woes are diluting the effect of the pitching staff's improvement on the overall club's performance. After idling around National League-avereage in runs created against average ("RCAA," explained here) for most of the season, the Stros hitting overall declined dramatically over the past 16-game segment, falling to an aggregate RCAA of -33, the lowest of the season to date and 12th among the NL clubs.

The club's hitting and pitching statistics to date are set forth below, and pdf's of the current hitting stats are here and the current pitching stats are here, courtesy of Lee Sinins' sabermetric Complete Baseball Encyclopedia. The abbreviations for the hitting stats are defined here and the same for the pitching stats are here:

The decline in the Stros' overall RCAA reinforces the club's unbalanced hitting lineup and its steady decline in hitting over the past six seasons. 1B/RF Lance Berkman (45 RCAA/.419 OBA/.625 SLG/1.044 OPS) remains one of the best hitters in the game, but only a few of the rest of the Stros hitters are above-National League-average hitters and one of those -- 1B Mike Lamb (8/.365/.513/.878) -- is blocked from playing while Berkman rehabs his injured groin while playing first base. Moreover, CF/2B Chris Burke has tailed off considerably to 1/.353/.442/.795 at the 7/10's pole from 10/.377/488/.859 after 60% of the season, and 3B Morgan Ensberg (13/.394/.485/.879) continues to show a dramatic power drop-off since his return from a shoulder injury. Meanwhile, RF Luke Scott has given the club a nice boost after being called up from Round Rock (14/.459/.691/1.151), but the verdict is still out whether a 28-year old career minor leaguer will be able to sustain that level of hitting over a prolonged period of Major League play, and mid-season acquisition 3B/OF Aubrey Huff -- despite his big game last night -- still has not really caught fire (3/.388/.500/.888).

On the other side of the hitting coin, the other Stros hitters continue to bleed badly. SS Everett (-22/.295/.331/.626), CF Taveras (-14/.329/.339/.668), C Ausmus (-29/.298/.292/.590) and LF Preston "Double-Play" Wilson (-20/.309/.405/.714); hit into 18 double plays!) -- are among the least productive regularly-playing hitters in the National League. Even future Hall-of-Famer Bidg is showing his age (-5/.327/.458/.785). At least Manager Phil Garner has finally placed Wilson squarely on the bench in favor of Scott, but he still tends to play Taveras and Ausmus more than their hitting performance justifies.

Nevertheless, the work of the pitching staff is encouraging. Roy O (3.27 ERA/24 RSAA) and Clemens remain two of the best starters in the National League and, as noted above, Backe has been a considerable improvement over either Buchholz or Rodriguez. The Stros are still searching for a fifth starter and will try AAA-sensation Jason Hirsch in that slot this Saturday, but even Pettitte -- who has had a miserable season to date -- has shown signs of improvement over the past 16 games (went from 5.50 ERA/-12 RSAA to 4.96/-6 RSAA). Although Manager Garner stubbornly insists on continuing his worst bullpen pitcher -- Lidge (5.65 ERA/-6 RSAA) -- as the closer when Wheeler (3.06 ERA/8 RSAA) should be in that role, the remainder of the staff has been above-National League-level in terms of RSAA, which bodes well for the rest of the season.

So, while I continue to believe that this Stros club is not quite strong enough to pull out another playoff berth, improved pitching gives them a shot in a weak National League if the hitting stablizes at an average or just below-National League-average level. The Stros have seven games remaining on the current homestand (1 more against the Pirates, 3 against the Padres (58-55) and 3 against the Cubs (48-65)) before going on a three-city, 11 game road trip that will probably determine whether the club will still be in the race for a playoff berth come September. If the Stros win, say, 12 of those next 18 games, then watch out.

Posted by Tom at 6:51 AM | Comments (0) |

Cheerleading for the Texans

As regular as the sun rising, the Chronicle sports staff reverts to hometown cheerleaders during each pre-season training camp of the Houston Texans, chloroforming readers with puff pieces such as this Richard Justice column on new Texans wide-receiver, Eric Moulds.

For the first three seasons of the Texans, the training camp stories all lapped up the optimistic theme that the team was making steady progress behind the well-coordinated plan of owner Bob McNair, GM Charlie Casserly and head coach Dom Capers that had led the expansion team to the brink of being a playoff contender. Unfortunately, that theme fell rather flat last season as the bottom fell out for the Texans during a horrifying 2-14 season. It was rather comical to watch as Chronicle sportswriters John McClain and Justice went from fawning praise of the Texans during the pre-season to acerbic criticism just several weeks later during that awful season.

Given last year's disastrous season, the Chronicle's overall theme this pre-season is a bit different -- the team has overhauled management and personnel, and the new, better-organized coaching staff and the new players who the Texans have brought in are moving the Texans in the right direction again. Maybe so, but there is no meaningful analysis in Justice's column on Moulds that would lead an objective observor to conclude that the receiver is a significant upgrade over the seemingly serviceable Jabar Gaffney, the former Texans receiver who Moulds replaced.

Compare Justice's fawning piece on Moulds with the following pre-season analysis by the folks at Football Prospectus, who base their evaluations of players primarily on objective criteria rather than subjective considerations:

Moulds has been an average receiver at best for several years now; even back in 2003, teammates such as Bobby Shaw outranked him in DPAR ("points above replacement-level player"). But the national media still considers Moulds an elite talent because the Bills throw him 150 passes per year, and he still has one or two 9-catch, 120-yard games each season, usually when the Bills are being beaten handily. The new Bills brain trust finally figured out that Moulds' best years were behind him, and they did everythign but throw his cleats into a trash dumpster in their effort to get rid of him this spring. Moulds is a top candidate to fall off the map in 2006.

In short, based on objective criteria, Moulds' decline in productivity has been masked by the fact that his former team threw to him frequently, albeit ineffectively. Thus, objective analysis suggests that the Texans overpaid for Moulds and that he will not be any better than a replacement-level player. Justice's column might make you feel better about Moulds for awhile, but my sense is that most serious followers of the Texans and the NFL prefer the cold, hard facts to the type of subjective blather that the Chronicle regularly fees us during the Texans' pre-season camp.

By the way, for current information on the Texans, check out the Chronicle's new blog, Stephanie Stradley's Texans Chick. Stephanie is an unabashed Texans' fan, so she is unfailingly optimistic about the team and its players. However, she does pass along quite a bit interesting information and analysis on the Texans and its players that is not available from the Chronicle's other sources. I recommend giving Stephanie's blog a look.

Posted by Tom at 5:56 AM | Comments (8) |

August 9, 2006

What might have been

This NY Times article checks in on Mets centerfielder, Carlos Beltran, who the Stros rented during their incredible second half drive to win a 2004 post-season berth and come within a game of their first World Series. Beltran had a disappointing, injury-plagued season last year (-2 RCAA/.330 OBA/.414 SLG/.744 OPS), his first as a Met, but he is making up for it this season (39/.384/.619/1.003) as the Mets are the favorite at this point to win the National League pennant.

Although Beltran is a wonderful talent, my sense still is that the Stros probably made the right move in not paying the $120 million over seven years that it would have taken to retain him after the 2004 season (see earlier posts here and here). Lance Berkman is only a year older than Beltran and has generated over 200 more RCAA than Beltran during their respective careers, so it would be hard to rationalize paying Berkman less than Beltran. That would tie up over $40 million in payroll for a long-term in two players, which the Stros learned was a tough pill to swallow during the declines of former sluggers Jeff Bagwell and Richard Hidalgo. Moreover, just to put it in the perspective of this season, even if Beltran were added to the Stros lineup, the club's combined RCAA/RSAA numbers reflect that the Stros would still be behind the Cardinals and the Reds in the National League Central race, although they obviously would be closer than they are now and would have a better chance of overtaking those two clubs for a post-season berth.

Thus, even as good as Beltran is, I still like better the flexibility that the Stros will have after this season when about $40 million in payroll attributable to Bags, Pettitte, Clemens, etc. comes off the books. That should be enough to buy the 2-3 additional hitters that the club needs to turn around the downward trend in hitting that the Stros have experienced since the 2000 season.

Posted by Tom at 5:53 AM | Comments (0) |

Houston's ambassador of learning

One of the many people that make Houston such a remarkable place is John Lienhard, the longtime University of Houston engineering professor who is the author and voice of the popular KUHF radio series -- Engines of our Ingenuity -- which is carried across the nation by more than 40 National Public Radio affiliates. As Professor Lienhard describes it, Engines is "a mix of history, engineering and science. The programs describe the machines that make civilization run, and the people who devise them."

Lienhard recently completed his 2,000th segment of Engines, so the Chronicle's science writer Eric Berger used the occasion to interview Professor Lienhard. A part of the interview is here, and Eric's podcast of the entire 30-minute interview is here. The following is Professor Lienhard's response to Eric's inquiry as to what he considers the greatest invention:

I don't like to identify "greatest inventions." I think inventions flow and swirl and intertwine with one another. There was a wonderful piece by Salman Rushdie where he described stories as flowing like different colors in a great sea, and what you do is dip in and pull out one of those stories. But they're intermixed and intertwined with other stories. There's the constant flow and ebb of stories, and the same is true of invention. And there's another reason. In the book I finally say we're in trouble when we talk about inventions. The airplane was not an invention. It was something else. I give it a word, multigenium. ... They are these accrued inventions that we finally point out and say this is the final thing, like Wright Brothers' airplane, or Morse's telegraph, which followed something like 70 years of working with electric telegraphy. We call that thing in a finished form the invention, but it's not an invention.

Posted by Tom at 5:25 AM | Comments (0) |

El Paso's rebound

Just a year of so ago, Houston-based El Paso Corp. looked as if it was a prime candidate to be the city's next big corporate reorganization.

That's not the case anymore. Earlier this week, El Paso announced that it had earned a $141 million profit in the second quarter on revenue of $1.21 billion. The natural gas pipeline company had a net loss of $246 million (38 cents a share) on $1.17 in revenues during the second quarter last year.

Good job, El Paso.

Posted by Tom at 5:07 AM | Comments (0) |

August 8, 2006

The WSJ gets it right on the BetOnSports case

After being oddly slow in objecting to the prosecutorial abuses of businesspeople that have resulted in this, this and this (among many others), the Wall Street Journal ($) editorial page finally gets it right in this editorial on the outrageous conduct of the Justice Department in arresting BetOnSports executive David Carruthers while he changed planes in Dallas. Read the entire piece, but the conclusion sums up the outrage well:

. . . BetOnSports and Mr. Carruthers are not charged with dishonest behavior toward their customers. They are being told that a business they believed was legal was a criminal enterprise even if it was being run in the open. That suggests that prosecutors believe they have the right to enforce compliance with even ambiguous U.S. laws on any business, wherever based, solely because some of the people accessing their site happen to be Americans. As a legal theory, this is a stretch. But as an excuse to incarcerate a foreign national just passing through, it smacks of a politically opportunistic prosecution.

Posted by Tom at 7:24 AM | Comments (1) |

You just knew this was coming

Following on posts here and here from last year regarding the City of Houston's ill-advised investment in several downtown hotel properties, this Matt Stiles/Chronicle article reports that the City had decided to "restructure" (translated: Can you please pay us something?) $15 million in second lien loans on the Magnolia and the Crown Plaza hotels in downtown Houston rather than attempting to foreclose on the properties and deal with the messy business of attempting to eke out a profit from the two highly-leveraged properties in an overbuilt downtown hotel market.

As noted in this previous post, the Magnolia and Crowne Plaza are poster projects for why local governments should rarely get involved in financing projects that private financing sources will not support. In reality, the City is nothing more than a preferred equity investor in these highly-leveraged properties and, thus, its entire $15 million investment is at serious risk of being lost. That type of loss is not going to break the City of Houston finances, but the quality of the City's investment decision should give one pause when considering the amount of money the City is throwing around in regard to these equally dubious investments.

Posted by Tom at 6:21 AM | Comments (3) |

The first salvo in the Bagwell disability claim lawsuit

Connecticut General Insurance Co. -- the lead insurer on the Stros' disability insurance policy on the best player in the history of the Houston Astros Baseball Club, Jeff Bagwell -- has fired the first salvo in the Stros' lawsuit against the insurer for its failure to pay the Stros' claim under the policy resulting from Bagwell's injured right shoulder. Previous posts on the issues relating to the disability insurance policy on Bagwell are here.

In this motion, Connecticut General requests that U.S. District Judge Keith Ellison sever the two extra-contractual claims from the Stros' contractual claim that the Stros have asserted against the insurer in the lawsuit and abate the extra-contractual claims pending the disposition of the lawsuit over the contractual claim. The insurer points out that Bagwell's play late last season during the Stros' playoff drive and in the post-season raises a legitimate question as to whether Bagwell is totally disabled. Accordingly, Connecticut General argues that the Stros' extra-contractual claims (which are a basis for greater damages against the insurer than breach of contract damages, which are fixed by the insurance policy) likely have no merit and that, even if those claims survive the breach of contract lawsuit, the insurer should not have to defend against those claims until after the dispassionate breach of contract claim is sorted out.

As one would expect, the Stros' response (download link here) suggests that the circumstances surrounding Connecticut General's denial of the club's claim under the Bagwell disability insurance policy indicate a reasonable basis for the extra-contractual claims and, thus, that Judge Ellison should exercise his discretion to have a jury consider all of the claims in one efficient trial. Even if the Stros are successful in opposing Connecticut General's motion to sever and abate the extra-contractual claims, this is likely not the last that the club will hear on this issue before trial. The insurer will probably request a summary judgment dismissing the entire lawsuit before trial, but almost certainly will request a partial summary judgment attempting to knock out the extra-contractual claims before trial. If Connecticut General is successful on that move, then the insurer would limit its risk of taking the case to trial to the contractual damages, which is a flyer that Connecticut General might just be willing to take.

Posted by Tom at 5:20 AM | Comments (0) |

More good news from the Fifth Circuit in the Nigerian Barge case

James Brown -- the only former Merrill Lynch executive who remains in prison after last week's Fifth Circuit decision reversing and vacating the convictions of the four former Merrill Lynch executives in the Nigerian Barge case -- appears to be on the verge of being released from prison pending further disposition of his appeal.

In this motion filed with the Fifth Circuit, Brown's attorneys argue persuasively that the year that Brown has already served in prison in regard to his conviction on perjury and obstruction of justice charges -- combined with the fact that substantial issues remain as to whether Brown's conviction on those charges should stand (read Judge DeMoss' dissent from the Fifth Circuit decision on that issue) -- is more than enough to justify Brown's release from prison pending further disposition of his appeal, including possible re-sentencing (the Fifth Circuit vacated Brown's conviction on wire fraud and conspiracy charges along with those of the other three former Merrill Lynch executives).

In a pleasant surprise, the Justice Department filed this short response to Brown's motion not opposing Brown's release. Inasmuch as it would be highly unusual for the Fifth Circuit not to grant such an unopposed motion under the circumstances, Brown should be released from prison shortly, perhaps as early as today.

Does the Justice Department's response signal something? After last week's decision in the case, Ellen Podgor, among others, speculated that the DOJ might request that the Fifth Circuit conduct an en banc review of the panel's decision. That's certainly possible, but the DOJ should be careful what it asks for -- my sense is that a good number of other Fifth Circuit judges would view the case much as DeMoss did. If the DOJ is concerned that the panel's decision is going to be dished up to them already in virtually every deprivation of honest services case, then just think how often the DOJ would have to confront an en banc decision that adopts Judge DeMoss' dissent as the majority view. As a result, although the DOJ may still request it, I would not be surprised if the DOJ passes on en banc review in this case.

Update: The Fifth Circuit has now issued this order directing Brown's release. What a wonderful surprise for the Brown Family and hopefully the beginning of the end to a long nightmare.

Posted by Tom at 4:32 AM | Comments (1) |

August 7, 2006

Another Longhorn winner

The University of Texas has a storied golf program, and another chapter was written in that story yesterday as Sherri Steinhauer won the Women's British Open yesterday at Royal Lytham. It was Steinhauer's third Women's British Open victory, but the first since 2001 when the tournament became a major on the LPGA circuit.

Steinhauer is a native of Wisconsin who attended the University of Texas, where she was an All-American in 1985. She was the MVP of the UT women's golf team in 1983 and '85.

Posted by Tom at 7:56 AM | Comments (0) |

Who exactly is Judge Kaplan?

This Paul Davies/Wall Street Journal Weekend ($) article provides a profile of U.S. District Judge Lewis Kaplan, the judge who is at the center of the KPMG tax shelter case.

Judge Kaplan is quite a character, as reflected by his following response to one of the banes of federal judges -- the wrong-number caller to the in-court conference speaker phone that is used by out-of-town attorneys to participate in hearings that do not necessitate their in-person appearance in court:

During one hearing, an outside caller was mistakenly connected to the courtroom telephone.

"Hello?" the caller said over the speaker phone.

Judge Kaplan deadpanned: "Punch one if you want to enter your credit card number."

Posted by Tom at 6:32 AM | Comments (0) |

Perpetuating the Enron Myth

As noted in this prior post on the death of former Enron chairman Ken Lay, the myth of Enron is now so fully embraced within American society that otherwise intelligent people reject any notion of ambiguity in addressing facts and issues that call the Enron morality play into question.

One of the poster boys for the myth of Enron is Chronicle business columnist Loren Steffy, who has made a good part of his living for the past several years appealing to resentment and scapegoating rather than fair-minded analysis in covering the aftermath of Enron's demise. Steffy's latest effort in that regard is this column on the Fifth Circuit's recent ruling eviscerating most of the Enron Task Force's dubious Nigerian Barge prosecution of four former Merrill Lynch executives. Steffy dismisses the ruling as "a quagmire" and "thick mumbo jumbo" that "only a lawyer could love," and suggests that none of the three judges on the Fifth Circuit panel who wrote the decision "completely agreed with each other." Compare Steffy's treatment of the case with this analysis from a year ago, which foreshadowed much of the Fifth Circuit's decision.

But the best indication that Steffy's appeal to resentment trumps sound analysis or good judgment is his statement that none of three Fifth Circuit judges involved in Fifth Circuit's decision "completely agreed with each other." That's simply false, as each of the Fifth Circuit judges agreed with each other that the conviction of Merrill Lynch executive William Fuhs should not only be vacated, but reversed and rendered (i.e., the case cannot be re-tried). In so doing, each of the judges agreed that the Enron Task Force had produced insufficient evidence during its case-in-chief against Fuhs for a jury to find him guilty beyond a reasonable doubt of any crime. The ruling is a strong rebuke of the Task Force's decision to prosecute Fuhs in the first place.

Inasmuch as that part of the Fifth Circuit's decision does not fit neatly into the myth of Enron, Steffy ignores it (after misrepresenting it). The human tragedy of a young man with a wife and two young children being unjustly imprisoned for almost a year and having his professional career shattered by a wrongful prosecution does not even register on Steffy's radar screen.

That it does not reflects the shallow nature of Steffy's analysis well. As Larry Ribstein has observed in his ongoing series of posts regarding the disingenuousness of NY Times business columnist Gretchen Morgenson:

The last thing the journalists want is the sort of analytical clarity that we need for useful public policymaking. Rather, they want to obfuscate differences to enlarge the apparent, though not actual, size of the story.

Posted by Tom at 5:30 AM | Comments (1) |

August 6, 2006

Say what?

According to this Chronicle article, State Representative Harold Dutton chose the keynote address at the summer commencement ceremonies of Texas Southern University to declare who is truly responsible for the recent scandal involving former TSU president, Priscilla Slade:

Along with the usual advice and good wishes for graduates, State Rep. Harold Dutton delivered some pointed criticism of Texas Southern University's Board of Regents during his keynote address at the school's summer commencement ceremony Saturday.

"You (regents) are directly responsible for the unsuccessful management and government of TSU," Dutton said in his speech, with the regents arrayed on the platform behind him.

In an interview later, Dutton, D-Houston, said he was referring to the "dark clouds" looming over TSU because of the regents' handling of the investigation, dismissal and subsequent indictment of former university president Priscilla Slade and their current dispute with the school's radio station. [. . .]

Dutton, an alumnus of the university, said that although the controversy centered on Slade, he felt that the regents were just as much to blame because it is the board's responsibility to oversee TSU's fiscal management. He said the regents acted so poorly he considered them "co-conspirators."

"I don't think you just look to Priscilla Slade for the reason why, I think you have to look at all the board members," he said. "She may be in the spotlight, but I don't think she's the only one responsible for the mess we're in."

H'mm, let's see here. The TSU regents hire Slade, who by all accounts did a good job as TSU president, except for that little problem with managing her expense accounts, which is hardly something that regents of a university should be using their time to oversee. Yes, TSU has chronic financial and related management problems, but this and this has a lot more to do with those problems than the efforts of regents who donate their time to deal with the mess.

In short, Representative Duncan, you and the parochial nature of Texas education politics are much more responsible for TSU's problems than the TSU regents or even Ms. Slade.

Posted by Tom at 7:41 AM | Comments (3) |

August 5, 2006

The view from the front lines of Iraq and Afghanistan

Scottish author and diplomat Rory Stewart has packed a lifetime of fascinating experiences into his 33 years. In this interesting interview tucked into the weekend Wall Street Journal ($), the WSJ's Jeffrey Trachtenberg talks with Stewart, who has become one of the foremost authorities on the day-to-day problems involved in stabilizing Iraq and Afghanistan after years of brutal totalitarian governments.

Born in Hong Kong, Stewart went on to receive undergraduate and master's degrees in Modern History and Politics, Philosophy and Economics from Balliol College, Oxford University, and has written for the New York Times Magazine, Granta and the London Review of Books. After college, Stewart served in the British Army and Foreign Office in a variety of capacities before electing in 2000 to set off on a two-year, 6,000 mile walking journey through Iran, Afghanistan, Pakistan, India and Nepal. He chronicled his journey through Afghanistan during the the winter of 2002 in The Places in Between (Picador/Macmillan 2004), which Harcourt Harvest published this past May in paperback.

Stewart returned to public service in late 2003 as Deputy Governorate Coordinator (Amara/Maysan) and Senior Adviser and Deputy Governorate Coordinator (Nasiriyah/Dhi Qar) in which Stewart established the governance structures of Maysan province, resolved tribal disputes to restore security and consolidate the authority of the Iraqi government and the police, set up NGOs and civil society organizations, ran municipal elections, inaugurated a new Provincial Council in Dhi Qar and saw the province through to the transfer of sovereignty in June 2004. Stewart was awarded the Order of the British Empire (OBE) by the British Government for his service in Iraq.

Last week, Harcourt published Stewart's second book -- The Prince of the Marshes -- in which Stewart describes his recent experiences in Iraq, including the troubling problem of persuading the Iraqis to embrace the Coalition's mission there and the abject failure of a Coalition military unit from Italy to come to Mr. Stewart's rescue when his compound came under a brutal mortar attack. During the WSJ interview, Stewart provides many insights into the practical problems involved in stabilizing Iraq and Afghanistan, including the following:

Q: Did you expect to find the Afghanistan you describe in your first book -- poor, hungry and feudalistic?

A: No, I was surprised. I wasn't prepared for how poor and remote from the rest of the world Afghanistan turned out to be.

Q: Is Afghanistan going to be a perpetual war zone?

A: For the next generation it will be fragile and unstable. You're unlikely to have much government control of the tribal areas. People have a very strong sense of honor and admiration for courage. Particularly young men can become quite excitable and sympathetic towards violence. The older generation would like peace. But half the population is under 18, and that's where a lot of the trouble is coming from.

Q: Very few people you met [in Afghanistan] seemed opposed to the Taliban. Does this suggest that fundamentalism is part of the country's culture?

A: Rural communities are much more conservative in their Islamic beliefs than we acknowledge. If they had problems with the Taliban it had to do with burning their village, or stealing a donkey. But they were in favor of the social codes. In Kabul, there is a lot of unhappiness that people are allowed to drink alcohol. Outside the urban areas you'll find people are surprisingly xenophobic.

Q: Near the end of book, you describe a mortar and small arms attack on your compound in Nasiriyah. Is Iraq the new Yugoslavia, a country that only a tyrant could govern?

A: I don't know the answer to that question. Certain Iraqis seem to want a more authoritarian government. We were pushing for gentler policing, but a lot of Iraqis were suspicious of that. Iraq probably needs a very firm government to restore security. What it needs above all are good politicians flexible enough to restore a sense of national identity.

Q: In light of the behavior of the Italian Quick Reaction Force when your compound was attacked, what chance is there that a multinational armed force can successfully serve as a buffer between Israel and Lebanon?

A: This is a real problem. I don't believe in multinational armed forces except as a symbol. As a fighting force they are often inadequate militarily. Their strength is political; their presence spreads the blame. A coalition says a broader section of the international community is involved. The interesting thing is that the Nasiriyah province is looking better than some other parts of Iraq. Perhaps the Italian approach of doing very little turned out to have positive consequences, in that the Iraqis sorted themselves out rather than relying on foreigners.

Jonathan Tepperman, deputy managing editor of Foreign Affairs, has more on the folly of relying on a multinational force to resolve the ongoing Hezbollah-Israeli conflict.

Posted by Tom at 8:52 AM | Comments (0) |

August 4, 2006

Colbert on "wikiality"

You have to hand it to Stephen Colbert. He sure has a way of keeping things lively.

First, Colbert does a segment on his Comedy Central show on the online encyclopedia Wikipedia and the phenomenon of "wikiality" -- the reality that exists if you make something up and enough people agree with you, it becomes reality.

Thousands of viewers then get online and storm Colbert's Wikipedia entry and engage in widespread wikiality.

Hilarity ensues.

Posted by Tom at 7:54 AM | Comments (0) |

MotherRock's bad bet

This Bloomberg article is reporting that former Nymex president and former El Paso Merchant Energy trading chief J. Robert "Bo" Collins sent investors in his hedge fund MotherRock L.P. a letter yesterday informing them that MotherRock is shutting down after betting big and losing on trades in the volatile natural gas market during June and July.

Collins formed MotherRock in early 2005. At its peak, the fund managed about $430 million in assets and reported net gains of 20% for 2005. Although its energy fund was up slightly as of the end of May, that MotherRock fund lost $230 million as investors fled and the natural gas prices moved contrary to MotherRock's positions. After an unusally high draw in natural gas from storage last week and a a heat wave across much of the country, natural gas prices rose 17% during the week of July 24 and 14% this past Monday. Guess which way MotherRock was betting prices would go?

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

A $43 million limousine service

Anne Linehan and Kevin Whited, and Tory Gattis continue to do a good job of covering Houston Metro Rail's ever-present expansion plans, which seem to be impervious to whether the expansion is actually needed. Previous posts on the boondoggle of rail systems in cities such as Houston are here.

Although not as slick as a trendy Metro economic report analyzing the projected benefits of an expansion of the light rail system in Houston, this Bill Schadewald/Houston Business Journal ($) op-ed describes his rather compelling analysis of Metro Rail's ridership on one portion of the existing rail line:

As Yogi Berra once observed, sometimes you can see a lot just by looking. Neighborhoods can change character in a just a year.

Today I'm revisiting the outer Texas Medical Center area with a stroll down Fannin past Reliant Stadium along the light rail line.

It's half-past five on a Tuesday afternoon. The walk from South Braeswood to the end of the line is about a mile, give or take. . . .

A Metro train passes, whistle wailing. The trains regularly come and go in opposite directions every few minutes.

I'm focused on heart rate and rock, not paying much attention to the rhythm of the rails. Then I happen to look over. Staring back is a single solitary face on an entire train.

The cell phone says a quarter to six. Just one rider? During rush hour? It doesn't make sense.

I change the radio station and find a traffic report. Traffic is in bumper-to-bumper gridlock and slowed to a crawl on every major freeway for miles on end. Nothing unusual there. It's a typical weekday afternoon.

I decide the first train must have been a fluke. The next one will be chock full of rail commuters happy to be without cars.

The next train is empty. No passengers. Nada. Zip.

I start checking ridership on each train and keep a running total. The math isn't hard. After 20 inspections the cumulative body count is only 32. Even if I missed five who were bent over tying their shoes, it's still below two per train.

The rail cars may be packed from downtown to the Medical Center, but South Braeswood is the end of the line for all but an average of less than two.

It's a mystery why Metro went the extra mile. This ghost spur owes existence to a Super Bowl, a seasonal Reliant Stadium, and a now-defunct seasonal Astroworld.

In post-Super Bowl Houston, trains are crammed with cowboy hats for a few weeks of rodeo festivities early in the year. Red pom-pons and Texans T-shirts fill the seats on Sundays in the fall. . . .

So a mile of the seven-mile system built at a cost of $300 million is now primarily a $43 million limousine service on tracks for livestock lovers and football fanatics.

The depressing sight of so many empty cars bringing down Metro's ridership statistics is turning my walk into a bummer.

Schadewald goes on to recommend that Metro attempt to increase ridership by using its excess capacity of rail cars in a bumper car attraction next to the Dome. Not a bad suggestion, actually.

Posted by Tom at 5:52 AM | Comments (2) |

The latest boom

The Wall Street Journal's ($) Ann Davis reports from Houston on the funny money flowing into oil and gas investment opportunities, even those that do not own any oil and gas yet:

Barry Kostiner traded electricity and natural gas for eight years on Wall Street. Last fall, he reinvented himself -- as a Texas oilman.

With no assets beyond plans to buy oil and gas fields, he set up shop as Platinum Energy Resources Inc. He had never worked in the oil industry or managed a company. Yet he carried out an initial public offering of stock and within two months persuaded several New York hedge funds to buy a large chunk of the shares, raising $115 million in all. . .

Energy-related endeavors of all kinds are a magnet for cash these days, thanks to the gravity-defying rise of oil prices and the recent boom in investment pools that cater to deep-pocketed institutions and the wealthy. Some energy investments, to be sure, are relatively low-risk and involve industry veterans. But private-equity firms, hedge funds and other professional speculators are also pouring billions into unconventional loans, management teams with limited track records and IPOs on lightly regulated stock markets.[. . .]

The fevered pitch reminds some of the Silicon Valley boom a few years back. "Energy's about as hot right now as tech was in 2000," says Ben Dell, an energy analyst with Sanford C. Bernstein & Co. [. . .]

One popular trend: management teams with virtually no assets other than big and costly ideas.[. . .]

Exotic new loan markets are another energy investment trend. Some energy companies that don't yet have positive cash flow are borrowing from hedge funds or others at double-digit interest rates. The loans are sometimes called "second-lien" loans because in the event of trouble the hedge funds have to line up behind more-traditional lenders that have first rights to any collateral.

I began practicing business law during the late 1970's-early 80's boom in the oil and gas business, and cut my teeth in insolvency and reorganization law while unraveling and putting oil and gas deals back together again during the prolonged bust that followed that boom. Although this boom is different in material respects from that earlier run-up in the oil and gas business, that prior experience compels me to listen more to the following advice of former Exxon CEO Lee Raymond from an earlier WSJ interview than the sharpies quoted in the latest WSJ article:

Q: What do you think of [the current boom in the oil and gas business]?

A: I can never remember an industry consolidating at high prices. But I can remember an industry consolidating at low prices.

Q: Some people think prices will keep going up.?

A: Maybe. I'll bet they'll be lower at some point.

Let me go back to the last time we went through something like this, which started when the shah of Iran was around. [The shah went into exile in 1979.]

A lot of people don't remember, but we went through a period of relatively high oil prices, which by today's standard would be very high oil prices, that lasted for almost five years. It was at that time that we got into our first stock-buyback program.

As today, we had very strong cash flows. There were a lot of people that were talking about buying other companies. Although we didn't say it directly at that time, we had a view that the price structure could not last -- that it was fundamentally unstable, and that it was just a matter of time. And so we concluded that the cheapest oil we could buy was our own. But because of the stock-buyback program, we were roundly criticized on Wall Street. There were no opportunities. We were liquidating the company. All that kind of stuff.

But the facts are that, behind the scenes -- we were not going to say it publicly, obviously -- we just felt that the price structure couldn't persist. And, come along December of 1985, it just collapsed. Went from $28 to $10 in two weeks. So when people ask today, what are you going to do with the money, my answer is: We're not going to do anything stupid. We're going to manage it like we've managed everything else.

Q: What is Exxon planning to do with all its cash?

A: First of all, we'll sort through it. And secondly, why in the world would we ever tell anybody in advance what we were going to do with it anyway?

Posted by Tom at 5:02 AM | Comments (0) |

August 3, 2006

Judge Young swings for the fences again

Doug Berman's remarkable Sentencing Law and Policy blog notes another key sentencing decision from U.S. District Judge William G. Young of Massachusetts, the jurist who declared the federal sentencing guidelines unconstitutional a few months before the U.S. Supreme Court issued its Booker decision. In this well-reasoned 125-page decision, Judge Young concludes that the existing sentencing scheme is unworkable in theory or in reality. "Juries can and should perform" sentencing "as a matter both of practice and of constitutional procedure," Judge Young reasons. He begins his treatise by hammering home a point that has been made continually on this blog during the Justice Department's dubious criminalization of business interests in the post-Enron era -- i.e., the enormous cost of such criminalization:

For seventeen years federal courts had been sentencing offenders unconstitutionally. Think about that. The human cost is incalculable -- thousands of Americans languish in prison under sentences that today are unconstitutional. The institutional costs are equally enormous -- for seventeen years the American jury was disparaged and disregarded in derogation of its constitutional function; a generation of federal trial judges has lost track of certain core values of an independent judiciary because they have been brought up in a sentencing system that strips the words "burden of proof", "evidence", and "facts" of genuine meaning; and the vulnerability of our fair and impartial federal trial court system to attack from the political branches of our government has been exposed as never before in our history.

Posted by Tom at 8:42 AM | Comments (0) |

Jury hung already in the natural gas trader case?

Shortly after getting the case, the jury in the criminal trial of former Dynegy and El Paso natural gas traders Michelle Valencia and Greg Singleton (previous posts here) sent U.S. District Judge Nancy Atlas a series of questions that -- according to this Kristan Hays/AP article -- prompted the judge to observe "they just don't understand the [the prosecution's] theories" and may be hung already.

Yesterday, I noted the defense's gamble in electing not to put on a case after the prosecution rested based on the bet that the defense could persuade the jury during closing argument that the prosecution had not met its burden of proving that the defendants committed a crime beyond a reasonable doubt. That bet is usually a bad one, but it's sure looking better in this particular case.

Update: The Chornicle's John Roper reports that the jury has reached a verdict on wire fraud charges, but has advised Judge Atlas that the jurors are deadlocked on the conspiracy and false reporting charges. Until Judge Atlas decides whether to declare a mistrial or direct the jury to continue deliberating, the nature of the verdict on the wire fraud charges will remain confidential.

Update II: The jury is back and has found Valencia guilty of seven counts of wire fraud and Singleton guilty on a single count of wire fraud. The jury either acquitted or deadlocked on all the other charges against the defendants.

Posted by Tom at 7:01 AM | Comments (0) |

The best local source for hurricane info and analysis

Last August, the Chronicle's fine science writer, Eric Berger, began his popular SciGuy blog shortly before Hurricane Katrina hammered the central Gulf Coast. On the Saturday morning before Katrina hit, Eric and I were two of the earliest bloggers to recommend that people get out of New Orleans immediately and, in so doing, discovered each other. Since that time, Eric has become my go-to source for science information generally and hurricane information, in particular.

In this Chronicle article and related blog post, Eric predicts that there is a good chance that Tropical Storm Chris will become this season's first Gulf hurricane by early next week (but maybe not, too). As a result, if you haven't done so already, be sure to bookmark Eric's blog and check it regularly -- there is no better local source for hurricane information and analysis. His blog is yet another example of how weblogs have revolutionized the way in which specialized information is disseminated in American society.

Posted by Tom at 6:31 AM | Comments (4) |

The more things change, the more they stay the same

Several posts from last year (here, here and here) addressed one of the constants of my 27-year legal career in Houston -- the chronically abysmal condition of the Harris County Jail. With this article, the Chronicle's Steve McViker continues the Chronicle's series on the problem that no Harri County official seems to want to solve. Despite showing a "good faith effort" to correct problems at the jail, the Texas Commission on Jail Standards has concluded that the jail will remain decertified for the third straight year.

During an inspection of the jail earlier this month, commission officials found that "although there were over 700 available beds, there were 548 inmates without bunks," which followed a 2005 commission report in which it noted that just under 1,300 inmates were sleeping on the floor. Meanwhile, Harris County officials continue to dawdle over increasing staffing at the jail and even are dragging their feet in regard to the Chronicle's open records requests regarding jail matters.

Last year, Scott Henson over at Grits for Breakfast wrote a fine series of posts that addressed the reasons for the problems at the Harris County Jail and what needed to be done to correct those problems. As has been the case for decades in Houston, Harris County officials continue to do the minimum necessary to avoid a state-mandated closing of the jail while avoiding the difficult work of actually addressing the causes of the jail's problems by implementing necessary changes in the jail's administration and the local criminal justice system.

A community's soul is often reflected by how the community deals with constituencies who are unpopular and have no political power. In the case of Houston and the people most impacted by the Harris County Jail, that reflection is ugly and -- as shown by this community's remarkable response to the Gulf Coast evacuees last year after Hurricane Katrina -- not an accurate indication of our community's conscience. It is well-past time that Harris County officials prepare and implement a plan to resolve the local jail's chronic problems once and for all, and here's hoping that the Chronicle and the TCJS stay on their tails until they do. Houston deserves better.

Posted by Tom at 5:53 AM | Comments (0) |

August 2, 2006

Another Stros problem

The Stros won at San Diego last night, but a situation during the game highlighted another among the many problems with this particular Stros team -- manager Phil Garner.

Now, don't get me wrong. Garner's less-than-average ability as a Major League Baseball manager is nowhere near as big a problem as the Stros' chronic hitting woes or this season's overall lackluster pitching performance. Moreover, he is a genuinely nice man who is impossible to dislike personally. But the fact of the matter is that he is not a good manager. Among recent Stros managers, not as bad as Jimy Williams, mind you, but certainly not as good as Larry Dierker.

The Stros 7th inning in last night's game was a case in point. Luke Scott led off with a double with the Stros leading 1-0 (which turned out to be the final score). Unfortunately, the next four hitters in the Stros lineup included three of the worst hitters in the National League -- Adam Everett (-16 RCAA/.303 OBA/.335 SLG/.639 OPS), Brad Ausmus (-23/.300/.294/.594), the pitcher's spot and then leadoff man Willy Taveras (-14/.315/.321/.637). Thus, manufacturing a run was going to be difficult under the best of circumstances, but Garner managed to make the situation worse.

What does Garner do? First, he has Everett -- who had already driven in the only run of the game with a sacrifice fly -- attempt to sacrifice-bunt Scott to third, resulting in a pop-up to the pitcher. After Ausmus -- who swings as if he is afraid that he is going to hurt himself these days -- made the second out by flying weakly to short centerfield, Garner then pinch-hits the Stros one stud hitter, Lance Berkman (40/.403/.613/1.016), in the pitcher's spot to try to drive home Scott from second base (Berkman was available to pinch-hit only as he continues to rehab a sore groin muscle).

Now, say you're a National League manager late in a close game with the opposing team's runner at second base, two outs, first base open, the second-best hitter in the league coming to the plate and one of the worst hitters in the league following him in the order. What would you do?

Well, I know what I would do. Exactly what Padres manager Bruce Bochy did -- intentionally walk Berkman to get to Taveras, who promptly struck out. As an aside, why on earth does Garner insist on putting a hitter who has a .315 on-base average (26 points below National League average) and a -14 RCAA in the leadoff spot in the order?

To make matters worse, Garner then had to waste Eric Bruntlett to pinch-run for Berkman so as not to risk further injury to Berkman's groin.

So, in a close game that could easily have gone into extra innings, Garner wastes his best hitter and another potential pinch-hitter so that the other team could have the opportunity of pitching to one of worst hitters in the National League with two outs. Think that one through next time, Phil.

Although not as important as player performances, managerial decisions can make a difference. Jimy Williams' disastrous decision to platoon the extraordinarily productive Morgan Ensberg with the notoriously unproductive Geoff Blum during the 2003 season may well have cost the Stros a playoff berth that season (the Stros finished one game behind the Cubs in the National League Central race). Thus, even though the Stros won last night, managerial gaffes such as Garner's last night -- particularly in a close race for a playoff spot -- can be the difference between playing in the post-season and packing one's bags after the regular season. I know one thing for sure -- this Stros club is not good enough to overcome such mistakes and pull out the NL Wildcard Playoff berth.

Posted by Tom at 6:18 AM | Comments (0) |

Key natural gas trader case goes to the jury

In a surprising development, the defense in the trial of former Dynegy trader Michelle Valencia and former El Paso trader Greg Singleton (previous posts here) on conspiracy and fraud charges relating to their submission of false gas trading data to trade publications rested without putting on any evidence, betting that they could persuade the jury during closing arguments that the government had failed to fulfill its burden of proving that Valencia and Singleton are guilty of the charges beyond a reasonable doubt. The Chronicle's Tom Fowler reports on the closing arguments in the trial here.

The defense strategy is risky, as Jamie Olis discovered when his trial defense team put on a bare bones defense during his trial. The jury in the Valencia and Singleton trial will begin deliberations today.

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

Former TSU President Slade indicted

After a six-month investigation, the shoe finally dropped on former Texas Southern University president Priscilla Slade. A Harris County Grand Judy indicted her yesterday on charges relating to alleged use of up to $1.9 million of school property for her personal benefit. Two other former TSU officials who worked for Slade - Quintin Wiggins and Bruce Wilson - and a current TSU employee -- senior safety system engineer Frederick Holts -- were also indicted for their roles in the alleged scheme.

This an enormously sad case on numerous fronts, not the least of which is that Slade was the most talented person to serve in the role of TSU president in some time. After a growth spurt under Slade, the chronically-troubled school is again having problems, with enrollment down significantly for the upcoming semester. More on that in a future post.

By the way, did anyone else think that the Chronicle headline on its article covering the Slade indictment -- "The former TSU president could face up to life in prison if convicted of misusing funds" -- is a tad over-the-top? Although technically true, it's highly doubtful that Slade, if convicted, would be sentenced to anywhere near that long a prison term. I don't even think that the Harris County District Attorney's office would even come close to asking for such a sentence. The Harris County DA's office is not the Enron Task Force, you know.

Posted by Tom at 5:25 AM | Comments (1) |

Finally, some justice in the Nigerian Barge case

As foreshadowed by this post from last month on the Fifth Circuit's decision to release from prison three of the four former Merrill Lynch executives pending disposition of their appeal in the Enron-related Nigerian Barge case (extensive discussion here), the Fifth Circuit issued this decision vacating the wire fraud and conspiracy convictions of all four Merrill Lynch executives and reversing the conviction altogether of former mid-level Merrill executive William Fuhs, but affirming the conviction of former Merrill head of Strategic Asset and Lease Finance Group, James Brown on perjury and obstruction of justice charges.

Thus, of the four Merrill defendants, Brown still faces the remainder of his 46 month prison sentence and Fuhs appears to be home free, while former head of Merrill's Global Investment Banking division -- Dan Bayly -- and Bayly's associate -- Robert Furst -- both face a possible retrial on the charges, although the fact that both have served a year of their sentences before being released from prison last month strongly mitigates against the government prosecuting the case against them again. At least one would think so in a reasonably civil society.

The decision is interesting on several fronts, not the least of which is the division on the panel in deciding the case. Judge E. Grady Jolly wrote the majority opinion of the Court, which was joined by Judge Harold DeMoss with regard to the reversal of Fuhs' conviction and the vacating of Bayly and Furst's. However, Judge DeMoss wrote a spirited dissent in which he persuasively argues that the perjury and obstruction charges against Brown should also be reversed, while Judge Thomas Reavley concurred with the reversal of Fuhs' conviction and the affirmance of the Brown conviction, but pens a dissent in which he contends the Court should have thrown the book at Bayly and Furst on the mail fraud and conspiracy charges.

The entire decision -- particularly Judge DeMoss' dissent -- is entertaining reading, but here are a few excerpts that stand out on first reading. First, the gist of the decision:

We reverse the conspiracy and wire-fraud convictions of each of the Defendants on the legal ground that the government's theory of fraud relating to the deprivation of honest services - one of three theories of fraud charged in the Indictment - is flawed. We further vacate appellant Fuhs's conviction on the ground that the evidence is insufficient to support his conviction. Finally, we affirm appellant Brown's convictions of perjury and obstruction of justice.

Turning to its analysis on the Enron Task Force's flawed deprivation of honest services theory, the Fifth Circuit falls squarely in line with the Second Circuit's decision in United States v. Rybicki, 354 F.3d 124, (2d Cir. 2003):

[W]e are guided by the leading opinion on honest-services fraud, the Second Circuit en banc decision in Rybicki, supra. Rybicki concluded, and we agree, that cases upholding convictions arguably falling under the honest services rubric can be generally categorized in terms of either bribery and kickbacks or self-dealing. The great weight of cases are clear examples of such behavior.

Applying Rybicki, the Court observes that the nature of the transaction -- even if viewed most negatively toward the defendants -- did not involve the type of kickback or bribery that would have tipped off the Merrill executives that the Enron employees were depriving their employer of honest services:

Given that the only personal benefit or incentive originated with Enron itself -- not from a third party as in the case of bribery or kickbacks, nor from one's own business affairs outside the fiduciary relationship as in the case of self-dealing -- Enron's legitimate interests were not so clearly distinguishable from the corporate goals communicated to the Defendants (via their compensation incentives) that the Defendants should have recognized, based on the nature of our past case law, that the "employee services" taken to achieve those corporate goals constituted a criminal breach of duty to Enron. We therefore conclude that the scheme as alleged falls outside the scope of honest-services fraud.

Taking a page from the Supreme Court's decision in the Arthur Andersen case (which reversed the Fifth Circuit's decision in that case), the Court noted the following about the expansive interpretation that prosecutors are using in regard to criminal statutes:

This opinion should not be read to suggest that no dishonest, fraudulent, wrongful, or criminal act has occurred. We hold only that the alleged conduct is not a federal crime under the honest services theory of fraud specifically. Given our repeated exhortation against expanding federal criminal jurisdiction beyond specific federal statutes to the defining of common-law crimes, we resist the incremental expansion of a statute that is vague and amorphous on its face and depends for its constitutionality on the clarity divined from a jumble of disparate cases. Instead, we apply the rule of lenity and opt for the narrower, reasonable interpretation that here excludes the Defendants's conduct.

The Court pulls no punches in criticizing the weakness of the Task Force's case against Fuhs:

Thus, the Government relies solely on the documentary evidence to assert Fuhs's knowledge of the oral buyback promise and his intent to participate in the scheme to conceal that promise for the purpose of effecting a misaccounting of the overall deal. We find that the documentary evidence fails to sustain the Government's burden of proof beyond a reasonable doubt. Much of the Government's evidence consists of e-mails or memos not written or initiated by Fuhs, not directly addressed to him, and in some cases not even copied to him. They neither recognize a secret oral side deal nor imply that the addressees of the correspondence knew of such a secret deal. While they may support the assertion that Fuhs knew Merrill wanted a buyback agreement to protect its investment, and that it was at one point understood to be part of the deal by Fuhs' subordinate Geoffrey Wilson, the principal documents relied upon by the Government simply do not sustain the inference that Fuhs had knowledge of an oral guarantee that was to be kept out of the written agreement and kept secret in (because it conflicted with) the accounting of the deal.

And in a wonderful passage that could be used to explain the recent prosecution of the late Enron chairman Ken Lay and former chief executive officer Jeff Skilling as well, the Fifth Circuit observes with regard to the Task Force's case against Fuhs:

As counsel for Fuhs noted at oral argument, if we begin with the assumption that Fuhs is guilty, the documents can be read to support that assumption. But if we begin with the proper presumption that Fuhs is not guilty until proven guilty beyond a reasonable doubt, we must conclude that the evidence is insufficient to prove beyond a reasonable doubt that Fuhs had the knowledge and intent to enter into the fraudulent scheme alleged by the Government.

Before disassembling the perjury and obstruction charges against Brown in his dissent, Judge DeMoss suggests that the deprivation of honest services statute is unconstitutional:

[T]he application of section 1346 to the facts presented in this case is particularly problematic for several reasons, the combination of which poses an even greater harm to future business relationships and transactions than would any one of the problems alone. The Government's extension of the already ambiguous reach of section 1346 by way of an indictment for conspiracy to commit honest services fraud is especially troublesome. . . . To the extent that . . . case law required a relationship that generated a duty of honest services, such a relationship does not exist in this case between the Defendants, who are employees of Merrill, and Enron or its shareholders, who are the purported victims of the alleged fraud. The limitation of criminal activity to relationships giving rise to a duty of honest services is ignored when any person who negotiates with an employee of another corporation is potentially entangled by the combination of section1346 with our very broad understanding of conspiracy.

I also believe that a serious problem arises with respect to the Government's theory of harm in this case. It is absolutely undisputed that Merrill paid $7 million to Enron as a result of the closing of the transaction contemplated by the Engagement Letter of December 29, 1999 that was the final written agreement of the two parties ("the Engagement Letter"). Even granting the Government that Enron paid back $250,000 as the advisory fee to Merrill, Enron still had $6,750,000 more in its bank account as a result of the Engagement Letter than it had before. The Government's theory of harm would have us ignore the initial gains to Enron and focus solely upon some later loss only tangentially connected to the particular investment transaction that forms the basis of the Indictment.

The cumulative effect of a vague criminal statute, a broad conception of conspiracy, and an unprincipled theory of harm that connects the ultimate demise of Enron to a single transaction is a very real threat, of potentially dramatic proportion, to legitimate and lawful business relationships and the negotiations necessary to the creation of such relationships.

And then Judge DeMoss absolutely nails the utter injustice of Brown's perjury and obstruction of justice conviction, which is based largely on evidence of terms of the Nigerian Barge transaction that were discussed in negotiations between Enron and Merrill, but never made it into the final contract between the parties:

The conversations preceding the deal are only negotiations, and the ultimate written agreement speaks for itself. Two material facts corroborate this reading: (1) Fastow himself averred to the Government that he, in fact, made only assurances of best efforts to Merrill, not promises or guarantees to take Merrill out of the deal; and (2) in conformance with the written agreement, Merrill actually paid $7 million to Enron, consistent with its purchase of an interest in the barge partnership investment, and therefore had absolutely no legally enforceable claim to be taken out of the deal. The Government mischaracterizes the transaction evidenced by the Engagement Letter when it labels the agreement a "sham" and asserts that Merrill was never "at risk" during the transaction. The Engagement Letter expressly states, "No waiver, amendment, or other modification of this Agreement shall be effective unless in writing and signed by the parties to be bound." . . . In light of these provisions, Merrill's $7 million was absolutely at risk. Any oral assurances of a take-out offered to Merrill by any Enron employee would not have been legally binding on Enron. . . .

Merrill could not have enforced Enron's assurance of its best efforts commitment to remarket the investment interest that Merrill had agreed to purchase; Merrill could only have refused to deal with Enron in the future if the Engagement Letter had resulted in an unsatisfactory business investment. Such negotiations should not be the fodder for criminal indictments. If there is any criminal wrong arising from the facts in this record, and I have serious doubts on that score, it would be in Enron's employees' reporting of the transaction described in the Engagement Letter, not in the manner in which Merrill's employees negotiated the deal.

So, three of the four former Merrill Lynch executives embroiled in the Nigerian Barge case have finally received some reasonable semblance of justice. Although I am happy for these men and their families, let's not overlook the emotional and financial carnage that has resulted from the Enron Task Force's dubious decision to criminalize this transaction. Four successful executives with Merrill Lynch have had their careers badly damaged. The men and their families have had to endure extraordinary stress and pain over the past four years. Lives and careers have been unalterably changed and for what? For having had the misfortune of being involved in a relatively small transaction with the social pariah of the decade, Enron?

Meanwhile, the person most responsible for this damage is doing quite well, thank you.

The prosecution of the Nigerian Barge case was based on resentment and scapegoating, not on justice or any reasonable concept of prosecutorial discretion. This is an increasingly common occurrence in American society and it's going to take much more than a just reversal in the Nigerian Barge case -- or even the deaths of a talented man and an American business institution -- to alter this troubling trend of how our government exercises its overwhelming prosecutorial power.

If you don't believe me, just ask Jim and Nancy Brown.

Update: An insightful reader points out that, with the reversal of the wire fraud and conspiracy conviction, Brown should be in line for a re-sentencing that could reduce his sentence considerably. Inasmuch as U.S. District Judge Ewing Werlein exhibited grace under fire during the original sentencing of the Merrill Four, here's hoping that Brown's attorneys can persuade him to reduce Brown's sentence to time-served (which is well over a year now).

Posted by Tom at 4:28 AM | Comments (0) |

August 1, 2006

The story behind the arrest of Dr. Pou

As noted in this previous post, the arrest in Louisiana of former University of Texas Health Science Center professor and physician Dr. Anna Pou on wrongful death charges for her actions in attempting to save lives during the chaotic aftermath of Hurricane Katrina is an egregious example of prosecutorial misconduct.

