This Atlanta Jounal Constitution article discusses an issue that UCLA law professor Lynn LoPucki characterizes as a “race to the bottom” — i.e., bankruptcy courts in certain jurisdictions bending federal bankruptcy law to market themselves to debtors’ lawyers who often are instrumental in choosing the venue of big business reorganization cases. The cost attributable to this “race to the bottom” is considerable because the two main bankruptcy venues — Delaware and the New York City — commonly approve professional fees in big reorganization cases that are at the highest level of the profession. In comparison, the high hourly rates being charged and routinely approved in the Enron reorganization case in New York would likely not have been approved if the case had been filed in Houston where Enron is based and which is a far more convenient venue for the vast majority of Enron creditors.
Monthly Archives: February 2004
The similiarities between Enron and U.S. Govt. financing
A substantial part of the Justice Department‘s criminal cases against former Enron executives Jeff Skilling and Richard Causey involves their complicity in Enron’s liberal use of “off-balance sheet” partnerships that Enron used to shift risk on debt that otherwise would have diluted Enron’s net worth. In an ironic twist, history professor Niall Ferguson and economist Laurence Kotlikoff explain in this insightful paper how the United States Government uses the same off balance sheet liabilities in accounting for its Medicare and Social Security liabilities to mask the true financial condition of the Government. The entire paper is well worth reading, and here are a couple of tidbits:
During the Clinton Administration, the CBO routinely projected that, regardless of inflation or economic growth, the federal government would spend precisely the same number of dollars, year in and year out, on everything apart from . . . entitlements. At the same time, the CBO confidently assumed federal taxes would grow at roughly 6 percent each year. As a result, it was able to make dizzying forecasts of budget surpluses . . . These phantom surpluses were the money Al Gore promised to spend on voters and George W. Bush promised to return to them during the 2000 election.
[T]he crisis of the American welfare state remains a latent one. Few people, least of all in the government, wish to believe it is real. But the crisis could manifest itself with dramatic suddenness if there is a significant shift in the expectations of financial markets at home or abroad. And when the finances of the United States “go critical,” there will inevitably be moves to cut back any federal program that lacks strong popular support. Though relatively inexpensive, and not in themselves a cause of American overstretch, “nation-building” projects in far-away countries will surely be among the first things to be axed.
Messrs. Ferguson and Laurence Kotlikoff also argue that our politicial leaders, the public, and bond market investors are all in denial about the large future liabilities that the government faces. This is provocative economic analysis and essential reading for anyone interested in understanding the financing of our government’s future liabilities.
The Lou Dobbs Rouge Fund
In this insightful piece, James K. Glassman of Tech Central Station ran an interesting analysis of U.S. companies that CNN financial commentator Lou Dobbs has criticized on his website and television show as “either sending jobs overseas or choosing to employ cheap foreign labor, instead of American workers.” Mr. Glassman calculated that the annual return for a hypothetical stock fund of these companies over the past year (12 months ending Feb. 23, 2004), was a remarkable 72.44 percent, which compares with a return of 39.11 percent for the benchmark Standard & Poor’s 500-Stock Index over the same period.
Outsourcing tech and other white-collar jobs is a common political canard that misguided or disingenuous demagogues promote to frighten voters. Accordingly, we will have to endure a great deal of this drivel over the next several months of this election year.
It never got this complicated with Seabiscuit
This NY Times article describes a fascinating situation that has developed regarding a fight for control of the Manchestor United soccer club — the New York Yankees of England professional sports — that also involves a racehorse named Rock of Gibralter and Malcolm Glazer, the owner of the NFL’s Tampa Bay Buccaneers.
Guys, we tried, but we failed
Getting paid for making dire business forecasts
This NY Times article is about Amory B. Lovins, who makes a very good living by telling the oil and gas industry that the demand for oil is likely to tumble more rapidly than the industry has projected. Mr. Lovins then helps the oil and gas companies figure out how they can profit from leading the transition away from today’s main uses of their core product. Interesting reading.
VDH’s latest
Victor Davis Hanson‘s latest column at National Review Online addresses America’s supposedly new preemption policy in its overall foreign policy. Mr. Hanson observes in a part of his piece:
Despite the current vogue of questionable and therapeutic ideas like “zero tolerance” and “moral equivalence” that punish all who use force ? whether in kindergarten or in the Middle East ? striking first is a morally neutral concept. It takes on its ethical character from the landscape in which it takes place ? the Israelis bombing the Iraqi reactor to avoid being blackmailed by a soon-to-be nuclear Saddam Hussein, or the French going into the Ivory Coast last year, despite the fact that that chaotic country posed no immediate danger to Paris. The thing to keep in mind is that the real aggressor, by his past acts, has already invited war and will do so again ? should he be allowed to choose his own time and place of assault.
