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January 31, 2007

Judge Gilmore vacates Kevin Howard's conviction

As predicted in this prior post, U.S. District Judge Vanessa Gilmore this afternoon vacated the conviction of former Enron Broadband executive Kevin Howard (prior posts here) on five counts of conspiracy, wire fraud, and falsifying books and records. A copy of Judge Gilmore's decision can be downloaded here and Kristen Hays' Chronicle article on the decision is here. The NY Times story on the decision is here.

Inasmuch as Judge Gilmore vacated Howard's conviction, the Justice Department could try him again, which would be the third time on the same charges. Don't bet against the DOJ doing just that. The Enron Task Force prosecuted the first two cases against Howard in the same manner as the case against the defendants in the now utterly discredited Nigerian Barge case (see also here). The Task Force first asserted an unwarranted expansion of a criminal law intended to punish kickbacks and bribes against a businessman-defendant who did no such thing. Then, the Task Force took the case to trial and blatantly appealed to the strong juror resentment (see also here) against anyone having anything to do with Enron to obtain a popular conviction against a supposedly wealthy businessman. Shattered lives, families and careers now lie in the wake of this outrage. Who is going to answer for that?

Posted by Tom at 4:31 PM | Comments (0) | TrackBack (0)

Doctoring under an increasingly regulated system

Christopher Tozzo recently articulated a troubling thought about the perverse incentives involved in a one payor, government-administered health care finance system:

A key premise in any call for socialized medicine is that physicians (and nurses and dentists and physical therapists and orderlies and equipment technicians and pharmacists and ...) will continue to do what they do now, as much as they do it now (and where they do it now and as well as they do it now and for as long as they do it now and ...) despite the efforts by government to enslave them. Like a battered spouse, the health care professional will, the bureaucrats presume, simply put up with it forever. [. . .]

If you're smart enough to become a doctor, then you are smart enough to become a lawyer, accountant, investment banker or a dozen other ultra-skilled occupations that are not price capped. The laws of economics are not subject to repeal by any legislature. An artificial price ceiling creates a shortage, regardless of what "noble goals" underlie it. Doctors, especially future doctors, will not be turned into indentured servants without limit.

Tozzo's point is a good one, and reminded me of the following note that I recently from one of my old friends, Dr. Jim Bob Baker. Jim Bob is a first-rate internist who was one of my late father's best and brightest medical students. Jim Bob wrote about a new regulation that is creating similarly-skewed incentives for doctors under the current American health care finance system:

I wanted to let you know about the next new development in the mess that is the U.S. health care finance system. The newest wrinkle is what is being called "P4P", or "Pay for Performance." Ostensibly, the program purports to be a budget-neutral process whereby doctors and hospitals who meet certain guidelines in the provision of healthcare in specific illnesses will be given higher reimbursement, while those who fall below the benchmark will see their payments cut even further.

What we expect will happen has more of an Orwellian flavor. Hospitals and private practitioners are already preparing for the first installment of a scheduled 40% cut in Medicare payments to them that will occur over the next several years. In all likelihood, we will see an across-the-board cut to all providers. Then, if you want to see an "increase" in payment to get a portion of that cut reinstated, you have to jump through the particular hoops mandated by CMS. Those who fall below the standard will see their payments cut even further.

Pay for Performance is a noble idea. The doctors and hospitals treating patients most correctly get a higher payment for that treatment. However, as with most governmental programs, implementation of the noble idea falls woefully short of intended result.

One of the benchmarks for outpatient treatment is for patients with Diabetes. The goal for chronic therapy is to keep the Hemoglobin A1c level below 7% -- this is a measurement of the amount of glucose bound to hemoglobin, which provides a correlation to a patient's average blood glucose level over the past three months. A HgbA1c of 7% implies and average glucose of 150-180. However, it is an imperfect measurement, as 7% would also correlate to glucoses ranging from 50-540, which obviously is not ideal control, but we'll ignore that fact for the time being.

The P4P benchmark for a doctor treating diabetics would be set as a certain percentage of his patients (90% for the sake of argument) with HgbA1c's under 7%. Meet this artificial standard and your payment from Medicare is "increased" as discussed above. Fall below this standard and payment for treating these patients falls further.

Imagine two physicians. Dr. A is a family physician who works in an affluent suburb with educated and motivated diabetics. Dr. B is a diabetes specialist who sees complex and less informed diabetics at an inner city medical center.

Which physician will be more likely to meet the P4P benchmark?

Add to this the likelihood that Dr. A will refer many of his difficult-to-treat patients to Dr. B, because he is the "specialist," further improving Dr. A's statistics and driving down Dr. B's. And this does not take into account the percentage of Dr. B's patients who willfully choose not to follow his recommendations about medications, diet, exercise, etc, which also worsen Dr. B's "performance."

There are many other benchmarks being proposed by the feds for both outpatient and inpatient care, with similar unintended consequences. The worst of these influences from my perspective is the intentional "cherry picking" of patients by physicians with more superficial training or by smaller community hospitals, with the subsequent "turfing" of the more difficult patients (along with the lower reimbursement for taking care of them) to the specialists and medical centers.

Another factor about P4P that is not readily apparent is the expense of producing the data necessary to determine if a doctor or hospital is meeting the benchmarks. Already inundated with regulatory paperwork, providers wanting to continue to feed at the Medicare trough will have to commit even more overhead resources to the process of documenting and transmitting to federal regulators the information necessary to show that they are meeting the guidelines.

This process is already in effect for the hospitals, at least partially so. To maintain eligibility for Medicare dollars, hospitals have to submit to reviews by JCAHO -- the Joint Commission of Accreditation of Healthcare Organizations. The hospital must invite this federal agency to come on site every 2 to 3 years to survey their operation and tell them what they are doing wrong.

Imagine the medical equivalent of boot camp inspection of footlockers by a drill sargeant with a bad attitude. And the hospital has to pay JCAHO for this enjoyment. Failure to do so means loss of accreditation, and with it, loss of Medicare dollars.

With these decreasing payments and increasing regulation, I think that there will be an increasing number of physicians opting out of Medicare in the next several years. Indeed, it would not surprise me if it becomes difficult to find a decent physician who will be willing to accept any Medicare-eligible patient, even with the world's most generous secondary insurance. This is a difficult process to imagine for the Internist -- the vast proportion of patients we care for are on Medicare. But if it costs more to provide the care than we can get reimbursed, then there is no future in seeing these folks. Kinda like the guy who said that even though he lost money on every business transaction, he would try to make up the difference by increasing his volume.

In closing, I think that your rather Walter would be very disappointed with where the practice of medicine is headed today. It is becoming less and less of the art that he practiced and taught. As I reflect on the recent changes I have made in my work situation, I am reminded of a line from the movie, "War Games," the Matthew Broderick film where he plays a teenage computer geek who hacks his way into the national nuclear defense computer network. After getting the super computer to play tic-tac-toe multiple times to a draw, the computer says, speaking about thermonuclear war, that "the only way to win is not to play." I kinda feel the same way about medicine these days.

And that's bad. Because who's going to be left in medicine to take care of you and me when we are in our 70's and 80's?

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

New Orleans may still be a mess, but at least fraud is under control

This Christopher Cooper/Wall Street Journal ($) article on the inability of the federal, state and local governments to administer the vast amounts of aid appropriated to rebuild New Orleans and the Gulf Coast region was published over this past weekend, so the story was not widely discussed around the blogosphere. But the story it tells is instructive regarding the inefficiency of government administration in comparison to entreprenurial activity in achieving the goal of rebuilding the region:

It's been almost 17 months since Hurricane Katrina pounded coastal Mississippi and southeast Louisiana, and about a year since Congress authorized the bulk of its rebuilding aid for the region. More than four months have passed since President Bush visited New Orleans on the anniversary of the storm and extolled the "amazing" reconstruction effort.

But a review of the devastated region shows that rebuilding is in a deep stall. Tens of thousands of residents remain displaced as authorities dither over how to disburse housing assistance. Many crucial infrastructure projects have yet to start. Of the tens of billions appropriated by Congress, half remains unspent.

There are many culprits. Among them: the size of the disaster, which continues to overwhelm agencies charged with rebuilding; the crush of competing bureaucracies, which has delayed many projects including the Bay St. Louis bridge; and weak local leadership.

In addition, many reconstruction efforts are ensnarled in spools of red tape spawned by a bevy of old and new government procedures. A prime example: an obscure set of 30-year-old Congressional rules designed to combat corruption known as the Stafford Act.

According to the White House, the federal government has provided $110 billion for the Gulf Coast region. But nowhere near that amount of actual cash has been made available. The total is spread over five states and covers damage done by three separate storms. Some of it consists of loans. A chunk comes from government insurance payouts that ultimately derived from premiums paid by homeowners themselves.

Of $42 billion given to the Federal Emergency Management Agency, the agency has spent only $25 billion, federal records show. Most of that went to temporary housing, debris removal and emergency operations in the early days of the disaster. It has spent more than $4 billion on administrative costs.

Louisiana says the Army Corps of Engineers has spent only about $1.3 billion of the $5.8 billion it received to repair the levees in and around New Orleans. Only about $1.7 billion of the $17 billion received by the Department of Housing and Urban Development has made its way to the streets, the agency says.

In New Orleans, officials say they have received only about 14% of the estimated $900 million in reconstruction money they estimate is needed to fix the ruined city. "We have lots of meetings," says Cynthia Sylvain-Lear, the city's liaison with FEMA.

The article notes a particularly stark example of the difference in effectiveness between government adminstration and private enterprise:

In August, 2005, Hurricane Katrina flattened two bridges, one for cars, one for trains, that span the two miles of water separating this city of 8,000 from the town of Pass Christian. Sixteen months later, the automobile bridge remains little more than pilings. The railroad bridge is busy with trains.

The difference: The still-wrecked bridge is owned by the U.S. government. The other is owned by railroad giant CSX Corp. of Jacksonville, Fla. Within weeks of Katrina's landfall, CSX dispatched construction crews to fix the freight line; six months later, the bridge reopened. Even a partial reopening of the road bridge, part of U.S. Highway 90, is at least five months away.

So, the government cannot invest the funds appropriated to rebuild New Orleans and the Gulf Coast region in a prompt manner. But at least fraud in the administration of those funds is under control. My sense is that the residents of New Orleans and the Gulf Coast would be willing to risk a good dose of fraud to achieve some results at this point. Harry Siegel, who has been studying the recovery of New Orleans over at the Manhattan Institute, has more.

Posted by Tom at 4:24 AM | Comments (0) | TrackBack (0)

A quick note about Barbaro's death

The sad but not unexpected end for Barbaro came earlier this week (prior posts here). Alas, thoroughbreds are born to race, not to convalesce. So, Barbaro was simply not able to fend off the multiple infections that increasingly afflicted his legs and hoof areas.

Although those in horse racing circles knew that the Kentucky Derby champ's recovery was always a longshot, Barbaro's death has generated a surprising amount of over-the-top public emotion. Thankfully, the Washington Post's Sally Jenkins does a good job of placing Barbaro's death in the perspective of the high-risk nature of thoroughbred racing, as does NY Times Joe Drape in analyzing the advancement in treatment of thoroughbreds that resulted from Barbaro's attempted recovery.

But the same thing cannot be said for NY Times Select ($) columnist Harvey Araton, who is utterly overwrought in attempting to interpret the public displays of emotion over Barbaro's death:

Maybe Barbaro, as the fallen champion, was reminiscent of a country that was seriously wounded on 9/11 and has been wobbly ever since. Maybe the horse’s medical roller coaster struck a chord at a time when a great American city, ravaged by nature and neglect, still can’t stand up. Maybe only in such context can we rationalize such widespread passion for the health of a horse that has exceeded that for any single American soldier killed or wounded in Iraq.

Harvey, get a grip. Sheesh!

Posted by Tom at 4:22 AM | Comments (2) | TrackBack (0)

January 30, 2007

So, where does Bob Dylan holiday?

The same way that I would like to -- he goes to his new vacation home in the Scottish Highlands to play golf:

Bob Dylan said in one of his songs that his heart was in the Highlands. Now he has proved the point by paying more than £2 million for a secluded Edwardian mansion with a view of the hills.

The notoriously reclusive American star and his brother David have bought Aultmore House in the foothills of the Cairngorms.

The house was built at the turn of the 20th century for the millionaire owner of a department store in Moscow and has been described as one of the finest homes in the Highlands. [. . .]

Dylan is a keen golfer and plays off a 17 handicap at Malibu Country Club in California. His new home is close to the more utilitarian Abernethy golf club, where a day ticket costs just £10, but membership is never a foregone conclusion.

Jack McCool, the treasurer, said: "Mr Dylan would have to apply in writing just like everyone else and be vetted by the committee.

"If there were no objections then he would be a member after paying the membership fee, which at present is £105."

Golf at Malibu and the Highlands? Sweet.

Posted by Tom at 4:50 AM | Comments (1) | TrackBack (0)

Food myths

Americans love their myths and their food, so it makes sense that some of our most active myth-making occurs in the realm of eating and nutrition.

Michael Pollan, author of "The Omnivore’s Dilemma," (Penguin 2006) provides this excellent NY Sunday Times magazine piece in which he reviews the food and nutrition myths that have been developed and dispelled over just the past two decades in America. It's a fascinating story, particularly how Americans' willingness to accept the latest food or nutrition fad co-exists with a huge fast-food industry that is largely based on high-calorie processed food of dubious nutritional value.

Pollan is spot on in his observation that most Americans know just enough about nutrition to be dangerous, which is also the case with medical matters generally. Few people can accurately recount how many calories they consume in a day, and even fewer still can tell you how many calories they need to consume to lose weight or maintain their optimum weight (do you know what 200 calories looks like?). Similarly, few of those overweight folks torturing themselves on the treadmills or stationary bicycles at the local gym have a clue of how long they would need to exercise to work off the excess calories that they have consumed. Despite their tenacity, most of those overweight exercisers almost always overestimate the amount of calories expended during exercise.

As my wise father used to say: "What would you rather do? Eat one less helping of mashed potatoes? Or go ride the stationary bicycle for an hour?"

By the way, the following are a couple of terrific resources on nutrition that approach the subject from very different, but quite insightful, perspectives -- Junkfood Science by nutritionist Sandy Szwarc, who exposes many food myths that are based on studies of questionable merit, and Art De Vany's blog, where he frequently explores the physiological impact of diet, obesity and exercise.

Posted by Tom at 4:31 AM | Comments (0) | TrackBack (0)

Tiger Woods, DB

Not only did Tiger Woods win his seventh straight PGA Tour event over this past weekend, but he debuted a pretty clever commercial in which he fends off a course rat from stealing his clubs on the range by nailing him in the head with a golf ball.

But frankly, the outtake below from the filming of the commercial is even better than the commercial itself. As they say in football evaluation circles -- "good closing speed."

Hat tip to Waggle Room, a solid new golf blog.

Posted by Tom at 4:09 AM | Comments (1) | TrackBack (0)

January 29, 2007

The ethanol con

While President Bush on one hand made a productive health care finance proposal in his State of Union Address last week, his big push for alternative fuel development was not as well-conceived. As this OpinionJounal op-ed notes, the development of ethanol as an alternative fuel source has been mostly a con job of epic proportions.

[F]ederal and state subsidies for ethanol ran to about $6 billion last year, equivalent to roughly half its wholesale market price. Ethanol gets a 51-cent a gallon domestic subsidy, and there's another 54-cent a gallon tariff applied at the border against imported ethanol. Without those subsidies, hardly anyone would make the stuff, much less buy it--despite recent high oil prices.

Jerry Taylor of the Cato Institute has done a ton of work exposing the ethanol boondoggle, and this recent post links several of his works. The ethanol con is a quintessential example of special interests manipulating market conditions and political rhetoric to capture a windfall that would not otherwise be available. It's also a reminder to all of us to grab our pocketbooks whenever we hear a government official touting the next big government program to develop something at a supposedly cheaper or more stable price than what the markets are providing.

Posted by Tom at 5:58 AM | Comments (1) | TrackBack (0)

Local attorney accused of bankruptcy fraud

Bankruptcy is strong medicine with serious side effects, so it's not a remedy for legal problems to be taken lightly. I don't know if local attorney Jose Antonio Villalon took the notion of filing bankruptcy lightly, but his multiple bankruptcy filings several years ago have resulted in a three-count indictment accusing him of bankruptcy fraud in connection with his alleged failure to disclosed an interest in an oil and gas lease that he either owned or had transferred shortly before commencing his bankruptcy cases. The U.S. Attorney's press release on Villalon's indictment is here.