As is typical in such cases, word is now filtering out about the real motivations for the prosecution. Not only is an elderly Louisiana attorney general who campaigned on a plank of "cracking down on abuse of the elderly" at the center of the dubious decision to arrest, this NY Times article reports that Dr. Pou's accusers are three employees of LifeCare Hospitals, the company that owned the facility where 24 out of 55 elderly patients died in the aftermath of Katrina and whose top administrator and medical director didn't even show up at the hospital during those chaotic days. It turns out that the accusing LifeCare employees didn't make any effort to evacuate the elderly and sick patients, either. Does this have the smell to you of someone attempting to distract attention (or perhaps avoiding prosecution) from their own indiscretions?

Dr. Kevin Pho of Kevin, M.D. is doing a good job of keeping up with the reactions and commentary around the web to the case against Dr. Pou and the nurses. The case against Dr. Pou is the other side of the same coin that the government flips when it criminalizes risk-taking by businesspersons, so stay tuned to developments in this troubling prosecution.

Posted by Tom at 8:49 AM | Comments (1) |

Hope for sanity in sentencing of business executives?

Although just one case, at least one federal judge has concluded that the resentment and scapegoating that has driven the criminalization of business during the post-Enron era has gone too far.

In this thoughtful sentencing memorandum relating to the conviction of former Impath, Inc. president Richard P. Adelson on conspiracy and fraud charges. U.S. District Judge Jed Rakoff began and concluded his decision -- which is ably dissected by Harlan Protass here, Doug Berman here and here and Ellen Podgor here -- with the following comments:

This is one of those cases in which calculations under the Sentencing Guidelines lead to a result so patently unreasonable as to require the Court to place greater emphasis on other sentencing factors to derive a sentence that comports with federal law. . .

To put this matter in broad perspective, it is obvious that sentencing is the most sensitive, and difficult, task that any judge is called upon to undertake. Where the Sentencing Guidelines provide reasonable guidance, they are of considerable help to any judge in fashioning a sentence that is fair, just, and reasonable. But where, as here, the calculations under the guidelines have so run amok that they are patently absurd on their face, a Court is forced to place greater reliance on the more general considerations set forth in section 3553(a), as carefully applied to the particular circumstances of the case and of the human being who will bear the consequences. This the Court has endeavored to do, as reflected in the statements of its reasons set forth at the time of the sentencing and now in this Sentence Memorandum prompted by the dictates of Rattoballi. Whether those reasons are reasonable will be for others to judge.

Along the same lines, Ellen Podgor asks all the right questions in regard to the disappointing Second Circuit decision upholding the absurd effective life sentence of former WorldCom CEO, Bernie Ebbers, while Larry Ribstein chimes in with a new SSRN paper, The Perils of Criminalizing Agency Costs. In a related post, Professor Ribstein rams home the essential point:

. . . criminalizing this business practice is not the answer. There is little doubt that the combination of regulation, civil liability and markets can solve -- indeed, probably already has solved -- any problems here. In fact, criminal charges are so patently not the answer that I suspect that one big effect of this scandal will be a reexamination of the whole issue of criminalizing agency costs.

Meanwhile, Jamie Olis and his family continue their long wait for justice, while three UK bankers bide their time in Houston far away from their families and friends while facing the daunting decision of whether to risk asserting their innocence against the prospect of a long prison sentence if they are convicted within the cauldron of hate that exists in Houston to anyone who had anything to do with Enron.

As Sir Thomas reminds us "do you really think you could stand upright in the winds [of abusive prosecutorial power] that would blow" if that power were to set its sights on you? What now is the more serious danger to justice and the rule of law -- out-of-control prosecutors and abusive prison sentences for businesspersons or the results generated from the risk-taking businesspersons?

Posted by Tom at 6:52 AM | Comments (0) |

Those dang baseball expectations

People who follow baseball love to talk about possible trades of players, particularly when the hometown club isn't doing well, as is the case with the Stros this season. That's certainly been the case in Houston over the past couple of weeks as almost anyone with even a passing interest in the Stros has been talking about who the club should jettison to jump-start the team for another pennant drive. Fans' emotions regarding those trade talks were not helped when former star-turned-human reliever Brad Lidge blew another save over the weekend, traumatizing Chronicle sports columnist John Lopez, among others.

Then, Chronicle sports columnist Richard Justice wrote yesterday that an unnamed baseball executive told him that Stros owner Drayton McLane had directed Stros GM Tim Purpura to get anything he could in trade for Lidge after the latest blown save. That rumor was quickly followed by an ever more troubling one that the Stros had supposedly even offered star pitcher Roy Oswalt in trade talks. And, then -- presto! -- in the end, the trade deadline passes and the Stros stand pat and don't do anything. I doubt that McLane ever said such a thing about Lidge to Purpura or that Roy O was ever seriously a subject of trade talks, but the gossip nevertheless got people's juices flowing.

Beyond how this type of social interaction binds a community and is one of the reasons that a Major League Baseball club can be a positive force for a city, what's particularly interesting about these discussions is how they reveal people's expectations about their baseball club. As I noted in this post from several weeks ago, those expectations are a funny thing given that they color our view toward the club regardless of whether the expectations are based in fact. That's one of the reasons why I tend to rely on statistical analysis of players' performance a great deal. Going through that analytical process helps me avoid relying on player myths or dubious generalities about teams. My sense is that Stros GM Purpura does the same thing, which comforts me.

The recent controversy over Lidge is a case in point. Lidge is having a miserable season -- his earned run average currently stands at 5.77 and his runs saved against average ("RSAA," defined here) is an atrocious -7, meaning that he has pitched well-below an average National League pitcher so far this season (a precisely average NL pitcher's RSAA would be zero). To make matters worse, Lidge has given up seven home runs -- usually at a key point in the game -- in a little over 48 innings after giving up only five in almost 71 innings last season and eight in over 94 innings in the 2004 season. And yes, people have not forgotten the emotional trauma of that whole Pujols affair in the playoffs last post-season. After the two straight seasons in which Lidge had a total of 40 RSAA (26 in 2004 and 14 in 2005), Lidge has fallen so far that I don't think it's a stretch to say that most Stros fans wouldn't have minded McLane and Purpura exiling him to, say, Kansas City, regardless of what crumbs could be recovered in trade.

Meanwhile, in the hand-wringing over what to do about Lidge, virtually nothing has been said about Stros lefthanded starter, Andy Pettitte, who has been much worse than Lidge this season. After having arguably the best season of his career last season, Pettitte has really stunk it up this season, currently meandering along at a 5.18 ERA and a -12 RSAA. He has given up an astounding 21 home runs in just over 139 innings after giving up only 17 in over 222 innings last season, and he has saved over 40 fewer runs for the club this season than he did at the same stage of last season (Lidge, in comparison, has saved only about 17 fewer runs this season than at the same stage last season). And just to punctuate how bad Pettitte has been, the Stros are paying him almost $16.5 million smackeroos for stinking up Minute Maid Park, while the Stros pay Lidge a relatively modest $3.975 million.

My point? While it's clear than Pettitte has been a much bigger reason for the Stros' troubles this season than Lidge, nary a word was mentioned over the past several weeks about trading Pettitte. Now, maybe Pettitte's performance and contract made him untradeable, but he is coming off the best season of his career in 2005 and it's not unreasonable to think that a veteran lefthanded starter could still help a potential championship club such as the Mets in the post-season. And certainly the Stros were incentivized to unload some of Pettitte's enormous salary, so you would think that a deal would not have been beyond the realm of possibility. We probably won't ever know whether Pettitte's name came up in trade negotiations before this season's trading deadline, but it's clear that he wasn't even on the radar screen of the fans' discussions about trades -- Lidge was almost the total focus.

So, the Stros fans clearly preferred to trade the cheaper, younger pitcher with more upside potential who has pitched better over the past three seasons and not dropped off this season as much as the aging veteran who is being paid far in excess of what his performance this season justifies. Let's just say that I'm glad Drayton McLane and Tim Purpura are making these decisions and not the fans.

By the way, as noted in this previous post, Stros management was prudent to stand pat. The Stros have a boatload of payroll coming off the books after this season, which allows the club to address needs in attempting to re-sign Oswalt and bringing in some additional hitters, which has been a chronic weakness that this club has had trouble addressing ever since the club gave Bagwell and Hidalgo the big contracts around 2000. Now that the club will finally be in a financial position to address those needs after this season, it would not have made sense to make a trade at this juncture that might have decreased the club's flexibility this coming off-season.

Lidge and Pettitte's career and season statistics are below, and the abbreviations for the stats are here:

Posted by Tom at 5:11 AM | Comments (1) |

July 31, 2006

Colbert strikes yet again

Eventually, Congressional staffers are going to refuse to allow their bosses to be interviewed by Comedy Central's Stephen Colbert (previous posts here).

However, until they do, let's continue to enjoy Colbert exposing the hilarious (and somewhat frightening) lack of perspective among our nation's members of Congress, this time of Eleanor Holmes Norton of the District of Columbia (remember, it's not a state):

Posted by Tom at 7:28 AM | Comments (0) |

Baseball fans, beware

If you are interested in Major League Baseball races from the past, do not go to this new website (described below) if you have some pressing deadlines -- you will not be able to leave for awhile:

BaseballRace.com is the creation of . . . Christopher J. Falvey. It is an online application that allows you to view any Major League Baseball season, split by league or division (even wild card races), as an animated, date-by-date race between the various teams you choose.

It was designed to bring a historical season to live more so than mere standings or graphs. With BaseballRace.com, you can experience an entire season "live."

The data goes back to 1901, and includes every game of every season up through yesterday (7/30/2006).

Unless you are a Phillies fan, go to September 20 of the 1964 National League season and watch what happens over the final two weeks of the season. Hat tip to Eric McErlain for the link.

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

The Wylys go to Congress

Following on this previous post from last year, this WSJ ($) article reports that colorful Dallas-based investor Sam Wyly (previous posts here) and his brother Charles get hauled in front of the Senate's Permanent Subcommittee on Investigations tomorrow in connection with the panel's investigation into the Wylys' use of the the Isle of Man tax haven to protect assets and avoid US income taxes.

The Isle of Man is a quasi-independent, largely agrarian republic of about 75,000 people in the sea between England and Ireland that operates under its own financial laws, the most important of which is that a foreign government cannot enforce a claim for unpaid taxes against an Isle of Man entity. As a result, wealthy foreigners for years have used Isle of Man-based shelf corporations and trusts to shield assets and limit taxes. This arrangement has often led to the unusual scene of $1,000 per hour London soliciters and barristers waiting for their court hearing to be called in the Isle of Man courts while the judge (called "the Dempster") adjudicates a dispute between local farmers over such matters as, say, the ownership of a goat.

The Senate panel has been probing offshore tax havens for several years under the direction of its panel's senior Democrat, Sen. Carl Levin of Michigan. Interestingly, Sam Wyly is one of the largest benefactors of the business school at Senator Levin's home state university, the University of Michigan.

As noted in the previous post, the Wylys are already the subject of a criminal investigation by the Manhattan District Attorney's office, the IRS and the SEC over their Isle of Man arrangements. The WSJ article reveals for the first time that the Wylys were advised on their Isle of Man investments by a network of shady characters, including former attorney David Tedder, a California-based, self-styled "asset-protection expert" who was disbarred in California before moving his practice to Florida in the 1990's. Tedder is currently serving a five-year federal prison sentence on tax and money laundering charges unrelated to his work for the Wylys.

Unlike most Senate hearings on rather dry financial matters, this one could be pretty entertaining.

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

July 30, 2006

A classy Houstonian makes the Hall of Fame

The best radio announcer that the Houston Astros Baseball Club has ever had -- Gene Elston -- will be inducted into the Baseball Hall of Fame today in Cooperstown, NY. Here is my previous post on Elston at the time that his induction was announced, and the Chronicle's David Barron has this interesting interview of Elston in the today's Chronicle.

I couldn't help but notice Elston's response to Barron's question about his opinion of former Cardinals and Cubs announcer, the late Harry Caray:

What did [Elston] think of Harry Caray?

"Harry Caray was a gem. He was one in a million. He was one of the greatest guys you would ever want to meet. Just absolutely fabulous.

"He was not a good play-by-play man, but he was the fans' announcer. He was an entertainer. He sold the game. He probably sold the game more just by being there than anybody I can think of."

A little bit different opinion of Caray than that expressed by another Hall of Fame announcer for the Stros, don't you think?

Update: Richard Justice has the story from Elston's induction ceremony.

Posted by Tom at 9:05 AM | Comments (1) |

July 29, 2006

Richard Justice's revisionist thinking

Chronicle sports columnist Richard Justice wrote the following answer to a question in his blog recently (toward the end of the blog post):

I love [disabled Stros slugger Jeff Bagwell] to death, but his big contract and him not wanting to admitt his playing day's are over has cost this 2006 team more than we thought it would.

I don't think so. Drayton McLane was told last summer that if he allowed Bagwell to be activated in September, his chances of winning an insurance claim would be reduced 50 percent. He was advised not to let him come to spring training because they'd be reduced another 50 percent.

He made the decision because it was the right thing to do. Did he nudge Bagwell toward retirement? Sure he did. No matter what happened, he was going to be obligated to pay Bagwell $17 million this season. What happens between the Astros and the insurance company may takes years to settle.

There's a fairness issue. Bagwell wanted to play. He still wants to play. Problem is, he can't. One doctor told him he has the biggest bone spur in his right shoulder he'd ever seen. If Bagwell chooses to have it removed, he risks doing permanent damage to his deltoid muscle. His alternative is a shoulder replacement procedure. Neither choice is very good.

To the many people who ask, he comes around only occasionally. He has purchased a home in San Diego and spends more and more time there. He also has a home in Cabo San Lucas and spends time there.

So, Justice is suggesting that Stros owner Drayton McLane acted reasonably with regard to Bags' injury? How on earth does Justice square that view with his broadsides against McLane over McLane's handling of the Bagwell injury situation set forth in previous blog posts here, here, here and here?

Kevin Whited over at blogHouston.net has previously noted the tendency of Justice to take both sides of an issue, although not usually in the same article. However, Justice's diplomatic blog post above regarding McLane's handling of the Bagwell injury situation is hard to square with his previous over-the-top criticism of McLane in regard to the matter while, at the same time, ignoring Bagwell's somewhat childish behavior.

I'll give Justice credit in that he is willing to admit when he takes a position that turns out wrong. Will Justice publicly apologize to McLane for his previous criticism of him over the Bagwell injury situation? Inquiring minds want to know.

Posted by Tom at 6:21 AM | Comments (0) |

July 28, 2006

Meet Steven Gerrard

I don't follow soccer closely (previous posts here), but I've come to appreciate the sport during this World Cup season and I particularly enjoyed Chronicle sports columnist John Lopez's World Cup reports from Germany.

Now, Bill Simmons passes along this video of star Liverpool, P.C. midfielder Steven Gerrard's ten greatest goals, which is well-worth the seven minutes it takes to view it. Gerrard is the English soccer equivalent of Reggie Bush, so take a moment to marvel at this wonderful talent.

By the way, the comments of the British announcers are priceless!

Posted by Tom at 8:37 AM | Comments (2) |

Local player agent suspended

In a story that appears to be flying underneath the radar of the local media, Houston-based sports player agent and lawyer Carl Poston has been suspended from representing NFL players for two years by the NFL Players Association because of alleged "bad faith efforts to delay, frustrate and undermine" an arbitration hearing about Poston's role in a contract dispute between NFL linebacker LaVar Arrington and the Washington Redskins. The NFLPA licenses agents of NFL players as a right granted under its collective bargaining agreement with NFL owners.

The NFLPA's disciplinary committee previously suspended Poston for two years due to his actions in connection with the December 2003 contract extension signed by Arrington with the Redskins. Inasmuch as the most recent action is a separate two-year suspension, Poston could now be barred from representing NFL players for up to four years.

Since the mid-1990's or so, Poston and his Michigan-based brother Kevin have made a splash for themselves for their "take no prisoners" approach to representing high-profile professional athletes, such as former NBA star Penny Hardaway, NFL All-Pro tackle Orlando Pace of the St. Louis Rams, Kellen Winslow Jr. of the Cleveland Browns, Charles Woodson of the Oakland Raiders, and Charles Rogers of the Detroit Lions. The Postons were somewhat unique in that they tended to represent linemen, defensive backs, and other NFL players who traditionally have earned far less than the marquee players at the skill positions.

But controversy has increasingly dogged the Postons recently, as many management-types within the NFL considered them to be unrealistic and needlessly adversarial in contract negotiations. Last year, Pace fired the Postons as his agents after they failed to secure a long-term contract for him with the Rams, and then quickly obtained a lucrative contract with the Rams after retaining another agent to represent him.

The Arrington case is particularly troubling for the Postons because the main issue is whether the team negotiated one contract and then -- unbeknownst to Carl Poston -- slipped Arrington another to sign, minus a $6.5 million bonus. That a lawyer didn't bother to read the contract of his client before having the client sign it is not a particularly effective basis for the client's claim.

Posted by Tom at 5:52 AM | Comments (0) |

Let's do lunch

Yes, lunch in LA can be so interesting.

You remember Barry Munitz, don't you? Former UH wunderkind president, Maxxam executive, California state university administrator and besieged Getty Museum director, the talented Mr. Munitz certainly knows how to get around the key social circles in SoCal. Previous posts on Munitz are here.

And remember California attorney general Bill Lochyer? He is that gem of statesmanship who told an interviewer in 2001 during the aftermath of the California power crisis that "I would love to personally escort [the late former Enron chairman and CEO Ken] Lay to an 8-by-10 cell that he could share with a tattooed dude who says, 'Hi, my name is Spike, honey.'" Of course, left unsaid by Lockyer was that Lay and Enron had little to do with that crisis, which was caused primarily by California state politicians (including then state senator Lockyer) who botched deregulation of electric utilities by freezing retail power rates while utilities bought juice from a newly-created wholesale market at prices that had no caps. Lockyer is the sort of politician who prefers to rely on myths and appeal to resentment rather than confront the truth.

Lockyer's office launched an investigation of then Getty Museum chief Munitz in mid-2005 after the LA Times reported that Munitz had made grants to friends, demanded a raise amid cost-cutting, traveled lavishly, expense and used staff to perform personal errands, all at the expense of the non-profit Getty (subsequent post here). Munitz resigned as the Getty Museum CEO this past February, agreeing to forgo more than $2 million under his contract with the Getty and to reimburse the non-profit $250,000 to resolve "continuing disputes."

However, it's now almost August and still nothing has been heard from Lockyer's investigation of Munitz. So, the LA Times started nosing around and asking questions and, earlier this week, Lockyer responded to the Times by admitting that he and Munitz had met in mid-January for lunch (at LA's Rocket Pizza, which has very good crust), smack dab in the middle of Lockyer's investigation of Munitz and a month before Munitz bailed out from the Getty.

Lockyer, who is now running for California state treasurer (can't this guy get a real job?), is in full retreat over the disclosure. He actually told the Times that the get-together did not violate his unwritten policy of not meeting alone with targets of an investigation because the probe was not discussed.

"This was, in my mind, lunch with a personal friend that I've known for a long time and it didn't have anything to do with the case," he said. . . "I was being a good listener, kind of consoling him as he leaves a job that he loves," said Lockyer, characterizing the discussion, which eventually shifted to books and movies, as "therapy with a friend."

I bet the pizza was good, too.

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

July 27, 2006

So that's what's on the grill of my car

Texas has its share of insect problems.

First, it was the invasion of the killer bees.

Then, it was the onslaught of those nasty fire ants.

Now, it's the invasion of the Libytheana bachmanii larvata.

Or, as they put it in South Texas, "Looks like you ran into some snouts."

Posted by Tom at 7:36 AM | Comments (1) |

Islam's real struggle

The current escalation of fighting between Israel and Hezbollah is currenly getting most of the attention on the world stage, but NYU Islamic Studies professor Bernard Haykel reminds us in this NY times op-ed that an even knottier problem than Islamic hatred of Israel is the conflict within Islam between Sunni and the Shiite ideologies.

Sunni ideology regards Shiites as heretics and Sunni groups such as Al Qaeda profoundly distrust Shiite groups such as Hezbollah (Al Qaeda reportedly gave the green light months ago to Sunni extremists in Iraq to attack Shiite civilians and holy sites). But if Hezbollah is successful in its current attack on Israel -- and "success" may only necessitate survival -- Haykel sees ominous signs for the West:

What will such a victory [by Hezbollah over Israel] mean? Perhaps Hezbollah’s ascendancy among Sunnis will make it possible for Shiites and Sunnis to stop the bloodletting in Iraq — and to focus instead on their “real” enemies, namely the United States and Israel. Rumblings against Israeli actions in Lebanon from both Shiites and Sunnis in Iraq already suggest such an outcome.

That may be good news for Iraqis, but it marks a dangerous turn for the West. And there are darker implications still. Al Qaeda, after all, is unlikely to take a loss of status lying down. Indeed, the rise of Hezbollah makes it all the more likely that Al Qaeda will soon seek to reassert itself through increased attacks on Shiites in Iraq and on Westerners all over the world — whatever it needs to do in order to regain the title of true defender of Islam.

Read the entire piece. And don't miss Dan Senor's Opinion Journal op-ed that explains how the militant Shiite forces in Iraq are shaping domestic and foreign policy there.

Posted by Tom at 6:37 AM | Comments (0) |

Lance Berkman is a funny guy

Amidst the Stros disappointing season, slugger Lance Berkman (42 RCAA/28 HR's/.403 OBA/.617 SLG/1.020 OPS) is having another outstanding season, slugging his way to production that is second only to the Cardinals' Albert Pujols in the National League.

In last night's Stros win over the Reds, Berkman whacked another two yaks, one of which was a 452 foot bomb that landed in the restaurant that overlooks centerfield at Minute Maid Park. Berkman, a happy-go-lucky, life-long Texan who is a genuinely nice fellow, commented after the game on his mighty home run:

"I think the waiter made a nice play."

Berkman's career stats are below. In the history of the Stros franchise, only Jeff Bagwell (stats below, also) has had better hitting statistics than Berkman at the same stage of his career. Berkman, who is 30, currently has 331 RCAA for his career and is about ready to overtake Craig Biggio (currently at 352 RCAA for his career) for second place on the Stros career RCAA list. At the completion of the season (1998) that coincided with his 30th birthday, Bags' RCAA was 431, and Bags tops the Stros career RCAA list at 680.

It's sometimes easy to overlook, but we have been blessed to have been able to watch in Bidg, Bags and Berkman the three best non-pitcher players in the history of the Houston Astros Baseball Club.

The abbreviations for the hitting stats are defined here.

Posted by Tom at 5:54 AM | Comments (2) |

The Yates verdict

It took awhile, but the Texas criminal justice finally got it right yesterday in the sad case of Andrea Yates, thanks to an honest and dispassionate jury.

Of course, as noted here earlier, this is a prosecution that never should have been tried once, much less twice. Yates and her attorneys were always willing to cut a deal in which the obviously insane Yates would spend the rest of her life in a tightly-controlled state mental hospital, yet the Harris County District Attorneys office stubbornly refused to provide any meaningful prosecutorial discretion in the case. The result has been a four year saga in which untold millions of dollars of has been spent so that the prosecutors could prove what? That this obviously insane woman just was lucid enough when she killed her children that she should spend the rest of her life in a maximum-security prison rather than a state mental institution?

Yates initially will be sent to a maximum-security hospital, probably North Texas State Hospital in Vernon, and then if doctors determine she is not a danger to herself or others, she later will probably be moved to a medium-security state mental health facility, such as the Rusk State Hospital where she lived for several months pending her retrial. Oh yeah, where she lived before prosecutors insisted that she be detained in the Harris County Jail during her retrial.

Although the Yates defense was successful this time around, there is no real victory here. Yates will spend the rest of her life in a heavily-guarded mental institution and any time she regains even a little bit of lucidity, she will descend back into a deep depression with psychotic features and schizophrenia when she realizes what she did to the children that no one involved in the case disputed that she adored.

One aspect of the case that I've not seen reported much in the media is that this trial only involved the deaths of three of the five children that Yates killed, so the Harris County District Attorneys office clearly hedged its bets that it could lose this case when it elected not to prosecute the deaths of the other two Yates children. Thus, it's possible that the DA's office could mount another murder case against Yates, although even their bad judgment in pursuing the first case against Yates through two trials does not seem to make that a likely scenario.

The bottom line on this case is that good people afflicted with terrible mental illness are capable of committing horrendous acts during a period of harrowing madness. That's the reason why insanity is a defense to a murder charge under our criminal justice system, and there is simply no reason to have that defense at all if the state insists upon using its overwhelming prosecutorial power to place obviously insane people such as Andrea Yates in prison -- rather than a more humane mental health facility -- for the rest of their lives.

Posted by Tom at 4:53 AM | Comments (0) |

July 26, 2006

Air France competitors, listen up!

Air France is right on the law in this recent Fifth Circuit decision (written by Judge Fortunato P. Benavides), but woefully wrong on the public relations front. In not settling the case, Air France has given an enterprising advertising firm for one of Air France's competitors the basis for an effective "we'd never do this to you" advertising campaign against the airline.

Here's what happened. Air France charged Edo Mbaba a $520 excess baggage fee for the four extra bags he took on his trip from Houston to Lagos. That was no problem, but when Mbaba flew through Paris, the flight was delayed and he missed his scheduled connection. As a result, he had to spend the night in the terminal and reclaim his baggage.

The next day, when Mbaba went to check his bags with Air France again for his flight to Lagos, Air France inexplicably advised him that he would have to pay another $4,000 in excess baggage fees. Thinking much as I would if confronted with such a demand, Mbaba requested that Air France simply return his luggage to Houston, which prompted the Air France personnel to inform Mbaba that if he didn't quit griping and pay the four grand fee, they would take his luggage outside and barbecue it. Mbaba paid the fee, but then sued Air France in Texas for breach of contract and other state law claims.

Alas, the U.S. District Court and the Fifth Circuit concluded that Mbaba’s claims are preempted by the Warsaw Convention. Nevertheless, here's hoping that some of Air France's competitors pick up on the decision and use it in the advertising wars so that the few bucks that Air France saved by stiffing Mbaba becomes an expensive lesson on how not to treat customers. Hat tip to Robert Loblaw for the link to the Fifth Circuit decision.

Posted by Tom at 8:19 AM | Comments (1) |

Harvey Miller takes one on the chin

As noted in this previous post, former Weil, Gotshal & Manges bankruptcy partner and current Greenhill & Co. investment banker Harvey Miller is arguably the most leader of the movement over the past 30 years to elevate the compensation of corporate reorganization lawyers to levels commensurate with that of other corporate and securities lawyers. In so doing, Miller was not accustomed to losing many disputes over his firm's fees in big reorganization cases, but -- as the Wall Street Journal's ($) Nathan Koppel reports here -- Miller absorbed a hit on his fees as an investment banker earlier this month that could be the largest in the history of US corporate reorganizations.

Based on a July 21 ruling of New York Bankruptcy Judge Robert Drain, Miller's employer -- New York investment bank Greenhill & Co. -- must return $4.6 million of the more than $11 million the firm was paid as an adviser to Loral Space & Communications Ltd. in the satellite company's chapter 11 case. Judge Drain concluded that Greenhill had improperly claimed a bonus for advising Loral in its 2003 bankruptcy and that Greenhill's retention agreement did not authorize such a bonus. Greenhill was allowed to retain the $7 million balance of its compensation.

As noted in the previous post, my sense is that Miller and attorneys at the Akin, Gump law firm are not going to be exchanging holiday greeting cards any time soon.

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

The spokesman for the NatWest Three

What do you do when you can't hang out and chat with your blokes?

Well, in the case of David Bermingham -- one of the three former London-based National Westminster Bank PLC bankers dubbed the "NatWest Three" in the lexicon of Enron criminal cases -- he sits for this interesting interview with the Chronicle's Tom Fowler. Although he does not reveal how he and his co-defendants intend to defend against the prosecution, Bermingham tells the story of how he and his NatWest colleagues -- Gary Mulgrew and Giles Darby -- voluntarily went to the UK equivalent of the SEC in November 2001 upon learning through news reports that a transaction in which they and NatWest Bank were involved had become part of the fraud investigation of former Enron CFO Andrew Fastow and his right-hand man, Michael Kopper.

Subsequently, the UK authorities passed along the information provided to them by Bermingham and his mates to the SEC and, the next thing you know, Bermingham, Mulgrew and Darby are the subject of a criminal complaint in Houston. No US investigator contacted Bermingham, Mulgrew or Darby to get their side of the story before firing off the criminal complaint against them, but -- as Bermingham notes -- the Enron Task Force probably viewed the three bankers as pawns in their effort to put pressure on Fastow. After Fastow copped a plea, the Task Force was stuck with its dubious decision to prosecute the three UK citizens.

Although not well-reported in the press yet, the case against the NatWest Three is fairly straightforward, at least as Enron-related criminal cases go. The Task Force alleges that the three defrauded their former employer by conspiring with Fastow and Kopper to underpay NatWest for its interest in an entity named Swap Sub, an affiliate of LJM1, the Fastow/Kopper-managed special purpose entity that was created in 1999 to hedge Enron's valuable but highly volatile interest in a technology company called Rhythms.

Fastow arranged to have an entity called Southhampton that was owned by his family, Kopper and several other Fastow underlings at Enron (including Ben Glisan) buy NatWest's interest in Swap Sub in March, 2000 for $1 million, which was substantially more than NatWest had that interest valued at the time. After NatWest sold out, Fastow sold a portion of the old NatWest interest in Swap Sub through Southhampton to the three bankers personally for $250,000. About a month and a half later, Fastow and Kopper arranged to have Enron and Swap Sub unwind the hedge on the Rhythms stock, which resulted in Enron purchasing a large chunk of Enron stock from Swap Sub. The NatWest Three's net share of the Enron stock sales proceeds was $7.3 million.

In short, the Task Force alleges that the NatWest Three's making $7.3 million on an investment of $250,000 a month and a half earlier violates the "too good to be true" rule. Presumably, Fastow and Kopper are prepared to testify that the NatWest Three knew that Fastow and Kopper had arranged with Enron to unwind the hedge on Rhythms stock with Swap Sub, knew that such unwinding would make Swap Sub worth much more than NatWest had it valued at the time, and that neither Fastow nor the NatWest Three disclosed the situation to NatWest before the bank sold its interest in Swap Sub to Southhampton for a measly $1 million.

For their part, Bermingham, Mulgrew and Darby contend that they knew nothing about Fastow and Kopper's plan to unwind the Rhythms hedge with Enron, that the $1 million price that Southhampton paid for NatWest's interest in Swap Sub was substantially more than it was worth at the time, that the $250,000 price they paid for an interest in Swap Sub was similarly reasonable given the risk of the investment, and that they were as pleasantly surprised as anyone on the big return on their investment when Enron and Swap Sub unwound the hedge a month and a half later (remember, all this took place before the bursting of the stock market bubble on tech stocks). Interestingly, despite the fact that all of the foregoing information has been well-known to NatWest for several years now, the bank did not pursue either a civil case or criminal prosecution of the NatWest Three in the UK.

By the way, colorful Houston-based criminal defense attorney Dan Cogdell, who successfully defended former Enron in-house accountant Sheila Kahanek in the Nigerian Barge case, is defending Bermingham. Cogdell's involvement ratchets up the entertainment value of any case, so stay tuned.

Posted by Tom at 4:40 AM | Comments (4) |

July 25, 2006

Colbert strikes again

How on earth did Florida Democratic Congressman Robert Wexler's staff allow him to do an interview with Stephen Colbert without first advising him what he was getting into?

Posted by Tom at 7:53 AM | Comments (1) |

Thinking about progress in health care

This NY Times article tells the fascinating story about the assassination of President James A Garfield back in 1881 while noting an exhibit commemorating the 125th anniversary of Garfield’s assassination at the National Museum of Health and Medicine on the campus of the Walter Reed Army Medical Center.

President Garfield was shot on July 2, 1881 in Washington by a disgruntled federal job-seeker, Charles J. Guiteau, who made his move while Garfield was waiting for a train. What is not as well-known is that neither of the shots that hit Garfield should have fatal even by the more primitive medical standards of the 1880's. As my late father once observed to me while discussing Presidential assassinations, "Garfield's assassin just shot him. Garfield's doctors killed him."

The Times article reminds me of another interesting medical case that Dr. Donald J. DiPette, chair of the Department of Internal Medicine at Texas A&M University Medical School, presented earlier this year during the Walter M. Kirkendall Lecture that the University of Texas Medical School conducts annually in honor of my father.

Dr. DiPette's subject was how advances in clinical research on hypertension had contributed to our understanding and knowledge of related medical problems that are related to high blood pressure, and he used a case study of a man in his mid-50's in the late 1930's who was showing signs of acute hypertension as an example of how that understanding can change the world.

The negative impact of hypertension on an individual's health was not well-understood in the late 1930's and 40's, and Dr. DiPette showed how the patient's health in the case study deteriorated at an accelerated rate as his blood pressure readings increased markedly from 1937 to 1945. One evening in early 1940, he collapsed unconscious at the dinner table. The patient's doctors at the time were unsure why.

By 1945, the patient -- who was still working in an important and high-pressure job -- had blood pressure that was off the charts and was experiencing a combination of associated medical problems that would have landed him in a hospital these days. Nevertheless, the patient continued to work and, about a month after a particularly important work-related meeting, the patient died of a massive stroke.

Only at the end of his lecture did Dr. DiPette reveal the name of the patient in his case study -- President Franklin D. Roosevelt.

Dr. DiPette's point was that President Roosevelt's acute hypertension clearly affected his performance at the Yalta Conference, and his doctors would likely have never allowed FDR to participate in that history-changing event had they known what we know now about the effects of hypertension. Thus, lack of knowledge about hypertension -- which finally began to be understood less than a decade after FDR's death -- literally changed the course of the 20th century.

Remember that as you contemplate the negative impact on clinical research of this, this and this.

Posted by Tom at 6:33 AM | Comments (2) |

Where Tiger stands

The NY Times Damon Hack, who is writing some of the best articles on golf in the mainstream media, weighs in on Tiger Woods' British Open victory with this article that summarizes where Tiger stands in relation to the greatest golfers in history.

Woods, who is 30, won his 11th professional major championship (14th if you include his three straight US Amateur championships), which tied him with Walter Hagen and places him seven professional major victories behind Jack Nicklaus' record of 18 majors. No one else stands between Woods and Nicklaus, and Nicklaus did not win his 11th professional major until he was 32.

After Nicklaus won seven professional majors by 1967, he had his biggest lull in his prime when he went the next 12 majors without a win, from the last two of '67 through the first two of 1970. Nicklaus came back to win 10 more by the end of 1980, and then added on his sixth Masters in 1986 for his 18th.

In the best stretch of his professional career, Woods won seven majors in less than three years from the 1999 P.G.A. Championship at Medinah Country Club to the 2002 United States Open at Bethpage Black. Then, Woods went 10 majors without a victory between 2002 and 2005 as he went through an extensive swing change that flattened his swing plane, but with the victory over this past weekend, Woods has now won three of the last seven majors and will enter the final major of the year -- the P.G.A. at Medinah in August -- as the odd's-on favorite again.

Posted by Tom at 5:58 AM | Comments (0) |

July 24, 2006

The New Spirit of Aggieland?

Given the recent downturn in Texas A&M football fortunes, rumor has it that Coach Fran is going to replace the Aggies' traditional pre-game ritual "Spirit of Aggieland" with the New Zealand National Rugby team's traditional pre-game HAKU.

Just kidding.

Posted by Tom at 8:13 AM | Comments (0) |

Something to think about before you grab the big stick

Tiger Woods' dominating performance (and here is a video of the swing that he used) in winning this year's British Open gives us hackers something to think about next time we tee it up on our home course.

Woods averaged 291 yards off the tee at Royal Liverpool, which stretches over 7,200 yards. He led the field by hitting 48 of 56 fairways while making three eagles, 19 birdies, 43 pars and seven bogeys. And nothing worse than that.

By the way, Woods accomplished this mostly by not using his driver, which he used precisely once during the entire tournament. His club of choice off most par 4's and 5's was his steady 2-iron.

Now, links golf is different from American golf in that the ball rolls farther and the need for forced carries is not as great on links courses. However, count the number of fairways you are hitting with your driver the next time you play. If it's less than 75%, then try a round without using it at all. My bet is that your score will not be much different and, if it is, it will probably be lower.

By the way, I wonder if Phil Mickelson noticed what Tiger was hitting off the tee?

Posted by Tom at 6:27 AM | Comments (1) |

More rumblings at Dell, Inc.

Following on this previous post from about a month ago, Round Rock-based Dell, Inc. announced late last week that -- as Jeff Matthews aptly notes -- it had "puked the quarter."

Dell's announcement sent its shares sliding almost 10% for the day on Friday to the lowest close in about five years (Dell's stock was down $2.19 to $19.91 a share, its lowest since October, 2001). This type of announcement is getting a tad monotonous for Dell, which missed forecasts for its fiscal first-quarter revenue and earnings earlier this year, and missed sales projections last year for its fiscal second and third quarters. Dell's basic problem is that the computer market is shifting away from Dell's core strength in providing computers to business toward consumer PC's, which is a smaller part of Dell's business. To make matters worse, Dell's cost-structure is such that it doesn't have any room left to undercut competitors on the cost of PC's.

Meanwhile, Dell competitor Hewlett-Packard is taking advantage of the situation. HP has restructured its operations to focus on sales growth in consumer PC's, where its wide footprint in retail stores across the US gives it an advantage over Dell's focus on web-based and mail order sales. HP's PC shipments in the U.S. jumped more than 15% in the second quarter.

Finally, Matthews is not convinced that the slide in Dell's stock price is over, either:

[Dell] has used options extensively as a key component of its employee compensation. . . Dell spent more than $15 billion in the last four fiscal years buying back stock—yet fully diluted shares declined a mere 200 million shares over that time, thanks to the company’s willingness to dilute its shareholder base with large option grants. This is all perfectly legal, of course, but as options lose their place in the hearts and minds of investors, Dell may have to figure out a better way to keep costs down.

Posted by Tom at 5:53 AM | Comments (0) |

Thinking about foreign policy

Inasmuch as foreign affairs issues are simmering all over the place right now, I pass along the following items that I've come across recently:

In this Investor’s Business Daily article, Claremont Institute President Brian Kennedy evaluates the US missle defense capabilities and explains why it is wholly indequate. Most interestingly, Kennedy describes an admittedly "fanciful" scenario under which North Korea would hit Seattle with a nuclear missle and an aftermath that is foreboding. The Claremont Institute is also maintaining this site that updates America's vulnerability to ballistic missile attack as the proliferation of ballistic missile technology increases.

We haven't checked in with Victor Davis Hanson in awhile, so this National Review op-ed provides a welcome contrary view to the gloom and doom of most media reports regarding the current Israeli-Hezbollah conflict.

For up-to-the-minute updates on the situation in the Middle East, the Truth Laid Bare provides this useful page of bloggers categorized by region and this NY Times article passes along several online diaries from the front of the Israeli-Hezbollah conflict.

Finally, Foreign Affairs magazine is providing this excellent online forum on the question of "What to Do in Iraq." Take a few minutes to review the give-and-take from the various experts particpating in the forum.

Posted by Tom at 5:14 AM | Comments (0) |

July 23, 2006

Sending bad messages

It's hard to imagine that the federal government could have sent worse signals to foreign investors in US markets and businesses than the ones that it sent over the past week.

First, there was the latest news about the NatWest Three, the three UK bankers who had the misfortune of making an investment in one of Enron's special purpose entities controlled by former Enron CFO Andrew Fastow and his right-hand man in crime, Michael Kopper. Remarkably, the only reason that the NatWest Three were spared from the Enron Task Force demanding their incarceration in Houston's downtown Federal Detention Center pending their trial was the intervention of UK Prime Minister Tony Blair, who assured an angered British Parliament a week ago that the bankers would be released on bail.

Nevertheless, even Blair's intervention didn't stop the Task Force from demanding that the bankers remain in the US pending their trial (despite the fact that the three offered to waive extradition for trial) and that the three friends live apart and not talk to each other about their case unless their counsel is present. Unbelievably, the federal magistrate who adjudicated the bankers' bail motion accepted the Task Force's ludicrous "live seperately" and "no-talk" demands, which means that three UK friends in a foreign land must live alone and cannot talk freely with each other while preparing their joint defense in an extraordinarily unfriendly venue. In the meantime, their only known accusers -- admitted felons and liars Fastow and Kopper -- have no such restriction in hobnobbing with each other and continue to live comfortably in their expensive Houston homes.

Meanwhile, UK business executive David Carruthers remains in an orange jumpsuit and is being moved from Dallas to St. Louis in chains and handcuffs after his arrest by federal authorities earlier in the week while changing planes. This Times Online article puts the situation in perspective for UK investors:

The US authorities seem to have abused an anti-terrorist deal, allowing them to vet passenger lists in advance, as objectors to the arrangement had feared. Misuse of the laws on federal racketeering, money laundering and extradition is a sadly routine feature of the US justice system. It is no consolation to holders of BetonSports shares, which have been suspended, that Mr Carruthers believes that the company was acting legally. Nor will blaming US practice help investors in larger rivals in the fast-expanding internet gambling sector. But it should make us more aware of catastrophic risk.

Finally, the masterful Larry Ribstein takes stock of the Justice Department's decision to go Enron on Brocade's former CEO and human resources VP over the overhyped problem of backdating stock options:

[T]his is about criminalizing agency costs. By all reports, backdating was a very widespread practice, potentially affecting a significant percentage of all public companies. While some smaller firms were doing it ad hoc, other bigger ones probably had advice of big accounting firms and at least in house counsel, at least some of whom were not gaining personally from the options. For example, the WSJ's scorecard of companies under scrutiny includes, among others, Apple, Barnes & Noble, Home Depot, Intuit, Microsoft, Monster. [. . .]

Are we nevertheless going to indict executives in all of these companies? And if you're going to indict the HR director at Brocade, how far down in the other companies? If the Brocade CFO knew about this and furthered the fraud, as the SEC charges, why not indict him, too, instead of just a civil complaint? Then why not all the other CFO's at all the companies in such a position. What about all the non-executive employees who got the options and knew about the accounting/disclosure problems?[. . .]

. . . [C]riminalizing this business practice is not the answer. There is little doubt that the combination of regulation, civil liability and markets can solve -- indeed, probably already has solved -- any problems here. In fact, criminal charges are so patently not the answer that I suspect that one big effect of this scandal will be a reexamination of the whole issue of criminalizing agency costs.

See here for Steve Bainbridge's contrary view in regard to the Brocade indictment. I hope that Larry is correct on that last point about reexamining the federal government's dubious policy of criminalizing agency costs, but his weekly disassembling of NY Times columnist Gretchen Morgenson identifies one knawing problem that needs to be overcome if that reexamination is to take place:

It would be nice if [Morgenson] gave us a little more analysis and a lot less overheated rhetoric. Of course that assumes Morgenson is interested in informing her readers and contributing positively to the executive compensation debate. On the other hand, if she is interested in ratcheting up the hysteria of readers who want their daily fix of anger and resentment at executive greed, she's doing a fine job.

And don't forget what is likely to result from relying on resentment and scapegoating rather than dispassionate and objective analysis.

Posted by Tom at 11:31 AM | Comments (0) |

July 22, 2006

Stros 2006 Review, Part Six

After the Stros were blown out by the Mets on Friday night and fell to a season-worst 46-51 record, it's looking clearer by the day that the magic of the Stros' past two second-half playoff runs has worn off completely.

Now through 60% of the season (7-9 in the last 10% of the season; prior periodic reviews here), the Stros have not won more games than they have lost in any of the five 10% segments of the season after the first one. The club's hitting overall remains almost precisely National League average (team RCAA is -2 -- 10th among the 16 NL teams) and the pitching staff continues to toil at well below National League-average level (RSAA of -20 -- 13th in the NL). As noted in previous posts, the Stros' trend of average or below National League-average hitting over the past half-dozen seasons means that the Stros need extraordinary pitching to contend for a playoff spot, and the club received just that in the past two seasons. Unfortunately, this season, the Stros pitching staff is a bit below National League average and, thus, the Stros are currently just that -- a slightly-below National League-average club.

The club's hitting and pitching statistics to date are set forth below, and pdf's of the current hitting stats are here and the current pitching stats are here, courtesy of Lee Sinins' sabermetric Complete Baseball Encyclopedia. The abbreviations for the hitting stats are defined here and the same for the pitching stats are here:

So, is there any hope for the Stros' playoff chances? I'd put them at under 10% now as the Stros would have to go 44-21 over the rest of the season to finish 90-72, which is probably the minimum it will take to win the NL wildcard playoff spot. Although 1B/RF Lance Berkman (37 RCAA/.403 OBA/.595 SLG/.998 OPS) continues to be the hitting star of the team, and the club has gotten solid contributions from CF/2B Chris Burke (10/.377/488/.859) and 1B Mike Lamb (10/.371/.516/.887), there are simply not enough other indications that this club has what it takes to put together the winning streaks necessary to pull off that type of finish.

In fact, the Stros' biggest problem remains the same one that I've been harping about for three seasons now -- an unbalanced hitting attack. Berkman is one of the best hitters in MLB, but outside of Lamb, Burke, the injured 3B Morgan Ensberg (17/.390/.500/.890), and new acquisition Aubrey Huff (0/.367/.440/.807), the rest of the Stros' hitters are rather pathetic. No other Stros hitter is even above-National League average and several of them -- SS Everett (-16/.293/.321/.614), CF Taveras (-14/.309/.310/.620) and C Ausmus (-17/.303/.308/.612) -- are among the least productive hitters in the National League. Taveras, in particular, needs to replace Jason Lane (-5/.722/.393/.330) as soon as possible at AAA Round Rock until he can learn to generate at least a National League-average on-base percentage, which is essential for Taveras if he is ever to become a productive MLB player.

To make matters worse, Stros' manager Phil Garner seems to have a case of Jimy Williamitis as he insists upon trotting out the quietly unproductive LF Preston "Double-Play" Wilson (-10/.315/.415/.730) in the starting lineup each day. Faced with those hitting problems, Stros GM Tim Purpura acquired Huff a week or so ago, but Huff is no Carlos Beltran, so even when he hits his stride, Huff will likely be only a marginal upgrade who will not elevate the Stros' hitting enough to vault the club into this season's wildcard race.

Meanwhile, the pitching staff overall continues to muddle along, but there are signs that a surge could take place during the second half of the season. Roy O (3.22 ERA/16 RSAA) and Clemens (2.43 ERA/7 RSAA) are rock-solid and will likely continue to be through the remainder of the season. Pettitte (5.50 ERA/-12 RSAA) and rookie starter Buchholz (5.36 ERA/ -11 RSAA) continue to be inconsistent and problematic, but Brandon Backe (2.25 ERA/2 RSAA) will come off the disabled list this weekend, and he is likely to provide some better service than either Pettitte or Buchholz. Finally, the bullpen has actually showed some signs of hope recently, so a reasonable case continues to exist that the Stros' pitching staff could turn things around during the second half of the season and return to above National League-average status. Just not enough to propel the Stros into the playoff race.

So, what to do over the remainder of the season? Actually, there is much to be optimistic about with regard to the Stros. Owner Drayton McLane has shown that he will pay among the highest payrolls in MLB to give the Stros a chance to succeed, and the club will free up over $50 million (almost half the club's current payroll) after this season as Bagwell, Pettitte and Clemens' contracts end. Attempting to extend Oswalt's contract before he reaches free agency after the 2007 season should be a first priority (MLB.com reporter Alyson Footer speculated earlier this week that Oswalt was planning on testing free agency after the 2007 season), while declining to exercise the option on Wilson's contract is a no-brainer. Berkman, Ensberg, Huff and Burke constitute a decent hitting nucleus, Lane and Lamb are capable of being solid contributors, and even the weak-hitting Everett is an extraordinary talent in the field. With money to spend and several good pitching prospects on the MLB roster and in the upper minor league pipeline, the Stros appear to be in a good position -- with sound personnel decisions -- to pick up a couple of productive hitters in the upcoming off-season who could vault the club back into a playoff contention.

After completing the series with the Mets over this weekend, the Stros play 15 of their next 21 games at Minute Maid, beginning with the Reds and the Diamondbacks next week. So, if the Stros are going to begin a run this season, this would be the time to do it. Just don't bet on it happening.

Posted by Tom at 10:32 AM | Comments (4) |

July 21, 2006

Good swing thoughts

As I write this, Tiger Woods is leading by 3 strokes in the second round of the the Open Championship.

For one of the main reasons why Woods is the favorite to win the Open at the relatively defenseless Royal Liverpool Golf Club, check this out.

Sweet!

Posted by Tom at 7:11 AM | Comments (0) |

Do we really need this?

This NY Times article reports on the latest international reaction to the US Justice Department's over-the-top crackdown on internet gambling:

The World Trade Organization set up a panel on Wednesday to investigate whether United States restrictions on Internet gambling comply with international trade rules.

The Caribbean country of Antigua and Barbuda asked the W.T.O. to set up the panel after consultations with the United States failed to yield a solution to a dispute over whether Washington should drop prohibitions on Americans placing bets in online casinos.

A previous W.T.O. ruling said that some United States laws were in line with international commerce rules, but others were not. “The United States has been busy passing legislation that is directly and unequivocally contrary to the ruling,” Antigua told a meeting of the W.T.O.’s dispute settlement body.

The nation contends that the United States has taken no measures to comply with the recommendations and rulings of the dispute settlement body, Antigua said.

Let me get this straight. A supposedly free-trade and business-friendly GOP administration is risking World Trade Organization sanctions over criminalization -- as opposed to regulation -- of internet gambling?

Posted by Tom at 6:33 AM | Comments (2) |

What's that criminal charge again?

One big problem with the federal government's criminal case against the defendants in the KPMG tax shelter case is that neither the defendants nor any of their clients engaged in any affirmative act of evasion, such as keeping false accounting books or literally hiding income so that the IRS could not find it. Rather, each taxpayer claimed losses on the taxpayer's return in accordance with a literal application of the tax law and then, as often happens, the IRS challenged the claims. KPMG's clients needed KPMG's opinion regarding the validity of the tax shelters to protect themselves against civil penalties the IRS might try to impose as a result of a challenge to the tax returns, but they did not need the KPMG opinions to file the tax returns claiming the losses. Thus, the KPMG opinion had not bearing on the propriety of filing a tax return and is irrelevant to the crime of tax evasion.

To get around that problem, federal prosecutors came up with the second crime of so-called tax perjury, which involves a demonstrable lie asserted in a tax return or some other document that is submitted to the IRS under penalty of perjury. However, the tax perjury case against the accountants is flimsy at best. During the audit of the KPMG clients' returns, the KPMG clients contended that they had a business purpose sufficient to meet the IRS standard for avoiding civil penalties and then produced KPMG opinion, which is not submitted under penalty of perjury. Thus, best case for the prosecution is that the taxpayers and KPMG may have been disingenous, but that hardly renders perjurious the submission of a tax return that was factually correct.

Now, it appears that at least some of those tax returns were not even misleading. According to this NY Times article, US District Judge T. John Ward of the Eastern District of Texas ruled earlier this week in a civil case that one of the KPMG tax shelters that is at the center of the KPMG tax shelter case is essentially legitimate.

What is the Justice Department's justification for criminalizing such conduct? According to the article, "prosecutors in the KPMG case have indicated that they will argue that the shelter itself was technically valid, but that the way the defendants carried it out was not."

As this Wall Street Journal ($) editorial opines today, there is a serious shortage of adult supervision in the US Department of Justice these days.

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

July 20, 2006

The doctor at the center of the Hurricane Katrina wrongful death prosecution

Dr. Anna Pou, the New Orleans doctor who heroically served severely-ill patients during the chaotic aftermath of Hurricane Katrina last summer, is at the center of the highly-publicized and controversial decision of Louisiana criminal authorities earlier this week to arrest Dr. Pou and two assisting nurses and charge them with second-degree murder in the deaths of four patients who died during that horrible time. She is also a former Houston-area resident, having served on the faculty of the University of Texas Medical Branch in Galveston from 1997-2004, where she was the Director of the Division of Head and Neck Surgery from 1999 to 2004.

Today, this excellent NY Times article places in perspective the arrest and prosecution of this outstanding physician, who is a diplomate of the American Board of Otolaryngology, Fellow of the American College of Surgeons, and a member of the American Head and Neck Society. Dr. Pou has authored more than forty publications, has also served on multiple committees of the American Academy of Otolaryngology, and has lectured in national and international forums on topics in otolaryngology, head and neck oncology, and microvascular reconstructive surgery.

In short, Dr. Pou is no murderer. This prosecution has all the earmarks of yet another lynch mob that is more interested in myths than reality, so watch it closely.

