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July 31, 2007

Steyn on the criminalization of everything

Still numbed by the experience of blogging the injustice of the Conrad Black trial, Mark Steyn takes up the appalling lack of judgment behind the McMinnville, Oregon district attorney's prosecution of two 7th grade boys as sex offenders. The alleged criminal act? The egregious offense of participating at school with their classmates in a juvenile greeting ritual on Fridays called "Slap Butt Fridays." Steyn concludes as follows:

A world that requires handcuffs and judges and district attorneys for what took place that Friday in February is not just a failed education system but an entire society that's losing any sense of proportion. Without which, civilized life becomes impossible. So we legalize more and more aspects of life and demand that district attorneys prosecute ever more aggressively what were once routine areas of social interaction.

A society that looses the state to criminalize schoolroom horseplay is guilty not only of punishing children as grown-ups but of the infantilization of the entire citizenry.

The WSJ's George Melloan expressed similar sentiments a couple of years ago.

Posted by Tom at 12:06 AM | Comments (1) |

Does Jose de Jesus Ortiz research anything?

Is shooting from the hip a Houston Chronicle requirement for covering the Stros?

As noted in earlier posts here, here, here, here, here and here, the Chronicle's Stros beat writer -- Jose de Jesus Ortiz -- incongruously struggles with analyzing baseball. But on the heels of watching Stros sore-armed starting pitcher Jason Jennings get torched for 11 runs in 2/3rd's of an inning on Sunday, Ortiz displays his utter ignorance of the history of the club he covers on a daily basis:

Seeing Jason Jennings give up 11 runs while only securing two outs on Sunday afternoon, opposing scouts surely had to tell their bosses not to give up top prospects for the veteran righthander.

Because the Astros made the Jennings trade out of desperation after pushing Andy Pettitte out of town and then failing to acquire Jon Garland, the Jennings trade seemed to be the best the Astros could do at the time.

As it turns out, they could hardly have done worse, especially considering that a little digging in Colorado would have uncovered that Jennings hadn't thrown bullpen sessions between starts in the second half of the season because of a tender right elbow.

As Tim Purpura heads into Tuesday's non-waiver trade deadline, let's look back and see where this trade fits among the worst in franchise history?

What are the worst three trades in franchise history?

Here are my list in order of the worst:

• Getting rid of Joe Morgan.

• Getting rid of Billy Wagner for three prospects who didn't produce.

• Getting rid of Willy Taveras, Jason Hirsh and Taylor Buchholz for Jennings.

Had Ortiz merely bothered to run a Google Blog Search before publishing the foregoing, he would have discovered that two of the three trades that he lists are not even in the top seven of all-time bad Stros trades.

Then, on one hand, Ortiz contends that the Stros traded Billy Wagner for "three prospects who didn't produce," which is not really correct, either. The Phillies sent an established Major League pitcher who was not very good -- Brandon Duckworth -- along with pitching prospects Taylor Buchholz and Ezequiel Astacio to the Stros for Wagner.

However, undaunted, Ortiz then in the following sentence lists Buchholz -- one of the prospects "who didn't produce" from the Wagner trade -- as one of the reasons why the Jennings trade is supposedly the third worst in Stros history.

Is this really the best that the Chronicle can do in covering the Stros?

Posted by Tom at 12:03 AM | Comments (2) |

Endurance training to death

As noted in previous posts here and here, the myth that endurance training and long-distance running are good for one's health remains firmly entrenched among most Americans, despite sad reminders such as this. In this timely article, Mark Sisson lucidly explains why endurance training is hazardous to one's health. Here is a snippet:

The problem with many, if not most, age group endurance athletes is that the low-level training gets out of hand. They overtrain in their exuberance to excel at racing, and they over consume carbohydrates in an effort to stay fueled. The result is that over the years, their muscle mass, immune function, and testosterone decrease, while their cortisol, insulin and oxidative output increase (unless you work so hard that you actually exhaust the adrenals, introducing an even more disconcerting scenario). Any anti-aging doc will tell you that if you do this long enough, you will hasten, rather than retard, the aging process. Studies have shown an increase in mortality when weekly caloric expenditure exceeds 4,000. [. . .]

Now, what does all this mean for the generation of us who bought into Ken Cooper’s "more aerobics is better" philosophy? Is it too late to get on the anti-aging train? Hey, we're still probably a lot better off than our college classmates who gained 60 pounds and can't walk up a flight of stairs. Sure, we may look a little older and move a little slower than we'd like, but there's still time to readjust the training to fit our DNA blueprint. Maybe just move a little slower, lift some weights, do some yoga and eat right and there's a good chance you'll maximize the quality of your remaining years… and look good doing whatever you do.

Posted by Tom at 12:00 AM | Comments (0) |

July 30, 2007

"Hook'em Barry?"

It's not been a good off-season for the University of Oklahoma Sooners football team.

First, there was this popular entry in the Wizard of Odds' digital billboard contest.

Then, that was followed by the NCAA leveling additional sanctions on the OU program, including making the Sooners vacate their 8 wins during the 2005 season and extending the program's probation through 2010.

But the above is nothing compared to legendary Sooners head coach Barry Switzer flashing the "Hook'em Horns" sign (hat tip Jay Christensen) with Texas head coach, Mack Brown.

Or maybe Coach Switzer had something else in mind than "Hook'em Horns?"

Posted by Tom at 12:57 AM | Comments (1) |

The Wigginton deal

So, the Stros trade Dan Wheeler, the club's best relief pitcher over the past two seasons who is having a bad season this year, for Tampa Bay utilityman Ty Wigginton, who is the right-hand equivalent of the Stros' Mike Lamb. The Stros then prepare to release 3B Morgan Ensberg, who has been mired in a slump for over year, but who has far better career hitting statistics (55 RCAA/.367 OBA/.475 SLG/.843 OPS) than either Wigginton (-11/.326/.448/.774) or Lamb (-15/.339/.428/.768) and is a far better third baseman defensively than either of them. By the way, even during his prolonged slump, Ensberg's hitting (-8 RCAA) has been substantially more productive for the Stros than the hitting of other Stros' starters Craig Biggio (-31 RCAA), Adam Everett (-32 RCAA) and Brad Ausmus (-53 RCAA) over the same period of time.

Thus, absent a further trade of either Lamb or Mark Loretta for a potentially productive prospect or two, this deal is akin to rearranging the deck chairs on the Titanic. Why is a team whose main problem is bad pitching trading one of its better pitchers for a below-average National League hitter? Wheeler, Wigginton, Lamb and Ensberg's career statistics are below the hyperlinked break. The abbreviations for the hitting stats are defined here and the same for the pitching stats are here.

Update: Baseball Prospectus' Joe Sheehan agrees with my analysis ($) on the Wheeler for Wigginton deal and the give-up on Ensberg:

You got me. Rumors persist that Ensberg will be traded before his DFA period ends, but even if he is, the return won’t be much. So for Wheeler and Ensberg, the Astros get a 29-year-old infielder who runs a below-average OBP with good power and so-so defense. Mildly impressive at second base, Wigginton is just a guy at third base, and this is the first season since 2004 in which he’s outhitting Ensberg. At that, the difference this year is just 17 points of EqA. This looks more like a tantrum by the Astros than a baseball decision, their frustration with Ensberg’s injury woes and power outage getting the better of them.

Posted by Tom at 12:17 AM | Comments (3) |

Give it up, Arnie

Want a glimpse into the regulatory mindset of government?

This earlier post passed along Don Boudreaux's response to the Wall Street Journal letter-to-th editor of Arnie Celnicker, a former attorney for the FTC and the Antitrust Division of the Justice Department, in which Celnicker defends the FTC's opposition to the proposed Whole Foods-Wild Oats merger (previous posts here). In an attempt to have the last word, Celnicker has written another letter-to-the editor in which he contends, in part, as follows:

We agree that consumers want more organic products, and that there has been increased investment to meet that demand. The financial markets, however, have deprived Wild Oats of the capital to compete head-on with Whole Foods. Mr. Boudreaux's assertion that this indicates Wild Oats' assets are now poorly managed, and that they would be better managed by Whole Foods, is a non sequitur.

Avoiding head-on competition with Whole Foods indicates that Whole Foods already has such market power that the risks of head-on competition are great, for Wild Oats or any other firm. It does not mean Wild Oats is poorly managed; it does show the capital market's respect for a firm, Whole Foods, with a dominant market position. Even if Wild Oats were poorly managed, it does not follow that an acquisition by Whole Foods would enhance consumer well-being. These two firms are the only two national premium natural and organic supermarkets. Surely there are others, besides Whole Foods, who can efficiently manage Wild Oats' assets, without reducing competition.

Celnicker suggests that capital markets "have deprived" Wild Oats as if the company has some entitlement to capital, and that such deprivation justifies government intervention. But if there are others who can efficiently manage Wild Oats' assets, then why did they not outbid Whole Foods for those assets?

The Wild Oats board has determined that the best value for the company's shareholders can be derived by selling to Whole Foods. Celnicker contends that the government's judgment regarding "consumer well-being" should trump the Wild Oats board's judgment on behalf of Wild Oats' shareholders. But will the government provide a safety net for the loss in value to Wild Oats' shareholders if the Wild Oats board's judgment is correct and those assets decline in value without the merger? If the government is not willing to step up and arrange alternative capital, then the value of that "consumer well-being" that Celnicker seeks to have the government protect is largely ephemeral in nature.

Posted by Tom at 12:16 AM | Comments (0) |

July 29, 2007

Tilman's bad dream

It wasn't a good end of the week for Landry's Restaurants, Inc CEO Tilman Fertitta (previous posts here).

First, there was Landry's public disclosures that the company was delinquent in its regulatory filings with the SEC and that it was in need of refinancing over $400 million in debt in a rapidly deteriorating debt market.

Those missteps led to Fertitta's public announcement on Friday that the refinancing "was no big deal," which led to the inevitable comparisons in some media circles of Landry's and Enron, and Fertitta and Donald Trump (actually, that comparison has been made before). Not surprisingly, the company's stock closed at a 52 week low on Friday ($25.43), falling almost 20% in the past week alone.

Fertitta is an easy target, but the situation is probably not as grim as it might seem at first glance. Landry's has always been a highly-leveraged company. Heck, the latest news resulted in Moody's downgrading the corporate family rating from B2 from B1, and S&P lowered its ratings on Landry's corporate credit rating to CCC from B-plus. So, it's not as if Landry's stock was blue chip even before the latest developments.

Where things appear to have gone awry is that the company decided that building stores from within wouldn't allow it to grow fast enough. Back a few years ago when Landry's was a popular growth stock, the company's casual dining seafood eateries were popular and growing quickly in generally first-rate locations. But in an attempt to accelerate that solid growth, Landry's overpaid for the high-volume Rainforest Cafe chain a few years ago and then went on to make a relatively big investment in buying and revitalizing the Golden Nugget casino in downtown Las Vegas. It looked as if Landry's had decided to pull back on its debt-loaded buying binge when it sold off its its Joe's Crab Shack chain late last year in a $192 million deal, but the company came right back a short time later to make an unsolicited offer to buy the high-end steakhouse Smith & Wollensky before being topped by a rival bidder.

As the price of Landry's stock slumped over the past several months, the company sensed value and initiated a program to buy back $87 million in stock. Nevertheless, the market did not respond all that positively to the buyback program, so the stock is still trading at a relatively small 14 times this year's profit estimates, Thus, a case can be made that Landry's is a good buy if it can extract itself from its current debt refinancing problems, but the downgrades reflect that the market is a bit skeptical regarding Fertitta's assurance that arranging such refinancing "is no big deal."

Nonetheless, this just might be the kick in the rear that Landry's needs. Building well-located and good-looking restaurants while providing solid service is how Landry's grew quickly. Paying substantially more for financing the debt necessary to buy overpriced stores may be just the way to persuade Landry's board and management that building from within wasn't such a bad strategy after all.

Posted by Tom at 12:09 AM | Comments (0) |

July 28, 2007

Rumblin' and stumblin'

Back in the late 1970's, it was 260 pound Texas A&M Wishbone fullback George Woodard.

Then, several years ago, it was 270 pound Aggie tailback JaMaar Toombs.

Now, it's 282 pound Aggie tailback Jorvorskie Lane.

What is it about over-sized running backs that fascinates the Aggies?

Posted by Tom at 12:41 AM | Comments (0) |

July 27, 2007

Steyn on the Conrad Black trial

Mark Steyn continues his excellent analysis of the criminal case against Conrad Black (prior posts here) with this lengthy piece on the trial, in which he agrees with me regarding the defense team's decision not to have Lord Black testify:

When Black declined to testify in his own defence, the result was that he was defined only by the glimpses of him permitted by the government: he was the guy who, in Alana's phrase, got the money, and sent boorish emails, and installed heated towel rails in his Park Avenue apartment. Had he been put on the stand, he would certainly have been tripped up by government lawyers in some areas, but he would have opened up others that allowed the jury to see Conrad Black as a man in full, warts and all, rather than only the warts, the unsightly carbuncles of non-compete fees and company-jet perks and a security video of a British peer taking boxes down the back stairs of a Toronto office building.

Steyn also has some choice words for the Black defense team, which he viewed as largely dysfunctional. Reading Steyn's piece along with this lengthy Adrian and Olga Stein essay (pdf) on the background of the case against Lord Black leaves one with a depressing image of how the U.S. criminal justice system is being manipulated to regulate the unpopular businessperson of the moment.

Posted by Tom at 12:20 AM | Comments (0) |

Is Landry's in trouble?

Cerberus Capital Management's decision earlier in the week to terminate its attempted sale of $12 billion in Chrysler debt underscored the quickly tightening U.S. credit markets (except on oil patch deals!), and the ripple effects are already being felt in Houston. Check out this Houston Business Journal article about Houston-based restaurant company Landry's:

Landry's Restaurants Inc. is looking for new financing to replace its current credit agreement and outstanding 7.5 percent senior unsecured notes.

The Houston-based casual dining chain operator said Wednesday that it would not be able to file its annual report for the year ended Dec. 31 because an internal review of stock option granting practices is not complete.

As a result, Landry's (NYSE: LNY) said it has been notified by U.S. Bank National Association -- the trustee of its $400 million unsecured notes -- that the unpaid principal and any interest is now due.

Landry's expects to be able to refinance the loan, but due to "the recent tightening of the credit markets," it could be under less-favorable financing terms.

The company also said it is not in compliance with a $450 million credit agreement with Wachovia Bank, National Association and other lenders. Landry's expects it can get a waiver of the covenant and does not expect Wachovia to accelerate the indebtedness of the agreement. The amount outstanding is about $97 million.

Late yesterday, Standard & Poor's Ratings Services lowered its credit ratings of Landry's and continued to place the company's ratings on negative watch because of Landry's failure to file its 10K regulatory filing with the SEC for fiscal 2006 and its 10Q for the first-quarter 2007.

H'mm.

Update: Tilman's bad dream.

Posted by Tom at 12:03 AM | Comments (0) |

Fit Nation Map

The map on the left purports to track the increase in the percentage of obese persons in the U.S. over the past 20 years. I don't know about the methodology of the statistical analysis, but the map is pretty darn cool.

