Monthly Archives: May 2004

Don’t cross Judge Sam

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Galveston-based civil rights attorney Anthony Griffin has learned an $18,000 lesson that many local litigators know — do not get U.S. District Judge Sam Kent of the Galveston Division angry.
This Chronicle article reports on the $18,000 fine under Fed. R. Civ. P. 11 that Judge Kent recently levied against Griffin in connection with Griffin’s representation of a former Galveston Independent School District administrator in a wrongful termination-civil rights lawsuit.
As as his nature, Judge Kent did not mince words in sanctioning Griffin. He noted that the district “is currently fighting a severe and genuine economic crisis that has forced budget cuts resulting in the reduction of staff and programs.” He then observed that the money the district spent on the Boone lawsuit “does not come from a magic money tree.”

“Even a minimal investigation into the facts and the law of this case would have revealed the abject frivolity of all of plaintiff’s claims. Filing it shows either an ignorance of the law or an utter disregard for it, both of which are inexcusable.”

He went on to find that Griffin’s client’s claims were “utterly wanting in merit. This attorney, and all others similarly situated, must be made to realize that abusive manipulation of the legal system and attempts to legally extort money from public institutions, with no basis in fact or law, must and will be appropriately rebuked.”
Griffin has 30 days to pony up the $18,000.

Radical prescriptions

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This Wall Street Journal ($) article reports on innovative techniques that several corporate health care finance departments are undertaking in an attempt to mitigate the adverse effects that the third party payor system has on the consumer’s decision regarding health care choices. The entire article is well worth reading, and here is one of the strategies noted:

In the fall of 2001, Pitney Bowes Inc.’s corporate medical director, John Mahoney, proposed an unusual experiment: Slash the amount that employees pay for diabetes and asthma drugs, and see what happens.
On its face, the proposal seemed it would only add to the company’s escalating health-care costs. But there was a simple logic to Dr. Mahoney’s theory: If diabetic or asthmatic employees found drugs more affordable, they might take them more regularly. Over time, taking better care of their chronic conditions might reduce expensive complications.
But Dr. Mahoney says even he didn’t expect the dramatic savings that resulted. Since 2001, the median medical cost for a Pitney Bowes employee with diabetes has fallen 12% from about $1,000 a year. The median cost for a patient with asthma has dropped 15% from $900 annually. Overall, the company says it will save at least $1 million in 2004, with continued savings in future years.
Pitney Bowes’s move is indeed radical. Amid health-care cost increases of 11% to 15% annually, many employers are taking the more obvious approach: have employees shoulder some of the financial burden by raising premiums, deductibles and co-pays. Such moves appear to be helping to slow health-care cost increases in the short term. But Pitney Bowes’s experience shows that spending more upfront to make it easier — and cheaper — for employees to manage some chronic illnesses may actually bring about greater savings in the long run.
“There’s a reluctance among many people to take this kind of a chance because conventional wisdom says it’s going to increase your costs,” says Dr. Mahoney, a former White House physician in the Ford administration.
“But health care is kind of like a balloon. When you squeeze costs in one place, they often pop up in another.”

M.D. Anderson fat pill research

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Both the Chronicle and the Wall Street Journal ($) have front page stories on the research project that Dr. Wadih Arap, a cancer biologist at the University of Texas M.D. Anderson Cancer Center in Houston’s Texas Medical Center, is leading a study that offers a potential new approach to treating obesity and is also showing promise in cancer treatment. The results are being published in the June issue of the journal Nature Medicine.
Such research is becoming increasingly important because several recent studies are revealing that many of the improvements in health that medical advances have bestowed upon middle-aged and older Americans will likely be effectively erased over the next 20 years if Americans’ weight continues to increase.
The researchers said they melted away body fat in laboratory mice by cutting off the blood supply to fat cells. The agent is a drug the researchers designed to home in on blood vessels cells linked to fat tissue and then deliver an agent that induces the cells to self-destruct. As the blood vessel cells died, the fat tissue essentially vanished.
Weight-loss drugs typically seek to suppress appetite or increase the body’s metabolism to make it burn more calories. However, the body can quickly compensate for the effects of such drugs, making it difficult to lose and keep off weight. Accordingly, the new research is important because it could decrease the amount of fat in a completely novel way.
Dr. Arap cautions that only mice have been studied so far and that what works in mice often fails in people. Even if additional research goes well, it would probably be several years before any treatment could reach the market.
No corporate sponsors were involved to date in the study. The research has been funded with grants from the National Institutes of Health and several philanthropies. M.D. Anderson has filed patents related to the approach, and its institutional policies enable Drs. Arap and other researchers in the project to benefit financially if the strategy is commercially developed.
As far as potential corporate sponsors go, I recommend highly that the researchers get in touch with a certain doughnut makere.

