Daily Archives: May 20, 2004

Stros go Fish

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Josh Beckett pitched seven and two thirds strong innings and the Marlins roughed up Roy O for eleven hits over six innings as the Fish downed the Stros in the final game of their series at Pro Player Stadium, 6-2.
Beckett clearly had his game face on for his hometown team as he gave up only five hits and two runs, one of which was Lance Berkman‘s third yak of the series. The Stros made it interesting by loading the bases with two out in the eighth, but the marginally competent home plate umpire Lazaro Diaz rang Berkman up on an absurdly outside pitch from Benitez and the Stros were toast.
The Stros to to Cincinnati for a weekend series with the Reds before returning to the Juice Box next Tuesday for a two week stretch of games against the Cubs and the Cards. The NL Central race is about to heat up.

R.I.P., Lord Hill-Norton

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As the members of my old Clear Thinkers email list know, I enjoy reading British obituaries. The British have a long and special talent for writing witty obituaries, and the good folks over at Southern Appeal point us to the latest example, this London Telegraph obituary of Admiral of the Fleet Lord Hill-Norton, who died this past Sunday at the age of 89. The entire obituary is a hoot, and you get a flavor for it in the first two paragraphs:

Admiral of the Fleet Lord Hill-Norton, who died on Sunday aged 89, was a formidable Chief of the Defence Staff before becoming the senior military officer in the Nato alliance; he also had a reputation for being one of the rudest men in the Royal Navy.
Almost from the beginning of his career some considered him destined either to be court martialled or to end up as First Sea Lord. His reputation for ruthless efficiency and meticulousness, combined with good luck and an irritating habit of being right, took him to the top. This made it seem all the more strange when, as a retired officer in the House of Lords, he placed rather more credence on the possible existence of unidentified flying objects than did less talented individuals.

Sounding like a character out of the brilliant British comedy “Fawlty Towers,” Lord Hill-Norton’s immediate post-WWII duties are described as follows:

By now his reputation as an abrasive and short-tempered officer was well established. He was in the habit of answering the telephone with the words: “Gunnery Division. Hill-Norton. Kindly state your business briefly; we’re busy men here.” An inadequate response would result in the telephone receiver being slammed down.

Even in retirement, the Lord’s demeanor did not improve, as is reflected by his reaction to some proposed cuts in military appropriations:

The defence cuts ordered by Options for Change did not improve his view of politicians, whom he regarded as sufferers from sea blindness. He was scathing about proposals to economise on Armed Forces pensions, and most notoriously called the then defence secretary Michael Portillo “a little creep” for suggesting the sale of Admiralty Arch.

But in classic British obituary style, Lord Hill-Norton’s obit closes with an acknowledgement of his good side:

Although Hill-Norton was feared, hated and respected in equal measure he led from the front. His harsh manner and foul language belied a man who could, on rare occasions, demonstrate an otherwise well-concealed humanity. He was always receptive to sound arguments but would not suffer fools or those who weakened before his onslaughts.
He married, in 1936, Margaret Linstow, whom he selflessly brought out of hospital to nurse at home himself in recent years. She survives him, with their daughter and son, Vice-Admiral Sir Nicholas Hill-Norton.

Backwardation of oil prices

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Don’t miss Arnold Kling’s analysis over at EconLog regarding the phenomenom known as backwardation energy prices. Arnold explains backwardation by using the example of current and future prices of oil:

As of May 20th, the June 2004 futures contract for light crude oil was at $41.66, while the June 2005 futures contract was at $35.58. When futures prices are below spot prices, this is known as “backwardation.” I believe that it represents a puzzle. Think of it this way. If you have oil, by holding onto it for a year, you are losing 15 percent. That seems kinda dumb.

Arnold goes on to explain that the various theories on why backwardation occurs all seem to be somewhat flawed, but then makes this observation and asks this very salient question:

Speculators buy low and sell high. The American and Saudi governments do the reverse. Which is the stabilizing force in the oil market?

More on the sad case of Jamie Olis

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This Wall Street Journal ($) article is the most thorough report yet on the sad case of Jamie Olis, the 38 year old former Dynegy mid-level tax manager who was convicted and recently sentenced to over 24 years in federal prison for his role in the Project Alpha financial scheme that essentially masked loan proceeds as cash flow from operations. Here are the previous posts on Mr. Olis’ case.
The entire WSJ article is interesting reading, and provides the best background piece to date on how Mr. Olis finds himself in this position. As I suspected based upon previous rulings by U.S. District Judge Sim Lake in Mr. Olis’ case, his defense team made a serious tactical error (at least in my view) by electing not to rebut the government’s evidence at trial of the damage that the Project Alpha deal caused to Dynegy shareholders:

After eight days of prosecution testimony, Mr. Olis’s lawyers believed they had poked enough holes in the government’s case to win. They rested without putting Mr. Olis on the stand — or any other witness.

That decision meant that, in considering the length of Mr. Olis’ sentence, the only evidence that Judge Lake had on damages resulting from the deal was that which the government offered:

The new federal sentencing guidelines work on a kind of point system, with more points and more prison time given if the case involves more victims, larger losses or using special training to execute a fraud. The key issue was the size of the loss suffered by Dynegy investors from the scheme: Anything more that $100 million would garner the maximum number of points, lengthening the sentence.
After considering several options, U.S. District Judge Sim Lake settled on a loss estimate of $105 million — the amount the University of California retirement fund lost on Dynegy stock, a hit the fund attributed to Project Alpha. With that loss and other factors, the guidelines recommended a sentence of 292 to 365 months.

As the article relates, Mr. Olis remains convinced of his innocence and, thus, remains unwilling to assist the government in its investigation and possible prosecution of other Dynegy executives and outside lawyers who were implicated in the scheme during Mr. Olis’ trial:

But such cooperation seems unlikely. Though “facing years away from his wife and daughter, Jamie remains strong in his convictions,” close friend Joan E. Quinn wrote to Judge Lake before the sentencing.
Mike Shelby, the U.S. attorney for the southern district of Texas, who supervised the case, isn’t sympathetic. “We have been rebuffed at every turn” by Mr. Olis, said Mr. Shelby. “I would ask the question, ‘Why don’t you help us?’ “

My speculation: “Despite the tactical errors of his defense, maybe because Mr. Olis did not deserve 24 years in prison.”
I continue to maintain that the criminalization of questionable business practices — combined with the government’s sledgehammer approach of forcing executives to defend themselves only at the risk of what amounts to a life prison sentence if they lose — is an extremely unfair and unwise governmental policy. And this from an administration that touts itself as “business friendly?”
If you are interested in reviewing more on this topic, Professor Ribstein over at Ideablog has provided some of the best analysis of the Olis case and this troubling trend of the government criminalizing such things as bad accounting.