Posted by Tom at 12:00 AM | Comments (0) |

July 26, 2007

Stros 2007 Season Review, Part Five

At the quarter pole of this season, I observed the following:

Stros management, for all their declarations of trying to field a playoff contender, is really biding its time this season as Biggio trudges toward his 3,000th hit. There is simply no way that this club will be much better than a .500 ballclub with its current starting pitching staff and Biggio, Everett, Ausmus and the pitcher burdening the hitting lineup on most nights. The Stros should be honest and concede that the club is attempting to compete as well as possible while supporting Biggio's climb toward 3,000 hits and dispense with the ruse that this club, as presently configured, has any meaningful shot at the playoffs.

Well, as the Stros (44-57) have now completed 62.5% of the season (prior periodic reviews are here), Stros management has apparently embraced my suggestion. Rather than promoting the club's competitiveness, Stros management has decided to make the remainder of the season the Craig Biggio Good-Bye Tour, beginning with Bidg's well-orchestrated retirement announcement and game-winning, grand slam homer earlier in the week. Ah, the memories!

Unfortunately, when Biggio is retired and gone after this season, Stros management will have to figure out what to do next. As I have been pointing out for several years now, the ballclub has been in decline since 2001, although extraordinary pitching staff performances in 2004 and 2005 masked the decline during those two playoff seasons. But this season, the decline of the club has hit the club's traditional strength -- that is, pitching -- and the result is that the Stros may finish this season with the worst record in the National League.

Interestingly, this club's 44-57 record through 62.5% of the season is about the same as the club's record last season during the middle 60% of the season (42-55). Only good performances during the first and final 20% segments of the 2006 season allowed that club to finish two games over .500 (82-80). Now, in the first five eighth segments of this season, the Stros' record has been been consistently mediocre or worse -- 9-12, 11-9, 6-14, 8-12, and 10-10 in the most recent 20 game segment. So, the accelerating downward trend that started during the middle of last season has continued this season.

Although some folks continue to be confused about what ails the Stros, a dramatic and pervasive downturn in pitching remains the big problem. The Stros' staff -- which has been among the best in the National League over the past three seasons -- has given up 55 more runs than an average National League pitching staff would have allowed in the same number of innings (RSAA, explained here). That places the Stros staff 15th among the 16 National League teams with only the Cardinals' staff being worse, and only three Stros pitchers -- Roy Oswalt (5 RSAA/3.80 ERA), Chad Qualls (1 RSAA/3.83 ERA) and Brad Lidge (10 RSAA/1.94 ERA) -- have saved more runs this season than an average National League pitcher would have saved in the same number of innings.

Meanwhile, the Stros' hitters continue to be about National League-average (5 runs created against average, explained here), which is right in the middle (8th) of the 16 National League teams. Although National League-average in hitting is far better than the past two Stros squads achieved, it is not close to being good enough to make up for the Stros' abysmal pitching. As a result, the Stros' combined RCAA/RSAA score of -50 so far this season reflects that they continue to be a far below-average National League team.

The season statistics for the Stros to date are below, courtesy of Lee Sinins' sabermetric Complete Baseball Encyclopedia. The abbreviations for the hitting stats are defined here and the same for the pitching stats are here. The Stros active roster is here with links to each individual player's statistics:

In my most recent periodic review, I provided some background on how the Stros got to this point. Now that Stros management has conceded that this season's club is playing out the string, here's an outline for what management should do for the remainder of the season:

Preserve pitching assets. Oswalt has carried as heavy a load as any National League starter over the past six seasons. The chest muscle strain that he is currently dealing with is a clear overuse injury, and the Stros should make sure that Oswalt does not pitch that injury into a chronic condition. There is simply no good reason for the Stros not to moderate Oswalt's innings over the remainder of the season to lessen the toll on his body. Similarly, Chris Sampson (-2 RSAA/4.29 ERA) had never pitched the number of innings in a season that he has pitched to date this season, so he is a high risk of breaking down. As with Oswalt, the Stros would be smart to limit his starts over the remainder of the season, just as they should not hurry Brandon Backe back to the MLB this season in his recovery from Tommy John surgery. Finally, Lidge needs arthoscopic knee surgery to remove loose cartilage and -- absent a trade that makes sense -- the Stros should shut him down and allow him to have the surgery now so that his rehab can be completed well before next season. Lidge has never had the best pitching mechanics, so even a minor injury can cause a pitcher to adjust their mechanics, which often results in another injury that is more severe than the initial one. Pitching assets in Major League Baseball are extremely valuable and nothing would be gained by the Stros from risking damage to these assets over the the remainder of this lost season.

Develop pitching assets, but carefully. Dovetailing with the first recommendation, the Stros should undertake a concerted program during the remainder of the season to provide their young pitching talent some MLB experience. For example, Matt Albers (-6 RSAA/5.19 ERA) should be given every opportunity to establish whether he is capable of being a starting pitcher on the MLB level or whether he is destined for a Qualls-like existence in the bullpen. Similarly, farmhands such as Troy Patton, Juan Gutierrez, Chance Douglass, Felipe Paulino and Brad James should be given a taste of big league hitters to gauge their progress. None of these young pitchers are ready for extended exposure to MLB hitters, but getting their feet wet will provide important information regarding whether these are prospects who may be able to contribute in the next year or so. Trotting a washed up Woody Williams (-13 RSAA/5.03 ERA) out to the mound every fourth day for the remainder of the season doesn't reveal anything of comparable value.

Play Morgan Ensberg, Chris Burke, Jason Lane and Luke Scott every day. Each of these players has been a productive player for the Stros at one point in their careers, but each of them has also been mishanded during their time with the Stros. Ensberg's situation is explained here, while Burke and Lane have been blocked (see also here) by the Stros' indulgence of Biggio. Similarly, Scott has been yo-yoed in right field this season while fighting nagging injuries despite the fact he remains one of the half-dozen hitters on the club who has generated a positive RCAA this season. The only way that to tell what a big league player is likely to produce in the future is to give an extended period of day-to-day playing time (and, in Burke's case, at the position he is best suited to play). These three players deserve that opportunity. With nothing to lose and Hunter Pence's injury keeping him out for the next six weeks or so, let's see what these players can do in an extended, undisturbed period of play.

Trade judiciously. As noted here, the Stros overall legacy of trades is not exactly encouraging. Moreover, it's far easier to add to that legacy than to pull off one of those one-sided Larry Anderson-for-Jeff Bagwell deals. Nevertheless, the Stros do have a number of players who could be useful for a contending team down the stretch. Right now, this season's trading market appears to be a buyer's market with contending teams being relunctant to part with young MLB prospects for proven talent that can help down the stretch of a playoff drive. The Stros don't need any more average-to-below average big league players, so I'd prefer that Stros management hold out and take a flyer on some young prospects with a problem or two who nonetheless have the potential to bloom as Pence did while shooting through the minors.

It wasn't that long ago that Stros management was building around a what appeared to be a solid core group of young players developed within the Stros organization consisting of starting pitchers Oswalt, Carlos Hernandez, Wade Miller and Tim Redding, and emerging hitters Lance Berkman and Richard Hidalgo. Unfortunately, only Oswalt and Berkman were able to make it through the rigors of Major League competition to emerge as bonafide stars and, as noted here earlier, the Stros did not do a good job of choosing and developing talent during the five year period of 1998-2002 to replace the players who did not blossom into consistent above-average players. With this season's club bottoming out with one of the worst records in MLB, it's high time for the club's management to begin the hard work of developing a new core of young players to take the baton from the Biggio-Bagwell era, the most successful period in the history of the ballclub. A fan base now accustomed to a long period of overall success expects nothing less.

After hosting the Padres (54-46) in a four game set over this weekend, the Stros go on the road to play the Braves (54-47) and the Marlins (48-53) to start August before returning home to meet the NL Central leaders, the Cubs (53-46) and Brewers (56-45) in the second week of next month. Look for the next periodic review in mid-August or so.

Posted by Tom at 7:54 AM | Comments (4) |

Don't mess with Mickelson

I've never had the opportunity to meet Phil Mickelson, but my sense from this episode and others that I've heard and read about lead me to believe that he's a good and fun-loving guy. In addition, Philly Mick is apparently quite a practical joker.

Veteran Sports Illustrated golf correspondent Chris Lewis has just come out with an entertaining book about life on the PGA Tour entitled The Scoreboard Always Lies: A Year Behind the Scenes on the PGA Tour (Free Press 2007) and, in this interview about the book, Lewis passes along the following anecdote about Mickelson:

We were in Akron last year, and Phil was playing with Aaron Baddeley. Their group comes off on Friday (I think it was Friday), and all the sudden, these Akron cops come over, grab Aaron’s caddie, Pete Bender, and drag him into a police car.

Pete, of course, has been around forever, and has seen it all – he used to caddie for Greg Norman, put in a bunch of years with Rocco Mediate, and so forth.

But now, after this round in Akron, the cops take him away, and he has no idea what’s going on. Turns out that years before, during a practice round in Maui (probably the last time Phil played the Mercedes), Pete had set a couple of snails down on the seat of Phil’s golf cart (they use carts during practice rounds there), and Phil of course sat on them. So years go by, and Phil never forgets.

Finally, last year in Akron, Pete winds up in the back of that squad car, and the cops tell him, “Mr. Bender, you’re here because of an outstanding warrant on a violation of a Hawaiian ordinance against cruelty to mollusks.”

Phil had set the whole thing up. He’s just standing there about fifty feet away, laughing his head off, while Pete’s in the police car scared out of his wits.

Posted by Tom at 12:05 AM | Comments (0) |

The Kelleher legacy

Mitch Schnurman asks outgoing Southwest Airlines chairman and former CEO Herb Kelleher how he wants to be remembered:

"That I consumed more Wild Turkey and cigarettes than anybody else in the industry," he quipped to reporters last week, after announcing that this would be his last year as chairman of Southwest Airlines.

As Schnurman notes, Kelleher's fun-loving response dramatically underplays the revolutionary impact that this remarkable leader had on air travel, which he made affordable for millions of new air travelers. Read Schnurman's fine column on Kelleher, which includes this beaut of an anecdote on why Kelleher agreed to the Wright Amendment:

My favorite memory of Kelleher was in late 2005, when the debate over the Wright Amendment was intensifying and moving to Washington. In the Senate hearing room, he lived up to the moment, saying that he had agreed to the 1979 Wright law in the same way the Germans accepted the end of World War I.

"In other words," he told the senators, "with a gun to my head."

Posted by Tom at 12:01 AM | Comments (0) |

July 25, 2007

Good news for Dr. Pou

An old saying in criminal defense circles is that a prosecutor could persuade a grand jury to indict a ham sandwich if the prosecutor is inclined to do so.

Fortunately, that was not the case in regard to former Houston area resident, Dr. Anna Pou (previous posts here). Dr. Pou served on the faculty of the University of Texas Medical Branch in Galveston from 1997-2004, where she was the Director of the Division of Head and Neck Surgery from 1999 to 2004. Kevin, M.D. has been doing a good job of tracking developments and comments regarding the case against Dr. Pou, and here is the link to the website that has been established to help raise funds for Dr. Pou's defense.

Following on this recent post on developments in Dr. Pou's case, a New Orleans Parish grand jury today declined to indict Dr. Pou for second-degree murder in connection with the deaths of several elderly patients in the horrifying aftermath of Hurricane Katrina. The decision ends a two-year long criminal investigation into Dr. Pou's heroic treatment of patients at Memorial Medical Center in New Orleans, which was turned into a sweltering, powerless hellhole on Aug. 29, 2005 when the levees failed after the hurricane. Inasmuch as the hospital was not evacuated until several days after the storm, 24 out of 55 elderly and infirm patients died.

The case against this distinguished academic had all the earmarks of a political lynch mob from the beginning. It became quickly apparent that Dr. Pou's arrest was the result of the highly questionable accusations of three employees of LifeCare Hospitals, the company that owned the hospital and whose top administrator and medical director didn't even show up at the hospital during those chaotic days after Katrina. Inasmuch as the accusing LifeCare employees made no effort to evacuate the elderly and sick patients before or after the hurricane, it quickly became clear to any reasonably objective observor that they were attempting to divert attention (and perhaps prosecution) from their own appalling inaction.

But the facts didn't matter to an elderly Louisiana attorney general named Charles Foti, who had campaigned on a plank of "cracking down on abuse of the elderly." Foti engineered the arrest of Dr. Pou and two of her nurses while publicly referring to them as murderers, a charge that he repeated in an episode of 60 Minutes several months later. Although Dr. Pou's lawyer had told Foti that she would surrender to authorities if an arrest warrant were issued for her, Foti had his investigators arrest Dr. Pou and haul her into Orleans Parish Prison on the evening of July 17, 2006, where she was booked on four counts of second-degree murder. Thankfully, the decision on whether to prosecute Dr. Pou was not Foti's, but that of New Orleans District Attorney Eddie Jordan and the local grand jury, which was undoubtedly persuaded by the New Orleans coronor's report that earlier this year concluded that no compelling evidence of homocide existed. But that did not stop Jordan from recently granting immunity to the two nurses who were charged with Dr. Pou in an effort to induce them to testify against Dr. Pou before the grand jury. Sheesh!

So, when does the investigation of the public officials begin who were responsible for attempting to organize this lynch mob?

Posted by Tom at 12:14 AM | Comments (1) |

A bully exposed

As noted in this post from a couple of weeks ago, more than a few folks are not losing any sleep over the fact that former crusading state attorney general and current New York Governor Eliot Spitzer is having trouble getting along with with his new playmates in Albany.

But now things are getting even more interesting. According to a report issued yesterday by Andrew Cuomo, Spitzer's successor as New York AG (and perhaps as governor sooner than we thought), Spitzer's aides used the state police to gather information about whether Spitzer’s chief political rival, Joseph Bruno, improperly used state-owned aircraft for political purposes. To make matters worse, when the improper use of state police was revealed, Spitzer’s communications director, Darren Dopp, concocted a false story as to why the aides sought the information. Although the Cuomo report concluded that the aides’ conduct was “not unlawful,” Spitzer suspended Dopp and conceded at a press conference that his administration had “grossly mishandled” the situation. And all this occurred despite the fact that Cuomo's report was not thoroughly prepared.

Spitzer has a lot of experience in the area of "grossly mishandling" situations. OpinionJounal notes the same thing.

The irony of Spitzer's plight has generated quite a few entertaining blog post titles around the blogosphere, the best of which are Ellen Podgor's (she of "Busted for Yoga" fame) "Spitzer Spitzered" and Nathan Koppel's "Spitzer Schadenfreude." Seems as if Spitzer is redefining the bully pulpit.

Posted by Tom at 12:11 AM | Comments (1) |

"Pulling a Mackey"

Overstock.com's CEO Patrick Byrne is already a controversial character in business circles over his dubious demonization of shorting (earlier posts here and here) and his rather bizarre handling of Wall Street conference calls. But as this Gary Weiss post explains, Bryne has now outdone himself -- he's "pulled a Mackey."

Posted by Tom at 12:00 AM | Comments (0) |

July 24, 2007

Steyn on reforming the criminal justice system

Canadian Mark Steyn's experience in blogging the Conrad Black trial gives him an interesting perspective in proposing several common sense reforms for the federal criminal justice system, most of which have been addressed in this blog over the years:

1) An end to the near universal reliance on plea bargains, a feature unknown to most other countries in the Common Law tradition. [. . .]