Notably, Villalon did not even receive a discharge of his personal liability for his debts, which is the primary benefit of enduring a bankruptcy case in the first place. Both of Villalon's bankruptcy cases were dismissed before he received a discharge, and the second one was reopened after the trustee discovered the allegedly undisclosed asset. Thus, Villalon's creditors still can recover their claims against his non-exempt assets, assuming that they can find them, and Villalon has only a criminal indictment and no discharge for all his bankruptcy trouble.

Serious side effects indeed.

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

Risky Business

As we endure the overblown run-up to Super Bowl XLI this week, there will invariably be much blather about the high incomes of the participants and professional football players generally. Frankly, given the risks of what these players face, they deserve every dime they make.

As this NY Times article reports, the life of even a relatively high-income NFL football player is no picnic:

[F]ootball players’ careers resemble life as Thomas Hobbes described it in the 17th century: they’re nasty, brutish and short. The average football career lasts less than four years, . . .

The minority of players who do make it past a fourth year are still treated like (highly paid) temporary or contract workers. In baseball and basketball, teams must honor multiyear contracts, even if players suffer career-ending injuries or if their skills decline.

Not so in football. “A person with a five-year contract will get paid only for the current year if he suffers a career-ending injury,” Professor [Skip] Sauer [of The Sports Economist fame] noted.

Star players with bargaining power have been able to protect themselves by negotiating guaranteed multimillion-dollar signing bonuses. But less-valued players are not able to extract those bonuses, and the relatively weak players’ union has not been effective in getting many concessions from owners, nor much protection for players hurt on the job.

The article goes on to mention the examples of former Houston Oilers Hall of Fame running back, Earl Campbell, who is partially disabled from the punishment he took during his football career, and the more recent case of former Philadelphia Eagles defensive back Andre Waters, who committed suicide after battling depression and brain damage caused by the multiple collisions he endured while playing football.

Along those same lines, San Francisco Chronicle reporter Stan Kroichick recently wrote this fine series of articles (see also here, here and here) on the 1981 San Francisco 49er's, the first of that franchise's four Super Bowl championships of the 1980's (the 1994 team won another one) in which he chronicles the physical problems that the players on the 1981 team have endured over the 26 years since that magic season (and here's another one examining the health problems of Wilbur Marshall, one of the stars of the 1985 Bears Super Bowl championship team). It's a daunting tale and one that will be simmering just beneath the surface of the NFL’s pomp and circumstance during Super Bowl week.

Posted by Tom at 5:23 AM | Comments (4) | TrackBack (0)

January 28, 2007

"30 Rock" channels a sitcom classic

It's well known in my family that I haven't watched a sitcom regularly on television for many years. But my son Cody and brother Mike recently recommended that I give the new NBC comedy sitcom "30 Rock" (8:30 p.m., CST, Thursday) a try, so I watched it over the past several weeks and found it to be quite clever and entertaining.

As this CNN.com article notes, the show is basically a 2007 version of the popular Mary Tyler Moore Show from 30 years ago, with former Saturday Night Live writer and performer Tina Fey playing the Mary Tyler Moore-type lead role and Alec Baldwin playing an absolutely hilarious combination of the Lou Grant/Ted Baxter character from the MTM show. Having seen Baldwin in several movies, I knew that he was a fine actor, but had no idea that he possessed the depth of comedic talent that he is exhibiting on this show. The scene of outtakes of Baldwin's flubs ("product integortion?") during the filming of a short corporate presentation -- which can be viewed here toward the end of part two of episode 5 "Jack-Tor" -- is already a cult classic. Check it out.

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

January 27, 2007

Update on university endowments

The financing of public universities (see here and here) and college education generally (see here) have been frequent topics recently, so this National Association of College and University Business Officers publication ranking the 765 top endowments of U.S. universities is timely (last year's ranking is here). Here are the rankings of some universities that will be of interest to most Texans:

1 Harvard University $28.9 billion
2 Yale University $18.0 billion
3 Stanford University $14.0 billion
4 University of Texas System $13.2 billion
10 Texas A&M University System $5.64 billion
19 Rice University $3.98 billion
55 Southern Methodist University $1.22 billion
57 Baylor College of Medicine $1.0 billion
62 Texas Christian University $1.0 billion
65 University of Oklahoma $960 million
73 Baylor University $870 million
80 Trinity University (San Antonio) $815 million
100 Louisiana State University System $593 million
116 Texas Tech University $540 million
135 University of Houston System $454 million
190 Southwestern University (Georgetown) $280 million
217 Abilene Christian University $228 million
297 St. Mary's University (San Antonio) TX $135 million
315 Austin College (Sherman) $120 million
325 Austin Presbyterian Theological Seminary (Austin) $110 million
362 Hardin-Simmons University (Abilene) $88 million
375 Houston Baptist University $82 million
389 Angelo State University $77 million
419 University of North Texas $66 million
437 Texas State University-San Marcos $61,596
449 Texas Lutheran University (Seguin) $58,524
466 St. Edward's University (Austin) $54 million
472 McMurry University (Abilene) $53 million
494 University of St. Thomas (Houston) $48
497 East Texas Baptist University (Marshall) $47 million
510 University of Dallas $45 million
515 Howard Payne University $44 million
523 University of the Incarnate Word (San Antonio) $42 million
524 Schreiner University (Kerrville) $42 million
580 Texas Wesleyan University (Ft. Worth) $32 million
763 Laredo Community College $1.9 million

Houston's problem-laden university -- Texas Southern University -- does not even make the list. Meanwhile, the University of Texas, Texas A&M University and Rice University continue to maintain top 20 endowments, but the University of Houston continues to provide the most bang for the educational buck of any university system in Texas. Which is all the more reason why the state and the Houston area should be exploring ways to supplement UH's endowed capital in connection with elevation of the UH-Central Campus to tier I research university status.

Posted by Tom at 6:40 AM | Comments (0) | TrackBack (0)

January 26, 2007

Does New Orleans really need this?

A week or so ago, this post noted that the local and state governments of Louisiana have to date failed to do what is necessary to jump-start the revitalization of New Orleans.

So, faced with such a record of failure, what does the local government of New Orleans do?

Hire former Houston mayor Lee P. Brown as a consultant.

As with Anne Linehan, this development left me speechless. But thankfully, Richard Connelly over at the Houston Press was able to pull himself together to place the hiring of Brown in perspective:

If you've ever asked yourself, as you've watched the post-Katrina morass of incompetence and violence that has engulfed New Orleans, whether that city has suffered enough, you have your answer. And that answer is "no."

N'awlins, get ready for...the magical world of Lee P. Brown!

Brown, who was Atlanta's public-safety commissioner during a famously inept serial-murder investigation, who was New York's police commissioner during the ineptly handled Crown Heights riots, who was Houston mayor while the HPD crime lab was run...eptly? Guess again!...has been hired to solve New Orleans' massive violent-crime problem.

If his time here is any indication, Brown will implement a two-pronged attack. He will a) bore everyone to death, using content-less, cliché-filled, charisma-free speeches to put criminals into a stupor; and b) take a lot of taxpayer-funded out-of-town trips. We're sure Rome and London need to be studied closely for tips on how to stop Ninth Ward gangbangers.

Brown told the Louisiana Weekly that "there is no silver bullet that is going to say that this is going to be done tomorrow...Working together, you can get the job done."

We're kind of surprised Brown didn't mention making New Orleans "a world-class city," but it's still early.

Connelly goes on to report that even residents of New Orleans are scratching their heads over what Brown is supposed to do.

Meanwhile, the prescription for government to revive New Orleans remains simple -- ensure law and order, provide basic services, create an environment where entreprenuers will take the risk of starting businesses that will create jobs that will attract residents to the area, and then get out of the way. If Brown passes that advice along to Mayor Nagin, then he actually might be worth whatever New Orleans is paying him.

But don't count on it.

Posted by Tom at 5:24 AM | Comments (0) | TrackBack (0)

Plaintiff Charlie Weis

Football coaches from time to time get embroiled in lawsuits over contract matters. But it's not every day that a coach is the plaintiff in a medical malpractice lawsuit such as the one that Notre Dame coach Charlie Weis is pursuing:

Only those closest to Charlie Weis were supposed to know. The Notre Dame football coach, then offensive coordinator for the Patriots, checked into Massachusetts General Hospital in 2002 under an assumed name.

Embarrassed by his chronic obesity, Weis planned to undergo gastric bypass surgery and quietly return home the next day, avoiding public attention.

Instead, complications developed. Weis nearly died. And now, almost five years later, he faces the prospect of every detail of his long battle with obesity and his bypass ordeal becoming public record as he goes to trial next month in Suffolk Superior Court in his medical malpractice suit against two Mass. General physicians.

With Patriots quarterback Tom Brady expected to appear as a star witness, the case could draw national attention as Weis tries to prove that the doctors -- Charles M. Ferguson and Richard A. Hodin -- acted negligently in leaving him so close to death that he received the Catholic sacrament of last rites.

Weis has altered Notre Dame's spring football schedule to accommodate the trial, which is slated to begin Feb. 12.

Posted by Tom at 5:08 AM | Comments (0) | TrackBack (0)

What to do about TSU?

Earlier this week, the discussion in Texas education circles was the University of Houston's proposal to establish a third medical school in the Texas Medical School in conjunction with The Methodist Hospital and Cornell University. Today, the discussion turns toward one of chronic problems of the Texas system of public universities -- what to do about Texas Southern University?

Turns out that former TSU president Priscilla Slade's spending habits are the least of TSU's problems. TSU cannot come close to paying its current and projected liabilities, which include the following:

Deferred maintenance on buildings -- including daily pumping of water out of the school's administration building -- totaling $54 million over the next 10 years;

Missing purchase orders and outstanding payables from past years to vendors of $1.7 million owed without purchase orders and another $900,000 owed with purchase orders that were not budgeted;

Shuttle service and parking garages do not collect enough fees to support debt service on $34 million in construction projects. Who thought that they would?;

The athletics department has a $2 million operating deficit even though it is subsidized primarily with student fees;

The institution's computer and information technology is obsolescent and needs to be overhauled at a short term cost of more than $500,000, which is also not budgeted; and

There is a $1.2 million debt service shortfall on two new dorms that are not even fully occupied.

Governor Perry's office issued the usual strong words about TSU needing to fix its problems immediately. But, really. What the heck is the TSU board of regents to do in the short term? Hold bake sales to raise money?

Texas Southern's financial problems are chronic and are not going away absent a re-evaluation of its place among Texas public universities in general and the Houston area's need for multiple open admission institutions, in particular. Although it provided an important service to Texas in the days of segregation, TSU has been largely overtaken in providing the open admissions service to the Houston area by the University of Houston-Downtown, which does a better job of educating its students and, over the past decade or so, has grown into a larger institution than TSU. Of course, it helps that UH-D has access to the University of Houston system's relatively modest endowment, a distinct advantage that TSU has never enjoyed.

So, what to do with TSU? Well, it's clear that providing minimal emergency funding for its short-term financial problems -- the usual response -- is akin to throwing money on a dormant campfire. TSU needs to be merged into one of the major university systems -- the UH system probably makes the most sense at this point -- and then the legislature needs to provide realistic short-term and long-term funding while UH absorbs TSU, probably into a second UH-D campus. But however TSU is reorganized, one thing is clear -- providing funding for its current financial problems without a long-term plan for reorganizing the institution and redefining its purpose would be a failure of leadership, something that Texans have endured for far too long in the funding and administration of their public universities.

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

January 25, 2007

Thinking beyond the UH Medical School

BlogHouston.net's Kevin Whited notes this Chronicle/Todd Ackerman article about the University of Houston floating a proposed new Texas Medical Center-based medical school in a collaborative project with The Methodist Hospital and Cornell University's Weill Medical School.

Unfortunately for UH, the proposal has zilch chance of floating for much more than a few minutes amidst the shark-infested waters of Texas educational politics. Heck, the political forces in Texas cannot even agree to provide adequate funding of UH's uncriticizable goal of becoming the state's third tier I research university. The University of Texas, Texas A&M University, and Baylor College of Medicine -- Methodist's former longtime partner -- are just a few of the powerful political forces that would almost certainly line up against the UH-Methodist proposal.

Yet, the UH-Methodist proposal has merit, so here's a proposed modification. Rather than start another medical school from scratch, let's merge the University of Houston system with the Texas A&M system and have A&M expand its fledgling medical school into the Texas Medical Center from its current central Texas outpost. From a broader standpoint, the merger makes sense because it gives the A&M system something that it desperately needs -- a major urban presence -- while also giving UH something that it has always lacked -- that is, access to adequate endowed capital. Such a merger would also provide A&M with the law school that it has always coveted and would greatly facilitate UH's elevation into a tier I research institution, which is something that would substantially benefit the Houston area.

While the University of Texas would almost certainly oppose such a merger, perhaps a deal could be struck at the same time to merge the Texas Tech University system into the UT system while organizing the remainder of Texas' non-affiliated public universities into a third university system for funding and administrative purposes. Such a structure would give Texas a similar structure to that of the reasonably successful California model, which has generated far more first rate, tier I research universities (10) than the current dysfunctional Texas system (2). Indeed, almost anything would be a huge improvement over the current Texas system, which allocates a disproportionate amount of endowed capital to the UT and A&M systems while starving the remainder of Texas' public universities.

Make sense? You bet. Chances of happening? Probably not much. But just as UCLA and Cal-Berkeley co-exist productively in the same university system in California, UH and A&M could do the same in Texas. And just as two major university systems work side-by-side together to educate Californians, a similar structure would be a substantial improvement in the educational system of Texas.

Posted by Tom at 4:54 AM | Comments (1) | TrackBack (0)

Bobby Maxwell rings the bell

This earlier post reported on the lawsuit by former Interior Department auditor-turned-whistleblower Bobby Maxwell against Kerr-McGee Corporation, a subsidiary of The Woodlands-based Anadarko Petroleum, for allegedly cheating the government out of millions of dollars in oil royalties on production that the company generated from leases on government-owned property. Kerr-McGee contended that no fraud was involved and that it simply computed royalties differently under the leases than Maxwell contended was correct.

Earlier this week, this NY Times article reports that the jury in Maxwell’s case decided that Kerr-McGee had underpaid the government $7.5 million. Accordingly, under the False Claims Act, the law under which Maxwell is bringing his whistleblower lawsuit, Kerr-McGee could be forced to pay more than $30 million -- double or triple the jury verdict, as well as penalties of up to $11,000 for each of over 1,000 false statements that the company is accused of making in its royalty reports to the government. Maxwell is entitled to as much as 30 percent of that amount.

The bottom line -- skimping on payment of oil and gas royalties is risky business.

Posted by Tom at 4:37 AM | Comments (0) | TrackBack (0)

Gauging the health care finance litmus test

It's looking as if the health care finance litmus test noted earlier this week is already quite revealing. The Washington Post's Steve Pearlstein, who has never been particularly enthusiastic about the Bush Administration, reports:

But the most surprising and encouraging development is that a president who for six years has only nibbled around the edges of health-care issues has weighed in with some bold ideas to expand coverage, rein in costs and bring some fairness to the tax code. And get this: It actually involves raising taxes on the rich and lavishly insured and giving the money to the working poor and the uninsured.

Given that, you'd think Democrats would have welcomed a politically courageous proposal to put a cap on one of the biggest and most regressive features of the individual income-tax code. But instead, they've shifted reflexively into partisan attack mode, mischaracterizing the impacts of the proposal and shamelessly parroting the propaganda from the labor dinosaurs at the AFL-CIO.

"Dead on arrival," declared Rep. Pete Stark (D-Calif.), chairman of a key health subcommittee in the House, hinting at a dark conspiracy to kill off employer-sponsored health insurance.

"A dangerous policy that ultimately shifts cost and risk from employers to employees," said Charlie Rangel, chairman of the House Ways and Means Committee.

Sen. Harry Reid, the majority leader, called it nothing less than an "attack" on American workers.

Worst of all was the five-page memo distributed by Sen. Edward Kennedy to Democratic colleagues that ought to embarrass a man who considers himself the Senate's leading health-care expert -- a compendium of half-truths, unsupported assumptions and outright lies. Kennedy reverted to the hackneyed rhetoric of class warfare, asserting that the president's proposals will do nothing for working families, give new tax breaks to the rich, increase the number of uninsured and encourage everyone to buy less insurance coverage than they should have.

In fact, all of these are almost precisely the opposite of the truth.

The president's health plan would, in fact, put a cap on a $200 billion-a-year tax break that now goes disproportionately to those with the most generous and costly employer-provided health insurance plans. It would redirect a small portion of that break to those who have less generous coverage or those who have to buy their own insurance because their employer does not offer it. For a few million of the roughly 47 million Americans with no insurance, it may also make the difference between being able to afford basic insurance or not.