Stros rebound to beat Braves

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After last night’s bizarre game, the Stros came back this afternoon to beat the Braves in a pitching dual, 2-1. Andy Pettitte was sharp, pitching six innings and strinking out five, giving up three hits, four walks, and one run. The Braves’ Russ Ortiz was just as good, going six and two thirds, striking out nine, and giving up only two hits and two runs. Miceli and Dotel were money again in relief.
Manager Jimy Williams, still irritated from last night’s debacle with the umpiring crew, got in a few choice words with the plate ump this afternoon after Pettitte expressed frustration at the arbitrary nature of the ump’s pitch calls. At least Jimy did not go nuclear and get thrown out again, although he is facing a suspension for bumping the plate ump from last night’s game.
The Stros (20-11) get an off day on Monday to play in Bidg’s charity golf tournament at Wildcat Golf Club, and then the Rocket opens up a six game homestand at the Juice Box on Tuesday against the World Champion Fish (18-13) and the Mets (14-17).

Say what, Wendy Gramm?

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Floyd Norris notes in this NY Times article that Securities and Exchange Commission chairman William Donaldson is not sounding or acting like the go-slow regulator that many expected when he was named to the post. As Mr. Norris notes:

[Mr. Donaldson] compared the current system of electing corporate directors, in which the incumbent board nominates a slate and no other candidates are on the ballot, to elections in the former Soviet Union: “It’s not really an election at all.”

[Mr. Donaldson] also emphasized the need to do something to change what he called the Lake Wobegon system that has caused pay for corporate bosses to soar. He said boards all conclude their chief executives are above average, as are all the children in Garrison Keillor’s mythical Minnesota town. He also said he was determined to force hedge funds to register with the S.E.C.

As one might expect, Mr. Donaldson’s proposals are not particularly pleasing to some elements of the Republican Party:

Mr. Donaldson’s efforts are frustrating to those who expected that the Bush administration would roll back regulation. The proposal received a D- average grade from Wendy Gramm, director of the regulatory studies program at George Mason University. “The S.E.C. offered no evidence that existing solutions to poorly performing boards do not work,” wrote Ms. Gramm . . .

Say what? Wendy Gramm, the former Enron director, is the “director of regulatory studies” at George Mason University? And is a spokesperson against Mr. Donaldson’s rather lame recommendations regarding corporate governance?
Could there be a worse spokesperson for maintaining the status quo in regard to “solutions for poorly performing boards?” Mrs. Gramm sat on an Enron board that blithely approved a staggering number of off balance sheet debt vehicles that admitted felon Andrew Fastow engineered to disguise Enron’s foreboding debt load, approved the clear conflict of interest that allowed Mr. Fastow to become enriched from such off balance sheet investments while he was Enron’s CFO, sat on Enron’s board (and was well compensated for doing so) while her husband — former Texas Senator Phil Gramm — was receiving campaign contributions from Enron and its upper management, and sold over a quarter of million dollars of Enron stock before the scandal broke.
My sense is that Mrs. Gramm’s above quote just might make it into the hands of the plaintiffs’ lawyers who are suing Enron’s board and its insurers for billions.
Update: Barry Ritholtz over at The Big Picture is even more incredulous than me over this.
Update II: Just for clarification: I tend to agree with Ms. Gramm’s position that less government regulation of corporate governance is generally better than more. But I just don’t think she should be out front for that position on this particular issue. Her Enron legacy is serious baggage.