2) An end to the reliance on technical charges such as "mail fraud" and "wire fraud", whereby you're convicted not for the crime itself but for sending a letter or authorizing a bank transfer in the course of said crime. [. . .]

3) An end to the process advantages American prosecutors have accumulated over the years - such as the ability to seize a defendant's funds and assets and deprive him of the means to hire good lawyers and rebut the charges. Or to take another example: Unlike the Crown in Commonwealth countries, in closing arguments to the jury the US government gets to go first and - after a response from the defence - last. This is an offence against the presumptions of English law: The prosecutor makes his accusation, the accused answers them. Every civilized legal system allows the defendant the last word.

4) An end to countless counts. In this case, Conrad Black was charged originally with 14 crimes. That tends, through sheer weight of numbers, to favour a conviction on some counts and acquittal on others as being a kind of "moderate" "considered" "judicious" "compromise" that reasonable persons can all agree on. [. . .]

5) An end to statute creep. One of the ugliest features of American justice is the way that laws designed to address very particular situations are allowed to metastasize and be applied to anything a prosecutor fancies. The RICO statute was supposed to be for mobsters and racketeers. Conrad Black is not a racketeer but he was nevertheless charged with racketeering. [. . .]

6) An end to de facto double jeopardy. Conrad Black is likely to wind up back in court to go through all the stuff he's been acquitted of one mo' time, this time in a Securities and Exchange Commission case. That would be a civil case, not a criminal one, and the US Attorney insists that the SEC is an entirely separate body. Oh, come on. The US Attorney and the SEC are both agencies of the US Government. They work in synchronicity. It's not the same as Nicole Brown's family suing OJ after the state's murder case flopped. In this instance, two arms of the same organization are bringing separate cases on exactly the same matters. That's double jeopardy - or, in fact, given the zealousness of the SEC, triple and quadruple jeopardy.

Steyn expands on these points, so read the entire post. And here is another proposed reform that should be added to the list.

Posted by Tom at 12:25 AM | Comments (1) |

Belly putters as Segways

For the first three days of this year's British Open, Sergio Garcia used his new belly putter to sink seemingly every crucial putt to take a three-stroke lead into the final round. Through five holes of the final round, Garcia's new-found putting stroke continued as he extended his lead to four strokes. But then, as Lawrence Donegan of The Guardian reports, the wheels of Garcia's putting stroke suddenly careened into the nearest burn:

The first glimmer that the procession was heading for a few detours came on par-five 6th when he missed a four-foot putt for birdie, then barely holed the one coming back for par. The scores on the boards remained the same but the mood music had changed, from steady march to jazzy stagger. A poor approach shot to the back of the 7th green ended up costing him a shot and he dropped another at the next when he missed an eight-foot putt for par.

Which brings us to the best line that I've seen describing the probable result of Garcia's fourth round putting collapse:

To [Garcia's] credit he made a par at the next but, when he missed another short one on the 10th, shares in belly putters went the way of the Segway scooter.

By the way, my bet is that it's just a matter of Garcia becoming comfortable with his belly putter before he wins a major tournament. He is a simply too good a ball-striker not to win at least one.

Also, did you notice how much more entertaining the British Open was in comparison to this year's U.S. Open?

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

Debt really is cheaper than equity

Dealmaking in Houston is as hot as the downtown pavement these days. Last week it was the Plains-Pogo deal, and this week local offshore drilling firms Transocean Inc. and GlobalSantaFe Corp. are proposing an $18 billion merger deal that will create the largest offshore drilling contractor by a mile. The new company will have a market capitalization of $52 billion and will have a 145-rig fleet, which is more than twice as many rigs as the fleet of the next largest competitor.

The deal comes amidst an unprecedented period for deep sea drilling contractors. With crude-oil and natural gas prices maintaining at historically high levels, exploration and production companies have been willing to pay top dollar to be able to tap reserves that often are often deep under the ocean. As a result, offshore drilling contractors are enjoying intense demand for deepwater rigs, which has increased lease rentals dramatically. Not surprisingly, the stock prices of most of the publicly-owned drilling contractors have been soaring for the past year or so.

Transocean, which is the much larger company (a $32 billion market cap to GlobalSantaFe's $17 billion), is actually the acquiring company in the merger. Transocean shareholders will end up with around 66% in the combined company, while GlobalSantaFe shareholders will end up with the other 34%. But the really interesting aspect of the deal is that the merged company is going to borrow a cool $15 billion (Goldman Sachs and Lehman Brothers are handling that debt vehicle) to spread among the shareholders of the two companies even as debt offerings generally are being downsized in most other markets. The merged company will use its first two years of free cash flow to reduce that debt.

Thus, the bottom line is that the companies are borrowing $15 billion, giving it to their shareholders, and then will take advantage of the hot drilling market to pay the money back quite quickly out of cash flow. Why not just use the cash flow over the next several years and give that to shareholders? Not sure, but I suspect that the structure of the deal will save the merged company a boatload of taxes over the next several years.

Posted by Tom at 12:05 AM | Comments (0) |

July 23, 2007

Dalrymple on Tony Blair

The recent resignation of U.K. Prime Minister Tony Blair provides an opportunity for British psychiatrist and author, Anthony Daniels (who writes under the pen name of Theodore Dalrymple), to provide this interesting early appraisal of the Blair years:

There undoubtedly were things to be grateful for during the Blair years. His support for American policy in Iraq won him much sympathy in the U.S., of course. He was often eloquent in defense of liberty. And under Mr. Blair's leadership, Britain enjoyed 10 years of uninterrupted economic growth, leaving large parts of the country prosperous as never before. London became one of the world's richest cities, vying with New York to be the global economy's financial center. Mr. Blair did inherit a strapping economy from his predecessor, and he left its management more or less to the man who succeeds him, Gordon Brown. Still, unlike previous Labour prime ministers, he did not preside over an economic crisis: in itself, something to be proud of.

But how history will judge him overall, and whether it will absolve him (to adapt slightly a phrase coined by a famous, though now ailing, Antillean dictator), is another matter [. . .]

Tony Blair was the perfect politician for an age of short attention spans. What he said on one day had no necessary connection with what he said on the following day: and if someone pointed out the contradiction, he would use his favorite phrase, "It's time to move on," as if detecting contradictions in what he said were some kind of curious psychological symptom in the person detecting them.

Many have surmised that there was an essential flaw in Mr. Blair's makeup that turned him gradually from the most popular to the most unpopular prime minister of recent history. The problem is to name that essential flaw. As a psychiatrist, I found this problem peculiarly irritating (bearing in mind that it is always highly speculative to make a diagnosis at a distance). But finally, a possible solution arrived in a flash of illumination. Mr. Blair suffered from a condition previously unknown to me: delusions of honesty.

Check out the entire op-ed. It's worth the time.

Posted by Tom at 12:20 AM | Comments (0) |

Dr. Pou's defense goes on the offensive

The state's threat to prosecute Dr. Anna M. Pou for murder is a sad reflection of the incompetence in the Louisiana state government that permeated the preparations for and the aftermath of Hurricane Katrina. After almost two years now of legal limbo, Dr. Pou's defense team is fighting back:

Dr. Anna Pou - the physician arrested in the deaths of four patients at a New Orleans hospital after Hurricane Katrina - filed suit against the Louisiana Attorney General on Monday, accusing him of using her arrest to fuel his re-election bid.

The suit, filed in state court in Baton Rouge, also seeks to force the state to provide a legal defense for Pou against civil lawsuits filed by families of three of the patients.

Last year, State Attorney General Charles Foti claimed Pou and two nurses killed four people with a ‘‘lethal cocktail'' at Memorial Medical Center during the chaotic conditions after the August 2005 storm. The four were among at least 34 who died at the sweltering, flooded hospital in the days following Katrina. Pou, who is free on bond, has not been formally charged. A New Orleans grand jury is looking into the case.

Foti had Pou arrested, ‘‘called an international press conference the next day to announce the arrest, made extra judicial comments totally contrary to the Rules of Professional Responsibility, and culminated the week's activity with an attorney general fund raiser to showcase his ‘achievements' in the arrest of Dr. Pou and the two nurses,'' the suit says.

Foti was not immediately available for comment . . .

Go Dr. Pou!

Posted by Tom at 12:10 AM | Comments (0) |

The latest point shaving scandal

With the news from Friday that just-resigned National Basketball Association referee Tim Donaghy bet on NBA games that he officiated over the past couple of seasons, we have been deluged with media predictions over the weekend that the "integrity of the game" has been compromised and that this is a huge problem for the NBA.

Frankly, my reaction was quite similar to that of Captain Renault's in Casablanca after the Nazis ordered him to close down Rick's -- "I'm shocked, shocked to find that gambling is going on in here!" (exclaimed while picking up his winnings).

In short, I don't think the fact that an NBA referee was on the take will affect the entertainment value of the NBA one iota, and Dave Berri's Sports Economist post explains why. My sense is that the biggest problem that the NBA will face in this entire episode is (1) explaining why the league office did not suspend Donaghy when it learned that he had a gambling problem and was somewhat of a loose cannon, and (2) if Donaghy, in an effort to obtain a more favorable sentence, starts fingering other point shaving referees. But as this NY Times article explains, NBA referees are already monitored closely, so the risk that a widespread point shaving problem exists among referees is unlikely.

Posted by Tom at 12:05 AM | Comments (0) |

July 22, 2007

"Hook'em what?"

This Washington Post article reports on a U.S. Joint Forces Command commissioned Rand Corp. study that examines how U.S. credibility is often undermined when American media images are misinterpreted in foreign countries. Supporters of the University of Oklahoma and Texas A&M University will be happy to learn that the picture on the left of President Bush and others flashing the University of Texas' famous "Hook'em Horns" gesture was used as one of the study's examples, with the following description:

Background: President Bush makes a "hook'em horns" gesture familiar to University of Texas fans during the 2005 inaugural parade.

Rand Commentary: "Unfortunately, that particular gesture is not unique to Texas, and it carries different meanings elsewhere in the world. Norwegians seeing the image were shocked to see the president of the United States making the 'Sign of the devil.' Mediterranean viewers and those in parts of Central and South America . . . saw the president indicating that someone's wife was unfaithful."

Also looks like excellent material for the Marching Owl Band's halftime performance during Rice's September 22nd game against UT. ;^)

Posted by Tom at 12:09 AM | Comments (1) |

July 21, 2007

The Stros' legacy of bad trades

This earlier post explored the possibility that Stros management got snookered in the trade for pitcher Jason Jennings because of possible undisclosed arm problems. After serving a stint on the disabled list with elbow inflammation earlier this season, Jennings has come back to pitch sport a 4.76 ERA in 70 innings, which means that Jennings has given up 5 more runs than an average National League pitcher would have given up in the same number of innings (RSAA, explained here). To top off this uninspiring season-long performance, Jennings gave up 7 earned runs in 5 innings in his last outing against the hapless Nationals (40-55). That prompted the following observation from Baseball Prospectus ($) injury expert, Will Carroll:

"He's done," the source told me after watching Jason Jennings pitch [against the Nationals]. A very knowledgeable man that I trust on pitching, he thinks that Jennings' shoulder is "catching," reducing his velocity and changing his mechanics enough to reduce movement. He also doesn't believe that Jennings made any improvement after a DL stint, implying that there's more going on inside the arm. Jennings' results back up this assertion, and point to perhaps another period on the DL in the near future. With Jennings' impending free agency, it will be curious how the Astros handle this. Will they acknowledge their trade for Jennings didn't work, or will they try to get whatever they can from him in a season that's lost?

Thus, the trade for Jennings -- which was a reasonable risk at the time -- is not turning out well. At least the Stros can take solace in the fact that they didn't give up much in the trade -- all three of the players that the Stros gave up (pitchers Jason Hirsh and Taylor Buchholz, and centerfielder Willy Taveras) have been below-average so far during their Major League careers and none of them is above-average this season.

Nevertheless, many Stros fans -- apparently confused by the club's poor play this sesaon -- think the Jennings deal was a horrible trade. Earlier this week, I even heard a host of one of the ubiquitous sports talk shows on Houston's radio landscape -- a barren wasteland of insightful thought with the exception of Charlie Pallilo and a couple of others -- predict that "the Jennings trade will go down as one of the worst trades in Stros history."

Come on. The radio host apparently did not take the time to review the Stros' extraordinary legacy of bad trades:

1971: The Stros traded secondbaseman Joe Morgan in the prime of his career, pitcher Jack Billingham, shortstop Denis Menke, and outfielders Cesar Geronimo and Ed Armbrister to Cincinnati for firstbaseman Lee May, secondbaseman Tommy Helms and utility infielder Jimmy Stewart. Morgan cemented his Hall of Fame career with the Reds, while Billingham and Geronimo were also solid contributors in the Reds' World Series teams of the 1970's. For many years, this trade set the standard by which bad trades in Major League Baseball were compared.

1969: The Stros traded slugging outfielder Rusty Staub in the prime of his career to Montreal for Jesus Alou and Donn Clendenon. When Clendenon refused to report, Houston agreed to take pitchers Jack Billingham and Skip Guinn instead. The Stros did not have another hitter the caliber of Staub for over 20 years until Jeff Bagwell joined the club in 1991. Clendenon went on to help the Mets win the 1969 World Series.

1992: The Stros traded 24-year old pitcher Curt Schilling to Philadelphia for pitcher Jason Grimsley. Schilling went on to become one of the best starting pitchers of the following 15 year era and saved his teams 345 more runs over that period than an average National League pitcher would have saved during that time pitching the same number of innings.

1991: The Stros traded 24-year old centerfielder Kenny Lofton and infielder Dave Rohde to Cleveland for catcher Eddie Taubensee and pitcher Willie Blair. Over the past 16 seasons, Lofton has generated 234 more runs than an average National League player would have created over that span using the same number of outs as Lofton. Just to rub it in, the now 40-year old Lofton had his best series of the season several weeks ago against the Stros while playing with the Rangers.

1994: The Stros traded thirdbaseman Ken Caminiti, centerfielder Steve Finley, shortstop Andujar Cedeno, firstbaseman Roberto Petagine and pitchers Brian Williams and Sean Fesh to San Diego for outfielder Derek Bell, pitcher Doug Brocail, shortstop Ricky Gutierrez, pitcher Pedro Martinez (no, not that Pedro Martinez) outfielder Phil Plantier and infiedler Craig Shipley. Caminiti proceeded to become one of the best sluggers in the National League over the next four seasons with the Padres, while Finley has been a well above-average centerfielder for the past 13 seasons. On the other hand, Bell in 1999 had one of the worst seasons by an outfielder in Stros history by generating 32 fewer runs than an average National League player would have created using the same number of outs as Bell used.

1968: The Stros traded starting pitcher Mike Cuellar to Baltimore for Curt Blefary and John Mason. Cuellar went on to have a career season for the Orioles in 1969 (41 RSAA) and was a dominant starter for the O's for the following five seasons. Blefary played one average season for the Stros before they traded him to the Yankees.

