Author Archives: Tom

Milberg Weiss on the Brink

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The longstanding criminal investigation and finally the indictment of the class action plaintiffs’ firm Milberg Weiss Bershad & Schulman has been a common topic on this blog, so it has been with interest that I have been following the WSJ’s Nathan Koppel, Peter Lattman and Ashby Jones’ excellent coverage (see here and here) over the past week of the plea deal rumblings for the firm and at least one of the prominent attorneys ensnared in the prosecution. In short, David Bershad is supposedly negotiating a plea deal with prosecutors that reportedly could have a domino effect on several current and former partners of the firm, including Mel Weiss and Bill Lerach.

Inasmuch as the plaintiffs’ class action securities fraud bar tends to be a lightning rod for criticism regarding vexatious, costly and unproductive litigation, there hasn’t been much public support for Milberg Weiss and the individuals involved in this episode.

But as Larry Ribstein points out in this wise post, the Milberg Weiss criminal case is not only thick with ironies and contradictions, the issues involved in the case are not easy to sort out.

Encouraging the government to use its overwhelming prosecutorial power as the default regulatory tool to deal with the unpopular businesspersons or business lawyers of the moment is not as neat and tidy as it may seem on the surface, despite what this narrow-minded WSJ ($) editorial suggests.

Texas’ medical licensing logjam

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texas_doctors_comp.jpgThe number of insurance companies offering medical malpractice insurance policies has dramatically increased and malpractice insurance premiums have substantially decreased since the 2003 legislation enacting medical malpractice caps in Texas, but the med mal caps have contributed to at least one unanticipated problem:

. . . about 2,250 license applications await processing at the Texas Medical Board in Austin. The wait could be as long as a year for some of the more experienced doctors because it takes longer to review their records.
The fear is that some doctors will give up on Texas and go elsewhere instead of waiting. A $1.22 million emergency funding request was approved during the last days of Texas legislative session for the Texas Medical Board, which licenses physicians. That is on top of the $18.3 million regular biennial appropriation, said Jane McFarland, the board’s chief of staff.
The board plans to add nine new employees to its 139-member staff, seven of which will help chop away at the backlog of license applications.

Champions Cypress Creek overrated?

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Champions_6green.jpgDon’t expect Jack Burke, owner of Houston’s venerable Champions Golf Club, to be taking out any new subscriptions of Golf Magazine any time soon after this Golf.com article rates Champions’ Cypress Creek Golf Course as the fifth most overrated course in the U.S.:

Champions was founded as an Augusta Nationalóstyle retreat 50 years ago by Texas golf legends Jimmy Demaret and Jackie Burke, but the only thing this Ralph Plummer design shares with its Georgia counterpart is that Tiger Woods has won at both. The grand historyóa U.S. Open, a Ryder Cup and multiple Tour Championshipsódoesn’t compensate for the flat fairways, shapeless bunkers and overgrown ditches masquerading as water hazards.

At least Burke and his Champions members can take solace in the fact that Augusta National, Pebble Beach, the Country Club, and Pinehurst No. 2, among others, also made the list.

Competing with the NFL? Or with NCAA football?

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Mark%20Cuban%20on%20stage.jpgMark Cuban’s Shareslueth speculative venture has not exactly been going gangbusters, so his announcement last week of a new professional football league to compete with the National Football League probably does not have the NFL owners quaking in their very well-heeled boots. Phil Miller has a good rundown on the basic economics behind Cuban’s football venture, not the least of which is the current cost of an expansion NFL franchise — probably $800 million or so to the other NFL owners even before absorbing other startup costs.
But is the NFL the real competition for this new venture? It seems to me that NCAA football will be the new venture’s main competition, particularly for players. Could Cuban’s venture be the professional minor league football league that could spur NCAA members to reform big-time college football toward the college baseball model that has been so successful over the past couple of decades?

