Merck gets hammered

merck_logo.jpgAs anticipated by this prior post, a Brazoria County jury found that Merck & Co. was liable for $253 million in damages ($24 million in actual damages, plus $229 million in punitive damages) as a result of its negligence in the death of a 59-year-old Robert Ernst, who at the time of death was taking Merck’s prescription painkiller Vioxx that over 20 million Americans took regularly before it was pulled from the market last year over concern that it might cause increased risk of strokes and heart attacks. The prior posts on the Merck/Vioxx trial are here, here, and here.

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Is the noose tightening in the investigation of the Brown Administration?

City of Houston logo4.gifThe Chronicle’s Dan Feldstein continues his solid coverage of the Cleveland, Ohio corruption trial of Cleveland entreprenuer Nate Gray, who is the person from whom two former Houston officials — Lee Brown Administration chief of staff Oliver Spellman and building services director Monique McGilbra — testified that they took cash and gifts. A previous trial of Mr. Gray ended in a mistrial, and the retrial that resulted in the conviction began earlier this month. Earlier posts on the trial and the related investigation of Brown Adminsitration officials are here, here, here and here.
Mr. Feldstein sums up what the result of this trial means to the Houston part of the ongoing criminal investigation:

In Houston, the question is this: What did it mean when a federal prosecutor asked FBI agent R. Michael Massie on the witness stand whether the investigation was finished in Houston and Massie testified, “No”?
McGilbra admitted she took favors from five companies. Mayor Brown’s brother, Earl, was a “subconsultant” to Gray on Houston matters. Gray paid him to talk to Mayor Brown on behalf of his company, which was seeking a shuttle bus subcontract at Bush Intercontinental Airport.
Although he was not a registered lobbyist as would be required, Earl Brown said he did [talk to Mayor Brown]. Former Mayor Lee Brown has denied it.

McGilbra and Spellman are scheduled to be sentenced here in Houston on their plea deals on September 2nd.

KPMG rumbles with the McNair boys

kpmg logo14.jpgThis NY Times article has the skinny on the slobberknocking litigation that is taking place between harried but feisty KPMG and R. Cary and D. Calhoun McNair, sons of Houston Texans’ owner Bob McNair, over tax shelters that KPMG allegedly promoted to the McNairs back in 1999.
KPMG is walking a fine line in this lawsuit and numerous other civil lawsuits that have arisen over the firm’s former clients having problems with the IRS over claiming deductions for shelters that the IRS ultimately determined were abusive. Inasmuch as KPMG has already conceded that certain of its tax partners engaged in “unlawful conduct” in creating and selling the tax shelters, KPMG now has to juggle the dueling positions of being contrite while attempting to avoid a criminal indictment through negotiation of a deferred-prosecution agreement while fighting similar allegations in civil lawsuits with former clients to avoid potentially huge damage awards that could also sink the firm.

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The latest Dome redevelopment plan

astrodome3.jpgFollowing on these earlier posts (here and here), this Chronicle story reports that an outfit named Astrodome Redevelopment Corp. has obtained a preliminary $450 million financing commitment to redevelop the Astrodome into a Gaylord Texan-type hotel and entertainment complex. Astrodome Redevelopment Corp. is an investment company comprised of Oceaneering International Inc., a publicly traded firm working in engineering, science and technology; URS, a large architectural and design firm; NBGS International, a theme park developer; and Falcon’s Treehouse, a Florida-based design firm.
Emphasis here should be on the word “preliminary.” A project of this magnitude would entail working out huge problems, such as how an additional 1,200 rooms can be justified to lenders and equity investors in light of Houston’s current glut of hotel rooms, parking woes during football games and the Houston Livestock Show and Rodeo, and the dubious nature of the pitiful Astroworld Six Flags Amusement Park across the freeway from the Dome as a draw for the hotel. As a result, my sense is that this deal will never come together, but crazier financial decision have been made — just look at the Metro Light Rail line! ;^)
Anne Linehan over at blogHouston.net summarizes local reaction to this latest Dome boondoggle.

Analyzing the Harris County Jail problems

jail6.jpgEarlier posts (here and here) have addressed the chronically abysmal condition of Houston’s Harris County Jail. As noted in the posts, local politicians have an amazing propensity for blaming others rather than addressing the causes for an unpopular problem and resolving them in a responsible manner. Recently, the County Commissioners voted to throw some money at one of the symptoms of the jail’s problems (i.e., serious overcrowding), but there still appears to be no meaningful action being taken on addressing why the jail’s problems have continued to fester for decades.
Into that vacuum of action, Scott Henson over at Grits for Breakfast files this first in a series of posts that analyzes Harris County bail policies and their contribution to the jail’s overcrowding. As Scott notes:

According to a recent consultant’s report (download pdf), a major reason is clear: A shift in bail policy over the last decade to require cash bond in more cases instead of personal bond, or releasing defendants on their promise to later appear in court. Half of all inmates presently in the Harris County Jail are awaiting trial; a large proportion couldn’t make bail.
Though other factors are also at play, much of the Harris County Jail’s overincarceration crisis can be explained by this shift in policy. In other words, Harris County’s jail overcrowding crisis is a self-inflicted wound.