1971: The Stros traded 23 year old slugging firstbaseman John Mayberry and Dave Grangaard to Kansas City for pitchers Lance Clemons and Jim York. Over the next four seasons, Mayberry had the most productive stretch of his career as he generated 175 more runs during those seasons than an average National League player would have created using the same number of outs as Mayberry.

1998: The Stros traded SS Carlos Guillen and pitchers Freddy Garcia and John Halama to the Mariners for Randy Johnson. Johnson gave the Stros what they wanted -- an ERA of 1.28 in 11 stretch-drive starts and a 1.93 ERA in two NLDS starts. But the Stros lost in the NLDS and Johnson signed with the Dbacks the next season. Guillen went on to become a three-time All-Star, Garcia, who won 117 games over the following nine seasons and Halama was a National League-league pitcher over the next eight seasons. This marked the beginning of the decline in the Stros' farm system that now ranks as one of the worst in MLB.

If Hirsh, Buchholz or Taveras turns into a star player, then maybe the Jennings deal will be included among these truly horrid Stros trades. But until then, the Jennings trade will remain simply a reasonable risk that did not work out.

Posted by Tom at 12:18 AM | Comments (5) |

July 20, 2007

The University of Wisconsin at The Woodlands?

Not satisfied with hammering high schools in the Midwest, the University of Wisconsin is now demanding (see also here) that my local high school football team -- The Woodlands High School Highlanders -- change the "W" insignia on the high school's helmets because it allegedly violates Wisconsin's trademark on the "W" that the university has used on its football helmests since 1990. Apparently, the university has turned these types of demands into a sort of cottage industry as there are now 40 similar infringement cases pending in 26 different states.

Jeffrey Standen explains why this is such a waste of time.

Posted by Tom at 12:05 AM | Comments (1) |

A Wells Notice bouquet?

When the Securities and Exchange Commission sends you a Wells Notice, that's not usually considered a positive development. It means that the SEC Enforcement staff has decided that sufficient evidence and cause exists to file an enforcement lawsuit, usually seeking civil penalties, disgorgement of proceeds from stock sales and almost always bans from serving as an officer or director of a public company.

Under SEC guidelines, a target of a Wells Notice may respond directly to the SEC Commissioners by submitting what is know as a "Wells Submission," but doing so is a dicey proposition. The Commissioners almost always defer to the Enforcement Division's recommendation on whether to pursue an enforcement action, so filing a Wells Submission is essentially providing the Enforcement Division an outline of the target's defense. Moreover, a Wells Submission is neither privileged nor confidential, so anything in the submission can be used against the target in further proceedings with the SEC or in related civil or criminal proceedings.

Thus, with that backdrop, get a load of the way in which Interpublic Group describes the receipt of a Wells Notice in a recent press release, as this footnoted.org post reports:

[J]udging by the press release that Interpublic Group (IPG) put out this morning, you’d think that getting a Wells notice from the SEC was something to celebrate. Indeed, the idea that responding is not voluntary is missing from the release. Instead, Interpublic describes it as an "invite" and calls it as another step in the settlement process.

The spin doesn’t end there. The release goes on to quote Chairman and CEO Michael Roth, who notes that "Given our understanding of new procedures at the SEC, this development is not unanticipated and we believe that it moves us a step closer to resolution in this matter."

Heck, based on this logic, an indictment related to the company's activities would be cause for a big party.

Posted by Tom at 12:02 AM | Comments (0) |

July 19, 2007

Talk about a misleading P.R. campaign

Get a load of this press release (hat tip Ellen Podgor) from the Department of Justice heralding the five year anniversary of the DOJ's Corporate Fraud Task Force. Here is the press release's description of the Task Force's accomplishments in connection with its investigation into the demise of Enron:

Criminal charges were brought against 36 defendants, including 27 former Enron Corporation executives. Eighteen of those charged pleaded guilty or were found guilty after trial, including Enron�s former chief executive officer, who was sentenced to 292 months in prison. The guilty verdicts against the former chairman/CEO in two cases were dismissed by abatement following his death. The Task Force seized over $100 million in ill-gotten gains and the Department of Justice worked jointly with the Securities and Exchange Commission to obtain orders directing the recovery of more than $450 million for the victims of the Enron frauds.

What parallel universe are these people living in? Here is the harsh reality of the Task Force's legacy in regard to the Enron criminal cases:

The Enron Task Force procured a deeply flawed conviction that put the nail in the coffin of one of the oldest and most respected U.S. accounting firms, costing tens of thousands of jobs in communities and wealth loss to individuals throughout the nation. Later, the head of the Task Force expressed an appallingly arrogant "end justifies the means" regarding the wrongful prosecution of Andersen and other Enron-related cases;

Then, the Task Force ruthlessly ruined the careers of four respected former Merrill Lynch executives and sent them to prison for a year before the Fifth Circuit overturned that atrocity. That prosecution included a disingenuous market loss argument in connection with the sentencings of the four executives, an argument that contradicted the Justice Department's position at the time in a case involving the same issue that was pending before the U.S. Supreme Court.

After two trials, the Task Force finally obtained a conviction against former Enron Broadband executive Kevin Howard, only to have that conviction tossed out (the Task Force is appealing that decision). After the latter trial, the Task Force characterized as "harmless error" strong evidence of misconduct during jury deliberations.

For the past two years, Task Force lawyers have been attempting to patch something together to make a case against Howard's former co-defendants in the Enron Broadband case that the Task Force has already lost once. In connection with the first Enron Broadband trial, the Task Force's threatened two defense witnesses (here and here) in an attempt to induce them not to testify, elicited false testimony from former Enron executive Ken Rice, the Task Force's key witness in that trial, and a Task Force prosecutor violated the judge's instruction during trial not to question witnesses on certain subjects.

The Fifth Circuit -- even before the appeal briefs have been filed -- has opined that "serious frailties" exist in the conviction of former Enron CEO Jeff Skilling (see also here), and the stress associated with mounting a defense to the Task Force's questionable case against former Enron chairman Ken Lay almost certainly contributed to his death.

Serious questions remain as the validity of the Task Force's controversial prosecution of the NatWest Three (see also here), an ordeal that is now entering its fifth year for those defendants.

The Task Force obtained a highly dubious indictment against former Enron mid-level executive Christopher Calger (the prosecutor handling the plea bargain hearing could not even articulate Calger's crime to the judge who took the plea), and Calger's later renunciation of the plea deal exposed several dirty secrets of the Task Force, particularly the bludgeoning of former Enron executives into plea bargains.

The Task Force engaged in a highly prejudicial and inflammatory public relations campaign demonizing anyone and anything having to do with Enron.

The Task Force engaged in a dubious tactic of fingering potential defense witnesses as either unindicted co-conspirators or targets of the Enron criminal investigation to deter those witnesses from testifying for defendants in the Enron criminal trials. Strong evidence exists that the Task Force threatened witnesses with indictment (see also here and here) if they testified for the defense in the Lay-Skilling trial.

The Task Force's tactics have had a negative impact on such fundamental rights as the attorney-client privilege, the presumption of innocence and the right to a fair trial, not to speak of the negative effect on creation of wealth and jobs.

Meanwhile, as noted earlier here and here, many of the Task Force lawyers who contributed to making this mess have moved on to lucrative careers outside of government.

In light of the foregoing, rather than extolling the Corporate Fraud Task Force's accomplishments, wouldn't it be a more productive exercise to examine the cost of the Task Force and its actions relative to the value of its benefits?

Posted by Tom at 12:20 AM | Comments (1) |

Hope for the Texans?

Despite my earlier reservations, the Michael Vick debacle actually provides some hope for the Houston Texans' draft strategy:

In 2000, [the San Diego Chargers] stunk. Fan apathy grew like dandelions. The Chargers had gone 1-15, almost impossible in the modern-day NFL. Ryan Leaf was their starting quarterback, fading away like bad smoke, soon to get into coaching (of all things). They needed oomph. They needed star quality. They needed box office.

The quarterback situation was beyond dismal. So, what did they do? They didn't take my advice (as usual), which was, in 2001, to draft electric Virginia Tech quarterback Michael Vick. That's why I'm a sportswriter, not Lombardi.

But they almost took Vick. They came this close. So the worst team in the NFL sent its No. 1 overall pick to Atlanta for the fifth selection, who turned out to be just a guy, a someone, a nice fellow, a tailback named LaDainian Tomlinson, who has scored 111 touchdowns and thrown for six more since that fateful day.

LT now owns San Diego. Vick now owns a set of tremendous problems. He makes Leaf look like Johnny Unitas.

Read the entire column. The Chargers are now one of the elite teams in the NFL, while the Falcons are trolling quickly to the bottom. Maybe that Texans 2006 draft wasn't so bad after all.

Posted by Tom at 12:10 AM | Comments (0) |

Dissecting the expanding realm of white collar prosecutions

Over at Point of Law.com, Moin Yahya, Assistant Professor of Law Faculty of Law at the University of Alberta, is dissecting the prosecution against Conrad Black (earlier posts here) in a series of posts, the first two of which are here and here. Unless you are in favor of the expansion of federal criminal power, his findings are troubling. Take, for example, the obstruction of justice charge against Lord Black:

One of the charges that the prosecution added against Black was obstruction of justice. This charge was added at the last minute and was not in the initial indictment. The charge related to the fact that Black removed boxes of documents from the offices of Hollinger Inc. (which was the parent company of Hollinger International the American company based in Chicago). The order not to remove the boxes had been issued by a Canadian judge in Toronto. (As an aside, wouldn’t a simple contempt of court charge have sufficed?)

What jurisdiction did the United States have over Black for an event that took place on foreign soil? Putting aside the question of whether the prosecution already had these documents, so it is not clear that his removal obstructed any investigation; the more important and troubling aspect of this case is the creeping federalization of American law not just inside the United States but abroad. [. . .]

But now, will Congress seek to regulate the conduct of Americans and American corporations all over the world? . . . [A]s we have seen before, the courts cannot seem to find that magic bright line to constrain Congress . . . Today Congress regulates sex tourism, truly a noble cause, but tomorrow what else will it decide on. Will it outlaw dog-fighting in foreign lands? Will Congress criminalize paying workers in developing countries less than the minimum wage in the United States? Will Congress criminalize not following the mandates of Sarbanes-Oxley even if the American company is only listed on a foreign exchange? What then will be the result? The answer depends on your view of whether federalism is good or bad. If the growth of Congressional power concerns you, then these latest cases should cause you more concern; if not, then not.

Update: Professor Yahya's third segment is here.

By the way, it sounds as if Houston business executive and philanthropist Dan Duncan is getting a dose of what Professor Yahya is talking about:

A 2002 big game hunting trip in Siberia could bring big trouble for Houston billionaire Dan Duncan.

The 74-year-old founder of pipeline giant Enterprise Products Partners may face criminal charges following his appearance Wednesday before a grand jury in Houston, where he answered questions about the trip he and other hunters took with Russian guides.

During the trip, Duncan shot and killed a moose and a sheep while riding in a helicopter, a practice Duncan said he did not know was illegal in Russia. Neither animal was considered endangered, he said.

Russian officials were aware of the hunting expedition — Duncan's attorney Rusty Hardin said the guide on the trip is now a top official with the Russian Federation's hunting licensing agency — but there were no complaints or charges filed in that country.

Hardin said prosecutors from Washington, D.C., may use the Lacey Act, a 107-year-old law designed to prevent the interstate and international trafficking of rare plants and animals, to bring felony criminal charges against Duncan. If found guilty he could face jail time, Hardin said.

"What the hell is the U.S. interest in bringing felony charges here for hunting on Russian soil, where not one single person has complained?" Hardin said Wednesday. "Is this really the best use of our prosecutorial resources?"

Read the entire article.

Posted by Tom at 12:05 AM | Comments (0) |

July 18, 2007

Another Tiger Tale

As we watch Tiger Woods pursue his 13th major championship this weekend at the British Open, it's worth reminding ourselves that we are blessed to be able to watch the best golfer in history. CBS golf commetator David Feherty, who often walks with Woods while covering tournaments, passes along this anecdote in a recent interview:

"People have accused me of being so far up Tiger’s arse that he can barely make a full swing, but I maintain that he is a special person."

"There’s no one else on the planet who can do what he does or even think of doing what he does. I’ve often thought, instead of showing Tiger’s reaction to a shot he’s hit, we really should show the reaction of those around him.”

"But here is the next best thing. I’m walking down the 18th fairway at Firestone Country Club with Ernie Els and Tiger, who has popped up a three-wood about 40 yards behind Ernie into some wet, nasty, horrible, six-inch rough."

"Tiger’s cursing and taking clumps out of Ohio with his three-wood. And, of course, we’re not showing this on TV because we want to be able to interview him later. Ernie and I walk past Tiger’s ball, and it is truly buried."

“Ernie is tied with Tiger and he’s in the middle of the fairway. I’m standing with Ernie and my microphone is open. Ken Venturi [in the CBS booth] sends it to me and I say, ‘Tiger’s got 184 yards with two big red oaks overhanging the green. He’s got absolutely nothing. With a stick of dynamite and a sand wedge I might be able to move this ball 50 yards. Steve Williams [Woods’ caddie] tells me [with a hand signal] that he’s using a pitching wedge.’"

"Tiger takes his swing. Every muscle in his body is flung at the ball. It looks like he’s torn his nutsack. The divot went as far as I could hit the ball. I’ve got my microphone at my mouth thinking, what the hell was that! The ball sails over the trees, lands behind the hole and backs up to a bout six feet from the flag. I open my microphone and Ernie turns and says, ‘F*** me!’"

"My producer comes on in my earpiece and says, ‘Was that Ernie?’ I say yes. He says, ‘Fair enough.’"

"I could have described that shot for 15 minutes and not done as good a job as Ernie did with two words. This is one of the best players in the world talking, and you wanna know how good Tiger is? Ask Ernie Els."

Posted by Tom at 12:48 AM | Comments (0) |

Dissecting the Stros' woes

The Stros (40-54) won last night for the first time in five games since the All-Star Break, which has put the club in contention for the worst record in Major League Baseball this season. That performance prompted Baseball Prospectus to provide this "what's busted" capsule summary ($) of the Stros' woes:

What's Busted? Organizational decision-making. Whether it's putting Craig Biggio's goal ahead of the ballclub's fortunes, or Phil Garner's fickle relationship with Lidge, or unquestioning Brad Ausmus cultism, or spending big money on Woody Williams and being surprised by the result, it's fair to say that the Astros have consistently made the wrong choices when they have to freedom to make them, and only have happy results from those—like Hunter Pence—who force choices upon them.

Add to those bad decisions a string of bad drafts from 1998-2002 and the Stros have a real mess on their hands. In those five drafts, the Stros generated only a handful of productive players -- Brad Lidge and Morgan Ensberg (1998); Jason Lane and Chris Sampson (1999); Chad Qualls and Eric Bruntlett (2000); Chris Burke and Matt Albers (2001); and nothing so far out of the 2002 draft, which is shaping up to be one of the worst drafts in Stros franchise history. The foregoing is not much of a return on investment in the Stros' minor league development program.