Life in Baghdad

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baghdad02_large_300.jpgFurther in line with this sobering analysis from last week on the obstacles that U.S. Armed Forces face in training the Iraqi Army, Terry McCarthy — Baghdad correspondent for ABC News — provides this equally daunting report on day-to-day life in Baghdad:

Danger is everywhere in Baghdad; life here is a continuous series of risk assessments. From the moment people wake up, they have to check whether it is safe to leave the house. Is there an unusual amount of gunfire? Have strangers been seen driving through the neighborhood? Is there something new to be afraid of?
Anything out of the ordinary is cause for fear. A friend who lives in southwest Baghdad says a man recently parked a car on the main street across from his apartment block, then ran away. He was spotted by a butcher, who summoned a U.S. patrol. The troops cordoned off the area and defused what turned out to be a massive bomb inside the suspicious car. The brave butcher was taking a risk either way: He could have had his store blown up, but now he risks a bullet from insurgents for informing the Americans about the car.

Read the entire intriguing piece. And also this one on the status of the current U.S. “push” to stabilize Baghdad.

A Wie incongruity

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wietop.jpgAnyone who follows professional golf even casually knows about the recent travails of teenage phenom, MIchelle Wie, who Butch Harmon thinks is playing worse now at the age of 17 than she was as a 14 year-old. The latest golfing embarrassment for Wie was withdrawing this past Thursday from her first LPGA tournament of the season after posting a 16 over par score on her first 16 holes of the tournament. As Geoff Shackelford reports, most folks think Wie withdrew to avoid the LPGA’s “88 and over rule,” which bans a non-LPGA member from playing in an LPGA event for a year if the non-LPGA member shoots 88 or over in any tournament round.
Juxaposed against Wie’s golf problems, however, is this annual Sports Illustrated list of the 50 highest earning athletes for 2007. Tiger Woods laps the field with his prodigious $100 million in endorsement income, but the only female on the list is Wie, who comes in at no. 22. Interestingly, Wie has the higest ratio of endorsement income to income derived directly from competition at 26-to-1 (she earned about $750,000 in golf earnings last year). And she hasn’t even entered Stanford University yet!
Is American a great country or what? ;^)

Edwardsian demagoguery

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John%20Edwards%20060107.jpgAs if on cue after this post from yesterday, Democratic Presidential candidate John Edwards is engaging in his usual brand of demagogery (earlier examples here):

Democratic presidential hopeful John Edwards says a wave of mergers in the oil industry should be investigated by the Justice Department to see what impact they have had on soaring gasoline prices.
During a campaign stop in Silicon Valley Thursday, Edwards planned to berate the oil industry for “anticompetitive actions” and outline an energy plan he says would reduce oil imports “and get us on a path to be virtually petroleum-free within a generation.”
“Vertically integrated companies like Exxon Mobil own every step of the production process — from extraction to refining to sale at the pump, enabling them to foreclose competition,” says an outline of Edward’s energy plan.

Now, you can peruse the “Economics-Energy Prices” category archive of this blog and find many credible resources that utterly debunk Edwards’ theory regarding the cause of rising gasoline prices. But Andrew Morriss, one of Larry Ribstein’s colleagues at the University of Illinois College of Law, provides this handy SSRN paper in which he cogently explains that governmental interference with gasoline markets has a far larger impact on gasoline prices than anything Exxon Mobil does:

Rising gasoline prices have brought energy issues back to the forefront of public policy debates. Gasoline markets today are the result of almost a hundred years of conflicting regulatory policies, which have left them dangerously fragmented. In this article, I analyze that regulatory history, highlighting the unintended consequences of regulation that have pushed the United States into a series of loosely connected regional markets rather than a broad, deep national market. This fragmentation leaves the American economy is vulnerable to natural disasters, terrorist attacks, and foreign dictators in ways that it need not be. It also produces higher prices for consumers and reduced innovation by refiners.

TigerHawk understands, too.