Umps cost Stros a win

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Occasionally, umpires cost a team a game, and tonight was one of those nights for the Stros as they lost in 10 innings to the Braves, 5-4. Andruw Jones hit a two-out homer off Ricky Stone that barely cleared the right-field wall to win the game for the Braves.
However, the Stros had the game in hand until the bottom of the eighth, when the Braves’ Jesse Garcia convinced umpires he had been grazed on the helmet with a pitch, sparking a two-run eighth that tied the game 3-3. The disputed call led to the ejection of Astros manager Jimy Williams. Before the inning was over, bench coach John Tamargo and starter Roy O also were tossed.
The controversy began when Garcia claimed a pitch from Oswalt nicked the top of his helmet and began trotting toward first. Plate umpire Gary Darling didn’t make a call but consulted with second-base umpire Rob Drake, who ruled that Garcia had been hit. Astros’ manager Williams went nuclear, and tried to run around Darling several times to go after Drake.
Oswalt gave up a bases-loaded single that pulled the Braves to 3-2, then threw up his arms after a low fastball to Chipper Jones was ruled a ball. Darling, who by this time wasn’t calling a strike for Oswalt unless it was right down the middle, bounced out from behind the plate and yelled at Oswalt, who promptly walked Jones and forced in the tying run.
Tamargo, now running the team, came out to make a pitching change and wound up getting ejected when he began jawing with Darling. About that time, Oswalt tossed a blue case — filled with bubble gum — from the Houston dugout, and its contents sprayed along the third-base line. Several batboys had to come out, scurrying around on their knees to clean up the mess.
Oswalt’s reaction is reflective of the absurdity of the umpires’ calls and behavior. Roy O is normally as calm and well-mannered as any player in baseball. Frankly, this game might have turned into a mob scene had Roger Clemens been pitching.
The Stros came back to take the lead in the top of ninth, but Brad Lidge, filling in for Octavio Dotel — who had pitched in three straight games — couldn’t hold that lead. That set the stage for Jones’ heroics in the bottom of the tenth.
Andy Pettitte goes for his second win after coming off the DL in the series finale against the Braves. I guess pitching coach Burt Hooten will take the lineup card to the meeting at home plate with the umpires before the game.

A Better Bet for Horse Racing

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Steven Pearlstein of the Washington Post (free subscription required) has written this fine article on the problems in the American horse racing business.
Horse racing was one of the three — along with baseball and boxing — most popular sports in America in the early 20th century. However, abolition shut down almost all tracks in America and horse racing did not make a comeback until the 1930’s. That’s when state governments utilized pari-mutuel betting to generate revenue during the Great Depression era. Racing quickly became popular again, as the recent fine book and movie “Seabisbuit” relates well.
However, as Mr. Pearlstein’s article describes, racing struck a devil’s bargain by accepting dubious state regulation and taxation in return for its right to exist. Accordingly, while other professional sports skyrocked in popularity and value during the generation after World War II, horse racing remained mired in mud of governmental micro and mismanagement.
So, how is the industry attempting to change this course? The less creative approach is to beg the state governments to allow horse track owners to turn their facilities into “racinos” — that is, allow the owners to install slot machines at the tracks and split the take with the state.
On the other hand, Churchill Downs, Inc. is pursuing this consolidation business plan that would create what amounts to a national tour of quality tracks that would host competition of top horses similar in the same way the Tour Players’ Association puts on professional golf tournaments around the country. This approach seems to have at least a flavor of creativity that is utterly absent in the “racino” stategy.
One anecdote about horse tracks. Houston’s race track — Sam Houston Race Park in northwest Houston — was built in Houston during the early 1990’s, and promptly went into bankruptcy a year or two after it opened. A bright client of mine who was thinking about making an investment in the track to bring it out of bankruptcy asked me to sit in on a meeting with a representative of Churchill Downs, Inc. to determine whether they would be interested in being a co-investor and manager of the track.
During the meeting, the Churchill Downs rep indicated that the company had down a feasibility study on building a track in Houston several years earlier before deciding to pass. He disclosed that their study indicated that the best approach to developing horse racing in Houston was to start relatively small and expand the facility as the popularity of the product developed over time. Consequently, the study indicated that initially spending about $40 million (I may be off on the numbers a bit) and placing the track in a corridor between the Astrodome area on the north and the Gulf Greyhound Dog Racing track near Galveston on the south was the way to go.
“So,” I inquired or the Churchill Downs representative. “Where do you think the current owners went wrong with the Sam Houston Race Park?”
“Well,” he replied. “Except for spending more than twice as much as they should have in building it, and then placing it in the wrong location, nothing.”
My bright client passed on the investment opportunity.
Hat tip to Professor Sauer over at the Sports Economist for the link to article and this issue.

