Monthly Archives: April 2004

WSJ Golf section

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It’s Shell Houston Open week in Houston, and the Wall Street Journal ($) has a timely section in today’s edition that focuses on the troubled golf business. Although professional golf tournaments continue to do well as a television product, the rest of the golf business is not doing well at all, burdened by over-construction of golf courses and a lagging supply of golfers. As usual, the Journal staff does a fine job of covering the various sectors of the golf industry. Check it out.

Stros beat Brew Crew again; 1st “down on the farm” report

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The Rocket picked up his third win of the young season as the ‘Stros cruised by the Milwaukee Brewers for the third straight day, 6-1. Clemens spaced four hits over seven innings, walked one, struck out seven, and even knocked in his second RBI of the season. With the win, the ‘Stros are now 9-4 and in first place in the NL Central. The Stros are off on Monday and then begin a three game series with the St. Louis Cardinals at Minute Maid Park on Tuesday.
The following is the first in a series of “down on the farm” reports that I will post periodically throughout the season to provide information on the Astros’ primary MLB prospects playing in the club’s minor league system. The development of minor league prospects is the lifeblood of most Major League Baseball teams, and the Astros are no exception to that rule. Indeed, the Astros’ consistent success over the past decade (four division titles and five second place finishes) is attributable to the club’s development of such players as Craig Biggio, Lance Berkman, Richard Hidalgo, Roy Oswalt, Wade Miller, and Billy Wagner.
Although most experts considered the Astros’ minor league system as one of the best in Major League Baseball over the past decade, that is no longer the case. For the first time in recent memory, the Astros have no grade A prospects in the minors, which led Baseball America to rank the Astros’ minor league system 29th out of the 30 MLB teams at the beginning of this season. There are a number of reasons for this decline, but the most troubling one is that the Astros’ delayed until last season to include a “high-A” team in its minor league system. Accordingly, in prior seasons, the lack of a high-A team in the ‘Stros’ system forced the organization to promote players from its mid-A team in Lexington to AA Round Rock, which often caused players to be overmatched. For example, shortstop prospect Tommy Whiteman and catcher prospect John Buck are examples of good prospects who struggled at AA Round Rock after being promoted from mid-A ball. The Astros corrected this deficiency in their system by fielding a high-A team in Salem, Virginia during the 2003 season.
The first prospects to be evaluated in this series are those on the Astros’ AAA team, the New Orleans Zephyrs. Unfortunately, there is not much to report from New Orleans, which is the weakest of the Astros’ minor league teams. New Orleans is currently 4-7, in last place, and not hitting. The best news is that the pitching staff is reasonably strong, and that Carlos Hernandez has pitched well in his first two starts as he continues his comeback from shoulder surgery.
In the 2001 season, Hernandez was considered at least as good a pitching prospect as Roy Oswalt and pitched very well during the Astros’ pennant drive that season. However, Hernandez partially tore his labrum in his pitching shoulder in a baserunning mishap that season, and he opted to rehab the injury without surgery. Hernandez started off O.K. in the 2002 season, but after 117 decreasingly effective innings, the ‘Stros’ elected to put him on the disabled list and he had the surgery to repair the labrum that he probably should have had after the 2001 season.
Hernandez rehabbed the shoulder and did not pitch during the 2003 season, and then started his comeback in winter league baseball after last season. He progressed well during spring training, but his endurance and fastball speed have not returned to what they were during 2001 season. The ‘Stros are taking a prudently cautious approach with Hernandez, allowing him to pitch only five innings in each of his first two starts this season. Nevertheless, he has given up only one earned run to date, and appears to be making steady progress. If that progress continues, then he should be ready to contribute to the Astros’ staff by midseason.
The other top pitching prospect on the New Orleans staff is Taylor Buchholz, a 22 year old righthander who was one of the two young pitchers that the Astros received from Philly in the Billy Wagner deal. Buchholz looked decent in the spring, but he has been hammered in his first two outings at AAA. Look for him to spend the entire season at New Orleans and, if he develops steadily, to compete for a rotation spot next spring.
The other two pitchers who could help the Astros this season are Jared Fernandez (he of the 54 ERA, just recently sent down) and Chad Qualls, a 25 year old righthander who has pitched reasonably well while gobbling up a large number of innings the past two seasons at AA Round Rock. Although Fernandez started off horribly this season, he pitched well for the ‘Stros for most of last season, and it is not unusual for knuckleballers to turn it around at any time (in fact, he pitched six scoreless innings for New Orleans today).
Other news from New Orleans is not promising. John Buck, who as recently as a year ago was considered to be Astros fans’ solution to the Brad Ausmus problem. However, after being jumped from mid-A ball to AA Round Rock in 2002, Buck fell apart, losing the plate discipline and power that he had displayed in low-A ball. The ‘Stros then promoted him to AAA New Orleans in 2003, where Buck’s performance became even worse (although he was injured for a couple of months last season). Buck’s stunted development was one of the reasons that the Astros’ overpaid Ausmus (yet again) in another contract extension, and Buck’s early performance at New Orleans reflects that he may be the poster child for premature advancement in a minor league system — six hits (one double, the rest singles) in 31 plate appearances, two walks, and seven strikeouts. Buck is not yet 24, so he is still young enough to turn it around. But as the scouts say in the bush leagues, the numbers don’t lie.
Similarly, none of the other everyday players at AAA are performing very well. Second baseman Chris Burke, a top choice from the 2001 draft out of the University of Tennessee, may become a decent utility infielder, but he has exhibited neither the on base average nor the slugging percentage that would make him a front line MLB second baseman. In fact, the only New Orleans player hitting decently is 27 year old outfielder Mike Hill, who has the look of a career minor leaguer and is probably not more than a fifth outfielder prospect for a MLB club.
Consequently, the time is now for the Astros. Other than Hernandez and maybe Buchholz, Fernandez, and Qualls, there is not any help at the AAA level. My next “down on the farm” report will be on the prospects at AA Round Rock, which are more promising.