$12 million = Billions in damages

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golfplated%20scales.jpgAmerican Enterprise Institute’s Ted Frank provides this excellent WSJ ($) op-ed on the stakes involved in the upcoming Supreme Court decision in Stoneridge v. Scientific-Atlanta, which could seriously erode the Central Bank rule against holding financial institutions secondarily liable for damages in providing financing for a company that defrauds its investors. As usual, Professors Ribstein and Bainbridge do a fine job of explaining why it would be poor public policy to undermine the Central Bank rule, while J. Robert Brown makes the case for expanding secondary liability.
But policy reasons aside, there is a practical reason why the Supreme Court should uphold the Central Bank rule. The Court is currently considering whether to expand the Stoneridge v. Scientific-Atlanta case to include the review of the denial of class status to the plaintiffs in the main securities fraud lawsuit against several investment banks that provided financing for Enron. One of the myriad of claims in that case is one based on the much-discussed the Nigerian Barge transaction that has already resulted in the unjust conviction and imprisonment of four former Merrill Lynch executives. The plaintiffs in that Enron securities fraud case contend that Merrill should be held liable for billions of dollars in damages resulting from Enron’s demise because Merrill purchased an interest in the barges that allowed Enron to book $12 million in allegedly false earnings.
So, the Enron securities fraud case provides a preview of what we will get from erosion of the Central Bank rule: Help arrange $12 million in earnings = liability for billions of dollars in damages.
I don’t see the Supreme Court buying that math.

What is it about John Edwards?

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John_Edwards_NYC.jpgPresidential politics is outside the usual scope of this blog, but Democratic candidate John Edwards is a lawyer and was so underwhelming as the 2004 Democratic Vice-Presidential candidate that he became a fairly regular topic with his frequent gaffes. Well, along those lines, in this article in this week’s Time magazine, former Kerry campaign advisor Bob Shrum new book is previewed and here’s some of what Shrum has to say about Kerry’s first meeting with John Edwards when he was considering him as the VP candidate:

Kerry talked with several potential picks, including Gephardt and Edwards. He was comfortable after his conversations with Gephardt, but even queasier about Edwards after they met. Edwards had told Kerry he was going to share a story with him that he’d never told anyone elseóthat after his son Wade had been killed, he climbed onto the slab at the funeral home, laid there and hugged his body, and promised that he’d do all he could to make life better for people, to live up to Wade’s ideals of service. Kerry was stunned, not moved, because, as he told me later, Edwards had recounted the same exact story to him, almost in the exact same words, a year or two beforeóand with the same preface, that he’d never shared the memory with anyone else. Kerry said he found it chilling . . . [. . .]
Kerry also wanted a specific reassurance. He asked Edwards for a commitment that if he was chosen and the ticket lost, Edwards wouldn’t run against him in 2008. Edwards agreed “absolutely,” as Kerry recalled him saying. If Kerry had shared this at the time, I would have told him what I did later: it was naive to think he could rely on a promise like that.

Shrum also alleges that Edwards told him that wanted to vote against the Iraq War, but didn’t do so because he thought it would hurt his career.
Now, Shrum has not been the most successful political advisor, so perhaps these allegations should be taken with a grain of salt as the sour grapes of a bitter man with an ax to grind. But much of it sure seems consistent with what was revealed about Edwards during the 2004 campaign. Given his lackluster performance during the 2004 campaign, and now with a former prominent Democratic Party advisor throwing him under the campaign bus, how does Edwards remain a serious political candidate?
Perhaps the answer lies somewhere in this development.

Nothing changes at TSU

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tsu053107.gifAs bad as Texas Southern University’s chronic problems are, they can be resolved through a combination of forceful leadership and common sense. However, intractable local and state political forces prevent TSU’s problems from being addressed effectively. Consequently, it is somehow appropriate that the first act of the new board of trustees of TSU to address TSU’s financial problems is taken against the folks least capable of resolving those problems — i.e., the students:

Texas Southern University’s regents approved a new round of tuition increases Wednesday, with students paying 8 percent more at the historically black institution this fall. [. . .]
The tuition hike follows a 22 percent increase last year. The university had tried in previous years to hold off increases because of the potential hardship for students, many of whom are working adults or recent high school graduates from low-income families.
Regents said they voted reluctantly for the tuition increase, but the university’s financial problems required the additional revenue.

TSU’s tuition is now higher than Houston’s other open-admissions university, the University of Houston Downtown Campus, which does a better job of educating its students than TSU.
I put the over/under for the next scandal at TSU at three years.