The fact that some of those who have these rich policies happen to be members of auto or postal unions doesn't change that the president's proposal would make the tax code more progressive, not less. They are the aristocrats of the working class who, like lawyers, investment bankers and journalists, earn more in tax-free benefits each year than uninsured janitors earn in taxable wages. And whatever modest tax increase they might face from the cap on tax-free health benefits, it is certainly less than the tax cuts they got from Bush that Democrats are so eager to rescind.

Almost every health economist agrees that the tax subsidy for employer-paid health insurance is not only unfair but that it also encourages people to buy too much insurance, consume too much health care and pay too much for both. Bush deserves praise for having the political courage to confront the issue.

Now is this the magic bullet that will solve the health-care crisis? Of course not.

Would any real solution also require finding billions of dollars more to subsidize the purchase of health insurance by low-income workers and getting states to reform dysfunctional markets for individual and small group insurance? No doubt about it.

But anyone seriously interested in health reform would welcome the president's proposal as a basis for negotiations, raising public expectations and increasing pressure on the president to embrace more comprehensive reform. Unfortunately, that is not the approach of Messrs. Stark, Rangel, Reid and Kennedy, who apparently prefer demonizing the president and grandstanding on the issue until the next election.

Haven't we had enough of this?

Read the entire piece. President Bush's proposal -- although not an all-encompassing solution to America's dysfunctional health care finance system -- addresses a fundamental problem of system -- tax subsidies that have insulated many Americans from the true cost of health care through employer-based health insurance. The president's plan identifies the problem and responds to it in a common sense way by proposing to negate the distorting subsidy. There are reasonable alternatives that should be examined -- such as removing the tax subsidy of health insurance altogether -- but to castigate the President's proposal in favor of the insulation provided by the current system is the epitome of elevating political form over substance.

Posted by Tom at 4:18 AM | Comments (4) | TrackBack (0)

January 24, 2007

The sad story of Denice Denton

Denice Denton grew up in the Houston area, went to MIT to study engineering, won a number of research awards and eventually signed on in 1987 as a faculty member at the University of Wisconsin, where she was the only female faculty member in the department of electrical and computer engineering at the time. She continued to excel at Wisconsin and by 1996, Denton was hired at the age of 37 as the first female engineering dean at a major US research university in the U.S. (the University of Washington's College of Engineering).

Thus, it was not particularly surprising that Denton was named as chancellor at the University of California, Santa Cruz in 2004, the youngest chancellor in the UC system. Less than two years later, an embattled Denton went on medical leave and checked herself into the Langley Porter Psychiatric Hospital at the University of California at San Francisco. On June 24, 2006, after checking out of the hospital, Denton committed suicide by leaping from a high-rise apartment building in San Francisco.

This Paul Fain/Arts & Letters Daily article covers the final few weeks of Denton's life, and it's fascinating look into the intersection of depression, political correctness, anti-political correctness, and the byzantine world of academic politics. Definitely not a life for the faint-hearted.

Posted by Tom at 5:49 AM | Comments (0) | TrackBack (0)

Where to sit at Cafe Annie

Cafe Annie has been one of Houston's finest restaurants for over a decade, so it tends to attract an interesting mix of local personalities.

This recent Wall Street Journal ($) article presents the restaurant's floor plan and notes who sits where among a number of well-known regulars.

My wife and I prefer a table in the area of tables 54-66, which are away from most of the traffic and provide a decent amount of privacy.

And, yes, that deep-fried quail is quite good.

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

Messrs. Personality

Bill Parcells and his former assistant, Patriots head coach Bill Belichick, are good football coaches. But, man, can't they just take themselves a bit less seriously?

Parcells quit the other day as the head coach of the Dallas Cowboys after four mostly mediocre seasons. As this earlier post noted, Parcells is reasonably good at what he does, but is miserable doing it. This clever Onion piece from a couple of weeks ago picked up on that in predicting Parcells' resignation.

Meanwhile, Belichick showed his sunny side after the Patriots' loss to the Colts in the NFC Championship game this past Sunday, as this YouTube clip reflects:

By the way, aren't Parcells and Belichick an interesting contrast to the two Super Bowl coaches this year, Tony Dungy and Lovie Smith? Michael Smith of ESPN.com describes the latter two:

Dungy and Smith are role models, not just for coaches who look like them or men who look like them, but for all coaches and all men. They live their lives the right way, and as a result they do their jobs the same way. Their priorities are, in order: faith, their families and football. The outcome of the Super Bowl or any game does not define them. They personify words such as class, grace, dignity, honor and integrity.

Posted by Tom at 4:53 AM | Comments (1) | TrackBack (0)

January 23, 2007

Horse sense at the Fifth Circuit

The Texas justice system may leave a lot to be desired in the area of capital punishment, but you can't say that the Lone Star State doesn't protect its horses.

A couple of Texas slaughterhouses recently learned that lesson when they began processing and selling horse meat for human consumption in several emerging foreign markets. The Attorney General's office promptly informed the slaughterhouses that they were violating a 1949 law that bans processing of horse meat for human consumption and the slaughterhouses protested that the 1949 law had been repealed or was at least pre-empted by federal law. The AG's office refused to back down, so the slaughterhouses sued to enjoin the AG from enforcing the law and the district court granted the injunction.

On appeal, a Fifth Circuit panel led by Judge Benvanides had some fun. In Empacadora de Carnes v. Curry, 05-11499 (5th Cir., Jan. 19, 2007), the Court held that "[t]he lone cowboy riding his horse on a Texas trail is a cinematic icon. Not once in memory did the cowboy eat his horse, but film is an imperfect mirror for reality." The panel goes on to concede that horse thieves occasionally would eat horse meat, but holds that the Texas horse meat ban has not been repealed and is neither pre-empted by the Federal Meat Inspection Act nor violative of the Dormant Commerce Clause. As a result, the Fifth Circuit shut down the slaughterhouses' horse meat processing operations, leaving those heartless folks in Illinois as the only current US exporters of horse meat for human consumption.

Woodrow Call and Gus McRae and the other members of the Hat Creek Cattle Company would be right proud of the Fifth Circuit. HT to Robert Loblaw.

Posted by Tom at 4:53 AM | Comments (0) | TrackBack (0)

A Wie bit of a problem

Suffice it to say that former Houstonian and prominent professional golf instructor Butch Harmon won't be receiving any holiday greeting cards from the family of female golfer, Michelle Wie after the following public remarks from over the weekend:

"The whole thing is absolutely ridiculous," he says. "Michelle has regressed. She is worse now at 17 than she was at 14. To continue telling us that she is getting better by playing with the men is an insult. She says it's a learning experience. What is she learning by finishing last? It's hurting her mentally."

"She should go play with the women and dominate that competition first. But the whole Michelle Wie camp is about money. The biggest difference between Earl [Woods, the father of Tiger] and BJ [Wie, Michelle's dad] is that Earl didn't worry about money. He knew it was more important for Tiger to learn to win and then the money would take care of itself. But Michelle Wie wins nothing."

"You should invite her to the next member-guest competition at your home club and she might actually win something because what's going on now is ridiculous. And it's not good for the game of golf."

Next time, Butch, tell us what you really think and don't beat around the bush. HT Geoff Shackelford.

Posted by Tom at 4:20 AM | Comments (1) | TrackBack (0)

More on the new Prohibition

On the heels of this post from last week, the Justice Department is now turning on Wall Street in connection with the federal government's jihad on internet gambling. We can now rest easier that the scoundrels who have been helped finance this threat to the public will now be brought to justice.

Meanwhile, as noted earlier here, the Justice Department's campaign against legitimate businesses from other countries who run afoul of an anchronistic US law is not winning the US any friends. The broad latitude that federal prosecutors are being given to criminalize business interests is generating a wave of prosecutorial abuse and waste that is far more troubling than the problem that the prosecutors are attacking. Along those lines, Christine Hurt over at the Conglomerate blog is asking all the right questions about the ominous direction that this criminalization policy is taking us.

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

January 22, 2007

A first-rate health care finance proposal

The Bush Administration announced over the weekend that President Bush will propose a common sense reform of the health care finance system during his upcoming State of the Union Address -- extension of the tax deductibility of health coverage to everyone who acquires it outside of the workplace.

As has been noted many times in this blog, the federal government doesn't currently tax employer-provided health insurance benefits but gives no tax breaks to most consumers who buy medical insurance outside the workplace. President Bush will propose to make it easier for consumers who do not have employer-provided health insurance to buy coverage on their own by making the tax incentive for doing similar so simlar to that of homeowners who deduct interest payments on their mortgages. The Bush Administration's plan would also set a cap on the amount of employer-based health care benefit that an employee could receive tax-free.

The Bush Adminstration proposal is particularly sound because it addresses the mindset that has developed over the past couple of generations of Americans who are conditioned to employer-based health insurance -- that is, that health care benefits are some sort of obligation from employers with regard to which employees have little incentive to care much about cost. The Bush plan treats employer-based insurance as compensation (which it is -- such insurance arose as a loophole to get around wage and price controls during WWII), which provides a much sounder basis for assessment of the value of employer-based insurance. In so doing, it addresses the problem of medical "insulation" policies that Arnold Kling and others recently addressed over at Cato Unbound (see here and here).

By the way, this proposal addresses one of the issues that is a wonderful litmus test for political candidates. Although a politician could argue that removing the tax deductibility of all medical insurance makes even more sense than President Bush's proposal, no reasonable argument can be made to support the current disparate tax treatment of employer-based versus individual policies. The Administration's proposal is actually much more progressive than the current state of affairs because the wealthier employees currently benefit the most from not having to declare the value of their employer-based insurance as income.

Thus, if a politician opposes the Bush Administration's proposal, then that politician is probably either ignorant about the issues involved or in the pocket of the large business interests that profit from the current employer-based insurance system. That's a pretty clear indication that such a person should not be in a position of deciding one of the most important economic and social issues facing American society today.

Posted by Tom at 4:20 AM | Comments (5) | TrackBack (0)

The best character actor you never heard of

Don't miss this fine piece by the Chronicle's Andrew Dansby on the late Trey Wilson, the fine character actor from Houston who died tragically of a cerebral hemorrhage at the age of 40, just as he was hitting his stride in Hollywood.

The 20th anniversary of the Coen Brothers' masterpiece comedy Raising Arizona prompted the look-back at Wilson, and Dansby begins his piece with one of Wilson's most memorable scenes from that movie -- playing unpainted furniture dealer Nathan Arizona Huffheins, Sr. facing the questions of investigating authorities after the kidnapping of one of the baby quintuplets he had fathered:

Raising Arizona, celebrating its 20th anniversary this year, is the kind of cult comedy that blossoms with repeated viewings. Its most memorable scene doesn't involve leads Nicolas Cage and Holly Hunter. Instead, it follows an unpainted-furniture salesman named Nathan Arizona; one of his quintuplets has been abducted.

And Nathan Arizona. Well, shoot. Y'all know who he is. Or maybe not. Years after his death, Houston-born character actor Trey Wilson, who brought proud, frenzied and compassionate life to that character, is a vaguely familiar face and an unknown name.

But on DVD, that marvelous scene remains vivid. "Was the child wearing anything when he was abducted?" asks a police officer, gathering information for an APB.

"Nobody sleeps naked in this house!" says Nathan. He's unshaven and clad in a bathrobe, simultaneously tragic and comic. As Wilson played him, he's both believably frantic and wildly funny.

An FBI agent joins the fray: "What was the child wearing?" "A dinner jacket," snaps Nathan. "What do you think? He was wearing his damn jammies." "What did the jammies look like?"

"Aw, I dunno," says Nathan. His head rolls back in frustration, also reflected in his gruff voice. "They were jammies. They had Yodas and (expletive) on 'em."

Heck, Dansby's fine piece on Wilson doesn't even include my favorite exchanges from the scene:

Policeman: "Do you have any disgruntled employees?"

Nathan Arizona Sr.: "Hell, they're all disgruntled. I aint running no damn daisy farm. My motto is 'Do it my way or watch your butt!'"

Policeman: "Well, do you think any of them could've done it?"

Nathan Arizona Sr.: "Oh, don't make me laugh. Without my say-so they wouldn't piss with their pants on fire."

Or this one:

FBI Agent: "Sir, we discovered you were born 'Nathan Huffheins.'"

Nathan Arizona Sr.: "Yeah, I changed my name. What of it?"

FBI Agent: "Can you give us an indication why?"

Nathan Arizona Sr.: "Would you shop at a store called 'Unpainted Huffheins?'"

That scene was one of three remarkable scenes involving Wilson in that movie, the two others being Wilson's negotiation scene with the frightful bounty hunter played by the former heavyweight boxer Randall "Tex" Cobb and the penultimate scene of the movie in which Wilson exhibited extraordinary depth in counseling the estranged kidnappers (played by Nicholas Cage and Holly Hunter). Dansby sums up Wilson's talent well:

In Raising Arizona, Wilson was on screen no more than 12 minutes, and he lit up every one of them. "It's an inspired piece, to play the comedy of it so vividly and at the same time to be this realistically harried father," said Thomas Schlamme, a writer/producer (West Wing, Studio 60 on the Sunset Strip) who was friends with Wilson. [. . .]

Robert Wuhl, who starred with Wilson in Bull Durham, said that had the actor lived another 10 years, "there's no question he becomes a John C. Reilly or a Jerry Orbach. He was a funny man and a great actor. He made you feel like he was on the way to his best role." "He was just turning a corner in his career," said Blye Wilson, "Each project he got closer and closer to a very big character spot."

Today Wilson's great, small roles are easy to find and enjoy. He made an impression as he put it, something people could identify with sometimes in a matter of minutes.

Posted by Tom at 4:15 AM | Comments (1) | TrackBack (0)

What's the big deal about a snowstorm?

Legendary basketball coach Bobby Knight (prior posts here) is not everyone's cup of tea, but he sure keeps things entertaining.

After coaching for most of his career at Indiana University where basketball is king, Coach Knight has never been all that comfortable playing out his coaching string at Texas Tech, where basketball is just a distraction between football and spring football.

On Saturday, Coach Knight was not impressed that only about 11,000 fans showed up to see Tech beat perennial Big 12 basketball powerhouse Kansas despite a snowstorm that dumped several inches of snow in the Lubbock area. Coach Knight is amazed that Texans make such a big deal about winter weather (just imagine if he had been in Houston last week!):

"People in Texas gotta understand that goddamn snow, you drive through it. Jesus!" Knight observed in his post-game remarks. "I mean, they're selling out grocery stores."

Not missing a beat, Coach Knight then turned entreprenurial:

"I think I'm going to buy a store and start rumors about snowfall."

HT DMN College Sports blog.

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

January 21, 2007

Colbert v. O'Reilly

Steven Colbert and Bill O'Reilly recently agreed to be interviewed on each other's show, and the interviews took place this past week. O'Reilly is the more popular pundit and Colbert overmatches O'Reilly humor-wise, but neither man went for the jugular in the interviews, which is common with such highly-anticipated showdowns,

Nevertheless, Colbert did get in a couple of good cracks. After O'Reilly admitted that his TV show persona was all "an act," Colbert asked O'Reilly: "If you're an act, what am I?"

Another came during O'Reilly's interview of Colbert. "They criticize you for what you say," observed Colbert about O'Reilly's critics. "But they never give you credit for how loud you say it."

Finally, when Colbert pitched O'Reilly's new book, one of those large, red "30% Off" Barnes & Noble stickers blotted out a portion of O'Reilly's head during the close-up of the book's cover. O'Reilly did not appear pleased.

Here is the first interview, Colbert on O'Reilly:

And the second, O'Reilly on Colbert:

Posted by Tom at 6:45 AM | Comments (2) | TrackBack (0)

January 20, 2007

Sign of the Apocalypse?

Zero Mostel seemed larger than life in defining the role of Max Bialystock, the lovable Ponzi-schemer in the original film version of The Producers.

And Nathan Lane was a worthy successor to Zero when The Producers was revived as a musical on Broadway.

But Tony Danza as Max?

Posted by Tom at 6:59 AM | Comments (0) | TrackBack (0)

January 19, 2007

The price of favorable testimony

In response to my recent lengthy posts (here and here) on the injustice of the conviction and brutal sentencing of former Enron executive Jeff Skilling, many folks who have not followed the Enron criminal cases closely have observed to me that they did not realize that the Enron Task Force relied almost entirely on testimony from cooperating witnesses who had copped pleas with the Task Force in convicting Skilling. That approach, coupled with the Task Force's equally dubious tactic of freezing exculpatory testimony for Skilling and the late Ken Lay out of the trial (see here, here and here), raises serious appellate issues regarding the legitimacy of the entire prosecution against Skilling and Lay.