Kerry as a lawyer

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Jeffrey Toobin of the New Yorker has written this interesting story on John Kerry’s background as a lawyer before his career as a politician. There is nothing earth shattering in the article, but it is nevertheless provides interesting insight into Kerry. As Toobin notes:

John Kerry graduated from Boston College Law School in 1976, when he was thirty-two years old and on the brink of obscurity. His celebrity as the former leader of Vietnam Veterans Against the War was fading. The war was over, and his much heralded testimony before the Senate Foreign Relations Committee was five years in the past. He had entered law school after losing a congressional election in 1972, a race he was widely expected to win. A story about him in the Boston Globe during this time ran under the headline ?once a hot political property.?
Kerry practiced law for six years. During that period, he began inching back into public view in Massachusetts, rebuilding a reputation both for aggressive investigation and for showmanship which he still enjoys today. The issues that mattered to him then have dominated his subsequent legislative career, and it is his brief career as a lawyer, more than his record as a protester, that could suggest what kind of President he would make.

And somewhat surprisingly, Kerry was not a bleeding heart criminal defense lawyer:

Given his background in the antiwar movement and progressive politics, Kerry might have seemed like a natural for a public defender?s office. ?That?s a stereotype of the worst order and a total knee-jerk reaction,? Kerry told me during a recent conversation about his legal career. ?I always had a prosecutor?s mind and a prosecutor?s bent. It was always what I wanted to do, even in law school. There was a rule in Massachusetts that allowed law students to prosecute misdemeanor trials in front of six-person juries, and I got an unbelievable amount of experience before I even graduated.? For a politically ambitious young lawyer like Kerry, especially one who was known only as a protester, it also made sense to earn a law-enforcement credential.

Hat tip to Ernie the Attorney for the link to this piece.

The amazing Barry Bonds

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If you hadn’t noticed, Barry Bonds has just completed one of the best months of hitting in the history of Major League Baseball.
In April, Bonds’ had an incredible .472 batting average, an equally impressive .696 on base average, an astronomical 1.132 slugging percentage, and an historic 1828 OPS (on base average + slugging percentage).
Joe Sheehan and Keith Woolner over at Baseball Prospectus did some research and determined that Bonds’ April was the best month of hitting in the past 30 years (see chart below). In fact, Bonds’ 1848 OPS during April dwarfs Todd Helton’s May of 2000, which had been the best month by a player in the past 32 seasons. Moreover, Helton played 15 of his 23 games that month in the hitting haven of Coors Field, and Bonds’ April OPS still beats him by over 300 points!
The first chart is interesting also because each player listed is a great player with the exception of Ron Cey (good, but not great) and Richard Hidalgo (good, but not great at this point in his career). Given the large number of games played in baseball, this reflects that it is risky to draw dispositive conclusions based on a player’s anecdotal performance in a limited sample of games. This is the most common error that casual fans of baseball make in evaluating players.
The second chart below reflects the research of the Wall Street Journal’s ($) Allen St. John in this piece in which he suggests that Bonds’ hitting has been helped significantly by playing in the new National League ballparks that have been built over the past decade. As Mr. St. John notes:

SBC isn’t the only retrostyle new park that suits Mr. Bonds. From 2000 through 2003, he played 105 games at the NL parks built since 1995: Coors Field in Colorado, Bank One Ballpark in Arizona, Houston’s Minute Maid Park (previously Enron Field), PNC Park in Pittsburgh, Alanta’s Turner Field, Miller Park in Milwaukee, and Cincinnati’s Great American Ball Park. In those games he hit .372 and slugged .868. Plus, he hit 46 homers, for an average of 75.6 round trippers per 162 games, above his single-season record pace of 2001.

Hitter-friendly ballparks and steroids aside, Bonds is providing us with a once in a lifetime performance over the past decade. Bonds is simply the best hitter in Major League Baseball since Ted Williams and one of the three or four best of all-time. Sit back and enjoy it, because we are unlikely to see it again in our lives.
Bonds parks and hitting Chart1.gif

Redding cancels flight plan to New Orleans

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Tim Redding finally pitched a game this season similar to the way he pitched last season as he led the Stros to a 5-3 victory over the Braves in Atlanta. Redding pitched six innings, gave up four hits, a walk and a run, which came on a J.D. Drew dinger. Relievers Backe and Miceli were a bit shaky in the seventh, but Lidge bailed them out again with an inning and a third of strong relief. Dotel closed it with another strong ninth as he appears to catching his stride. Jeff Kent was the hitting star again with three hits and three RBI’s, including his sixth jack of the season.
The Stros have now won four in a row and eight out of their last nine. Hard luck Roy O goes for his third win tomorrow evening in the second game of the weekend series with the Braves.