Read Scott’s entire piece, and his future posts on this issue will be noted. As noted in the previous posts, the horrid condition of the Harris County Jail is an embarrassing reflection of our community’s values. This is a problem for which all Houstonians should unite and demand resolution once and for all.

Update on the talented Mr. Munitz

munitz4.jpgFollowing on this post from earlier this summer on former University of Houston chancellor, Barry Munitz, this NY Times article indicates that the heat is being turned up on current Getty Trust executive director.
Reporting on a LA Times article from this past week, the Times reports that the California attorney general has opened an investigation into the finances of the Getty Trust, particularly the financial records relating to Mr. Munitz’s eight-year tenure. The state is examining whether those expenditures had violated state laws governing its tax-exempt status, as well as a real estate deal between the Getty Trust and L.A. billionaire, Eli Broad, who happens to be one of Mr. Munitz’s buddies.
Mr. Munitz is one of the best-paid executives of a nonprofit institution in the nation, with salary, benefits and perks totaling over $1 million annually over the last several years. It appears that everything that Mr. Munitz received was approved by the Getty Board, so it appears that the primary purpose of the investigation is to embarrass Mr. Munitz and the Getty board. My sense is that neither Mr. Munitz nor the Getty board really cares.

The Psychology of Light Rail

Tory Gattis (Houston Strategies) recently authored this insightful post that explores the vexing question of why many people passionately support light rail in the face of the overwhelming economic arguments against it?

Tory concludes that it has something to do with an unexpressed human psychological need to be liked — sort of like, “Here, check out and play with my light rail toy, and you will probably think better of me.”

Tory is clearly on to something in that there appears to be an element of a civic inferiority complex underlying some folks’ support for light rail. However, Tory’s point still does not explain why people who need mass transit the most — i.e., folks who cannot afford the cost of buying and maintaining a car — support light rail, which certainly does not improve their mobility and, by drawing resources away from mobility projects that would, probably harms it.

My sense is that that question lies somewhere between the human demand for entitlement and lack of viable choices.

As previously noted on this blog, the true economic benefit of light rail is highly concentrated in only a few interest groups — political representatives of minority communities who tout the political accomplishment of shiny toy rail lines while ignoring their constituents need for more effective mass transit, environmental groups that are striving for political influence, construction-related firms that feed at the trough of light rail projects, and private real estate developers who enrich themselves through the increase in their property values along the rail line.

Inasmuch as none of these reasons for mass transit appeal to the part of the electorate who actually need mass transit, this amalgamation of interest groups continues to disguise their true interests behind amorphus claims that the uneconomic rail lines reduce traffic congestion (they do not), curb air pollution (they do not), or improve the quality of life (at least debatable). The literature on all this is public and volumnious — check out demographia.com, cascadepolicy.org, and americandreamcoalition.org.

So, how do these interest groups get away with this? The costs of such systems are widely dispersed among the local population of an area such as Houston, so the many who stand to lose will lose only a little while the few who stand to gain will gain a lot.

As a result, these small interest groups recognize that it is usually not worth the relatively small cost per taxpayer for most citizens who do not use mass transit to spend any substantial amount of time or money lobbying or simply taking the time to vote against an uneconomic rail system.

Meanwhile, the light rail interest groups garner support for light rail from the part of the electorate that actually needs mass transit by simultaneously limiting the mass transit choices and threatening that part of the electorate with loss of the governmental funds for mass transit if they fail to support light rail.

Thus, a referendum on mass transit issues is never promoted with choices between alternatives such as a light rail system, one one hand, and a cheaper and more effective bus-based system system, on the other. It’s simply an “all or nothing” choice, and folks who need mass transit will understandably vote in favor of getting their share of public transportation funds even if it does not improve their mobility one iota.

Indeed, given the cost of light rail systems, one wonders how those citizens who actually need mass transit would vote if the alternative were a light rail system, on one hand, and a new Toyota Prius for each such citizen, on the other? Frankly, the cost of the latter alternative would likely be cheaper than most any light rail plan.

So, at the end of the day, where does that leave us? Is it wrong that people who need mass transit vote in favor of something that does not really address their needs? No, it does not, but it troubles me when they are misled in doing so.

As Anne Linehan and Kevin Whited (blogHouston.net) have repeatedly pointed out, a part of Metro’s pitch for its light rail plan was that light rail would enhance Metro’s bus system and service. Inasmuch as that representation has turned out to be patently false, it seems reasonable that our public officials should at least be required to point out publicly that Metro’s most utilized and efficient mass transit system — i.e., the bus system — will likely continue to erode as Metro continues to invest heavily in light rail.

In the meantime, it would also be nice if public officials would admit publicly that the usual economic justifications for light rail are also dubious. If mass transit users and other citizens want to allow Houston’s public officials to continue to throw money at a light rail system in the face of the economic truth about such a system, then I can live with that result despite my compassion for those citizens who are not being provided the mass transit that they need.