Hitler was ruthless in starting a war against Poland. Yet he could have been stopped far earlier in 1936 or so ? had the democracies preempted him. Indeed, a failure to preempt is often far worse than the act itself. Serbia posed no “imminent” threat to the United States in 1998; but President Clinton ? with no U.N. sanction, no U.S. Congress resolution ? finally decided to act and end that cancer before it spread beyond the Balkans.
Interesting decision on cross-examination of experts
As a way of suggesting bias or financial benefit from such testimony, trial attorneys often ask the opposition’s experts whether they have frequently testified on one particular side of an issue. Although such cross-examination is widely assumed to be fair, the Iowa Supreme Court just handed down this interesting decision in ordering a new trial for a babysitter convicted of murdering a child under her care based in part on prosecutorial cross-examination along these very lines. The prosecution’s theory was that the babysitter had caused blunt head trauma to the child, but the babysitter’s expert testified that that the child’s head trauma had occurred much earlier than when the prosecution asserted that it had happened. On cross, the prosecution questioning attempted to connect the defense expert’s opinion to a presentation the expert had given “in front of all the defense lawyers here in the State of Iowa,” and also asked the following question: “You are routinely hired by the defense in cases where children are allegedly victims of child abuse and you testify on behalf of the perpetrator; isn?t that true?” The prosecutor also implied in other questions that the defense expert had testified on 46 occasions on behalf of persons charged with killing children.
The Iowa Supreme Court’s opinion condemns such prosecutorial questioning as an “improper effort to demean the witness,” citing the ABA Standards for Criminal Justice, which provide: “The interrogation of all witnesses should be conducted fairly, objectively, and with due regard for the dignity and legitimate privacy of the witness, and without seeking to intimidate or humiliate the witness unnecessarily.” Although this decision involves a criminal case, it should nevertheless provide pause for attorneys in civil cases who attempt to impeach an opponent’s expert through derisive and suggestive questioning.
Rise and fall of a ‘Haitian Mandela’
This Christian Science Monitor article details the signs that Jean-Bertrand Aristide was doomed to failure as President of Haiti. The CSM notes:
How a man hailed as a potential Nelson Mandela for his impoverished and oppressed nation of 8 million could fall so far appears to be as much a tale of wishful thinking by desperate Haitians and the international community that backed him, say experts, as it was a tale of the old clichÈ that “absolute power corrupts absolutely.”
Aristide was given that rarest of political gifts – a second chance. But, reinstalled in the presidency in October 1994 by a multinational military force, he used his resurrection to perfect an autocratic style, say even those close to him who were interviewed for this story.
Today, having infuriated, humiliated, and – some allege, killed – any once-devoted followers who crossed him, Aristide has few political allies left. Even his strongest credential – his election to a second term in 2000 – counts little as rebels gobble up territory and threaten to take the capital.
Languishing in that familiar pre-coup limbo that is a trademark of modern Haitian presidencies, Aristide is a symbol of a political culture that has been bankrupt nearly since it began as a slave revolt 200-plus years ago. . .
UT honors Dr. Denton Cooley
Dr. Denton Cooley is one of Houston’s many legendary doctors who have helped build the Texas Medical Center into one of the world’s great medical centers. Dr. Cooley founded The Texas Heart Institute at St. Luke’s Episcopal Hospital, and he performed the first successful heart transplant in the United States in 1968 and the first involving an artificial heart in 1969.
As Houston sportswriter Mickey Herskowitz writes in this column today, Dr. Cooley was a starting basketball player at the University of Texas at Austin in the late 1930’s, and UT is honoring Dr. Cooley by naming its new basketball practice facility after him. The entire column is worth reading, but this part is essential for all fans of legendary former UT football coach Darrell Royal:
Among the speakers in Austin the other night were Mack Brown and Rick Barnes, who coach the marquee men’s sports at UT. But the one who stole the show was Jody Conradt, the Hall of Famer who gave the Longhorns a national championship in women’s basketball.
“They built the Erwin Center 21 years ago,” she said, “and obviously it never occurred to anyone that the women would need a separate locker room. So every room in this place had urinals in it.
“Now we have one of our own. Before one of our games, coach Darrell Royal was kind enough to speak to my team. Before he left, someone asked what the biggest difference was between our locker room and all the ones he knew from all his years of coaching. Coach Royal said, `Offhand, I can’t remember anyone ironing anything before a game in one of our locker rooms.’ ”