Interestingly, the same dynamic is at play in the current prosecution of the Milberg Weiss law firm (see prior posts here). Larry Ribstein has been at the forefront of pointing out the injustice of the prosecutorial tactic of "paying" witnesses and proposing a framework for addressing it. Recently, Professor Ribstein posted the paper that he and Bruce Kobayashi are developing on this issue, The Hypocrisy of the Milberg Indictment: The Need for a Coherent Framework on Paying for Cooperation in Litigation, which includes in its abstract a wonderfully cogent sentence regarding the essence of the problem:

[T]he . . .important hypocrisy is that Milberg's prosecutors are essentially paying the same witness . . . that Milberg is being prosecuted for paying.

Posted by Tom at 5:43 AM | Comments (0) | TrackBack (0)

More on health insulation policies

This previous post reported on Arnold Kling's insightful Cato Unbound piece in which he explains how America's health care finance system is being undermined by health "insulation" policies rather than real health insurance.

Kling's article has provoked three excellent responses, including this one from Duke University professor Clark C. Havighurst, who has taught courses and written on health care law and policy, antitrust law, and economic regulation at Duke since 1964. Professor Havighurst explains cogently how the tax subsidy on employer-based health insurance has become a destructive force in the health care finance system and why it survives despite the fact that everyone knows that it is the principal cause of wasteful spending on health care:

The tax subsidy thus introduces new “moral hazards” into health care decision-making. Not only are employers, union leaders, legislators, and courts happy to commit employee-voters’ money in ways that make themselves appear to care about health above all things, but their stake in not having to say “no” to more and better health care also coincides perfectly with the preferences of the politically powerful health care industry. For these reasons, the tax subsidy has survived through political thick and thin even though every policy wonk knows that it is a principal cause of wasteful spending on health services. Liberals, of course, resist proposals to fix this glaring defect in the incentive system that drives health care spending. Why fix incentives to encourage consumers to make more appropriate health care choices when big government stands ready to choose for them?

Read the entire Havighurst piece, as well as this one by Jonathan Cohn, (a New Republic senior editor and the author of Sick: The Untold Story of America's Health Care Crisis — and the People Who Pay the Price, which will be published by HarperCollins later year) and this one by Matthew Holt (author of the Health Care Blog), both of whom favor a universal care, one-payor system administered by government. Holt, in particular, provides a pithy explanation of why meaningful reform of the health care finance system is so difficult to achieve:

[T]he political strength of the health care system actors combined with the disaggregated weakness of the consumers and those paying the bill — intermediated by the costs of health care being hidden within overall employment compensation and buried in the murky finances of the federal government — has meant that the system has chewed up and spat out any serious attempt to reform it since the 1930s.

Update: All of the authors have now responded to each other pieces in this cyber-conversation.

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

The ultimate risk of a wrongful prosecution

The US Supreme Court's strained relationship with Texas and the Fifth Circuit Court of Appeals over death penalty cases -- which was previously discussed here and here -- is back in the news as the high court again takes up the case of LaRoyce L. Smith, who was convicted and sentenced to die for the murder of a former co-worker. The Supreme Court overturned the sentence in 2004, but the Texas Court of Criminal Appeals promptly reinstated the conviction on the ground that the constitutional error that the Supreme Court had identified was harmless. The main issue in the second appeal is whether the Court of Criminal Appeal's response was an appropriate one to the Supreme Court's previous mandate in the case.

As the article points out, the recent history of capital punishment in the United States is inextricably tied to capital punishment in Texas, where 380 prisoners have been put to death since the Supreme Court reinstated the death penalty in 1976. That number is far more than any other state -- Virginia is second with 98.

Meanwhile, this Ralph Blumenthal/NY Times story reports on a case that reflects the main reason why I oppose the death penalty (previous posts here, here and here) -- a 50 year-old Dallas black man being exonerated by DNA evidence after serving nearly half his life in prison after being wrongfully convicted of rape. It is the 12th such case in Dallas County alone of a conviction being overturned by DNA evidence since 2001.

Finally, sentencing expert Doug Berman provides this post and related links explaining why the Supreme Court's fixation on death penalty cases is not such a good thing.

Posted by Tom at 4:18 AM | Comments (0) | TrackBack (0)

January 18, 2007

And about those declining oil markets

Crude oil fell to $50 a barrel earlier this week, the lowest price since early 2005 and a continuation of a steady decline in price since the market hit $80 a barrel last year. Why those greedy oil companies would continue to allow crude oil prices to fall after last year's election (rather than simply before) has not yet been explained by the O'Reilly-type conspiracy theorists, but Clear Thinkers favorite James Hamilton analyzes the data and concludes that there has not been any dramatic shift in the underlying market forces that would explain the decline. Professor Hamilton believes that fundamentals generally drive the price of oil, so he notes the trendy belief that speculators in the oil markets drove last year's price hike:

What about attributing the run-up in oil prices almost to $80 a barrel, and now the latest drop back near $50, entirely to speculation, without any reference to fundamentals? The reason I’ve resisted that hypothesis is that it’s based on the premise that the folks who manage these funds are just throwing their money away.

Thus, Professor Hamilton observes:

Until U.S. and Chinese oil demand are kept in check, and until big production increases are forthcoming, it's hard for me to see how the price could continue to plunge.

My advice to would-be speculators remains that fundamentals are ultimately what must drive the market. Anyone who believes otherwise should not expect to hang onto their wealth for long.

Check out the entire post, as well as some of the insightful comments.

Posted by Tom at 5:27 AM | Comments (0) | TrackBack (0)

Your Congress and Justice Department at work

As noted earlier here, here and here, the federal govenment's crackdown on Internet gambling is a wasteful exercise in nanny-state futility. However, it also is damaging to foreign investment in American markets, which is also something that we should not take lightly.

Well, the modern-day Prohibition-protectors are at it again. Earlier this week, the founders of Internet payment-services company Neteller PLC -- a publicly-traded London Stock Exchange company that merely facilitates payments to many online gambing sites -- were arrested and charged with conspiracy in connection with the transfer of billions of dollars of Internet gambling proceeds. The Manhattan U.S. attorney's office charged Stephen Eric Lawrence and John David Lefebvre, with conspiracy to transfer funds with the intent to promote illegal gambling, charges which carry a possible sentence of 20 years in prison. Lawrence was arrested in the Virgin Islands and Lefebvre was hauled off to jail in Malibu.

What level of waste regarding the destruction of lives, careers and wealth will it take before Congress and the Justice Department learn that enforcement of paternalistic laws criminalizing something that is not even a particularly serious problem is bad public policy? Along those lines, the Washington Post's Andrew Beyer reports on how the prohibition-style legislation has already had a detrimental impact on American gambling consumers and an innovative company.

Posted by Tom at 4:52 AM | Comments (1) | TrackBack (0)

The Murray education series

The American Enterprise Institute's W. H. Brady Scholar, Charles Murray, completes today a provocative three-part series in the WSJ's OpinionJournal on education in America (earlier installments are here and here.

As with Murray's many books and this earlier piece on reforming welfare, Murray presents his thoughts on education in a compelling and provocative manner, urging us to modify our thoughts and societal prejudices regarding education and intelligence. Murray's emphasis on IQ as a standard for tailoring education puts some people off, which is unfortunate. As he concludes below, Murray's purpose is to provoke discussion on changing attitudes and prejudices that undermine productive and sensitive reforms in our educational system:

The aim here is not to complete an argument but to begin a discussion; not to present policy prescriptions, but to plead for greater realism in our outlook on education. Accept that some children will be left behind other children because of intellectual limitations, and think about what kind of education will give them the greatest chance for a fulfilling life nonetheless. Stop telling children that they need to go to college to be successful, and take advantage of the other, often better ways in which people can develop their talents. Acknowledge the existence and importance of high intellectual ability, and think about how best to nurture the children who possess it.

Don't miss this series. The three installments are as follows:

Intelligence in the Classroom: Half of all children are below average, and teachers can do only so much for them.

What's Wrong With Vocational School? Too many Americans are going to college.

Aztecs vs. Greeks: Those with superior intelligence need to learn to be wise.

Posted by Tom at 4:22 AM | Comments (2) | TrackBack (0)

January 17, 2007

The Texans' playoff star

It's not as bad as that whole Vince Young thing, but Badsports' Kevin Whited and Scott over at H-Town Sports do raise a valid question in wondering how wide receiver Jabar Gaffney (the second draft pick in the Texans' history) has gone from Texans castoff to playoff star for the New England Patriots?

I wondered the same thing before this season and why the Texans overpaid for a wide receiver in decline to replace Gaffney.

Meanwhile, consistent with that quality of decision-making, the Texans announced late last week that they are raising ticket prices for next season.

Posted by Tom at 5:10 AM | Comments (1) | TrackBack (0)

The man who would not shut up

Fox News talk show host Bill O'Reilly has some strange ideas about energy prices, but he remains a popular -- and quite wealthy -- television demagogue. This Cathy Young/Reason article sums up O'Reilly's demagogy well:

O’Reilly has not lost the independent streak that sets him apart from GOP apparatchiks like Sean Hannity. But shrill, intolerant rhetoric has almost entirely eclipsed intelligent discussion on his show, and his pugnacious but likable populism has given way to a paranoid and venomous self-aggrandizement.

O’Reilly cultivates an image of a giant almost single-handedly fighting for “the folks” against slimy politicians, elitist journalists, nutty professors, namby-pamby judges, and greedy corporations. Sometimes he champions unquestionably good causes, such as the rights of abused children. But even then, he undercuts his own stance with grandstanding and selective presentation of facts.

Meanwhile, this Jacob Heilbrunn/NY Times Book Review article reviews Marvin Kitman's The Man Who Would Not Shut Up (St. Martin's Press 2007), which tracks O'Reilly's career as a local television news reporter into wealthy demagogue. Heilbrunn notes:

"[T]here is something more than a little nonsensical than a little nonsensical in O’Reilly’s lachrymose nostalgia about his humble origins, as well as in his self-important declarations about his heroic battle to save America from the cultural elites." [. . .]

. . . O’Reilly’s struggle isn’t about conservative ideas. It’s about parading his seething personal resentments in order to become the very thing he purports to despise: a celebrity.

Posted by Tom at 4:53 AM | Comments (0) | TrackBack (0)

The struggle of recovery made worse

Although the Bush Administration's troubles in devising and implementing a workable strategy for bringing civil order to Baghdad receives most of the mainstream's media attention, the failure of government to facilitate order in New Orleans and rebuilding throughout the Hurricane Katrina-ravaged Gulf Coast region is a more appalling failure (earlier post here).

It's not as if my expectations for government in the New Orleans region are all that high -- I'd be satisfied with ensuring law and order, making sure that basic services are provided and creating an environment where entreprenuers will take the risk of starting businesses that will create badly-needed jobs for the residents of the area. In this NY Times article, Adam Nossiter continues his series of excellent series of articles over the past year regarding the failure of the local and state governments in New Orleans to ensure law and order and the devastating effect that failure is having on the region.

Meanwhile, in another not as well-reported failure of government, this NY Times article reports on the Oreck Corporation's decision to move its maufacturing facility and 500 jobs from the Gulf Coast region of Mississippi to Tennessee, in large part because of the company's difficulties in arranging insurance for its operations in Mississippi. As Ted Frank observes, the lack of insurance coverage is the direct result of Mississippi courts expansion of the coverage of insurance contracts beyond their plain terms and the state legislature's response to those court decisions, which "has [made] things worse: criticize the businesses who have left, and seek to further regulate the price of insurance, despite thousands of years of evidence that limiting the price will reduce the amount supplied and lead to shortages."

But at least the region has (for this season anyway) a good professional football team, which continues to exist in New Orleans only because local and state governments in Louisiana found the time and resources to arrange several hundred million in emergency funding for the team and its facilities. And even that subsidy might not work in the long run. As usual, the government has its priorities in order.

By the way, while on the subject of interesting Ted Frank blog posts, don't miss this one.

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

January 16, 2007

The Power of Choice

Greg Mankiw passes along that PBS has announced that it will broadcast The Power of Choice, a documentary about Milton Friedman, on January 29th.

This promises to be a special show and one that should not be missed by anyone who is interested in the course of economics and capitalism in American society. The preview for the show is up on YouTube and can be viewed here.

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

The Admiral of San Antonio

One of my sisters, Mary, is a pediatrician who lives in Boerne and works in San Antonio.

Although sister Mary couldn't care less about professional sports in general and professional basketball in particular, she knows who former San Antonio Spurs center David Robinson is and admires him a great deal. This NY Times article explains why.

Robinson made a lot of money in San Antone while playing for the Spurs, embraced the community during his playing days and decided to stick around and give back to the community after his playing career was over. Bully for him.

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

Texas football play of the year

As noted in this earlier post and several previous posts, football is synonomous with autumn in Texas and, each year, there always seems to be one play that stands out among all the rest from the season.

This season, there really is no question about the play of the year, but it's not for the faint of stomach. During a key part of the 4th quarter in the state 5A D-1 championship game between Southlake Carroll and Austin Westlake, Southlake Carroll QB Riley Dodge barks out the signals, vomits immediately before taking the snap, proceeds to throw a perfect TD pass to put Southlake ahead for good in the game, and then is helped off the field by a couple of his teammates as he vomits again on his way to the sideline.

Through the genius of YouTube, you can now enjoy -- or at least admire -- QB Dodge's effort.

Posted by Tom at 4:05 AM | Comments (2) | TrackBack (0)

January 15, 2007

The Todd Graham affair

My, the risk of managing a minor league professional football team certainly is not pleasant at times, is it?

As this John Lopez column relates, Conference USA Coach of the Year Todd Graham -- who in his first season at Rice University led the Owls to their first bowl game since the early 1960's -- stunned the Rice community last week by announcing that he was leaving after only one season to replace his former boss, Steve Kragthorpe, as head coach at the University of Tulsa.

Hightailing it after only one season, switching jobs between conference members and leaving Rice without a head coach and most of its football coaching staff during the middle of recruiting season -- Graham pretty well handled this job change about as shabbily as possible (Whew! Just wait until the Marching Owl Band gets ahold of that material for its halftime show at the next Rice-Tulsa game). And as Lopez's column and Rice alum Charles Kuffner report, supporters of the Rice football program are certainly not happy with Coach Graham.

Of course, many of those disgruntled Rice supporters overlook the fact that they ran off a loyal and good football coach who had served the Rice program honorably and effectively for many years in order to hire Coach Graham in the first place. Oh well, chalk it up to the dysfunctional marriage (see also here, here and here) of university management and minor league professional football.

All of which reminds me of an anecdote that legendary Houston sportswriter Mickey Herskowitz passes along about NFL coaching icons, George Halas, Vince Lombardi and George Allen:

In the mid 1960's, the Los Angeles Rams had hired Allen off of the coaching staff of Halas in Chicago.

Halas was furious that the Rams failed to ask for his permission and threatened to take Allen to court. At a league meeting after the issue was resolved, Halas used the occasion to vent his anger at his former defensive coach.

"George Allen," Halas raged, "is a man with no conscience. He is dishonest, deceptive, ruthless, consumed with his own ambition."

At that point, Vince Lombardi leaned over to the owner of the Rams and whispered: "Sounds to me like you've got yourself a helluva football coach."

By the way, Coach Graham better hope that his career choices are better than the last Rice football coach who elected to take another job after just one season on South Main.

Posted by Tom at 5:46 AM | Comments (0) | TrackBack (0)

January 14, 2007

Also a golf pioneer

On this eve of Martin Luther King Day, GolfObservor.com's Frank Hannigan reflects in this piece on a little-known pioneering effort of another important black man of Dr. King's era -- Willie Mays.

Although Jackie Robinson broke the color barrier in Major League Baseball in 1947, Mays and Hank Aaron were the first true black superstars in baseball. To give you a snapshot of Mays' greatness, he began his career as a 20 year-old in 1951 and played until he was a 42 year-old. During that span, he only had one season (as a 42 year old in 1973) in which he generated fewer runs for his team than an average National League hitter would have created using the same number of outs as Mays ("RCAA," explained here). For his career, Mays generated an RCAA of 1008, which is 11th all-time among Major League ballplayers and second only to Mickey Mantle (who had an RCAA of 1099) among centerfielders in Major League Baseball history. A true five-tool player, Mays was also an extraordinary defensive player and a fine baserunner for most of his career. In short, anyone who knew anything about professional sports in that era knew about Willie Mays.