Posted by Tom at 7:34 AM | Comments (9) |

John Daly storms the Beatles hometown

The 135th edition of the British Open begins today, and the venerable tournament has returned to Liverpool -- the gritty hometown of the Beatles -- for the first time in 40 years. As you might expect, 1995 British Open champ John Daly is having quite a time (see also here) this week. The overweight, chain-smoking, beer-guzzling and problem-laden Daly turned philosophical while visiting the Cavern Club, the Liverpool pub in which the Beatles legend began:

“Music is my therapy,” Daly said. “I think for all of us it is therapy, whatever style of music you are into. If I am driving my bus, I can’t do it with no sound. The world can’t exist without music.”

The Scotsman's Alan Patullo has more here. Meanwhile, wouldn't you like to be the caddy for a day for one of the members of this twosome?

By the way, in the morning rounds, 4-under par is leading the tournament and Houstonian Steve Elkington -- who had an easier time getting into the British Open than the US Open -- had an opening round 71 (one under part). K.J. Choi of The Woodlands had an opening round 72 and Jeff Maggert -- who also lives in The Woodlands -- has not yet teed off in the first round.

Posted by Tom at 6:02 AM | Comments (0) |

Say what?

Chronicle reporter Megan Manfull opens her article on the latest development in Texanville with the following paragraph:

Spencer, an offensive tackle out of Pittsburgh, will receive a $610,000 signing bonus on a four-year contract that voids to three years. He is slated to make $275,000 this season, $360,000 in 2007 and $440,000 in 2008. The deal is expected to be finalized today.

I have my limitations as a lawyer, so can someone explain to me what "a four-year contract that voids to three years" means? By the way, my understanding is that Spencer has not yet dispensed formally with his first name, which is Charles.

Manfull also reports that the Texans -- who begin their pre-season camp next week -- have signed all of their draft choices except University of Miami offensive tackle Eric Winston (3rd round, 66th player chosen in 2006 NFL draft). Winston's agent is Drew Rosenhaus, which may explain why the once highly-touted Winston was still available for the Texans to pick up in the 3rd round of the draft.

Update: Ted Frank, who knows a bad regulation when he sees it, writes to explain the "four voiding to three" jibberish: "A four-year contract that voids to three years is a four-year contract where the fourth year can (and almost certainly will) be unilaterally voided by the player. The effect is to fool the salary cap by allowing the team to divvy the signing bonus over four years, rather than the three years that is the economic reality of the contract."

Posted by Tom at 5:33 AM | Comments (2) |

The Abbeville Institute's tribute to Dr. Ross M. Lence

The late Dr. Ross M. Lence of the University of Houston was a founding member of board of directors of the Abbeville Institute in Atlanta, which is an association of scholars devoted to the critical study of philosophical nature of the Southern tradition in the United States. Upon his death last week, the Abbeville Institute issued this endearing tribute to Dr. Lence, which -- as is always the case in discussing the indomitable Good Doctor -- provides several amusing anecdotes, including this classic:

Once at a seminar with other academics, Ross was challenged by an especially obnoxious participant who, rather than confront his arguments, hoped to end the argument by saying that Ross had not read Locke carefully. Ross calmly replied (he was always calm) with that wry smile of his that if the gentlemen would tell us the paragraph number of the Second Treatise that interested him, he would quote it from memory and then attend to what the gentleman thought he had failed to understand in it.

The entire Abbeville Institute tribute is below.

Dear Colleagues, Students, and Friends,

It is with sadness that I inform you that Professor Ross M. Lence died on July 11th, 2006. Ross was a founder of the Abbeville Institute and a member of its Board of Directors. Much of what we stand for was exemplified by his teaching and character.

Ross studied at the University of Chicago, Georgetown University, and the British Museum before completing his Ph.D. at Indiana University under Professor Charles Hyneman. He greatly admired Hyneman who became his mentor and friend. Ross often quoted him and had a portrait of him prominently displayed in his office at the University of Houston over a table set with bottles of whiskey and sherry for the refreshment of his visitors.

Ross tells the story of how, as a raw graduate student, he first met Hyneman. Ross appeared in his office, confronting the abrupt question, what do you want? Ross replied, to study American political science. Hyneman asked, have you seen it? Ross answered, seen what? America, Hyneman replied. If you want to see it, meet me tomorrow morning. They spent the next few summers traveling around America observing its life in small and large towns, villages, and out of the way farming communities.

This story expresses a truth Ross learned from Hyneman and which he embodied in his own work; that theorizing about political things must be rooted in a connoisseur's understanding of practice. Unhappily this essentially Aristotelian wisdom is missing from much of American political science which has not freed itself from an ideological style of theorizing.

Ross also thought one had to have a detailed knowledge of classical political texts. He could quote Locke's Second Treatise and The Federalist from memory. Once at a seminar with other academics, Ross was challenged by an especially obnoxious participant who, rather than confront his arguments, hoped to end the argument by saying that Ross had not read Locke carefully. Ross calmly replied (he was always calm) with that wry smile of his that if the gentlemen would tell us the paragraph number of the Second Treatise that interested him, he would quote it from memory and then attend to what the gentleman thought he had failed to understand in it.

His knowledge of political theory and of political things was broad and deep. But he wore his learning lightly. It never intruded pedantically in conversation. It was there as a cultural inheritance which he had worked hard to make his own and from which flowed his disarming Socratic questions; his refusal to accept facile answers even when they favored his own position; his insistence on clarity; and all of this carried on with a wit that was both piercing and lovable.

These qualities made him a great teacher. It is no exaggeration to say that he must be included in a handful of the greatest teachers in the America of our time. He joined the Department of Political Science at the University of Houston in 1971. Over the years he won many teaching awards within and outside the University. In the late 1990's hundreds of students established an endowment for a chair in his honor. In 2001 Ross was appointed to the Ross M. Lence Distinguished University Teaching Chair. For over twenty years he regularly taught at the Women's Institute of Houston. Ross was one of the earliest, and a frequent participant in Liberty Fund Colloquia, a private foundation devoted to exploring the ideal of a society of free and responsible individuals. He was devoted to "Liberty," the ideal of an older federative America which today has largely been replaced with talk of "democracy," and "freedom" both of which typically reduce to "equality." By liberty he meant the right of individuals and communities of human scale to govern themselves. He lectured at the first Abbeville Institute summer school, 2003, which was recorded on video. So we are fortunate to have a film of his lectures.

Ross was a leading scholar on the philosophy of John C. Calhoun whom he saw as embodying much of what he loved in the ideal of liberty. He edited the Liberty Fund collection of Calhoun's writings Union and Liberty in 1992. He never published much. Learning for him was inseparable from character, and was a way of life best communicated through face to face knowledge. He not only gave of his time freely to students, he in time acquired an informal reputation at Houston as one to whom students could turn for counsel.

His last year was an ordeal of serious illness and suffering, made more bearable by the great numbers of current and former students and friends who gave their love, respect, and gratitude, and assistance. Few people will leave the world more loved than Ross. And so the Abbeville Institute salutes for the last time our never to be forgotten friend, mentor, and colleague with the words he always used in parting: Gaudeamus!

Posted by Tom at 4:52 AM | Comments (0) |

July 19, 2006

More on the latest prosecutorial abuse

Following on the latest example of out-of-control federal prosecutors, Cato Institute's Radley Balko has the best line of the day in responding to one of the vapid rationalizations for Congress' jihad against online betting -- "we have to protect our chidren from such evils:"

"The people who are pushing this ban in Congress . . . try to argue these sites prey on children, which is totally ridiculous," [Balko] said. "If your kid has access to your checking account or credit card and is making transfers to off-shore accounts across the world, Internet gambling is the least of your worries."

Balko has more on the absurdity of all this here.

Posted by Tom at 6:40 AM | Comments (0) |

What's driving the latest business scandal?

As noted in this previous post, the mining of claims in regard to the widespread corporate practice of backdating options as a method of executive compensation is in full gear despite the relatively straightforward nature of the legal issues related to the practice. So, what's driving this litigation freight train?

In this lucid post regarding the allegedly dastardly practice of granting options after the stock market dropped on the heels of the 9/11 attacks, Larry Ribstein observes that the scandal reflects a journalistic cooking of the books:

The whole backdating/springloading story has had the aspect of the mutual fund "scandal" -- leveraging a bunch of tangentially related stories involving quite disparate practices into one big scandal that keeps the readers coming back and buying newspapers. The last thing the journalists want is the sort of analytical clarity that we need for useful public policymaking. Rather, they want to obfuscate differences to enlarge the apparent, though not actual, size of the story. With respect to the 9/11 "scandal," the reporters can add to the usual book-cooking large dollops of greed-and-resentment-mongering curried in sanctimony.

But now, the WSJ's Peter Lattman -- author of the popular Law Blog -- weighs in with this WSJ ($) article that reports on another powerful driver of the latest business scandal de jure -- big law firms:

For public companies, investigations of possible stock-option backdating have become a huge headache. But for big law firms, they're the latest full employment act, generating hour after billable hour of work across practice areas, from tax and executive compensation to securities and white-collar defense.[. . .]

Because cases of backdating can require restating earnings, there is tremendous pressure on companies to address any problems immediately. And even as backdating touches myriad legal disciplines, individual players -- from the company itself to a board committee to individuals -- often require their own separate counsel. [. . .]

Some law firms are marketing themselves aggressively in the area. Earlier this month, [law firm] Proskauer [Rose] issued a press release saying it had formed a "Stock Options Task Force," bringing together more than 20 lawyers across practice areas. Mr. Cleary says that when he and his partners began to work on options-timing matters they asked themselves, "Why are we doing this all discretely? We can be much more efficient, much more nimble and much more effective in handling these issues collaboratively."

Ah, the synergistic power of the media and big law firms! ;^)

Posted by Tom at 5:27 AM | Comments (0) |

Michael Shelby, R.I.P.

Michael Shelby -- former U.S. Attorney for the Southern District of Texas from 2001-2005 and more recently a partner at Houston's Fulbright & Jaworski (previous posts here and here) -- died at his home in northwest Houston on Tuesday from what authorities described as a self-inflicted gunshot wound. Shelby, who was 47, had been suffering from cancer that had rendered him unable to work in recent weeks. The Chronicle story on Shelby's life is here.

Posted by Tom at 4:45 AM | Comments (0) |

Ted Estess eulogizes Ross M. Lence

As noted in this post from last week on the funeral services for one of Houston's finest teachers, Dr. Ross M. Lence of the University of Houston, Dr. Ted Estess -- Dean of the University of Houston Honors College and one of Ross' closest friends -- gave a superb eulogy during the Requiem Mass for Ross.

Ted has kindly allowed me to post the text of his eulogy (pdf here), the quality of which is surpassed only by Ted's moving delivery of the eulogy during the funeral mass. Take a moment to read this touching tribute from a dear friend to a teacher's teacher who has left an indelible mark on Houston:

Farewell to Our Teacher and Friend

I begin with the salutation that Ross himself used most often: Salutem in Domine.

Our teacher and friend Ross Lence was well known and loved for many things: certainly for the clarity and sharpness of his intellect; for the generosity and gaiety of his spirit; for his indefatigable dedication to his students.

In his early years, he was known for the briskness of his step across campus, such that admiring students hurried to keep up; throughout his years, we knew him for the garish colors and shocking patterns of his ties and suspenders.

But perhaps above all, our friend and brother Ross was known and loved for the quickness of his wit; for the merriment and laughter that he bestowed on any gathering, effortlessly, with grace, bite, and kindness. If his greeting was Salutem in Domine, his farewell was Gaudeamus — Rejoice! Take pleasure in life! Enjoy!

A spirit of hilaritas and felicitas — that’s what our friend gave us. That’s what we gladly remember, what we shall sorely miss.

So it is not surprising that every one of Ross’ students has some story to tell. One student received his first paper back from the Good Doctor, only to read this comment: “Young man, if we are going to communicate, we are going to have to settle on a common language. I prefer English.”

This morning, we have no difficulty finding a common language. And I am not speaking of English. What we hold in common — what holds us in common — is gratitude, respect, and affection for Ross himself.

For you see, Ross Lence had an extraordinary capacity to dispose persons in a common direction, and to constitute community. The means by which he did so was conversation; for conversation, practiced with Ross’ wit and generosity, binds persons together. It builds and manifests community.

Anyone who visited Ross in the hospital this past weekend, or anyone who saw him during the year of his illness, witnessed that community. Last evening and again this morning, that community gathered in abundance, present and palpable. Graybeards from the early 1970's are taking interest in current Honors students; graduates from the 1980's are interacting easily with Lencians from the 90's — all of them, students, faculty, and alumni from four decades, immediately connecting, telling their own stories about their outrageous and beloved teacher and friend.

One Lencian tells of the student who, having been late or absent from class a number of times in the semester, walked up to turn in her final exam. His back turned to her, the Good Doctor was writing something on the board, as she said: “Dr. Lence, you are a horrible teacher, and I want you to know that because of the way you teach, we haven’t learned a single thing this semester.” And without so much as turning around, Ross replied: “Yes, madam, and you are empirical proof of that.”

Circero helps us understand the charisma—the spirited gifts—of Ross Lence when he says, “The essence of friendship consists in the fact that many souls . . . become one.”

The collegial community of friends that arose around Ross Lence owed much, of course, to his own altogether distinctive qualities: his personality was as winsome and energetic and engaging as one is ever apt to find. Donald Lutz — Ross’ close colleague of thirty-five years and a master teacher himself — got it right when he told me earlier this week, “Every thing that Ross did had a little bit of magic about it. He was a chariot of fire, a visitor from another place, a gift of God.”

Ross was our chariot of fire, our celebrity teacher, the one we showed off, the one whom we sent out to the community, the one in whose radiating light we like to stand, as if to suggest, We are a bit like him ourselves. He was our high star (High Star was the street on which Ross lived in Houston for some thirty years), the one by whom we charted our course and calibrated our compass, pedagogically, intellectually, and morally.

But not always politically. Ross was sometimes — well, often — heard to complain about the state of political affairs in the country he so dearly loved. He would snort, “In America, anything is permitted between and among consenting adults except the shooting of firecrackers.”

Those of you who studied Greek philosophy with Ross certainly learned that we can measure every art, including the art of teaching, by its product. The monument to the artist is what he creates.

If we would see the monument to Ross Lence, we need only look around this morning at the community that he, as artist and midwife, brought into being.

Ross would of course want me to say that he had much help in his life and his work, most notably that of his mother, Nickie. “Big Momma,” he sometimes called her. One needs only to meet Nickie to see the source of many of her son’s gifts. Over the years, literally thousands of students came to her house to see her son and to eat her food. They also came for the beer.

Our friend Ross, of course, was a teacher of virtue, a philosopher, a lover of wisdom. But he was, as well, a lover of sights and sounds, and of all things beautiful. His offices at the University were appointed more stylishly than mine and other faculty’s offices. And I have to say it: he was an impulsive shopper. Once he told me, “Ted, the only things I regret are the things I didn’t buy.”

To be sure, not all students took to Ross — some were unhappy because he wouldn’t tell them what they should think. He wouldn’t even tell them what he thought.

Other students were unhappy because Ross was irreverent. He said things that would get any other faculty member fired. He talked about cannibalism and goats, and you were never quite sure why. He certainly was a trickster. Some students, and probably one or two colleagues and an occasional dean, suspected him of being a diabolical Machivel. This made him especially happy.

But in reality, the wellspring of Ross’ irrepressibility, of his merriment and generosity, the ground bass of the songs that he sang, was religious. To him, teaching itself was a religious vocation.

I am speaking of religious in the root sense of the word: re-ligio, a binding together again, as ligaments connect and bind. Ross was bound, first of all, to life itself; to reality and to the structure of the real; but also to country, family, and friends — and to the religious tradition that nurtured him from his mother’s arms to his dying day.

The inclination of Ross Lence toward the religious is evident in words that he wrote several years ago to the parents of an Honors student who had suddenly, and tragically, died. As was his custom when people were in trouble — and Ross did such things an untold number of times over the years — Ross reached out to those parents. He visited them in their home, attended the funeral service of their son, called them several times, and wrote a note, a portion of which I, in closing, want to share with you. As is often the case with what a teacher says, these words of Ross return now to their source:

“How I wish that some faint words of mine could erase the sorrow in your hearts. All of us wish for a little more time to reflect and to love life. But God will never abandon those who love him.”

“I am reminded of the immortal words of Catullus on the death of his own brother: atque in perpetuum, frater, ave atque vale — and so for all eternity, brother, hail and farewell.”

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

July 18, 2006

How not to treat friends

First, federal prosecutors heavy-handed tactics generated a political firestorm with one of America's closest allies over the NatWest Three case. Now this:

In a sharp escalation of their crackdown on Internet gambling, United States prosecutors said yesterday that they were pressing charges against the chief executive of BetOnSports, a prominent Internet gambling company that is publicly traded in Britain, and against several other current and former company officers.

Federal authorities arrested the chief executive, David Carruthers, late Sunday as he was on layover at Dallas-Fort Worth International Airport on his way from Britain to Costa Rica. In a hearing yesterday in Federal District Court in Fort Worth, he was charged with racketeering conspiracy for participating in an illegal gambling enterprise.

Let me get this straight. Carruthers is a UK citizen, legally runs a UK-based company with a UK-based website, and he gets arrested in the US because US citizens are gambling on his website?

Here's hoping that the UK raises hell with the Bush Administration over this latest incident as well as the handling of the NatWest Three case (which, by the way, has not generated even a civil case in the UK, much less a criminal one). As Larry Ribstein has pointed out on many occasions, the remedy of granting federal prosecutors broad latitude to criminalize business interests is generating a wave of prosecutorial abuse that is far more troubling than the original "problem" that the remedy is supposed to address. Christine Hurt has more.

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

"A peep show of utter horror"

On of my favorite books of 2003 was Erik Larson's Devil in the White City (Crown 2003) (website here), the engaging tale of Chicago and the 1893 World's Fair, which has just finished an astounding 124th straight week on the NY Times Bestseller List. A movie is currently being planned for the book, so the Chicago Sun-Times interviewed Larson and several other experts on the "White City" to determine the source of the fascination over the 1893 Fair:

On the one hand, Larson says, the White City was designed and built by the Gilded Age elite "as a way of demonstrating that America could come up with this level of sophistication. They went for drama at a time when architecture had very little relevance for most of the country, paving the way for things to come by inserting into the American psyche an appreciation for architecture. The sheer beauty in that array of buildings in the Court of Honor, ingeniously using the backdrop of the lake to stage the whole thing, was enough to knock anybody flat."

But if the White City was a dream made real, much of the rest of Chicago was a nightmare.

"The fair gripped people," [Chicago Architecture Foundation lecturer Christopher] Multhauf says, "partly because it was a vision of beauty in a place that was so squalid." The streets were a quagmire of mud and manure, the air laced with soot and the rank aroma of stockyards and slaughterhouses. Poverty was widespread; labor unrest simmered and sometimes boiled. Prostitution flourished. Not far from the baronial mansions of Prairie Avenue, there were 31 brothels on Clark Street between Congress and Harrison, all of which were open at the time of the fair. The German writer Paul Lindau called Chicago "a peep show of utter horror, but extraordinarily to the point."

Read the entire article and, if you have not already done so, pick up this fine book.

Posted by Tom at 5:56 AM | Comments (0) |

Innocence as a distraction

David Dow, a University Distinguished Professor of Law at the University of Houston, is one of nation's leading experts on the death penalty and the author of Executed on a Technicality: Lethal Injustice on America's Death Row (Beacon 2006) (previous death penalty posts here). Rick Garnett passes along this NY Times op-ed from several weeks ago in which Professor Dow makes the interesting point that "innocence is a distraction" in the political and legal debate over capital punishment:

For too many years now, though, death penalty opponents have seized on the nightmare of executing an innocent man as a tactic to erode support for capital punishment in America.

Innocence is a distraction. . . [M]ost people on death row did what the state said they did. But that does not mean they should be executed.

Focusing on innocence forces abolitionists into silence when a cause célèbre turns out to be guilty. When the DNA testing [proved that such a defendant] was a murderer, and a good liar besides, abolitionists wrung their hands about how to respond. They seemed sorry that he had been guilty after all.

I, too, am a death penalty opponent, but I was happy to learn that [the defendant] was a murderer. I was happy that the prosecutors would not have to live with the guilt of knowing that they sent an innocent man to death row. . . .

As Justice Scalia has said elsewhere, of course we are going to execute innocent people if we have the death penalty. The criminal justice system is made up of human beings, and fallible beings make mistakes.

But perhaps that is a price society is willing to pay. If the death penalty is worth having, it might still be worth having, despite the occasional loss of innocent life. . .

[We] ought to focus on the far more pervasive problem: that the machinery of death in America is lawless, and in carrying out death sentences, we violate our legal principles nearly all of the time.

Professor Dow nails the key issue in the death penalty debate. Proponents of the death penalty reason that it is not wrong for the state to kill a person as punishment for murder where that person was lawfully convicted in a fair and accurate criminal justice process. However, reasonable proponents of the death penalty must confront the reality that errors will occur in carrying out the death penalty in even a morally-justified criminal justice system. By making the above-stated moral justification the central issue in the debate, proponents of the death penalty are overlooking the glaring defects in the process that undermine the moral justification.

Posted by Tom at 5:08 AM | Comments (4) |

Dome redevelopment plan lurches forward

Has it really been almost two years since we began talking about what to do with the Astrodome? (previous posts here, here, here and here).

After floating a Gaylord Texan-type concept for the past year or so, Astrodome Redevelopment Corp. and Harris County are ready to enter into a letter of intent regarding ARC's $450 million plan to reinvent the Astrodome as a luxury convention hotel with a parking garage and new exit from Loop 610 South to keep the facility from interfering with Houston Texans games and the Houston Livestock Show and Rodeo. ARC is a consortium comprised of Oceaneering International Inc., a publicly traded firm working in engineering, science and technology; URS, an architectural and design firm; NBGS International, a theme park developer; and Falcon's Treehouse, a Florida-based design firm.

Although touted "as a major milestone," the letter of intent is not such a big deal. ARC needs it to be able to negotiate deals with the array of entities (Texans, Rodeo, Harris County, financiers, investors, etc.) that it will have to cut deals with in order to make a deal of this magnitude come together. The letter of intent requires ARC to have its financing arranged in six months and to have its final deal cut with the county in a year.

Although I'm surprised that this proposal has gotten this far, I give the chances of the Astrodome hotel actually coming together without public financing as roughly the same as the Texans making the Super Bowl this upcoming season.

Posted by Tom at 4:33 AM | Comments (1) |

July 17, 2006

Houston's most influential churches

The Church Report has released its annual list of America's 50 Most Influential (Protestant) Churches and, as with last year's list, several Houston megachurches made the list.

Lakewood Church and the ubiquitous Joel Osteen come in again as the highest-rated local church at fifth, while Kerry Shook's Fellowship of The Woodlands dropped from no. 17 last year to 41 this year, and KirbyJohn Caldwell's Windsor Village United Methodist dropped from no. 43 to 49. Surprisingly, Ed Young's Second Baptist Church -- one of Houston's original megachurches and arguably its most influential -- dropped out of the top 50 list altogether after being listed at no. 33 last year.

The list is interesting in that it includes churches from both ends of the current political debate that is raging among Protestants regarding the core nature of megachurches. Osteen, Shook and a number of others on the list preach what traditionalists criticize as a feel-good gospel that views God as sort of a cosmic bellhop who exists to meet desires of humans and to make them feel comfortable with material wealth. Dallas' T.D. Jakes (Potter's House - 8) even denies the orthodox doctrine of the Holy Trinity, although the rest of his message has a harder edge than that of either Osteen or Shook. On the other hand, the list also includes a number of church leaders -- including notably John MacArthur (Grace Community - 31), John Piper (Bethlehem Baptist - 42) and Dallas' Tony Evans (Oak Cliff - 44) -- who advocate the more traditional Christian theology that emphasizes Christ's divinity, justification by faith, sacrifice and stewardship.

Meanwhile, the Catholics just shake their heads and go off to Mass. ;^)

Posted by Tom at 6:31 AM | Comments (7) |

Is KPMG's tough stance helping its former partners in the tax shelter case?

In connection with negotiations over its non-prosecution agreement with the Justice Department in the KPMG tax shelter case, KPMG decided to give in to a DOJ "suggestion" and revoke in the tax shelter case its longstanding policy of paying defense costs of the firm's partners who were accused of wrongdoing in the course of firm's business. U.S. District Judge Lewis Kaplan issued a blistering decision condemning the DOJ's tactic, but stopped short of dismissing the case. Rather, he directed the former KPMG partners to sue KPMG to reimburse them for the defense costs.

As noted in this earlier post, I'm skeptical that attempting to force KPMG to pay the defense costs through another legal action is a sufficient remedy for the prosecutorial misconduct and, according to this Lynne Browning/NY Times article, it's looking as if my skepticism is warranted -- KPMG is contesting any obligation to pay its former partners' defense costs in the tax shelter case.

Frankly, despite Judge Kaplan's belief that KPMG should pay the defense costs, KPMG's position is a smart one. If the firm voluntarily paid the costs, then it faces the risk that the DOJ would view that action as a lack of cooperation, which could damage KPMG's prospects of avoiding a criminal prosecution in a future case. On the other hand, if the firm continues to stiff its former partners, then it does not run the risk of being perceived as being uncooperative by the DOJ and besides -- even if it loses the former partners' civil action for reimbursement of the defense costs -- the firm will only have to pay about the same amount that it would if it paid the defense costs voluntarily.

However, the more interesting question is whether KPMG's continued refusal to pay the defense costs will ultimately persuade Judge Kaplan that dismissal of the criminal case is the only effective remedy to the Justice Department's improper interference with the financing of the defendants' legal defense. Judge Kaplan is already perturbed with the prosecution's foot-dragging on other issues in the case, and the financial plight faced by the defendants as a result of KPMG's refusal to pay their defense costs may be enough to push Judge Kaplan toward dismissal of the charges against the former KPMG partners. If so, then KPMG's tough stance on refusing to pay its former partners' defense costs could turn out to be better for its former partners than if the firm had simply paid the defense costs after issuance of Judge Kaplan's earlier decision.

Posted by Tom at 5:43 AM | Comments (0) |

Can the NatWest Three receive a fair trial in Houston?

Barry Turner, lecturer in criminal law and criminal evidence at Leeds Law School, makes the following declaration in this Times Online blog post regarding the NatWest Three, who are presently awaiting a bond hearing in Houston in regard to the Enron-related criminal case against them:

"It is . . . absurd to suggest that the men will not get a fair trial in a country that uses exactly the same legal system as we do."

H'mm. Better check the facts, Mr. Turner. Kevin Howard and Ken Lay are stark reminders that the suggestion is not absurd at all.

By the way, a friend who is prominent in the media business was vacationing in England when Ken Lay died. He passes along the following observation regarding the British media coverage of Mr. Lay's death:

"The coverage [of Mr. Lay's death] on the domestic BBC service was interesting. Close to the top of the report, the journalist noted that Ken Lay continued to maintain that he had done nothing wrong. The report then went on to entertain the idea that this might actually be true.

The extensive coverage of the Natwest Three added to the sense that, in Britain at least, there is now as much questioning of the Department of Justice as there is of ex-Enron officers."

Posted by Tom at 5:08 AM | Comments (0) |

July 16, 2006

"On Teaching" by Ross M. Lence

This has been a weekend of reflection for me as I contemplate the life of one of Houston's finest teachers -- Professor Ross M. Lence (previous post here) of the University of Houston -- who died this past week.

Over a hundred former students, colleagues and friends gathered this past Thursday evening to laugh, cry and reminisce about Ross at the visitation, and then those friends and hundreds more gathered on Friday morning for the Requiem Mass for Ross at St. Anne Catholic Church. The mass was profoundly moving, with St. Anne's soloist Kay Kahl providing beautiful singing and UH Honors College Dean Ted Estess -- one of Ross' best friends and closest colleagues -- absolutely hitting the ball out of the park with a poignant eulogy that conveyed perfectly Ross' extraordinary combination of teaching brilliance, humor and humanity. The Chronicle here, the UH student newspaper here and UH Dean of Political Science Harrell Rodgers here chimed in with thoughtful tributes.

A particularly nice touch of the services for Ross was his family's decision to provide a copy of one of Ross' essays to everyone who attended. The essay -- entitled "On Teaching" -- was writted by Ross a decade or so ago while collecting his thoughts on teaching in connection with the effort of his former students and friends to raise the funds that eventually endowed the Ross M. Lence Distinguished Teaching Chair at the University of Houston. Ross never published "On Teaching," but by passing it along below (pdf here), I hope that each teacher who happens upon this special essay will take a moment to read and reflect on it, and then use it as inspiration to provide the type of warm, thoughtful and rich mentoring to their students that is Ross Lence's legacy to his:

I shall not shock anyone, but merely subject myself to good-natured ridicule, if I profess myself inclined to the old way of thinking that the primary concern of teaching and teachers is the student.

While such an observation may seem elementary, it should be noted that for those who define the function of a university as “the discovery, preservation, and transmission of knowledge,” the role of teaching (presumably the transmission of knowledge) is formulated in such a way as to avoid mentioning either the teacher or the student. Indeed, when confined to the transmission and preservation of knowledge alone, teaching would seem to be little more than the transmission of decaying sense, entombed in that graveyard of knowledge, the notes of the teacher’s students.

Teaching necessarily involves the highest forms of discovery, the awakening of the students’ minds and souls to the world of creativity and imagination. A good teacher challenges students to join in the continuous, meticulous, and solitary questions of the mind. I myself prefer important questions partially answered to unimportant questions fully answered.

Who could doubt that those students were blessed who witnessed the phenomenal mind of Enrico Fermi as he unleashed the power of the universe on that cold, winter day under the bleachers of Stagg Field at the University of Chicago? There, with only the assistance of a slide rule and his hands, Fermi managed to do what it now takes two computers to replicate: to produce man’s first nuclear reaction. There, a great teacher, who in the tongue of his native Italy and understood by hardly anyone present, managed to convey to his peers the desperate need to insert the carbon rods into the nuclear mass, thereby saving not only themselves, but the city of Chicago.

No doubt everyone remembers the teacher who most influenced his or her thoughts, person, and soul. No one is perhaps more aware of the best teachers than teachers themselves. That person who most influenced my own thinking was the Sage of Goose Creek, Charles S. Hyneman, Indiana University’s Distinguished Service Professor and President of the American Political Science Association. That man did for me something that few teachers have ever done for a student. In a desperate effort to teach this kid from the wilds of Montana about the American Regime, Charles Hyneman took me on a 15,000 mile, 5-year trip across America, where he introduced me to every site where an Indian had died, every sausage factory in American and even Alvin, Texas, home of Nolan Ryan.

Today I attempt to lead my students on such a journey of the mind. Some days are good; some days are not so good. But every day I remind myself that teaching is like missionary work, and that I am the messenger, not the message. I constantly strive to bring others to see the excitement, as well as the limits, offered by the life of the mind. I encourage all students to be bold in their thoughts, moderate in their actions, and courageous in their pursuit of truth—wherever it is and however it can be known.

As I now come to my own golden age, I often think of my teacher. Of his incredible kindness, his depth of soul, and the power of his imagination. My real hope is that I, too, will be remembered by those who come after me with the same fondness.

This, then, is my philosophy of teaching: teachers love their own teachers, and they are loved in turn.

Ross M. Lence
Houston, Texas

Update: Ted Estess eulogizes Ross and the Abbeville Institute provides a touching tribute.

Posted by Tom at 6:55 AM | Comments (1) |

July 15, 2006

Agency costs of big-time college football

College football is a big and competitive business, so it's no surprise that the issue of agency costs has reared its head with frequency over the past century of the sport. This NY Times article reports on the latest incident of apparent academic fraud -- an Auburn University sociology professor arranged to have 18 members of the 2004 Auburn football team, which went undefeated and finished No. 2 in the nation, take a combined 97 hours of the "directed-reading courses" which required no classroom instruction whatsoever. More than a quarter of the students in the professor's directed-reading courses were Auburn University athletes. The usual NCAA investigation is to follow while serious academics at Auburn must be shaking their heads over it all.

As noted in this previous post, big-time college football and basketball are caught in a vicious cycle of uneven growth, feckless leadership from many university presidents and obsolescent business models. As the previous post notes, it's an unfortunate situation because big-time college football and basketball would likely not suffer a bit from reform that required universities to compete with true student-athletes, as opposed to minor league professional players. Given the hyprocrisy of many state universities subsidizing minor league football and basketball at the same time as grappling with funding issues for core academic programs, one would think that expensive and mostly unprofitable system of big-time college football and basketball would be ripe for reform. However, powerful and wealthy special interests continue to support the current system despite the implications to the universities' academic responsibilities.

Is there any hope for true reform of intercollegiate athletics as well as minor league football and basketball? Or is the current system so entrenched in concentrated wealth and regulation that it is impervious to reform?

Posted by Tom at 9:36 AM | Comments (0) |

July 14, 2006

Not so fast, Mr. Eisenstat

As noted in a number of these previous posts, the Russian government's dismemberment and effective nationalization of the assets of OAO Yukos last year has dire implications generally for Western business interests hoping to engage in reasonably free commercial investment in Russia, the recent Rosneft IPO notwithstanding.

In this WSJ ($) op-ed, former Carter and Clinton admnistration official Stuart Eizenstat observes that the Yukos affair has had broad and negative implications to the world economy, and contends that the Bush Administration and other free-market governments' failure to call Russian Prime Minister Putin to task for his trashing of free-market business interests has contributed substantially to that negative impact. Eisenstat makes a number of good points, including the following:

Mr. Putin should also be put on notice that . . . the continued incarceration of Messrs. [former Yukos CEO Michael] Khodorkovsky and [Russian financier Platon] Lebedev, who is ill and suffering unnecessarily in a prison north of the Artic Circle, limits Russia's prospects of being viewed as a member in good standing of the world's group of leading nations.

Unfortunately, based on this and this, Mr. Putin could quite appropriately respond "say what?" to such a notice.

Posted by Tom at 5:53 AM | Comments (0) |

Nice gesture, but what about these folks?

This NY Times article reports on Utah Senator Orrin G. Hatch's intervention recently on behalf of Dallas Austin, a 35-year-old, black record producer who had been arrested, convicted and sentenced to four years in prison in Dubai for possession of about a gram of cocaine. Kudos to Senator Hatch for helping prevent a talented man from enduring an injustice over a victimless crime.

But as noted in this previous post, the American criminalization of drug possession is a costly nightmare on many fronts. Currently, over 350,000 people languish in American prisons for drug possession. Commenting on Senator Hatch's intervention on behalf of Austin, David Boaz over at the Cato @ Liberty blog observes:

Surely Hatch thinks regular old Americans are due the same consideration as a Grammy-winning singer. He’d advocate the release of any American convicted of possessing 1.26 grams of cocaine, right?

Or are politicians hypocrites? Could it be that they think average Americans like Richard Paey should go to jail for using large amounts of painkillers, but not celebrities like Rush Limbaugh? Could it be that they laugh about their own past drug use while supporting a policy that arrests 1.5 million Americans a year, as a classic John Stossel “Give Me a Break” segment showed? (Not online, unfortunately, but you can read a commentary here.)

Putting people in jail for using drugs is bad enough. Putting the little people in jail while politicians chortle over their own drug use and pull strings to get celebrities out of jail is hypocrisy on a grand scale.

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

Dolphins and Capers scam Texans

In this previous post, I speculated that former Houston Texans head coach and current Miami Dolphins defensive coordinator Dom Capers will be particularly incentivized to have his Dolphins defensive unit ready for the Dolphins' game with the Texans this coming October.

Well, the following blurb in this MiamiHerald.com article indicates that Texans owner Bob McNair has reason to have his troops reciprocate with some spirited play in the upcoming game:

Dom Capers won't have the defensive coordinator title, but that essentially is his job. ''Maybe some day he'll be that, but not this year,'' coach Nick Saban said. Miami is saving a bundle by withholding that title. Now Houston, which fired him as head coach, must pay Capers $2 million in 2006, and Miami only $300,000.

Posted by Tom at 5:02 AM | Comments (2) |

July 13, 2006

Rice Press revived online

Looks as if the Chronicle missed this local item of media news.

Houston's Rice University -- one of the nation's most prestigious universities -- is reviving its defunct academic press online in a bold move that will undoubtedly reignite the discussions over over who will ultimately profit from Web publishing. Rice University Press was a money-losing proposition when it went out of business about a decade ago. However, under its new all-digital format, the press will instead post works online at a new Web site where people can read a full copy of the book free. Customers will be able to order a regular, bound copy from an on-demand printer at a cost far less than picking up the book in a store.

Rice's bold move comes as many book publishers are struggling to figure out how to modify their business models to the new publishing world of the Worldwide Web. Although innovative, Rice's initiative faces challenges because some universities -- Stanford comes to mind -- have already experimented with the online format and found lackluster demand for online books, which has been a chronic problem for online books generally.

However, Rice's program is ambitious in that it will publish all of its books online through Connexions, which will absorb the press's editing and transmission costs. Readers can freely view the online works under a special online publishing license and will be charged only a small fee for downloading the works to a computer. Inasmuch as all the books will be in digital form, authors will be able to amend their works online, add links to other website materials and sources, and communicate with readers of the works. Books on the Rice site will never go out of print and Rice officials are even considering asking authors whether they want to allow "derivatives" of their works to be created online -- the Connexions site will operate under an "open-source" model that allows readers to update online course material.

Posted by Tom at 7:33 AM | Comments (1) |

Harmless error?

This previous post passed along the motion of former Enron Broadband executive Kevin Howard's motion for new trial based on serious allegations of juror misconduct and ex parte communications between the trial judge and the jury during deliberations (previous posts on the case are here).

In this reply filed earlier this week, the Enron Task Force takes the expected position that the allegations of juror misconduct were "internal" and not the product of "external forces" and, thus, do not justify a new trial. However, in response to Howard's allegations that U.S. District Judge Vanessa Gilmore had at least two sessions in which she improperly discussed the case with jurors outside the earshot of Howard and the attorneys involved in the trial, the Task Force contends only that such communications constitute "harmless error."

A trial judge discussing the case ex parte with jurors while the jury in a highly-publicized, related trial is delivering its verdict amidst a media firestorm is "harmless error?" Looks to me as if Mr. Howard has a pretty good shot at reversal if that's the best the Task Force can come up with on that issue.

Posted by Tom at 7:00 AM | Comments (0) |

The Huff deal and the state of the Stros

Does anyone else get the impression that there is some serious gripping going on over in the Stros management offices?

What prompted the latest evidence of discontent was the Stros announcement yesterday that they had traded a couple of marginal minor league prospects for Tampa Bay 1B/3B/OF Aubrey Huff and about $1.65 million in cash.

Huff had been on the Devil Rays' trading block for the past two seasons and it's reasonably clear that the Rays' management waited too long to pull the string on a trade. As a result, my sense is that the Stros got the better of this trade. Huff is a 29 year-old, six year player who had a mediocre rookie season in 2001, but then had three solid seasons from 2002-2004 (successive runs created against average [RCAA] of 20, 26, and 28). A lousy third baseman defensively, the left-handed hitting Huff was caught up in a logjam of Tampa Bay outfielders last season (-5 RCAA) and he has been mediocre this season (2 RCAA/.343 OBP/.477 SLG/.819 OPS). Nevertheless, at his age, Huff is a good bet to bounce back with a change of scenery and he certainly has the incentive to do so -- he is a free agent at the end of this season. Besides, even at his current level of production this season, he is the fourth most productive hitter on the Stros behind Berkman, Ensberg and Lamb. Huff's career stat line is 53/.343/.477/.819, which is nicely above the league average of 0/.335/.430/.765 for the time he has been in Major League Baseball.

Despite the good move in acquiring Huff, the thinking of Stros management appears to be increasingly muddled. The Stros made room for Huff on roster by optioning slumping OF Jason Lane (-7/.330/.393/.722) to AAA Round Rock to play centerfield while getting his hitting stroke back. That's not a bad decision, except that the Stros are still carrying an inferior player to Lane on the major league roster -- CF Willy Taveras (-16/.307/.308/.615) -- who needs the seasoning in AAA even more than Lane (although maybe this explains the reason the Stros are keeing Taveras around). And Stros management didn't even mention that the best place for Huff would currently be in leftfield replacing the odious Preston Wilson, who has quietly combined an extraordinarily bad first half of the season (-9/.322/.424/.746; league average is 0/.343/.435/.779) with a stunning propensity to ground into double plays (14 to date!).

Meanwhile, during the press conference announcing Huff's acquisition yesterday, Stros GM Tim Purpura made the point that Huff would cut into slumping 3B Morgan Ensberg's playing time. Now, much has been made of Ensberg's current slump -- his RCAA has been -5 since May 26th and his OBP/SLG/OPS have declined from .403/.627/1.030 to .390/.500/.890 since that date. But let's not overreact here. Assuming that his bruised shoulder is not preventing him from turning around his slump, Ensberg remains the club's second-best hitter behind Berkman and replacing him with Huff (who is a poor-fielding third baseman to boot) while keeping less-productive players such as Wilson or Taveras in the lineup makes no sense.

Finally, in yet another questionable move, the Stros canned hitting coach Garry Gaetti yesterday and hired AAA hitting coach Sean Berry to replace him. Now, Gaetti was not the best hitting coach around -- he continued a dubious trend among recent Stros hitting coaches of failing to emphasize to Stros hitters selective aggressiveness at the plate and the importance of taking a walk. As a result, the Stros over Gaetti's two seasons as hitting coach have had a below-league aveage OBP, which is one of the two key statistical components in generating runs (SLG is the other).

Nevertheless, the 2006 Stros club was hitting better at the All-Star break than either the 2004 or the 2005 clubs. Moreover, during his MLB career, Berry was the same type of hitter as Gaetti -- a free-swinger who rarely took a walk and thus, had a below-league average OBP. Accordingly, unless Berry has seen the error of his ways, Stros fans will continue to endure a hitting coach who accepts below-league average OBP from regular players such as Ausmus, Wilson, and Everett, which is one of the key reasons that the Stros have struggled to score runs over the past three seasons (the Stros are -12 RCAA as a team as of this All-Star break).

Whether the Stros are going to remain in the race for a playoff spot will likely be determined over the next two weeks. Coming off the All-Star break, the Stros hit the road for their second monster three-city road trip in less than a month as they play four in Florida, three in Chicago against the hapless Cubs and then three in New York against the mighty Mets. If the Stros can at least break even on the road trip, then the probable improvement in pitching during the second half combined (hopefully) with at least league-average hitting should be enough to keep the Stros competitive for the wild-card playoff spot in a National League comprised of mostly mediocre clubs.

Huff's career statistics are below.

Posted by Tom at 5:22 AM | Comments (1) |

Another strange turn in the NatWest Three case

Neil Coulbeck, former chief of North American financial markets for NatWest’s corporate bank who provided evidence to the F.B.I. and the Justice Department about Enron-related transactions involving three former NatWest Bank colleagues, was found dead in an East London park Tuesday less than two days before the politically-charged extradition of his former colleagues to Houston to stand trial. Although the death is still under investigation, early speculation is that Coulbeck committed suicide. Previous posts on the case of the NatWest Three are here.

Earlier today, American marshals took the NatWest Three — David Bermingham, Giles Darby and Gary Mulgrew — into custody in London in preparation for flying them to the Houston. The Enron Task Force indicted the three over a transaction involving the sale of NatWest’s stake in an Enron-related asset that prosecutors contend was structured by the former bankers to give NatWest less profit than it should have had while personally benefiting the bankers and several former Enron executives, principally former CFO Andrew Fastow. The three former bankers deny any criminal conduct and the successor to NatWest Bank — Royal Bank of Scotland — has not pressed either criminal or civil charges against the men.

The fate of the bankers has generated a political firestorm in the UK over the past year as British politicians and business executives have criticized their extraditon to the United States as the product of overzealous American prosecution of business interests after the bursting of the late 1990's stock market bubble. The political controversy centers on a treaty between the US and UK that was signed soon after the 9/11 attacks to facilitate the extradition of suspected terrorists. The treaty permits either country to extradite citizens of the other on more limited evidence than previously required, and US is now using the treaty to facilitate prosecutions against business interests rather than just suspected terrorists despite the fact that the US has not ratified the treaty (the UK ratified it 2004). On Tuesday, the House of Lords passed a resolution to overturn the treaty and the treaty was debated Wednesday in Parliament.

Interestingly, during the Wednesday debate in Parliament, British Prime Minister Tony Blair — who supports the extradition — stated that the three bankers would probably to be granted bail in Houston. Given the strict conditions for release on bail that has been required in previous Enron-related prosecutions, I wonder if Mr. Blair knows something that we don't?

Posted by Tom at 4:56 AM | Comments (1) |

July 12, 2006

"Could adversely effect public safety?"

The legal and political maneuvering in regard to former Houston Congressman and House Majority Leader Tom DeLay is hard to keep up with, so I rely on Kuff and others to keep me informed of what's going on in that ongoing saga. However, this Austin American-Statesman article on a seemingly innocuous aspect of the legal battle caught my eye.

Seems as if the Chronicle filed a request in March under Texas' open records law for vouchers, travel receipts, budget documents, memos and e-mails in regard to the expenses of Travis County DA Ronnie Earle's investigations of DeLay and related cases of DeLay's associates. Earle rejected the Chronicle request and appealed to Texas Attorney General Greg Abbott, who ruled that that the law requires disclosure of "information in an account, voucher, or contract" relating to the expenditure of public monies.

Rather than simply complying with what appears to be a straightforward open records request and ruling, Earle announced this past Monday that he had sued Abbott in an attempt to avoid public disclosure of the information, claiming that such a release "could adversely effect public safety."

Release of travel receipts "could adversely effect public safety"? (I think Earle meant "affect"). H'mm. Stayed tuned on this one. Kevin Whited has more here. Hat tip to Letter of Apology for the link to the article.

Posted by Tom at 6:59 AM | Comments (1) |

End of the line for Jordy Tollett?

According to this Chronicle article, it's looking as if the end of the line is near for Jordy Tollett as head of the Greater Houston Convention and Visitors Bureau. Everyone in Houston seems to know Tollett, who somehow managed to maintain a position in each of the past four mayoral administrations over more than a 20 year period. Without getting indicted, too!

The straw that appears ready to break the camel's back in regard to Tollett's current job is local television station KPRC's (Channel 2) news story this week in which the station caught Tollett on camera drinking over the noon hour on several occasions and then driving away from a Midtown restaurant. Apparently, the GHCVB board of directors is investigating the report and the tea leafs indicate that Tollett's contract with the bureau -- which expires in February 2007, anyway -- will either be bought out or not renewed.

Now, I do not know Tollett personally, but I know that he's taken his share of criticism and that it may be time for him to move on from public or quasi-public employment. However, do we really want to run someone off from the position of drumming up convention business for having a drink or two? I doubt that there are many teetotalers who excel in that line of work.

Posted by Tom at 4:52 AM | Comments (3) |

Ross M. Lence, R.I.P.

A grand and far too rare experience in life is learning from a great teacher. I have been blessed in my life to have been mentored by two wonderful men who were extraordinary teachers. The first was my father, Dr. Walter M. Kirkendall, who died around this time in 1991.

The other was Dr. Ross Marlo Lence, who died on Tuesday morning, July 11 in Houston at the age of 62 after a year-long battle with pancreatic cancer (Chronicle obituary here). With Ross' death, Houston has lost one of its greatest treasures.

Ross was one of Houston's finest teachers of this generation. Over a phenomenal 30 plus-year teaching career at the University of Houston, Ross taught classic and American political philosophy to scores of eager students and citizens. Utilizing a marvelous intellect that was refined at the Universities of Chicago, Georgetown and Indiana, Ross was a master craftsman in the art of teaching and was an unparalleled expert in the Socratic method. Ross deployed a delightful mixture of insightful philosophy, passionate oratorical skill, and self-deprecating humor to ignite and stoke a passion for learning in his students ("Be bold in thought, precise in speech, moderate in action," he would continually urge). When I once asked Ross to confide his primary goal as a teacher, he replied with a wry smile:

"Tom, my goals are modest. All I want is to teach my students how to think, and the difference between right and wrong."

As a result of Ross' outstanding talent and dedication to the University of Houston (he served on virtually every academic committee at the University over his career), a large group of his students over a decade ago raised funds to honor him by endowing a chair in his name in the political science department at the University of Houston. Accordingly, as of his death, Ross was the original holder of the Ross M. Lence Distinguished Teaching Chair at the University of Houston. How many professors have an endowed chair funded and named in their honor during their lifetimes? Such was the excellence of Ross Lence.

Ross was also a John and Rebecca Moores University Scholar at the University of Houston, where he was continually honored with numerous awards for his teaching, including the Minnie Stevens Piper Professor Award, which annually honors the most outstanding teacher in the state of Texas, (1987), and the Henri Stegemeier Award for the Outstanding Faculty Advisor in North America (1987).

In addition to his superlative teaching talent, Ross' selfless heart and humanism attracted students like a magnet. His office had the quintessential open door and always resembled a scene from a Robert Altman film with students and colleagues milling in and out carrying on multiple conversations with Ross and each other on the various subjects of the particular day. Inasmuch as he dedicated his life to teaching and his students, Ross never married, yet he has the largest family of anyone that I have ever known. To enter one of Ross' classes was literally to be drawn into Ross' huge family of students, former students, colleagues and friends. The devotion of Ross' family members was surpassed only by Ross' devotion to them and his wonderful mother, Nickie, for whom he cared lovingly over the past 25 years.

What was it that made Ross' life so fulfilling? An experience that I had several years ago with Ross provides some insight into the answer to that question. I had the privilege of helping Ross coordinate a strategy in regard to a legal matter that had a political component, the details of which are not particularly important. Suffice it to say that it was serious and could have adversely affected much of what Ross had worked for during his professional career. Due to the nature of the problem, we had to work quickly in devising and implementing our strategy.

With but a few phone calls, we were able to put together a legal team of over a half-dozen prominent Houston attorneys, each of whom had been a student of Ross and were instantly willing to provide their services on a pro bono basis (Ross took great pleasure in reminding his university colleagues of his personal legal team, the aggregate hourly billing rate of which was in excess of $2,000). As we devised and implemented our strategy to resolve the matter, Ross never exhibited even a moment of personal despair over the seriousness of the matter and instead relished the opportunity to engage his old students and friends in matters of legal and political intrigue. Even when we resolved the matter favorably for Ross after a couple of weeks of intense posturing and negotiation, Ross' main goal was to arrange the post-resolution party where he could dissect and analyze what had occurred, and revel in the success of his crack legal team.

You see, it was not the reward that he received from the successful resolution of the matter that drove Ross, although he certainly appreciated it. Rather, it was the reward of renewing and deepening the relationships with his former students and old friends -- even during one of the most threatening moments of his professional life -- that was most rewarding to Ross. What a special gift it was to have my old mentor and friend remind me of the true source of happiness in his richly-rewarded life.

Ross was diagnosed in August, 2005 with pancreatic cancer, which is particularly pernicious. So, the final 11 months of his life have been draining physically for Ross, although his mother's loving care undoubtedly extended his life by at least several months. Consistent with his remarkable nature, Ross used the experience of dealing with terminal illness to provide a remarkable lesson on faith, which he exhibited in a series of confidence-boosting email messages to his extended family over the past 11 months. I have accumulated those email messages in chronological order here -- they are an inspiring reflection of the true nature of this fine man, who was literally a conduit of God's grace.

As regular readers of this blog know, A Man for All Seasons -- the story of Sir Thomas More's conflict with King Henry VIII -- is one of my favorite movies, and it was one of Ross' favorites, too. Ross particularly enjoyed the scene early in the movie when Sir Thomas attempts unsuccessfully to persuade his student, Richard Rich, to eschew a desire for a political appointment and become a teacher. After rejecting Thomas' advice, Rich takes a political appointment from Henry's henchman Cromwell in return for agreeing to betray Thomas.

"Sir Thomas knew that Rich had a corrupt heart and would never be able to resist the temptations of politics," Ross observed to me once with a hearty laugh. "But is Thomas suggesting that a corrupt heart is not a problem for a teaching career?"

As I have talked and corresponded with hundreds of Ross' friends, colleagues and former students over the past several months leading up to his death, I was reminded continually that Ross Lence's life is proof of the truth of Sir Thomas' advice to Rich during their exchange that Ross so enjoyed:

Sir Thomas: Why not be a teacher? You'd be a fine teacher; perhaps a great one.

Richard Rich: If I was, who would know it?

Sir Thomas More: You; your pupils; your friends; God. Not a bad public, that.

Yes, my dear friend Ross, "not a bad public, that." Your job has been extraordinarily well done. Rest in peace, friend.

A visitation will be held for Ross at the the Settegast-Kopf Co. Funeral Home at 3320 Kirby Drive (77098) beginning at 5 p.m. on Thursday, July 13 to be followed by a Rosary service at 7 p.m. A funeral mass will be held for Ross at 10 a.m. on Friday, July 14 at St. Anne Catholic Church at the corner of Westheimer and Shepard. It is my understanding that the University of Houston is planning a memorial service for Ross later this year after the beginning of the fall semester.