Despite the clarity of the foregoing mistakes, Chronicle sports columnist Richard Justice continues to manage to to get it wrong in analyzing the Stros:

Tim Purpura's biggest blunder was swapping Andy Pettitte and Roger Clemens for Woody Williams and Jason Jennings. It really begins with Pettitte. The Astros had such a dislike of his agent, Randy Hendricks, that they allowed it to influence their evaluation of the player. Bad mistake. Childish, too.

We'll never know if they could have signed Pettitte. I suspect his heart was set on returning to New York. Close friends in the home clubhouse tell me he agonized over the decision and would have returned if the Astros had tried a little harder. Instead, they treated him like he was an optional part.

Neither he nor Roger Clemens have been great this season, but they've been far better than Woody Williams and Jason Jennings, who are a combined 5-16 with 14 quality starts and a 4.94 ERA. Pettitte and Clemens are 7-10 with 15 quality starts and a 4.25 ERA. To adjust the ERAs by league, Pettitte and Clemens are .18 of a run under their league average while Williams and Jennings are .65 of a run above.

Purpura's biggest blunder? In point of fact, trading Pettitte and Clemens for Williams and Jennings hasn't had much of an effect on the Stros' season at all, while not signing them has had a huge positive impact on the Stros' payroll. Had Pettitte and Clemens been pitching for the Stros this season, they would have saved the club about 27 more runs than Williams and Jennings to this point in the season. That translates to about 4-5 more wins, which would make the Stros record at best 45-49 and still far behind in the NL Central. Meanwhile, if the Stros had signed Pettitte and Clemens, then the club's payroll would be bleeding by an additional $25 million or so over and above the aggregate $10.5 million or so that they are paying Williams and Jennings. Had that occurred, Justice would probably be criticizing the Stros for wasting a substantial chunck of the club's payroll on a couple of high-injury risk veterans on the downside of their respective careers.

The bottom line on this season is that the Stros pitching staff has underperformed so badly that having both Pettitte and Clemens would not have improved that overall performance enough to matter. Stros General Manager Tim Purpura has made some mistakes, such as signing Williams in the first place. But electing to pass on overpaying Pettitte and Clemens was not among them.

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

A big Houston deal

Two Houston-based exploration and production companies made big news on Tuesday as Plains Exploration & Production Co. agreed to buy Pogo Producing Co. for $3.42 billion in cash and stock. The Houston Chronicle story on the transaction is here.

Plains will pay $1.5 billion in cash and issue 40 million of its shares to purchase Pogo, which has been the subject of acquisition rumors for months as dissident shareholder Third Point LLC expressed disappointment with Pogo's financial performance and the legacy management team of Pogo founder, chairman and CEO, Paul Van Wagenen. Pogo shareholders will receive 0.68201 share of Plains Exploration and $24.88 in cash for each share of Pogo they own, which values each Pogo share at $57.53. Pogo shareholders will hold a 34% stake in Plains Exploration and two Pogo board members board will join Plains' board when the deal closes in the fourth quarter of this year.

The acquisition will nearly double Plains' estimated-reserve potential to 1.4 billion barrels of oil equivalent and provide the company with substantial onshore producing properties in the Texas Panhandle and Permian and Gulf Coast regions, as well as the Madden Field in Wyoming and the San Juan Basin in New Mexico.

Pogo, which agreed in May to sell its Northrock Resources unit for $2 billion to Abu Dhabi National Energy Co., saw the markets greet the announcement with enthusiasm as the comany's shares rose $7.02 (or 14%) to $57.50 as of 4 p.m. in New York Stock Exchange composite trading. On the other hand, Plains stock was off $3.31, or 6.5%, to $47.88.

Bully for Mr. Van Wagenen, who is one of the classiest and most pleasant CEO's in the Houston business community.

Posted by Tom at 12:05 AM | Comments (0) |

July 17, 2007

Judge Kaplan hammers the DOJ in the KPMG case

As widely anticipated, U.S. District Judge Lewis Kaplan dismissed all charges today against 13 former KPMG partners in the KPMG tax shelter case because of the prosecution's interference with the defendants' Constitutional rights under the Fifth and Sixth Amendments. A copy of the decision is here (pdf), Peter Lattman provides this handy timeline of the case, while Ellen Podgor and Larry Ribstein and Kevin Lacroix provide their usual lucid commentary on Judge Kaplan's decision.

Although expected, Judge Kaplan's decision is a watershed event in the government's campaign since the demise of Enron to increase regulation of business through criminalizing merely questionable transactions where responsibility for financial loss is more appropriately allocated among multiple participants in a civil context. The difficulties of fitting the round peg of legal business transactions into the square hole of criminal law has resulted in an unprecedented surge in dubious cases and prosecutorial misconduct epitomized by the legacy of abusive tactics of the Enron Task Force. Jamie Olis is serving six years in prison after being put through precisely the same wringer that Judge Kaplan determined was unconstitutional in the KPMG tax shelter case. But the shameless prosecutorial tactics of pursuing weak cases against unpopular targets (see also here), icing witnesses with exculpatory testimony and introducing junk evidence to confuse the jury are just as alien to justice and the rule of law as depriving defendants of their ability to mount an effective defense.

And make no mistake about it, Judge Kaplan lays the wood to the U.S. Attorneys' Office for the Southern District of New York in his decision. The following excerpts are just a sampling of his criticism. As to the government's disingenous assertion that KPMG ceased paying defense costs of its former partners on its volition and not under the threat of the DOJ going Arthur Andersen on the firm:

It now is undisputed that KPMG has been paying the defense costs of at least eleven of the sixteen KPMG Defendants in civil cases relating to the tax shelters here at issue and also the defense costs of eight of them in regulatory inquiries relating to the conduct in question in this case. . . . it is striking that KPMG has paid these costs subject to the requirement that the individuals be represented in the civil matters by attorneys who are not involved in defending this criminal case.

The fact that KPMG is paying civil defense costs, regardless of amount, is consistent with its uniform practice over many years. What makes the criminal case different is only the Thompson Memorandum and the USAO’s actions. Indeed, the fact that KPMG has been paying the civil defense costs on condition that the defendants’ lawyers in those matters be different than their lawyers in the criminal case – a condition that is at war with any consideration of economy or efficiency – demonstrates with astonishing clarity that the different treatment of the criminal case defense costs has been driven from the outset by the fear that the government would view any assistance in defending against the indictment as a black mark against KPMG. KPMG cut off payment of defense costs to anyone who was indicted for one reason and one reason alone – the Thompson Memorandum and the related actions of the USAO. In their absence, KPMG would have paid every penny, just as it always had done before.

On the prosecution's shocking manipulation of KPMG to deprive the defendants of their constitutional rights:

Just as prosecutors used KPMG to coerce interviews with KPMG personnel that the government could not coerce directly, they used KPMG to strip any of its employees who were indicted of means of defending themselves that KPMG otherwise would have provided to them. Their actions were not justified by any legitimate governmental interest. Their deliberate interference with the defendants’ rights was outrageous and shocking in the constitutional sense because it was fundamentally at odds with two of our most basic constitutional values – the right to counsel and the right to fair criminal proceedings. But the Court does not rest on this finding alone. It would reach the same conclusion even if the conduct reflected only deliberate indifference to the defendants’ constitutional rights as opposed to an unjustified intention to injure them. [ . . . ]

The government’s actions with respect to legal fees were at least deliberately indifferent to the rights of the defendants and others. In all the circumstances, this behavior shocks the conscience in the constitutional sense whether prosecutors were merely deliberately indifferent to the KPMG Defendants’ rights or acted more culpably.

And Judge Kaplan concludes with the following passage from Berger v. United States on the proper purpose and scope of prosecutorial conduct, the meaning of which has been lost among the current crop of prosecutors in the Department of Justice:

[A prosecutor] is the representative not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all; and whose interest, therefore, in a criminal prosecution is not that it shall win a case, but that justice shall be done. As such, he is in a peculiar and very definite sense the servant of the law, the twofold aim of which is that guilt shall not escape or innocence suffer. He may prosecute with earnestness and vigor – indeed, he should do so. But, while he may strike hard blows, he is not at liberty to strike foul ones. It is as much his duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate means to bring about a just one.”

Amen.

Posted by Tom at 12:30 AM | Comments (5) |

It's time for The Open

The 136th British Open begins play this Thursday at Carnoustie in Scotland, so NY Times golf writer Damon Hack sets the stage (see also here) for this year's event. The Open's website is always one of the best tournament websites, and this year's version includes this slick visual guide to the golf course. Meanwhile, Austin's Dave Pelz, Phil Mickelson's short game guru, gives this interesting interview on how Team Mickelson is preparing for the special challenges of Carnoustie.

By the way, this year's event is the first time that the Open has been back to Carnoustie since 1999, when France's Jan Van de Velde self-destructed on the 72nd hole by taking a 7, blowing a three shot lead and then blowing another opportunity to win the championship in the subsequent playoff. That meltdown on the final day of a major tournament prompted one of the better golf jokes that I've heard over the years:

"What does 'Jan Van de Velde' mean in English?"

"Greg Norman."

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

The sad grave of Bullet Bob Hayes

Before the ubiquitous burners these days at the wide receiver position in the National Football League was the Dallas Cowboys' Bullet Bob Hayes, the 1964 Olympic gold medal winning sprinter-turned-NFL All-Pro wide receiver.

Hayes played before the days of big money in the NFL and his life took a turn for the worse in the 1970's when he served prison time for being involved in a drug ring. Hayes died at the age of 59 in 2002 from kidney failure and is still a legend in his hometown of Jacksonville, Florida, but this Jacksonville Times-Union article indicates that his legendary status does not equate with a fitting resting place:

In a corner of A. Philip Randolph Park, a statue surrounded by red, white and pink flowers captures "Bullet" Bob Hayes at his Olympic peak - the 1964 Tokyo games - whizzing past the competition in the anchor leg of the 4x100 meter relay.

Yet, on the other side of the city, the final resting place for Jacksonville's most revered athlete is nothing more than a bare patch of grass. [. . .]

In 1999, the Times-Union named the phenom who rose from poverty on Jacksonville's Eastside to Olympic greatness, and later stardom for the Dallas Cowboys, as its Athlete of the Century.

Hayes is remembered locally as an Olympic legend for his world record performances and two gold medals in Tokyo - his anchor sprint in the relay is still considered among the fastest ever. And later, as a player in the National Football League, his unmatched speed forced defenses to revise their zone schemes. He holds 22 Dallas records, including 71 career touchdown receptions and 20 yards per catch, and is enshrined in the Cowboys' Ring of Honor.

But in Edgewood Cemetery, where Hayes is buried, there seems to be a legacy deferred - an empty tract with no headstone. Times-Union reporters who visited the burial site twice, once in June and again last week, observed no marker of any sort. A Times-Union photographer on Saturday found a temporary marker at the site. [. . .]

Posted by Tom at 12:10 AM | Comments (0) |

July 16, 2007

The influence of junk evidence on juries

What do the juries in the Conrad Black , Dr. William Hurwitz and the Enron-related criminal trials have in common?

In response to the verdict in Lord Black's trial, Professor Bainbridge observed that the result appeared to be a "compromise" verdict in which a portion of the jury did not believe Black was guilty of any of the thirteen charges against him but gave in to a guilty verdict on four of the counts just to get the damn thing over with.

Meanwhile, Professor Ribstein notes that this WaPo article reports that Dr. Hurwitz -- a sacrificial lamb of America's dubious drug prohibition policy -- has been re-sentenced to a bit less than five years in prison as a result of his conviction on drug trafficking charges for prescribing pain relief medication for his chronic pain patients. In that connection, John Tierney explores the shameless prosecutorial tactic in the Hurwitz trial of offering shoddy evidence and testimony based on junk science to influence the jury against Hurwitz and the distraction that such charges caused for both the jury and the Hurwitz defense.

The prosecutorial misconduct that Tierney exposes in the Hurwitz trial also took place during the Black trial, where the prosecutors mischaracterized Black's actions on the CanWest deal, on the Bora Bora trip, on his wife's birthday party and much else, including now that Black is a flight risk and should be jailed immediately. The same prosecutorial tactics were also rampant throughout the Enron-related prosecutions, particularly the Lay-Skilling trial (see also here), the Nigerian Barge trial and the Enron Broadband trials.

In Lay-Skilling, the prosecution frequently elicited testimony about matters that it had either dropped from the case prior to trial or never charged in the first place; these bunny trail distractions became so common that the defense team began to characterize them as "drive-by shootings." Heck, during the trial last year of former Enron Broadband executive Kevin Howard, the government argued to the jury that Howard's knowledge of Enron Broadband's mere breach of a joint venture agreement was evidence of a crime, despite the fact that the breach of contract was clearly in Enron Broadband's financial interest and had been disclosed to and approved by Enron Broadband's outside counsel.

Add in the fact that all of these white collar cases involve at least a dozen charges and months of testimony, and it's easy to understand how jurors become overwhelmed by it all. The common juror reaction to such prosecutorial mudslinging -- along with the real presumption in such cases -- is "Gosh, the government is contending all this bad stuff against the defendant, he must have done at least something criminal." Compromise verdicts are the natural result.

What can be done? Well, one thought is to give the judge more power to determine whether the case should ever go to trial in the first place. In civil cases, summary judgment procedure provides judges with this option, and often resolves the case before trial or dramaticaly limits the issues that are tried to the jury.

Probably because of the limited discovery that takes place in criminal cases, no analogous procedure has developed in criminal cases where a defendant could argue before trial that -- based on a preview of the evidence and testimony that the prosecution and the defense would introduce at trial -- the trial judge should dismiss the case because no reasonable jury would conclude that the government could fulfill its burden of proving each and every element of the alleged crime beyond a reasonable doubt. Nevertheless, given the current unlevel playing field in white collar criminal cases, perhaps such a pre-trial procedure would be one way to pre-empt the prosecutorial chloroforming of the juries that has become sadly common in white collar prosecutions since the demise of Enron.

Posted by Tom at 4:28 AM | Comments (2) |

The WSJ discovers The Hamptons of Houston

First it was the New York Times extolling Galveston as "the Hamptons of Houston."

Now, Houstonian's favorite getaway destination is getting the favored treatment from the Wall Street Journal:

Throughout its history, Galveston has been a striking testament to human persistence and ingenuity -- and the power of denial. The island has a stomach-churning history of boom and bust. Its rise as a major Southern port city was cut short by the 1900 hurricane.

Protected by a new 17-foot sea wall, Galveston boomed again as the Sin City of the Gulf until Texas Rangers shut down its illegal gambling trade in the late 1950s. After that, eclipsed by the Port of Houston, Galveston limped through the remainder of the 20th century, struggling to pay the bills.

This century has seen Galveston's fortunes rise again. The island is beloved in Texas as part of the state's colorful past and also for its diverse appeal. Tourists flock to the historic districts and miles of public beaches, while fishermen and birders hang out along the jetties, bayous and surf. Out-of-town investors have revitalized the east end of the island, protected by the sea wall, where the original city and docks were built. Now it is a vibrant tourist spot packed with restaurants and shops against a backdrop of cruise ships and barnacle-covered fishing boats lined up along the docks.

Read the entire article.

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

Fair tax?

Greg Mankiw provides this particularly lucid analysis of the current status of the progressive U.S. income tax system. Keep it handy when listening to the demagoguery over tax rates that will take place during the upcoming 2008 Presidential campaign.