Mays was also an avid amateur golfer and, along with dozens of other baseball players, he had played in an off-season golf tournament in which the promoter had provided some prize money to entice the ballplayers. Under the rules of the United States Golf Association at the time, the USGA ruled that all the participants in the tournament had lost their amateur status, regardless, as Hannigan puts it, as to "whether or not they could break 100."

Mays enjoyed playing in the annual Bing Crosby Pro-Am at Pebble Beach during the off-season, so losing his amateur status would have prevented him from playing in that tournament. As a result, shortly after the close of the 1972 baseball season, Mays showed up at the USGA's offices in New York to arrange to reclaim his amateur status and Hannigan was the USGA Assistant Director who helped Mays do so. In reflecting on his short meeting with Mays, Hannigan concludes by observing that even Mays probably did not realize just how much of a pioneer that he was:

Mays was soon to join the Los Altos Country Club in the San Francisco Bay area, known to be a club that was favored by professional athletes including John Brodie and Bob Rosburg.

Although there are no precise records for such matters, it was my impression at that time that no other black person in America belonged to a member-owned club. This was more than an impression since we at the USGA knew the front office managers of every golf organization in the United States. It's hard to imagine we would not have known of a black member of a private, member owned course.

So, until somebody tells me otherwise, I regard Mays as having been a pioneer. My guess is that he may not have known that.

Posted by Tom at 7:03 AM | Comments (0) | TrackBack (0)

January 13, 2007

The NFL Network gambit

These previous posts have questioned the judgment of the National Football League owners in restricting viewership of NFL games through the new NFL Network. In this American.com op-ed, Will Wilson -- who shares my lack of ability to win football pools -- wonders the same thing:

For casual fans, as opposed to the diehards, spectator sports are a cultural artifact with unique rhythms and socialization rituals: we clean in the spring, we shop the day after Thanksgiving, and we watch football on Sundays. For casual fans, interest in the culture of football on Sunday afternoons—and, crucially, around the water cooler on Monday mornings—depended on a rhythm that was broken once games began taking place midweek. Casual office pool participants didn’t want to structure their weeks like hardcore fans. For them, the choice wasn’t between football and no football, as the NFL would like to believe, but between football and reading, or sewing, or learning Mandarin, or watching sitcoms, or whatever it is that people do on Thursday evenings in December. These casual fans weren’t interested in the game for the game’s sake. They were involved because the game opened up a social interaction without much time commitment. Many people in my office only watched on Sunday in order to participate in the pool, and participated in the pool because it only involved Sunday (with a Monday bonus if they were still in the running). For them, the NFL vanished between Tuesday and Saturday. When Thursdays became mandatory, the NFL ceased to exist for them altogether. [. . .]

All of this raises one question: why are professional sports leagues threatening to stamp out the cultural ties that keep casual fans interested in sports? Surely they are shrewd enough to recognize the risk—attempts to capture all possible present profits drive potential and future users to other hobbies. Fantasy sports are a billion dollar a year business, but much of that would erode quickly if initial entry costs were raised.

Both leagues have a “last period problem”—a phrase not from the language of sports, but of economics. Today’s ballplayers and owners don’t care if tomorrow’s ballplayers and owners make a dime, so they’re willing to discourage potential fans of the future in order to capitalize on the diehards right now.

It is already absurdly expensive to attend an NFL football game in person. When the flap between the NFL owners and the cable companies over the NFL Network is eventually resolved, it will be more expensive to watch television because of NFL football. Maybe this is the way for NFL owners to maximize profits, but there are many other things to do in life than watch NFL football games. Just ask folks in L.A.

Posted by Tom at 6:32 AM | Comments (0) | TrackBack (0)

January 12, 2007

Rabinowitz on the mob in the Duke lacrosse team case

I've written frequently about how a mob mentality took hold in a case familiar to Houstonians and led to a grave injustice for a large number of businesspersons, particularly two men and their families (examples here, here and here). The Wall Street Journal's Dorothy Rabinowitz examines in this OpinionJournal op-ed how a similar dynamic resulted in the demonization of several young men in what will now forever be known as the Duke lacrosse team case. Rabinowitz analogizes the Duke students' case to that of the phony child-abuse cases that she has previously exposed, but the dynamic is the same in many high-profile cases in which certain elements of the government, media and the public jump to a conclusion about guilt when a reasoned, objective and deliberate examination of the facts of the case would result in a far different and more nuanced conclusion. Larry Ribstein and the WSJ's ($) Holman Jenkins have masterfully presented how the same dynamic has led to the unnecessary destruction of careers and lives in connection with the media-inspired scandal regarding the widespread policy of backdating options as a means of compensating corporate personnel (Larry analyzes today's news of the newly-reported criminal investigation of Apple here). In the Duke lacrosse team case, it is particularly ironic that many in the media and on Duke's faculty were enablers of abusive, dishonest law enforcement and prosecution tactics that are far more often used in cases against minorities that those enablers would decry. They now share responsibility for the continued use of such tactics long after the spotlight on the Duke lacrosse team case has moved on to the next fixation of the mob.

Posted by Tom at 5:06 AM | Comments (0) | TrackBack (0)

The myth of healthy marathoners

The Chevron Houston Marathon takes place Sunday morning, and this Dale Robertson/Chronicle article tells the story of Dolph Tillotson, the Galveston Daily News publisher who almost died of a heart attack while training at Memorial Park in preparation for the 2004 marathon. Tillotson has now recovered to the extent that he is going to try and complete the marathon on Sunday, which is certainly a remarkable comeback.

But is Tillotson's long-distance running making him healthier? Art DeVany argues that it does not and, in this recent post, notes a study from the Annals of New York Academy of Sciences that indicates that long-distance running is more dangerous to one's health than conventional wisdom suggests:

Ann N Y Acad Sci. 1977;301:593-619. Related Articles, Links

Coronary heart disease in marathon runners.

Noakes T, Opie L, Beck W, McKechnie J, Benchimol A, Desser K.

Six highly trained marathon runners developed myocardial infarction. One of the two cases of clinically diagnosed myocardial infarction was fatal, and there were four cases of angiographically-proven infarction. Two athletes had significant arterial disease of two major coronary arteries, a third had stenosis of the anterior descending and the fourth of the right coronary artery. All these athletes had warning symptoms. Three of them completed marathon races despite symptoms, one athlete running more than 20 miles after the onset of exertional discomfort to complete the 56 mile Comrades Marathon. In spite of developing chest pain, another athlete who died had continued training for three weeks, including a 40 mile run. Two other athletes also continued to train with chest pain. We conclude that the marathon runners studied were not immune to coronary heart disease, nor to coronary atherosclerosis and that high levels of physical fitness did not guarantee the absence of significant cardiovascular disease. In addition, the relationship of exercise and myocardial infarction was complex because two athletes developed myocardial infarction during marathon running in the absence of complete coronary artery occlusion. We stress that marathon runners, like other sportsmen, should be warned of the serious significance of the development of exertional symptoms. Our conclusions do not reflect on the possible value of exercise in the prevention of coronary heart disease. Rather we refute exaggerated claims that marathon running provides complete immunity from coronary heart disease.

DeVany -- who has been studying physiology and exercise protocols for years -- has accumulated a series of posts regarding the unhealthy nature and outright dangers of endurance training. The reality is that many endurance runners are not particularly healthy people, suffering from lack of muscle mass, overuse injuries, dangerous inflammation and dubious nutrition.

Tillotson obviously has great desire and discipline to be able to return to marathon running after almost dying of a heart attack. But his judgment in doing so is open to serious question.

Posted by Tom at 4:33 AM | Comments (1) | TrackBack (0)

Rocket docket

Awhile back, this post noted a Harris County criminal district judge who contributes to the chronically over-crowded Harris County jail by requiring jail time for any defendant convicted of a drug offense, no matter how inconsequential.

Now, another Harris County criminal judge is being called on carpet for his rather odd manner of administering justice. This Chronicle article reports that Harris County Criminal Court at Law No. 3 Judge Donald Jackson ordered more than a dozen criminal defendants who were late to court earlier this week to enter a guilty plea or spend the night in jail:

Jackson, who presides over County Criminal Court No. 3, ordered 16 people accused of misdemeanor crimes to sit in the jury box, told them that they were in custody and that their bonds were being revoked and raised, according to several Houston attorneys.

Jackson also told the defendants they would have to stay in jail overnight unless they agreed to plea bargain — essentially to enter guilty pleas, the attorneys said. [. . .]

Houston attorney Kyle Vance, whose client was about 20 minutes late to court, said the man was "trying to get out of jail" Wednesday afternoon.

Vance said his client is facing a first-time charge of driving while intoxicated and had posted a $500 bond. Jackson raised his client's bail to $2,500, Vance said.

"I was out of the courtroom for just a minute, and I asked the clerk, 'Is their bond being revoked?' And she said, 'Both. It has been revoked and raised, unless you plea bargain.' "

Right after that, Vance said, another defendant entered a plea bargain. "And the judge said the revocation has been withdrawn since he pled."

To make matters worse, the Harris County Criminal Justice building is a tough slog most mornings, with long lines at the x-ray machines slowing down traffic. The ACLU and the Harris County Criminal Defense Lawyers Association are looking into Judge Jackson's behavior. Sounds as if it's about time that the State Board of Judicial Conduct and Harris County voters did, too.

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

January 11, 2007

Did Drew outsmart himself?

Early in this past season for baseball free agents, I noted that J.D. Drew appeared to make a savvy move by opting out of a player option with the Dodgers that would have guaranteed him $33 million over the next three seasons. It appeared that I was right about a month ago when uber-agent, Scott Boras, engineered a $70 million deal for Drew with the Red Sox over five years. Nothing like picking up a cool $37 million by simply opting out of an option.

However, it's been over 40 days since the announcement of the Drew-Red Sox deal and Drew still has not signed a contract. As this Murray Chass/NY Times article notes, there are rumors that Drew's recent shoulder injury may have been more serious than the Red Sox thought before examining Drew physically. If so, then it's highly doubtful that the BoSox will commit anything close to $70 million smackeroos to Drew over five years.

If Drew's deal with the Red Sox goes awry, I wonder whether Boras will pick up the difference between the $33 million that Drew left on the table from the Dodgers and the possibly lesser amount that a tarnished Drew can draw on the rebound in even a superheated free agent market?

Posted by Tom at 4:58 AM | Comments (1) | TrackBack (0)

Acrobatic lawyers

In my practice, I am continually amazed at how most lawyers underuse Adobe Acrobat's features despite the fact that pdf files have become the standard file form for legal briefs and pleadings. Such basic and simple-to-use Adobe features as bookmarking and linking greatly facilitate the review of large documents, but rarely do lawyers include these features in their papers. I bookmark and link all my large briefs and pleadings, and many judges -- most of whom review briefs and pleadings on a computer these days -- have commented to me on how much they enjoy using those features in reviewing voluminous documents.

Ed Poll realizes the same thing that I do. So, he interviews Rick Borstein, Business Development Manager for the Legal Community for Abobe Systems, Inc. in this podcast in which Borstein discusses the new features in the latest version of Adobe Acrobat that are of special interest to lawyers. It's 20 minutes of listening that will be well worth your time.

Posted by Tom at 4:53 AM | Comments (0) | TrackBack (0)

Big money golf

Don't miss this fascinating Ron Sirak/Golf Digest article on the top 50 money-generating golfers. Julius Boros ushered in play-for-logo deals for professional golfers back in the early 1960's when he donned an Amana hat for $50 a week. I think it's safe to say that no one in their wildest dreams imagined at that time that a 17-year old female golfer (Michelle Wie) would be pulling in almost $20 million in off-course income in a single year. Imagine what she could pull down if she actually won a tournament or two.

Several other interesting tidbits:

Wie made $2 million more in off-course income than Jack Nicklaus.

Someone still paid David Duval over $4 million in off-course income?

Chad Campbell is the highest-ranking Texan at 19 with over $6.6 million in total income, but The Woodlands' K.J. Choi is gaining on him (25th at $5.7 million).

A caddie for a mid-range player in the top-50 money-earning list, who won at least once on the PGA Tour in 2006, had gross earnings of around $260,000.

This year, everyone on the PGA Tour will get a courtesy car at every tournament.

Posted by Tom at 4:28 AM | Comments (0) | TrackBack (0)

January 10, 2007

Reacting to Gladwell's Enron article

It's been a week now since Malcolm Gladwell's New Yorker article on the injustice of the case against Jeff Skilling. One of the more revealing reactions to the article resulted from a question that Gladwell posed in this blog post relating to his article:

Can anyone explain—in plain language—what it is Jeff Skilling and Co. did wrong? . . . The question is strictly a legal one: according to the way the accounting rules were written at the time, what specific transgressions were Skilling guilty of that merited twenty-four years in prison?

Peter Lattman forwarded Gladwell's question to former Enron Task Force prosecutor John Hueston, who is now in private practice. You may recall Hueston from the Lay-Skilling trial -- he was the prosecutor who conducted a largely disingenuous cross-examination of the late Ken Lay (see also here) and then bragged after the trial to the New York Times that he and the other Task Force prosecutors had brilliantly convicted Lay even though the case against him was weak (he is proud of that "accomplishment"?).

At any rate, Hueston's response to Lattman's request largely avoids addressing Gladwell's straightforward question, preferring instead to speak in the platitudes that have become all too familiar to anyone who attempts to have an objective discussion of anything having to do with Enron. However, toward the end of his email to Lattman, Hueston makes three conclusory statements that are at least somewhat responsive to Gladwell's question:

Skilling was found guilty because he was caught flat-footed in lies about the performance of highly-touted business units such as Enron Broadband Services, telling employees the sour truth about the dismal state of the EBS business and then reversing course in a public call with analysts just eight days later.

Skilling didn’t suspect earnings manipulation, he condoned and promoted it with CFO Fastow and CAO Causey, who kept a tally sheet that included accounting side deals that unequivocally violated accounting rules.

Likewise, Ken Lay repeatedly and falsely misrepresented the performance of Enron’s business units, told employees and others to ignore the Wall Street Journal exposes and reports from short sellers, and lulled them with reports of his purchases of Enron stock as he quietly dumped $70 million of his Enron holdings.

Taking Hueston's point about EBS first, and as noted in this earlier comprehensive post on the Enron Task Force's case against Skilling, the Task Force attempted to prove that Enron lied about the health of EBS exclusively through the testimony of four cooperating witnesses who had copped pleas with the Task Force to hedge the risk of long prison sentences -- former Broadband executives Ken Rice and Kevin Hannon, and former Enron investor relations executives Mark Koenig and Paula Rieker. Of course, Hueston doesn't mention that fact, nor the fact that the Task Force effectively prevented (see also here) witnesses with exculpatory testimony for Skilling from testifying during the trial and disputing the cooperating witnesses' allegations.

Moreover, the documentary evidence regarding EBS introduced during the trial actually supported Skilling's defense. Documents 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. Even more importantly, far from being the vehicle for fraud that Hueston suggests, Enron's broadband unit was attempting to develop and deliver the video-on-demand service that is now a popular and profitable product of cable television and Apple's iPod. These systems are a creative accomodation to copyrighted music and video programming under which enormous wealth is generated for artists and shareholders. As Skilling passionately testified during his trial:

And one last thing -- I'll make the last one argument for Broadband because people criticize me about Broadband, and I will take the criticism. We -- certainly, we made a mistake. But it wasn't big. I mean, it was a billion dollars. We invested a billion dollars in the Broadband business. If it had worked, it could have been worth $30 billion. It didn't work. We lost a billion dollars, but if you can make those kinds of bets, that's the kind of the risk you [should be taking] as a corporation. And if you do a lot of [deals with a] downside of a billion and upside of 30 [billion], you're doing a good job for your shareholders in the long run, in my opinion. This one didn't work.

Frankly, given the current value of video-on-demand technology, Skilling's valuation of Enron's Broadband business -- had the company been able to capitalize on its investment -- was probably low. Yes, Enron ended up being ahead of the market in regard to this investment. But what public policy does it serve to have the likes of Hueston use government power to prosecute businesspeople who take the risks necessary to facilitate the development of this type of valuable asset?

Moving on to Hueston's other allegation against Skilling, the evidence that Skilling engaged in earnings manipulation is so sketchy (see more extensive discussion in the earlier comprehensive post) that Hueston resorts to attempting to tie Skilling to the alleged Global Galactic agreement between Fastow and Causey. Revealingly, only the non-believable Fastow testified during the trial that Skilling knew about Global Galactic. Moreover, even after Causey copped a courthouse steps plea deal to hedge the risk of the effective life sentence that Skilling received, the Task Force chose not to call Causey as a witness. More than likely, the reason that the Task Force did not call Causey is that Causey wouldn't have corroborated Fastow at all, which raises a quite reasonable question -- why did the Task Force prosecutors use Fastow's testimony to convict Skilling when they knew that there was reasonable doubt about Fastow's veracity? Indeed, what does Hueston have to say about the Task Force's duplicity with regard to Fastow's testimony during the Lay-Skilling trial? And again, what does Hueston have to say about the numerous witnesses who the Task Force effectively prevented from testifying who would have provided exculpatory testimony for Skilling and refuted Fastow's testimony?