Update: "On Teaching" by Ross M. Lence, Ted Estess eulogizes Ross, and the Abbeville Institute provides a moving tribute. Finally, the Chronicle's obituary on Ross includes this online guest book that includes dozens of tributes to Ross from his students, former students, collegues and friends.

Update II: The University of Houston's Memorial Service for Ross.

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

July 11, 2006

The politics of prosecutorial misconduct

If you haven't followed the case of alleged would-be 9/11 bomber Zacarias Moussaoui closely, you probably have never heard of Carla J. Martin.

Well, Martin is the federal aviation attorney who almost undermined the Moussaoui prosecution when she violated a court order that is commonly entered in criminal and civil trials by allowing prosecution witnesses to read transcripts of trial testimony that they were not supposed to see or hear until after they had testified during the trial. According to this Jerry Markon/WaPo article, Martin's career is shot as a result of her transgression and she apparently is not holding up well:

The woman at the center of the storm is emotionally distraught, crying when she talks about the criminal investigation and feeling like a prisoner in her own apartment, Martin's mother said last week. "She's not doing very well. It's terrible, devastating for her," said Jean Martin Lay, who believes that her daughter did nothing wrong. "She doesn't do much of anything but stay at home, as far as I know."

According to the article, Martin remains subject to an array of federal and state investigations, all determining just how and to what extent she should be punished.

Too bad for Martin that she didn't engage in prosecutorial misconduct against business interests that she could have parleyed into a cushy job in private practice or a promising political career.

Posted by Tom at 7:26 AM | Comments (1) |

From UT Wishbone QB to HTU golf coach

Former Houston plaintiff's attorney Marty Akins -- who was the University of Texas' wishbone quarterback from 1973-75, has a rather interesting new job.

He's been named the golf coach at Huston-Tillotson University in Austin. Akins has also taken a position on the HTU faculty in the business school.

By the way, that's former UT Heisman Trophy winner and Houston Oiler great Earl Campbell taking the handoff from Akins in the accompanying photograph. Campbell was a wishbone fullback at UT before being converted to an I formation tailback in his senior season when UT ditched the wishbone formation in 1977 under then new coach Fred Akers. The rest is history.

Posted by Tom at 6:57 AM | Comments (0) |

L.A.'s urban boondoggles

Houston's metropolitan area shares many characteristics with Southern California, so it's always interesting to review assessments of Los Angeles' urban boondoggles for guidance on how to avoid the same mistakes here.

In this L.A. Times op-ed, urban economics expert Joel Kotkin (previous posts here) explores the latest initiative to allow L.A.'s white elephant -- the downtown convention center -- to feed at the public trough. Despite the fact that the center has been a chronic money-pit despite a $500 million city expansion investment 17 years ago, the city is now proposing $300 million in loans, tax breaks and fee waivers for a $750-million, 54-story complex — including a 876-room Marriott Marquis, a posh 124-room Ritz-Carlton and 216 luxury condos — across from the Convention Center (sound familiar?). Despite the huge public outlay of public funds for the downtown convention center, Kotkin reports the following:

L.A. is still not on the list of the nation's top 10 convention cities and has little prospect of competing successfully against Las Vegas, New York and Orlando, which have far more attractions. According to one trade publication, L.A. hosted fewer major conventions last year than Indianapolis and Rosemont, Ill. But there's a bigger problem here.

The simple truth is that convention centers are rarely a good public investment. A definitive national study by the Brookings Institution, released last year, found that they frequently operate at a loss, including the recently expanded centers in Washington and St. Louis. In most cases, their much-ballyhooed effect on the local economy — new private investment, more jobs and increased levels of tourism — "has simply not occurred," reported Heywood Sanders, the study's author.

One problem is the convention business itself, Sanders noted. Overall attendance at the 200 largest trade shows — the critical market for large convention centers — has not grown measurably since 1993. Yet 44 cities — including Boston, Houston, Atlanta, Phoenix, Philadelphia, Washington and San Diego — were building or expanding convention centers, some by subsidizing the construction of a convention hotel, a development Sanders compared to an "arms race" among cities.

Stagnant trade-show business coupled with a convention center glut translates into more white elephants subsidized by taxpayers. Some cities such as Washington are already offering deep discounts to conventioneers to keep their buildings occupied. The L.A. Convention Center faces ever more cutthroat competition in such an environment. Unfortunately, the evidence suggests that a flashy hotel nearby may not increase the center's allure, especially because other cities, including Denver and Phoenix, are planning similar investments.

So, if the investment of public funds doesn't generate jobs and other economic benefits for a city's core, then who is benefitting from the public largesse?:

So if the hotel subsidy doesn't make economic sense, who benefits from the largesse? The biggest winner from the new public investment stands to be billionaire Phil Anschutz, whose $2.5-billion, 27-acre L.A. Live project — billed as "Times Square West" — is slated to be built adjacent to Staples Center. The refracted prestige of a new Ritz Carlton and luxury condos in the neighborhood would add luster to Anschutz's project, the proposed home of the West Coast headquarters of ESPN and a Grammy Award museum.

Meanwhile, urban economics expert Robert Bruegmann (previous post here) authors this LA Times op-ed in which he explains that L.A.'s urban sprawl is a reflection of its economic success and that its mobility problems largely stem from expectations generated from that success. Bruegmann suggests that it's time to think outside the box:

Unhappily, the fixation on sprawl has also detracted attention from the scenarios that might, over the long run, help build effective new public transportation systems. It is quite likely that this will need to involve the replacement of both the train and the gasoline-fueled automobile in the years ahead. Both are, after all, 19th century means of transportation, and very inefficient ones at that.

There is no technical reason that we couldn't have, not too far in the future, personal rapid transportation capsules running both on rails and rubber wheels, using alternative fuel sources and operating either on their own over short distances or linked together for longer distances on guideways that would allow speeds of hundreds of miles per hour. Such a system could vastly increase the capacity of existing right of way and go far toward reducing pollution.

Because cities are so dynamic, it is difficult to know whether our future urban areas will be lower or higher in density than today's. In either case, new modes of transportation that combine the adaptability and personal comfort of the auto with the efficiency of the train or bus are more likely, in the long run, to satisfy the needs of most Americans than forcing everyone back into high-density cities so they can ride trains.

We can do it, and we can enhance mobility for everyone. But only if we can put aside for a while the old and not-terribly-helpful battles over sprawl.

Hat tip for the links to Peter Gordon, who notes ruefully in his latest post:

Not to beat a dead horse, but today's LA Times includes a front-page feature, "Roads at Breaking Point" which begins this way: "California's highways, once the gold standard of the interstate system, are today some of the busiest, most dilapidated and under-financed roads in the country ..."

Nowhere does the article mention that the 30-year old crackpot idea (cheered by the Times at every turn) of diverting funds from roads to transit explains the mess.

Is Houston's Metropolitan Transit Authority listening?

Posted by Tom at 5:44 AM | Comments (0) |

July 10, 2006

Crashing the Ken Lay funeral?

Overall, the Houston Chronicle's coverage of the Enron case has at least been exhaustive, if not particulalry balanced. But in the interests of exhaustive coverage, was it really necessary for the hometown newspaper to have society columnist Shelby Hodge attempt to crash the funeral of Ken Lay in Aspen on Sunday?

Posted by Tom at 8:20 AM | Comments (2) |

Barbaro is struggling

It's beginning to look as if Barbaro may not make it (related, subsequent stories on Barbaro's increasing health problems are here, here, here and here).

The condition of the Kentucky Derby champion who broke down at the beginning of the Preakness took a turn for the worse late Saturday when veterinarians had to remove the plate and some of the screws from his injured right hind leg to stave off infection. Although Barbaro's leg appears to be healing reasonably well, the horse is having a hard time shaking off an elevated temperature, which is an indication that attempts to control infection are failing.

Posted by Tom at 6:54 AM | Comments (0) |

I Wanna Hold Your Royalty

In Cameron Crowe's Almost Famous, Phillip Seymour Hoffman does a fine job of playing disenchanted rock music critic Lester Bangs, who views the purity of Rock n' Roll as being corrupted by commercial interests. Of course, Rock n' Roll has never been all that pure in the first place, but that's another story.

At any rate, even as business-oriented a fellow as me never thought that I would see the day that the Beatles would be providing the background music for a Vegas casino stage show or the day that the Grateful Dead would be cozying up to lawyers and business-types while entering into management deals involving the group's intellectual property.

Does this mean it's only a matter of time before Bob Dylan plays Branson, Missouri?

Update: As my brother Joe points out, this may not be Branson for Dylan, but it's close.

Posted by Tom at 6:31 AM | Comments (1) |

The shrinking supply of disaster insurance

This Liam Pleven-Ian McDonald-Karen Richardson WSJ ($) article reports on an interesting market condition in the disaster insurance business that has been reverberating in business circles around Houston since the storms of last summer -- despite robust demand for disaster insurance and huge amounts of capital pouring into providing such insurance, there is nowhere near a sufficient supply of such products to meet the demand for disaster insurance.

As a result of seven costly hurricanes in two years, insurers are pulling back from the amount of risk that they will take in hurricane-prone areas such as the Gulf Coast. The shortage of supply is showing up primarily in the reinsurance market, where primary insurers buy coverage to hedge the risk of loss on the policies that they issue. Reinsurers covered over half of the estimated $40 billion in insured losses that occurred last year as a result of Hurricance Katrina. Consequently, the cost of property-catastrophe reinsurance has risen over 25% this year and, in hurricane-prone areas, the rates are increasing almost four times that amount. And all of this occurring despite the financial market's creation of new forms of investment vehicles to induce investment of capital at reduced-risk levels.

As noted in this earlier post on federally-subsidized flood insurance in hurricane-prone areas, this tight market condition for disaster insurance is actually having a beneficial impact. Businesses in hurricane-prone areas are considering alternatives to paying huge premiums for disaster insurance, such as self-insurance and re-evaluating investment decisions. This is precisely how markets efficiently allocate risk and resources, and reflects why that efficient allocation is undermined by the federal subsidy on flood insurance.

Posted by Tom at 5:54 AM | Comments (0) |

Thinking about those Saudi oil reserves

This Bhushan Bahree-Russell Gold/WSJ ($) article reports on Chevron Corp's pilot project in Saudi Arabia in which it is using its steam injection technique to to loosen up sludge-like heavy-oil reserves in Wafra, the huge field in the so-called neutral zone between Saudi Arabia and Kuwait.

Heavy oil is costlier to produce than light oils, typically contains more contaminants such as metals and sulfur, and is priced lower than light oil to boot. But because of the decreasing supply of easily-produceable light oil, a growing number of refineries around the world are acquiring the special equipment necessary to turn heavy oil into petroleum-based products such as gasoline, jet fuel and heating oil. Inasmuch as most heavy-oil fields in Saudi Arabia are not included in the country's current estimate of 260 billion barrels of recoverable reserves, a successful steam injection initiative in such heavy-oil fields would potentially add billions of barrels to Saudi reserves

Meanwhile, Clear Thinkers favorite James Hamilton explores the effect that a recent reduction in Saudi oil production may be having on speculation over oil prices. Interestingly, the drop in Saudi production has occurred at the same time as the Saudis are aggressively increasing their drilling efforts.

Posted by Tom at 5:03 AM | Comments (0) |

July 9, 2006

Key trader case is teed up

This Tom Fowler/Houston Chronicle article reports on the trial that begins Monday in U.S. District Judge Nancy Atlas' federal court in which former Dynegy trader Michelle Valencia and former El Paso trader Greg Singleton (previous posts here) face charges of conspiracy and fraud under the rarely-used Commodities Exchange Act for allegedly submitting false gas trading data and withholding data to trade publications between 2000 and 2002.

The criminal case against Valencia and Singleton is the highest profile case of over a dozen of such cases that the Justice Department has been pursuing in Houston and San Francisco against former natural gas traders over alleged manipulation of natural gas trading indexes, which the trading industry uses to used to value billions of dollars in gas contracts and derivatives. Industry publications such as Inside FERC use data from traders to calculate the index price of natural gas, which can affect the level of profits that traders can generate. However, one of the key issues in in each of these cases is in what context the allegedly false information was transmitted or whether the publication even used any the false information. The government's theory of criminal liability is that it needs only to prove that fake trades were reported to the publications and not that the trades were actually published or affected the markets. Most of the traders charged in these cases have pled guilty under cooperation agreements with the DOJ, but Valencia and Singleton have been fighting the charges from the beginning, so no last-minute plea deal is expected.

Posted by Tom at 8:37 AM | Comments (0) |

July 8, 2006

The magic of Prairie Dunes

The US Senior Open (for golfers 50 years and older) is being played this week at Prairie Dunes Country Club in Hutchinson, Kansas, just up the road from Wichita.

Prairie Dunes is a fascinating course that is a favorite of golf course-design experts. The course sits in the windy heartland of America, but it has many characteristics of a seaside links course. Its original designer -- Perry Maxwell -- was a banker who designed some of the best golf courses in the central United States, such as Tulsa's Southern Hills. Maxwell began construction of Prairie Dunes in 1937, but the masterpiece was not completed until almost 20 years later.

Despite its somewhat isolated location, Prairie Dunes is now regularly recognized as on one of the best golf courses in the U.S. Although only a modest 6,600 yards in length, the course is holding up well in the tournament and receiving rave reviews from the participants, most of whom have never played it until this tournament. The Prairie Dunes Country Club hosts this excellent virtual review of the course, and I highly recommend that you take a moment to admire this gem of America's heartland.

Posted by Tom at 10:00 AM | Comments (0) |

July 7, 2006

Judge Kaplan sticks to his guns

Federal judges and prosecutors often have a cozy relationship. So, it was not particularly surprising that Southern District of New York U.S. Attorney Michael Garcia requested that U.S. District Judge Lewis Kaplan delete the names of federal prosecutors and his sharp criticism of those prosecutors in his June 26 opinion in the KPMG tax shelter case, which found that prosecutors had improperly pressured KPMG to abrogate its long-standing policy of paying the defense costs of over a dozen KPMG former partners charged in the case. While Judge Kaplan responded professionally to US Attorney Garcia's request, he firmly denied it and included the following language in his ruling on the request:

[The Court] views the actions of the U.S. Attorney's office that evoked criticism more as a disappointment borne of the ordinarily exceptional performance of the office that this Court has come to expect than as anything else. The Department of Justice policy that the office dutifully carried out, on the other hand, is more than a disappointment -- it is unconstitutional.

Meanwhile, Larry Ribstein lucidly analyzes Judge Kaplan's decision in this TCS Daily op-ed and sums up the underlying importance of Judge Kaplan's decision:

This case isn't going to solve all of the problems of corporate criminal liability. The government retains considerable leverage in prosecuting corporations and their employees. This problem is inherent in cases involving common business practices such as the structuring and sale of tax shelters, where the very criminality of the conduct is an extremely complex issue. The problem is compounded in this case by the haziness of the line between merely wrong and criminal interpretations of the tax code. The court must determine whether the tax shelters in this case were illegal rather than simply aggressive and ultimately unsuccessful tax planning that was not sharply distinguishable from what tax advisers do everyday. [. . .]

Real relief from undue burdens of criminal prosecution will come only when courts face up to these underlying problems of corporate criminal liability. Judge Kaplan's opinion is important for its recognition that fundamental fairness in a criminal trial may turn on the parties' contract and property rights, as well as on business realities. It is to be hoped other courts will follow the principle Judge Kaplan has established to restore balance in white collar crime cases.

Interestingly, the importance of Judge Kaplan's opinion in the KPMG case is readily apparent in the Enron-related Nigerian Barge case. In the barge case, the government threatened Merrill Lynch with an indictment, ultimately resulting in a settlement in which Merrill tossed four of its executives to the wolves in return for a non-prosecution agreement for the firm. Inasmuch as that deal was cut relatively early in the current trend of federal corporate crime prosecutions, the government did not require as a part of the non-prosecution agreement that Merrill abrogate its policy of paying the defense costs of the four former executives. Although rumors circulated in legal circles after the executives were convicted that the government was "suggesting" to Merrill that the firm should not pay the legal cost of the executives' appeals, Merrill has continued to pay those costs, which are certainly in the several million dollar range by now.

As this earlier series of posts reflects, the Nigerian Barge case involves a particularly odious prosecution in which the Enron Task Force effectively prosecuted the four former Merrill executives for doing their jobs in connection with Enron's sale of an asset for which Enron may have improperly accounted, although even that issue was never proven at trial. Given the adverse climate in Houston for anyone that has had anything to do with the social pariah Enron, the Task Force was able to obtain convictions of the Merrill Four, although at least three out of the four convictions are now unraveling and will almost certainly be reversed (see here and here). But for Merrill's payment of the defense costs of its former executives, it is doubtful that these out-of-work executives and their families would have been able to afford the extraordinary cost of attempting to correct the stark injustice of their convictions on appeal.

Finally, if you want to see what happens when a company sacrifices a former executive in connection with cutting a deal with prosecutors and then does not pay that executive's legal defense costs, then read this.

Posted by Tom at 6:35 AM | Comments (1) |

The State of Securities Class Actions

Bruce Carton over at the Securities LItigation Watch has posted his annual State of the (Securities Litigation) Union analysis, which provides an excellent overview of the status of class action securities lawsuit sector. Interestingly, it does not appear that the Milberg Weiss troubles or attempts to constrain such lawsuits are having any meaningful effect on the growth of the sector:

Again, viewed in context, neither the number of cases in 2005 nor the NERA dismissal statistics support the argument that securities class actions have recently “dried up” in any meaningful way—the number of cases is roughly what it has been since 1997 and the dismissal rate is, according to NERA, the same as it has been since 1998. [. . .]

With respect to Milberg Weiss, it seems clearer by the day that even if the firm’s practice is diminished or destroyed altogether by the indictment, there will not be a significant impact on securities class actions generally. There are far too many competent plaintiffs’ law firms out there that will gladly fill any void that may be created. It also appears that to the extent Milberg Weiss is losing any lawyers, it is because these lawyers are being recruited away by competitors, where they will promptly resume their securities class action practices.

Read the entire post.

Posted by Tom at 5:41 AM | Comments (0) |

Mack Brown's dream role

When your team wins a national football championship in Texas, a vast array of interesting opportunities emerge. This Ed Bark/Dallas Morning News preview gives a hearty thumbs up to Friday Night Lights, a new television show that debuts this fall and includes a cameo role for University of Texas football coach Mack Brown. My sense is that Coach Brown is especially well-prepared to play this particular role:

"Friday Night Lights" (drama): A terrific continuation of the best-selling book and feature film, with Kyle Chandler the perfect choice to play under-the-gun new football coach Eric Taylor. Filmed in Austin, the pilot superbly sets a small-town West Texas stage in fictional Dillon, Texas. Football action is brilliantly choreographed, and the key players come off as far more than tackling dummies.

University of Texas coach Mack Brown has an effective cameo as a demanding booster who expects the Panthers to triumph at all costs.

Posted by Tom at 5:22 AM | Comments (0) |

July 6, 2006

Ken Lay and the Enron Myth

Former Enron chairman and CEO Ken Lay died yesterday of a heart attack and, given the stress that Mr. Lay had endured over the past five years, such a fate is certainly not surprising. However, my sense is that the heart attack was merely the physical manifestation of what really killed this proud, talented and flawed man -- his inability to overcome the Enron Myth and the societal implications of it.

By now, we all know the myth -- Enron was merely an elaborate financial house of cards hidden from innocent and unsuspecting investors and employees by a deceitful management team led by the greedy and lying Mr. Lay. The Enron Myth is so thoroughly accepted that otherwise intelligent people reject any notion of ambiguity or fair-minded analysis in addressing facts and issues that call the morality play into question. The primary dynamics by which the myth is perpetuated are scapegoating and resentment, which are exhibited everywhere:

The Houston Chronicle's business columnist ridiculing Mr. Lay and calling for his conviction on almost a daily basis throughout the trial;

The community outpouring of celebration over the guilty verdict against Mr. Lay and the self-righteous indignation over his continued claim that he committed no crimes;

A Houstonian interviewed on radio yesterday contending that she was unsatisfied because Mr. Lay's death had allowed him to escape appropriate punishment;

A prominent Houston-based blogger mocking Mr. Lay's death (here and here);

Without a smidgen of evidence, a Houston criminal defense attorney suggesting during an interview on MSNBC yesterday that Mr. Lay may have committed suicide to void his conviction.

These are but a few examples of the frequent eruptions from the cauldron of societal bitterness over Enron that are palpable reminders of the fragile nature of civil society. The Enron Myth conveniently serves to obscure that which most people do not want to confront. Loss, fear, and anger expose our essential human insecurity -- Christians sometimes refer to it as our "brokenness." The vulnerability that underlies such insecurity is scary to behold, so we use myths and the related dynamics of scapegoating and resentment to distract us.

Therefore, a wealthy and powerful businessman who is easy to resent becomes a handy scapegoat. We rationalize that he did bad things that we would never do if placed in the same position and thus, he is deserving of our punishment. That the scapegoat is portrayed as greedy and arrogant -- just as we are -- makes the lynch mob even more bloodthirsty as it attempts to purge collectively that which is too sordid for its members to face individually.

As noted in this prior post, even the Task Force prosecutors have admitted that the legal case against Lay was extraordinarily weak. But the power of the Enron Myth and the real presumption in the criminal case against Mr. Lay are such that even presumably fair-minded jurors dispense with critical thinking skills when confronted with supposedly the biggest business conspiracy in the history of federal prosecutions. Rather than seeking the truth regarding that alleged mass conspiracy, the jurors were content with a prosecution that cast Mr. Lay as a liar about Photofete and his company line of credit, and ignored the paucity of evidence of any alleged massive conspiracy or even the true reasons why Enron collapsed. The myth is so pervasive and accepted -- why bother with the truth?

The carnage of the Enron Myth and similar myths is now stacked high -- the destruction of Arthur Andersen, the vapid Enron-related Congressional hearings, the shallow Enron documentary, Martha Stewart, Jamie Olis, Daniel Bayly, William Fuhs, Frank Quattrone, Hank Greenberg, Mr. Lay -- the list goes on and on. In the wake of such destruction of wealth and lives, the public is even less willing to confront the vacuity of the myth and the destructive dynamics by which it is perpetrated. In fact, any challenge to the myth is now commonly met with derision and appeals to even more resentment over the Enron failure.

Such syndromes are not only an abuse of our justice system, but a serious affront to civil society. Ken Lay was no criminal. Did he fudge the truth? Maybe. But even if so, did his lies justify public humiliation, a physically-draining criminal trial, and a life prison sentence? Not in a truly civil society.

Ken Lay's death is a terrible tragedy for his family and friends, and my family's thoughts and prayers are with them. But the larger tragedy is that a myth has again played out as "justice" in our criminal justice system while distracting us from examining what really happened at Enron, understanding the benefits and risks of such a company, and educating ourselves on how to take advantage of such benefits while hedging those risks prudently.

Such a sober undertaking is not as easy as rationalizing a financial failure by calling a rich man a crook and reveling in his demise, but it's far more likely to result in a better -- and far more honest -- understanding of investment and markets, as well as ourselves.

Posted by Tom at 5:35 AM | Comments (8) |

July 5, 2006

The death of Ken Lay

Former Enron chairman and CEO Ken Lay died early this morning in Colorado, reportedly of a heart attack. He was 64 at the time of his death.

I have a day's worth of meetings that prevent me from collecting and conveying my thoughts immediately on Mr. Lay's death, but I wanted to pass along a couple of recent posts (here and here) about Mr. Lay and the weakness of the criminal case against him, one of which includes this excerpt about the man that Mr. Lay was:

Lay is clearly a proud man who desperately wants to tell his side of the story, and it is quite a story. Born and raised in a family with little money, Lay worked his way through college and graduate school, landed his first job with Houston-based Humble Oil (the predecessor to ExxonMobil), and then served his country admirably as a Naval officer and Deputy Undersecretary of Interior for Energy for six years during the Vietnam War. After his governmental service, Lay rose quickly through the executive ranks of a couple of gas pipeline companies before assuming the chairman and CEO position of the company that eventually became Enron in 1985. From that perch, Lay accumulated a personal net worth of about $350 million as of 2000 as he oversaw the growth of Enron into one of the largest publicly-owned companies in the U.S., and then saw that net worth evaporate over the past four-plus years since Enron's collapse into bankruptcy.

But as difficult as that fall must have been, Lay does not appear to be the type of man who is bothered all that much by the loss of wealth, and certainly not nearly as much as he is aggravated by the Task Force and media’s ravaging of his reputation over the past five years. According to media reports, Lay and [defense counsel Mac] Secrest struggled somewhat during the early stages of Lay’s direct examination, and my sense is that their struggles were attributable largely to Lay’s frustration with not being able to explain to the jurors directly — without the limiting framework of a trial — the utter contradiction between his life story and the nature of the criminal charges against him.

And, as usual, Larry Ribstein has these insightful observations on Mr. Lay's death and Peter Henning passes along an interesting implication of Mr. Lay's death on the criminal case against him.

Posted by Tom at 9:32 AM | Comments (0) |

The big problem with Mexico

The presidential election in Mexico garners more interest in Texas than many places because of the increasing problems that the state faces in regard to the influx of immigrants and violence on the border. Calderon's apparent victory is almost certainly better economically for Mexico, and Opinion Journal's Mary Anastasia O'Grady observes that the handling of the election is a hopeful sign for Mexico's emerging multi-party political system. However, the Washington Post's Robert Samuelson identifies in this column the problem that continues to vex Mexico's economic development -- inefficient big businesses that are protected by the government and vibrant small businesses that are threatened by it:

[Mexico's] economy consists of two vast sectors, each slow to adopt better technology and business practices.

One sector involves large, modern firms in semi-protected markets that limit the pressure to improve efficiency or lower prices. "Mexico's business sector is risk-averse. It's never had to operate in a true competitive environment," says Pamela Starr, an analyst for the Eurasia Group, a consulting firm. "It's operated with monopolies and oligopolies encouraged by the government."...

The other part of the economy is usually called the "informal sector." It consists of thousands of small firms -- street vendors, stores, repair shops, tiny manufacturers -- that theoretically aren't legal, because they haven't registered with the government and often don't pay taxes or comply with regulations on wages and hiring and firing. Almost two-thirds of Mexico's workers may be employed in the informal sector, according to one rough estimate by the International Monetary Fund.

The sector's size might suggest great entrepreneurial vitality. The trouble is that these firms are virtually compelled to remain small and inefficient. Because they're technically illegal, they can't easily get bank loans and can't grow too large without being forced to pay taxes or comply with government regulations.

Read the entire column.

Posted by Tom at 7:19 AM | Comments (0) |

Kerkorian's deal for GM

Kirk Kerkorian's proposed deal to save General Motors came up just before the holiday weekend, so analysis of the proposal has been sparse to date (previous posts on GM's Enronesque experience are here). Last Friday, Kerkorian's Tracinda Corp. -- the largest individual shareholder in GM -- publicly proposed that GM become the third wheel in an automotive alliance with Nissan and Renault, both of which would buy substantial minority stakes in GM. Nissan and Renault are led by Carlos Ghosn, whose revival of Nissan six years ago has made him the most influential automotive CEO in the world. Interestingly, Kerkorian's salvo was deftly timed to coincide with the Big Three automaker's June sales reports, which were dismal.

As GM's stock rose nearly 10% after Kerkorian's announcement, GM's directors convened an emergency meeting while grumbling that they didn't appreciate negotiating in public, although they announced after the meeting that they would consider the proposal (imagine the lawsuits if they didn't?). Nissan and Renault's boards kept up the heat on Monday by announcing that they would entertain an alliance if GM agrees. Such an alliance would leave the weak and struggling Ford Motor Co. as the only independent American automaker.

The WSJ's Holman Jenkins ($) sizes up Kerkorian's strategy and suggests "the possibility that Mr. Kerkorian is simply lining up a lifesaver in the event of a sudden auto recession that some see looming. GM likely would not survive a sharp drop in SUV and pickup sales right now." Regardless of whether that's the underlying reason for Kerkorian's proposal, Jenkins observes that Kervokian's message is clearly "there's not enough change going on around here. Give me more change."

Kerkorian's concerns about GM's management have merit. Although GM posted a small profit in the first quarter of 2006 on the heels of its gargantuan $10.6 billion loss last year, the profit was primarily the result of an accounting change. Cash flow remains negative and the company's debt remains in the deep junk category. This lackluster performance comes amidst a larger backdrop of GM's poor performance over the past six years. Since earning a record $5.7 billion in 1999 and having its stock top out at $70 a share in June 2000, GM's stock has declined by over 70% since then to below $19 per share at the end of last year, although it has recovered to $29 per share on the early success of current GM CEO Rick Wagoner's reorganization plan and now Kerkorian's proposal. Perhaps most importantly, however, GM's U.S. market share has plummeted to 24.4% from almost 30% in 1999. Twenty years ago, GM's share was 41%.

Looking at all this, Jeff Matthews has the most entertaining analysis of Kerkorian's strategy to date, analogizing GM's choice to the one faced by Sonny Corleone in The Godfather if it turned out that Don Corleone did not survive after being severely injured in Sollozo's assassination attempt. As Matthews notes, brother Michael's plan ended up being a better alternative for Sonny than making a deal with Sollozo, there is no Michael Corleone for GM.

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

Golf 101

Let's see now. Suppose you are a trustee of the Houston Community College system.

You are confronted with a chronically underfunded system that is operating in a region where golf courses are overbuilt and will do most anything to attract customers.

What would you do?

Well, I don't know about you, but I wouldn't be approving the construction of a three-hole, par 3 golf facility to provide "a new and unique opportunity for residents of northeast Houston to learn or improve skills in the age-old sport of golf."

The Houston Press' Richard Connelly has the story.

Posted by Tom at 4:52 AM | Comments (0) |

July 4, 2006

Is this a new A&M recruiting video?

I recognize that football recruiting at Texas A&M has not kept up with Big 12 competitors such as Texas and Oklahoma. The Coach Fran era has not gone as expected, and even the sacred 12th Man tradition is under attack. So, drastic measures are required to turn things around.

But a rap music video extolling the virtues of Bryan-College Station? Let's just say I'm still partial to the Aggie War Hymn.

Former A&M football coach Bear Bryant is turning over in his grave. Old Army will never be the same. Hat tip to the Burnt Orange Nation for the link.

Have a safe and happy 4th!

Posted by Tom at 8:54 AM | Comments (0) |

July 3, 2006

The random nature of movie success

This fascinating Leonard Mlodinow/LA Times special (registration req.) explains why I am utterly incapable of predicting which movies will be successful. In reality, nobody can:

The magic of Hollywood success—how can one account for it? Were the executives at Fox and Sony who gambled more than $300 million to create the hits "X-Men: The Last Stand" and "The Da Vinci Code" visionaries? Were their peers at Warner Bros. who green-lighted the flop "Poseidon," which cost $160 million to produce, just boneheads?

The 2006 summer blockbuster season is upon us, one of the two times each year (the other is Christmas) when a film studio's hopes for black ink are decided by the gods of movie fortune—namely, you and me. Americans may not scurry with enthusiasm to vote for our presidents, but come summer, we do vote early and often for the films we love, to the tune of about $200 million each weekend. For the people who make the movies, it's either champagne or Prozac as a river of green flows through Tinseltown, dragging careers with it, sometimes for a happy, wild ride, sometimes directly into a rock.

But are the rewards (and punishments) of the Hollywood game deserved, or does luck play a far more important role in box-office success (and failure) than people imagine?

We all understand that genius doesn't guarantee success, but it's seductive to assume that success must come from genius. As a former Hollywood scriptwriter, I understand the comfort in hiring by track record. Yet as a scientist who has taught the mathematics of randomness at Caltech, I also am aware that track records can deceive.

That no one can know whether a film will hit or miss has been an uncomfortable suspicion in Hollywood at least since novelist and screenwriter William Goldman enunciated it in his classic 1983 book "Adventures in the Screen Trade." If Goldman is right and a future film's performance is unpredictable, then there is no way studio executives or producers, despite all their swagger, can have a better track record at choosing projects than an ape throwing darts at a dartboard.

That's a bold statement, but these days it is hardly conjecture: With each passing year the unpredictability of film revenue is supported by more and more academic research.

Read the entire highly entertaining article. The money quote comes from Art DeVany, who really should have been an expert witness for the plaintiffs in Disney-Ovitz:

"Today's Hollywood executives all act like wimps," [DeVany] says. "They don't control their budgets. They give the actors anything they want. They rely on the easy answers, so they try to mimic past successes and cave in to the preposterous demands of stars. My research shows you don't have to do that. It's just an easy way out, an illusion."

"[A] careful study reveals that no strategy the studios devise is going to give them any kind of advantage at all. So any studio executive getting paid more than the salary of a comparable executive at your local dairy is getting paid too much."

Larry Ribstein, who knows a thing or two about the movie business and the way in which it portrays business, comments on the article here.

Posted by Tom at 7:21 AM | Comments (0) |

Playing high stakes poker at Refco's Bermuda unit

Wall Street Journal reporters Carrick Mollenkamp, Ian McDonald and Peter A. McKay have authored this article of the day ($) in updating the fascinating story on the bankrupt, New York-based brokerage firm. Refco, Inc. (prior posts here). This WSJ report focuses on Refco's unregulated Bermuda unit, which Refco allegedly used as sort of a piggy bank to make loans to customers on high-risk bets and to cover up losses on those bets. When Refco went into the tank after an Enronesque experience, the Bermuda unit -- called Refco Capital Markets -- was supposed to have at least $3.7 billion in customer account assets, but had only $1.9 billion in such assets. Now the customers who played such high-stakes poker with Refco are scrambling to pick up some scraps on their gambling losses in Refco's bankruptcy case.

As an "exempt" Bermuda company, Refco Capital Markets wasn't required to keep customers' money seperate from Refco's company funds, so customer and company money was routinely commingled in the Bermuda unit's accounts and commonly used by various Refco entities to pay bills, make loans and finance investments. Apparently, even other Refco units routinely sent funds to the Bermuda unit to invest. According to the article, some investors are contending in the bankruptcy court that they were surprised by the Bermuda unit's practices:

"That is not a business model of which I am familiar with," Mr. [Richard] Deitz, the Moscow-based hedge-fund manager, said at a bankruptcy-court hearing. "It's something that I think is more in common with three-card monte."

I would suggest that Mr. Dietz was playing the equivalent of three card monte with Refco and that he knew it.

Although beyond the scope of the WSJ article, one issue that continues to baffle me regarding Refco and former Refco CEO Phillip Bennett's criminal case is this -- presuming as true the allegation that Bennett and Refco were running a scam, why on earth did Bennett take Refco public?

Had the fraud been discovered while Refco was a private company, matters probably would have turned out much differently for both Refco and Bennett. Bennett probably would have been forced to resign, but there would have been no obligation to disclose the resignation publicly and, if it was disclosed at all, probably would have been described in the euphemistic manner of “pursuing other opportunities.”

As a private company, Refco would have no legal obligation to advise the market on why Bennett resigned and the financial press probably would not have connected it to fraud at Refco absent a leak from someone at Refco. Inasmuch as most folks would have never heard of Refco, Bennett's resignation would not have been particularly newsworthy outside of Wall Street. Indeed, unless Refco alerted the authorities about the fraud -- which it probably would not have done out of fear of triggering an Enronesque experience -- Bennett would not have been arrested.

Meanwhile, Refco's new management and board would have probably arranged an adjustment of the purchase price on the large investment that Thomas H. Lee Partners made in Refco in order to avoid a civil lawsuit that would have publicly disclosed the fraud. Perhaps the Refco board and management would have instituted some internal controls to lessen the risk of such a fraud occurring in the future. Most importantly, Refco probably would not have collapsed.

However, since the fraud was discovered after Refco had gone public, matters have played out quite differently. Refco went through an Enronesque experience and filed bankruptcy, Bennett was indicted, Thomas H. Lee Partners lost over $300 million on its Refco investment, and it is being sued for millions by Refco investors and creditors along with Refco’s board, Refco's auditors (Grant Thorton) and the underwriters of the Refco IPO.

Perhaps the answer to the question of why Bennett took Refco public is simply that Bennett was greedy, wanted to cash out on the IPO, and thought he could continue to cover-up the fraud. But such questions are rarely answered so simply. Stay tuned.

Posted by Tom at 4:45 AM | Comments (2) |

July 2, 2006

Stros 2006 Review, Part Five

Well, the Stros (39-42) are halfway through their 2006 season and the first half of the season reminds us again of just how much expectations shape our perception of how likely it is for the club to contend for another playoff run.

Remember this same time in 2004? Pessimism surrounded the club. The hitting was lousy and the pitching staff was reeling from the loss of Wade Miller and the sore elbow of Andy Pettitte. However, after reaching a season-worst 56-60 on Aug. 14, the 2004 Stros won an incredible 36 out of their next 46 games (including a 12 game winning streak and nine out of their last 10 to close out the regular season) to take the National League wildcard playoff spot and come within a game of the 2004 World Series.

And remember this time last season? After starting the 2005 season with an atrocious 15-30 record amidst the worst hitting in the club's history, that Stros club came to the halfway point of the season on a totally unexpected 29-13 run that had everyone brimming with cautious optimism. Of course, that club went on to post a 45-30 record for the remainder of the season to make the playoffs, won the National League Championship Series over the Cardinals and made it to the club's first World Series.

What about this year? Well, after getting hopes up by blowing out of the gate with a 19-9 record, the 2006 Stros have gone into a 20-33 tailspin that has exhibited not only chronic inconsistent hitting, but also pitching that has been far below the levels of the 2004 and 2005 Stros. As a result, no one seems to be particularly sanguine at this time about the prospects for the Stros making a third straight playoff run.

But you know what's interesting? The Stros 39-42 record to date this season is not materially different from the 44-43 record at the All-Star break for the 2004 Stros or the 44-44 All-Star break record of the 2005 club. And just like the Stros clubs of the past two seasons, the 2006 Stros have the ingredients to contend for a playoff spot in the second half of the season if certain players elevate their performance to past levels. See what I mean about expectations?

At any rate, this fifth of ten reviews of the Stros season (prior summaries are here) takes us to the halfway point (81 games) of the season (this summary covers 17 games, while each of the past four covered 16). The club's hitting and pitching statistics to date are set forth below, and pdf's of the current hitting stats are here and the current pitching stats are here, courtesy of Lee Sinins' sabermetric Complete Baseball Encyclopedia:

The abbreviations for the hitting stats are defined here and the same for the pitching stats are here.

Despite the Stros' recent road meltdowns against the White Sox and Tigers, the Stros hitters are actually hitting better than either of the past two playoff teams were at this point in the season and are seventh in runs created against average ("RCAA," explained here) among the 16 National League clubs. Lance Berkman (31 RCAA/.397 OBA/.609 SLG/1.006 OPS) continues to be one of the best hitters in Major League Baseball, and Chris Burke (8/.370/481/.850) and Mike Lamb (9/.372/.532/.905) have been solid contributers at the plate while working into the lineup as regular players over the past month or so. Although he has a -2 RCAA since May 26th, Morgan Ensberg (18/.388/514/.902) continues to be a far above-average National League hitter and is likely to break out of his slump soon. Even Jason Lane (-3/.336/.399/.735) and Preston Wilson (-3/.324/.429/.753) are showing signs of becoming at least average National League hitters for the season, although Wilson continues to hit into double plays (10) with irritating frequency.

Unfortunately, the rest of the Stros' hitters are pretty pathetic. Bidg (-4/.327/.413/.740) is showing signs of wearing down earlier than normal in the long season, and Everett (-14/.281/.325/.607) and Taveras (-11/.315/.319/.634) remain train wrecks. Meanwhile, fast-starting Ausmus (-13/.315/,311/.626) has descended to his usual depths of hitting incompetency that have made him one of the worst-hitting regular National League players over the past decade. Consequently, whenever Everett, Ausmus and Taveras are in the lineup, the Stros have four spots in the lineup (including the pitcher) that have far less than an average National League player's ability to generate runs. That's not good, so Manager Garner needs to limit as much as possible the games in which those three players are in the lineup together.

Meanwhile, the pitching staff had actually improved and risen to seventh in the National League in runs saved against average ("RSAA," explained here), but then the nightmare series against the White Sox and then the Tigers sent the staff's RSAA spiraling to 15th among the 16 National League clubs. Nevertheless, there are definite signs of hope.

First, Roy O (3.27 ERA/13 RSAA) and Clemens (2.38 ERA/2 RSAA) are studs and likely to remain strong starters throughout the second half of the season. Although Pettitte (5.58 ERA/-15 RSAA), rookie starter Buchholz (5.36 ERA/ -11 RSAA) and Lidge (5.30 ERA/-4 RSAA) have struggled mightily at times this season and are the main reasons for the staff's high RSAA, each of them has shown improvement in recent appearances (well, alright, except for that little problem Lidge had in Chicago). Rodriguez (4.79 ERA/-5 RSAA) has been a bit shaky of late, but the rest of the Stros pitchers have actually pitched at either an average National League pitcher level or slightly above-average level for the season. And, for good measure, Brandon Backe (2.25 ERA/2 RSAA) is currently on a rehab assignment and his successful return to the rotation would likely be an improvement over either Buchholz or Rodriguez. So, a reasonable scenario does exist for the Stros' pitching staff to turn things around during the second half of the season.

Finally, the other good news is that the National League is simply not very good this season. The 43-36 Cardinals have lost nine of ten games and are not running away with the National League Central as they did in the past two seasons (even at 39-42, the Stros are only five games out of first in the NL Central). Similarly, the Stros are currently just a few games out of leading the race for the National League wildcard playoff spot. In short, despite the Stros troubles over the past 30% of the season, the club has not played itself out of the playoff hunt by any means.

Thus, if the Stros can continue their hitting level at slightly above-National League average, and improve their pitching to the upper third of the National League (definitely possible based on the past two seasons performance), then the Stros will at least contend for the wildcard playoff spot and could even contend for the NL Central title. On the other hand, if the pitching does not improve significantly during the second half, then the Stros playoff goose is cooked because the club simply just does not have enough hitting to carry a pitching staff operating at anywhere near or below National League-average.

After Sunday's game against the Rangers (41-38), the Stros return home to play the Cubs (29-51) and Cards (43-36) leading up to the All-Star break. Good pitching traditionally tends to dominate hitters after the All-Star break and during the dog days of summer, so here's hoping that the Stros' strong pitching -- which carried the club far into the playoffs during the past two seasons -- revives and carries the 2006 club to a similar finish.

Posted by Tom at 9:16 AM | Comments (0) |

The amazing Roy Oswalt

Roger Clemens is one of the greatest pitchers in Major League Baseball history, so he rightly gets most of the publicity among Stros pitchers. However, Roy Oswalt is currently the best pitcher on the Stros' staff, one of the best pitchers in the National League and is well on his way to becoming the best Stros pitcher ever.

As noted in this recent post on Clemens, the statistic "runs saved against average" ("RSAA) is one of the best measures for evaluating a pitcher's true effectiveness because it is based on the two most important things for a pitcher in winning baseball games -- that is, not giving up runs and getting hitters out. RSAA measures the number of runs that a pitcher saves for his team relative to the number of runs that an average pitcher in the league would give up while obtaining an equivalent number of outs for his team. Inasmuch as the hypothetical average pitcher's RSAA is always zero, a player can have an RSAA that is either a positive number -- which indicates he is an above average pitcher (i.e., Clemens and Oswalt) -- or an RSAA that is a negative number, which means he is performing below average (i.e., remember Brandon Duckworth and Tim Redding?).

Moreover, RSAA is a the best measure for comparing pitchers who played during different eras. Inasmuch as RSAA measures a pitcher's ability against that of an average pitcher in the pitcher's league for each particular season, a pitcher's lifetime RSAA measures how that pitcher performed against the average pitcher of his era. That's really the best way to compare pitchers from different eras because comparing other pitching statistics -- such as earned run average, wins and hitting statistics against -- is often skewed between pitchers of hitter-friendly eras (i.e., the era in which Clemens and Oswalt have pitched) versus pitchers of pitcher-friendly eras (i.e., such as the late 1960's and early 70's).

In pitching a complete game the other day against the Tigers, Oswalt attained another milestone by reaching 150 RSAA for his career. Roy O is easily the Stros career leader in RSAA:

1 Roy Oswalt 150
2 Billy Wagner 99
3 Roger Clemens 87
4 Mike Hampton 76
5 Dave Smith 75
6 Octavio Dotel 67
7 Nolan Ryan 60
8 Wade Miller 56
9 Don Wilson 55
10 Joe Sambito 53

But what is not as well known is that Oswalt is getting close to being in the National League's top 10 list for career RSAA through the age of 28:

1 Christy Mathewson 279
2 Tom Seaver 234
3 Robin Roberts 229
4 Don Drysdale 219
5 Dizzy Dean 207
6 Ferguson Jenkins 196
7 Greg Maddux 189
8 Juan Marichal 177
9 Grover C Alexander 176
10 Jose Rijo 158
11 Roy Oswalt 150

Not bad company, eh? Barring injury, Oswalt is well on his way to a Hall of Fame career. He is signed through the 2007 season, but unless the Stros sign him to a long-term deal before the expiration of that deal, the best pitcher in Stros franchise history will become a free agent. Losing Roy O would be a serious blow to the Stros.

Oswalt's career pitching statistics are set forth below and the abbreviations for each of those stats is set forth in pdf here.

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

July 1, 2006

The Lay-Skilling forfeiture motion

In the least surprising post-verdict motion to date, the Washington Post's Carrie Johnson reports that the Enron Task Force filed its forfeiture motion yesterday against former key Enron executives Ken Lay and Jeff Skilling. A bookmarked pdf copy of the motion can be downloaded here.

As expected, the Task Force requests that the remaining net worth of both Skilling and Lay be forfeited to the government to satisfy the Task Force's contention that the two should pony up about $183 million as the undeserved fruit of the securities fraud for which the two were convicted. In addition to the defendants, the Task Force's forfeiture request will probably generate opposition from various parties in the civil litigation still swirling around the Enron case, which parties are also seeking compensation from Lay and Skilling on various business and securities fraud claims. Finally, both Lay and Skilling owe substantial amounts to their respective defense teams, so the claims of those firms will also need to be sorted out in connection with the Task Force's forfeiture claim. Lay and Skilling have requested that U.S. District Judge Sim Lake schedule a bench trial regarding forfeiture issues sometime this fall, but it remains unclear at this time just how Judge Lake will handle the Task Force's forfeiture request.

Posted by Tom at 7:58 AM | Comments (0) |

June 30, 2006

The fraying KPMG tax shelter defense

U.S. District Judge Lewis Kaplan's decision earlier this week was a major victory for the defendants in the KPMG tax shelter case because it at least gives the defendants the basis for obtaining the financial means for defending the case effectively. However, as this Lynnlee Browning/NY Times article points out, the deck is still stacked firmly in favor of the prosecution in such multiple-defendant, business fraud criminal cases. The conflicting interests of the multiple defendants are now rising to the surface of the case, as is the prosecution's ability to cherry-pick certain defendants for attractive plea deals:

In pretrial hearings since their clients' indictments last August and last October, defense lawyers have presented a unified front, filing joint motions and refraining from public squabbling. Lawyers for all of the defendants, countering prosecutors' assertions of criminal intent, are expected to argue that their clients thought at the time that what they did was aggressive but legal.

But increasingly, defense lawyers speak of different camps forming over recent weeks, with lawyers for the junior defendants indicating that they will focus on proving that their clients took orders from the senior defendants, who were responsible for designing and approving the tax shelters.

"You're beginning to already see the finger-pointing," said a lawyer for one of the KPMG defendants, declining to be named or to name his client, saying he did not want to jeopardize the case. "It's going to get antagonistic."

Another lawyer, who also declined to be named, said, "If the shelters weren't legitimate, then my client was fooled as much as anybody else."

Lawyers for the junior defendants are expected to argue that senior-level defendants contributed to their clients personally being indicted, by withholding crucial materials from or lying to the Internal Revenue Service when KPMG first came under hard scrutiny, in early 2004.

By contrast, lawyers for the senior defendants, who also include a former chief financial officer and a former associate general counsel, have indicated that they will argue that because the lower-level defendants dealt directly with the investors who bought the shelters, the senior defendants are not responsible for any misrepresentations those clients may have made to the I.R.S.

In recent weeks, prosecutors offered a plea deal to Mark T. Watson, a former partner in KPMG's Washington National Tax group, saying they would drop at least one of the 40 counts he faces and recommend probation if he pleads guilty and agrees to cooperate with the prosecution.

Mr. Watson, a midlevel partner, declined the offer, according to two defense lawyers close to the matter. Michael Kim, the lawyer representing Mr. Watson, said that he "was not authorized to comment" on the matter. But Mr. Kim said that in the past Mr. Watson "had a lot of friction with his co-defendants over some of the very issues on trial here, and those frictions have not disappeared." He declined to elaborate.

The bad blood stems from Mr. Watson's appearance under subpoena before a Senate subcommittee in 2003 looking into tax shelters. In the hearings, which later started a wave of criminal and civil cases against KPMG and other promoters of supposed tax shelters, Mr. Watson cast himself as a canary in the coal mine. He said he wrote e-mail messages to his superiors questioning the propriety of certain shelters at the heart of the indictment.

Peter Henning has typically insightful thoughts on the situation confronting the KPMG defendants. Judge Kaplan's decision is a welcome criticism of the prosecutorial misconduct that has been apparent in numerous of the criminal prosecutions in this particular post-stock market bubble era. However, the more insidious corruption that besets the federal criminal justice system is the policy of prosecutors placing employees under pressure not not only to plead guilty, but also to testify against their bosses and fellow employees. When such a witness is placed under such extraordinary pressure, the witness will almost always feel compelled to deliver testimony that will ingratiate the witness to prosecutors. Grizzled criminal defense attorneys refer to this syndrome as a pressured witness learning how to "sing and compose."

Posted by Tom at 6:17 AM | Comments (0) |

The increasingly sensitive energy markets

Bill O'Reilly contends that it's all just an energy company conspiracy, but this week's price hike for gasoline and crude oil is actually showing just how sensitive U.S. energy markets have become to disruptions that just a few years ago would have barely registered a blip in those markets.

Gasoline and crude-oil and prices surged after the June 20 spill of 47,000 barrels of oil waste snarled the Calcasieu Ship Channel, a major Louisiana waterway that connects the Port of Lake Charles to the Gulf of Mexico. The stoppage stranded oil barges and tugs that are delivering crude oil to three refineries that together refine about 775,000 barrels of crude oil a day into fuels such as gasoline. The Coast Guard reported yesterday that it might open the channel to limited traffic by this weekend.

Primarily as a result, gasoline futures on the New York Mercantile Exchange have risen by almost 15% over the past week to yesterday's close of $2.29 a gallon, the highest level since the aftermath of last summer's Gulf Coast hurricanes. Meanwhile, August crude-oil futures rose over $1.30 to $73.52 a barrel, which is about $3 higher since the spill and an 11% increase for the current quarter. The spill is merely the latest in a series of supply disruptions over the past year that have increased average U.S. gasoline prices by almost 25% and crude-oil prices by 15% since the beginning of the 2005 hurricane season.

Not only are the US gasoline and crude oil markets tightening because of increased global crude-oil demand and flat production levels, US refineries are already operating at almost 95% of capacity, which is making the US more dependent on gasoline imports. Accordingly, expect short-term gasoline prices to go even higher during this hurricane season and the peak summer vacation season while longer term prices also will likely trend upward because of the limited refinery capacity. Inasmuch as the US currently uses just over 9 million barrels of gasoline a day and US refineries can produce about 8.5 million barrels a day, the balance of the US daily usage is imported and will grow if US demand for gasoline increases.

Just a few years ago, an incident such as the Calcasieu spill would have barely caused a ripple in the gasoline or oil markets that had bountiful supplies and untapped refining capacity. But no more. With little spare global capacity in crude oil and even less untapped refining capacity, any blip on the global oil production or refining radar screen is likely to generate quick price hikes in those markets. Remember that the next time you hear O'Reilly railing against energy companies or US politicians dithering about how to limit energy company profits rather than on how to encourage those companies to increase production of oil and gasoline.

Posted by Tom at 5:03 AM | Comments (0) |

Feds finally get Scrushy

After failing to convict former HealthSouth chairman and CEO in a highly-publicized business fraud prosecution almost exactly a year ago, federal prosecutors obtained a conviction of Scrushy and former Alabama governor Don E. Siegleman on multiple bribery, conspiracy and mail fraud charges relating to Scrushy's alleged bribe to Siegleman of $500,000 to procure a seat on a state regulatory board that oversees hospital construction projects. Two other defendants -- a onetime Siegleman aide Paul Hamrick and former head of the Alabama transportation department, Gary Roberts -- were acquitted on all charges.