But at least let’s require truth in advertising in connection with having citizens vote on such matters.

A similar sentiment is shared in this interesting Owen Courreges post (Lone Star Times) in which he takes the Chronicle to task for suggesting that Metro’s political opposition — rather than Metro itself — is misleading the public about Metro’s expanded light rail plan.

Finally, Tory points out that we should take some comfort in the fact that Houston’s light rail plan is at least not as big an economic boondoggle as similar plans proposed for Seattle and Denver. Similarly, a couple of commentators to Tony’s post chime in that the marginal cost of the light rail system to Houston area citizens is relatively small for a civic asset that will impress citizens and visitors alike for many years to come. That latter point may have some validity, but let’s make sure that we are talking about the correct marginal cost.

A big difference between the light rail system and the publicly-funded stadiums that Houston has built over the past several years are that the stadiums have tenants who pay the vast majority of the cost of maintaining the facilities.

In comparison, Metro’s light rail system does not come close to generating enough revenue to pay its ongoing costs, as was brought home by Metro’s recent announcement of desultory operating results coupled with the expenditure of $104 million more on the three-year-old rail line to fix problems caused by construction errors and add more rail cars.

In that regard, even the $1.5 million that Harris County spends annually to mothball the Astrodome pales in comparison to underwriting the ongoing cost of the light rail system.

The bottom line is that light rail systems eat voraciously, and any analysis of the true marginal cost of such a system to citizens has to take into consideration the high cost of feeding that appetite.

Lakewood and Houston’s other big churches

LakewoodInternonalCenter.jpgThis Church Report articleThe 50 Most Influential Churches — examines the fifty largest churches in the United States based on a survey that was sent to 2,000 church leaders with the goal of ranking the nation’s fastest growing churches and churches with more than 2,000 weekend attendance.
Houston is well-represented on the list, with Lakewood Church ranking fifth (are there really four churches that are larger than one that holds its services in a renovated basketball arena?), Fellowship of The Woodlands at no. 17, Second Baptist Church at no. 33, and Windsor Village United Methodist at no. 43. The common thread through all of these mega-churches is that each of them is closely associated with a charismatic leader, and that is certainly true of the Houston contingent — Joel Osteen at Lakewood, Kerry Shook at Fellowship, Ed Young at Second Baptist, and Kirbyjon Caldwell at Windsor Village.

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Trouble in Nuevo Laredo

border map2.gif
Following on earlier posts on the same topic here and here, this article reports on an ominous development that flies under radar screen of most Texans and Americans — the increasing violence in the Mexican border towns along the Texas-Mexico border.
Tony Garza, the U.S. ambassador to Mexico, ordered the closure of the U.S. Consulate in Nuevo Laredo for a week Friday night to assess the security situation just hours after rival drug cartels engaged in a gunfight with machine guns, grenades and rocket launchers in an upscale Nuevo Laredo neighborhood. The battle was fought Thursday night at a single-story house near a country club, which is about five blocks from the Nuevo Laredo’s main drag.
The Texas-Mexico border area of Texas — called the Rio Grande Valley or simply “the Valley” — has always been a fascinating and troubling part of Texan culture. The area is among the lowest in terms of per capita income in the United States, yet even the chronically depressed economy of the Texas side of the border is a fantasy of riches for many of those living in the poverty of the teeming Mexican border towns. The following is the way I characterized the area’s problems in this earlier post:

The region’s problems are complex and difficult, which makes the area prone to being ignored. The increased violence of late is the natural result of such neglect, and the usual response to such spikes in violence along the border — i.e., heightened law enforcement — is only a short term solution that often contributes to the animus that many of the Hispanic citizens of the area have toward the state. The area is desperate for leadership and a vision for solving its problems, yet those intractable problems tend to repel those in government who are in a position to do something about them. In short, the Valley needs statesmen, which are in short supply in the polarized American political landscape of the early 21st century.

With some politicians calling for the creation of state militia units to combat the increasing problems on the border, it’s high time for federal and state leaders to address the problems facing the Valley and devise short and long-term plans to address them. For if they do not, expect to see what happened in Nuevo Laredo on Thursday night to spill over to the Texas side of the border soon.

“It’s nowhere near as bad as the one a few months ago”

Texas City disaster2.JPGThe comment that serves as the title of this post qualifies as genuinely good news these days at BP p.l.c. However, as noted in this post from just the other day, it is getting a bit difficult to keep up with BP’s various problems these days.
Another fire erupted at BP’s Texas City plant Thursday evening, just four months after the one in March this year that caused 15 deaths and dozens of injuries. No injuries were reported in Thursday’s fire that took place in BP’s Texas City 1,200-acre complex, but not close within the complex to the unit that exploded in March. BP released a statement saying that “there is no connection between the two incidents.”
Meanwhile, crude-oil futures settled up nearly a dollar to push prices above $60 a barrel for the first time in more than two weeks.