From Stu’s Views:
Everyone who has lived in Houston over the past 40 years has shopped at a Randall’s grocery store. Robert Onstead, the co-founder of that grocery store chain, died Wednesday morning while on a trip to Italy.
After Mr. Onstead and his original partners started Randall’s in the early 1960’s, the chain grew steadily through the next three decades and became the premier grocery store chain in the Houston area during the 1980’s (remember those great Randall’s “Flagship” stores?). But then, in the early 1990’s, Randall’s hometown character began to change when it acquired the Dallas-based Tom Thumb grocery store chain and a dozen AppleTree grocery stores in Austin. While that expansion made Randalls one of the largest Texas grocery companies, it also foreshadowed a change in the way Randall’s did business.
By the time Mr. Onstead sold his the Randall’s chain of 117 stores to Safeway for almost $1.5 billion in 1999, Randall’s was beginning to reel under the competitive pressures being exerted by other grocery retailers in Randall’s key markets. Now, Randall’s is becoming an afterthought in the Houston grocery wars as Wal-Mart, Kroger and increasingly H.E.B. take over turf that Randall’s previously dominated.
But Randall’s had a great run, and it was largely due to Mr. Onstead’s vision and leadership. Houston’s business community will miss him.
The Braves’ John Thomson dominated the Stros’ hitters in leading the Braves to a 5-4 victory Wednesday night at the Juice Box.
Thomson threw just 79 pitches in seven innings and gave up two runs on only four singles. Meanwhile, the Stros’ Pete Munro got raked for eight hits and four runs in four and a third innings by a Braves team that is not exactly a hitting juggernaut, either.
Actually, this was one of those games that was not as close as the final score indicates. The Braves were leading comfortably 5-2 with two outs and a runner on in the bottom of the ninth with Smoltz closing when Bags whacked a completely unexpected two run tater to make the score 5-4. Poor Ensberg had to follow Bags to the plate and face a very irritated Smoltz, who proceeded to strike Ensberg out on three quite fast pitches. Game, set, match.
It’s a duel of lefties in the rubber game on Thursday night as Darren Oliver goes for the Stros against ex-Stro Mike Hampton. The Virginia Expos come to town on Friday for the weekend series.
Following on this earlier post about allegedly being thrown out of a youth league game involving one of his sons, Roger Clemens gives his side of the story in this Chronicle article:
Clemens said he didn’t even witness the call in question, one in which Kacy Clemens, who plays for the 10-and-under Katy Cowboys, was called out attempting to steal second base despite an admission from a Bakersfield, Calif., player who said he failed to make the tag.
Clemens said he was standing behind a fence, well away from the action, where he videotaped his son’s base hit and then resumed signing autographs, something he had been doing for most of the afternoon and for the balance of the weekend.
He retreated to his car, per his routine, for a respite from the autograph-seekers.
“They did not ask me to leave,” Clemens said, which conflicts with the account of field supervisor Jim Carpenter, who told the AP he supported the decision to eject Clemens. “I did not even know I was supposedly thrown out. I didn’t see the play my son happened to be involved in. I videoed (taped) his at-bat and when he got a hit and got on first, I put the video camera up and started dealing with the public like I always do.”
Clemens said he was upset no one contacted him or his agent Randy Hendricks to get his version of what happened. Instead, he said, the national media ran with an unsubstantiated story.
Some local media outlets picked up the story, and Clemens said what angered him was the same group of reporters who heralded his return home after he came out of retirement and signed with the Astros on Jan. 12 were quick, in his opinion, to assume the story was correct as reported.
“I’m disappointed in a lot of media because I was only a phone call away, and my agent said anybody could have called up on the story,” Clemens said. “It was reckless the guy that ran the story because I was at the ballpark for at least an hour (after the game ended) signing autographs, and if he had any questions he could have come over and asked me.
“It was reckless by some of the national media that I was able to see comments like I was toe to toe, nose to nose arguing (with the umpire).