Interestingly, the Scrushy-Siegleman jury had reported to the judge on several occasions over the 11 days of deliberations that It was deadlocked, and it is not immediately clear from news reports what ended the deadlock. In this particular case, Scrushy's defense team attempted to sway the predominantly black jury by comparing Scrushy to civil-rights figures of the 1950's and 60's who suffered injustice in Alabama and the deep South. Scrushy's defense team even included Alabama lawyer Fred D. Gray, who represented Rosa Parks when she was arrested in 1955 for refusing to give up her seat on a Montgomery, Alabama bus. As you might expect, prosecutors denounced the Scrushy defense team's strategy as a racially-motivated attempt to influence the jury while contending that Scrushy was simply using his money and power to gain political influence to help HealthSouth.

The 53-year-old Scrushy was convicted on six counts and faces a potential sentence of over 20 years in prison. Sentencing is expected to take place this fall.

Posted by Tom at 4:16 AM | Comments (0) |

June 29, 2006

Colbert on Buffett's big donation

Stephen Colbert's comment on Warren Buffett's decision to donate $30 billion to the Bill and Melinda Gates Foundation qualifies as the line of the week:

"Warren Buffet is so rich, he just hired Bill Gates to spend his money for him."

By the way, Larry Ribstein has an interesting perspective on the Buffett donation in relation to the growing effort of certain shareholders to pursue social causes through their corporate ownership.

Posted by Tom at 7:55 AM | Comments (2) |

Criminalizing corporate agency costs and the KPMG decision

As noted earlier here, U.S. District Judge Lewis Kaplan earlier this week slapped the Department of Justice upside the head for threatening KPMG with indictment in the KPMG tax shelter case unless the firm threw its partners to the wolves by rescinding the firm's policy of paying its partners' defense costs in such cases. Although Judge Kaplan concluded that it was premature to dismiss the indictment against the KPMG partners as the remedy for the DOJ's misconduct and fashioned a financial remedy for the partners instead, Larry Ribstein believes that Judge Kaplan's opinion is a landmark decision that calls into question the DOJ's dubious policy of criminalizing corporate agency costs in reaction to Enron and other recent corporate scandals:

My basic problem with criminalization of agency costs is precisely that it ignores internal corporate arrangements. The complex set of contracts and incentive devices that comprise a corporation simply doesn't fit with the sort of moral condemnation that criminal penalties necessarily involve. The nuances of an agency contract are the proverbial square peg in the round hole of criminal law.

But Judge Kaplan emphasizes that indemnification serves an important function in an agency contract: If directors and other agents are over-exposed to liability, they simply won’t work for the firm. One might add that even if they do work for the firm, they won’t take the risks that are necessary to maximize shareholder value and to make capitalism work. Corporate criminal liability essentially seeks to reengineer the firm to change incentives so that agents are no longer maximizing profits, but attempting to root out fraud at all costs.

The fundamental importance of this case is that Judge Kaplan is telling the government that the contract matters, even if it gets in the way of prosecution. By doing this, Judge Kaplan is re-reengineering the firm to make it, once again, a profit-maximizing entity rather than a government agent. [. . .]

Of course this one case isn’t going to solve all of the problems of corporate criminal liability. Corporate defendants will face the basic problem that it is hugely burdensome to defend these cases, which gives the government considerable leverage. The case's precise implications for other uses of government leverage are unclear. But by saying that there is a limit to what the government may do in criminalizing agency costs, the judge has taken an important first step. I predict the opinion will be a landmark.

Read the entire post.

Posted by Tom at 6:25 AM | Comments (0) |

Another milestone for Clemens

Although the 2006 Stros are quickly sliding into oblivion (I will post my next periodic analysis of the club's 2006 season this weekend after the Stros reach the halfway point in the season on Saturday), Roger Clemens is still likely to make baseball interesting in Houston for the remainder of the season.

Earlier this week, Clemens pitched well (6 1/3 IP, 3 H, 2 R, 1 ER, 2 BB, 3 SO) in his second game of the season and, in so doing, became the first pitcher in Major League Baseball who has pitched after 1900 to reach 700 runs saved against average ("RSAA") in his career. The following is the top ten pitchers in career RSAA who pitched after 1900, courtesy of Lee Sinins:

1 Roger Clemens 701
2 Lefty Grove 668
3 Walter Johnson 643
4 Greg Maddux 548
5 Pedro Martinez 526
6 Grover C Alexander 524
7 Randy Johnson 521
8 Christy Mathewson 405
9 Tom Seaver 404
10 Carl Hubbell 355

Clemens' accomplishment is particularly notable because RSAA is arguably the best measure for the most important statistic in baseball for a pitcher -- that is, saving runs for his team. As with its counterpart for comparing hitters -- runs created against average ("RCAA," explained here) -- RSAA is valuable in evaluating pitchers because it focuses on the two most important things for a pitcher in winning baseball games -- that is, not giving up runs and getting hitters out. RSAA measures the number of runs that a pitcher saves for his team relative to the number of runs that an average pitcher in the league would give up while obtaining an equivalent number of outs for his team (as with RCAA, RSAA is park-adjusted). Inasmuch as the hypothetical average pitcher's RSAA is always zero, a player can have an RSAA that is either a positive number -- which indicates he is an above average pitcher (i.e., Clemens) -- or an RSAA that is a negative number, which means he is performing below average (i.e., remember Brandon Duckworth or Tim Redding?).

Moreover, RSAA is a the best measure for comparing pitchers who played during different eras. Inasmuch as RSAA measures a pitcher's ability against that of an average pitcher in the pitcher's league for each particular season, a pitcher's lifetime RSAA measures how that pitcher performed against an average pitcher of his era. That's really the best way to compare pitchers from different eras because comparing other pitching statistics -- such as earned run average, wins and hitting statistics against -- is often skewed between pitchers of hitter-friendly eras (i.e., the era in which Clemens has pitched) versus pitchers of pitcher-friendly eras (i.e., such as the late 1960's and early 70's).

Thus, Clemens' career RSAA reflects that he is inarguably one of the greatest pitchers in the history of Major League Baseball. Enjoy watching him perform for the remainder of this season because it is becoming increasingly clear that the 2006 Stros as a team will continue to struggle. The following are Clemens' career statistics through his most recent game:

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

In a split decision, the winner is the Texas GOP. For now.

The Supreme Court issued its long-awaited decision yesterday (earlier posts here) ordering congressional districts in south Texas redrawn because a 2003 redistricting map orchestrated by former House Majority Leader Tom DeLay was designed to disenfranchise Hispanic voters so that vulnerable Republican incumbent Rep. Henry Bonilla could maintain his seat. However, a sharply-split Court rejected a broader Democratic challenge to the DeLay redistricting plan that prompted the new Republican majority in the Texas Legislature to throw out existing districts in favor of new ones designed for partisan benefit. Charles Kuffner, who has followed the redistricting case closely, has more here and an extensive archive on the case here. Amy Howe passes along what appears to be an interesting error in the opinion, a pdf of which is here.

The bottom line on this incredibly split-decision (the justices filed six separate opinions concurring and dissenting from parts of the ruling) is that that Justice Anthony Kennedy's controlling opinion leaves open the possibility that the Court could step in someday to set limits for partisan gerrymanders if future litigants find "a manageable, reliable measure of fairness" for doing so. Four liberal-leaning justices joined Justice Kennedy in concluding that the south Texas districts violated the Voting Rights Act and must be redrawn. But Justice Kennedy and the four more conservative justices concluded that the state-wide map complied with Constitutional requirements and that a second district -- which Democrats claimed disenfranchised black voters in Austin -- posed no voting-rights violation. Just to give you an idea of how the Court is all over the place on these issus, Justices Thomas and Scalia would have simply dismissed the case as beyond the scope of the courts to resolve, while several Justices -- including Samuel Alito and John Roberts -- were in a group that left open the possibility that the Court might in the future come up with a legal test to be applied in this type of case.

Posted by Tom at 5:06 AM | Comments (0) |

June 28, 2006

Here's one for the hedgies

Given the hedge fund theme today, it seems appropriate to note that the Russian state oil company Rosneft (previous posts here in connection with the Yukos chapter 11 case) is proceeding with its huge $10 billion initial public offering on the London Stock Exchange. As this NZ Herald op-ed notes, participation in the Rosneft IPO is not recommended for the faint-hearted and, as this Financial Times ($) article reports, the company's prospectus includes 25 pages of risk factors that certainly could not be construed as underplaying the risk of investing in the IPO:

Rosneft yesterday began selling itself to investors, warning of "material weaknesses" in its internal controls, a Kremlin-controlled board that might not always act in the interests of minority shareholders and possible legal liabilities of at least $14.7bn (£8bn).

The state-owned Russian oil giant published the preliminary prospectus for its float in London and Moscow next month. It hopes to raise $10bn-$11.7bn, making it one of the world's largest initial public offerings and valuing the company at up to $80bn.

Over 25 pages, the potential pitfalls are set out. As expected, the central threat to any investment lies in the legal challenges surrounding Rosneft's contentious acquisition of the former assets of Yukos, the oil company once owned by the now imprisoned oligarch Mikhail Khordokhovsky. Rosneft acquired Yuganskneftegaz, the main asset, in an opaque and forced auction.

The prospectus says that Rosneft is a defendant or respondent in four cases brought by Yukos or its shareholders that could result in damages of at least $14.7bn. Rosneft is "actively contesting" the claims and suing Yukos in Moscow for more than $17bn.

It adds: "If certain shareholders of Yukos are successful in obtaining an arbitral award against the Russian Federation, those shareholders may seek to enforce that award against Rosneft which may expose Rosneft to substantial liability."

Rosneft's corporate governance might also prove offputting. The prospectus says the Russian government indirectly owns 100 per cent of Rosneft and that six members of the nine-member board are officials in the government. This means Rosneft may "engage in business practices that do not maximise shareholder value" and cause it to "take actions that may not coincide with the interests of minority share-holders".

Its accounting systems may not be as sophisticated as that of companies with a longer history of compliance with US accounting rules and "Rosneft's independent auditor has identified certain material weaknesses in Rosneft's internal controls".

Rosneft might also have trouble financing its capital expenditures. It is relatively highly leveraged and must observe certain financial and other restrictive covenants under the terms of its indebtedness. The document notes that "crime and corruption could create a difficult business climate in Russia". . . .

So, if you're looking for an investment in a company that lacks internal controls, has a board that often does not maximize shareholder value, may lose its shirt in pending litigation, may have trouble financing its capital expenditures and treads in markets that are rife with crime and corruption, then this one's for you!

Posted by Tom at 6:08 AM | Comments (1) |

Infidelity Investments?

Markets are truly amazing. The ever-observant Walter Olson reports that UK financial institutions are now providing "matrimonial dispute loans" -- loaning money to a party in a pending divorce secured by the party's expected award or settlement from the party's soon-to-be-ex in the divorce. Inasmuch as the hedge funds cannot be far behind such a financial innovation, it's only a matter of time before the next reason touted for regulation of the hedgies is that they are promoting marital discord without appropriate oversight.

Posted by Tom at 4:46 AM | Comments (0) |

The securities fraud myth

Richard Booth is the Marbury Research Professor of Law at the University of Maryland School of Law. In this fine Washington Post op-ed (hat tip Ted Frank), Professor Booth explains that the US securities fraud litigation framework is fundamentally flawed in that investors collectively end up worse off as a result of securities litigation and that a coherent system would protect reasonable investors (that is, ones who diversify their portfolios) rather than unreasonable ones (betting the farm on one company):

For diversified investors who do happen to trade during the fraud period, there are no benefits from class action suits over the long haul. A diversified investor is equally likely to be on the winning side of a given trade as on the losing side. Indeed, diversified investors are net losers from class action because of the costs of litigation. So it is no wonder that an investor would need a little inducement to sue.

Undiversified investors may suffer significantly more harm from securities fraud, possibly losing thier entire investment. But it does not follow that an undiversified investor should have a remedy if they voluntarily assume the unnecessary risk that goes with failure to diversify. Through diversification, an investor can eliminate the risk that goes with investing in a single stock without any sacrifice of expected return. The only risk that remains is market risk.

Moreover, . . . it is so cheap and easy for investors to diversify that it is simply unnecessary for investors to take company-specific risk. Given that the fundamental goal of investing is to generate the greatest possible return at the lowest possible risk, it is irrational for an investor, not to diversify.

The Supreme Court has clearly stated that securities law should be interpreted consistent with the needs of reasonable investors. Plaintiff class members should thus be presumed to be diversified and such actions should be dismissed for lack of harm . . .

Meanwhile, in the face of such lucid analysis, chief NY Times securities regulation advocate Gretchen Morgenson contributes to this article that breathlessly reports that the SEC may be firing employees who take up the good fight of attempting to protect unsuspecting investors from those shady hedge funds. The notion that anyone who invests in a hedge fund in the first place should not be unsuspecting (and, thus, not in need of government protection) is noticeably absent from Ms. Morgenson's analysis.

Posted by Tom at 4:08 AM | Comments (0) |

June 27, 2006

Disparate results from overreaching prosecutions

Amidst a busy summer day, I pass along a rare and quick afternoon post on disparate results emanating earlier today from a couple of cases involving overreaching prosecutions of businesspeople.

First, Peter Lattman (here and here), Dave Hoffman and Ellen Podgor are doing standout instant analysis of U.S. District Judge Lewis Kaplan's opinion issued earlier today rapping the knuckles of the Department of Justice for threatening KPMG with indictment in the KPMG tax shelter case unless the firm shirked its policy of paying the defense costs of partners who were indicted for work performed in the course of the firm's tax shelter business (background posts here and here). As Professor Hoffman notes, Judge Kaplan is not ready to dismiss the indictment as the remedy for the prosecutorial abuse, so it appears that KPMG will be left holding the bag for the not insubstantial costs arising from the improper prosecutorial strongarming. That would not seem to be much of a deterrent for a prosecutor to engage in such tactics in the future, but maybe dismissal will be the remedy next time around when prosecutors engage in this sort of nonsense.

Meanwhile, following on this post from last week, the three former National Westminster Bank PLC bankers who Enron Task Force prosecutors are attempting to extradite to Houston to face criminal charges (previous posts here) lost their final appeal to halt or postpone the extradition as the European Court of Human Rights (ECHR) in Strasbourg rejected their request for a stay pending disposition of their appeal to that body. It is now likely that the NatWest Three will be extradited to Houston next month and detained in the Federal Detention Center in downtown Houston as they attempt to prepare for a trial in an unusually hostile environment.

You can bet that the Task Force's reliance on a treaty of tenuous applicability to extradite the NatWest Three to a holding cell in downtown Houston is being followed closely by business interests in the UK. Is this really the way we want the US criminal justice system to be perceived internationally?

Posted by Tom at 3:30 PM | Comments (0) |

Going nuclear

My sense is that Asheville Tourists manager Joe Mikulik suspects that Stros farmhand Koby Clemens is getting some favorable treatment from the umps that is normally reserved for his father:

Lexington's Koby Clemens -- whose famous father Roger made a tuneup start for the Legends this month after re-signing with the Houston Astros -- was leading off second base after hitting an RBI double when Asheville pitcher Brandon Durden tried to pick him off.

Umpire Andy Russell called Clemens safe, sending Mikulik roaring out of the dugout and setting off a prolonged tirade that he carried all over the infield and into the dugout.

That led to this:

Posted by Tom at 8:54 AM | Comments (0) |

An unintended consequence of Hurricane Katrina

Of all the consequences of Hurricane Katrina on the state of Louisiana, this NY Times article reports on one that I never expected:

State officials assumed that Louisiana's tax base had been battered by last year's hurricanes, but the latest figures show that the opposite occurred: more tax dollars than ever are pouring into the state's coffers as the budget year draws to an end.

The state predicted that tax collections would plunge by almost $900 million this year, and it slashed spending to match. Instead, a record $9.2 billion is on track to be collected by the time the budget year ends on June 30, and at least some of that tax flow looks as if it is likely to continue.

Part of the tax revenue boost has come from increased gambling at casinos and video poker machines located in the state, and higher energy prices has also helped increase tax and state royalty revenue. However, the biggest surge has come from sales taxes as hurricane victims have used federal aid and insurance proceeds to replace personal property. State officials estimate that the state will end up with almost a half-billion more in sales tax revenue than they expected before Katrina.

Meanwhile, the hulks of thousands of damaged cars remain under the highway overpasses of New Orleans as state and federal officials quibble over who will finance the cost of towing the scrap to landfills and scrapyards. And this NY Times article follows up on this earlier post regarding the "breathtaking fraud" that took place in regard to the federal aid that has flowed into the Gulf Coast after last summer's storms. So it goes in Louisiana.

Posted by Tom at 6:42 AM | Comments (0) |

And you think the Shell Houston Open has problems?

Heavy rains on the East Coast are making it difficult for the PGA Tour to complete this past weekend's Booz Allen Golf Tournament that is being played just outside Washington, D.C. on the Tournament Players Course at Avenel in Potomac, MD. But according to this Thomas Boswell/Washington Post article, the rain is the least of the tournament's problems:

Golf is the game of sportsmanship and proper manners, the sport that exemplifies respect for others. We even use it to teach values to kids, to instill the idea that conscience defines character.

So this is a week for golf -- at least the crass, ungrateful, traveling-circus PGA Tour version -- to hang its head in shame.

It's no accident that all of the world's four major championships are run by organizations other than the PGA Tour. The tour keeps pumping its own Players Championship to join the elite. But it'll never happen -- not as long as the tour humiliates itself, shows its true colors and drives itself down the scale of social respectability with disasters such as the one it is perpetrating in Washington this week.

Even a golf tournament deserves a decent burial. The funeral for the summer pro golf stop in Washington is being held at TPC Avenel this week. The PGA Tour didn't even have the decency to close the casket.

Geez, sort of makes the well-chronicled problems of the Shell Houston Open (see here, here and here) seem rather tame in comparison, eh?

By the way, given the fact that the problems with the Washington and Houston professional tournaments are not isolated, does anyone else have the feeling that the PGA Tour is heading for serious trouble?

Posted by Tom at 6:12 AM | Comments (0) |

Foreshadowing a key issue in the Lay-Skilling appeal

In a strong indication that he believes that the matter raises important appellate issues, U.S. District Judge Sim Lake issued this this 22-page opinion late last week in the criminal case of former key Enron executives Ken Lay and Jeff Skilling expanding on the reasons for his ruling during the trial (see here and here) denying Lay and Skilling's request that Judge Lake grant defense immunity to a half-dozen or so former Enron executives who Lay and Skilling believe would have provided exculpatory testimony for the defendants. Lay and Skilling contend that the Enron Task Force used the threat of indictment against those former executives and dozens of other former Enron executives to induce the witnesses to assert the Fifth Amendement against self-incrimination rather than provide exculpatory testimony for Lay and Skilling.

The Task Force's tactic of icing favorable witnesses for Lay and Skilling has been swirling around the case from the beginning. Lay and Skilling raised the issue prior to trial in regard to the Enron Task Force's alleged intimidation of witnesses (see here and here) and also on the key evidentiary issue in the trial (here and here). Then, Lay and Skilling raised the issue again during the trial as the defendants struggled to corroborate their testimony that key Task Force witnesses such as Ben Glisan and Andrew Fastow were lying when they testified that they had cautioned Lay and Skilling about Enron's shaky financial condition at various times when Lay and Skilling were making positive statements to the market regarding the company's finances.

In a key part of the ruling, Judge Lake explains his reasoning for denying Lay and Skilling's request for the Court to grant defense immunity to the proposed witnesses:

The testimony that defendants expect the proposed witnesses would provide may be relevant and exculpatory, but it falls far short of being essential exculpatory evidence for the simple reason that defendants do not — and cannot — argue that these are the only witnesses capable of providing exculpatory evidence on these issues. When defendants filed their motion to immunize the proposed witnesses both defendants had testified and their testimony contradicted the government’s evidence on these issues. At best, the anticipated testimony of [the witnesses] would be cumulative of the testimony of defendants and of other evidence presented by defendants. Accordingly, the court concludes that the defendants have failed to establish that the testimony that defendants seek to immunize would constitute essential exculpatory evidence.

This reasoning seems oddly superficial. Not only does it fail to address the fact that the Task Force's witness-icing strategy allowed the prosecution to use hearsay statements from alleged co-conspirators against the defendants, the reasoning ignores the important impact that corroborating testimony has in a criminal trial. Just as prosecution witnesses testifying under draconian plea deals have a powerful incentive to testify favorably for the prosecution, defendants asserting their innocence have a similar incentive to testify consistent with that position. Juries intuitively understand this dynamic, and thus often discount such testimony while placing more weight on the testimony of corroborating witnesses who are not subject to those pressures. That Judge Lake's opinion does not address that important impact of the Task Force's witness-icing strategy will almost certainly be a key point on the appeal of this issue.

By the way, the same prosecution witness-icing strategy that was used in Lay-Skilling case is already an issue in the the Nigerian Barge appeal and the Bernie Ebbers appeal. Inasmuch as a number of the convictions in the barge appeal already appear to be unraveling, the Fifth Circuit may even issue a ruling on the issue before the Lay-Skilling opinion arrives at the Fifth Circuit's doorstep.

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

June 26, 2006

Handling defeat

Although this NY Times article reports that Phil Mickelson is still having trouble getting over his 18th hole meltdown at last week's U.S. Open, this earlier Alan Snipnuck article gives us a taste of why Mickelson is currently one of the most popular U.S. sporting figures:

On Saturday, . . . evening [after a grueling 3rd round of the US Open], cordoned off behind the Winged Foot clubhouse, a jolly group of fans had gathered to get a glimpse of their heroes. Player after grumpy player stomped past, looking like they were trying to find a puppy to kick. None stopped to sign autographs.

At 7:30 p.m. Mickelson emerged behind the clubhouse, having endured 45 minutes of media obligations. It had already been a long, draining day. His caddie, Jim MacKay, was nursing sore feet, and had peeled off his shoes and socks to reveal shocking tan lines on his ankles. Mickelson's wife Amy was slumped against a clubhouse railing, occasionally checking her watch. The Mickelson escape car, a gray SUV, was idling nearby. But drawn by the chanting of his name, Phil jogged over to his adoring public. Not content to just scribble autographs, he began working the crowd with a giddy shtick.

A French cameraman got in Mickelson's face to record the scene, and hearing his accent, Phil said,"I love Paris. Tour d'Argent is my favorite restaurant in the world." When a fan asked Phil if he would be playing a tournament in France anytime soon, he stopped signing long enough to jiggle his ample midsection for effect. "I don't go to Paris to play golf," Mickelson said. "I go to eat. Obviously." The crowd spooned it up.

By this time, a pretty blonde had wiggled her way to the front row and was trying to engage Phil with some flirty banter. Mickelson finally asked her for her phone number . . . and then passed on the digits to a sportswriter hovering nearby, giving him a showy introduction. The scribe and the toothsome fan wound up making dinner plans on the spot, a hookup that brought smiles from the burly state troopers doing crowd control. . . . Phil signed three more, and then with a wave he jumped into his car and sped off. On the drive home he made a call to the writer on his cell phone, referring to himself as "pimp daddy" and asking for an update on the date.

On the other side of the popularity coin, this John Huggan/Scotsman article reports on why Colin Montgomerie remains one of the least popular professional golfers in the US:

There was one big difference between the other challengers and Monty, of course. While they managed to maintain the highest standard of etiquette during what turned out to be a traumatic afternoon for all concerned, the same cannot be said for our tartan hero.

Adding to his already lengthy list of crass and boorish behaviour over the years, Monty managed, in less than half an hour, to alienate the gallery around the 17th tee, make unwarranted physical contact with a New York state trooper and offend the United States Golf Association. This made three mean feats and no mean feat, if you know what I mean.

Witnessed first hand by two fellow Scots, Monty was disturbed by a child while over his drive on the 17th tee. After treating the youngster to one of his patented, prolonged glares, he missed the fairway, picked up his tee, walked a couple of paces, then - though he has since denied the following - viciously hurled the tee at his 'tormentor.' It missed, only just.

This provoked understandable outrage among many spectators. "That's why you don't get our support," yelled more than one.

The altercation with the trooper occurred as the officer escorted the Mickelson family to the 18th green for a prize-giving that Monty decided he could happily skip - hence the USGA's disappointment. At first, the incident was reported as a "shove" from Monty, later downgraded to a "collision", presumably when his agents, International Management Group, sent their spin-doctors into action. Sadly, some journalists, no matter what Monty gets up to on the course, are willing to forego their professional credibility, take on the role of apologists and downplay any controversy. It is amazing what the promise of some freelance work or a future exclusive interview will do.

Anyway, at least the now five-time runner-up in major championships did deign to stop for a brief post-round press conference, during which he admitted to "messing up". It's only a pity he was talking about that shot to the last green, and not his disgraceful treatment of an innocent child.

For Monty, growing up has always been hard to do.

Posted by Tom at 6:20 AM | Comments (0) |

Houston's gift to Botswana

Major W. Bradshaw has long been one of the talented physician-teachers that makes Houston Texas Medical Center such a fascinating place. Dr. Bradshaw came to Houston and the Baylor College of Medicine as an Assistant Professor of Medicine in 1972 to ramrod Baylor's development of expertise in microbiology and immunology. An outstanding teacher, Dr. Bradshaw was promoted to Dean of Education in 1996 and to Senior Vice-President and Dean of Medical Education in 2004. Now, while most contemporaries are planning their retirement, the Chronicle's Leigh Hopper reports that Dr. Bradshaw has other things in mind:

[After 30 years at Baylor], Bradshaw is making an unusual career move. He's heading to Botswana, a country in sub-Saharan Africa that is roughly the size of Texas.

Baylor is expected to announce this week that Bradshaw has accepted a job as interim founding dean at University of Botswana's medical school, the first such school in a country with one of the world's worst HIV rates. Next month, he and his wife move to Gaborone, Botswana's capital, leaving their home, their children and grandchildren for at least a year.

"It's pretty remarkable for (the University of Botswana) to have the sitting dean of education for the No. 10 medical school in the United States to all the sudden be their new founding dean," said Baylor College of Medicine President Peter Traber. "That's quite a recruitment."

Dr. Bradshaw's appointment is part of Baylor's affiliation agreement with the University of Botswana, which is starting the country's first medical school to address Botswana's critical health needs, including a high percentage of the population that is infected with the HIV virus. Under the leadership of Baylor pediatric professor Mark Kline, Baylor has already opened a treatment center for HIV-infected children in Botswana in 2003 as a part of Baylor's International Pediatric AIDS Initiative. What better legacy for a teacher such as Bradshaw -- who has had a major influence on one of America's finest medical schools -- than to contribute his talents to the creation of a medical teaching institution in a part of the world that needs it the most. Just another example of the magnificent influence that the professionals of Houston's remarkable Texas Medical Center are having throughout the world.

Posted by Tom at 5:37 AM | Comments (0) |

New York's regulation premium

This Landon Thomas/NY Sunday Times article is the definitive report to date on the status of New York aspiring governor Eliot Spitzer's lawsuit against former New York Stock Exchange chairman and CEO Richard Grasso (prior posts here) over Grasso's $140 million pension from the NYSE. In short, the NYSE board was quite involved in Grasso's compensation arrangements, although there is some question over how well the details of those arrangements were disclosed to the entire board. However, at the end of the day, the board members knew what they were doing, debated the merits of the package extensively and approved it. If this case were to be determined in accordance with the corporate case of the decade, then it would not even appear to be a close call -- Grasso and the NYSE board wins.

So, you ask, what's driving the lawsuit? Well, apart from the propaganda for Spitzer's political campaign, Thomas reports that the NYSE has already incurred in excess of $40 million in legal fees and costs in defending Grasso and the other board members in the lawsuit. Inasmuch as the cost of defending the lawsuit will likely increase substantially by the time the case is resolved through either trial or settlement, the defense cost will likely be at least half again as large as Grasso's pension itself. That cost is really just the regulation premium that firms should expect to pay if its board decisions on big ticket items do not pass muster with the Lord of Regulation. Can you imagine how high those regulation premiums will go when the Lord of Regulation is elevated to governor?

Posted by Tom at 4:43 AM | Comments (0) |

June 25, 2006

Thinking about performance-enhancing drugs

Mark Sisson is a Malibu-based former elite marathoner and triathlete who became well-known in athletic circles as an expert on drug testing for athletes while serving for 13 years as the anti-doping and drug-testing chairman of the International Triathlon Union and as the union's liaison to the International Olympic Committee. In this provocative letter to Art DeVany (previous posts here), Sisson talks about drug-testing for athletes and makes some rather startling observations:

At the risk of sounding a bit brazen, I would suggest to you and your audience that sport would be better off allowing athletes to make their own personal decisions regarding the use of so-called “banned substances” and leaving the federations and the IOC out of it entirely. (Even the term “banned substance” has a negative connotation, since most of these substances are actually drugs that were developed to enhance health in the general population). Bottom line: the whole notion of drug-testing in sports is far more complex than even the media make it out to be. [. . .]

The performance requirements set by the federations at the elite level of sport almost demand access to certain “banned substances” in order to assure the health and vitality of the athlete throughout his or her career and – more importantly – into his or her life after competition. . . . World class athletes tend to die significantly younger than you would predict from heart disease, cancer, diabetes and early-onset dementia. They also typically suffer premature joint deterioration from the years of pounding, and most endurance athletes look like hell from the years of oxidative damage that has overwhelmed their feeble antioxidant systems. Most people don’t realize it, but training at the elite level is actually the antithesis of a healthy lifestyle. The definition of peak fitness means that you are constantly at or near a state of physical breakdown. As a peak performer on a world stage, you have done more work than anyone else, but you have paid a price. It is again ironic that the professional leagues and the IOC -- the ones who dangle that carrot of millions of dollars in salary or gold-medalist endorsements -- are the same ones who actually created this overtrained, injured and beat-up army of young people. They don’t care. These organizations then deny the athletes the very same drugs and even some natural “health-enhancing” substances that the rest of society can easily receive whenever they feel the least bit uncomfortable. [. . .]

I believe that with proper supervision, athletes could be healthier and have longer careers (not to mention longer and more productive post-competition lives) using many of these “banned substances.” And perhaps the biggest assumption I will make here is that the public just doesn’t care. Professional sport has become theater. All the public wants is a good show and an occasional world record.

Read the whole letter. As noted earlier here with regard to Barry Bonds' use of steroids, management of professional sports has not done a good job of drawing the line with regard to what should constitute illegal use of drugs, on one hand, and legal performance-enhancing substances that are beneficial to the health of the athletes, on the other. As a result, the league rules (as well as our nation's laws) governing which substances are legal and illegal are often arbitrary and hypocritical. Indeed, professional sports teams (as well as their fans) often encourage their players to risk their health. Players who "play with pain" are the subject of adulation in all levels of sport, as are players who risk injury by running into walls, taking cortisone shots to be able to perform with reduced pain and undergoing risky surgeries to lessen pain in order to play in a big game (remember Curt Schilling in the 2004 World Series?). The difference between a professional athlete taking pain-reducing drugs to get through a season and another athlete using performance-enhancing drugs in an attempt to be more productive during a season is not as wide as it may appear at first glance.

Posted by Tom at 5:39 AM | Comments (4) |

June 24, 2006

Regulating the regulation

Houston-based -- er, . . I mean Bermuda-based, or is that Barbados-based? . . . -- Nabors Industries, Inc. is one of the world's largest drilling contractors. The company has nearly 600 land drilling rigs and more than 900 land workover and well-servicing rigs, and operates across the U.S. and in Africa, Canada, Central and South America, and the Middle East. Nabors' offshore equipment includes platform rigs, jack-ups, barge drilling rigs, and marine support vessels, and the company provides oil field hauling, maintenance, well logging, engineering and construction services. In short, Nabors is the type of oil field service company that exploration and production companies want to have competing for the business of drilling or providing other services for an oil or gas well at the lowest possible price.

One of the reasons that Nabors has been one of the most profitable oil field service companies over the past 20 years or so is that its management team is constantly searching for ways to make the company more profitable and valuable to its shareholders. So, in 2001, Nabors moved its tax headquarters to Bermuda and its legal headquarters to Barbados to lessen its American income taxes. The move has paid dividends for Nabors shareholders as the company paid only $6 million in U.S. income taxes last year on almost $430 million in profits, which would have generated over $80 million more in taxes if Nabors were based in the U.S. Several other big companies have done the same thing as Nabors.

So, given the competitive advantage that Nabors and other tax haven-based companies have over their American-based competitors, you would think that Congress might get the message and simply reduce the tax regulation that prompted such moves. But that would be too easy. Rather than addressing the cause, a fierce debate developed in Congress with demagogues from both parties promising voters to crack down on "Benedict Arnold companies" such as Nabors that move to tax havens to avoid paying U.S. income taxes.

As a result, Congress passed a law before the fall elections in 2002 that bars companies that moved their tax headquarters to tax havens from getting government contracts. However, in a classic example of American political disingenuousness, Congress quietly included a loophole in the law (probably drawn up between members of Congress and certain industry representatives over a power lunch) that allows American subsidiaries of the tax haven-based companies to bid on the government contracts. Thus, everyone was happy -- the demagogues in Congress got to tell voters that they passed a law against those dastardly Benedict Arnold companies while those companies were able to get around the law and get on with their business by simply bidding on the contracts through a subsidiary.

Now, as this NY Times article reports, Congress and Nabors are at it again. This time the problem for Nabors is the largely obsolescent national security portion of the 1920's Jones Act that provides that only American-built, owned and manned ships can move people and cargo between domestic ports. Again, the key word here is "American," which Nabors is technically not.

But wait. Nabors owns over 30 big ships with wide berths that ferry various heavy drilling equipment, supplies and people to various offshore drilling rigs. And, as you might expect, those vessels come in handy in the aftermath of storms such as Hurricanes Katrina and Rita which damaged a large part of the Gulf Coast drilling and production infrastructure last summer. But if Nabors' vessels aren't available to move equipment and cargo around between American ports, then the cost of repair of oil and gas facilities -- which has a direct impact on the cost of oil and gas products to you and me -- will be higher than it would otherwise be if Nabors could compete in the market and push the cost of such repairs down.

So, it would seem that the logical thing to do is for the politicos to strike another face-saving compromise that would allow their constituents to realize the benefit of the market having access to Nabors' assets while preserving the ruse of the Jones Act "protections." However, as with most things in Washington, it's not that easy. Now, Nabors' competitors have joined together to lobby against an exemption from the Jones Act for Nabors on the grounds that they should be allowed to benefit from the protectionist provisions of the Jones Act because Nabors has an unfair competitive advantage by virtue of not having to pay oppressive U.S. taxes. And just for good measure, Nabors' competitors throw in for demogogic appeal the bogeyman argument that all of the drilling companies will flee the U.S. to foreign countries unless the American companies are allowed to make more money than the market for their services would otherwise allow if companies such as Nabors were allowed to compete.

So, there you have it. A profitable company with assets that push prices lower is hampered from doing so through tax and related governmental regulation. In the meantime, those same governmental regulations are allowing other companies to charge higher prices in those markets that are ultimately passed on to you and me. The real problem is counterproductive corporate tax and related regulations, but condemning Benedict Arnold companies and decrying price gouging is certainly more entertaining.

Update: Congress continues to fiddle while Rome burns.

Posted by Tom at 10:00 AM | Comments (0) |

June 23, 2006

Anadarko's big deal

The Woodlands, Texas-based Anadarko Petroleum Corp. announced this morning (NY Times story here) that it has agreed to buy Kerr-McGee Corp. and Western Gas Resources Inc. in separate all-cash deals totaling $21.1 billion, plus the assumption of $2.2 billion in debt, in a deal that will create America's largest independent exploration and production company. The boards of each company have already approved the transaction, although Kerr-McGee shareholders and regulators must still approve the deals, which are expected to close by the end of the third quarter. Previous posts on Anadarko are here.

Gee, that's pretty big news in the old hometown.

Anadarko will pay about $16.4 billion, or $70.50 a share, in an all-cash deal for Kerr-McGee and assume debt and other liabilities estimated at $1.6 billion, which works out to pay a premium of about 40% to Kerr-McGee shareholders over Thursday's closing price of $50.30. Anadarko will also pay about $4.7 billion, or $61 a share, and assume about $560 million in debt for Western Gas, which translates to a premium of about 49% for Western shareholders over Western's closing price on Thursday of $40.91. The Kerr-McGee deal includes a right to match competing offers and a break-up fee of $493 million while Anadarko's agreement with Western Gas includes a right to match competing offers and a break-up fee of $154 million.

Anadarko will fund the entire deal with a $24 billion line of credit from UBS, Credit Suisse and Citigroup, and reasons that it expects to recover 3.8 billion barrels of oil equivalent from the acquired properties at less than $12 per barrel. Oil has traded near $70 per barrel for the past couple of months and Anadarko announced that will hedge 75% of the acquired production through late 2008.

Anadarko's bold play follows other huge acquisitions in the oil patch, such as last year's Chevron Corp. acquisition of Unocal Corp. for about $18 billion and ConocoPhillips' purchase of Burlington Resources for $36.5 billion while more conservative industry players such as Exxon Mobil Corp. have held tight and plowed their huge profits over the past couple of years into share buybacks.

Never a dull moment in the oil and gas business, eh?

Posted by Tom at 8:56 AM | Comments (0) |

How much did you say you wanted, honey?

Former Texas Southern and current New York Giants star defensive lineman Michael Strahan is discovering that they play for keeps in the divorce courts of New York City:

Michael Strahan's nasty divorce trial hit a new low yesterday - as his estranged wife suggested the Giants sack king and handsome married TV doctor Ian Smith are more than just friends.

After the couple's marriage collapsed, "Michael moved into Ian's one-bedroom apartment," Jean Strahan told reporters after another bruising day in divorce court.

"And you can say an alternative lifestyle sprouted," she added, though her lawyer stopped her before she could elaborate. [. . .]

Michael Strahan himself hinted at some controversy when he said in court that he wasn't sure whether one of his love letters was addressed to "Jean" or "John."

"I've been accused ..." Strahan, 34, quipped on the witness stand before cutting himself off in midsentence and flashing his gap-toothed smile.

Strahan's lawyer rejected any hint that there's anything more than a friendship between his client and Smith.

That's not all.

Posted by Tom at 5:54 AM | Comments (1) |

The sad case of Andrea Yates

While on the subject of Houston-based cases that are not reflecting well on the U.S. criminal justice system, the jury in the retrial of Andrea Yates -- the suburban Houston mother and housewife who drowned her five young children in a bathtub in 2001 -- was seated yesterday and opening arguments are scheduled to begin on Monday.

The Yates case is not Texas at its finest. Despite overwhelming medical evidence that Yates was severely mentally ill, suffering from post-partum depression and had been taken off the only medication that had ever helped her when she killed her children, the State of Texas still wants to put Yates in prison instead of a mental health facility for the rest of her life. Not surprisingly, prosecutors have never been able to offer any motive -- much less a reasonable explanation -- for why an otherwise attentive and loving mother would suddenly go nuclear on her young children and kill them.

But it gets worse. The state is retrying this case despite the fact that Yates' first trial ended in a conviction that was subsequently overturned because the lead prosecution expert witness made the dubious link between Yates and an episode of the television show Law and Order in which a mother drowns her child. Now, it's bad enough that State District Judge Belinda Hill ever allowed the jury to hear an expert make such a questionable reference to in the first place, but what's worse is that the episode that the expert referred to was never even broadcast!

Moreover, it's not as if this trial of Yates even involves the issue of incarceration versus freedom -- even if successful, Yates' insanity defense would result in her assignment to a secured psychiatric hospital, probably for the remainder of her life. And, from the looks of it, the prosecution and Judge Hill do not appear to be acting any more responsibly in the second Yates trial than they did in the first one. Last week, Judge Hill granted an inhumane prosecution request that Yates be incarcerated in prison during the retrial rather than in a mental health facility.

In short, despite the fact that there is no meaningful dispute regarding the nature and depth of Yates' mental illness, the State insists upon punishing this feeble and tormented woman by imprisoning her for the rest of her life. Such a lack of prosecutorial discretion leaves a serious black mark on the Harris County District Attorney's Office and the State of Texas criminal justice system, and it is not one that is easily erased.

Posted by Tom at 5:09 AM | Comments (1) |

The clock is ticking on the NatWest Three

As noted in these earlier posts, the Enron Task Force's prosecution of three former National Westminster Bank PLC bankers has raised a political firestorm in the United Kingdom, where the Task Force is attempting to use the 2003 Extradition Treaty signed with the US in the wake of the 9/11 attacks on New York and Washington, D.C. as the basis of extraditing the three former bankers to Houston to stand trial for allegedly bilking their former employer of $7.3 million in one of the schemes allegedly engineered by former Enron CFO Andrew Fastow and his right hand man, Michael Kopper.

According to this article from the Independent, the House of Lords refused on Wednesday to hear the NatWest Three's challenge to the UK's extradition treaty with the US, leaving the former bankers with only six days in which to appeal to the European Court of Human Rights in an attempt to avoid extradition to Houston. If extradited to Houston, the NatWest Three likely will face incarceration in the Federal Detention Center pending a trial in an unfriendly environment that could send each of them to prison for over 20 years.

As noted in the prior posts, the NatWest Three are contending that the treaty that is the basis for the proposed extradition is unfairly slanted because the U.S. has not yet ratified the treaty while it is already being implemented in the U.K. Under the treaty, the U.S. government is no longer required to present a prima facie case against the former bankers and the Department of Justice may continue to challenge the evidence put forward in extradition requests while U.K. citizens who are subject to U.S. extradition requests have have no such parallel right. Moreover, the NatWest Three point out that U.K. authorities have already investigated the matter and declined to pursue charges against the former bankers, and that the U.S. culture regarding Enron almost assures a conviction while, at worst, the three would be be facing either fines and light prison sentences if the case were prosecuted in the U.K.

However, the most damaging aspect of the NatWest Three case is the portrayal of the U.S. justice system in the U.K. and internationally as a wild frontier with no respect for due process of law. That portrayal is a natural byproduct of the criminalization of business mindset that elevates propaganda campaigns and prosecutorial misconduct over proof of criminal charges in a court of law. Little wonder that the already high price of asserting innocence of business crimes in the U.S. justice system continues to rise.

Posted by Tom at 4:24 AM | Comments (0) |

June 22, 2006

The remarkable Mr. Ogilvy

Somewhat lost amidst Phil Mickelson, Colin Montgomerie and Jim Furyk's train-wrecks at the final hole of last weekend's U.S. Open is the fact that Geoff Ogilvy, the winner of the tournament, is a quite interesting fellow and one of the rising stars on the PGA Tour.

As John Huggan observes in this excellent interview of the 29 year-old Austrailian, "Ogilvy has the potential to be just the sort of wise, high-profile spokesman the professional game needs if it is to rescue itself from the technological black hole into which it is currently headed." For example, Huggan provides the following analysis from Ogilvy on the state of the modern game:

Two important aspects of golf have gone in completely the wrong direction. Most things are fine. Greens are generally better, for example. But the whole point of golf has been lost. Ben Hogan said it best. His thing was that you don't measure a good drive by how far it goes; you analyse its quality by its position relative to the next target. That doesn't exist in golf any more.

The biggest problem today is tournament organisers trying to create a winning score. When did low scores become bad? At what point did the quality of your course become dependent on its difficulty? That was when golf lost the plot. The winning score should be dictated by the weather.

The other thing is course set up. Especially in America there is too much rough and greens are way too soft. Then, when low scores become commonplace, they think how to make courses harder. So they grow even more long grass.

But that misses the point. There is no real defence against a soft green. Today's players with today's wedges can stop the ball from anywhere. The angle of attack and the shape of the shot mean nothing. It doesn't matter where you hit it as long as it is between the out of bounds stakes or between the trees. And so the game becomes a one-dimensional test of execution, time after time after time.

And, as usual in matters pertaining to golf, there is a Houston connection to Ogilvy's win at the U.S. Open. As you can see from the picture of Ogilvy's swing above, Ogilvy has what is referred to in golf swing circles as a "one-plane swing," while each of his main competitors in the U.S. Open -- Mickelson, Montgomerie and Furyk -- all use "two-plane swings" (Furyk's idiosyncratic swing might be more like six planes). As noted in this earlier post, long-time Houston golf teaching pro Jim Hardy authored a ground-breaking golf swing instructional book last year that differentiated the one plane and two plane swings and explained that key principles of the two swings are much different. Although Hardy teaches both types of swing in his book, he prefers the one-plane swing for better players because it has fewer moving parts than the two-plane swing and, thus, is less dependent on timing and more consistent under the intense pressure of tournament golf. No better example of that observation could have been provided than the final hole of last weekend's U.S. Open, where Ogilvy's swing held up brilliantly while both Mickelson and Montgomerie's swings broke down under the intense pressure of the moment.

Finally, you know that Ogilvy has finally arrived when he is the subject of David Letterman's Top Ten List "Top Ten Things That Went Through Geoff Ogilvy's Mind After Winning The U.S. Open." My favorite is no. 10: "This is one of those things you never forget, like seeing John Daly in the locker room naked."

Posted by Tom at 5:41 AM | Comments (0) |

Owls hit a bump in the road

The Rice Owls quest for a second NCAA baseball championship took a detour Wednesday night as the Oregon State Beavers used a career-performance from young starter Daniel Turpen -- who had only started one prior game all season -- to defeat the Owls 5-0 and set up another game with the Owls this evening to determine which team will face North Carolina in the best-of-three championship series that begins on Saturday night in Omaha.

As noted earlier here, winning the College World Series is usually all about pitching depth, and so Wednesday's loss provides a clear advantage to North Carolina in the championship series. Regardless of whether Carolina faces Rice or Oregon State, the Tarheels will have the better-rested pitching staff for the championship series. On the other hand, both Rice and Oregon State will use their aces in tonight's elimination game (television by ESPN2) -- Rice's Eddie Degerman and Oregon State's Dallas Buck -- which will effectively limit their availability in the championship series.

One concern for Rice coach Wayne Graham is that the Owls' bats have suddenly gone quiet in Omaha. One of the best hitting teams in college baseball, the Owls have now gone 14 straight innings without a run. If that trend doesn't change, the Owls will likely submit to the old baseball adage "when you don't hit, you sit."

Update: Baseball can be such a cruel game. After mashing the ball for virtually the entire season, the Owls' bats remain asleep as they lose the elimination game to OSU, 2-0.

Posted by Tom at 5:10 AM | Comments (2) |

Olis resentencing hearing finally scheduled

Red Redding, Morgan Freeman's character in The Shawshank Redemption, commented that "prison time is slow time" and that "prison life consists of routine, and then more routine." Those observations are certainly true in regard to the resentencing of Jamie Olis.

The Fifth Circuit Court of Appeals set aside Olis' original 24+ year sentence on October 31, 2005. Since that time, Olis has spent most of his time in a small prison cell in the Federal Detention Center in downtown Houston waiting to be resentenced as the prosecution engaged in a series of delaying tactics over most of the past year relating to its new expert report on the key issue in Olis' resentencing -- the alleged market loss attributable to the criminal acts for which Olis was convicted. Finally, yesterday afternoon, U.S. District Judge Sim Lake scheduled Olis' resentencing hearing for September 12, 2006, almost 11 full months after the Fifth Circuit ordered it.

Although the Olis court docket indicates that the prosecution has still not filed its new expert report on the market loss issue, my sense is that some form of it has been provided to the Olis defense team because Judge Lake ordered Olis to respond to the prosecution's report by August 18 and for the prosecution to file any reply by September 1.

Meanwhile, the sad case of Jamie Olis remains a stark reminder of the injustice that is inevitable when the state is allowed to use its overwhelming prosecutorial power to regulate corporate agency costs.

Posted by Tom at 4:19 AM | Comments (0) |

June 21, 2006

NY stabbing victim comes home

In the good news department, Houstonian Christopher McCarthy, who was repeatedly stabbed in a shockingly random assault on a New York City subway a week ago, was released yesterday from a New York City hospital and is on his way back home to Houston. The man who assaulted McCarthy and several other subway travelers over a 12-hour period was later apprehended by NYC police.

Upon leaving the hospital, the classy 21 year-old McCarthy thanked New Yorkers for their kindness to his family and him, and expressed forgiveness for the man who attacked him. Welcome home, Chris.

Posted by Tom at 6:24 AM | Comments (0) |

The city that time forgot

On the heels of articles noted in earlier posts here and here, the New York Times continues its excellent series on the enormous difficulties involved in the rebuilding of New Orleans with this article that reports on the city's strained public health system, which is attempting to cope with such things as a suicide rate that is three times higher than the pre-Hurricane Katrina rate. The article sums up the dreadful situation:

This is a city where thousands of people are living amid ruins that stretch for miles on end, where the vibrancy of life can be found only along the slivers of land next to the Mississippi. Garbage is piled up, the crime rate has soared, and as of Tuesday the National Guard and the state police were back in the city, patrolling streets that the Police Department has admitted it cannot handle on its own. The reminders of death are everywhere, and the emotional toll is now becoming clear.

Speaking of Hurricane Katrina, the Sun-Herald.com has compiled this extraordinary webpage that contains hundreds of "before and after" photographs of structures and landmarks affected by the storm. It's well worth taking a few minutes to peruse the pictures and contemplate the enormity of the destruction facing the Mississippi-Louisiana Gulf Coast region.

Posted by Tom at 6:02 AM | Comments (0) |

Rather leaves CBS; Chung leaves asylum

Former Houstonian Dan Rather's mercurial 44-year career at CBS News came to an end yesterday. The departure had been long anticipated after he stepped down as "CBS Evening News" anchor last year in the wake of a scandal over a report about President Bush's Vietnam-era military service. Rather pulled no punches in publicly stating the reason for his resignation from CBS News: "[A]fter a protracted struggle, [CBS News] had not lived up to their obligation to allow me to do substantive work there." The 74 year-old Rather is currently negotiating a deal to handle a weekly news program for Mark Cuban's HDNet cable channel.

Meanwhile, on a less significant note, Rather's former co-anchor at CBS News, Connie Chung, just had her dreadful show -- "Weekend with Connie and Maury," the MSNBC show with Chung and her husband, Maury Povich -- mercifully terminated, but not before Chung gave this "Thanks for the Memories" musical number in farewell. Suffice it to say that I hope never to be caught in a karaoke bar with Chung.

Posted by Tom at 5:10 AM | Comments (1) |

June 20, 2006

So far, so good

The Rice Owls are off to a good start in the 2006 College World Series, winning their first two games over Georgia (6-4) and yesterday over Miami (3-2). In so doing, the Owls avoided the dreaded loser bracket task of having to win three games in three straight days just to have the opportunity to play in the best-of-three championship series that begins on Saturday evening. North Carolina is the only other team in the CWS with two wins and no losses, so the Owls and Carolina are currently the favorites to proceed to the championship series.

The Owls' next game is on Wednesday at 7 p.m. (television by ESPN2) against the winner of today's Miami-Oregon State game and, if the Owls win that one, then they proceed to the first game of the championship series on Saturday evening. If the Owls lose tomorrow's game, then they play the winner of that game again on Thursday night at 7 p.m. for the right to play in the championship series. Consequently, a win in tomorrow's game would be huge for the Owls, who would then be able to preserve key pitching depth for the championship series while avoiding another pre-championship series game on Thursday. Baseball America's continually updated bracket is here and Baseball America's excellent CWS page is here, along with Aaron Fitt and Will Kimmey's blog on the CWS.

By the way, this NY Times article from over the weekend will be of interest to those who follow the Rice baseball program. The article chronicles the surgeries that each of the three top pitchers from Rice's 2003 NCAA Championship Baseball team have undergone during the initial stages of their professional careers.

Posted by Tom at 6:25 AM | Comments (1) |

The sad state of New Orleans

On the heels of this report that New Orleans has lost over 60% of its population since Hurricane Katrina last summer, this NY Times article reports that, despite billions of dollars in federal aid that is available, local New Orleans governmental officials cannot even agree on whether a government plan to faciliate the rebuilding of New Orleans is even being prepared, much less when such a plan will be issued.

Then yesterday, after a weekend of grisly violence, New Orleans Mayor C. Ray Nagin admitted that New Orleans police could not control the city's crime problems and requested that the state send National Guard troops to help patrol the streets of New Orleans.

Meanwhile, amidst such dire problems, enormous resources are being expended on the civic largesse of supporting the city's National League Football team.

What a mess.

Posted by Tom at 6:04 AM | Comments (0) |

More guilty pleas in gas trading-price reporting cases

Three former natural gas traders pleaded guilty yesterday in San Francisco to conspiracy to manipulate the price of natural gas in interstate commerce in connection with criminal cases that are the same as federal prosecutors have pursued in Houston against former local traders. This previous post contains information on the Houston cases.

The three former traders admitted in their plea agreements that they conspired to report fictitious trades to Inside FERC, a natural gas industry newsletter, from roughly July 1, 2000 through Nov. 1, 2000 in an attempt to manipulate the published index prices of natural gas in the direction that would benefit their companies -- Atlanta-based Mirant and Cincinnati-based Cinergy -- natural gas positions in the market at the time. All three defendants entered into cooperation agreements with the Department of Justice and face up to five years in prison.

