You would think that hammering Morgan Stanley for $1.57 billion in damages would be enough for Ronald Perelman.
No way. This Wall Street Journal ($) article reports that Mr. Perelman has requested the same Florida state district judge who eviscerated Morgan Stanley’s defense in his lawsuit to hold the investment banking firm in criminal contempt of court for allegedly lying to the court in connection with testimony over when company executives found out that certain electronic tapes at issue in the trial might have contained potentially relevant email.
Under normal circumstances, Morgan Stanley should not worry too much about Mr. Perelman’s motion. Unless the contemptuous behavior takes place in the judge’s presence, all the judge should be able to do is refer the matter to the local district attorney for prosecution if she concludes that Mr. Perelman has made a prima facie case of criminal contempt. Moreover, the judge should recuse herself from overseeing the criminal case because she would likely be a witness in that case.
Having said all that, the way this case has gone for Morgan Stanley, the firm would be well-advised to have bail money immediately available for use after the hearing.

This Wall Street Journal ($) article picks up on a subject that I have previously addressed in regard to the legacy airline bankruptcies — that is, the federal government’s increasing equity stake in public companies resulting from the conversion of the Pension Benefit Guaranty Corp.’s debt to equity in the reorganized companies under their chapter 11 reorganization plans:

The U.S. government is on its way to becoming a big shareholder in the nation’s airline industry and possibly in the auto industry.
The Pension Benefit Guarantee Corp., the federal agency that partially guarantees traditional pensions, recently was awarded 7% of US Airways Group Inc. by a federal bankruptcy court handling the company’s Chapter 11 reorganization, according to the PBGC’s recent filing with the Securities and Exchange Commission. The agency got the shares as compensation for the underfunded pension plans it assumed when the company filed for bankruptcy.
The agency is likely to get an even larger stake — between 15% and 35% of new shares — of UAL Corp.’s United Airlines when it emerges from Chapter 11 in February, after 38 months in court protection, according to a PBGC official. And it’s likely to get sizable chunks of Northwest Airlines, Delta Air Lines and Delphi Corp. — if, as expected, the companies ask the bankruptcy courts to dump their pension plans on the insurer.

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The travails of Krispy Kreme over the past couple of years have been a common subject of posts here, so it is worth noting that some Southern California-based Krispy Kreme franchisees have started a blog about the company and its problems called Protectors of the Krispy Kreme Brand (introductory post here). Gotta love those Spiderman Krispy Kreme doughnuts! ;^)

In many respects, investment in an entertainment project is similar to investment in an oil and gas well. Often, individuals involved in putting together such a project negotiate “sweat equity” in the form of a “back-in working interest” — i.e., an interest in the net profits of the project after payment of all expenses of creating and maintaining the project.
The agents involved in putting together the popular Paramount Pictures’ television sitcom Frasier cut such a deal with Paramount and, after the show ran for 11 seasons and grossed over $1.5 billion, it looked like they had made a pretty good deal. When the agents demanded an accounting from Paramount regarding their back-in interest, Paramount responded by asserting that the show had never reached profitability and had actually lost $200 million. Lawsuit ensues, as this L.A. Times article reports.
This type of lawsuit is becoming increasingly common in Hollywood, as reflected by this earlier post about Peter Jackson’s lawsuit over the Lord of the Rings movies. And you thought the oil and gas business was hard-knuckled?
Hat tip to Craig Newmark for the link to the LA Times article.

Stephen Moore is a senior economics writer for the Wall Street Journal and a member of the WSJ’s editorial board. He also enjoys ice cream, and he has written this clever OpinionJournal piece about the socially-responsible nonsense that Ben & Jerry’s Ice Cream spews while selling its quite good — but unhealthy (i.e., socially irresponsible) — ice cream. He describes a recent tour that he took of the ice cream maker’s factory in Vermont:

The tour itself is a 30-minute propaganda campaign explaining why the company’s founders, Ben Cohen and Jerry Greenfield, deserve the Nobel Peace Prize for their unwavering commitment to the environment and economic justice.
Meanwhile, their factory is a monument to the efficiencies of capitalism and technological progress: Several dozen giant computer-operated machines churn out hundreds of thousands of cartons a day. I half expect the massive energy-gulping freezers to be solar-paneled or powered by green-friendly windmills, but no, they use lots and lots of conventional electricity. It turns out that if you want really good ice cream, you just have to tolerate a little more global warming. That’s a trade-off that I personally am willing to make.