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

July 15, 2007

Katrina evacuees and the enduring nature of poverty

In the summer of 2005, tens of thousands of citizens from the New Orleans area relocated to Houston and other cities in the aftermath of Hurricane Katrina, most of whom never returned to their former home. A substantial number of those evacuees were poor and largely unemployed in the depressed New Orleans-area economy that existed even prior to the destruction of Katrina. Thus, the hope was that those evacuees would be able to improve their living standard by starting anew in economically vibrant areas such as Houston.

Unfortunately, that has not been the case. As this Jacob Vigdor post notes, research on the Katrina evacuees is indicating that the syndrome of poverty is extremely difficult to change:

Should governments help residents of depressed regions move towards more prosperous areas? Evidence from Katrina evacuees suggests that such efforts are likely to fail. The fortunes of long-term evacuees are almost completely unrelated to the characteristics of the cities to which they relocated. [. . .]

What can the world learn from the experiences of Hurricane Katrina evacuees? As indicated in other recent research carefully examining the impact of residential location on employment, moving a poor, undereducated citizen from a declining urban area to the middle of a vibrant economy is not likely to be a quick, cheap way to find him or her a job. While participants in a voluntary relocation programme would almost certainly be exposed to less personal trauma than Katrina evacuees, the survival instinct alone appears to be insufficient to guarantee success. Particularly in nations with social welfare systems more generous than the American model, the result of any such programme seems quite likely to increase, rather than assuage, drains on the public budget in the short-to-intermediate term.

Posted by Tom at 12:41 AM | Comments (3) |

July 14, 2007

The Conrad Black verdict

So, despite being acquitted on 9 of 13 counts, former Hollinger CEO Conrad Black was convicted yesterday in Chicago of three counts of mail fraud and one count of obstruction of justice (previous posts on the case are here). Three of Black's former Hollinger associates were also convicted of three counts of mail fraud.

The essence of the verdict against Lord Black and the others is that they stole millions in non-compete compensation from the sale of Hollinger assets that should have gone to Hollinger. As noted earlier here, the big problem with that theory is that the payments were disclosed and approved on multiple occasions by Hollinger's audit committee and board of directors. Thus, in effect, Lord Black and the others were convicted for not disclosing their receipt of the non-compete payments well enough.

The implications of this latest government foray to regulate business through the criminalization of merely questionable business transactions is troubling, to say the least. As noted most recently here and many times over the years on this blog, the presumption in these prosecutions over wealthy businesspeople is no longer innocent until proven guilty. Rather, the presumption is that that these defendants are rich and the government is accusing them of all sorts of bad stuff, so they must have done something wrong. Although I think Lord Black made a mistake in not taking the stand in his own defense, a reasonable counter-argument can be made that doing so doesn't make any difference when dealing with such an onerous presumption. Do any of us really think that we could stand up in the face of such winds if they turn toward us?

An extremely talented businessman and author is now facing the prospect of spending a good part of the remaining part of his life in prison. For an extraordinarily insightful analysis of Lord Black's career and the vested interests that pursued the criminal case against him, take the time to read this lengthy Adrian and Olga Stein essay (pdf) entitled Conrad Black, Corporate Governance, and the End of Economic Man. The conclusion of the Steins' essay is particularly apt in light of the verdict against Lord Black:

The prosecutors of Conrad Black know nothing of the “animal spirits” to which Lord Keynes refers. Their only interest is to squash any independent spirit in the interest of defending the mirage of ideas that falls under the rubric of corporate governance. For the general public the challenge is to realise that injustice can conceal itself in attacks on the powerful, the privileged, the wealthy, and the elected; natural objects of resentment and envy, they are people for whom we tend to think a ‘fall’ or redress is in order. The injustice proceeds in small and public acts of complicity, and finds an abode in various subconscious registers of the psyche where schadenfreud and vicarious pleasure in the failures and misfortunes of others fester. The Spanish Inquisition, the French revolutionary trials, the Alfred Dreyfus Affair, the Soviet show trials, and the McCarthy-era hearings all happened within a sanctioned legal framework, with voluminous evidentiary support, cooperative witnesses, and with broad public consent. These trials were often conducted by zealous prosecutors. All of them maintained the pretense or facade of pursuing justice. It is only with the passing of time and the shift in the historical frame of reference that we come to understand the ‘injustice’. The imperative is to see injustice in all of its guises, to face it squarely, and confront it with courage.

Update: Larry Ribstein provides his usual sharp insight, while Peter Henning provides this initial analysis of the sentencing issues. Also, here are some further thoughts on the problems that juries confront in sorting out the issues in trials such as Black's.

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

July 13, 2007

The McCain meltdown

The fellows over at Professors R-Squared are having a rather fun time chronicling the remarkably quick demise of the John McCain Presidential Campaign (see here and here). But the best line on the McCain campaign meltdown still came from Jay Leno earlier in the week:

"Sen. John Edwards began what he's calling his poverty tour today. He's visiting people who have no money and no hope. His first stop: John McCain's campaign headquarters."

Posted by Tom at 12:45 AM | Comments (1) |

Myths of the war

My nephew Richard and I had a good laugh about the new Homeland Security Threat Level on the left that resulted from Michael Chertoff's ill-advised warning regarding the terror threat from earlier in the week. But kidding aside, following on this earlier post regarding James Fallows' Atlantic Monthly piece, this Steve Chapman RCP op-ed provides a level-headed analysis of the actual threat of an attack from Islamic fascists and the counterproductive nature of the Bush Administration's characterization of the conflict as a global "war on terror." Check it out.

Posted by Tom at 12:19 AM | Comments (1) |

It's the season for youth baseball conflicts

Holland & Knight's Tampa office has started an interesting area of specialization:

The signs at the New Tampa Little League field are clear: Please practice good sportsmanship at all times.

League officials say one parent has missed the message, and they've asked him to leave the park more than once.

But that parent also happens to be a lawyer for one of the largest law firms in Florida. Now he's alleging that the New Tampa Little League defamed his character in front of parents, friends and clients, and he has hinted strongly at legal action.

Fred Grady, 47, a construction lawyer for Holland & Knight in Tampa, sent league president Monica Wooden a letter on Holland & Knight stationery. The letter, dated June 11, says the league officers' actions and accusations damaged him. Pursuant to state law, the letter gives Wooden 30 days to send him a copy of the league's insurance policies and coverage.

That letter capped off a series of e-mail exchanges between Grady and Wooden in which Grady repeatedly asked for a letter of apology from Linda Harrell, a league director who ordered him off the field on April 28. Grady wanted the letter sent to all parents, players and coaches on his son's team, and he wanted it in time for the end-of-the-season party so he could read it aloud, Wooden said.

"I'm all about principle," Wooden said. "But I'm not going to patronize some guy who needs something for his self-gratification."

When Grady didn't get the letter, he sent Wooden the e-mails.

"If NTLL decides or has decided the Director acted outside of her scope of authority then so be it but that issue will NOT be determined by me, but rather by a judge or jury if this matter proceeds," said one e-mail bearing Grady's name.

Another read: "If the NTLL is not prepared to resolve the matter along these lines then I will have no other choice but to take legal action against NTLL and Ms. Harrell individually."

Grady requested the name of the league's lawyer: "I assume NTLL does not have LOCAL counsel? Perhaps NTLL should consider retaining a local attorney."

Read the entire piece. But that rhubarb is nothing compared to this bit of youth baseball sociopathy:

A judge refused to reduce the sentence of a former youth baseball coach convicted of offering a player money to bean a 9-year-old autistic teammate.

Mark Downs Jr., 29, had argued in his appeal that his former attorney wasn't effective. But Fayette County Judge Ralph Warman ruled Monday that Downs' arguments were without merit. He let stand Downs' one- to six-year prison sentence imposed last year.

Downs was convicted of corruption of minors and simple assault for offering $25 to an 8-year-old boy to hit his mildly autistic teammate with a ball while warming up before a June 2005 playoff game. The younger boy testified at trial that, on Downs' instructions, he purposely threw a ball that hit his teammate in the groin, then threw another that hit him in the ear.

Prosecutors said Downs didn't want the autistic boy in the game because he didn't play as well as his teammates. League rules require each player to play at least three innings.

Wow.

Posted by Tom at 12:04 AM | Comments (0) |

July 12, 2007

The Bershad plea deal

As expected, former Milberg Weiss partner David Bershad copped a plea deal this week in which he pled guilty to a single count of conspiracy out of the 20 count indictment that he, the law firm and former Milberg partner, Steven G. Schulman, are facing (prior posts here). Bershad also agreed to "give back" $7.75 million (not clear to whom), pay a $250,000 fine, and to cooperate with the government’s continuing investigation of other Milberg Weiss partners (presumably Mel Weiss) and at least one of its former partners, Bill Lerach. The conspiracy charge carries a maximum penalty of five years in prison, although it is unclear if Bershad will serve any jail time. His sentencing hearing is scheduled for about a year from now, June 23, 2008.

The reaction to the plea deal lit up the blawgosphere. Peter Lattman and Ashby Jones over at the WSJ Law Blog have been following the developments in the case closely (see also here), as has Kevin LaCroix, Peter Henning, and Roger Parloff, among others. This WSJ ($) editorial essentially concludes that the Bershad plea deal means that the case against the firm and the other targets is already over and that we ought to throw away the prison key for the entire bunch.

Count me as not so sure. Given the unpopularity of Lerach and Milberg Weiss generally among a substantial portion of the defense bar and the business community, the WSJ's rush to embrace the prosecution's case is not particularly surprising. But as Larry Ribstein has pointed out on numerous occasions, there is an important policy issue here that is easy to overlook in the rush to judgment. Is it wise to allow the government to pay witnesses for testimony so that it can convict Milberg Weiss for paying folks to serve as their lead plaintiffs? Bershad may be as pristine as the driven snow, but the fact of the matter is that he has protested his innocence for years until now. What has changed? Absent a plea deal, Bershad is a 67 year-old attorney facing an effective life prison sentence in a trial before a jury that will likely be hostile toward lawyers in general and rich plaintiffs' lawyers, in particular. Is it really any surprise that he took the deal? And is it prudent to ruin the careers of the other defendants and targets, and irreparably damage their lives and families, based on the testimony of an admitted liar?

No one is suggesting that Milberg Weiss should get away with paying kickbacks, if that is indeed what happened. But as noted in this earlier post, these payments have been common knowledge for a long time. No opposing party in any of the class actions from which the payments derived ever requested that the federal courts that approved the settlements from which the payments derived disgorge the payments and refer Milberg Weiss to criminal authorities for failing to disclose the payments. Why have these matters been criminalized before that process has occurred? Could it be that the other parties in the class actions didn't think they had much of a case for disgorgement and referral? If so, what does that say about the criminal case?

Milberg Weiss and Lerach face an imposing enough burden in defending themselves against the overwhelming prosecutorial advantage of the government without the mainstream media deciding that they are guilty before the case is even teed up for trial. Even unpopular lawyers deserve a fair chance. At this point, I'm not sure that Lerach and Milberg Weiss are getting one.

Update: The WSJ's Law Blog interviews Professor Ribstein on the hypocrisy of the case against Milberg.

Posted by Tom at 4:21 AM | Comments (2) |

If you can't beat'em on the message boards, then buy'em!

In one of those "you just can't predict everything that comes up in a government investigation" moments, this David Kesmodel and John R. Wilke/WSJ ($) article (free NY Times article here and free WSJ Deal Journal post here) reports that Whole Foods Markets CEO John Mackey has been a longtime pseudonymous contributor to a Yahoo stock-market forum on both Whole Foods and its proposed merger partner, Wild Oats Markets, Inc (prior posts here):

For about eight years until last August, the company confirms, Mr. Mackey posted numerous messages on Yahoo Finance stock forums as Rahodeb. It's an anagram of Deborah, Mr. Mackey's wife's name. Rahodeb cheered Whole Foods' financial results, trumpeted his gains on the stock and bashed Wild Oats. Rahodeb even defended Mr. Mackey's haircut when another user poked fun at a photo in the annual report. "I like Mackey's haircut," Rahodeb said. "I think he looks cute!"

Mr. Mackey's online alter ego came to light in a document made public late Tuesday by the Federal Trade Commission in its lawsuit seeking to block the Wild Oats takeover on antitrust grounds. Submitted under seal when the suit was filed in June, the filing included a quotation from the Yahoo site. An FTC footnote said, "As here, Mr. Mackey often posted to Internet sites pseudonymously, often using the name Rahodeb."

Whole Foods is certainly a different type of place. Somehow, I just can't envision Jack Welch or Hank Greenberg in their heyday trolling the internet message boards debating the relative merits of their companies. But beyond the public embarrassment to Mackey, the FTC achieves little by "outing" his message board persona. Has the FTC's case against the Whole Foods-Wild Oats merger really devolved into a personality conflict?

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

The Declines of the Times

Most folks involved in the blogosphere understand the challenges that the traditional "bricks and mortar" media are facing in attempting to remain competitive in the delivery of information. And most folks who read newspapers regularly recognize that The New York Times is not the newspaper that it used to be. But until I came across this Political Calculations post, I did not realize the depth of the Times' decline. The substantial declines of both the weekday editions and the Sunday edition of the newspaper indicates that "the Gray Lady is fading into the twilight of its existence. At very least, as we have known it." Check it out.

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

July 11, 2007

More on business golf therapy

James Cayne's golf therapy prompted this interesting article over at The Economist on the deeply engrained nature of business golf:

The central role played by golf in business life is under-reported—except maybe in Japan—perhaps because journalists can’t afford the green fees let alone the membership dues of the swanky clubs to which chief executives belong. Nor are bosses exactly rushing to draw attention to yet another perk.

Yet, “no matter how sophisticated business becomes, nothing can replace the golf course as a communications hub”, argues a new book, “Deals on the Green”, by David Rynecki. “It’s where up-and-comers can impress the boss and where CEOs can seal multibillion-dollar deals. Its no coincidence that many of the most admired people in business—Jack Welch, Bill Gates, Warren Buffett, Sandy Weill—always carved out time in their busy schedules for golf.”

Mr. Welch, arguably the best golfing chief executive ever, is the “patron saint of corporate golf”, argues Mr Rynecki, . . . Mr Welch . . . regarded golf as a key part of his managerial armoury, which he deployed with great success during his long, glorious reign at General Electric (GE). The firm was already known as a “golf company” when he took charge. But under Mr Welch, “golf became an essential tool for any manager looking to move up”. Golf “was a litmus test for character. It showed whether a person had the guts to work in Welch’s GE.”

Not everyone is convinced. The other week, two veteran Wall Street tycoons railed against the game. Hank Greenberg, the former boss of AIG, complained that golf was a distraction from business: “A lot of people like to get away from their work. You have to wonder about whether they like what they’re doing.” Carl Icahn, the legendary corporate raider, sees golf as a symbol of all that is wrong with the clubby higher echelons of American business: “These guys would rather play golf, slap each other on the back. I want a guy running a company who sits in his tub at night thinking about the challenges he faces. The guy who can’t let it go. The focused guy.”

Read the entire article. I bet Mr. Cayne will do so, maybe even before his afternoon tee time. ;^)

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

Spitzer is suffering?