The guilty pleas resolve three more of over a dozen cases that the Justice Department has been pursuing in San Francisco and Houston in regard to alleged manipulation of natural gas trading indexes, which are used to value billions of dollars in gas contracts and derivatives. Industry publications such as Inside FERC use data from traders to calculate the index price of natural gas, which affects the level of profits that traders can generate. However, in each of these cases, it remains unclear in what context the allegedly false information was transmitted or whether the publication even used any false information. The government's theory of criminal liability is that it needs only to prove that fake trades were reported to the publications and not that the trades were actually published or affected the markets.

Most of the traders charged in these cases have pled guilty under cooperation agreements with the DOJ, but several others are fighting the charges and currently awaiting trial, including former Dynegy trader Michelle Valencia and former El Paso trader Greg Singleton. Jury selection in the case against Valencia and Singleton is currently scheduled to begin on July 5, 2006 at 9 a.m. in U.S. District Judge Nancy F. Atlas' court in Houston.

Posted by Tom at 5:17 AM | Comments (0) |

June 19, 2006

Have you heard about Dwayne Wade?

Inasmuch as I'm somewhat ambivalent about the Houston Rockets, I tend not to follow the NBA Playoffs all that closely.

However, even while not following the playoffs closely, it's a bit hard not to realize that Dwayne Wade is something special.

If you haven't heard, after losing the first two games of the best-of-seven series, Wade has now led the Miami Heat to a 3-2 series lead over the Mavericks as the series shifts back to Dallas for the sixth game and, if necessary, the seventh.

Posted by Tom at 10:02 AM | Comments (0) |

Dan Jenkins on professional golf and growing up in Texas

Although it was mildly interesting to watch Phil Mickelson, Jim Furyk and Colin Montgomerie's choking competition yesterday afternoon that handed the U.S. Open title to Geoff Ogilvy on an absurdly tricked-up Winged Foot Golf Club West Course, this Anthony Cotton/Denver Post interview of Clear Thinkers favorite Dan Jenkins is far more entertaining. Among Jenkins' gems are the following:

Q: Do you like professional golf now?

I like the majors. I don't care about the rest of it. It's boring. If you take away Tiger (Woods) and Phil (Mickelson), there's nothing. They're the only two superstars out there right now. There's no set decoration like there used to be, no 12, or 13 or 14 guys. It's just a bunch of people you don't care about. God forbid Tiger and Phil get hit by a truck, because I don't know what they'd have left. . .

Maybe it's just me, but I'm hearing [from] other people who don't care either. That's the best thing that's happened to the LPGA. Everybody likes Michelle Wie and Paula Creamer and all of them. You've got to have glamour, you've got to have excitement in any sport. This is the worst period in (men's) golf I've ever seen, in all of the thousands of years that I've been out here. [. . .]

I hate what equipment has done to the game. I'm old-fashioned. I just think style and technique should be more important than driving it 350 yards, making a putt and "See you on the next tee." That's what the tour game has become because of equipment. It makes great old courses outdated. You can't have a U.S. Open anymore without an extra course to store all the hospitality tents. I used to be able to drive up to the clubhouse and park like the players. Now, there are seven corporate hospitality guys who have my spot and I'm on a bus.

Q: You're so closely associated now with golf, but you have done a lot of the NFL and other sports.

My favorite sport, frankly, is college football. I'm a college football junkie, even though I'm associated with golf and like golf and have played it all my life. . . Golf and football are the two things I've covered all my life and the things I grew up with. If you didn't like football growing up in Texas, they just drowned you.

Read the entire interview. By the way, while on the U.S. Open, did anyone else notice that David Duval finished 11th in the tournament? Also, as you are placing Mickelson, et al's collapses yesterday in perspective, don't miss Johnny Miller's classic Golf Digest piece on choking and this play-by-play rendition of Miller's analysis of Mickelson's decision-making over the disastrous last two holes of the tournament.

Posted by Tom at 6:26 AM | Comments (0) |

Remember the space shuttle?

Although seemingly already mothballed, NASA chief administrator Michael Griffin announced late last week that NASA will launch the space shuttle Discovery as planned on July 1. It will be only the second shuttle flight since the shuttle Columbia disintegrated over north Texas on February 1, 2003 during re-entry into the Earth's atmosphere.

As noted earlier here, Griffin proposed the shelving of the space shuttle program by 2010 even before he became NASA's chief administrator, and the latest mission will be the first of about 15 more flights between now and that projected cut-off date. The purpose of most of those missions is to continue construction and maintenance on the International Space Station and service the Hubble Space Telescope.

The Chronicle's Eric Berger -- who, by the way, is the best science blogger around -- speculates here that Griffin's patience for the space shuttle program is scant and that the upcoming Discovery mission is a "make or break" mission for the program. Consequently, if problems arise during any of the next few shuttle flights, then don't be surprised when Griffin terminates the remaining shuttle flights and moves on. As noted earlier here, it's time.

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

Understanding the next business scandal

Covering local business scandals and all, there has not been much time to address certain regulators and media members' attempts to make the apparent widespread practice of backdating stock options (see this WSJ ($) chart of companies that engaged in the practice) as the next reason to bash business interests.

Inasmuch as the practice is really just another method of providing compensation to corporate executives, the issues surrounding the practice appear to be relatively straightforward -- whether the options were properly disclosed (if so, then no big deal; if not, then that's bad) and whether companies properly accounted for them. Clear thinkers favorite Stephen Bainbridge agrees while breaking down the issues pertaining to backdating options in this TCS Daily op-ed (blog post here):

It's the lack of disclosure that's the real problem with backdated options. Under tax regulations and stock exchange listing standards, shareholders generally must approve stock option plans. When soliciting shareholder approval of such plans, corporations tell the shareholders that the options issued pursuant to it will be issued with a strike price equal to the market price on the day issued. Backdating options breaks that promise and thus constitutes securities fraud. [. . .]

[But] . . . there's nothing inherently wrong with paying bonuses by even backdating an option contract, so long as proper corporate procedures were followed and the grant does not amount to a waste of corporate assets, . . .

[Thus,] the answer to backdating options is to be found in Louis Brandeis' famous aphorism that "Sunlight is said to be the best of disinfectants; electric light the most efficient policeman."

But even such a lucid analysis cannot stem the mining of claims against companies that attempted to maximize potential compensation through its option grants. As this NY Times article notes, it was standard practice during the 1990's for many tech companies -- including Microsoft -- to grant options at the time at which the company's stock price was the lowest for the year or at the lowest price in the 30 days after a new employee joined the company. In Microsoft's case, that meant granting options at the stock price's low price in July, when apparently everyone at the company was on vacation and not tending to the stock price. By the way, Microsoft disclosed and discontinued the practice in 1999 when it took a charge against earnings for the practice.

End of the story? Apparently not. Regulators and plaintiff's attorneys are already speculating that the practice created a perverse incentive for corporate executives to breach their duties to their company by allowing the company's stock price to decline during a certain time of the year when the option price was set or in the 30 days following the hire of a particularly important new executive. That dubious notion is already prompting Larry Ribstein to grab for the Advil:

This brought to mind the image of Microsoft executives mismanaging the company every July. "It's July," they must have been saying. "Time to write some bad code." I think I must have gotten some of that July software, sort of like Monday cars.

On the other hand, we've also heard a lot about executives driving the stock price up so they could cash in on their options. So maybe every July they just let the stock price do whatever it wanted to do.

On the third hand, remember that the big problem during this period was that everybody thought MS was making too much money, and getting the antitrust folks in on the act. So maybe MS was trying to get its executives to do a little worse so the company wouldn’t make so much damn money. At least in July.

On the fourth hand, given MS’s stellar stock performance during that period, giving executives the lowest July price would increase the payoffs, and therefore maybe the incentives, for exercises after price was fixed. So maybe some of that November software was enough better than the July software that it all balances out.

By now I've got a headache with these incentives.

Recoiling, Professor Ribstein zeroes in on the morality play that is really shaping up here:

But it might not be about incentives after all. It might be that it’s just not “fair” that executives get to, in a way, pick their price when the rest of us are stuck with fate. In fact, it's not fair that some people got to work for Microsoft in the 90s when the rest of us were teaching, or something.

Whatever the reasoning, I hope that our regulators understand that, although executive compensation is not perfect, regulating in response to every newsworthy imperfection is not going to make it better.

And, as if on cue, this Gretchen Morgenson/NY Times column ($) is the basis for this Professor Ribstein post explaining that, for certain media members and regulators, it's really not about the practice of backdating options at all -- it's really about the filthy amount of money that some executives make from them.

Posted by Tom at 4:43 AM | Comments (0) |

June 18, 2006

This is a compromise on the Wright Amendment?

These previous posts have examined the hopelessly obsolescent Wright Amendment, which protects DFW Airport and its main airline -- American -- from competition that is beneficial to consumers by restricting Southwest Airlines and other discount carriers from flying passengers from Dallas' more consumer-convenient Love Field to most states. Despite the absurdly anti-competive and anti-consumer nature of the Wright Amendment, American has done a good job of lining up powerful politicians on both sides of the aisle to oppose repeal of the outmoded law. As this Ft. Worth Star-Telegram article reports, American's lobbying efforts appear to have paid off.

Rather than an outright repeal -- or at least a reasonable phase-out -- of the Wright Amendment, politicians and airline officials met Friday at DFW to talk about a "compromise" that would delay long-haul flights into Love Field for at least eight more years. This proposal flies in the face of the latest positive news from the exemption of a state from the Wright Amendment -- since Missouri was exempted from the Amendment in November and Southwest started flying directly from Love Field to St. Louis and Kansas City, airfares have decreased dramatically and passenger traffic to those cities increased by almost 45% percent in the first two months. But rather than passing along this obvious benefit to citizens wanting to travel to other locales, our politicians are talking about forcing consumers to wait until almost 2015 to enjoy this benefit of competition.

I can hardly wait to hear the rationalizations for that one. One benefit of publicity over the Wright Amendment is that it provides a clear view regarding the leadership qualities of Texas politicians. Although American has bought support of the Wright Amendment from both sides of the political aisle, it is interesting that most of the Amendment's supporters are Republicans, which is supposedly the pro-business and pro-competition party. So much for such myths.

Update: Mitch Schnurman has further analysis on the the skinny on the compromise, including Southwest's conclusion that GOP Rep. Joe Barton would have bottled up an outright repeal of the Wright Amendment.

Posted by Tom at 8:00 AM | Comments (0) |

June 17, 2006

The Lord of Regulation flunks geography

According to this NY Times article, Eliot Spitzer needs to bone up a bit on his western New York geography.

Posted by Tom at 11:27 AM | Comments (0) |

Skilling talks

In his first meaningful public comment since being convicted on 19 criminal charges, former Enron CEO Jeff Skilling agreed to this Wall Street Journal ($)/John Emshwiller interview in which he concedes, among other things, that his decision to testify before the SEC in the aftermath of Enron's collapse into bankruptcy provided prosecutors with the information (particularly Photofete) that they were able to use to undermine his credibility with the jury during his trial.

Inasmuch as Skilling made his decision to testify in front of the SEC and Congress against the advice of his counsel, one of the many legal ramifications of Lay-Skilling trial is that any future corporate executive confronted with a criminal investigation into his company's business will almost certainly assert the Fifth Amendment privilege in connection with any investigation and decline to provide the executive's perspective about what happened at the company. Thus, the prosecution's use of Skilling's bad memory about Photofete and his attempted Sept. 6, 2001 Enron stock sale reinforced a perverse incentive for business executives -- if an executive declines to assist in determining what really caused the business failure of the executive's company, then the chance of the executive being successful in what Larry Ribstein calls the lottery of corporate criminal trials improves. Some public policy, eh?

Meanwhile, WaPo's Carrie Johnson reports on Skilling's attempt to use a portion of the $60 million or so that the prosecution has frozen in connection with the criminal charges against him to pay his defense firm. By my estimate, the Lay-Skilling defense teams have now incurred a total of over $100 million in defending the charges against the two former executives. In the great waste of criminalizing corporate agency costs, the price of asserting innocence continues to increase.

By the way, Skilling and Lay's sentencing hearing has been postponed for six weeks to October 23.

Posted by Tom at 4:20 AM | Comments (0) |

June 16, 2006

The exclusionary rule takes a serious hit

In one of first concrete signs of the erosion of limits on governmental misconduct toward U.S. citizens, this NY Times article reports on yesterday's controversial 5-4 U.S. Supreme Court decision in the Michigan "knock-and-announce" case, which raises troubling new issues about whether the "exclusionary rule" will survive the Roberts Court for constitutional violations by police, including Fourth Amendment violations of searching citizens' homes and seizing their property. A copy of the decision is here, and the SCOTUS blog has a good analysis of the Supreme Court's opinion here.

Make no mistake about it, the Supreme Court's decision is a full-blown attack on the traditional remedies for ensuring civil liberties in America. The decision clearly indicates that that Justice Scalia is intending a significant revision or casting aside of the exclusionary rule as a remedy for illegal governmental police conduct, perhaps best reflected by the opinion's naive trust placed in police officers to ensure Constitutional protections. Particularly troubling to me is Justice Scalia's dismissive attitude toward the "knock-and-announce" rule, not the least of which are the understandable terror and fear involved in having one's door beaten down in the middle of the night by armed and masked men, the disturbing predicament that a homeowner confronts in deciding whether the intruders are criminals or police and the fact that the high emotion of such a situation can lead police to make horrifying misinterpretations of harmless gestures, which often result in tragic consequences. Justice Scalia gallingly ignores those valid reasons for the knock-and-announce rule by contending that the reasoning behind the rule is simply "the right not to be intruded upon in one's nightclothes."

Yeah, right. Orin Kerr places the positive face on the decision here, while Cato's Mark Moller and Grits for Breakfast's Scott Henson echo my more ominous view of the decision.

Posted by Tom at 7:14 AM | Comments (0) |

Rumblings at Dell

Things are not looking all that rosy these days at Austin-based computer powerhouse, Dell, Inc. While competitor Hewlett-Packard, Inc. is undergoing a revival of sorts, Dell's revenue growth has slowed considerably and profits have fallen. Not surprisingly, Dell's share price has steadily declined to around $25, a loss of about 40% in less than a year. Long gone are the heady days of the company's $60 share price in 2000.

Noting these problems, this NY Times article provides a good overview of Dell CEO Kevin B. Rollins' plan to reverse the downward trend at Dell. The seriousness of Dell's problems is perhaps best reflected by the fact that the company is questioning virtually everything in its business model, including the possibility of breaking its longtime exclusive alliance with major chip supplier, Intel. As the story notes, it's far from clear whether even Rollins' plan will revive Dell's dominance in the notoriously competitive PC manufacturing industry, so stay tuned.

Posted by Tom at 6:14 AM | Comments (0) |

Checking in on the MARS platform

One of the enduring images of the catastrophic damage that last summer's hurricanes inflicted on Gulf Coast oil and gas production facilities was the picture to the left of Royal Dutch Shell PLC's MARS floating production platform (previous posts here and here), which was badly damaged by Hurricane Katrina. As this Washington Post article reports, Shell has finished repairing the huge platform, just in time for this year's hurricane season. The article goes on to provide a handy overview of the importance of the Gulf Coast oil and gas infrastructure for meeting the nation's energy needs and the efforts to bolster the ability of that infrastructure to weather the severe storms of hurricane season.

Despite the massive repairs, the main improvement in the MARS platform to protect it from another severe storm is decidedly low-tech -- stronger and twice as many clamps to hold the drilling rig to the platform. Those clamps work against vertical and horizontal forces and, during Katrina's category 4-5 winds (the storm hit shore as a strong cat 3 storm), three inch steel bolts holding the previous clamps were sheared straight through. Although the old clamps had survived many storms, Shell engineers believe that the new ones will work even better.

Posted by Tom at 5:43 AM | Comments (0) |

The talented Mr. Graham

As noted earlier here, Houston has become the amateur baseball hotbed of America over the past decade, and no person is more responsible for that development than the coach of Rice University's fine baseball program, the remarkable Wayne Graham.

Coach Graham was already a local coaching legend in local circles when he took over the Rice program 15 years ago. Already an accomplished high school and junior college baseball coach (he developed such players as Roger Clemens and Andy Pettitte at San Jacinto Junior College amidst the petrochemical plants on Houston's southeast side), Coach Graham was 55 when he took the Rice coaching position, which was his dream job. Under Graham, Rice has won 11 conference championships in a row, gone to 12 NCAA regional tournaments and six Super Regional tournaments, and -- with this year's team -- have five appearances in the College World Series. Rice's 2003 NCAA National Championship in baseball was the school's first team national championship in any sport, an achievement made all the more incredible given Rice's high academic requirements and relatively small enrollment (less than 3,000 undergraduates).

Graham is now 70, but his real age is closer to 50 because of a rigorous workout regimen and a healthy diet. Thus, he has no intention of slowing down and, as this excellent David Barron/Houston Chronicle profile reports, don't be surprised if Graham is still coaching the Owls at the age of 80. Although Barron's profile captures the special nature of Graham well, this related Barron article passes along my favorite anecdote about Graham, which involves happy-go-lucky Stros star, Lance Berkman, who played for the notoriously no-nonsense Graham at Rice during the mid-1990's:

Berkman, meanwhile, is to Graham what Yogi Berra was to [legendary New York Yankees manager Casey Stengel] — certainly one of his best players, clearly one of his favorites (a picture of Graham, [Rice Athletic Director Bobby] May and Berkman dominates one wall of Graham's office at Reckling Park) and undoubtedly his most reliable source of unintended mirth.

Take, for example, the time against TCU when Berkman tried to track down a ball that came to rest inside a plastic bag in a pile of debris in the left-field corner.

Berkman managed to shake the ball out of the bag, but as he tried to relay the ball back into the infield, the wind blew the bag into the path of Berkman's throw. The ball made it about 10 feet, and the TCU batter had an inside the park homer.

"He (Graham) jumped out of the dugout and ran down the left-field line and told me I was the worst outfielder he's ever seen and turned around and ran back to the dugout as I'm trying to extract myself from a chain link fence that I had slid into trying to make the play," Berkman said. "But he never said another word about it."

"I still can't believe it," Graham said, shaking his head at the memory. "How does something like that happen?"

Read both of Barron's fine pieces about Graham, another of the many remarkable people who make Houston such a fascinating place to live.

Posted by Tom at 5:01 AM | Comments (0) |

June 15, 2006

Has that been proof read?

I've been meaning to pass along the Securities and Exchange Commission's slick new full text search engine for regulatory filings. It's a very helpful resource.

On the other hand, as Paul Kedrosky notes, one of the unintended consequences of the new search engine is that management of publicly-owned companies may want to consider upgrading the proof-reading department.

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

Prepping for the U.S. Open

The 2006 U.S. Open Golf Tournament begins today at New York's venerable Winged Foot Golf Club, so the following will provide you with some interesting reading while you enjoy this year's edition of golf's most challenging tournament:

This NY Times article describes how Phil Mickelson's recent success in major golf tournaments is largely the result of his team of advisors refining Mickelson's preparation for major golf tournaments;

A family of golf pros with strong connections to both Winged Foot and Houston provide helpful hints on surviving Winged Foot;

Nike is going to try and make us cry on Father's Day, which Jim Corrigan finds appalling;

Speaking of Tiger Woods, this NY Post article reports on Tiger's yacht, which he is using this week in lieu of a hotel while playing at Winged Foot, and includes Tiger's morning greeting to the gawking reporters ("It's a little early to be taking pictures out there, isn't it? Have a nice f- - -ing day.");

By the way, PGATOUR.com writers Joe Wojciechowski, Dave Shedloski and Brett Avery are following Tiger during his U.S. Open rounds and blogging about it here;

The Guardian's Lawrence Donegan reviews the brutal conditions at Winged Foot and includes this quote from Mickelson:

Phil Mickelson went as far to suggest the course was "on steroids". "I'm going to make a prediction," he added. "Someone will hit the wrong ball out of the rough this week. There are not hundreds of members' balls out there, but thousands, and you just can't see them even when you are standing over them. It is thicker and denser than any rough I have ever seen."

John Hawkins reports that some of the pros are not thrilled with the condition of Winged Foot's greens;

And, although not U.S. Open-related, don't miss this video of Fuzzy Zoeller's incredible hole-in-one a couple of weeks ago during a Champions Tour event in Des Moines.

Posted by Tom at 5:43 AM | Comments (0) |

The art of free throw shooting

Almost lost amidst Dwayne Wade's heroics during the final six minutes of Miami's nailbiting win over Dallas in the third game of the NBA Finals the other night was Miami center Shaquille O'Neal's making two free throws down the stretch to help his team's comeback. For the free-throw challenged O'Neal, those free throws were nothing short of remarkable -- to that point in the series, he had made only four of 20 free throws.

Of course, poor free-throw shooting is nothing new for O'Neal. Although he is one of five best centers ever to play professional basketball (Russell, Chamberlain, Abdul-Jabbar, and Olajuwon are the other four), O'Neal would inarguably be the best of the bunch if he could shoot free throws close to as well as Abdul-Jabbar and Olajuwon did. Only Chamberlain among the greatest centers has a worse free throw shooting percentage than Shaq, and O'Neal (52.8%) may even go below Chamberlain's desultory 51.1% career free-throw shooting percentage before his career is over.

The art of free-throw shooting has always interested me, and I could probably go out and hit six or seven out of ten free throws today even though I have not shot one in several years. So, when I came across this latest article about the Miami coaching staff's attempts to help O'Neal with his free-throw shooting, it reminded me of a conversation that I had years ago about free-throw shooting early one morning on the driving range of Sweetwater Country Club in Sugar Land. The only other person on the range that morning happened to be a very good free-throw shooter, former Houston Rockets guard, Mike Newlin (87% career percentage).

Newlin had a solid 11-year NBA career, mostly with the Rockets and then with the Nets and Knicks for his last three seasons. He had impeccable fundamentals as a basketball player, and his free throw shooting style was close to perfect. At the time we found ourselves on the same driving range, I had never met Newlin, but I felt a connection to him because we had both come to Houston in 1972, my late father and I had watched him play many games in the early years of the Rockets in Houston and we had a number of mutual friends in the business community. So, before leaving the range to find my golfing partners and head for the first tee, I approached Newlin and introduced myself. He was extremely cordial and we spent several minutes chatting about our mutual friends and the early years of the Rockets in Houston.

During our chat, I observed to Newlin that he exhibited the best fundamentals in shooting free throws of any player that I had ever seen. Newlin, who is quite bright, had obviously had similar thoughts, but did not agree with me:

"Nope. I had the second-best fundamentals," he replied.

"Who had the best?" I inquired.

"Rick Barry."

Perhaps Shaq should listen.

Posted by Tom at 4:43 AM | Comments (0) |

June 14, 2006

Best house deals are in Aggieland

This James Hagarty/Wall Street Journal ($) article reports on a recent analysis that ranks the Bryan-College Station area -- home of Texas A&M University -- as the most "undervalued" housing market in the country during this year's first quarter. In fact, eight out of the ten most undervalued markets are in Texas (Dallas and Ft. Worth are second and third, and Houston is fourth). Although such studies are usually accompanied by some hand-wringing from those who are concerned about the value of their home, the reality is that the availability of relatively cheap housing is one of the main drivers of Texas' economic growth over the past generation. Here's hoping that it continues.

Posted by Tom at 5:58 AM | Comments (1) |

Hey FEMA, can you spare a dime?

So, you thought that the Federal Emergency Management Agency's response to the damage from Hurricane Katrina last year left much to be desired? Well, this NY Times article reports that a recent Congressional investigation has determined that the agency's relief effort was stellar in comparison to its fraud management policies:

As much as $1.4 billion in government disaster aid to victims of Hurricanes Katrina and Rita — nearly a quarter of the total — went to bogus or undeserving victims, a new Congressional investigation concludes. [. . .]

The improper or fraudulent payments went to a dizzying array of con artists or other undeserving recipients, according to the analysis by the Government Accountability Office, which is set to announce its findings at a hearing Wednesday.

In one case, a man stayed more than two months on the government tab at a hotel in Hawaii that cost more than $100 a night. At the same time, he was getting $2,358 in government rent assistance, even though he had not been living in the property he claimed was damaged in the storm.

Emergency aid was used to pay for football tickets, the bill at a Hooters in San Antonio, a $200 bottle of Dom Perignon, "Girls Gone Wild" videos, even an all-inclusive weeklong Caribbean vacation, the report says. More than $5 million went to people who had provided cemeteries or post office boxes as the addresses of their damaged property.

FEMA also provided cash or housing assistance to more than 1,000 prison inmates, totaling millions of dollars; one inmate used a post office box to collect $20,000. . .

In another case, 24 payments, totaling $109,708, were sent to a single apartment, where eight people each submitted requests for aid eight times, each time using their own Social Security numbers.

Another person collected 26 payments using 13 different Social Security numbers — a total of $139,000 — even though public records show the individual did not live at any of the addresses reported as damaged. [. . .]

Investigators concluded that fraudulent or improper payments probably ranged from $400 million to $1.4 billion, leading them to settle on $1 billion as their most likely estimate, representing about 16 percent of the distributed aid. [. . .]

Representative Michael McCaul (Rep. Tex.), who is chairman of the House subcommittee that led the inquiry, is not pleased:

"When you have federal and state prisoners applying for the taxpayers' money — while they are in prison — and then the disaster aid, that is a real assault on the American taxpayer," he said. "I don't have any tolerance for that."

Posted by Tom at 5:32 AM | Comments (2) |

A NYC subway attack injures a young Houstonian

This NY Times article reports on the random stabbing attack of 21-year old Houstonian, Christopher McCarthy, on a New York City subway at 110th Street and Central Park West yesterday afternoon. McCarthy, who was on a two-week vacation in New York City with his girlfriend, is in critical condition after undergoing surgery for multiple stab wounds to his chest. The attacker walked away after stabbing McCarthy and has not been apprehended.

Although always unsettling, subway violence in New York City is actually far less frequent now than in earlier eras. When Utah tennis pro Brian Watkins was murdered 16 years ago by a gang that attacked Watkins and his family on a NYC subway as they were on their way to dinner, Watkins was one of more than 2,000 people murdered in New York City that year. Last year, less than 600 murders occurred in New York City, the fewest in over 40 years.

Update: Looks as if NYPD has caught the likely attacker.

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

June 13, 2006

Melvin and Howard redux

For anyone interested in Houston lore, a subscription to the Wall Street Journal is a must today as WSJ reporter Jonathan Karp weighs in with this front page article on the latest lawsuit of Melvin Dummar, the former Utah milkman who unsuccessfully claimed during a highly-publicized trial in 1978 that a handwritten "Morman Will" from reclusive billionaire and former Houstonian Howard Hughes entitled Dummar to over $150 million from the Hughes estate (Hughes died while flying to Houston in 1976 for medical treatment). Dummar claimed that the handwritten will was a reward for saving Hughes' life after Dummar found him lying alone one night on a desolate Nevada desert roadside about 150 miles north of Las Vegas. Dummar's story about the Mormon Will is the basis of the clever 1980 movie, Melvin and Howard.

Amidst that rich backdrop, Karp reports that Dummar is again after a chunk of the Hughes estate, albeit indirectly through two beneficiaries of the Hughes estate, Houstonians William Lummis and Frank Gay. Dummar's new lawsuit alleges that Lummis, a Hughes cousin and the main family heir, and Gay, a former Hughes executive, conspired to withhold information from the court in the 1978 trial in order to discredit the validity of the Morman Will. The 77-year old Lummis currently serves as a trustee for the nonprofit Howard Hughes Medical Institute and the 85-year old Gay was also a member of medical institute's board of trustees until recently.

Dummar's latest lawsuit is based largely on the testimony of a former Hughes pilot, who allegedly corroborates Dummar's allegation that Hughes had left Las Vegas to visit a brothel -- appropriately named the "Cottontail Ranch" -- near the spot where Dummar allegedly found Hughes in the Nevada desert. According to the pilot, the purpose of Hughes' visit to the brothel was to renew a regular tryst with "Sunny, a redhead who had a diamond in an upper incisor. 'You couldn't see it unless she smiled broadly,' [the pilot] recalls. 'She was the class of the field.'"

Read the entire article. New movie to follow.

Posted by Tom at 6:13 AM | Comments (0) |

Owls are on their way to Omaha

For the fifth time in the past decade, the Rice Owls baseball team will play in the College World Series in Omaha, which begins this weekend. The Owls qualified for this year's CWS with a heart-thumping 9-5 victory over the Oklahoma Sooners in the rubber game of their three-game Super Regional series on Monday afternoon at Rice's Reckling Park. The Owls return to the CWS tournament in Omaha for the first time since 2003, when Rice won the tournament and was crowned national champion. The Owls first game in the CWS tournament this year is against Georgia on Saturday.

This year's trip to the CWS for the Owls is of particular interest to me because, several years ago while coaching youth baseball here in The Woodlands, I had the privilege of coaching Owls OF Jordan Dodson and Owls catcher Danny Lehmann, both of whom went on to become star players in the excellent high school baseball program at The Woodlands High School before enrolling at Rice. Somehow, these two fine young men were able to overcome my coaching to develop into excellent ballplayers. I'm thrilled for them and the entire Rice squad. Go Owls!

Posted by Tom at 5:30 AM | Comments (1) |

Rumblings from the jury room of the first Enron Broadband retrial

As noted in this earlier post, U.S. District Judge Vanessa Gilmore's decision to conduct the re-trial of former Enron Broadband executives Kevin Howard and Michael Krautz during the latter stages of the media-saturated Lay-Skilling trial was highly prejudicial to Howard and Krautz. As it turned out, the juries in both cases deliberated at the same time, and the Howard-Krautz jury was deliberating amidst the media firestorm on the Thursday before Memorial Day weekend when the Lay-Skilling verdict was announced. The following Tuesday, the Howard-Krautz jury returned a verdict convicting Howard and acquitting Krautz. Previous posts on this case are here, including this recent one on the closing arguments of the trial.

The dubious nature of the decision to conduct the Howard-Krautz trial during the Lay-Skilling trial is now becoming readily apparent. This John Roper-Purva Patel/Houston Chronicle article reports that Howard's defense team has filed a motion for a new trial that contains statements from two jurors and two alternate jurors in the Howard-Krautz trial alleging that the Howard-Krautz jury deliberations were seriously compromised and that certain jurors promoted a vindictive environment in the jury room "to fry" top Enron executives, including Howard. It does not appear that the Chronicle reporters had a copy of the motion when they prepared their article, so here is a download site for the motion and juror affidavits, which are bookmarked in Adobe Acrobat to facilitate ease of review. Among other things, the motion and affidavits confirm the following troubling allegations:

Jurors holding out for acquittal for Howard were threatened with physical harm from jurors pushing for conviction;

Contrary to Judge Gilmore's instructions, certain jurors regularly discussed the case between themselves during the trial and, after deliberations began, discussions among certain jurors took place outside the jury room;

One male juror asserted that he was an expert on Enron because he had read one of the books on the Enron scandal, and used information from the book in persuading jurors to convict Howard;

The jury in the Howard-Krautz trial deliberated in a room literally next door to the room used by the Lay-Skilling. When the Lay-Skilling jury agreed on a verdict, the loud applause and cheering from the Lay-Skilling jury room was readily apparent in the Howard-Krautz jury room; and

Without advising attorneys involved in the case, Judge Gilmore met with and answered questions from the jurors at least twice during deliberations, including immediately after the Lay-Skilling verdict was announced. According to the jurors quoted in Howard's motion, Judge Gilmore told the jurors after the Lay-Skilling verdict that they had to reach a unanmious verdict, leaving the holdout jurors with the impression that a hung jury was not an option. Moreover, one juror also advised the rest of the jurors that the hung jury in the previous Enron Broadband trial (a fact that was not brought up during the retrial) was a failure that would be emulated by jurors in the retrial if they also could not reach a verdict.

Although the allegations regarding Judge Gilmore's ex parte communications with the jury will likely put her on the defensive and prone to deny Howard's request for a new trial, the motion indicates that the Howard-Krautz trial probably should not have been conducted in Houston and, at very least, should never have been allowed to proceed during the Lay-Skilling trial. The Fifth Circuit -- which already has some issues with Judge Gilmore -- is likely to take Howard's appeal on these issues very seriously.

Posted by Tom at 4:33 AM | Comments (1) |

June 12, 2006

Stros 2006 Review, Part Four

Although the fourth of the Stros' ten segments of the 2006 season (prior 1/10th of a season posts are here) was not the most successful -- the Stros had to win five of their last six to finish 7-9 for the 16-game segment and 32-32 on the season to date -- it was certainly lively in other areas:

The Rocket returned to the club and even acquired a new nickname;

The Stros' best pitcher -- Roy O -- went on the 15-day disabled list after aggravating his back by attempting to pitch through a hamstring injury;

Stros manager Phil Garner looked as if he was gripping midway through the fourth segment of the season, but seemed to rebound in his decision-making recently; and

The Jason Grimsley Affair threatened to blow the lid off of Major League Baseball's performance-enhancing drug scandal.

Whew! Meanwhile, the 2006 edition of the Stros continued to exhibit traits of a .500 club after 40% of the season, but -- as with last season's club at this point in the season -- the Stros are showing signs that they could still make a playoff run.

It's interesting to compare last season's club at the same stage of the season with this one. At this point in the 2005 season, the Stros were nine games under .500 at 25-36 and had the worst hitting team in Major League Baseball by far. However, the club was beginning to win consistently despite the horrendous hitting behind a pitching staff that was well on its way to having the best performances by three starting pitchers on one team (Clemens, Pettitte and Oswalt) in the past 50 years of Major League Baseball. Over the balance of the season, the hitting improved enough (primarily due to Berkman returning from injury and Lane having a solid second half of the season) so that the outstanding pitching staff carried the club into the post-season and ultimately the World Series.

This season, despite their chronic hitting woes, the Stros are actually hitting much better than last season's club. The Stros have generated only six fewer runs to this point in season than an average National League club would have produced using the same number of outs (in other words, a -2 RCAA, explained here) compared to a -73 RCAA for last season's Stros at the same point in their season. Thus, while the 2005 club was the worst hitting team in the National League on this date last year, this season's club is smack dab in the middle of the 16 National League clubs.

On the other hand, this season's pitching staff as a group has not performed nearly as well to date as last season's staff -- the Stros' pitching staff currently ranks 14th in the National League in runs saved against average (RSAA, explained here). Consequently, the 2006 club's better hitting has allowed the team to post a much better record at this point in the season than last season's club, but the club's hitting is still not good enough to overcome the club's relatively mediocre pitching to generate the type of finishing kick that the 2005 club's pitching allowed that club to enjoy. Thus, as noted earlier here, the return of Clemens is likely to help, but the Rocket alone will not be enough for this club to turn it around and become a bonafide playoff contender. Some other things need to occur for that happen.

The club's hitting and pitching statistics to date are set forth below, and pdf's of the current hitting stats are here and the current pitching stats are here, courtesy of Lee Sinins' sabermetric Complete Baseball Encyclopedia:

The abbreviations for the hitting stats are defined here and the same is done for the pitching stats here.

The club's hitting remains slightly below-National League average overall. 1B Berkman (19 RCAA/.388 OBA/.615 SLG/.1.003 OPS) and 3B Ensberg (16/.380/.562/.941) remain in the top dozen hitters in the National League this season and, absent injury, are on their way to All-Star seasons. 2B Bidg (1/354/.467/.821) continues to click along productively, while Mike Lamb (8/.402/.545/.947) and Chris Burke (2/.343/.424/.767) have made consistent contributions whenever they have played regularly.

The main problem for the Stros hitting-wise has been in the outfield, where only RF Lane (-3/.341/.403/.745) has come close to being even a National League-average hitter, while CF Taveras (-13/.320/.313/.633) and unintended LF singles-hitter Preston Wilson (-8/.310/.397/.707) are big drags on the lineup. Inasmuch as light-hitting SS Everett (-14/.272/.298/.570) is considered the best defensive player on the club, and over-performing but traditionally weak-hitting C Ausmus (-3/.369/.371/.741) is also considered by the Stros brass as a key defensive player, the Stros should limit Taveras and Wilson's play in favor of the more-productive Lamb, Burke and Bruntlett (0/.392/.388/.780) over the balance of the season. Everett and Taveras -- who are among the ten worst-hitting regular players in the National League -- should, absent injury to more productive players, never be in the starting lineup together.

Meanwhile, even though the pitching staff's overall performance to date has been lackluster, there are signs of hope. Despite his recent stint on the disabled list, Roy O (3.11 ERA/12 RSAA) remains one of the best starters in the National League and rookie Nieve (4.85 ERA/-3 RSAA) is beginning to show signs of becoming a reasonably consistent starter. Rodriguez (4.48 ERA/-1 RSAA) somehow continues to muddle along reasonably well despite an atrocious walk rate, and star relievers Lidge (4.85 ERA/-1 RSAA), Wheeler (4.73 ERA/-1 RSAA) and Qualls (3.79 ERS/2 RSAA) recently appear to be finding their rhythm after a spotty first third of the season.

However, problems still exist as veteran starter Pettitte (5.81 ERA/-13 RSAA) and rookie starter Buchholz (6.06 ERA/ -13 RSAA) are two of the worst ten pitchers in the National League this season in terms of RSAA (both have given up a horrendous 14 yaks to date), and it's never a comforting feeling when your only lefty out of the bullpen is Trevor Miller (4.86 ERA/-1 RSAA).

So, what's the most likely prescription for the Stros to end up in the playoff hunt this season? It's probably unrealistic to expect any meaningful increase in offensive production, but it's essential that the club at least maintain the current hitting level by playing combinations of Lane, Lamb and Burke in the outfield over Taveras and Wilson and spotting Bruntlett and Munson (-1/.315/.431/.746) for Everett and Ausmus. The bigger improvement should occur in pitching where the replacement of Buckholz with Clemens clearly elevates the starting rotation, while past performance indicates that Pettitte will not remain as bad as he has been to date this season. With Lidge, Wheeler and Qualls appearing to stabilize to their more typical productive performance levels, the improvement in the staff from Clemens and an improved-Pettitte should generate an above-average National League pitching staff to combine with an average or slightly below-average hitting attack. That should be good enough for the Stros to stay in the playoff race and -- inasmuch as the Cardinals (37-25) have injury problems with several of their key players -- a substantial improvement in the Stros' performance levels could even propel the club into the NL Central Division title race, although one or two key mid-season player acquisitions would probably be necessary to elevate the Stros to that level of contention.

The next 16-game segment of the season starts off reasonably well with a series at Wrigley against the Cubs (26-26) and then back home to Minute Maid at the end of this week for six games against the Royals (16-45) and the Twins (28-34). But the segment ends with a brutal three-city roadie against the rugged White Sox (38-24), Tigers (40-23) and Rangers (34-29), so another near .500-type record for the next tenth of the season would not be all that bad. However, the Stros finish the pre-All-Star Game break part of the season with seven games at home against the Cubs and Cardinals in early July, so that string of games could well determine whether this Stros club is a contender or a pretender in the competition for a playoff spot during the second half of the season.

Posted by Tom at 12:23 PM | Comments (0) |

The pressured ex-wife in the Milberg Weiss affair

This Justin Scheck/The Recorder article reports on the latest development in the criminal investigation into Milberg Weiss Bershad & Schulman -- the apparent willingness of the former wife of one of Milberg Weiss' favorite expert witnesses to testify that the firm -- and perhaps even name partners Melvyn Weiss and William Lerach -- improperly used money it recovered in class action securities fraud lawsuits to supplement her ex-husband's compensation for his work in prior cases.

The expert involved is John B. Torkelsen, a former financial analyst from Princeton, N.J., who made millions from this testimony in numerous cases as an expert on shareholder damages in Milberg Weiss class actions during the 1980s and 1990s. Torkelsen's ex-wife, Pamela, reportedly agreed to provide evidence against Milberg Weiss and former husband after she pled guilty last year in a Washington federal court to assisting in the theft of $1.9 million from a venture-capital partnership. The speculation is that Mrs. Torkelsen is a possible link to Weiss and Lerach because Mr. Torkelsen was an expert witness in a number of cases personally handled by Weiss and Lerach. Mrs. Torkelsen's sentencing in the Acorn matter has apparently been delayed for more than a year because of her cooperation in the Milberg Weiss investigation.

Meanwhile, it's getting a bit difficult to find a judge for the Milberg Weiss criminal case -- this New York Sun article reports that the fifth judge has recused himself from handling the case, while this NY Times article reports that Congressional Democrats are getting in gear to defend Weiss, who is a prominent Democratic Party fundraiser.

Posted by Tom at 5:27 AM | Comments (0) |

The mercurial Mr. Bailey

After Florida and Massachusetts disbarred well-known criminal defense lawyer F. Lee Bailey, a three judge panel of the federal district court in Massachusetts was presented with the issue of whether the court should discipline Bailey on a reciprocal basis. The panel did so, and Bailey appealed to the First Circuit Court of Appeals, which issued this interesting opinion that sets out the facts of the case that got Bailey in trouble, but then concludes that those facts are irrelevant because of the principle of reciprocal discipline.

Key tip of the opinion -- when reaching deals with prosecutors on behalf of clients, get them in writing.

Posted by Tom at 5:06 AM | Comments (0) |

June 11, 2006

Sports notes for the weekend

It's certainly been a busy weekend in the sports world, and a good bit of the action involves Houston-area teams.

First, Houston reinforced its status as the youth baseball hotbed of America this weekend as The Woodlands High School baseball team won the Texas 5A Baseball Championship over fellow Houston-area championship game participant, the Katy Tigers. The 38-1 Highlanders will conclude the season as the no. 1-rated high school team in the U.S. by Baseball America, a position that the team has maintained for most of the season. The Highlanders best player -- pitcher and shortstop Kyle Drabek -- was the Philadelphia Phillies first-round draft pick earlier this week in the Major League Baseball Draft of high school and college players.

Meanwhile, Houston's other no. 1-ranked baseball team -- the Rice Owls -- are just a win away from the College World Series after rolling over the Oklahoma Sooners in the first game of their best-of-three NCAA Super-Regional series at Rice's Reckling Park. The second game in the series takes place today at noon at Reckling.

Another remarkable performance radiated somewhat beneath the radar screen on a sports scene pre-occupied with baseball, NBA and Stanley Cup playoffs, French Open tennis, and the upcoming U.S. Open golf tournament. Xavier Carter -- a 6' 3", 190 lbs. sophomore sprinter for LSU who also plays wide receiver for the Tigers' football team -- put on the greatest performance in the history of college track and field on Saturday since the legendary Jesse Owens back in the mid-1930's. Carter became the first sprinter to win the 100 and 400 meters at the NCAA track and field championships Saturday, and then punctuated that incredible performance by anchoring LSU's winning 1,600-meter relay team. Combined with his anchor on LSU's winning 400 relay team the previous night, Carter shared in four NCAA event titles, the first person to do so since Owens won both short sprints, the 220-yard low hurdles and long jump for Ohio State in 1935 and '36. Carter won the 100-meter race in a school-record 10.09 seconds and then followed that performance with a 44.53 in the 400 only 30 minutes later. In so doing, Carter scored an incredible 40 of his team's 51 points in LSU's second-place finish (behind first place Florida State) in the NCAA Track and Field Championships.

In the more sanguine world of golf, Jim Furyk went on the disabled list this week by injuring himself gargling, while this Bob Verdi/Golf Digest interview examines David Duval's travails in attempting to regain Duval's stature as one of the PGA Tour's top players. Also, in the wish-I-had-time-to-do-that-department, don't miss this Wall Street Journal ($) article on the emerging number of senior amateur players who slide into retirement by playing in dozens of amateur tournaments around the country. One of the featured players in the article is Houstonian Mike Rice, who is the reigning US Senior Amateur champion.

Finally, speaking of the NBA Championship Series, although the focus is usually on the star players such as Shaq, Nowitzki, and Wade, David J. Berri -- the Cal State-Bakersfield economist who is a co-author of The Wages of Wins: Taking Measure of the Many Myths in Modern Sports -- notes in this NY Times article that it is actually the lesser-recognized players who often make the difference in the series.

Posted by Tom at 6:31 AM | Comments (0) |

June 10, 2006

The English and Germans are getting warmed up

As predicted in this earlier post, it didn't take long for English and German soccer fans to begin bashing each other amidst the World Cup matches. And this was before England's 1-0 victory over Paraguay today. By the way, the Chronicle's John Lopez is filing a series of interesting reports from the World Cup matches.

Posted by Tom at 10:18 AM | Comments (0) |

A possible big bank deal in the Valley

This Reuters article reports this morning that Madrid-based Banco Bilbao Vizcaya Argentaria SA ("BBVA") is considering an acquisition of McAllen, Texas-based Texas Regional Bancshares Inc., a holding company with with a market capitalization of $1.87 billion that is in the retail banking business under the name of Texas State Bank.

BBVA is Spain's second-largest bank that has traditionally focused on the remittance market in the U.S. where it facilitates the transfer of funds by immigrants to their home countries. Lately, BBVA has been expanding its U.S.-Mexican business operations -- its Bancomer unit is already Mexico's largest bank and it recently purchased Laredo National Bancshares for $850 million, so the possible acquisition of Texas State Bank's owner would constitute a further expansion of BBVA's U.S. business operations. BBVA is a big outfit, with a market cap of over $66 billion, net income of over $3.8 billion last year and over 90,000 people employees worldwide.

Texas Regional Bancshares is a regional bank located in Texas' Rio Grande Valley (wonderfully depicted in the movies Lonesome Dove and Lone Star) that has about 75 branches and $6.5 billion in assets based primarily in south Texas. In 2002, Texas Regional commenced an expansion plan in which it has bought small banks in the Houston, Corpus Christi and Dallas areas, which likely makes the bank even more attractive to BBVA. With the large immigrant populations in both Houston and Corpus, BBVA could use the Texas State Banks as the foundation of a substantial increase in its remittance business in Texas while also expanding its traditional banking operations in the state.

Posted by Tom at 6:48 AM | Comments (0) |

June 9, 2006

Ripples from the Grimsley Affair

Get used to it because the ripples from the Jason Grimsley Affair are already starting and may turn into pretty tasty waves soon.

It looks as if Grimsely has fingered Chris Mihlfeld, a Kansas City-based “strength and conditioning guru” (and the former Strength And Conditioning Coordinator for the Kansas City Royals baseball club) as referring Grimsley to a source from whom Grimsley obtained "amphetamines, anabolic steroids and human growth hormone." Mihlfeld has been Cardinals star Albert Pujols’ personal trainer since before Pujols was drafted by the Cardinals in the 13th round of the 1999 draft.

Meanwhile, as speculated in this previous post from over a year ago, this NY Times article reports that the perjury investigation into Barry Bonds is continuing to fester.

This is going to get very ugly. Quickly.

Update: Mihlfeld is denying that his name is connected to the drug probe that has ensnared Grimsley or that Pujols was involved in taking performance-enhancing drugs.

Posted by Tom at 9:04 AM | Comments (1) |

Ford and that pesky "B" word

Although somewhat lower on the radar screen than General Motors' more well-publicized troubles, Ford Motor Co. is reeling today after Fitch Ratings downgraded the company's credit rating (see also here) two notches to the highly-speculative single-B-plus level while analyzing how creditors might fare in a corporate reorganization of Ford under chapter 11. Despite the downgrade, Ford's rating is still higher than GM's credit rating, which is B3 by Moody's Investors Service and single-B by Standard & Poor's and Fitch.

Inasmuch as Ford (as with GM) continues to have a strong liquidity position (about $24 billion in cash and securities as of the end of the first quarter), a bankruptcy filing is probably not imminent even though Ford estimates that it will burn through about $5-6 billion of that cash in 2006. At the close of yesterday's New York Stock Exchange composite trading, Ford shares were down 2% to $6.66 while on the debt side, Ford's 7.45% bonds due in 2031 fell 3.5% to about 70 cents on the dollar, which translates into a yield of 11% that is slightly below the yield on GM's 8.375% bonds that mature in 2033.

In its analysis, Fitch reminds investors that companies with a single-B-plus rating end up in bankruptcy about 24% of the time within five years. In a hypothetical Ford bankruptcy case, Fitch estimated debt holders would get back 50% to 70% of their investment from Ford and 70% to 90% of their investment in Ford Credit Company.

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

Disney-Ovitz decision upheld

Professor Ribstein -- who was prescient in predicting the outcome of the corporate case of the decade -- can rest easy.

In a ruling issued yesterday afternoon, the Delaware Supreme Court upheld the Delaware Chancellory Court's decision dismissing the civil lawsuit brought by certain Disney shareholders against the board of Walt Disney Co. for approving the rather generous $140 million severance package paid to former Disney executive Michael Ovitz after Ovitz was effectively fired by his longtime friend and former Disney CEO Michael Eisner for essentially doing nothing during Ovitz's year as president Disney. A copy of the decision is here, and here are initial comments from corporate law scholars Professor Ribstein, Professor Bainbridge and Professor Smith.

Steven Schulman, the former Milberg Weiss partner who has bigger problems now than the loss in the Disney-Ovitz case, pursued the case on behalf of certain Disney shareholders and contended that the Disney board's decision-making process amounted to a series of sham "jam sessions" in which the board abrogated its responsibilities to Disney shareholders by rubberstamping the Eisner-supported severance deal for Ovitz. However, the Delaware Supreme Court upheld the Chancellory Court's decision that was critical of the Disney board, but concluded that Eisner and the other Disney directors acted in good faith in approving Ovitz's termination without cause and thus, were immunized from liability to shareholders regardless of whether approving the generous severance may have been a bad decision.

Posted by Tom at 5:24 AM | Comments (0) |

Scheduling conference today in the sad case of Jamie Olis

On the heels of the Fifth Circuit ordering the release from prison yesterday of two other business executives who have been subjected to the Justice Department's demonization of business in the post-Enron era, U.S. District Judge Sim Lake will conduct a scheduling conference this afternoon in Houston in the sad case of Jamie Olis in an effort to kick-start the resentencing of Olis that the Fifth Circuit ordered seven months ago after throwing out Judge Lake's original 24-year sentence of Olis.

Judge Lake, who has been preoccupied with a rather long trial in another case over the past several months, is not the type of judge to allow pending matters to linger on his docket, so expect him to use today's hearing to schedule a final resentencing hearing in the near future. The key issue in the resentencing is the amount of market loss attributable to the transaction on which Olis' conviction is based, and the prosecution has been dragging its feet since the resentencing was ordered in an apparent effort to buttress its untenable market loss theory upon which Judge Lake based the original sentence of Olis. Judge Lake has not yet tipped his hand on how he intends to view the market loss issue on the resentencing of Olis, so today's hearing may provide a forum for the judge to give the parties some direction for preparing the evidence on that key issue for the final resentencing hearing.

Posted by Tom at 4:33 AM | Comments (2) |

June 8, 2006

Fifth Circuit orders the release of Bayly and Furst in the Nigerian Barge case

As this earlier post anticipated, the Fifth Circuit Court of Appeals this morning ordered the release of former Merrill Lynch executives Daniel Bayly and Robert Furst pending disposition of the appeal of their controversial convictions in the Enron-related Nigerian Barge case. Another former Merrill executive convicted in the case -- William Fuhs -- was previously ordered released from prison by the Fifth Circuit on March 30. The fourth Merrill executive convicted in the barge case -- James Brown -- had his renewed motion for release pending appeal curiously denied summarily by the Fifth Circuit. Daniel Boyle, Enron's former vice president of global finance, was also convicted in the case and is serving a 46 month sentence, which he is not appealing. Former Enron in-house accountant, Sheila Kahanek, was the only defendant acquitted in the trial of the case.

As noted in these earlier posts, the plight of Bayly and Furst in the Nigerian Barge case is a prime example of the appalling cost of the government's criminalization of business in the post-Enron era (for a thorough discussion of that subject in the context of the barge case, begin here). In the Nigerian Barge case, the Enron Task Force took a relatively small transaction under which Merrill Lynch bought a stream of dividend payments from an Enron affiliate and criminalized it through a brazen web of distortion, suppression of key testimony, inadmissible hearsay, opposition to the defense's jury instruction on the key issue in the case and prosecutorial misconduct. The Task Force effectively prosecuted the Merrill Four for doing their jobs in connection with Enron's sale of an asset for which Enron may have improperly accounted, although even that issue was never proven at trial.

In reality, the Merrill Four were convicted for having the misfortune of being involved in a legitimate transaction with the social pariah Enron. Kudos to the Fifth Circuit for beginning to correct this monstrous wrong.

Bayly is represented on his appeal by a team of lawyers, including his lead trial counsel, Tom Hagemann and Marla Thompson Poirot of Gardere Wynne and Sewell in Houston, appellate specialists Lawrence S. Robbins, Gregory L. Poe and Alice W. Yao of Robbins, Russell, Englert, Orseck & Untereiner LLP in Washington, D.C., and Richard J. Schaeffer, Peter J. Venaglia, and Brian Rafferty of Dornbush Schaeffer Strongin & Weinstein, LLP in New York City. Furst is represented on appeal by John W. Nields, Jr. William L. Webber, Kyle S. Cohen and Sowmia Nair of Howrey, LLP's Washington, D.C. office.