The man “who believed the solution to every human problem was death”

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Richard Pipes, a professor emeritus of history at Harvard, reviews Simon Sebag Montefiore’s new book on Josef Stalin, ”Stalin: The Court of the Red Tsar” in today’s NY Times Review of Books. The entire review is well worth reading, and this tidbit about Stalin’s post-WWII mood is a good sample:

Stalin emerged from the war utterly exhausted and more than ever convinced of his infallibility. In his last years he became inordinately capricious, suspecting everyone and ready to jettison on trumped-up charges even his most loyal followers. He spent much time vacationing in his lavish palaces. He indulged in drunken orgies, where he would force his ministers to dance for his amusement: ”He made the sweating Khrushchev drop to his haunches and do the gopak that made him look like ‘a cow dancing on ice.’ ” The Polish security boss, Jacob Berman, was made to waltz with Molotov.

Martin Lipton and the Disney board

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This NY Times article reports on corporate attorney Martin Lipton‘s work with the board of Walt Disney Company in connection with the sputtering Comcast takeover bid.
Mr. Lipton is famous in corporate legal circles as being one of the lawyers who devised the poison pill strategy, which is an anti-takeover strategy that Professor Bainbridge explains much better than I can.
However, Disney was never really in a position to adopt a poison pill strategy in regard to the Comcast bid. Inasmuch as the Board has already been heavily criticized for its unwavering support of CEO Michael Eisner despite Disney’s lackluster performance over the past several years, a poison pill strategy would be widely viewed as the Disney Board again supporting a strategy mainly benefitting Mr. Eisner and an unproductive management team at the expense of Disney’s shareholders.
Nevertheless, as the Times article reports, Mr. Lipton has made a strong impression on the Disney board members, and his close friend Mr. Eisner has to date weathered the corporate storms relating to the Comcast bid and Disney’s lagging stock price:

Indeed, if there was any dissension on Disney’s board about the fate of Mr. Eisner before Mr. Lipton arrived on the scene, there is none now.
With Mr. Lipton in, out went Cravath, Swaine & Moore, the white-shoe law firm that had been working with the Disney board to help swat away Roy E. Disney’s mob of irate shareholders. Cravath could hardly be counted on to rescue the company and protect Mr. Eisner’s job. (Technically, Cravath resigned the account, but what else could it do?)
After Mr. Lipton’s arrival, several independent Disney directors raised the issue of whether they should be seeking out their own lawyers and bankers to help evaluate the situation separately from Mr. Eisner and management. Naturally, the idea was summarily rejected, according to executives close to the board. The board’s other advisers were hardly independent, either: Alan D. Schwartz, president and co-chief executive of Bear Stearns, is a close friend and longtime adviser to Mr. Eisner. Gene T. Sykes, a managing director of Goldman Sachs, has similarly had a long relationship with Mr. Eisner, as has Morton A. Pierce, a partner in Dewey Ballantine, the company’s regular outside counsel.
Of course, new independent advisers would interfere with Mr. Lipton’s game plan. In a telling memorandum Mr. Lipton sent to all his clients last year, he wrote, “There is no need for the board to create a special committee to deal with a major transaction, even a hostile takeover, and experience shows that a major transaction is best addressed by the full board.”
That advice may be right under some circumstances, but between Comcast’s bid for Disney and Roy Disney’s effort to oust Mr. Eisner, it is hard to believe that any adviser hired to be a sage and savior on both issues could be anything but conflicted. Mr. Lipton declined to comment. A spokesman for Disney called him “a world-renowned lawyer and expert” whose “reputation and integrity are beyond reproach.”

‘Stros continue to roll

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The Astros beat the Milwaukee Brewers 14-5 on Saturday night for their second win in the third of their current four game series. Bidg and Mike Lamb each had three run jacks, and Hidalgo continued his torrid early season hitting with two doubles and four RBI’s.
The ‘Stros used six pitchers (why, Jimy, why?) in the rout, including newly-acquired Chad Harville, who pitched a scoreless inning. Roger Clemens takes the hill on Sunday afternoon seeking his third win of the season as the Astros close out the series with the Brew Crew. On Tuesday, the ‘Stros open a three game series with the St. Louis Cardinals at Minute Maid Park.

Hiding money in Swiss accounts is getting harder

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This NY Times article reports on the increasing difficulty of secretly stashing ill-gotten money in Swiss bank accounts. The article notes as follows:

According to a report in March from the Paris-based Financial Action Task Force on Money Laundering, which is supported by 32 countries, only seven jurisdictions – the Cook Islands, Guatemala, Indonesia, Myanmar, Nauru, Nigeria and the Philippines – now qualify as “non-cooperative” in international efforts to block the flow of illicit funds.
Less than four years ago, the list comprised 15 countries, including many in the Caribbean, like the Cayman Islands, that have now been removed. . .
Not surprisingly, Switzerland has no wish to be associated with this list of shame, and its bankers say they have been tightening their controls since 1977.
That does not alter the fact that Switzerland’s bank secrecy laws, dating to 1934, impose far fewer obligations to report customers’ affairs than laws elsewhere.
* * *
But there is a counterimage that resurfaced in the 1990’s, when Swiss banks were discovered to have denied survivors access to funds deposited by Holocaust victims. The Swiss National Bank, moreover, was obliged to acknowledge that it had accepted deposits of Nazi gold during World War II.
More than anything, the disclosures undermined Swiss respectability and persuaded the bankers that their image needed a makeover to protect an industry that employs 110,000 people and accounts for 11 percent of the country’s economic output.
Indeed, as the enforcement of regulations on illicit money has tightened, Swiss banks have become more cooperative with investigators, he said. Since Sept. 11, 2001, for example, Swiss authorities have frozen $26 million in 82 accounts said to be linked to Al Qaeda or the Taliban . . .

In addition to the foregoing, the Swiss banking bar is a remarkably small and close knit group. If clear proof exists that the Swiss banking system is being used to facilitate a criminal purpose, then, in my experience, members of the Swiss banking bar have been quite helpful in facilitating discovery of information relating to the funds and accounts in question.

Pick your own playoff opponent

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Stuart Benjamin over at the Volokh Conspiracy makes this interesting proposal that the top seeds in the NBA playoffs ought to be able to pick their own opponent in each round of the playoffs. Inasmuch as the first round of the NBA playoffs is only mildly more interesting than the utterly boring NBA regular season, my sense is that Stuart’s suggestion has merit and might spice things up a bit.