Finally, as to Hueston's allegations regarding the late Mr. Lay, one can only ponder what he is remembering? Lay was charged with wrongdoing for only about a two-month period following his return to Enron's CEO position after Skilling resigned unexpectedly in mid-August, 2001. Had Lay not made that ill-fated return at the behest of the Enron board, he presumably would not have been charged at all. Moreover, as noted here and here, Hueston spent most of his time cross-examining Lay during the trial about his lavish lifestyle and his line of credit arrangement with Enron, neither of which represented the core basis of any of the criminal charges against Lay.

In fact, the entire line of credit issue reflects how the Task Force elevated form over substance in the Lay-Skilling prosecution. Lay traditionally took a substantial part of his compensation from Enron in stock, which was a good thing for both the company and him. As an accommodation to Lay, Enron’s board approved a line of credit -- eventually reaching $7.5 million -- that allowed Lay to monetize the stock efficiently by borrowing on the line and then repaying it with his Enron stock. Each year, Lay and Enron complied with the requirement under SEC rules to disclose Lay’s use of stock to pay the credit line.

That arrangement probably wouldn’t have made any difference except that Lay made what turned out to be a bad decision in regard to his personal financial affairs well before the time that the Task Force contended he was involved in wrongdoing at Enron. Because his at-one-time $300 million-plus net worth was almost entirely invested in Enron stock, Lay and his financial advisers decided that he should diversify his portfolio. However, Lay continued to believe that Enron stock was the best value in his portfolio. So, rather than selling the stock and using the proceeds to buy other securities, Lay borrowed $100 million from third party financial institutions, pledged his Enron stock as collateral and began buying other assets with the loan proceeds. Accordingly, Lay was actually exhibiting an optimism and confidence in the underlying value of Enron, a fact that the Hueston blithely ignores in alleging that Lay knew that Enron was a sinking ship.

The steady decline in Enron stock price during 2001 undermined the value of the Enron stock collateral for the $100 million in personal loans that he had used to diversify his portfolio. Thus, as the collateral value fell and margin calls resulted, Lay used the most efficient facility at his disposal to repay about $70 million of debt in 2001 — i.e., the proceeds from draws on his company line of credit, which he repaid with his Enron stock.

During his cross-examination of Lay, Hueston hammered Lay relentlessly over the fact that Lay did not disclose to Enron employees in late October, 2001 that he was using Enron stock to repay the line of credit, on one hand, while advising the employees at the same time that he was purchasing Enron stock and that the stock remained a good value, on the other. However, Hueston is simply wrong in his contention that Lay was dumping Enron stock at a time when he was advising employees and the market that it was a good value. In September 2001, Lay accepted $10 million in cash and another $10 million in Enron stock in return for agreeing to step back into the CEO role after Skilling resigned, and Lay used the $10 million in cash to repay a portion of his margin loans. In so doing, Lay effectively bought $10 million in Enron stock, meaning that Lay acquired over $20 million in Enron stock roughly a month before he made the statements to Enron employees of which Hueston complains. Consequently, even though Lay was also paying his line of credit with Enron stock at the same time, his acquisition of another $20 million in Enron stock is consistent with the optimistic view about Enron that Lay was communicating to employees and the public. In his quest to demonize Lay, Hueston simply ignores that fact.

So at the end of the day, Hueston falls squarely into what Gladwell calls the Higgs Boson syndrome with regard to answering Gladwell's question. Hueston is gung ho for nailing Skilling and Lay, but he just can't plainly explain their guilt without leaving out important parts of the story. Of course, it is far easier to conclude that someone is guilty of a crime if you start from the presumption that they are guilty of the crime.

In reality, Hueston's view simply plays to the real presumption in the case against Skilling and Lay -- that Skilling and Lay were rich, Enron went bust, and investors had big losses, so Skilling and Lay must be guilty of something. Although they made some bad business judgments (as well as some very good ones, too), Skilling and Lay are not the villians that Hueston and many in the mainstream media portray them to be. Skilling and Lay may not have been saints, but it should give us all pause that the government's overwhelming prosecutorial power has been manipulated to hand them effective life sentences for, at worst, denying that their business dream had ended.

Posted by Tom at 8:32 PM | Comments (3) | TrackBack (0)

Those pesky dealbreakers

In this TCS Daily op-ed, Professor Bainbridge weighs in on a problem that businesspeople invariably complain about in connection with the handling of contractual matters relating to their business -- those damn dealbreakin' transactional lawyers:

In his book, The Terrible Truth About Lawyers, Mark H. McCormack, founder of the International Management Group, a major sports and entertainment agency, wrote that "it's the lawyers who: (1) gum up the works; (2) get people mad at each other; (3) make business procedures more expensive than they need to be; and now and then deep-six what had seemed like a perfectly workable arrangement. Accordingly, I would say that the best way to deal with lawyers is not to deal with them at all."

Pretty depressing stuff, especially if you hope to make a living as a transactional lawyer.

Bainbridge sums up by providing wise advice not only to transactional lawyers, but to any lawyer attempting to make a living resolving business issues:

All of which is why both legal education and the apprenticeship served by young associates must emphasize not only legal doctrine but also economics and business. It may still be possible for someone lacking any knowledge of finance and economics to be a successful mergers and acquisitions lawyer, but I doubt it. As Mark McCormack observed, "when lawyers try to horn in on the business aspects of a deal, the practical result is usually confusion and wasted time." Transactional lawyers therefore must understand the business, financial, and economic aspects of deals so as to draft workable contracts and disclosure documents, conduct due diligence, or counsel clients on issues that require business savvy as well as knowing the law.

Posted by Tom at 4:38 AM | Comments (1) | TrackBack (0)

Health "insulation" policies are the problem

EconLog's Arnold Kling is doing some of the best thinking and writing on America's broken health care finance system these days. In this lucid Cato Unbound article, Kling channels one of this thoughts from his book Crisis of Abundance: Rethinking How We Pay for Health Care (Cato 2006):

The health coverage most Americans have is what I call “insulation,” not insurance. Rather than insuring them against risk, most families’ health plans insulate them from paying for most health care bills, large and small. [. . .]

Real insurance would pay for treatments that are unavoidable, prohibitively expensive, or for illnesses that occur relatively rarely. Instead, insulation reimburses even relatively low-cost services, such as a test for strep throat or a new pair of eyeglasses. Insulation pays for treatment even if it is commonplace or discretionary.

For health care providers, insulation is a bonanza. Because consumers are not spending their own money, they accept doctors’ recommendations for services without questioning them and without concern for cost. Faced with an insured patient, a health care provider is like a restaurant catering to convention-goers with unlimited expense accounts. The customer will gladly take the most high-end recommendation and not worry about the price.

Consumers are happy as well. Insulation relieves the patient of the stress of making decisions about treatment. The patient also does not have to worry about shopping around for the best price.

The problem with insulation is that it is not a sustainable form of health care finance. Individuals, employers, and government are all under stress. [. . .]

Today it is fairly deeply ingrained with most Americans that health care services are something that you should not have to pay for yourself. Insulation is the norm, and real health insurance as I would define it is almost nonexistent.

Ultimately, I think we are headed for a collision of cultural values. We prefer insulation to real insurance. We expect services to be readily available, without the supply limitations or waiting lists that exist in countries where government is responsible for more health care funding. And yet we are growing increasingly concerned over the expansion of health care spending that takes place in a system that lacks constraints on either supply or demand.

Real health insurance may not be popular now. But when Americans see that the providers of insulation, including Medicare, have to turn to the rationing of health care services in order to meet budgetary constraints, real health insurance may start to look like a good alternative.

Posted by Tom at 4:21 AM | Comments (3) | TrackBack (0)

January 9, 2007

More on Perverted Justice

Awhile back, this post noted the sad case of Louis Conradt, Jr, the Terrell, Texas prosecutor who killed himself late last year as the police were knocking on his door to arrest him. Conradt's arrest was a part of a sting operation set up by Perverted Justice, the group that NBC Dateline has adopted as a highly profitable vehicle for generating mass anxiety about child sexual offenders. A Dateline NBC camera crew was outside Conradt's house when he killed himself.

As this recent Allen Salkin/NY Times article notes, this arrangement has been mutually profitable for Perverted Justice and NBC. Perverted Justice receives $70,000 for every hour of Dateline content, while Dateline uses the 9 million or so viewers per pedophile episode to generate more ad revenue (Dateline nets only 7 million viewers for non-Pedo Dateline episodes). Inasmuch as business is good, Dateline already has six more Pedo-Dateline episodes in the pipeline for 2007.

In this insightful post, Dan Filler over at Concurring Opinions wonders about the efficacy of the Dateline-Perverted Justice venture and where it is leading us:

I leave to the Times article, and the various policy advocates, a discussion of the utility of this joint project. Will it reduce internet child abuse? Hard to know. Will it cause innocent people to suffer? Unclear. But it is time that we come to understand that the trade in fetishized fetishes is if nothing else weird and discomforting. And perhaps - just perhaps - it twists our own culture in exactly the direction we most abhor.

Posted by Tom at 5:12 AM | Comments (5) | TrackBack (0)

Reviewing the best Web technology of 2006

Dallas lawyer Tom Mighell is the dean of Texas law bloggers and is a widely-respected expert on application of technology to the practice of law. Along with fellow legal technology expert Dennis Kennedy, Tom writes a monthly column entitled "Strongest Links" for the ABA Law Practice Management magazine that highlights helpful technologies.

In this column, Tom and Dennis provide their "Strongest of the Strongest Links" that they wrote about during 2006. Although written primarily for folks interested in application of the technologies in the practice of law, most of the technologies are helpful for anyone interested in using their time more efficiently. Check it out.

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

The final verdict on David Carr

Dave Berri over at the Wages of Wins blog has posted his final ratings for NFL quarterbacks for the 2006 season (related blog post here). The final rating is further confirmation that the David Carr saga is over in Houston.

As noted earlier here, here and here, Berri's QB rating is a much more accurate measure of a QB's true value than the misleading QB rating that the NFL uses (incredibly, the formula for the NFL rating system not only is complicated and unclear, it also ignores sacks, yards lost from sacks, rushing yards, rushing attempts, and fumbles!). Carr finished the season ranked 28th among the 32 starting NFL QB's (he ranked 15th in the NFL's official rating), higher only than such luminaries as Joey Harrington, Charlie Frye, Bruce Gradkowski and Andrew Walter. Suffice it to say that Texans coach Gary Kubiak -- who had nothing to do with the decision to use the Texans' first draft choice in history to acquire Carr -- will not likely elect to continue hitching his coaching legacy to the wagon of such high-priced mediocrity at the QB position.

Carr is a nice fellow, so it's too bad that it didn't work out for him in Houston. The team certainly didn't do him any favors, what with a chronically make-shift offensive line and several failed forays at acquiring a true left tackle to protect Carr's backside. And it's important to remember that player statistics tracked in football are not the same as statistics tracked in baseball. In baseball, many of the hitting statistics that are tracked reflect the ability of the individual. In football, however, this is not precisely the case. The stats that a quarterback accumulates are a reflection of not only his ability, but also the ability of his teammates, his coaches and the defensive players that the quarterback faces. Consequently, it's not always the case that even Berri's QB rating shows that one player is "better" than another player.

But after five seasons, Carr's numerous technical deficiencies -- poor reading skills, a low release point that causes many tipped balls at the line of scrimmage, poor pocket presence, mediocre leadership skills, inability to handle the shotgun formation, etc. -- are simply too numerous to overlook. His abysmal QB rating simply confirms that he is unlikely to improve to even an average level of NFL quarterback. At this point, backup Sage Rosenfels is a far better bet than Carr to achieve a better-than-average QB rating in the 2007 season.

By the way, for the fourth consecutive year the top quarterback in the NFL is Peyton Manning, who achieved a QB score over 2,000 under Berri's rating system, only the fourth time that a QB has attained that level since 1995. In watching Manning in his prime, we are witnessing one of the truly great NFL QB's in history.

Posted by Tom at 4:20 AM | Comments (0) | TrackBack (0)

January 8, 2007

Houston College Baseball Classic set

In most parts of the country, baseball fans have to wait until the beginning of spring training in late February to get their baseball fix.

But here in Houston, we don't have to wait that long. We have the Houston College Classic at Minute Maid Park in early February each year. This year's classic will be on the weekend of February 9 and will include teams from local powerhouses Rice and Houston, as well as from Texas A&M, Baylor, Arizona State and Vanderbilt.

The Stros also coordinate their annual Fun Fest at Minute Maid Park to coincide with the College Classic. Although some games during the weekend attract big crowds (say, 20,000 or so), the crowds are usually not bad. If you enjoy baseball you've never been to the College Classic, check it out. The Stros do a good job of putting it on.

Posted by Tom at 6:11 AM | Comments (1) | TrackBack (0)

And you thought big-time college football was competitive?

Alums of several Ivy League powerhouses might be calling for the head of their coaches soon.

Their chess coaches, that is.

As noted in this Washington Post article, former Ivy League chess powerhouses such as Harvard and Princeton are now routinely waxed by emerging powers such as burgeoning powers as University of Maryland, the University of Texas at Dallas and Miami Dade College. Even more interesting is the way that these new top teams are doing it. They hire Russian and East European coaches and offer full-ride scholarships for recruits, many of whom are from abroad, one of whom was a 40 year old grandmaster. Ringers such as that led to the usual regulatory initiatives, such as prohibiting grandmasters over the age of 25. Now, there is even a six-year eligibility limit and a requirement that players maintain a 2.0 GPA and at least a half-time course schedule. Sounds almost like football . . .

But the market for chess coaches remains robust. Might things have turned out differently for Bobby Fischer had this market been around a generation ago?

Posted by Tom at 5:50 AM | Comments (0) | TrackBack (0)

The Nardelli paycheck

Last week, this post noted Henry G. Manne's op-ed regarding the myth of shareholder democracy being some sort of panacea to all sorts of corporate agency cost problems. As if on cue, Professor Manne's op-ed was followed by Home Depot's announcement that it was terminating the contract of CEO Robert Nardelli, which triggered Nardelli's right to receive about $210 million in exit compensation under his contract.

Of course, Nardelli's rich exit comp generated the typical wails of woe from various business media pundits who contend that an executive profiting from failure is concrete evidence of a defect in corporate governance that needs to be addressed through more regulation. A typical reaction is this one from Chronicle business writer Loren Steffy:

That cuts to the heart of recent hot-button executive pay issues. From options abuses such as backdating and repricing to lavish perks, all tend to be awarded with a sense of entitlement.

It's as if executives deserve ever-increasing pay packages simply because they're executives.

How many of us, failing to meet our bosses' expectations, are given a bonus or a raise equal to last year's?

But as Ted Frank points out, self-righteous egalitarians such as Steffy miss the point. Nearly all of Nardelli's $210 million was part of Nardelli's original employment contract that he negotiated when the Home Depot board lured him from General Electric, where Nardelli had been a star and one of the three executives competing to succeed Jack Welch as GE's CEO. When the GE board passed him over in favor of Jeff Immelt, Nardelli was a hot property in a market in which such talent is at a premium, sort of like Nick Saban or Carlos Lee in their markets. And, by the way, all of the terms of the rich deal to attract Nardelli were included in the annual Home Depot proxy.

So, what exactly is Steffy's point about his so-called "Nardelli Principle?" That Nardelli's deal should be abrogated now simply because the board concluded it made a mistake in hiring him in the first place?

Look, top executive talent -- just like good football coaches and star baseball players -- is hard to find, a fact that even private equity is realizing. As a result, boards are willing to pay a premium to get it. Those decisions don't always work out -- just as Drayton McLane's final contract with Jeff Bagwell didn't turn out well -- but that doesn't mean that the boards or McLane were wrong to pay a lot to attempt to reduce the risk of loss.

Meanwhile, bringing the discussion back to center is Professer Manne, who responds through this Larry Ribstein post to criticism that his views on shareholder activism leads to "philosopher king" board members overpaying failed cronies such as Nardelli:

. . . don't forget that we do not want changeovers of management teams to be quite as easy as changing which grocery store (or gardener) you use. That would introduce an element of uncertainty and confusion into the management picture that no intelligent shareholders would want. I do not know the optimal difficulty to put in the way of regime changers, but I am certain that it is more than zero. I do not think there is any good substitute for allowing the market to work that matter out through unregulated experience.[. . .]