Posted by Tom at 10:28 AM | Comments (0) |

The patriarch of Houston's First Family of Golf

In preparation for the next weekend's U.S. Open at venerable Winged Foot Golf Club in New York, Golf Digest's Bill Fields weighs in with this entertaining article on former Winged Foot head pro and former Houstonian, the late Claude Harmon (pictured on the left with his old friend, Ben Hogan). Claude -- who was a formidable PGA Tour player and teaching professional during his life -- was the father of the famous quartet of Harmon brother teaching professionals, Butch, Craig, Dick (see here also) and Billy. In addition to Claude, both Butch and the late Dick Harmon lived in Houston for a substantial part of their lives, and each of the Harmon brothers has been regularly rated among the best golf instructors in the U.S.

For the final decade of his life, Claude was the pro emeritus at Houston's Lochinvar Golf Club, where Claude's green jacket from winning the 1948 Master's Golf Tournament is still displayed prominently in the clubhouse's trophy case. As noted in Fields' article, Claude was an extraordinary golf talent who regularly beat Hogan in their daily games during the winter months in Florida and who tied for 3rd in the 1959 U.S. Open at Winged Foot, the best finish by a club pro in the U.S. Open other than Horace Rawlins' victory in the first U.S. Open in 1895.

Posted by Tom at 7:26 AM | Comments (0) |

Carlene R. Lewis, R.I.P.

Well-known Houston plaintiff's attorney, Carlene Rhodes Lewis, died on Monday at M.D. Anderson Hospital in Houston from the effects of ovarian cancer. The Houston Chronicle obituary on Ms. Lewis' life is here.

Ms. Lewis specialized in products liability cases, and she was at the forefront of developing the Vioxx cases against Merck. Ms. Lewis began investigating the cases against Vioxx in 2000 and, in August 2005, she was part of a team of three lawyers that won a $253.5 million jury verdict against Merck in Brazoria County district court, just south of the Houston metro area. Over 20 million people took Vioxx before Merck took it off the market in September 2004, and the company is now facing around 11,500 lawsuits by about 23,000 plaintiffs. So far, the plaintiffs and Merck have split the six cases that have gone to trial, and about a dozen other cases are scheduled for trial before the end of this year.

Ms. Lewis moved to Houston after finishing law school in 1984 and joined Sewell & Riggs, where she specialized in the defending product liability lawsuits. About five years later, she and her former Sewell & Riggs colleague, Houston attorney Daniel Goforth, formed their own firm and began pursuing plaintiff's cases. Over the past 17 years, Ms. Lewis was a respected and well-liked member of the formidable Houston plaintiff's bar.

A memorial service for Ms. Lewis will be held Friday, June 9, at 3:00 pm at Chapelwood United Methodist Church in Houston. The eulogy will be given by her long-time friend and colleague in various plaintiff's cases, Mark Lanier.

Posted by Tom at 6:16 AM | Comments (0) |

The Jason Grimsley Affair

This NY Times article reports on the criminal investigation into alleged illegal use of steroids and human growth hormone by journeyman Major League Baseball pitcher Jason Grimsley, who retired from the Arizona Diamondbacks yesterday after the media reported on the search of his home by federal authorities. Here is a pdf file of Special Agent Jeff Novitzky's affidavit (redacted of names of other MLB players involved) in support of the search warrant on Grimsley's home, and here is an NY Times profile on Grimsley. Novitzky has also been involved in the investigation of Barry Bonds' use of steroids and other related performance-enhancing drugs.

Prior to this latest development, Grimsley was most well-known in MLB circles for slithering through a ceiling to retrieve his Cleveland Indians teammate Albert Belle's corked bat from the umpires' room at Chicago's Comiskey Park after the umps had confiscated it during a 1994 game. However, Grimsley has apparently been the focus of the investigation for some time and, as noted in this earlier article of unverified allegations, the investigation could very well lead to the Stros clubhouse, as well as the clubhouses of most other MLB teams.

Grimsley has apparently made a statement to investigators in which he has named over 20 teams and team-related drug sources, and the contents of that statement will almost certainly be leaked in the upcoming days. Within MLB, the crossword puzzle of identifying the redacted names in Novitzky's affidavit is already going full blast, not only because many of the names are easily connected to Grimsley, but also because some are big MLB stars. As a result, the Grimsley Affair -- even more than the situation involving Bonds -- has the potential to blow the lid off MLB's ongoing public relations nightmare involving use of performance-enhancing drugs by its players.

Posted by Tom at 5:13 AM | Comments (0) |

June 7, 2006

More on the ripples of the 2005 hurricane season

This NY Times article reports on two recently-published Census Bureau reports that constitute the findings of the bureau's first study on the social, financial and demographic impact of the Hurricanes Katrina and Rita last summer on the Gulf Coast region:

After the twin barrages of Hurricanes Katrina and Rita last year, the City of New Orleans emerged nearly 64 percent smaller, having lost an estimated 278,833 residents, . . . Those who remained in the city were significantly more likely to be white, slightly older and a bit more well-off, . . . The bureau found that while New Orleans lost about two-thirds of its population, adjacent St. Bernard Parish dropped a full 95 percent, falling to just 3,361 residents by Jan. 1. [. . .] The black population of the New Orleans metropolitan area fell to 21 percent from 36 percent, the bureau found.

While the New Orleans area lost population, the Houston metropolitan area emerged with more than 130,000 new residents, many of them hurricane evacuees. Whites made up a slightly smaller percentage of Houston's population — 62.8 percent of the city in January compared with 64.8 percent last July, a month before Hurricane Katrina hit.

In Harris County, which includes Houston, median household income fell to $43,044 from $44,517, while New Orleans area's actually rose, to $43,447 from $39,793.

Interestingly, the reports debunk widespread speculation that the New Orleans evacuees who went to nearby Baton Rouge, where the population grew by nearly 15,000, were disproportionately poor. The evacuees who landed in Baton Rouge ended up being more middle-class, while the poorer evacuees ended up going to more distant cities, such as Houston.

Posted by Tom at 6:42 AM | Comments (0) |

The Rocket's new nickname

The Roger Clemens Family Traveling Show was in Lexington, Kentucky last night as the Rocket pitched three innings of a minor league game in preparation for returning to the Stros' rotation later this month. It will likely be the only game that Clemens pitches in this season that also features a wiper fluid promotion and a milking contest involving a ceramic cow.

By the way, Clemens' son, who plays third base for Lexington, has coined a new nickname for his father -- "Bernie Mac," the name of the actor who stars in the forgettable 2004 movie Mr. 3000, about a washed-up ballplayer who comes out of retirement to collect one last hit.

Posted by Tom at 6:20 AM | Comments (1) |

Never underestimate what can go on in the jury room

When you put a dozen of so strangers in a jury room together, weird things happen.

That's certainly been the case recently in Chicago, where the current big news is that the defense team for former Illinois Governor George Ryan is seeking a new trial based on jury misconduct after the jury convicted Ryan on all 18 counts of a federal corruption indictment in a six-month trial earlier this year (previous post here). Although jury misconduct motions are always longshots, based on news reports, this one has a better than typical chance if only a few of the allegations of juror misconduct turn out to be true.

In the Ryan case, the allegation is that one of the jurors looked up a definition of "good faith deliberations" in attempting to persuade a holdout juror that she was not deliberating in good faith. Inasmuch as the holdout was ultimately dismissed from the panel for unrelated reasons, the trial judge denied Ryan's first juror misconduct motion. However, Ryan's defense team is now demanding a new hearing into allegations that there was so much pressure put on the holdout -- and so many other jurors either lied in their jury questionnaire forms or did not follow the court's instructions -- that the jury deliberations were utterly skewed and a new trial is required.

Such conduct is a growing issue in high-profile trials as information about such trials is readily available to jurors who routinely work or engage in recreation on their computers each day. This is particularly important in a case such as Lay-Skilling, where pre-trial motions indicated widespread bias (see also here) against the defendants among prospective jurors. During the trial, several media outlets -- including the hometown newspaper, the Houston Chronicle -- covered the trial by innovatively blending traditional media reports and columns with blogging and podcasts. Although a valuable resource for the general public, such coverage could easily affect jurors who disregard the court's instruction not to read ongoing media reports about the trial. For example, before and during the Lay-Skilling trial, the Chronicle's Enron webpage prominently promoted the newspaper's business columnist's columns and blog that regularly ridiculed the defendants and called for their conviction, and also promoted regular blog posts from a former Enron Task Force prosecutor. It is certainly the media's perogative to cover a trial in that manner, but the potential effect of such coverage on the jury pool would seem to mitigate strongly in favor of a more liberal rule in favor of changing the venue of such trials than has traditionally been applied.

Posted by Tom at 4:59 AM | Comments (0) |

June 6, 2006

Lerach goes for a piece of the Kinder Morgan action

Plaintiff's lawyer William Lerach is already looking to make a handsome $1 billion fee as lead counsel in the main Enron class action securities fraud lawsuit. Now, he's looking for a little more from an Enron spinoff.

Yesterday, Lerach's firm filed a lawsuit (press release here) in state district court in Houston over the proposed management leveraged-buyout of Houston-based oil and gas pipeline operator, Kinder Morgan Inc. (previous posts here and here). A lawsuit filed last week in Kansas on similar grounds beat Lerach's lawsuit to the courthouse door in the race to be the first lawsuit to challenge the proposed leveraged buyout.

As one would expect, Lerach's lawsuit contends that KM's officers and directors violated state law by proposing a price of $100 per share, which it said was "grossly inadequate and unfair." Of course, that allegation is pure speculation at this point in that the proposed buyout is still subject to being outbid by a superior offer for the company. Expect the state court lawsuit to be removed by KM to federal court rather quickly, where it will likely rest fallow while either the proposed buyout or a superior proposal for the company is worked out.

Posted by Tom at 5:53 AM | Comments (0) |

Elk tells Lakeside and the USGA to shove it

Houston's Steve Elkington failed to qualify for next week's U.S. Open Golf Tournament at New York's venerable Winged Foot Golf Club during yesterday's sectional qualifying tournament at Houston's Lakeside Country Club, but at least he went out with a splash.

As this Steve Campbell/Houston Chronicle article reports, Elk left Lakeside yesterday before even teeing it up when U.S. Golf Association officials informed him that he could not wear metal spikes on his golf shoes while playing the golf course at Lakeside, which has a local rule that players may only use soft spikes (which cause less wear and tear on the greens) on the course. Inasmuch as the PGA Tour allows its members to use either metal or soft spikes in its golf tournaments and many other golf courses that the USGA uses for its qualifying tournaments have the same rule, Elk -- who is a notorious golf traditionalist -- told the USGA officials at Lakeside that adoption of a different rule at the Lakeside qualifier was wrong and left in a huff before his 8:50 a.m. tee time, leaving the USGA officials blathering about "a rule is a rule."

Quick tip to Lakeside -- it's not going to do any damage to your greens to allow players in one golf tournament to use metal spikes. Next time, waive the friggin' local rule for the tournament.

By the way, two college players -- Ryan Baca of Baylor and Ryan Posey of Oklahoma State -- earned the two Open spots at Lakeside by shooting sturdy 6-under-par 136's over the 36 hole qualifier.

Posted by Tom at 5:24 AM | Comments (7) |

The new Texans GM

Houston Texans' owner Bob McNair completed his overhaul of the team's management yesterday by naming former Denver Bronco's assistant Rick Smith as the second general manager in the Texans' five year history. Smith replaces Charley Casserly, who resigned last month amidst widespread criticism regarding the Texans' player personnel choices and a disastrous previous season. McNair began the overhaul earlier this year by firing head coach Dom Capers and replacing him with former Broncos offensive coordinator and Houston native, Gary Kubiak.

The hiring of Smith also completes an interesting change in management philosophy for McNair, who originally went with the strong GM management approach in hiring Casserly as the Texans' first employee. Casserly was the public face of the team's management, much more so then former head coach Capers. Although that approach placed most authority in football operations in Casserly's hands, it also sealed his fate as he became increasingly verbose with the media over the past season in attempting to deflect criticism over the team's horrifying performance. My sense is that Casserly's manipulation of the media during the team's horrendous season did not sit well with McNair, a classy man who does not appreciate such public posturing.

With the hiring of Smith, McNair has completed the adoption of the Broncos' management system in which the head coach has the decision-making authority on personnel matters and the GM serves in a support role. Under the Texans' new regime, it's clear that head coach Kubiak is calling the shots, just as Broncos coach Mike Shanahan does in Denver.

What's particularly interesting about the shift in the Texans' management philosophy is that Kubiak is getting far more power as an unproven coach than Capers ever received when he became the Texans first coach five years ago with a much more impressive resume than Kubiak. Capers took the expansion Carolina Panthers to the NFC title game in only their second season, and he was a successful NFL defensive coordinator before and after his tenure in Carolina. On the other hand, Kubiak's sole NFL coaching experience prior to receiving extensive authority under the Texans' new management approach is that of being the trusty sidekick to the Broncos' Shanahan, who delegated limited authority to underlings in regard to running the Broncos' offense.

In light of the foregoing, do you think the Miami Dolphins' defense -- which is now coached by Capers -- might be hitting with a little more, might we say, "enthusiasm" when the Dolphins come to town on October 1 to play the Texans?

Posted by Tom at 4:30 AM | Comments (3) |

June 5, 2006

Update on Roy O

Amidst the Stros' free fall over the past month, the worst news to arise to date is All-Star pitcher Roy Oswalt's back injury that forced him to miss a start on Sunday afternoon against the Reds. Major League Baseball injury expert Will Carroll passes along the latest information on Oswalt's back injury, which came on the heels of a pulled hamstring that Oswalt endured in his previous start:

There is no question in my mind that Roy Oswalt has a cascade injury. In the always-great Alyson Footer’s article at MLB.com, Oswalt all but says so himself. “I may have altered my mechanics,” he says, referring to what he did after straining his hamstring. Oswalt is now dealing with mid-back spasms, an unusual location. Elsewhere in the article, we get clues. Oswalt’s back only acted up when he threw curves, meaning that his mechanics remained altered into this session. Mid-back spasms usually involve some muscles rather than structural problems, so this isn’t as bad as it sounds. The Astros medical staff will have to stop the pain-spasm cycle, the Astros field staff will have to keep Oswalt from altering his mechanics, and Oswalt will have to listen. A decision on the DL won’t be made until mid-week and would follow an as-yet-unscheduled MRI.

The Stros have one of the best medical staffs in Major League Baseball, so Roy O's injury will be handled conservatively. But make no doubt about it -- this Stros club is barely a .500 team with Oswalt; the club is not close to being even a .500 club without him.

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

Remember those high prices for natural gas?

Remember those high natural gas prices of last year and the corresponding calls for more regulation of the oil and gas industry?

Well, after a hurricane season last year when prices skyrocketed to above $15 per British thermal unit and stored supplies were slashed as multiple storms played havoc with Gulf of Mexico production and storage facilities, U.S. supplies of natural gas are now so plentiful that the natural gas industry is running out of places to store it. Thus, despite the prospect of another active hurricane season, natural gas prices are down over 40% this year to $6.62 per BTU and likely will move even lower.

Rather than governmental intervention, the primary reason for the declining prices is the weather. As a result of a relatively mild winter, lower-than-expected demand for heating resulted in more plentiful supplies of natural gas this spring. Accordingly, over half of the estimated four trillion cubic feet of U.S. underground natural gas-storage capacity is already being used, which means that those facilities could be at near full capacity even before the first hurricane hits the U.S. mainland later this summer.

Meanwhile, Bill O'Reilly and attorneys general from several Midwestern states -- who last year condemned the big oil and gas companies and gas traders for manipulating prices and pushing up home-heating bills for all U.S. citizens -- have not yet explained how, with all their market power, those avaricious companies and traders could not prevent the current collapse of natural gas prices.

Posted by Tom at 6:02 AM | Comments (2) |

The Ken Lay narratives

On several occasions while covering the Lay-Skilling trial, I noted that the Enron Task Force prosecutors were presenting a fundamentally weak case in an effective manner. Quite a few commenters both here and on other blogs took me to task for that view, some of whom suggested that my defense bias rendered me incapable of appreciating the true strength of the Task Force's case.

So, it was with a small dose of vindication on Sunday that I read Alexei Barrionuevo and Kurt Eichenwald's NY Times article on the story behind the Enron Task Force's preparation and prosecution of the case against former Enron chairman, Ken Lay. According to Barrionuevo and Eichenwald's piece, Enron Task Force prosecutors such as John Hueston agree with me -- their case against Lay was so weak they had serious doubts whether they could even make one.

Barrionuevo and Eichenwald's article provides an interesting peek into the lengths that federal prosecutors will go to make a case against a person who the prosecutors have already concluded is a crook. But leave it to Larry Ribstein in this post on the Barrionuevo/Eichenwald article to nail the serious implications of the Task Force's motives and actions toward Lay:

Many people no doubt will get a warm feeling from the job our government servants have done in finally nailing the evil Lay. But as I said at the beginning, there’s an alternative narrative. The prosecutors were out to get Lay, who had already been convicted by public opinion just for being associated so closely with Enron, which of course journalists, filmmakers and other shapers of public opinion had already elevated into the symbol of whatever it was that went pop at the end of the big boom.

The prosecutors and journalists had a willing audience. Stupid and greedy investors, convinced they knew more than the market did and that gravity was suspended just for them, abetted by credulous analysts who didn’t think they had to ask questions, now needed somebody other than themselves to blame. The prosecutors looked long and hard and finally found Ben Glisan, whom the jury was primed to believe despite his questionable provenance. There were other potential witnesses with other potential stories, but the government was willing neither to free them from the threat of indictment nor grant them immunity.

Read Professor Ribstein's entire post. As Barrionuevo and Eichenwald note in their article, the case against Lay boiled down to the testimony of Ben Glisan and Andy Fastow, both of whom testified that they were telling Lay as early as mid-August 2001 immediately after he replaced Skilling that Enron was in far worse financial shape than the company was letting on to investors. The Task Force prosecutors molded this testimony into the securities fraud charges against Lay, contending that he continued to urge employees and investors to buy Enron stock even though he supposedly knew better.

Of course, Lay testified that neither Glisan nor Fastow said anything of the kind to him; indeed, Lay contended that they were advising him of exactly the opposite -- that the company's liquidity was as strong as it ever had been -- and he had substantial documentary evidence to back up his version of the events, such as Glisan's October 8, 2001 presentation to the Enron board. However, the Task Force iced other Enron executives who would have provided exculpatory testimony for Lay, so Lay was forced to go it alone in defending himself against Glisan and Fastow's allegations.

Thus, the case against Lay came down to an old-fashioned swearing match -- Glisan and Fastow, on one hand, and Lay on the other. That's why such a large part of the Task Force's cross-examination of Lay (see also here) focused on such things as PhotoFete and Lay's clumsy but legal use of his line of credit with the company. With Glisan and Fastow's testimony in hand, the Task Force simply had to cast Lay as a liar to the jury and they would win the swearing match.

Interestingly, Eichenwald's seminal book on Enron -- Conspiracy of Fools (Broadway 2005) -- actually suggests that it is Glisan and Fastow who are lying. On pp. 540-541 of his book, Eichenwald relates an amusing story about Enron's chief operating officer, Greg Whalley, meeting with Fastow and Glisan around October 20, 2001 when it was becoming clear that the market was turning on Enron after a series of Wall Street Journal articles had exposed Fastow's shenanigans with certain special purpose entities.

Whalley called the meeting with the two financial officers so that they could apprise him of Enron's liquidity position in the face of the quickly-unfolding crisis. Fastow began the meeting by assuring Whalley that the company was in very good liquidity position because it had $3.8 billion in available lines of credit. But then, under questioning from Whalley, Fastow and Glisan conceded that the company actually had only $1.5 billion in available liquidity. As Eichenwald relates, the meeting ended rather abruptly:

What the hell? Whalley stood up, disbelief etched on his face.

"You guys are out of your minds!" he said, turning to head out. "I walked in with $3.8 billion in liquidity, and I'm leaving with $1.5 billion."

[Whalley] shook his head. "I don't want to ask you another question. I don't think we can afford it."

So, how likely is it that Glisan and Fastow were telling Lay that Enron was a house of cards as early as mid-August when they began a meeting with Enron's chief operating officer on October 20th by assuring him that the company's liquidity position was in good shape?

Posted by Tom at 5:21 AM | Comments (1) |

A Quick Enron Reality Check?

As expected, the Conglomerate Enron online symposium last week generated over 15 interesting posts, including ones by the reliably insightful Larry Ribstein (see also here), Ellen Podgor, Don Langevoort, Lisa Fairfax, and Thomas Joo.

However, one of the final posts in the symposium particularly caught my attention. Moderator Gordon Smith passed it along from John Kroger, who served on the Task Force for a year or so in 2002-03, during which time he helped prosecute Arthur Andersen out of business and prepare the odious prosecution that placed four former Merrill Lynch executives in prison for arranging to have Merrill buy an asset from Enron that Enron may have improperly accounted for, although even that has never been proven.

Following his service on the Task Force, Kroger took a job as a law professor in Portland, from where he proceeded to publish a law review article, Enron, Fraud and Securities Reform: An Enron Prosecutor's Perspective. Kroger's resume reflects no apparent background in either structured finance or the private finance business sector, but that doesn't stop him in the article from, among other things, characterizing Enron's structured finance transactions as wholesale frauds and proposing that such risk-taking should be criminalized. For a more balanced view from experts in the field of structured finance regarding the economic and financial benefits of such transactions and Enron's use of them, see Christopher Culp and William Niskanen's Corporate Aftershock: The Policy Lessons from Enron and Other Major Corporate Corporations and Culp's subsequent book, Risk Transfer: Derivatives in Theory and Practice.

With that backdrop, Kroger wrote the following post on the Conglomerate Enron symposium:

"Here's a Quick Reality Check"

I am shocked at how skeptical most of these blog entries are. Of course, as a former prosecutor in the case, I am certainly biased. That said, here's a quick reality check. In 2000, 96% of Enron's reported net income and 105% of its reported funds flow came from accounting manipulation schemes, the vast majority of which clearly violated GAAP. At the same time, Enron managed to keep some $25 billion in company debt off its financial statements, hidden from investors. Lay told his employees to keep buying more Enron stock while he was secretly selling his own. Both men made millions spinning the socks off investors for a company that was, in the end, revealed as an empty shell. The jury heard months of testimony and concluded, quite reasonably, that the defendants knew precisely what was going on. In the United States, we don't always treat poor criminals and rich criminals alike, but we should. When people commit fraud, they should go to prison.

Using Kroger's post as a template, my reply is as follows:

I am shocked at how many of the blog entries presume that Lay and Skilling were involved in a massive fraud at Enron. Of course, as a defense attorney in various Enron-related civil actions, I am certainly biased. That said, here's a quick reality check.

In 2000, rather than allowing shareholders to suffer loss of value during a difficult post-stock market bubble period, Enron supplemented its net income and reported funds flow through innovative structured finance transactions that effectively hedged the risk of loss in many of its assets for the benefit of investors. Moreover, when the Enron board induced Lay to return to the Enron CEO position after Skilling's resignation in August 2001, he put his money where his mouth was — he used the entire board-approved $20 million bonus to invest in more Enron stock. Indeed, Lay made that bold investment in Enron even though he had already lost an enormous amount of his personal net worth in the first seven months of 2001 due to the decline in Enron's stock price, losses that he willingly incurred because he insisted that his personal portfolio remain disproportionately invested in Enron stock.

The jury heard months of testimony from primarily cooperating prosecution witnesses who had a substantial incentive to lie by implicating Lay and Skilling in crimes. After the prosecution effectively prevented witnesses with exculpatory testimony for Lay and Skilling from testifying, the jury concluded, quite reasonably, that Lay and Skilling were rich and the company they led went bust, so they must be guilty of some crime. In the United States, we don't always treat poor criminals and rich criminals alike, but we should. When business executives are accused of fraud, they should get a fair trial before they are sent to prison for life.

Posted by Tom at 4:17 AM | Comments (0) |

June 4, 2006

The Fifth Circuit's latest skirmish with SCOTUS over death penalty cases

Although the conflict flies below the radar screen outside legal circles, the Fifth Circuit Court of Appeals and the U.S. Supreme Court have been engaged in a caustic war or words (see articles here and here) over the past several years in regard to death penalty cases emanating from Texas courts. Based on the recent decision in Jackson v. Dretke, 05-70031 (5th Cir., May 30, 2006), it looks as if the Fifth Circuit judges are now getting testy with each other over such cases.

Jackson involves what type of mitigation of punishment evidence is a defendant entitled to propound to the jury during the sentencing phase of a capital murder case. Jackson admitted murdering his wife and two children, but his defense attorney sought to have the jury hear from Jackson's family and friends who did not want him to be executed. The trial judge denied the defense request and the Texas Court of Criminal Appeals upheld the decision. Jackson's habeus corpus proceeding in federal court followed, seeking what in death penalty appeal jargon is called a "certificate of appealability" ("COA") from the state courts' rejection of Jackson's request to have the jury hear the testimony of Jackson's family and friends.

In federal district court, U.S. District Judge John Rainey granted a summary judgment in favor of the state that Jackson did not satisfy the standard for a COA, effectively concluding that reasonable judges could not disagree with the state courts’ application of clearly established federal law. In upholding Judge Rainey's decision that Jackson is not entitled to a COA on the issue, the 2-1 Fifth Circuit majority decision by Judge Jerry E. Smith reasons that, even though the U.S. Supreme Court has previously ruled that the Constitution requires that a capital jury consider "any aspect of a defendant’s character or record . . . that the defendant proffers as a basis for a sentence less than death," the Supreme Court has not expressly concluded that the Constitution requires a jury to consider death penalty impact statements from friends and family. Thus, the majority narrowly concludes that Jackson cannot show that the state courts’ resolution is contrary to clearly-established federal law and, therefore, Jackson is not entitled to have his appeal considered on the merits.

In a vigorous dissent, Judge James L. Dennis contends that the majority improperly resolved Jackson’s claims at the COA stage and notes that the majority decision is at clear odds with the trend in Supreme Court decisions that broaden procedural safeguards for defendants in death penalty cases:

[T]he Supreme Court has required the liberal admission of mitigating faxtors in death cases that may be relevant to the deathworthiness or 'culpability' of defendants, and these holdings conflict with the idea that there are limited categories of admissible evidence in death cases to which evidence can be neatly fitted. [. . .]

If the value of the victim's life is permitted to be brought before the jury, however, then I see no option under Supreme Court jurisprudence but to permit the defendant to counter this evidence with evidence of the value of his own life.

Despite such apparent logic, the majority rejected Judge Dennis' reasoning. Moreover, inasmuch as Jackson's request for a COA should be rejected under Supreme Court guidelines only if reasonable jurists could not disagree over the state courts' application of federal law on the issue, the clear implication of the Fifth Circuit majority decision is that Judge Dennis is not a reasonable jurist.

My sense is that we have not heard the last word on this case.

Posted by Tom at 6:41 AM | Comments (0) |

June 3, 2006

Why bother with being a public company?

Following up on thoughts expressed in this post on the Kinder Morgan leveraged buyout from earlier this week, this Opinion Journal editorial (and related WSJ ($) article) note that the trend toward private equity financing is a direct result of management realizing that public equity has become too pricey in the regulatory maze of the post-Enron era:

Behind much of this trend is basic economics. Hedge funds, pension funds and endowments are all looking for new places to invest their mountains of cash, and private equity has been offering some impressive returns. Corporate management, meanwhile, far from running from these new barbarians at their gates, often see a financial upside. With capital abundant, the cost of borrowing low and return on equity soaring, why not?

But that's hardly the whole equation. At least part of the strength of private equity is a direct result of the problems besetting public markets. Public-to-private deals are in fact lengthy and costly and can lead to unpleasantness with shareholders--often via lawsuits. The fact that so many companies have nonetheless been willing to take the plunge speaks volumes about how eager they are to escape the increasing burdens of public-company regulation.

Sarbanes-Oxley has been the last straw for some, with its auditing and reporting requirements imposing major new costs, especially on smaller companies. This has already played a part in the remarkable slowdown in U.S. initial public offerings. Today's largest IPOs are taking place mainly on foreign markets, away from the reach of U.S. regulators. New York Stock Exchange CEO John Thain understands this as well as anyone, which is one reason for his $20 billion EuroNext purchase.

Thus, in its zeal to regulate away the risk of investing in public markets, government is making such markets less vibrant. And Larry Ribstein notes that this government-induced flow of investment capital into private equity isn't all that healthy, either, and then wryly adds:

I'm confident that we'll see that some excesses accompanied the boom in private equity, as they do every boom. In other words, there is some Enron of private equity waiting to happen.

When the scandal breaks, the politicians and the journalists will have their usual fun decrying the horrors of private equity. Watch for the Private Equity Reform Act of 2007. Everybody by then will have forgotten how all this was created by SOX, the child of the last scandal.

Is anyone really surprised that the government's solution is worse than the problem?

Posted by Tom at 4:55 AM | Comments (0) |

June 2, 2006

And you thought the Longhorn-Aggie rivalry was heated?

Texans enjoy their intense sports rivalries as much as anyone, but this clever Sarah Lyall/NY Times article notes that preparations for the upcoming World Cup soccer match between England and Germany indicate a rivalry on an entirely higher level:

They have been warned, as always, not to rampage through the streets, destroying things and attacking people. But as England's soccer fans prepare to visit Germany for the World Cup this month, another item has been added to their long "verboten" list: Don't mention the war.

"It's not a joke," Charles Clarke, then the home secretary, warned at a pre-World Cup briefing earlier this spring. "It is not a comic thing to do. It is totally insulting and wrong."

That means, basically, no getting drunk and goose-stepping in a would-be humorous manner. No Nazi salutes. No shouting "Sieg Heil!" at the referees. No impromptu finger-under-the-nose Hitler mustaches.

"Doing mock Nazi salutes or fake impersonations of Hitler — that's actually against the law in Germany," Andrin Cooper, a spokesman for the Football Association, which administers English soccer, said in an interview.

Even something as simple as wearing an ersatz German war helmet could violate German laws against inciting hatred and glorifying extremism, Mr. Clarke said at the briefing.

"The reason why the German Parliament passed these laws was because the era we are talking about was one of total horror and destruction in Germany," he continued. "Anyone who thinks it's entertaining to get involved in this sort of thing, I absolutely urge them not to do so."

The authorities in both countries have developed elaborate programs to ensure that England's fans behave themselves in Germany when the competition begins June 9. Some 3,200 people with histories of violence and hooliganism have been required to surrender their passports and are forbidden to leave Britain during the tournament.

Dozens of British officers are being dispatched to Germany to help keep order. Some English players have recorded advertisements exhorting the fans to respect their hosts, and fans' groups have arranged various communal activities with their German counterparts. One group plans to visit Auschwitz.

Placing the British fans' continued preoccupation with Germany and WWII in perspective, Lyall references one of the most brilliant episodes from the fine BBC comedy series from the 1970's, Fawlty Towers, starring John Cleese as Basil Fawlry, the wonderfully irascible owner of a small-town English hotel:

Britain's awkwardness on the subject was lampooned most famously in a television episode of "Fawlty Towers," when Basil Fawlty, the hotelier played by John Cleese, tries to attend to a group of German guests after suffering a concussion.

"Don't mention the war," [Basil] tells his staff, even as he descends into a xenophobic frenzy, repeating the Germans' lunch order of a prawn cocktail, pickled herring and four cold meat salads as "a prawn Goebbels, a Hermann Göring and four Colditz salads," and then high-kicking his way around the dining room, à la Hitler.

"So it's all forgotten and let's hear no more about it!" he says of Germany's wartime past. But somehow, he keeps bringing it up. When the Germans ask him to stop, Basil says that they started it.

"We did not start it," one [German guest replies].

"Yes, you did," [Basil retorts]. "You invaded Poland."

Posted by Tom at 6:35 AM | Comments (0) |

VE under the Enron microscope

With the announcement yesterday of Houston-based Vinson & Elkins' $30 million settlement of one of the myriad of lawsuits pending against the firm as a result of its representation of Enron, the WSJ's Peter Lattman notes this BusinessWeek Online article that reviews some of the evidence that the plaintiffs in the main Enron class action securities fraud lawsuit are marshalling against VE:

[P]laintiffs' lawyers are preparing to unleash a new volley of evidence on June 13 to support allegations that V&E should be liable for some of the $40 billion in investor losses resulting from the energy giant's collapse. [. . .]

[D]ocuments and transcripts reviewed by BusinessWeek indicate that V&E attorneys had doubts about the legitimacy of Enron's business practices. Sometimes they even made light of the company's aggressive accounting. At the end of 1997, as Enron scrambled to complete a series of deals aimed partly at burnishing its financials, it dumped a pile of paperwork on V&E. On Christmas Eve, Dilg sent an e-mail to buck up his beleaguered troops. It contained a poem, which read in part: "no sooner than you could say 'mark to market'/Our client's year end financials began to sparkle." That passage referred to Enron's use of mark-to-market accounting, which allowed it to recognize the entire revenues from a 20-year gas contract, say, in the first year.

In a 1999 voicemail that was forwarded to Dilg, V&E partner Boyd Carano expressed concern after learning that the now-notorious entity known as LJM, which was buying part of Enron's interest in a Brazilian power plant, was actually controlled by the company's chief financial officer, Andrew Fastow. "Basically, this is a fund that he set up in order to do these deals with Enron, where Enron pays him a 13 and then 25% return in order to get stuff off the balance sheet," he said. "Frankly, I don't approve."

In another voicemail, Carano told fellow V&E partner Mark Spradling that he had not been able to speak directly to Enron Chief Accounting Officer Richard Causey to get assurances that Enron had not secretly guaranteed Fastow's LJM investments. Instead, Carano had been forced to rely on the assurances of Kent Castleman, a lower-ranking employee. In his response to Carano's concerns, Spradling said: "I think the problem is that anything we do either calls into question the truthfulness of Kent Castleman or imbues this whole issue with our view that there may be fraud going on here" . . .

Given Sherron Watkins' highly-publicized testimony in the Lay-Skilling trial criticizing VE and publicity surrounding the firm's involvement in the the San Diego pension fund debacle, it has not been a pleasant past few months for VE. Moreover, the plaintiff's firms in the main Enron class action securities fraud lawsuit probably consider the $30 million that VE is paying to settle the Enron estate's lawsuit as the equivalent of a nominal "slip and fall" settlement payment. Thus, that settlement amount may not have much to do with the price of extracting VE from that even more troubling lawsuit.

As Lay and Skilling discovered, the societal morality play regarding Enron makes it enormously difficult to defend in a jury trial against allegations of wrongdoing involving the company. It's even harder when the defendent is a law firm, which juries generally don't mind hammering. VE remains in a tough spot, so stay tuned.

Posted by Tom at 5:06 AM | Comments (2) |

The shrinking of Milberg Weiss

As noted earlier here, the indictment of Milberg Weiss Bershad & Schulman is likely to put the firm out of business regardless of the outcome, although the firm is officially keeping a stiff upper lip and making a go of it.

Nevertheless, as the Arthur Andersen experience showed us, the odds of survival are long for a professional service firm under indictment. In that regard, Peter Lattman and Ashby Jones of the Wall Street Journal Law Blog have been doing a good job of keeping up with partner and client defections from Milberg Weiss, the latest of which is the New York State Common Retirement Fund's decision to seek replacement of Milberg Weiss as lead counsel in the Bayer AG class action litigation. This client defection comes on the heels of this Justin Scheck/The Recorder article that reports that several Milberg Weiss partners and associates have left the firm since the indictment, and that "competing class action plaintiffs firms say they're being bombarded with phone calls and resumes of Milberg lawyers seeking jobs."

Paragraph 83 of the indictment is probably the clincher in the decision of many lawyers and clients to bail out on Milberg Weiss:

Pursuant to Title 28, United States Code, Section 2461(c), Title 18, United States Code, Section 981(a)(1)(C), and Title 21, United States Code, Section 853, each of defendants MILBERG WEISS, DAVID J. BERSHAD, STEVEN G. SCHULMAN, and SEYMOUR M. LAZAR convicted under Count One of this Indictment shall forfeit to the United States any and all property, real or personal, which constitutes or is derived from proceeds traceable to such offense, including the following:

a. with respect to MILBERG WEISS, the more than approximately $ 216.1 million in attorneys’ fees obtained by MILBERG WEISS in the Lawsuits and litigation resolving the Lawsuits (the “tainted attorneys’ fees”).

A $216.1 million contingent forfeiture liability to the federal government has a way of inducing the search for greener pastures.

Posted by Tom at 4:38 AM | Comments (0) |

June 1, 2006

Score of the Year

I don't appreciate the finer points of soccer generally, but I must concede that this is the score of the year in any sport.

Hat tip to the ever observant Eric McErlain for the link.

Posted by Tom at 8:13 AM | Comments (0) |

Why Preston McAfee left UT

R. Preston McAfee is the J. Stanley Johnson Professor of Business Economics and Management at Cal Tech and a renowned expert on issues relating to pricing of goods and services.

Before going to Cal Tech, Professor McAfee was the Murray S. Johnson Professor of Economics and former Chair of the Department of Economics at the University of Texas at Austin. In this engaging lecture on how companies determine prices, Professor McAfee reveals that his decision to leave UT for Cal Tech was cemented when he received the following email from the UT administration regarding a message from the Texas Higher Education Coordinating Board:

From the Texas Higher Education Coordinating Board:

Your last name is your password. If you have questions or have forgotten your password, please contact the Coordinating Board.

Hat tip to Craig Newmark for the link to Professor McAfee's lecture.

Posted by Tom at 5:42 AM | Comments (0) |

The Conglomerate Enron Forum

On the heels of last week's jury verdict in the Enron Task Force's legacy case against former key Enron executives Ken Lay and Jeff Skilling, Gordon Smith, Christine Hurt and the rest of the blawgers over at the Conglomerate are hosting an online forum of legal scholars today and tomorrow to explore the issues relating to the use of criminal law as a corporate governance mechanism. In addition to Professors Smith and Hurt, Clear Thinkers favorites Larry Ribstein and Ellen Podgor are scheduled to participate, as well as University of Houston law professor and former law school dean, Nancy Rapoport.

Given the participants, this is likely to be a compelling discussion of the often troubling (and costly) implications of the government's increasingly-aggressive criminalization of corporate agency costs. Be sure to check it out.

Posted by Tom at 5:19 AM | Comments (4) |

The Rocket returns

Another segment in Houston's favorite reality show -- the Life and Times of Roger Clemens -- unfolded yesterday as the almost 44 year-old, indefatigable Rocket announced that he would return in a couple of weeks for his third season with the Stros and 23rd season of Major League Baseball. Clemens' career stats are here (pdf).

Clemens' performance during his two previous seasons with the Stros is the stuff of legends as the club reached the National League Championship Series twice, won one of those for the first time in the club's history, and reached the club's first World Series. Clemens was arguably the best pitcher in the National League during 2004, was even better than that for the first half of last season, but then nagging injuries prompted him to be much less effective down the stretch and during the 2005 playoffs. Although Clemens is still likely to be better than any of the pitchers on the Stros' staff other than Roy Oswalt this season, it's unlikely that his return will be enough to push this Stros club into the playoffs unless the club's hitters start generating more runs.

Assuming no injuries for Clemens, he will likely pitch between 140-150 innings over the remainder of the season. Assuming no dramatic drop-off in performance levels, Clemens will probably give up between 45-50 runs in those innings, which is probably about 25-35 runs better than the alternative pitcher (probably Fernando Nieve) would give up in those innings. That amount of run savings equates to between three and five extra wins for the Stros.

In a close race for a playoff spot, three to five extra wins is nothing to sniff at. Moreover, the Stros have an aging Major League roster and a farm system that is not stocked with strong hitters, so owner Drayton McLane and General Manager Tim Purpura realize that going for the gusto now is the best chance that the Stros will likely have to get back to the World Series any time soon. But adding Clemens doesn't address the Stros' chronic need for more hitting.

Clemens should help a pitching staff that is currently 15th out of the 16 National League pitching staffs in runs allowed, but that statistic is somewhat misleading because it is bloated by the troubles of the Stros' bullpen; the Stros' starters have actually been pretty good, currently sixth in the National League in terms of runs saved against average. On the other hand, the Stros are tied for ninth in the National League in on-base average and 14th in slugging percentage, and the club's corner outfielders -- Preston Wilson and Jason Lane -- have been performing at below replacement-level this season. The Stros' hitting woes are probably best summed up by the fact that Brad Ausmus -- one of the worst hitters among regular National League players over the past decade -- is the club's fourth-best hitting regular player so far this season. Ouch!

Thus, Clemens should help the Stros, but whether the club ends up in the middle of the race for a playoff spot come September depends not so much on Clemens, but on whether the Stros hitters can generate more runs. With non-hitters such as Wilson, Lane, Taveras, Everett and Ausmus regularly filling up over half of the Stros' lineup card, the prospects do not look promising.

Posted by Tom at 4:13 AM | Comments (0) |

May 31, 2006

Enron Broadband jury splits the baby

The jury in the first re-trial of the Enron Broadband case that ended in a mess of acquittals and a mistrial last year convicted former EBS CFO Kevin Howard (picture on the left) this afternoon on all five counts -- three counts of wire fraud, two counts of falsification of books and records and conspiracy to falsify books and records. Howard's co-defendant -- former EBS accountant Michael Krautz -- was acquitted on all counts. The previous posts on this case are here, including this recent one on the closing arguments of the trial.

U.S. District Judge Vanessa Gilmore scheduled sentencing for the morning of September 11, 2006, the same day on which former key Enron executives Ken Lay and Jeff Skilling will be sentenced by U.S. District Judge Sim Lake on the same floor of the Federal Courthouse in downtown Houston. Howard faces possible penalties of five years in prison on the conspiracy charge and each of the three wire fraud counts, and 10 years on the falsification of books and records count.

Given the unavoidable torrent of adverse publicity regarding all things related to Enron that has occurred since the Lay-Skilling jury returned its verdict last Thursday, it's highly unfortunate that the re-trial of Howard and Krautz was not postponed until a reasonable period of time had passed after the completion of the Lay-Skilling trial. The freedom of a 43 year-old family man and father of two young children now hangs in the balance of that dubious decision.

Posted by Tom at 2:17 PM | Comments (0) |

The storms of Katrina

With hurricane season officially starting tomorrow, this NY Times article about the research that has been done over the past year into Hurricane Katrina provides some interesting information, including the stages of the storm on the New Orleans metro area:

The first stage of Hurricane Katrina touched Louisiana as it passed south of the city in the Plaquemines Parish town of Buras with winds of more than 125 miles per hour pushing a storm surge. The wind and water overwhelmed the local hurricane defenses: levees built to withstand 13 feet of water were overwhelmed by more than 17 feet of surge, damaging levees and scattering homes and boats across the thinly populated parish like toys.

As the hurricane moved across Lake Borgne to the east, the effect was quite different: the second storm sent strong waves and a surge estimated at 18 feet or more back across the lake to the levees bordering St. Bernard Parish. The long levees there had been designed to handle 13 feet of water. The assault washed over Chalmette and other communities with floodwaters exceeding 14 feet in some areas. A similar pounding took out the southeastern levee of the development known as New Orleans East.

In its third incarnation, the storm sent the water up a funnel formed at the northwest corner of Lake Borgne and into the city's Inner Harbor Navigation Canal, where the water rose and churned with exceptional force, said Hassan Mashriqui, a researcher with the Louisiana State University Hurricane Center. Those waters shattered flood walls in several places and destroyed the city's Lower Ninth Ward.

As the storm pushed into Mississippi, it sent a final surge toward New Orleans across Lake Pontchartrain, north of the city. As the water stacked up against the south shore of the lake, it rose against the walls of the three main drainage canals that run from the center of the city. Though the surge was weaker than the others and the water did not reach the tops of the flood walls, the 17th Street Canal and the London Avenue Canal suffered breaches that caused the lake's waters to spill into the center of the city.

The NY Times article coincides with my reading over this past weekend of Douglas Brinkley's new book on Hurricane Katrina and New Orleans, The Great Deluge : Hurricane Katrina, New Orleans, and the Mississippi Gulf Coast (William Morrow 2006). Brinkley's book provides mounds of information, but is not particularly well-written, as reviewer Wilfred M. McClay notes in this blistering review:

Let me confess that I haven't read all of the writings of Douglas Brinkley. I doubt that anyone -- perhaps not even Mr. Brinkley himself -- has ever done that. He is a veritable ... deluge of literary productivity, with books to his credit on a dizzying array of subjects, ranging from Beat poetry to Jimmy Carter, and from Henry Ford to, most recently, the failed Democratic presidential candidate John Kerry. Indeed, the range of his literary productions is so wide as to seem indiscriminate. But his bestknown writings seem to have three things in common.

First and foremost is their relentless mediocrity. I cannot think of a historian or public intellectual who has managed to make himself so prominent in American public life without having put forward a single memorable idea, a single original analysis, or a single lapidary phrase -- let alone without publishing a book that has had any discernable impact. Mr. Brinkley is, to use Daniel Boorstin's famous words, a historian famous for being well-known.

By the way, on pp. 14-25 of the book, Brinkley notes the Houston Chronicle's fine science writer Eric Berger and his landmark December 2001 Chronicle story in which Eric predicted the dire impact of a storm such as Katrina on the New Orleans metro area. Eric began blogging at the beginning of the hurricane season last year, and he and I crossed paths as we encouraged New Orleans residents to evacuate on that fateful Saturday before Katrina hammered the upper Gulf Coast even as New Orleans Mayor Nagin continued to delay calling for a mandatory evacuation. Eric's blog became one of the "go-to" sources of information during last year's historic hurricane season, and that experience made me a regular reader of his blog and writings. I have not come across a better blog on science matters for laypersons than Eric's.

As with the Chronicle's recent innovative coverage of the Enron-related trials, Eric's blog is another example of the Chronicle's trendsetting initiative -- inspired by the Chronicle's fine technology writer, Dwight Silverman -- in blending traditional news reports with blogging to change the way in which major news events are covered. Houstonians tend to take the local daily for granted from time to time, but we should all appreciate the Chronicle's willingness to embrace this innovation that has dramatically improved the delivery of important information to citizens.

Posted by Tom at 5:10 AM | Comments (0) |

The law clerks of SCOTUS

The ubiquitous Richard Posner reviews in this New Republic Online article (free registration req'd) two new books about the law clerks of the United States Supreme Court -- Courtiers of the Marble Palace: The Rise And Influence of the Supreme Court Law Clerk (Stanford 2006) and Sorcerers' Apprentices: 100 Years of Law Clerks at the United States Supreme Court (NYU Press 2006) -- which provide a glimpse of how the modern Supreme Court operates. It's an entertaining and informative review, reflected by the following blurb:

Except for Justice John Paul Stevens, who writes his own first drafts of opinions, law clerks write the first drafts of their justices' opinions. (According to Courtiers, Stevens's clerks rewrite his drafts extensively, thus producing an inversion of the normal relation of clerk-author to justice-editor. In another inversion, Justice Harry Blackmun, a genuine eccentric, left the opinion-writing to his clerks after his first years on the Court and concentrated on cite-checking their drafts. He was by all accounts an awesome cite-checker.) Some justices rewrite the clerks' opinion drafts extensively, others little. Sorcerers' Apprentices estimates that 30 percent of the opinions published by the Supreme Court are almost entirely the work of the law clerks; and as they are the primary drafters of most of the other opinions as well, probably more than half the written output of the Court is clerk-authored.

Judge Posner is particularly interested in whether the elaborate Supreme Court law clerk system has actually resulted in improvement in the quality of the Court's decisions:

[O]ne can apply quality-related criteria, such as clarity, brevity, guidance provided to the lower courts, and candor in explaining the true grounds of decision, to the opinions in the two eras.

When one does this, one is not likely to find a dramatic, or perhaps any, overall difference in quality. Today's opinions are longer--a dubious virtue. There are more separate opinions, most of which are ephemeral. Today's opinions are more polished, more "scholarly," and more carefully cite-checked, but these are modest virtues. Neither judges nor their clerks are scholars. The scholarly apparatus of judicial opinions belongs to the rhetoric rather than the substance of judicial decision-making.

Read the entire review.

Posted by Tom at 4:39 AM | Comments (0) |

May 30, 2006

Monday morning QB'ing the Lay defense

Yes, it's Tuesday, but the Monday morning quarterbacking on the failed defense of Ken Lay is in full swing.

Donald Watkins, an Alabama-based lawyer who headed up the defense team that handled the successful defense of former HealthSouth CEO, Richard Scrushy, says the following about the Lay defense:

In an interview following the Enron trial, Watkins called Lay's strategy wrong from the start because the former Enron CEO began his defense by hiring a team of big-name trial lawyers. What Lay needed first, Watkins says, was a strategist with a broader view of what was needed to keep such a high-profile defendant out of prison.

"Lawyers are technicians," Watkins says. "They're like painters, plumbers and sheet-rockers."

Frankly, although somewhat interesting, Watkins' views should be taken with a rather large grain of salt. First, Lay did not hire a "team of big-name trial lawyers." Mike Ramsey -- Lay's lead attorney -- has a good local reputation as a criminal defense attorney, but is hardly close to a "big-name" trial lawyer in Houston or anywhere else. No one else on the Lay team comes close to having that reputation, either.

Moreover, although similarities exist, all big business criminal cases have significant differences. HealthSouth did not experience anywhere near the societal and media demonization of Enron, which made Lay's public relations problem much more difficult than Scrushy's. Moreover, under the circumstances of Lay's case, Lay's defense had to be far different from Scrushy's, who relied on the "honest idiot" defense and did not testify during his trial. In contrast, the jurors to a person in the Lay trial stated post-trial that they expected Lay to respond to the testimony of prosecution witnesses against him, signaling that they would have crucified him if he had not testified. Thus, the fact that Lay was not particularly effective in defending himself while testifying does not mean that it was a mistake to put him on the stand.

In short, different circumstances call for different strategies. The fact that Watkins' strategy worked in the Scrushy case does not mean that the same strategy would have worked in the defense of Lay. However, his success in the Scrushy case does provide a nice perch from which to Monday morning quarterback.

Posted by Tom at 8:10 AM | Comments (2) |

Lessons from an Enron short

Jim Chanos is a well-known investor and investment advisor who specializes in shorting stocks -- one of his most famous shorting targets was Enron back in 2001.

Making money by selling stocks short is most often accomplished through the process of borrowing stock, selling it, and then covering the loan of the stock at maturity by purchasing the stock in the market later at a lower price. The process is often criticized by the short seller's target because it generates profits from misfortune (i.e., when the target company's stock price goes down) and is counter-intuitive to the usual way folks make money on investments -- that is, holding stocks long-term as they appreciate in value. Nevertheless, the practice provides a valuable market purpose in hedging risk and, thus, is a component of any well-structured securities market.

In this Wall Street Journal ($) op-ed, short-seller Chanos provides the following ten lessons (without Chanos' explanation for each rule that is provided in the article) on the Enron saga:

1. The Enron scandal shows a need for a standards-based accounting system, rather than a rules-based one.

2. Mark-to-Market accounting was not the problem at Enron, Mark-to-Model was.

3. Off-balance-sheet deals and entities are "off" the balance sheet for a reason.

4. Wall Street analysts don't "do" complex.

5. The rating agency system breaks down when most needed. Rely on it at your own peril.

6. Beware of, and question, unexpected executive resignations.

7. Whistleblowers aren't whistleblowers if they blow their whistles inside the company walls (note: Chanos is referring to this).

8. Special investigations by corporate boards are almost always a waste of time/money, and often prove highly misleading.

9. Character cannot be compartmentalized.

10: Friends do not let (possibly guilty) friends take the stand in criminal trials.

Read the entire op-ed. Probably because Chanos did not actually read Lay and Skilling's testimony about Enron's short sellers, his comments regarding the extent to which the Lay-Skilling defense strategy relied upon short sellers in explaining Enron's demise reflects the generally overblown nature of the media's reporting of that testimony. Nevertheless, Chano's rules are helpful reminders of the myth that underlies much of American securities regulation and prosecutions such as the one against Lay and Skilling. As noted several times previously on this blog, investing heavily in a company such as Enron without a corresponding hedge is akin to playing the slots in Las Vegas. You can win big, but you can also lose big. The difference is that we don't generally create morality plays to assuage folks who gamble away their money in Las Vegas, and we don't prosecute the casino owners, either.

Posted by Tom at 6:18 AM | Comments (2) |

What might have been

In a development that drips with irony on the heels of last week's jury verdict in the Lay-Skilling trial, Houston-based Kinder Morgan, Inc. announced that its management team -- led by Kinder Morgan CEO and former Enron chief operating officer, Richard D. Kinder -- is proposing to take the oil-and-gas pipeline powerhouse private in a $13.5 billion deal that would be the largest management-led, leveraged buyout in American business history.