So New York Governor Eliot Spitzer and his family just don't know whether the rough and tumble nature of politics at the state level of New York is worth the severe emotional toll.

I wonder what Theodore Sihpol, Hank Greenberg, John Whitehead, Richard Grasso and Kenneth Langone, among others, think about that?

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

The PGA Tour pro takes on the local muni

What do you get when a big golf game is arranged between a young PGA Tour pro and a weekend duffer on the local municipal course?

One of the most interesting golf articles of the year. Check it out.

Posted by Tom at 4:00 AM | Comments (0) |

July 10, 2007

John L. Hill, R.I.P.

One of the giants of the Houston legal community, former Texas Attorney General and Texas Supreme Court Chief Justice John L. Hill, Jr., died yesterday morning at St. Luke's Hospital in Houston's Texas Medical Center while undergoing heart surgery. The Chronicle article on his death is here, the Chronicle legal blogger Mary Flood has a related post here and the Austin-American Statesman article on Hill's death is here.

John Hill packed several lifetimes of personal and professional achievements into his 83 years. He was the only person in the history of Texas to serve as secretary of state, attorney general and chief justice. He also ran twice for governor, the last time losing narrowly in 1979 to Bill Clements, who became the first Republican governor elected in Texas since Reconstruction.

As chief justice of the Texas Supreme Court, Hill championed reform of the state’s partisan election of judges, arguing that judges should be selected based on merit similar to the federal system. In a surprise news conference in August 1988, Hill announced his resignation as chief justice with three years remaining on the six-year term, explaining that the partisan election of judges was "creating a perception of impropriety" and that he planned to devote his time to reforming the judicial system. In his resignation letter to then Governor Clements, Hill called on the governor to create a special panel to propose his successor. Hill was replaced as chief justice by Thomas R. Phillips, who continued to support Hill's cause to change the system of judicial selection in Texas.

Born October 9, 1923 in Breckenridge, Texas and raised around the oil patch, Hill was a highly successful debater in high school and junior college, which paved his way to the University of Texas in Austin. After graduating from UT law school in 1947, Hill went to work for a small law firm in Houston that gave him an opportunity to get his feet wet immediately in trial work and, four years later, he founded his own Houston-based firm specializing in plaintiff's trial work.

Governor John Connally appointed Hill as secretary of state in 1966 and he served in that position until 1968. When Connally decided not to run for a fourth term that year, Hill ran for governor in a race that fellow Democrat Preston Smith won. In 1972, Hill ran successfully for attorney general and was re-elected for a full four-year term in 1974. He served as attorney general until 1979, when he resigned to run for governor a second time and was defeated in a close race by Clements. After returning to private practice for a few years, Hill jumped into the 1984 race for chief justice in which he was elected to replace retiring Chief Justice Jack Pope. Then, after the above-described resignation from the Supreme Court, Hill returned to private practice in Austin and Houston, working happily and productively up until the day he died.

But as impressive as these achievements and many awards that Hill received through the years, his large and lively family was what provided the greatest satisfaction in his life. Hill's loving wife of 61 years, Bitsy, was a fixture by his side throughout his career. His son Graham and son-in-law Mike Perrin (husband of John's daughter Melinda) are two of the finest trial attorneys in Houston, and his daughter, Martha Hill Jamison, is the well-regarded judge of the 164th District Court in Houston. Hill is also survived by 10 grandchildren and four great-grandchildren.

The funeral is 1 p.m. Friday at St. Luke's United Methodist Church in Houston, and the family will receive friends from 5-7 p.m. Thursday at the George H. Lewis and Sons funeral home. In lieu of flowers, the family is requesting that a donation to St. Luke's, Young Life or the John L. Hill, Jr. Trial Advocacy Center at the University of Texas Law School in Austin be considered.

A charming and genuinely good man, John Luke Hill will be sorely missed by all who knew him. May God bless this special man and his wonderful family.

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

July 9, 2007

Threatening to go Arthur Andersen on KPMG

This earlier post noted how the shadow of the sad case of Jamie Olis continues to hang over the KPMG tax shelter case in New York, and this post explored how Olis' defense was financially undermined by the Justice Department's overt threats to go Arthur Andersen on his employer, Dynegy.

Now, this Lynnlee Browning/NY Times article analyzes evidence that has been generated in the KPMG case about how the Justice Department threatened KPMG with indictment unless it abandoned its policy of paying the defense costs of its partners who had been indicted. It's a harrowing tale and a stark reminder of how the federal government's awesome prosecutorial power is being abused to cause job loss and erosion of wealth while ruining careers and damaging families in the process. This is not the product of a truly civil society.

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

Fiddling while the tofu burns

It all started with this Holman Jenkins/WSJ column in which he blasted the Federal Trade Commission's vacuous campaign against the proposed Whole Foods-Wild Oats merger.

That prompted this WSJ letter-to-the-editor from Arnie Celnicker, a former attorney for the FTC and the Antitrust Division of the Justice Department, in which he contends, among other things, that the complexities of markets is such that "[t]he fact that I can now buy organic milk at Wal-Mart tells us something, but very little, about the realistic nature of competition between Whole Foods and Wal-Mart, or about the effect of Whole Foods' acquisition of Wild Oats."

Which prompted Don Boudreaux to throw up his hands in exasperation:

How in the name of free-range chicken do these facts justify government blocking this merger? Precisely because consumers now want more and more organic products, financial markets have every incentive to invest in firms catering to this growing market if these firms are well-managed. Wild Oats' inability to get adequate private financing in this growing market is strong evidence that its assets now are poorly managed. It's only natural that Whole Foods spots and seizes this opportunity to use these assets more effectively at meeting consumer demands. The FTC's interference - an unwholesome additive to the market - jeopardizes consumer well-being.

Not to speak of the jeopardy in which the FTC's interference places the investment of Wild Oats shareholders.

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

A healthy way to deal with stress

According to this Patrick McGeehan/NY Times article, Bear Stearns chief James E. Cayne had a healthy way to relieve stress during the recent crisis surrounding the demise of two Bear Stearns hedge funds:

The near-meltdown of a hedge fund managed by Bear Stearns does not appear to have interrupted the golfing habits of its chief executive, James E. Cayne.

In the summer, Mr. Cayne routinely hops a helicopter from Manhattan to the Hollywood Golf Club in Ocean Township, N.J., where his pilot has permission to land on the grounds. According to scores posted on an online golf database, he continued to do so through the weeks in June when his firm was struggling to keep one of its mortgage securities funds afloat.

On June 14, the day when Bear Stearns reported a 10 percent drop in its operating earnings for the second quarter, Mr. Cayne played a round and shot a 96, his scores on the online database, GHIN.com, indicate. The next day, a Friday, he played again.

On Thursday, June 21, as several big banks pressured Bear Stearns to increase the collateral on loans they had made to its sinking fund, Mr. Cayne was back on the course. That day, he shot a 98.

The next day, in the biggest rescue of a hedge fund in almost a decade, Bear Stearns pledged to put up $3.2 billion to bail out its fund. (It later said that $1.6 billion would suffice.) Then the remarkably consistent Mr. Cayne played golf, shooting a 97.

Elizabeth Ventura, a spokeswoman for the firm, explained that Mr. Cayne flies down after work on Thursdays and plays an evening round of golf. On Fridays, he plays a round and works from his New Jersey home, where he is in constant touch with the office, she said.

Cayne's handicap index is 15.9, so his scores during that stressful time certainly ballooned a bit higher than normal. But think how bad this could have gotten for Bear Stearns if Cayne had not been able to get his golf therapy? ;^)

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

July 8, 2007

What a deal

Russ Winter wrote this interesting post analyzing the extraordinary amount of debt that will be needed to sustain Blackstone's bid for Hilton Hotels:

The total purchase including the balance sheet and debt looks to be about $29 billion. Typifying just how loonie these transactions have become, HLT has operating income of about $1.2 billion, or a mere 4.1% of the take out price. Assuming $25 billion in debt, that would place debt service at about $2 billion a year. Blackstone plans no divestitures, so the math is straightforward, and the presumption is as well, just borrow the balance.

The $25 billion of debt that Blackstone is heaping on Hilton far exceeds Hilton's book value of a bit under $4 billion, which means that there will not be much a recovery, at least immediately, in the event that things don't go well and Hilton has to be reorganized or liquidated.

That type of debt risk sure sounds like equity-style risk to me. And with a ceiling on the return of about 8% ($2 billion of debt service on $25 billion in debt). My sense is that the Blackstone limited partners are betting on returns substantially higher than that.

Posted by Tom at 12:30 AM | Comments (0) |

July 7, 2007

The Apple Rule is working for Dell

When Michael Dell jumped back into hot CEO seat at Austin-based Dell Inc in February, this post wondered whether he and the company would benefit from application of what Larry Ribstein has brilliantly coined "the Apple Rule."

Well, it looks as if the Apple Rule is working pretty darn well for Dell. The company just announced that it will miss another deadline for filing its quarterly report with the SEC, making it three straight quarters that the computer giant has failed to file its 10-Q. Nor has Dell filed its annual report for 2006. Under a strict application of its rules, Nasdaq should delist Dell, but it won't because the company remains an 800 pound gorilla (i.e., a $65 billion market cap). Meanwhile, despite all this apparent trouble, the market doesn't seem all that concerned -- Dell's stock price has increased by 23% since Mr. Dell returned as CEO.

Sort of makes you wonder what might have happened had the Apple Rule been around during far more turbulent times in the fall of 2001 to help a large, innovative company and a couple of its visionary leaders who ended up suffering far different fates than Dell?

Posted by Tom at 12:44 AM | Comments (2) |

July 6, 2007

The Absorption Nation

In this TCS op-ed, Don Boudreaux points out an incongruity in the current political debate over immigration:

In the Declaration of Independence, Thomas Jefferson complained that King George III "has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands."

In a related blog post, Professor Boudreaux asks the following:

Why is it that today, the wealthiest time in our history, so many Americans fear immigration? Why do so few Americans today share Jefferson's understanding that more free people in America mean an even more prosperous America?

Read the entire op-ed.

Posted by Tom at 4:20 AM | Comments (3) |

Legal investment banking on climate change

The Dallas Morning News' Eric Torbenson examines a potential growth area for business plaintiffs' lawyers and another burgeoning risk for business -- lawsuits asserting responsibility for damagres caused by climate change. And guess who's right in the middle of it? None other than Houston's longtime business plaintiff's lawyer, Steve Susman:

Steve Susman of Susman Godfrey in Houston has been a pioneer in such litigation. He led the charge this year to force TXU Energy into building fewer coal-fired plants in Texas than it had planned.

Now he's among several lawyers talking with a group of Inuits in northern Canada who have seen an entire island sink under rising seas from global warming. The tribe is weighing its options, including suing carbon-emitting corporations such as power companies for heating the planet, he said.

"Melting glaciers isn't going to get that much going, but wait until the first big ski area closes because it has no snow," said Mr. Susman, who teaches a climate-change litigation course at the University of Houston Law School. "Or wait until portions of lower Manhattan and San Francisco are under water."

Some lawyers are trying to tie the damage from Hurricane Katrina to global warming – and the energy companies who may have contributed to that warming.

Mr. Susman predicts large insurance companies, which have paid out billions of dollars in claims in the past two decades because of powerful hurricanes, eventually will become plaintiffs in broad greenhouse-effect litigation against energy companies. [. . .]

"You're going to see some really serious exposure on the part of companies that are emitting CO-2," Mr. Susman predicted. "I can't say for sure it's going to be as big as the tobacco settlements, but then again it may even be bigger. . ."

Oh, my.

Posted by Tom at 4:15 AM | Comments (3) |

Nimmer on over-regulation of e-commerce

Ray Nimmer, the Dean and Leonard Childs Professor of Law at the University of Houston Law Center, is one of Houston's foremost legal thinkers and an internationally recognized expert in legal issues relating to e-commerce. Ray's academic and administrative duties do not leave him much time to blog, but when he does, it's always worth reading. His latest post is on the risk of over-regulating e-commerce:

In our world, significant change seldom flows smoothly. While many embrace change, others resist it. Some of the resistance is due to what Lewellyn explained years ago: “You wake up then to the fact that the throne your subject matter once occupied is overshadowed”; that is a fearful situation for many. The costs imposed on commerce by reaction to that fear are extravagant and harmful.

In my view, rather than protecting the status quo, the role of law generally should be to establish a responsive body of rules that support change and that limit regulation to cases where actual clear abuse otherwise exists. This has been the tradition of U.S. commercial law. But it has not consistently been the way in which law related to electronic commercial transactions has evolved. Instead, we have seen an explosion of new law, often regulatory in nature, . . . Too often, political arguments and interest group politics weigh in toward the view that the proper role of law is to regulate commerce, rather than to support it. Much of this lies simply in a grab for position enforced through law, rather than in the marketplace. . .

But when a regulatory approach is taken in a period of rapid social change, the result is an enormous expansion of new law and we pay a huge price for this. Its short-term effect lies in the creation of an often-bewildering array of new rules and regulations with which commercial entities must deal, and which seldom reflect sound or considered legal or social policy.

Read the entire post.

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

July 5, 2007

Rating the NFL owners

SI.com's Michael Silver rates the owners of the 32 National Football League teams, and Texans' owner Bob McNair comes in a respectable seventh:

Like [Redskins owner Daniel] Snyder, McNair is an aggressive, personally invested owner who desperately wants to field a winning team. Unlike the Redskins' boss, McNair hasn't even come close to doing so.

Since the Texans joined the NFL in '02, there have been a lot of dubious decisions on key matters, from the stubborn insistence that David Carr was a franchise quarterback to the selection of Mario Williams over Reggie Bush and hometown hero Vince Young in the '06 draft. McNair, at the very least, deserves some blame for hiring the people who made those decisions.

That said, he has established a highly valued franchise in a market the NFL had abandoned. He also worked exceptionally hard on last year's revenue-sharing plan. And, on a self-serving note, McNair's may be the most media-friendly organization in the league.

If there was ever a sports franchise owner whose team deserved some good fortune on the playing field, then it's McNair.

Oilers owner Bud Adams comes in 18th, which is somewhat surprising only because it's hard to believe that there are 14 owners worse than him. Go figure.

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

EZ-Tag, EZ-Increase

So, according to this NY Times article about MIT economist Amy Finkelstein's research, EZ-Tags for electronic payment of tolls along tollroads makes it easier for government to increase the tolls (Tyler Cowen provides further analysis).

Everywhere but Houston, that is.

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

More on the myth of healthy long distance runners

This earlier post noted development of research indicating that long distance running over a long term may be hazardous to your health.

Thus, this article from earlier in the week about arguably the greatest American marathoner caught my eye:

Alberto Salazar, the former champion marathoner who collapsed over the weekend, had his condition upgraded Monday from serious to fair.

A cardiologist at Providence St. Vincent Medical Center said tests now indicate that Salazar had a heart attack while coaching distance runners Saturday at the Nike campus outside Portland, said Lisa Helderop, a hospital spokeswoman.

Salazar, who is alert and talking with his family, told a doctor at the hospital that he has a family history of heart conditions, Helderop said. [. . .]

Salazar, a University of Oregon graduate, won the New York City Marathon three straight years (1980-82) and the 1982 Boston Marathon. He has set six U.S. records and one world record. He is a longtime Nike employee and consultant who trains elite distance runners and has a building named for him on campus.