[A critic] says that "I want the system where residual claimants are able to pick their own agents." That is exactly what we do not want. We want shareholders to have full freedom to buy or sell shares with whatever provisions lie behind them. Corporate governance is none of the government's business; it is best left to the tender mercies of private contract unless some serious externality can be demonstrated or a market failure in the market for corporate control is shown, neither of which I am aware of. Who is being the "philosopher king" here?

Posted by Tom at 4:42 AM | Comments (0) | TrackBack (0)

January 7, 2007

Celebrating the new Lord of Alabama Football

This earlier post noted the rather obsessive behavior of numerous University of Alabama football fans as they followed the University's courtship of former Miami Dolphins head coach, Nick Saban. This Tuscaloosa News article covers the greeting of Saban at the local airport by hundreds of the 'Bama faithful, which included the frisky female fan who managed to plant a welcome kiss on Saban pictured on the left. As the article notes, she wasn't the only female fan who was overwhelmed by the presence of the new Lord of Alabama Football:

Colette Connell, one of the more exuberant fans at the airport, even had her own Saban cheer: “Praise the Lord, God is so good, Nick is now in the Bama hood."

Later that day, Connell was arrested for driving under the influence.

Posted by Tom at 4:11 AM | Comments (0) | TrackBack (0)

January 6, 2007

Westar Energy convictions are overturned

In this scathing 43-page decision, the 10th U.S. Circuit Court of Appeals set aside the convictions of former Westar Energy executives David Wittig and Douglas Lake on every count and ruled that most of the counts could not be retried. The convictions, which were based primarily on the executives' alleged failure to report their use of corporate jets for personal travel, “hung by a thin legal thread.”

Although largely overshadowed in the national media by the Lay-Skilling trial, Wittig and his corporate right hand man Lake were sentenced to 18 and 15 years in prison in April 2006 after being convicted of looting the utility of millions of dollars in unapproved compensation. An earlier contentious trial of the two former executives had ended in a mistrial in late 2004 after another federal jury in 2003 convicted Mr. Wittig of bank fraud charges in a case that was not directly related to Westar. Federal prosecutors had sought effective life sentences against the 50 year-old Wittig and the 55 year-old Lake.

Wittig and Lake left Westar late in 2002 amidst allegations of misuse of corporate funds. Subsequently, Westar under Mr. Wittig was implicated in the scandal surrounding efforts to fund Houston Congressman Tom DeLay's political action committee. Westar's contributions of funds during 2002 to DeLay's PAC were among the allegations of wrongdoing that led to DeLay's indictment in Travis County (Austin), Texas last year.

Wittig, who was a former star deal maker at Salomon Brothers, became Westar's CEO in 1998 and immediately turned the sleepy Midwestern utility into a deal machine. Wittig was paid compensation of more than $25 million in his seven years with Westar, and had no reservations about showing it in the staid Westar home of Topeka. He bought the largest home in town, which is a 17,000-square-foot mansion that former Kansas governor and one-time presidential candidate Alf Landon built. Wittig then spent over $2 million in art and interior decoration on the pad while driving around Kansas in a $230,000 Ferrari 550 Maranello. After some early success, Mr. Wittig's fast deal plan at Westar faltered and the company's stock price fell from $44 to $9 as Westar came under increasing pressure from shareholders and investigators, including the Travis County grand jury.

The first trial of Wittig and Lake was particularly wild. U.S. District Judge Julie Robinson, who is a former prosecutor, battled constantly with Wittig's defense attorneys -- Adam Hoffinger and Edward Little -- as the defense accused the judge of favoring the prosecution in her rulings. At several points during that trial, Judge Robinson angrily lectured the attorneys for their courtroom demeanor, which included rolling their eyes during witness testimony. Finally, a day before closing statements, the friction between the judge and the defense attorneys boiled over as Judge Robinson took the extraordinary measure of barring one of Mr. Lake's lawyers from the courtroom for the remainder of the trial.

Judge Robinson's judgment has also been questioned in regard to her sentencing of Wittig on the bank fraud charges. The judge originally sentenced Wittig to 51 months in prison in that case, but the 10th Circuit threw out that sentence. After she resentenced him to 60 months, the appellate court in November also threw out that sentence as far exceeding federal sentencing guidelines. Wittig is awaiting another sentencing in that case.

After this four-year ordeal of waste, is there really any question that responsibility for the alleged wrongdoing at Westar would have been more efficiently and justly allocated through civil rather than criminal proceedings?

The go-to duo for analysis of white collar criminal cases in the blawgosphere -- Ellen Podgor and Peter Henning -- analyze the 10th Circuit's decision overturning the Wittig and Lake convictions here, here and here.

Posted by Tom at 7:55 AM | Comments (0) | TrackBack (0)

January 5, 2007

The Houston connection to the Alabama-Saban deal

The college football world is abuzz this week with the lucrative deal that the University of Alabama rolled out to attract Miami Dolphins head coach Nick Saban to Tuscaloosa, which is yet another example of the market distortions that result from the NCAA's excessive regulation of big-time college football. But that's an issue for another day. Turns out that, as usual, there is a Houston business connection to the Saban hiring at Alabama.

You see, Alabama fans were highly interested in the University's behind-the-scenes courtship of Saban, so Houston-based FlightAware.com -- a web-based company that allows users to track flight activity -- became one of the favorite sources of information for Alabama fans following the Saban saga:

Before Nick Saban announced Wednesday that he was leaving the Miami Dolphins to take over at Alabama, fans had flocked to FlightAware.com, a Web site that allows users to track flight activity. Was South Carolina Coach Steve Spurrier flying into Tuscaloosa Regional Airport? Was a plane owned by the University of Alabama departing for Norman, Okla., perhaps with university officials on their way to court Sooners Coach Bob Stoops?

“When you set out a vision for how you can help people, you can envision a whole lot of things,” said Daniel Baker, the founder and chief executive of FlightAware.com. “We’d like to claim we had unlimited foresight into how our service would be used, but this certainly is an unusual use for FlightAware.”

Coaching searches at other prominent college programs have also sent fans scurrying to glean information from online flight data. Internet message boards revealed that fans from Michigan State, Cincinnati and North Carolina State turned to the Web site. [. . .]

Baker and his staff could not have anticipated those uses by fans. Neither could Wayne Cameron, manager of the Tuscaloosa airport. He said that after Mike Shula was fired, he fielded dozens of inquiries about activity at the airport.

“Everybody in the country has been tracking the university’s plane and Paul Bryant Jr.’s plane,” Cameron said. Bryant, the son of the renowned Alabama football coach Bear Bryant, is a member of Alabama’s Board of Trustees and the board’s athletics committee.

“They would ask who I’d seen get off planes, or if I’d seen Spurrier, or if I knew where the university plane was going,” Cameron added. “It was kind of like a feeding frenzy there for a few days.”

John Howard, a 25-year-old Crimson Tide fan, created the blog hirebobstoops.blogspot.com after he determined that flight activity he traced on FlightAware.com indicated that Alabama may be interested in hiring Stoops from Oklahoma.

“You have a lot of activity between Norman and Tuscaloosa,” Howard said in an interview in early December. “I have no clue if it’s all connected, and I’m not saying it is.

“I just think it’s real interesting that all these planes and these cities are connecting.”

By this week, however, signals were pointing elsewhere. Flight data turned Alabama fans’ attention to Saban when reports emerged that Mal Moore, the athletic director, had flown to Miami.

Doug Walker, the university’s associate athletic director for media relations, said Moore and others involved in the search knew that flights were being tracked.

“We’re aware of it, but it’s not affecting the way we’re conducting our business,” Walker said. “We’re not trying to conduct a world war here, we’re just trying to hire a football coach.”

And Baker is only trying to operate a flight-tracking service. If fans visit his site, so be it.

“If it’s all in good fun and everyone’s happy, it’s always a good thing,” Baker said.

“But I wouldn’t be surprised if people are losing sleep by hitting refresh on the page.”

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

Texas' best golf course designer

The PGA Tour kicks off its season this week with the Mercedes Championship at one of the most beautiful places in the world, Kapalua on the island of Maui, Hawaii. This Lorne Rubenstein/Golf Observer article examines the work on Kapulua's Plantation Course of the golf design team of Austin's Ben Crenshaw and Bill Coore, who have steadily become the best design team in the golf business over the past two decades:

Coore and Crenshaw are at the top of their games. Compared to some of the big names in course architecture, they've designed relatively few courses. That's by choice. They keep their staff small, seven people just now, but, to appropriate a line often used about the late James Brown, the hardest-working man in show business until he died the end of December at 73, they might be the hardest-working men in the architecture business. Their projects are few, their commitment to each is huge, and personal.

Just about every one of the courses they've done since they met in the early 1980s is a must-play for architecture aficionados. . . . These are courses that almost uniformly are without affectation. They tend to sit low to the ground, offer multiple options for shots, include short, driveable par-fours, room to drive the ball, angles, and above all, they're fun to play. Crenshaw's two Masters wins came on an Augusta National course that hadn't yet undergone the recent revisions that added length and rough and compromised the vision that Bobby Jones and Alister MacKenzie laid down on the property. It's fair to say that the course provided his philosophical grounding.

By the way, Crenshaw is also an expert on golf history, which assisted him in becoming quite a good story-teller, too.

Meanwhile, the Chronicle's excellent golf writer, Steve Campbell, previews the PGA Tour season here, and uses that article to pass along the following Tiger Woods crack about the always-entertaining John Daly:

What's the career prognosis from here for fan favorite John Daly?

Bleak. Daly was 193rd on the money list last year, never cracking the top 25 in a stroke-play event. He has been down before, but now back problems are part of the equation. Given Daly's distaste for work and fitness, don't look for his talent to get him out of this mess. As Woods cracked last month at his offseason event, "Well, his back is bothering him because he's got that front to deal with."

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

Lou Dobbs' misunderstanding of the trade deficit

CNN's financial news anchor Lou Dobbs is arguably the highest-profile critic of the U.S. trade deficit, which demagogues often use as justification for increased regulation of free trade. Cafe Hayek's Don Boudreaux has written extensively on how the U.S. trade deficit is really no big deal, and in this Christian Science Monitor op-ed, he takes on Dobbs over his complaints about the trade deficit. It's not a fair fight:

Perhaps you miss this fact because you are misled by familiar trade jargon. In your book, "Exporting America," in your columns, and on your television show you complain vigorously and often about America's trade deficit. You call it "staggering," and wonder how long America can continue to run such deficits.

Admittedly, the word "deficit" sounds ominous. In fact, though, America's trade deficit is evidence of its economic vigor and promise. Here's why:

When Americans buy foreign-made goods and services, foreigners earn dollars. The only way America would run no trade deficit is if foreigners spent all of these dollars buying goods and services from Americans. Instead, though, foreigners invest some of their dollars in America. They buy American corporate stock, they build their own factories and retail outlets in the US, they lend dollars to Uncle Sam, and they hold some dollars in reserve as cash.

Aren't you proud that so many people the world over eagerly invest their hard-earned wealth in America?

As an American, I'm proud and optimistic. Foreigners invest in the US so readily because its economy is so strong. And even better, these investments strengthen the economy by creating more capital for American workers. These investments raise workers' productivity and wages.

Remember: A trade deficit is not synonymous with debt.

I'm writing this letter on a new Sony computer that I bought with cash. I owe Sony nothing. If Sony holds the dollars it earned from this sale, or if it uses these dollars to buy stock in General Electric or land in Arizona - that is, as long as Sony invests its dollars in America in ways other than lending it to Americans - the US trade deficit rises without raising Americans' indebtedness.

Americans go more deeply into debt to foreigners only when Americans borrow money from foreigners. Uncle Sam, of course, borrows a lot of money, from both Americans and from non-Americans. I share your concern about the reckless spending and borrowing practiced by politicians in Washington.

Foreigners, however, are not to blame for this recklessness. Indeed, I'm grateful that foreigners stand ready to help us pay the cost of our overblown government. Fortunately, Washington's spending binges are not serious enough to cripple America's entrepreneurial economy. If they were, foreigners would refuse to invest here.

If you're still skeptical that America's trade deficit is no cause for concern, perhaps you'll be persuaded by Adam Smith, who wrote that "Nothing, however, can be more absurd than this whole doctrine of the balance of trade."

Smith correctly understood that with free trade, the economy becomes larger than any one nation - a fact that brings more human creativity, more savings, more capital, more specialization, more opportunity, more competition, and a higher standard of living to all those who can freely trade.

Posted by Tom at 4:11 AM | Comments (0) | TrackBack (0)

January 4, 2007

The unintended consequences of the anti-steroids crusade

As noted in this earlier post, I have long had reservations regarding the anti-steroids campaign that is promoted by various regulatory bodies and the media. As Peter Henning noted over the holiday season in this extensive post, the Ninth Circuit Court of Appeals recently issued an important decision in the Balco case in which the appellate court overturned three lower court orders that had declared government searches unconstitutional and directed the government to return the drug tests to the businesses that were searched. In United States v. Comprehensive Drug Testing, Inc., a divided Ninth Circuit panel reversed the lower court rulings and upheld the search warrants, including seizure of computer records, and ordered the lower courts to segregate records that fall outside the scope of the warrants so that they can be reviewed by a federal magistrate. The appellate decision also reversed the district judge's order quashing the subpoena issued after the search, and went on to declare that the government may issue a subpoena for documents held by a third party even after a search for the same records.

In this lucid ReasonOnline op-ed, Jacob Sullum sums up why all of this is quite troubling:

The 9th Circuit's loose treatment of "intermingled" data allows investigators to peruse the confidential electronic records of people who are not suspects, hoping to pull up something incriminating. It replaces a particularized warrant based on probable cause with a fishing license.

The mob believes that the athletes who use steroids are cheating criminals who should be punished. Let's just hope that the laws that protect us from government's overwhelming prosecutorial power aren't trampled in the process of upholding the myth of fair play in professional sports.

Posted by Tom at 4:55 AM | Comments (1) | TrackBack (0)

The most valuable college football programs

This post from awhile back addressed the widespread insolvency in big-time college football. However, as this Forbes article on the 15 most valuable college football programs points out, a few big-time programs do quite well, thank you. Notre Dame's program tops the list at a value of $97 million, while the University of Texas' program slides in at second at $88 million and Texas A&M's program checks in at no. 15 with a value of $53 million. By the way, Notre Dame remains the most valuable program despite being consistently the most overrated program on the big-time college scene these days. With last night's loss to LSU in the Sugar Bowl, the Irish have now lost nine straight bowl games since beating Texas A&M 24-21 in the 1994 Cotton Bowl.

A couple of surprises: Ohio State is only sixth on the list at $71 million, while the USC on the list is not the University of Southern California. Rather, it's the University of South Carolina at no. 14 with a value of $57 million. As you might expect, only teams from the Southeastern Conference, Big Ten Conference and Big 12 Conference made the Forbes list because those conferences have the most lucrative television deals with CBS, ESPN and ABC.

Finally, despite the value of these big-time programs, it is still decidedly minor league -- most NFL franchises are worth at least 10 times more than the most valuable college program.

Posted by Tom at 4:25 AM | Comments (0) | TrackBack (0)

The epidemic of diagnosis

Following on the strong NY Times medical-related stories of Lawrence K. Altman (here, here and here) over the holiday season, Drs. H. Gilbert Welch, Lisa Schwartz and Steven Woloshin contribute this op-ed to the Times in which they make the salient point that the American health care system is a hypochondriac's dream:

For most Americans, the biggest health threat is not avian flu, West Nile or mad cow disease. It’s our health-care system.

. . . The larger threat posed by American medicine is that more and more of us are being drawn into the system not because of an epidemic of disease, but because of an epidemic of diagnoses.

Americans live longer than ever, yet more of us are told we are sick.

How can this be? One reason is that we devote more resources to medical care than any other country. Some of this investment is productive, curing disease and alleviating suffering. But it also leads to more diagnoses, a trend that has become an epidemic.[ . . .]

. . . the real problem with the epidemic of diagnoses is that it leads to an epidemic of treatments. Not all treatments have important benefits, but almost all can have harms. Sometimes the harms are known, but often the harms of new therapies take years to emerge — after many have been exposed. For the severely ill, these harms generally pale relative to the potential benefits. But for those experiencing mild symptoms, the harms become much more relevant. And for the many labeled as having predisease or as being “at risk” but destined to remain healthy, treatment can only cause harm.