The Passion Experience Tour

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My old friend Chris Tomlin of Austin, Texas and his running buddy, Louie Giglio of Atlanta, Ga. are two of the subjects of this NY Times article today regarding their participation in the fabulously successful Passion Experience Tour, which is a series of Christian worship gatherings for college students that combines the groundswell of evangelical Christian spirit among young adults with talented leaders from the contemporary Christian music field. These are remarkable folks pursuing a wonderful and productive ministry, so the entire article is a refreshing and interesting read.
Although Chris continues to excel on the contemporary Christian music scene, he still has not been able to overcome my consistent throttling of him on the golf course.

Ernst & Young gets hammered

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As these earlier posts report, big four accounting firm KPMG has been keeping its defense lawyers quite busy. Now it appears that fellow big four firm Ernst & Young is getting into the act.
Floyd Norris of the NY Times reports today on an unusual court order that the chief SEC administrative judge issued yesterday that fined E&Y a cool $1.7 million and precludes the firm from taking on new audit clients in the U.S. for six months as a penalty for the firm’s improper conduct in auditing PeopleSoft, Inc. at a time in which the firm maintained a highly profitable consulting arrangement with the company.
The six-month suspension ties the longest suspension on signing new business ever imposed on one of the leading accounting firms. In 1975, Peat Marwick, a predecessor of KPMG, accepted a similar six-month suspension as part of a settlement of charges that it failed to audit several companies properly, including Penn Central, the railroad that went bankrupt back in the early 1970’s.

Stros deal Saarloos

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The Astros swapped young righthanded pitchers with the Oakland A’s Friday, trading Kirk Saarloos (who had been pitching at AAA New Orleans) for Chad Harville. Here is the Astros’ press release on the deal, which the Chronicle dutifully fails to supplement with better analysis of the deal.
My sense is that the A’s got the better of this deal because they got a promising young pitcher in Saarloos when they would have lost Harville had htey not made the deal (Harville was out of options and had demanded that the A’s give him his outright release rather than return to the minors).
Saarloos was a third round draft choice of the Stros in the 2001 draft, and he shot up the organization when he dominated the AA Texas League in the first half of the 2002 season. The Stros called him up in both the 2002 and 2003 seasons, but that is where Saarloos ran straight into Jimy Williams’ impatience with developing young ballplayers and Williams’ disdain for Saarloos’ less than blazing fastball (Saarloos patterns his pitching style after Greg Maddux).
In my view, Williams never really gave Saarloos a fair shot in the Astros’ less than stellar starting rotations of the 2001-2002 seasons, and so Saarloos was stuck in the Astros’ revolving door bullpen of the last two seasons, which is not his strong suit. This season, Saarloos did not pitch well early in the spring, but then recovered nicely, only to be told that there was no way he was going to make the Opening Day roster and that the ‘Stros were trying to peddle him. He promptly went to AAA New Orleans and was bombed in his first two starts there. However, Saarloos is only 25, and his minor league numbers indicate strongly that he will eventually be an effective 200 inning per season major league control artist with low walk and home run rates. Consequently, the Astros have really given up a talent in this deal.
And Harville? Well, he is a 27 year old fireballer who was a relief pitcher for the A’s last season. Here’s how Baseball Prospectus 2004 analyzes him:

The whole right-handed Billy Wagner thing just hasn’t worked out. Harville, once renowned for his small stature and tremendous fastball, pitched well for the [AAA Sacramento] RiverCats, but once again didn’t look particularly great in Oakland. He still throws very hard, but didn’t look completely comfortable with his improving curveball, and occasionally couldn’t find the strike zone with a sherpa and a GPS unit. He’s out of options, so he has to make the club out of spring training if the A’s want to keep him, and he’s still a reasonable bet to be a good pitcher in some role. If and when that actually happens is a matter of speculation.

So, in sum, a deal involving two pitchers of differing styles, both of whom have decent potential. I would have stuck with Saarloos, but perhaps this is one of those deals where both pitchers will thrive in new surroundings. With the Astros’ pitching staff of flame-throwers, Harville will certainly have a lot of company in that department.