This recent University of Maryland Medical Center study addresses another health risk of long-distance running. And none of the foregoing even touches on the heightened risk of joint and ligament damage that results from long distance running. Take note, runners.

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

July 4, 2007

A 4th of July treat

I don't know about you, but I didn't know that Kevin Spacey is almost as good an impressionist as he is an actor. Enjoy!

Posted by Tom at 12:23 AM | Comments (1) |

July 3, 2007

The rebranding of Nick Faldo

This entire Nick Greenslade/Observer article on how Nick Faldo remade himself from a recalcitrant PGA Tour pro to an affable CBS commentator is quite interesting, but I no idea that Faldo is a valuable annuity for the family law bar. Toward the end fo the article, Greenslade summarizes Faldo's three marriages and divorces:

Nick's ladies

Melanie Rockall

'We were happily married for eight months. Unfortunately, we were married for four-and-a-half years,' Faldo has said of his first marriage, which began in 1979 when he was only 21. . .

Gill Bennett

'Socially, he was a 24-handicapper,' Bennett said of Faldo, whom she had met while working as his agent's secretary when he was still married to Rockall. The couple married in 1986 and Bennett later revealed that the births of their three children, who now live with her in Ascot, Berkshire, had been induced to avoid any clashes with his playing schedule. . . .

Brenna Cepelak

College golfer Cepelak was 20 when she met Faldo, . . . 'It's always sad when these things end,' [Faldo] said. Cepelak responded to the break-up by taking an iron to his Porsche. 'It was a nine-iron or a wedge,' recalled Faldo. 'It was a very special car. It was so hi-tech, it was made of plastic. The club kept bouncing off. It wouldn't leave a dent. I auctioned it off.'

Valerie Bercher

The third Mrs Faldo, whom he had first met at a tournament in her native Switzerland in 1997, lasted five years. . . . On learning of his son-in-law's application for divorce last year, Bercher's father said: 'We are at a loss to explain. But it is not the first time he has changed his mind. He bought a Bentley recently, but once he had it he was bored with it after a month and got rid of it.'

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

Now, that's a home office

The concept of the home office has been elevated to an entirely new level.

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

The Tyler Rose's ordeal

In the late 1970's, Earl Campbell ushered in a generation of outstanding running backs from Texas and he remains the standard by which power runners are evaluated. However, the pounding that Earl took during his playing career has taken a heavy toll. As Jay Christensen and Tom Dienhart report, the Tyler Rose is badly crippled despite the fact that he has just turned 50 years of age (a related Chip Brown/Dallas Morning News article is here).

Given Campbell's condition, this recent Chronicle story looks even sillier than it did at the time it ran.

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

July 2, 2007

Will Houston learn from L.A.'s mistakes?

As noted earlier here and here, the Houston metropolitan area shares many of the same characteristics of the Los Angeles metro area, albeit with far lower density of population. Although rail transit is typically inefficient in areas of relatively low density of population, that has not stopped Houston's Metropolitan Transit Authority from spending enormous sums on inefficent light rail for Houston and proposing even more. One of the common rationalizations used by Metro for such boondoggles is that the transit lines will promote development of more densely-populated housing around the rail lines that will ultimately generate enough mass transit users to justify the enormous cost. Someday.

So, given the L.A. region's greater density of population, has rail transit generated such housing along the rail lines there? Well, not according to this front page Los Angeles Times article entitled "Near the rails but still on the road -- Research casts doubt on the region's strategy of pushing transit-oriented residential projects to get people out of cars":

In Los Angeles alone, billions of public and private dollars have been lavished on transit-oriented projects such as Hollywood & Vine, with more than 20,000 residential units approved within a quarter mile of transit stations between 2001 and 2005.

But there is little research to back up the rosy predictions. Among the few academic studies of the subject, one that looked at buildings in the Los Angeles area showed that transit-based development successfully weaned relatively few residents from their cars. It also found that, over time, no more people in the buildings studied were taking transit 10 years after a project opened than when it was first built.

To which USC urban economics professor Peter Gordon replies:

I could not have said it any better. Well actually, some of us did -- over 30 years ago.

Yes, it is not pretty to say I-told-you-so. But the arrogant know-nothings inside LA's beltway (including LA Times writers and including some who still hold public office) have been confused on this issue for years. Their plans have cost billions and, along the way, made traffic much worse. It was exactly the sort of fatal conceit that Hayek wrote about many years ago.

Yesterday, the same newspaper (front-page, below the fold) included "Will traffic-weary L.A. heed the toll call? ... The land of the freeway is poised to become a little less free ..."

What will they think of next?

Will Houston's leaders listen? Incidents such as this do not make me optimistic that they will.

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

The search for a cure

Yale University School of Medicine neurologist Steven Novella, the editor of the Scientific Review of Alternative Medicine, provides this insightful NeuroLogica post that addresses the issue of why medical research has not discovered a cure for cancer despite the enormous resources dedicated to cancer research. In so doing, he clears up several common misconceptions about cancer and the incentives involved in finding a cure. He concludes as follows:

The overall reality is that the standard of scientific medicine is not a monolithic entity, controlled by any one institution, agency, or industry. It is a complex and dynamic set of many forces and interests. It is ultimately driven by science, which is a transparent and public process, and prevents any big brother type of control (this is partly why it is so important that healthcare be based upon science).

Cancer is a very difficult type of disease to treat, and the public has a very distorted view of the nature of cancer and of medical scientific progress in general. This has lead to unrealistic expectations of progress in curing cancer, which then in turn leads to thoughts that cancer research is somehow not working.

I find the same to be true in medicine in general – the public thinks of scientific progress in terms of dramatic “breakthroughs.” Media hype feeds this misconception. The reality is that medical scientific progress is largely a series of very small steps, with a cumulative effect of slow steady improvement in treatments. We have not cured Alzheimer’s disease, ALS, Multiple Sclerosis Parkinson’s disease, and many other diseases as well. But treatments are slowly improving. Slow steady progress does not make good headlines, however, so the myth of miracle medical breakthroughs will likely continue to be promoted by the media.

Read the entire post. Hat tip to Sandy Szwarc.

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

An important distinction in the health care finance debate

Clear Thinkers favorite Arnold Kling, who appears to be everywhere these days in regard to discussions over reform of America's health care finance system, reminds us in this Washington Times op-ed of an important distinction in the health care finance debate -- despite the problems in health care finance, American medical care and research remains the hope of the world:

On one side of me at the graduation [of my daughter] sat [my wife], a breast cancer survivor. On the other side was my father, whose heart condition and blood pressure threatened to take his life before my daughter was ready to graduate kindergarten, much less college. Finally, there was my daughter herself, who since high school has had a chronic intestinal illness sufficiently contained that she could graduate on schedule.

None of these three stars would have been there without medical treatments that only became available since my daughter was born. New drugs played a significant role in each case. In fact, some pharmaceuticals critical for my daughter only were approved for her condition a few years before she was given them. Drugs in the pipeline are likely to play an important role in her future.

In other countries, would the same state-of-the-art medicines and equipment have been available to my father, my wife and my daughter? Perhaps. But it is a safe bet these technologies were not invented elsewhere.

Much of the medical innovation that the world enjoys comes from America. While as an economist I find much to criticize about our health-care system, America's role in medical innovation is crucial not just for Americans, but for the entire world.

Read the entire op-ed.

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

July 1, 2007

Stros 2007 Season Review, Part Four

So, now that the Stros are done with that, where does the club go from here?

As the Stros (34-47) reached the halfway point of the 2007 season, that's the question confronting the owner Drayton McLane and General Manager Tim Purpura. The club went 8-12 during the fourth 1/8th segment of the season after going 9-12, 11-9 and 6-14 during the first three (prior periodic season reviews here). That geneally abysmal performance removed any fleeting doubt that the Stros could compete for the National League Central division title. The Stros finished the first half of the season 13.5 games behind the division-leading Brewers (47-33), good for only fifth place in a mediocre six team division.

How has this happened to a club that is only a season and a half removed from a World Series appearance? As noted here earlier this season, some folks who cover the club on a regular basis don't even know the answer to that question. However, it's clear that the 2007 Stros have taken a major step backward because of an overall decline in pitching. Through 81 games, the Stros' pitching staff has given up 65 more runs than a merely average National League club would have given up in the same number of innings (runs saved against average or RSAA, explained here) and an astounding 139 more runs than the best National League pitching staff (the Padres). The aggregate RSAA of the Stros' staff is currently dead last in the 16 team National League, a startling development for a pitching staff that has been among the best in MLB over the past three seasons. The pitching staff's performance is by far the worst by a Stros staff since the 2000 season, when a similar meltdown during the club's initial season in Minute Maid Park resulted in a -69 RSAA and a disastrous 72-90 record, the only losing record for the Stros in the past 15 seasons until this season.

Meanwhile, the Stros' hitting has actually taken an upswing recently after meandering below National League-average for the first 3/8ths of the season. Improved hitting from slugger Lance Berkman (12 RCAA/.386 OBP/.434 SLG/.820 OPS), continued excellent production from Hunter Pence (16/.358/.562/.920), and solid contributions from Mark Loretta (10/.410/.441/.851), Carlos Lee (6/.346/.514/.860), Mike Lamb (8/.365/.475/.840) and Luke Scott (4/.335/.465/.800) resulted in the Stros generating, through 81 games of the season, 18 more runs than an average National League club would have created using the same number of outs (runs created against average or RCAA, defined here) through the halfway point of the season. That's good for 6th place in the National League, the best performance for Stros hitters since the 2004 club's late season surge allowed the Stros to finish 7th in RCAA among the 16 National League teams.

Unfortunately, the Stros' improved hitting does not come close to compensating for the Stros' overall atrocious pitching. By adding a club's overall RCAA and RSAA numbers, the sum provides a good measure for evaluating a club's overall performance relative to an average National League club, which would have a combined RCAA/RSAA score of precisely zero. The Stros' RCAA/RSAA deficit of -47 this season is a clear indication that the Stros are currently a far below-average National League team.

The season statistics for the Stros to date are below, courtesy of Lee Sinins' sabermetric Complete Baseball Encyclopedia. The abbreviations for the hitting stats are defined here and the same for the pitching stats are here. The Stros active roster is here with links to each individual player's statistics:

Getting back to the "how has this happened?" question, it's helpful to look back at how the Stros' organization has developed over the years to figure out the answer to that question and to chart what club management needs to do to right the ship.

Despite never having won a World Series, the Stros have been a reasonably successful franchise over their 45 year existence, particularly over the past 15 years. Given the club's initial expansive environment in the Astrodome, Stros management chose a model that emphasized development of good pitching and defense, which has allowed the club to be more consistently competitive over the years than many other clubs, such as the Stros in-state rival, the Rangers. Although the Stros developed some good hitters such as Rusty Staub, Joe Morgan, Jimmy Wynn and Cesar Cedeno, the organization has always been known more for development of its pitching than hitting. For years, Major League scouts joked that, whenever they would scout the Stros' minor league teams, they would always bring their radar guns along because the Stros always seemed to have a bunch of fireballing prospects coming up through the ranks.

With the commencement of the Biggio-Bagwell era in the early 1990's, the Stros model changed somewhat as the club became more balanced between pitching and hitting. Beginning in 1992, the Stros put together a string of seasons from 1992-2004 in which the club overall was above National League-average in terms of creating runs, topped by the 1998 juggernaut that generated a remarkable 154 more runs over the course of the season than an average National League club. With the exception of the 1992, 1995, 1996 and aformentioned 2000 seasons, the Stros' pitching also remained above-average during those years, resulting in the club's three straight playoff appearances in the late 1990's, two more in 2001 and 2004, and topped by the 1998 club's 116 RSAA (how did the Stros not win it all that season?).

Beginning in 2000 with the move to the more hitter-friendly Minute Maid Park, the Stros' overall hitting began to decline again. Part of that downturn was attributable to the inevitable erosion of Biggio and Bagwell's productivity as they grew older, but it also resulted from Richard Hidalgo's surprising failure to develop into a consistent above-average National League hitter and the organization's failure to develop any above National League-average hitters in their minor league system after 2000 other than Berkman, Pence, and Morgan Ensberg.

Nevertheless, this decline in hitting was somewhat offset with increased productivity in the Stros' pitching staffs. Interestingly, the Stros' increased emphasis on pitching since the 2000 season paid big dividends, as the chart below reflects:

Thus, the only two seasons since 2000 that the Stros have played sub-.500 ball have been the 2000 season and this season, the two seasons in which the Stros fielded below-average pitching staffs. On the other hand, when the Stros had their best pitching performance since 2000 in 2005, the Stros went to their first World Series despite a well-below average hitting performance.

So, what was McLane and Purpura's mistake this season? Contrary to conventional wisdom that one regularly hears on sports talk radio shows and reads in the Chronicle, none of the trades or non-tenders that they have made over the past two seasons has really hurt the club. Jason Jennings (2 RSAA/4.69 ERA) has pitched better than either Jason Hirsh (-4 RSAA/4.90 ERA or Taylor Buchholz (-1 RSAA/4.66 ERA), and Willy Taveras (-1/.335/.346/.681) is not as productive a hitter as either Lee, Pence or Scott, the Stros' three top outfielders. The same goes for Purpura dealing away Ben Zobrist and Mitch Talbot for Aubrey Huff last season -- neither of those players has shown anything to suggest that they will ever be even National League-average players. Similarly, given the expense relative to the injury risk, not re-signing Clemens and Pettitte was absolutely the right move for a club that has no business locking up $40 million in payroll in two old, fading pitchers.

Thus, it has not been bad trades or ill-advised non-tenders that has caused the current dismal state of affairs with the Stros. Rather, McLane and Purpura's mistake this season was in moving away from the club's "development of pitching first" philosophy and thinking that improving the club's hitting could compensate for a decidedly lackluster pitching staff and allow the Stros to compete for the NL Central title.

Consequently, rather than trading away productive players (those are the only ones that other clubs want), the Stros need to renew dedication to their long-term model of developing above-average pitching talent and depth throughout the organization. If the Stros can become comfortable that Jennings is not damaged goods, then the club should make every effort to re-sign him before he hits the free agent market after the season. But the key to turning around the ballclub's decline is in restocking the pitching staff and that is done primarily by developing pitchers in the minor league system. So long as the club's downturn in pitching performance is a temporary blip on the radar screen -- which has usually been the case with the Stros over their history -- the resurgence of the club's hitting this season bodes well for development of a balanced club that has the potential to be above National League-average hitting and pitching over the next several seasons. That should be good enough to return quickly to contention in the NL Central.

After finishing their four game series with the Rockies today, the Stros face the Phillies (41-40) and the Mets (46-33) in the next seven games at Minute Maid Park leading up to the All-Star break and then go on the road after the break for nine games in Chicago (39-40), Washington (32-48) and Pittsburgh (35-45) before returning home on July 23rd for three game sets against the Dodgers (45-35) and the Padres (45-33). Look for the next periodic update around July 28th or so, by which time the Stros hopefully will be evaluating a few of the club's good pitching prospects on the Major League level.

Posted by Tom at 6:56 AM | Comments (0) |