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Houston-based Continental Airlines announced yesterday a modest third-quarter profit despite high fuel costs, parleying lower labor costs with increased revenue from its international flights and higher fares. Nevertheless, Continental announced that it expects to post a “significant loss” for the fourth quarter and that it will lose money for the full year. With various U.S. airlines currently operating in chapter 11, it is expected that combined losses in the U.S. airline industry this year will exceed $5 billion. For its part, Continental said that it had “sufficient” cash and projected cash flows through 2006.
Talk about a tough business. Announce a quarterly profit, reiterate that the company will lose money for the year, and offer that the company might be able to stay out of the tank for another year. And that’s considered a relatively rosy quarterly earnings report within the industry. So it goes in the U.S. airline industry, which is in dire need of a huge shakeout at a time when it remains difficult to put an airline out of its misery.

This NY Sunday Times article provides a good overview of the challenges that Southwest Airlines faces in the rough and tumble airline business as its fuel hedging strategy (noted in earlier posts here and here) fades and it faces the prospect of dealing with the higher fuel prices that its less-liquid competition has been dealing with over the past year and a half.
The analysis of Southwest’s business prospects is interesting, but even more so is the blurb at the end of the article that Dallas, Southwest’s home base, is not being particularly supportive in Southwest’s effort to have Congress repeal the Wright Amendment (earlier posts here, here and here), which restricts Southwest’s routes in and out of its Dallas Love Field hub. The article notes that, if the Wright Amendment is not repealed, it makes sense for Southwest to look for a new corporate home where their business is growing as opposed to the restricted nature of its current Dallas operation.
Mayor White, get on this one — Southwest Airlines in Houston is a natural fit.

In perhaps the least surprising business move of the year, Delphi Corp. and 38 of its U.S. subsidiaries filed chapter 11 reorganization cases today in an attempt to restructure its money-losing auto supply business and resolve over-priced union contracts. Delphi advised the bankruptcy court in its initial filings that it has secured a $4.5 billion in debtor-in-possession financing and that it hopes to emerge from its reorganization in mid-2007.

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Following on this earlier post, UAL Corp., the parent of United Airlines, announced that it has finalized $3 billion in debt financing commitments from Citigroup Inc. and J.P. Morgan Chase & Co. that will allow the company to exit its long-pending chapter 11 case early next year. Here are the previous posts about the United Airlines bankruptcy saga and related airline industry financial issues.
The airline industry is in a world of hurt right now, suffering under the toxic combination of record jet-fuel prices, stiff competition from lower-cost discount airlines, and dubious management decisions of legacy airline companies. UAL filed for Chapter 11 in December 2002, so even if it stays on course with its reorganization plan, it will emerge from chapter 11 after operating for over three years under bankruptcy court protection. US Airways Group Inc. has gone through a chapter 22 case (two Chapter 11 filings) over the past three years, and just recently emerged from bankruptcy under a plan based on a merger with America West Holdings Corp. Delta Air Lines and Northwest Airlines both filed chapter 11 cases on Sept. 14.

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I recognize the Wall Street Journal’s John R. Emshwiller has already cashed in on the Enron saga. But even that reason for wanting to move on to something else cannot explain this tepid ($) article on the prosecutorial misconduct that has tarred the Enron case and is now the subject of a pending motion to dismiss the criminal charges against former Enron key executives Ken Lay, Jeff Skilling and Richard Causey.
Although Mr. Emshwiller notes some of the allegations regarding prosecutorial misconduct in the pending Lay-Skilling-Causey motion, he inexplicably ignores compelling evidence of misconduct that has already occurred in other Enron-related cases, including the fact that such misconduct has already contributed greatly to the unjust conviction of at least four men. Meanwhile, Mr. Emshwiller’s article even suggests that the Enron Task Force is on the side of the greater public interest in requesting public disclosure of the confidential sources of information relating to prosecutorial misconduct that has provided under seal to the judge in the case, but then fails to explain how such confidential sources could be protected from Task Force retribution if they were publicly revealed and fails to report that it’s been the Task Force that has continually attempted to suppress evidence that would be helpful to the defendants in the only Enron-related criminal cases that have actually gone to trial.
My goodness, has the presumption of guilt toward any Enron-related defendant reached the point where even the nation’s leading business newspaper has simply dispensed with even reasonably detailed or at least balanced reporting on the case?