Author Archives: Tom

“Hook’em what?”

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Hook%27em%20Horns2.jpgThis 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. ;^)

The Stros’ legacy of bad trades

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Jason%20Jennings%20072007.jpgThis 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.

The University of Wisconsin at The Woodlands?

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Wisconsin%20v%20the%20woodlands.jpgNot 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.

A Wells Notice bouquet?

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bouquet.jpgWhen 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, youíd 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 doesnít 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.

Talk about a misleading P.R. campaign

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Enron Task Force.gifGet 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 that 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, 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, an ordeal for those men 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, 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?

Hope for the Texans?

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michaelvick.jpgDespite 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.

Dissecting the expanding realm of white collar prosecutions

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conrad_black%20071907.jpgOver 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, wouldnít 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 ó Duncan’s attorney Rusty Hardin said the guide on the trip is now a top official with the Russian Federation’s hunting licensing agency ó 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.

Another Tiger Tale

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Feherty04.jpgAs 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.”

Dissecting the Stros’ woes

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Biggio%20breaking%20bat.jpgThe 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 thoseólike Hunter Penceówho 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.

A big Houston deal

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pogo%20logo.gifTwo 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.