Read the entire article. Then take a chill pill! ;^)

Posted by Tom at 4:07 AM | Comments (0) | TrackBack (0)

January 3, 2007

Some of the reasons why Crane is taking EGL private

Channeling one of the dynamics involved in the increasing cost of public equity, Henry G. Manne (prior post here) provides this excellent Wall Street Journal ($) op-ed (available free here for the next 7 days) in which he systematically disassembles the myth of corporate democracy and the current media fascination with the supposed panacea of shareholder activism. The following are just a few of Professor Manne's insights:

"They're back! Every 20 or 30 years shareholder democracy ideas come back in vogue, and their time seems to have arrived again -- with a vengeance."

"The SEC is huddling on whether to facilitate direct shareholder nomination of directors through a new interpretation of its shareholder proposal rule. A prominent professor at Harvard Law School, Lucian Bebchuk, proposes, among other democratizing moves, amending state corporation laws to encourage contested elections for board members. . . . There is absolutely nothing new in any of this discussion. The real world has not changed in any significant way, and our knowledge of corporate governance has not been revolutionized by some intellectual breakthrough. Furthermore, the provenance of the "corporate democracy" oxymoron has long been understood. The idea results from the inappropriate conflation of political ideals with market institutions. Its persistence can only be attributed to the intelligentsia's far greater comfort and familiarity with political models and events than with knowledge and appreciation of how markets function."

"It ill behooves corporate democrats like Professor Bebchuk to deride this system as not satisfactorily monitoring managers when he knows full well that regulatory interferences are mainly responsible for poor performance in the market for corporate control and, for that matter, for much of the steep escalation in executive compensation in recent years. That they would then propose intricate regulatory provisions for more shareholder democracy is evidence of the mindset that causes the problems."

"Perhaps many of the advocates of shareholder democracy actually have a hidden agenda, most usually either a greater degree of government control over private enterprises, or more power to unions via their control of pension funds. Neither has proved beneficial to the investing public or is consistent with a vigorous and innovative public economy."

"We need corporate activists today more than ever, but we need them to lobby and argue for repeal of our many costly and ill-serving bits of corporate regulation."

And I'll leave it to the always-insightful Larry Ribstein to connect the myth to the process involved in the proposed EGL private equity buyout:

Shareholder democracy is just one of the burdens that public corporations have to bear these days (e.g., SOX). All of this is pushing more firms into the hands of private equity. Of course the shareholder democrats don’t like that, any more than they liked Mike Milken and the LBO boom of a previous generation.

Finally, in this timely NY Times Select ($) op-ed, William A. Niskanen, chairman of the Cato Institute, makes the following cogent observations regarding the impact of the most well-known regulatory reaction to the Enron scandal:

Sarbanes-Oxley has seriously harmed American corporations and financial markets without increasing investor confidence. The section of the law requiring companies to perform internal audits has turned out to be far more costly than proponents projected, especially for smaller firms. These costs have led some small companies to go private, hardly a victory for public oversight, and some foreign firms to withdraw their stocks from American exchanges.

In addition, the average “listing premium” — the benefit that companies receive by listing their stocks on American exchanges — has declined by 19 percentage points since 2002. This explains why the percentage of worldwide initial public offerings on our exchanges dropped to 5 percent last year, from 50 percent in 2000.

Other costs associated with the act may turn out to be more important. For example, more stringent financial regulations and increased penalties for accounting errors may make senior managers too risk-averse. Most chief executives are not accountants, so the requirement that they personally affirm tax reports — at the risk of jail time should anything be amiss — may make them reluctant to partake in perfectly legitimate activities.

Paradoxically, Sarbanes-Oxley’s strict rules on oversight by boards of directors would have been insufficient to prevent the collapse of Enron. By the act’s standards, Enron had a model board; most members were distinguished professionals. The chairman of the audit committee was a former accounting professor and dean of the Stanford Business School.

Nor would the act’s provisions to create a stronger Securities and Exchange Commission have made a difference. The commission had been aware of Enron’s accounting techniques since 1992 and had never thought to question them. [. . .]

The negative repercussions of the act on businesses might have been worth it if the act had achieved its primary goal: substantially increasing the confidence of investors in the accuracy of the accounts of firms listed on the exchanges. But that does not seem to have happened.

The best measure of investor confidence is the price-earnings ratio — the price that investors are willing to pay for each dollar of a company’s reported earnings. The overall price-earnings ratio for the Standard & Poor’s 500-stock index, however, has declined continuously since the Sarbanes-Oxley Act was being drafted in the spring of 2002. [. . .]

Tinkering is not enough. Sarbanes-Oxley continues to discourage smaller companies from trading publicly and foreign companies from listing their stocks on American exchanges. In the eyes of investors, it hasn’t cleaned up any corruption, it has only forced companies to jump through hoops. As Senator Sarbanes and Representative Oxley drift into retirement, their act should retire with them.

Any surprise that Crane is willing to assume the risk of taking EGL private?

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

Jim Crane proposes to take EGL private

Last year, the Houston business community saw Kinder Morgan bail out of the increasing headache of operating as a public company. With the coming of the new year, Houston-based EGL announced that it is going private in a $1.2 billion deal led by its CEO, Jim Crane, and private equity firm General Atlantic.

EGL stands for EGL Eagle Global Logistics, which provides services such as supply-chain management, warehousing and freight forwarding for business and government air and marine shipments. The company earned $58.2 million in 2005 and had net income of $45.4 million through the first nine months of 2006. Crane founded EGL about 20 years ago in Houston, took it public over a decade ago, and remains its largest shareholder with 18%. General Atlantic has proposed to pay $36 a share for the rest of the stock, which would generate a 21% premium over the company’s $29.78 closing price as of Dec. 29. Crane and General Atlantic have secured $1.13 billion in financing, and the balance of the proposed purchase price would consist of equity contributed by General Atlantic, Crane and other senior EGL executives. EGL's board has formed a committee to study the offer.

As noted here in regard to the Kinder Morgan deal (also noted here in regard to New York City), the EGL deal is a direct result of the increased cost of public equity resulting from the ill-advised regulatory maze that government has imposed on public companies in the post-Enron era. As Professor Bainbridge says, "legislate in haste, repent at leisure." As is all too common, the governmental solution to business scandals is more harmful to its investor-citizens than the business scandals themselves.

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

The legacy of great Colts quarterbacks

Although I have long had my doubts that Texans' QB David Carr is a top flight NFL quarterback, I must concede that the deficiencies in the Texans' offensive line have really not given him a fair chance to develop his skills here. Along those same lines, the Colts' masterful QB, Peyton Manning, is often unfairly criticized for not being among the top NFL QB's of all time because his team has never qualified for the Super Bowl.

As Allen Barra explains in this lucid OpinionJournal op-ed, Manning truly is one of the NFL's all-time best QB's regardless of whether his team's limitations in other areas have prevented him from playing in a Super Bowl. Meanwhile, in another OpinionJournal piece on a Colts quarterback, Geoffrey Norman reviews Tom Callahan's biography of legendary Colts QB, Johnny Unitas, in the appropriately named Johnny U (Crown 2006). Just to give you an idea on how much the nature of the NFL has changed over the past 60 years, Norman reminds us of an anecdote that Callahan passes along about Unitas:

[W]hen [Unitas'] teammate [and star running back] Alan Ameche and his wife bought their first house for $8,000, it was former construction worker Unitas who laid the floor.

Posted by Tom at 4:06 AM | Comments (0) | TrackBack (0)

January 2, 2007

Malcolm Gladwell on Enron

Malcolm Gladwell, he of Tipping Point fame, has authored this must-read New Yorker article on the demise of Enron. Although Gladwell gets a couple of things wrong, his article provides a refreshingly candid and objective view of what happened to Enron and highlights several aspects of the company's demise that makes criminalization of the affair so troubling. Reading Gladwell's account along side this earlier post on the case against Jeff Skilling, is there really any meaningful doubt that an enormous injustice has occurred in regard to the conviction and sentencing of Skilling to 24 years in prison?

By the way, these observations are quite interesting regarding a lecture that Gladwell recently gave in Dallas.

Posted by Tom at 12:07 PM | Comments (3) | TrackBack (0)

Government Finance 101

In this post from almost three years ago, I noted the utter hypocrisy of Congress regularly vilifying big business for attempting creative financing mechanisms to hedge risk. So, over the holidays, this letter to Washington Post from the Comptroller General of the United States caught my eye:

The largest employer in the world announced on Dec. 15 that it lost about $450 billion in fiscal 2006. Its auditor found that its financial statements were unreliable and that its controls were inadequate for the 10th straight year. On top of that, the entity's total liabilities and unfunded commitments rose to about $50 trillion, up from $20 trillion in just six years.

If this announcement related to a private company, the news would have been on the front page of major newspapers. Unfortunately, such was not the case -- even though the entity is the U.S. government.

To put the figures in perspective, $50 trillion is $440,000 per American household and is more than nine times as much as the median household income.

The only way elected officials will be able to make the tough choices necessary to put our nation on a more prudent and sustainable long-term fiscal path is if opinion leaders state the facts and speak the truth to the American people.

The Government Accountability Office is working with the Concord Coalition, the Brookings Institution, the Heritage Foundation and others to help educate the public about the facts in a professional, nonpartisan way. We hope the media and other opinion leaders do their part to save the future for our children and grandchildren.

DAVID M. WALKER
Comptroller General of the United States
Government Accountability Office
Washington

Posted by Tom at 4:42 AM | Comments (1) | TrackBack (0)

Reviewing medical advances

Fresh off his fascinating article on Dr. Michael DeBakey's confrontation with death (here and here), the NY Times' Lawrence K. Altman reminds us in this article that -- despite the dysfunctional U.S. health care finance system -- medical advances are continuing at an increasing rate:

As a reporter for The New York Times for 37 years, I have witnessed many important medical events, from new treatments to new diseases. In reflecting on that panorama, it is clear that technology has accounted for the greatest changes in medicine. Technology has improved laboratory testing; allowed for the development of CT scans, magnetic resonance imaging exams and positron emission tomography, or PET, imaging to improve diagnostic accuracy; and produced new drugs and devices. Basic science, too, has deepened our understanding of disease, and much of that work depends on technology.

At the same time, the care for many ailments has been greatly improved by ancillary developments like better nursing care, newer antibiotics, transfusions of platelets to prevent bleeding, the insertion of monitoring tubes in major veins, and better organization of some services. [. . .]

Few people appreciate that medicine has advanced more since World War II than in all of earlier history. Newer drugs and devices and better understanding of disease mechanisms have vastly improved the care of patients. For male babies born in this country in 1960, the life expectancy was 66.6 years; for female babies, it was 73.1 years. In 2004, the figures, respectively, were 75.2 and 80.4. Medical advances account for much, though not all, of the gain.

Altman's point regarding the importance of medical advances reminds me of a similar one that Donald J. DiPette, the chairman of the Texas A&M Internal Medicine Department, made while giving the Walter M. Kirkendall Lecture at the University of Texas Health Science Center this past spring. Given the advances in treatment of hypertension over the past 60 years, Dr. DiPette noted that President Franklin D. Roosevelt would have never been allowed to participate in the Yalta Conference at the end of World War II had his doctors known then what doctors knew a decade later about the traumatic implications of acute hypertension. In short, a better understanding of hypertension at the time of Yalta almost certainly would have changed the course of human history.

Posted by Tom at 4:16 AM | Comments (1) | TrackBack (0)

Is the WSJ sizing up Nabors?

Remember awhile back when longtime Houston-based Nabors Industries Ltd was facing Congressional scrutiny over its efforts to minimize its tax obligations by maintaining its registration in Bermuda (or was that Barbados?)? Well, that little dust-up may be nothing in comparison to what emerged for Nabors over the holidays.

Last week, the Wall Street Journal ($) ran this article reporting that longtime Nabors CEO that Eugene Isenberg is among the highest-paid corporate executives in history, receiving more than $450 million in compensation over the past 19 years, much of which was generated through the exercise of stock-option grants whose value the WSJ contends was enhanced by certain "controversial moves" made by the company. The WSJ article alleged that the company allowed Isenberg to trade in certain worthless options for new ones with lower exercise prices and "reloaded" Isenberg with new options when he cashed in others.

A day later, Nabors announced that it was initiating a further review of its option-granting practices in light of "issues raised" in the WSJ article. This current review follows an earlier internal review of the company's stock-option practices since 1998 that the company contends "did not suggest that there was reason to question the propriety" of its option-granting practices.

Nabors has enjoyed a meteoric rise over the past 20 years or so, similar to that of another Houston-based company that the WSJ latched its teeth into awhile back.

Stay tuned.

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

January 1, 2007

2006 Weekly local football review

Texans 14 Browns 6

Despite having no effective passing game, the Texans (6-10) rode a strong second half rushing performance from rookie RB Chris Taylor and another spunky defensive effort to beat the Browns and fulfill my pre-season prediction that the team would win six games. Although two straight wins with strong defensive performances to close out the season must be gratifying to Texans owner Bob McNair, this remains a team that has multiple problems to address in the off-season -- generally poor pass blocking, QB David Carr, a need for a big-time running back, depth on defense, etc. The Texans will pick eighth in the first round of the upcoming NFL draft and then will rotate with the two other 6-10 teams (the Dolphins and Vikings) for the 7th, 8th and 9th slots for the remaining rounds of the draft.

Although the Texans remain far from contending for a playoff spot, they did finish 6-10 after a horrendous 0-3 start, going 6-7 over their final 13 games and 2-2 in their last four. They won their last game for the first time and won back-to-back games for only the second time in franchise history (the other time was in late December 2004). They did all this without a top notch QB or RB, three starters lost to injury in the offensive line, two starting defensive tackles lost to injury, Pro Bowl kick returner Jerome Mathis contributing for only two games and former star RB Domanick Davis not playing a lick. As Andy Dufresne says in The Shawshank Redemption, "Hope is a great thing, maybe the best of things."

Texas Longhorns 26 Iowa 24

The Longhorns (10-3) avoided another major embarrassment by edging a mediocre Iowa (6-7) team in the Alamo Bowl, and the game underscored the problems that the Horns will need to address over the off-season if the Horns are going to return to becoming a true top-10 team. The two main problems are a lackluster rushing attack and inconsistent pass coverage, which again combined to cause the Horns to sweat another game against an opponent with inferior personnel. Already facing a search to replace departed defensive coordinator Gene Chizek, head coach Mack Brown has his work cut out for him over the next several months.

Cal 45 Texas Aggies 10

After staying close for a half, the Aggies (9-4) laid a major egg in folding down the stretch in the Holiday Bowl to the Cal Bears (10-3). As already noted, the Aggies' lackluster performance has already revived skepticism in Aggieland over head coach Dennis Franchione, whose four year performance at A&M has not been particularly impressive. Although this season's 9-4 finish was the best of Franchione's tenure at A&M, most of those wins came against cupcakes and the only signature win came against the Longhorns in the final game of the regular season. The Aggies still struggle throwing the ball effectively and the defense remains suspect, so those are two areas that the Ags will need to address in the upcoming off-season.

South Carolina 44 Houston 36

In a hugely-entertaining game, South Carolina (8-5) edged the Cougars (10-4) in a Liberty Bowl shootout. Essentially, neither team's defense could stop the other team's offense, so the difference in this one was a Houston fumble that allowed South Carolina to score an easy TD and a key second half possession when a bad snap foiled a a third and goal situation for the Cougars at the SC five yard line. Replacing outstanding QB Kevin Kolb and upgrading the defense are the key areas that the Cougars need to address during the off-season, but this season has returned the Houston program to the college football map in Texas. The future looks bright over on Cullen Avenue.

Rutgers 37 Kansas State 10

Rutgers (11-2) easily handled a mediocre Kansas State (7-6) team in the Texas Bowl over at Reliant Stadium, but not many folks in Houston were able to watch it because the television network carrying the game -- the NFL Network -- does not allow Time Warner Cable, the major cable company in the Houston area, to carry the network. As noted earlier, the NFL owners are attempting to induce an outcry from cable customers over Time Warner's failure to accede to the NFL owners' financial demands, but what's happening instead is that the NFL owners are coming off as being petty and greedy. I cannot imagine a worse way of marketing what essentially is a public relations product for a community than to limit the number of television viewers who can watch the game.

Texas Tech 44 Minnesota 41

Although not technically a local team, the Texas Tech Red Raiders (8-5) merit a mention this week for their amazing comeback victory over Minnesota (6-7) in the Insight Bowl. Down 38-7 with less than 20 minutes to play in the game, the Raiders scored 31 straight points to send the game into overtime, and then won the game with a TD in OT. The Gophers reacted to the stunning loss by firing their coach. I know where the Gophers can find an excellent replacement.

Posted by Tom at 6:29 AM | Comments (0) | TrackBack (0)