Any further question that the public company model is looking less attractive to private ownership as a means to building owner wealth in the post-Enron era? Chalk up a good portion of that development as another cost (among the many others, as Larry Ribstein notes) of demonizing Lay and Skilling, as well as everything having to do with Enron. Remind me again -- the purported purpose of these prosecutions was to protect investors in public markets?

At any rate, Kinder and other KM executives are planning on contributing $2.8 billion of their existing shares to the newly private company, and private-equity investors Goldman Sachs Capital Partners, American International Group Inc. and the Carlyle Group would contribute another $4.5 billion. The new private company would take on a total of $14.5 billion in debt, which means that the transaction has a total value of around $22 billion. Kinder and other KM executives are offering $100 a share for the company, which is about an 18% premium on Friday's New York Stock Exchange closing price of $84.41. The 52-week high for KM shares is $103.75.

The irony of the deal is that KM is largely the result of a combination of Kinder's talent and Ken Lay's choice. Back in 1996, Lay and the Enron board were attempting to choose between Kinder and Jeff Skilling to replace Lay as chief executive in running Enron's day-to-day operations. Lay chose Skilling, so Kinder left and began KM with about $40 million in primarily pipeline assets that he bought from Enron as a part of his severance deal. Under Skilling, Enron embraced a business model based primarily on what became a huge trading operation, while Kinder built a formidable portfolio of stodgier, but increasingly valuable, oil and gas pipeline assets at KM.

KM has been fabulously successful. Since 1999, KM's share price has increased over 150% through an aggressive expansion of the company's business in both the U.S. and Canada and the company currently transports more than two million barrels of gasoline a day through 43,000 miles of pipelines, manages over 80 million tons of coal each year, owns huge terminals for distributing oil and gas and oil-sands assets in Alberta, Canada and stores about 75 million barrels of oil and chemicals. As a result, Kinder has become one of Houston's wealthiest business executives -- his 18% stake in KM is worth around $2.4 billion based on Friday's closing KM share price.

Thus, KM's success provides one of the most interesting "what if's" of the Enron saga. What if Lay and the Enron Board had chosen Kinder over Skilling and spun off Enron's trading operation to Skilling in a similar manner to the way in which Enron provided Kinder with the base assets he used in starting KM?

As this earlier post alluded, my sense is that Kinder would have steered Enron to success as a KM-type pipeline company, albeit probably not as successful as KM, which was never hindered by Enron's less-successful business ventures. Meanwhile, I believe Skilling would have enjoyed the same type of success in building a spin-off trading company that Kinder has enjoyed in building KM. Indeed, with the benefit of 20-20 hindsight, Skilling seems like the type of fellow who would have been much more fulfilled in building an Enron spin-off into a trading powerhouse than he was in dealing with many of Enron's far-flung business operations that he neither created nor thought were particularly important to Enron's success.

Amidst the current demonization of Lay and Skilling, most folks largely overlook the fact that Lay probably would not have been indicted at all if he had declined the Enron Board's request that he replace Skilling as Enron CEO when Skilling resigned unexpectedly in August, 2001. What is ignored even more is that the entire Enron saga would almost certainly not have occurred at all had Lay made the better choice ten years ago.

Posted by Tom at 4:26 AM | Comments (2) |

May 29, 2006

Garner said what?

My latest Stros review noted Stros skipper Phil Garner's limitations as a big-league manager. A reader asked me to elaborate.

First, let me be clear that I like Garner. He is a genuinely nice man and he represents the Stros well. He's not the worst recent Stros manager by any stretch of the imagination (remember Jimy Williams?). He is just not as good a manager as Larry Dierker.

Apart from allowing the odious Mike Gallo (5.74 ERA/-3 RSAA) and Trevor Miller (4.63 ERA/0 RSAA) to be on the same pitching staff together, Garner gave us a good example of his limitations in the following recent Chronicle blurb regarding two of the Stros' underachieving outfielders, Preston Wilson and Jason Lane:

For those fans wondering why Phil Garner is giving Preston Wilson steady playing time and sitting Jason Lane, Garner mentions Wilson's track record as a major-league run producer.

In contrast, Lane has been a major-league starter for only one season.

"I'll give him every chance I can to get on a roll," Garner said of Wilson, who responded Thursday by going 4-for-5 with a double, two runs, an RBI and two stolen bases. "He's been a productive player. I'll give him every chance I can to keep being a productive player."

So, Garner prefers Wilson over Lane because of "Wilson's track record as a major-league run producer." There is only one problem with that analysis.

It's wrong.

Wilson, who is almost 32 and became a regular National League player at the age of 24, has been a below-average National League hitter and run producer for his entire MLB career -- he has scored 17 fewer runs than an average National League player would have during the time Wilson has been an MLB player (RCAA, explained here). Wilson has been a below-average run producer while possessing a below-average .331 on-base average, an above-average .473 slugging percentage and an above-average .805 OPS (i.e., on-base average + slugging percentage).

Meanwhile, Lane, who is 29 and has been a regular National League player for one season, has been an above-average National League run producer for his two full major league seasons. He has a 14 RCAA while generating a below-average .328 on-base average and an above-average .488 slugging percentage and .816 OPS.

Moreover, even though Lane and Wilson are not having good seasons to date this year, Lane is clearly better than Wilson. Lane's RCAA this season is -2 and he has an above-averge .341 OBA, although his slugging percentage and OPS are below-average at .431 and .771. In 191 plate appearances, Lane has made 129 outs and generated 31 hits, including 9 yaks and 4 doubles, while taking 32 walks, second on the club to 3B Morgan Ensberg. Lane has struck out 32 times and grounded into one double play.

In comparison, Wilson's RCAA this season is -7 and his other numbers are equally atrocious -- a .305 OBA, a .392 SLG, and a pathetic .697 OPS. In just 12 more plate appearances than Lane, Wilson has already made 19 more outs (second on the club only to the equally ineffective-hitting Taveras) while generating 51 hits, only 11 of which have been for extra bases (including five yaks). Wilson has drawn only 9 walks, which is the worst on the team among regular players, and his 56 strikeouts leads the team by far. One good thing about Wilson's high strikeout rate is that at least it keeps him from hitting into double plays, which he has already done five times this season.

In addition to all that, Lane is a clearly superior defensive player to Wilson.

Consequently, Garner favors a less productive singles hitter (Wilson) over the slumping but more productive power hitter (Lane) because of the myth that Wilson is a "proven Major League run producer.' Inasmuch as I do not believe Garner is a disingenuous man, my sense is that he truly believes that Wilson has been the more productive player. That he doesn't understand that Lane has clearly been the more productive player reflects one of Garner's limitations as a manager -- relying on myths rather than analyzing performance accurately.

Jimy Williams' disastrous decision to platoon the extraordinarily productive Ensberg with the notoriously unproductive Geoff Blum during the 2003 season may well have cost the Stros a playoff berth that season (the Stros finished one game behind the Cubs that season in the National League Central race). The difference in productivity between Lane and Wilson that Garner faces is not as great as the difference between Ensberg and Blum that Williams faced in 2003, but -- particularly in a close race for a playoff berth -- these types of managerial mistakes can make a difference.

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

Maggert breaks through at Memphis

My neighbor in The Woodlands, Jeff Maggert, shot a 31 on the back nine yesterday of the TPC Southwind Golf Course in Memphis on his way to a final round, five-under-par 65 and his first PGA Tour win in seven years. Maggert's 72-hole winning score of 271 won the Fed Ex St. Jude's Tournament by three strokes.

Maggert is an interesting fellow. A 42 year-old graduate of Texas A&M, he has an impeccable swing, has played on three Ryder Cup teams (1995, 97, and 99) and has often been in contention in major championships over his 15 year PGA Tour career. However, his three career wins seem somewhat low for a player of his talent, although his streaky putter probably explains much of that.

He has never finished a season outside the top-125 money list during his 15 years on the Tour, but Maggert finished 106th last season and, until yesterday, appeared to be on his way to having his worst year on the Tour. For the year, he had won less than $300,000, missed the cut in his previous three tournaments and in five of the 13 tournaments that he had played in this year, and was 118th on the money list. So, yesterday's victory was particularly welcome, given that it vaulted Maggert to around $1,235,000 in winnings for the year, good for 26th on the money list. Another year, another top-125 finish for Maggert.

By the way, as the father of four teenagers, one of the things I admire most about Maggert is that he is the father of five children, several of whom are teens. He understands the importance of being around for them and his wife, so he does an excellent job of balancing his life on the Tour with his family responsibilities in The Woodlands. Thus, as the rest of the Tour players will be playing in the Jack Nicklaus' Memorial Tournament in Ohio this coming week, Maggert will be knocking it around the local courses with his children and not missing the Tour a bit.

With those priorities, my sense is that we will continue to see Jeff Maggert's name popping up on leaderboards from time to time. Just not all the time.

Posted by Tom at 6:10 AM | Comments (0) |

May 28, 2006

Administrative note

I've had to turn off comments for awhile because of an extensive spam attack. I will turn the comment feature back on once I've figured out how to stem the attack, which should be shortly.

Inasmuch as I moderate comments, none of the spam makes it on to the blog site, but it's still easier simply to turn off the comment feature while modifying the spam defenses to deal with the attack.

It's always something.

Update: I've decided to require TypeKey authentication for comments. I would have preferred not to do so, but authentication provides a strong component in the defense against comment spam. I hope the nominal registration requirement for authentication is not too much of a bother. Thanks for the patience.

Posted by Tom at 4:24 PM | Comments (2) |

Checking in on Southwest Airlines

Mitch Schnurman, the Ft. Worth Star-Telegram's business columnist, notes that low-cost airline leader Southwest Airlines is now one of the industry leaders in pilot and flight attendant compensation:

Southwest employees are also paid some of the highest salaries in the business, with pilots and flight attendants at the top of the scale.

An experienced pilot at Southwest, for example, earns 45 percent more than his counterpart at United and almost 18 percent more than at American Airlines.

It wasn't always that way. Three years ago, Southwest pilots were paid at least 20 percent less than pilots at legacy carriers. They usually made up the difference, and then some, from Southwest's profit sharing and stock options.

Then the competition began restructuring after losing tens of billions of dollars. Companies shrank, went bankrupt and cut jobs, pay and benefits. Southwest, meanwhile, continued to grow, and workers received small, steady increases, without involuntary layoffs.

If you charted the airlines' worker pay on a line graph, the lines would have crossed about 2004, with Southwest rising to the top and most of the competition heading south.

Schnurman notes Southwest chairman Herb Kelleher's line that "manage in good times as if they're bad, for the bad times will surely come" and then explains how the company has avoided the financial problems relating to employee compensation that have bedeviled the legacy airlines:

In lean times, the company's lower pay helped cushion results. But when profits soared, employees benefited as much as anyone, thanks to rich profit sharing and stock options.

In 2000, for instance, Southwest employees received 16 percent of their pay as a profit-sharing bonus. In 2004, in the midst of the industry slump, profit sharing totaled 5 percent of pay.

That's a lot less, but it's still a meaningful bump. And the payouts didn't become a permanent labor cost, as was the case with most legacy carriers. United, Delta and others signed labor contracts near the peak of the market, locking in expenses that would be difficult and painful to undo later. [. . .]

Southwest has a 401(k) plan and other savings programs, but it doesn't offer a traditional pension. That helps in managing the business, because the company pays as it goes, rather than incurring big long-term liabilities.

At legacy carriers, such pensions were a huge part of pilots' pay packages. United and US Airways dropped their pensions after filing for bankruptcy. At Delta and Northwest, the pensions are in doubt because the airlines are in bankruptcy now. . . Southwest pilots made a conscious decision to go with a defined-contribution plan so employees could get their money every year and decide how to invest it.

They saw what happened to workers at Eastern, Braniff and other carriers in the early 1980s.

"We didn't want to tie our retirement to the airline," [Southwest pilot union VP Carl] Kuwitzky said.

Another good call for the employees and a good call for Southwest.

Read the entire column and marvel at a company that establishes a sound plan and then sticks to it. Sounds simple in theory, but experience proves that it is quite difficult to achieve in practice.

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

May 27, 2006

Ray Nimmer named interim Dean of UH Law Center

After former University of Houston Law Center Dean Nancy Rapaport resigned under pressure recently, a friend asked me who I thought the UH Law Center should hire as the new dean. My reply: "The best replacement is already on the faculty -- Ray Nimmer."

It appears that someone may have been listening.

Earlier this week, the University announced that Professor Nimmer -- one of the most prolific legal minds in Texas -- has been named interim dean of the UH Law Center.

Professor Nimmer is one of the nation's leading authorities on business and bankruptcy law, computer information licensing, e-commerce, and related intellectual property issues, all of which are subjects that he has addressed in the 20 or so books and numerous articles that he has written over his superlative 30 year teaching career. Even more importantly, he is a gifted teacher who has taught a remarkably broad variety of courses at the UH Law Center, including Contracts, Contract Drafting, Evidence, Bankruptcy, Corporate Reorganization Law, Internet Law, Electronic Commerce, Secured Financing Law, Negotiable Instruments, Copyright Law, Information Law, Sales, and Licensing Law. Professor Nimmer's blog is here, and he comments on his decision to accept the interim appointment here.

This is Professor Nimmer's second stint as interim dean of the Law Center. Frankly, it's highly unlikely that the search committee for a new dean will find a more-qualified candidate for the permanent dean position than Professor Nimmer. Here's hoping that the search committee and the UH Board of Regents realize that and name this long-time treasure of Houston's academic community as the new UH Law Center Dean.

Posted by Tom at 8:25 AM | Comments (0) |

May 26, 2006

Stros 2006 Review, Part Three

Where have you gone, Roger Rocket?

That's the question that most Stros fans are asking at the 3/10's pole of the season (prior 1/10th of a season posts are here), but it's the wrong one. It's highly unlikely that a return of Clemens would make a viable playoff contender out of this 25-23 club, which backslid with a poor 6-10 record during the most recent 1/10th of the season after going 11-5 and 8-8 in the first two sixteen game segments of the season.

The big problem for the Stros over the past several seasons -- i.e., declining hitting production (see previous posts here and here) -- is combining with far less effective pitching than the Stros have enjoyed over the past two seasons to make this club look very much like an also-ran. Indeed, the Stros already trail the NL Central-leading Cardinals (31-16) by 6.5 games less than a third of the way through the season.

The club's hitting and pitching statistics to date are set forth below, and pdf's of the current hitting stats are here and the current pitching stats are here, courtesy of Lee Sinins' sabermetric Complete Baseball Encyclopedia:

The abbreviations for the hitting stats are defined here and the same is done for the pitching stats here.

As noted above, despite some awful pitching performances over the past 16 games, the Stros primary problem is hitting. During the moribund home series against the Giants when the Stros young starting pitchers fell apart and allowed the Giants to score 34 runs in three games, few people seemed to notice that the Stros scored a total of only five runs in those games. Then, after the Stros peppered the Nationals with nine runs in the first game of the club's most recent series, the Stros scored a total of seven runs in losing the next three games, including back-to-back one run performances. Even with above-average pitching that the Stros have enjoyed the past two seasons -- which this club does not have -- it's hard to win consistently with that type of insipid offensive output.

1B Berkman (13 RCAA/.375 OBA/.605 SLG/.980 OPS) and 3B Ensberg (20/.403/.627/1.030) remain two of the top half-dozen hitters in the National League this season and are the foundation of almost all of the Stros' run production. Although ageless 2B Bidg (1/.356/.472/.827) is having another solid season at the plate, the rest of the club's regular players are quickly becoming a collective train wreck at the plate. RF Lane (-1/.335/.411/.746) is at least remaining reasonably productive despite not hitting, but CF Taveras (-10/.322/.321/.642), SS Everett (-10/.271/.331/.602) and LF Preston Wilson (-9/.289/.384/.674) are quickly descending into the twilight zone of MLB hitting. Even over-performing C Brad Ausmus -- one of the worst hitters among regular National League players over the past decade (-203/.330/.353/.683) -- is showing signs that he is returning to his traditional hitting level after an unusually strong first 30% of the season (4/.377/.412/.789).

The club's hitting woes are exposing another of this club's weaknesses -- the questionable decisions of Manager Phil Garner. Almost a third into the season, Garner inexplicably continues to trot out Wilson rather than the more productive Chris Burke (5/.575/.413/.988), Eric Bruntlett (1/.378/.372/.750) or even Luke Scott, who is hitting .396./478/.874 at AAA Round Rock. Meanwhile, although Taveras' defense at least provides a colorable reason for playing him despite his offensive limitations (a trait that Wilson does not share), Garner doggedly continues to place Taveras at the top of the batting order despite the fact that he is quickly becoming one of the worst regular National League players in terms of producing runs. That's exactly the opposite of what you want to see out of a top-of-the-lineup hitter, and Garner's stubborn ignorance of that fact is a surefire sign that he does not have the flexibility of a top-flight manager.

Meanwhile, the pitching continues to be below average among the 16 National League teams in terms of runs saved against average (RSAA, explained here), which is a decided downturn over the Clemens-led staffs of the past two seasons. Beyond Roy O (3.36 ERA/8 RSAA), no pitcher on the staff has been particularly consistent, although almost all of them have had their moments when they have been effective. Despite the speed bump of the recent home series with the Giants, Buchholz (4.35 ERA/ 0 RSAA) and Rodriguez (3.88 ERA/3 RSAA) continue to pitch reasonably well for young starting pitchers, and even the less effective Nieve (5.36 ERA/-5 RSAA) had a reasonably strong outing against the Nationals the other day.

However, veteran starter Pettitte (5.76 ERA/-11 RSAA) continues to struggle mightily this season after having the best season of his career last season and most of the rest of the staff has been an accident waiting to happen, particularly troubled closer Brad Lidge (6.53 ERA/-5 RSAA), who is currently the second worst pitcher (after Pettitte) on the staff in terms of runs saved against average. With two spots in the bullpen manned by the ineffectual Mike Gallo (5.54 ERA/-2 RSAA) and Trevor Miller (6.23 ERA/-2 RSAA), this staff does not come close to the depth and overall strength of the staffs of the past two seasons. Such downturns sometimes happen to pitchers, whose performance (outside of the top pitchers such as Oswalt and Clemens) is generally far more prone to broad swings in productivity from season to season than hitters normally experience.

Which brings us back to my point about Clemens. Although it's unrealistic to expect the Rocket to perform at the extraordinary levels that he produced over the past two seasons, my sense is that his contribution to this club would still be an improvement over Nieve in the starting pitching rotation. Based on a reasonable expectation of productivity, that change in the pitching staff (including moving Nieve to the bullpen and dispensing with a less productive pitcher) would probably save the Stros 10-20 runs over the remainder of the season. While a considerable improvement over current pitching performance levels, that's not close to being enough runs to push this club into contender status without a big productivity turnaround in hitting (not likely) or pitching (more likely, but not probable).

Thus, the next tenth of the Stros season will likely determine whether the club can remain in the race for a playoff spot. After a series in Pittsburgh against the hapless Pirates (14-33), the Stros play the Cardinals in St. Louis, then the Reds (27-20), the Cubs (18-28) and the Braves (24-23) at Minute Maid Park. Absent a turnaround from the current downward trend -- which is not helped by the fact that Berkman will be out for a few days after hyperextending his right knee -- the Stros may find themselves being in the unusual position (for them) of playing out the string by mid-June.

Do you think that the Rocket really wants any part of that?

Posted by Tom at 5:00 AM | Comments (3) |

Lay-Skilling, Week Seventeen

Remember that point made in the previous week summaries about the predisposition of the leaders on the jury determining the outcome of the trial of the corporate criminal case of the decade?

Well, in a strong indication that this trial was already over after the jury was selected, the jury in the Lay-Skilling trial concluded its relatively short deliberation (less than five days) before the long holiday weekend and returned a verdict of guilty on most counts against the two key former Enron executives. The jury convicted former Enron chairman Ken Lay on all six conspiracy, wire fraud and securities fraud charges, and then U.S. District Judge Sim Lake piled on by finding Lay guilty of four more charges of bank fraud in connection with Lay's bench trial over his self-admitted violation of Regulation U in using bank lines of credit improperly in buying stock in publicly-owned companies. Former Enron CEO Jeff Skilling was convicted on 18 counts of conspiracy and securities fraud, but the jury convicted Skilling on only one of ten counts of insider trading, prompting Larry Ribstein to ask "does this mean that the jury thought he didn't know enough about what was happening to bar him from trading, but that he did know enough to go to jail for fraud?"

Ah, the vicissitudes of criminalizing corporate agency costs.

Most followers of the case agree that the jury's verdict is not particularly surprising. As noted here many times during the trial, the Enron Task Force prosecutors did an effective job of presenting a fundamentally weak case against Lay and Skilling, emphasizing time and time again the real presumption upon which the Task Force's entire legacy case was based -- that Lay and Skilling are rich and Enron collapsed, so they must be guilty of something in connection with Enron's descent into bankruptcy. Despite the transparent nature of that presumption, the harsh reality of defending wealthy business executives is that most jurors are just ordinary folks with nominal experience in complex business matters who readily accept such a presumption. That presumption -- coupled with an overwhelming public bias, particularly in Houston, against anything having to do with Enron -- was in the end simply too much for Lay and Skilling to overcome.

Although I did not attend nearly as much of the trial as many other observors, I read the entire trial transcript, so I have a reasonably good understanding of the testimony and the evidence. It's always a hard call to say when a case as long and arduous as this one may have turned in favor of the prosecution, particularly given the probability that the leaders on the jury were predisposed in favor of the Task Force's case from the beginning. However, my sense is that the Lay-Skilling defense was in reasonably good shape after completion of the Task Force's case-in-chief -- there had been no defining moment during that presentation that would have appeared to compel the jury to convict. Even as late in the trial as completion of Skilling's testimony during presentation of the defense's case, no one incident had occurred that appeared to undermine either side's position in the trial.

However, if there was a defining moment in the trial that sealed the defendants' fate, then it likely came in Week Fourteen during Task Force prosecutor John Hueston's cross-examination of Lay over the use of his company line of credit. Although Lay's line of credit was legal and the company disclosed his use of it in accordance with applicable law, Lay's repayment of the large draws on the line with Enron stock at a time when he was encouraging employees and the market to buy company stock was an apparent contradiction that the jurors could easily grasp.

Similarly, Lay's decision to draw down $1 million on the line five days before Enron's bankruptcy was a disastrous decision for the defense. Although done on advice of counsel, Lay's last-minute draw as the company was sinking into insolvency looked so bad that reference to that testimony by leaders of the jury during deliberations was probably enough to seal any wavering non-leader juror's view on whether to convict. If I'm right on that speculation, then one of the most fascinating "wonder if's" of this trial is whether Skilling would have done better had Lay's motion for a separate trial early in the case been granted rather than denied?

More time for reflection is needed before the true impact of this trial on business interests can be properly assessed, but the initial signs are not good. Beyond the waste involved in such prosecutions, it's hard to fathom how any CEO of a publicly-owned corporation after Lay-Skilling could feel comfortable about doing anything more than making the most banal public statements about the CEO's company. Indeed, little incentive exists for a CEO to say anything publicly about the CEO's company at this point other than "everything you need to know is in our regulatory filings, so go read those." The Lay-Skilling saga will quite likely represent yet another disincentive for business executives running emerging businesses to tap public equity markets, while another quite probable effect is to reduce the supply of innovative business executives who will be willing to take on the increasingly risky CEO position in a publicly-owned company at all. Given that none of that is good for the health of public equity markets, those are decidedly incongruous results for a prosecution that was supposedly premised on protecting investors in those markets.

Even more troubling for business interests is the disingenuous nature of the Task Force's theory of the case against Lay and Skilling. The Task Force pitched the case to the jurors as one in which Lay and Skilling misled unsuspecting investors by touting Enron during a period in which it was a much more troubled than they were really letting on. As Jeff Matthews pointed out during the trial, since when did it become a crime in America for business executives to be overly optimistic about their company?

Any investor who did who did any meaningful investigation of Enron over the final half-decade of its existence easily discovered that the company was a relatively highly-leveraged but innovative business with a low credit rating that was experiencing explosive growth in its trading operation. As such, it was never anything more than a speculative play for investors and, as such, one that should have been hedged. Jim Johnston of the Heartland Institute noted the same thing recently in this post:

[Investors in Enron stock] should have hedged their risk exposure. If they did not, they were like motorists who have accidents while driving without automobile insurance. We generally do not feel sorry for those people. Moreover, not being hedged is an indicator that those folks did not understand Enron’s basic business model and therefore did not deserve the run up in Enron’s stock price in 2000 and 2001. They gambled. For a while they won, but eventually lost. This is hardly any different from going to Las Vegas. Except, the federal government is not being asked to prosecute the casinos for fraud.

Stephen Bainbridge noted a similar dynamic in his initial blog post on the verdict:

One of the curious things about this case is the documented evidence that "a number of people were contradicting Enron's own rosy view of itself long before the middle of 2001." At what point does a lie by top management cease to matter if the market doesn't believe it? Presumably the government convinced the jury that people believed the lies Skilling and Lay told, but did the market really do so?

In short, the Task Force presented the jury with the convenient Enron morality play that has become so engrained in the American psyche over the past five years rather than the more nuanced truth. The morality play is easier to tell and understand, but the truth is much more likely to result in justice.

As far as appeal points go, there are a couple of obvious grounds. The first is Judge Lake's denial of the Lay-Skilling defense team's repeated motions to change the venue of the trial from Houston. Although that issue will be determined on appeal under the formidable abuse-of-discretion standard, the Lay-Skilling team will still be able to mount compelling evidence of five years of relentlessly negative local media reporting on Enron, Lay and Skilling, as well as pre-trial polling showing a jury pool that was overwhelmingly predisposed to believe that Lay and Skilling must have done something wrong. Even during the trial, the Houston Chronicle -- which did a commendable job of blending traditional news reporting with blogs in providing a trendsetting framework for covering an important news event -- featured its lead business columnist on its online Enron news page, who regularly mocked Lay and Skilling in blog posts and columns. If there ever was a case that begged for a change of venue, then this was it.

But the second obvious appeal point is the most troubling aspect of the entire case -- the Task Force's unprecedented designation of over 100 former Enron executives as unindicted co-conspirators with Lay and Skilling. Never before has such a wide-ranging conspiracy been alleged in a federal prosecution, and the transparent Task Force motive for doing so became apparent as the prosecution essentially punted on presenting any meaningful case involving a conspiracy of those unindicted co-conspirators during the trial.

The massive unindicted co-conspirator designation was vitally important to the Task Force's prosecution for two reasons. First, as noted in this post early in the trial, the designation allowed the Task Force to introduce hearsay statements of those unindicted co-conspirators through the testimony of the Task Force's cooperating witnesses. The Task Force elicited such hearsay statements from its cooperating witnesses frequently during the trial.

But even more importantly, the designation of unindicted co-conspirators effectively precluded dozens of former Enron executives with exculpatory testimony for Lay and Skilling from disputing those hearsay statements or even testifying in the trial because of the threat that a waiver of the Fifth Amendment privilege against self-incrimination would likely lead to criminal charges against such a witness if he or she were to testify contrary to the Task Force's theory of the case. As noted in this earlier post, the Task Force has used that dubious tactic in each of its Enron-related prosecutions and -- as with the other cases -- the impact on the Lay-Skilling trial cannot be underestimated.

The Task Force presented the jury with testimony against Lay and Skilling from around 15 or so cooperating witnesses who were former Enron executives. Inasmuch as the Lay-Skilling defense was hamstrung from calling former Enron executives who would have provided exculpatory testimony for the defendants, the jury could have reasonably concluded that the testimony of the former Enron executives who were cooperating with the Task Force was credible because that testimony was not counterbalanced with exculpatory testimony from other Enron executives. For example, what would the impact have been on this jury if several former Enron executives had testified that key Task Force witness Ben Glisan had repeatedly lied during his testimony? At least one juror in post-trial comments noted that the jury relied heavily on Glisan's testimony against Lay and Skilling. Would that reliance have been as great had Glisan's testimony been challenged by not just the defendants, but numerous other -- and potentially more credible -- former Enron executives?

As noted in last week's weekly post, reasonable people can differ over the issue of whether criminalizing corporate agency costs is sound public policy. However, there is simply no serious question that the Task Force’s effective preclusion of exculpatory testimony for Lay and Skilling from this trial is a serious affront to the principles of justice and the rule of law upon which our criminal justice system is based. As Sir Thomas More reminds us, "do you really think you could stand upright in the winds that would blow" if such a prosecution tactic were turned on you?

The parties and their attorneys in this titanic struggle now take a well-deserved breather for a couple of months until the sentencing hearing in early September, a week or so after Labor Day. Prosecutors Sean Berkowitz, Hueston and Kathy Ruemmler all performed effectively during the trial and carved a path for further success within either the Justice Department or a more lucrative job in private practice. On the defense side, lead Skilling attorney Daniel Petrocelli and his entire O'Melveny & Myers team were brilliant in defeat, and Lay attorney Mac Secrest did an admirable job under extremely adverse circumstances in picking up a substantial part of the Lay defense when Mike Ramsey was incapacitated by health problems during the trial. On the bench, Judge Lake was his usual steady presence in handling the unwieldly case and he now becomes the focal point as the case turns to its sentencing phase.

While operating under mandatory sentencing guidelines, Judge Lake was reportedly not pleased with what he considered to be his obligation to sentence former Dynegy mid-level executive Jamie Olis to a draconian 24-year prison sentence. Shortly thereafter, U.S. District Judge Ewing Werlein rejected Task Force calls for severe 15-year sentences against the four Merrill Lynch executives who were convicted in the currently unraveling Nigerian Barge case, and Judge Lake will almost certainly be confronted with Task Force requests for even longer sentences against the 64-year-old Lay and the 52-year-old Skilling. Nevertheless, the sentencing guidelines are no longer mandatory, so Judge Lake will have more flexibility in fashioning punishment for the two men than he previously believed that he had in the Olis case. In thinking about what Judge Lake ought to do in this case, I cannot improve on Larry Ribstein's observation in concluding his post on the Lay-Skilling verdict:

Many people think that there was so much loss associated Enron that the guys at the center of it must have been villains. But they weren't villains. The jury is saying they weren't even insider traders, as if that would have made a difference. They lost as much as anybody, and that's what drove them to lie, if they did lie. This doesn't make them saints, but it should make even the most hardcore antibusiness types queasy with the denouement of this tragedy. Locking these guys up for pretty much the rest of their adult lives for being unable to face the fact that their dream had ended is not the way a civilized society would deal with this case.

Speaking of that supposedly civilized society, amidst the media barrage over the Lay-Skilling verdict, two men and their families in a much different Enron-related case cling to the faint hope that the jury in that case can ignore the rabble and render a fair verdict. A faint hope indeed.

Posted by Tom at 4:00 AM | Comments (26) |

May 25, 2006

Oh, Canada!

This video puts to bed any question of whether "Oh, Canada" is the most stirring national anthem regularly played at a sporting event.

With that kind of inspiration, it's no surprise that the Edmonton Oilers are running away with the NHL Western Conference Finals series with the Mighty Ducks.

Hat tip to Eric McErlain for the link.

Posted by Tom at 8:12 AM | Comments (4) |

Thinking about heroin addiction

Theodore Dalrymple -- the pen name of British psychiatrist and author, Anthony Daniels (previous posts here) -- has written a new book, Romancing Opiates: Pharmacological Lies and the Addiction Bureaucracy (Encounter 2006) in which he challenges the conventional medical wisdom regarding opium addition. In this Wall Street Journal ($) op-ed, Dalrymple provides interesting insight into the nature of addiction:

I have witnessed thousands of addicts withdraw; and, notwithstanding the histrionic displays of suffering, provoked by the presence of someone in a position to prescribe substitute opiates, and which cease when that person is no longer present, I have never had any reason to fear for their safety from the effects of withdrawal. It is well known that addicts present themselves differently according to whether they are speaking to doctors or fellow addicts. In front of doctors, they will emphasize their suffering; but among themselves, they will talk about where to get the best and cheapest heroin.

When, unbeknown to them, I have observed addicts before they entered my office, they were cheerful; in my office, they doubled up in pain and claimed never to have experienced suffering like it, threatening suicide unless I gave them what they wanted. When refused, they often turned abusive, but a few laughed and confessed that it had been worth a try. Somehow, doctors -- most of whom have had similar experiences -- never draw the appropriate conclusion from all of this. Insofar as there is a causative relation between criminality and opiate addiction, it is more likely that a criminal tendency causes addiction than that addiction causes criminality.

Furthermore, I discovered in the prison in which I worked that 67% of heroin addicts had been imprisoned before they ever took heroin. Since only one in 20 crimes in Britain leads to a conviction, and since most first-time prisoners have been convicted 10 times before they are ever imprisoned, it is safe to assume that most heroin addicts were confirmed and habitual criminals before they ever took heroin. In other words, whatever caused them to commit crimes in all probability caused them also to take heroin: perhaps an adversarial stance to the world caused by the emotional, spiritual, cultural and intellectual vacuity of their lives.

It is not true either that addicts cannot give up without the help of an apparatus of medical and paramedical care. Thousands of American servicemen returning from Vietnam, where they had addicted themselves to heroin, gave up on their return home without any assistance whatsoever. And in China, millions of Chinese addicts gave up with only minimal help: Mao Tse-Tung's credible offer to shoot them if they did not. There is thus no question that Mao was the greatest drug-addiction therapist in history.

Substitution of one drug for another is at best equivocal as a means of treating drug addicts. No doubt if you gave every burglar $10 million, each would burgle far less in the future; but this treatment of the disease of burglary would scarcely discourage burglary as a social, or rather antisocial, phenomenon. And the fact that there would be a dose-response relationship between the amount of money given to burglars and the number of burglaries they subsequently committed does not establish burglary as a real disease or money as a real treatment for it.

Why has the orthodox view swept all before it? . . . [A]ddicts and therapists have a vested interest in the orthodox view. Addicts want to place the responsibility for their plight elsewhere, and the orthodox view is the very raison d'être of the therapists. Finally, as a society, we are always on the lookout for a category of victims upon whom to expend our virtuous, which is to say conspicuous, compassion. Contrary to the orthodoxy, drug addiction is a matter of morals, which is why threats such as Mao's, and experiences such as religious conversion, are so often effective in "curing" addicts.

Posted by Tom at 6:18 AM | Comments (3) |

Remember the NBA?

Once upon a time seemingly long ago, the Houston Rockets were the most popular professional sports franchise in Houston. However, after nine straight seasons of not winning a playoff series, and while watching its Texas competitors -- the San Antonio Spurs and the Dallas Mavericks -- ascend to NBA elite teams, the Rockets have become an expensive joke on the local sports scene. That's particularly unfortunate because, as Bill Simmons notes here, this season's NBA Playoffs have been highly entertaining.

Meanwhile, this NY Times article profiles mercurial Mavericks owner Mark Cuban, who has steered the Mavs to the NBA Western Conference Finals this season and has the club primed to make multiple runs at an NBA Championship over the next several seasons. Inasmuch as only three Rockets players (Yao Ming, Tracy McGrady and perhaps Luther Head) have sufficient ability even to play for the current Mavericks team, Cuban's rebuilding of the Mavericks' personnel -- as well as the Phoenix Suns making the Western Conference Finals this season despite the absence of the club's best player -- are powerful reminders of the poor personnel decisions that the Rockets have made over the past decade. One can only wonder why it took Rockets owner Les Alexander so long to do something about it?

On the NBA in general, Malcolm Gladwell, he of Tipping Point fame, has authored this interesting New Yorker review of the new book, The Wages of Wins: Taking Measure of the Many Myths in Modern Sport by three economics professors, David Berri, Martin Schmidt, and Stacey Brook. In this related blog post, the authors summarize their research about decision-making in the NBA as follows:

Payroll does not explain much of wins in the NBA, MLB, or NFL. Specifically, payroll only explains 12% of the variation in wins in the NBA. In baseball explanatory power is 18% while in the NFL it is below 5%.

We think the low explanatory power of payroll in baseball and football can at least partially be explained by the relative inconsistency of performance in these sports. As we note in our book, across time in baseball and football we see fairly wide variations in player productivity. After all, who expected the Detroit Tigers to be so good this year?

Relative to these sports, though, performance in the NBA is more consistent. So why is payroll still unable to explain much of wins?

We think the answer lies in how players are evaluated in the NBA. For more than two decades economists have looked at the link between player salary and various performance statistics. Scoring totals are the only player statistic that consistently explains player pay. Shooting efficiency, rebounds, steals, and turnovers do not consistently offer much explanatory power. We updated these studies in our book. Our story, though, was essentially the same. Scoring totals are the one statistic that matters most in determining player pay.

How much players are paid is not the only decision economists have examined. Ha Hoang and Dan Rascher published a study in Industrial Relations in 1999. The Hoang and Rascher study looked at the factors that caused a player to be cut from an NBA roster. The only player statistic these researchers found to matter was scoring. All other player statistics did not matter.

We have looked at the coaches voting for the All-Rookie team and the factors that impact where a college player is drafted. What matters most? Again, scoring matters more than factors associated with getting possession of the ball (i.e. rebounds, turnovers, and steals).

Wins in the NBA, though, are not just about scoring. Possession factors have a large impact on the outcomes we observe in the NBA. When you look at all the statistics the NBA tracks you find that with these you can explain 95% of the variation in wins. And when you look at all these statistics you find that you can create a very accurate estimate of the wins each player produces.

The authors then conclude:

Conventional wisdom in basketball is incorrect. Players who only score are not as valuable as people think. Players who do not score much — like Ben Wallace and Dennis Rodman – have a bigger impact on team wins than people seem to think.

Does this fit what many people believe about the NBA? No, but as academic research often indicates, what people believe does not always match what the data says.

Posted by Tom at 4:44 AM | Comments (1) |

The latest troubled PGA Tour event in Texas

First, it was the Shell Houston Open reeling from the consequences of some dubious decisions.

Then, a change of date and a mediocre golf course is generating concern over the future of Dallas' EDS Byron Nelson Open.

Now, this Kevin Sherrington/Dallas Morning News column (free registration required) notes that the best Tour players are turning their backs on the venerable Colonial Invitational in Ft. Worth and the tournament is losing its title sponsor to boot.

And, just to remind, San Antonio's Texas Open is played in October, smack dab in the middle of football season.

Does anyone with PGA Tour management notice or care that the Tour's Texas tournaments are quickly becoming afterthoughts?

In the meantime, this Alistair Tait column about Darren Clarke's costly example of sportsmanship at the recent Irish Open reminds us of one of the big reasons that golf is such a special game.

Posted by Tom at 4:22 AM | Comments (0) |

May 24, 2006

Rethinking H-P's merger with Compaq

The Wall Street Journal's Alan Murray is rethinking the conventional wisdom with regard to Hewlett-Packard's much-criticized 2002 acquisition of Houston-based Compaq Computer Company that many believe cost former HP CEO Carly Fiorina her job:

At a meeting of H-P's board not long ago, Chief Financial Officer Robert Wayman did a retrospective look at the merger. The results were so compelling that even some board members were stunned, some attendees say.

At the time of the merger in 2001, the company set three broad goals: to strengthen its market position, to improve its competitiveness and to increase shareholder value.

H-P was in third place in the personal-computer market in 2001 and posting losses. Today, it is a strong second, breathing down Dell's neck for the lead and posting profits -- though still not as much as it would like. In the industry standard computer-server business, H-P was then in fourth place and bleeding red. Today it is No. 1 and nicely profitable.

On competitiveness, the company's total operating expenses came to 21.5% of revenue back in 2001. Today, that is down to about 16% -- and all but one percentage point of the decline happened before [current H-P CEO] Mark Hurd's cost-cutting campaign took hold.

As for shareholder value -- well, at the time Ms. Fiorina left office, there was little to boast about. But recently, H-P has surpassed all of its rivals. Total return to shareholders since the merger has been almost 50%. Dell has been almost flat in the same period, while IBM shareholders have lost substantial sums of money.

So, did the H-P Board unjustly can Carly now that her vision is being vindicated? Murray notes that the story is more complicated than that:

The truth is that H-P's board members never completely lost faith in the merger -- after all, many of them had been a party to it. They just lost faith in Carly. She created a matrix-management structure they couldn't understand and muddled lines of reporting that made it difficult to hold anyone responsible. She concentrated too much power in her own office, and then took to the road making speeches and wasn't there when decisions needed to be made. Perhaps most importantly, she was disdainful of the board's efforts to change her ways.

It is difficult to find anyone involved with H-P today -- board member, shareholder, employee, customer, analyst -- who isn't happy that Ms. Fiorina is gone and that Mr. Hurd has taken her place. He is everything she wasn't. He dives deep into operations, is in love with the metrics and out of love with the media. He disdains vision; he is all about execution. [. . .]

H-P's directors went through hell together. In the end, they got the best of both worlds -- a charismatic CEO who brought about a hotly contested but transformational merger, and a no-nonsense, operations-oriented CEO determined to make the combined company work.

Read the entire column.

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

Toyota v. GM, Texas style

Texas is a big business battlefield in the automobile wars, and this excellent Lee Hawkins Jr. - Norihiko Shirouzu/WSJ ($) article reviews the competive advantages that Toyota Motor Corp. enjoys in building trucks in its new San Antonio manufacturing facility over General Motors Corp's reliance on its 50 year-old Arlington manufacturing facility. Not only does Toyota enjoy the advantages of newer equipment and more expansion room at its facility in comparison to the landlocked GM plant, a brief review of the cost structure of the two plants speaks volumes about GM's current problems:

Two decades ago, GM factories suffered from a sizable gap compared with similar Toyota factories, as measured in the number of hours it takes workers to build a vehicle. Recent Harbour surveys show that this gap has narrowed substantially. But GM's productivity gains are offset by higher hourly labor costs and the burden it carries for benefits owed to retirees.

In Arlington, GM pays union-scale wages of $26.50 to $30.50 an hour to its 2,800 hourly workers there. On average, GM pays $81.18 an hour in wages and benefits to U.S. hourly workers, including pension and retiree medical costs. At that rate, labor costs per vehicle at Arlington are about $1,800, based on the Harbour Consulting estimate of labor hours per vehicle.

In San Antonio, Toyota will use non-union labor and will start its 1,600 hourly workers at $15.50 to $20.33 per hour, which will grow after three years to $21 to $25. Harbour Consulting President Ron Harbour estimates Toyota's total hourly U.S. labor costs, with benefits, at about $35 an hour -- less than half of GM's rates. The brand-new plant won't have any direct retiree costs for many years. So if the San Antonio factory does no better than match the Arlington plant in productivity, it could still enjoy a labor cost advantage of about $1,000 per vehicle, a substantial sum in industry terms. That's money Toyota could translate into extra standard features -- such as stability control -- that could make its trucks more appealing.

Read the entire article. Despite GM's troubles, the company can still produce a pretty slick commercial.

Posted by Tom at 5:31 AM | Comments (2) |

Lloyd Bentsen, R.I.P.

Former WWII hero, Texas senator, Dukakis Vice-Presidential candidate and Clinton Administration Treasury Secretary Lloyd Bentsen died Tuesday in Houston. He was 85 at the time of death and had been largely out of the public eye for the past seven years or so after suffering a stroke. The Houston Chronicle story on his life is here.

Bentsen was a genuinely charming man and successful businessman who often seemed somewhat out of place in the dog-eat-dog world of politics in Texas and Washington. His political mentor was former legendary House speaker, Sam Rayburn, but Bentsen was not particularly close to the other Texas political icon of the 1950's and 60's, former President Lyndon B. Johnson. Most of Bentsen's political career occurred after Johnson had left office.

Bentsen was a member of the traditional part of the Texas Democratic Party that dominated Texas politics for over a century after Reconstruction, and he re-entered politics in the early 1970's to run against the standard-bearer of the more liberal faction of the party, Ralph Yarborough. Thus, Bentsen often sided with Republicans in political decisions, although he resisted the temptation to switch to the Republican Party as his Texas Democratic Party contemporary, former Texas Governor John Connally, did in the early 1970's.

Bentsen's popularity in Texas is perhaps best reflected by the fact that he won the 1988 Senate race by a large margin despite the fact that the Dukakis-Bentsen Presidential ticket lost the state to the Bush-Quayle ticket. Although Bentsen was able to help stem the demise of the Texas Democratic Party for a couple of decades, he and others in his faction of the party ultimately lost the war as the Republican Party began dominating Texas politics about the time that Bentsen retired from politics in 1994. After his retirement, Bentsen prepared an oral autobiography of his political and business career, which will remain confidential for five years after the date of his death.

A memorial service for Bentsen is tentatively scheduled for next Tuesday at First Presbyterian Church in Houston after a private graveside service at Forest Park Lawndale Cemetery.

Posted by Tom at 4:32 AM | Comments (7) |

May 23, 2006

Jamie Olis' nightmare continues

The ever-alert Doug Berman notes that, in an expected decision, the Fifth Circuit Court of Appeals has denied Jamie Olis' appeal of U.S. District Judge Sim Lake's denial of Olis' motion for release pending the Judge's re-sentencing of Olis after the Fifth Circuit late last year reversed Olis' original 24-year sentence and ordered re-sentencing. Although yet another unfortunate decision for Olis and his family, the Fifth Circuit traditionally defers to the trial judge in regard to such matters, particularly when the judge is as well-regarded as Judge Lake.

Judge Lake has scheduled a status conference in regard to Olis' resentencing for June 9th as the Justice Department continues to drag its feet in regard to the re-sentencing hearing. With the Lay-Skilling case finally coming to a close, my sense is that Judge Lake will use that conference to put the Olis resentencing on a fast track.

Posted by Tom at 8:35 AM | Comments (0) |

More on the Barbaro injury

My bright niece, Marianne Kirkendall, is entering her final year as a graduate student in veterinary medicine at Iowa State University in Ames. As you might expect, Marianne -- who has always loved horses -- is all over Kentucky Derby winner Barbaro's horrific leg injury, so she passes along this fascinating Barbaro website page for the New Bolton Center, which is the University of Pennsylvania facility where Barbaro's injury is being treated and one of the premier equine clinics in the country (a NY Times article on the same subject is here). Marianne comments on Barbaro's surgery:

The top picture on the left shows them lifting Barbaro out of the recovery pool. Equine surgery is obviously made very difficult given the size of horses, and their "flighty" nature. Cranes are used to lift them on and off of surgery tables. I've gotten to help with several surgeries, and the induction and recovery from anesthesia can get every bit as complicated (and even more exciting!) as the surgery itself!

Most equine hospitals recover horses by putting them into a dark, padded stall and using a tail rope to help them get up when they are ready. The anesthesiologist literally sits with the horse until they start trying to get up, then must leap out of the stall to avoid the commonly flailing hooves! Unfortunately, horses recovering from anesthesia sometimes break their legs as they wake up and try to stand before they are ready. This pool technique is a newer method of recovery that only a few clinics have as yet, but is really neat! Cool to see it in action!

Posted by Tom at 7:47 AM | Comments (0) |

More on the corporate crime lottery

Amidst an overwhelmingly negative media drumbeat, former Enron executives Ken Lay and Jeff Skilling await a jury verdict that could send them to prison for most of the rest of their lives. Meanwhile, in Amsterdam, such matters are handled a bit differently:

The executives in charge of the Dutch retailer Royal Ahold when it plunged into a financial scandal were convicted of fraud on Monday but were sentenced to a fine and no prison time, as judges found they bore little criminal guilt.

The former chief executive, Cees van der Hoeven, and the former chief financial officer, Michiel Meurs, were fined 225,000 euros ($288,000) each and they were given nine-month suspended sentences.

The verdict comes more than three years after Ahold — which operates grocery stores around the world, including the Stop & Shop and Giant chains — went to the brink of bankruptcy in February 2003.

An earlier post on the Royal Ahold case is here.

Meanwhile, if the prospect of fairness for Lay and Skilling is simply too difficult to fathom, then how do you square the resolution of the Ahold case with that of this case, this case, or this one?

So it goes as an unattractive cauldron of resentment towards business and wealth continues to produce the lottery-style results of prosecuting corporate crime in America.

Posted by Tom at 7:11 AM | Comments (0) |

Closing arguments in the first Enron Broadband re-trial

Inasmuch as I had a couple of hearings yesterday in federal court, I was able to slip in and watch most of the closing arguments of the Enron Task Force's case against former EBS CFO Kevin Howard (picture on the far left) and former EBS accounting director Michael Krautz. Based solely on the closing arguments -- which are not always a good indicator of how the evidentiary phase of the trial went for either party -- my sense is that acquittals of both men are likely.

Call the Howard-Krautz part of the Enron Broadband re-trials the "Nigerian Barge II case." As with its basic theory in that case, the Enron Task Force in this one contends that Howard and Krautz engineered a series of secret side deals that undermined the validity of Enron's accounting treatment for an otherwise valid joint venture deal with a small computer outfit named nCube. The purpose of the joint venture was to monetize Enron's video on demand ("VOD") contract with Blockbuster, which Enron used to buttress its earnings in a couple of quarters to the tune of around $100 million during 2000-2001. Although there is nothing wrong such a deal in theory, says the Task Force, the deal was a sham because nCube's equity in the joint venture was never at risk because Enron orally promised to take nCube out at a stated rate of return, Enron controlled the joint venture and the parties operated no real business in the joint venture. The Task Force contends that Howard and Krautz were at the center of the sham deal.

Unfortunately for the Task Force's theory of the case, nCube lost all of its equity in the joint venture and substantial evidence exists that the joint venture was not a sham. Sure, nCube wanted Enron to buy nCube's interest relatively quickly after the deal was consummated, but Enron auditor Arthur Andersen advised that such a purchase would undermine Enron's accounting for the deal and so, Enron undertook to find a third party buyer for nCube's interest, which never panned out. As far as I could tell from the closing arguments, the documentary evidence that the Task Force used during the trial to support its charges was equivocal at best and constituted primarily emails and memos in which Enron and nCube personnel discussed what they could and could not do in regard to the deal to preserve Andersen's blessing for accounting purposes.

Assistant U.S. Attorney Jonathan E. Lopez of Washington, D.C. handled the first part of the Task Force's closing argument and, although competent, it was a real snoozer. As is typical of Task Force arguments these days, Lopez opened by contending that this was really a simple case of lies and deception by Howard and Krautz, and then proceeded to bludgeon the jury with a very unsimple-like analysis of the prosecution's theory of the case. During Lopez's argument, I noticed at least three jurors nodding off to sleep and the attention of most other jurors waned after a half hour or so of the hour-and-a-half argument. Task Force prosecutor Van S. Vincent of Nashville, who is the lead prosecutor in this trial, handled the rebuttal portion of the Task Force's closing and, while more seasoned than Lopez in his presentation, largely covered the same material as Lopez. Although I didn't notice any jurors nodding off during Vincent's argument, my sense was that they were not particularly engaged.

The highlight of the day was the closing argument that Houston-based criminal defense lawyer Jack Zimmermann gave on behalf of Howard. Using the court's jury instructions and excerpts of specific testimony by the Task Force's main witness as a framework for his presentation, the folksy and articulate Zimmerman paced back and forth in front of the jury box in his trademark cowboy boots as he persuasively argued that the Task Force's case does not come close to meeting its burden of establishing guilt beyond a reasonable doubt, particularly on the key element of the defendants' intent. The jurors were transfixed by Zimmerman, who is one of several protégés of famed criminal defense attorney Richard "Racehorse" Haynes who make Houston's criminal defense bar one of the best in the country. By the time that Krautz defense attorney Barry Pollack of Washington, D.C. concluded his well-organized and impassioned argument that characterized the Task Force's case as a parody, my sense was that the jurors were ready to begin deliberations and that may explain their relative lack of enthusiasm for Vincent's rebuttal.

Although its impact on jurors is unclear, the most telling moment in the closing arguments occurred when Task Force prosecutor Lopez dealt with the key contradiction in the Task Force's case -- i.e., that nCube's equity in the joint venture was not at risk, but it nevertheless lost all of that equity. In an analysis that speaks volumes about the utter lack of business law-perspective that has permeated each one of the Enron Task Force's prosecutions, Lopez beguilingly contended with a straight face that the reason why nCube lost all of its investment in the joint venture was that Enron went bankrupt, not because Enron wouldn't have ultimately bought out nCube had it remained solvent. In the Enron Task Force's rather odd world of commercial transactions, actually experiencing the risk of insolvency apparently does not equate with "at risk."

Thus, based solely on closing arguments and in view of the upcoming holiday weekend, it would not surprise me if this jury makes short work of this particular case. Howard and Krautz -- both of whom testified during the trial -- are courteous and soft-spoken family men who did not make the big-money in Enron stock sales that their former Enron Broadband co-defendants made. Based on what I saw and heard during closing arguments, my sense is that, under normal circumstances, it would be extremely difficult for this female-dominated jury to send these two men to prison. But, as we all know, cases involving the social pariah Enron are anything but normal, so stay tuned.

Posted by Tom at 4:24 AM | Comments (2) |

May 22, 2006

Barbaro's injury

This NY Times article provides an excellent analysis of the prospects for recovery of Kentucky Derby champ