“And it’s the same thing here that went on in my hometown. I’m really disappointed because once you guys set these cameras and those pens down, I would think that you would know me a little better than that.”
PricewaterhouseCoopers publishes an annual survey of securities litigation, and it has just released its 2003 Securities Litigation Study. As usual, the review contains a number of interesting findings, including the following:
107 of the 175 securities class action filed in 2003 were accounting-related. In more than half of those cases, the primary allegation related to revenue recognition issues;
The percentage of cases with pension funds as lead plaintiffs has grown steadily from less than 3% in 1996 to over 28% of the cases in 2003;
Average settlements for all cases was up 20% from 2002, and there were more large settlements, including six greater than than $100 million;
After 2002 saw over 40 “triple jeopardy” cases in which companies were subject to securities class actions along with parallel SEC and Justice Department investigations, the number of those cases dropped to eight in 2003, which is above average.
Hat tip to Lyle Roberts over at the 10B-5 Daily for the link to the PwC report.
Check out this interesting TCS Central piece by San Diego attorney and former Harvard history professor Michael Rosen that compares this year’s Presidential campaign with that of 1904. Good stuff.
In this TCS Central piece, Arnold Kling addresses what he would like to hear President Bush say in his upcoming speech accepting the Republican nomination for President. On the key issue of financing Social Security and health care, Mr. Kling advises Mr. Bush to say the following:
Going forward, the most important issues are Social Security and the government’s role in health care. The Administration should focus on pursuing modernization and reform in those two areas.
On Social Security, the President should say that the system works for today’s seniors, but it does not work for younger people. As important as it is to keep our promises to those who are in retirement or close to it, it is just as important that we not leave Social Security as it is for people in their 20’s, 30’s, and 40’s.
The American people need to know that the money that workers put into Social Security now does not belong to them, but instead goes into the general Treasury, where Congress spends it as it pleases. You might think that the money you put into Social Security goes into an account where it belongs to you and nobody else can touch it. However, it does not work that way. It can work that way. It should work that way. It will work that way once reforms are enacted. Privatization is the ultimate lockbox.
Social Security also needs to be more flexible. Our existing system was designed when reaching the age of 65 meant that your active life was probably over, and you were likely to die within a decade. Going forward, we need a system that can accommodate everything from early retirement to seniors taking on second careers and new challenges in their 80’s. Personal accounts are the key to giving people more options as they age.
Then, Mr. Kling turns to financing health care:
On health care, reforms should adhere to some basic principles. These principles will promote personal choice and continued innovation.
The first principle is to give as much decision-making authority as possible to patients and doctors. Today, treatment choices can be distorted by Medicare regulations, fear of lawsuits, and other mechanisms. Reform should aim to minimize such sources of distortion.
The second principle is that taxes should be used to pay for health care only for those who truly need assistance. To the extent that the government pays health care expenses for everyone, your medical bills will go down but your tax bills will go up by much more. We need only limited paternalism.
A good start would be enhancing the recently established Health Savings Accounts, which are addressed in this prior post.
Victor Davis Hanson has another compelling Wall Street Journal ($) op-ed today in which he points out that the European desire that George Bush be defeated in the upcoming election could very well backfire on European interests:
Yet the European meddling in this particular presidential election is. Less talked about is that the image of an allied Europe has been shattered here at home. And all the retired NATO brass and Council on Foreign Relations grandees are finding it hard to put the pieces back together again. The American public now wants to be told exactly why thousands in their undermanned military are stationed in a continent larger and richer than our own without conventional enemies on its borders. If Europeans think it is nonsensical to connect Iraq with our own post 9/11 security, then Americans believe it is far more absurd to envision an American-led NATO patrolling their skies and roads 15 years after a nearby hostile empire collapsed — especially when NATO turns out to be as isolationist as America is expected to be engaged abroad.
The election of John Kerry would probably not reverse either the current policy in Iraq or the ongoing reappraisal of our foreign relations. The European fixation with the upcoming election and rabid hatred of George Bush instead may backfire here at home; indeed, even now European animus acerbates our own growing unease with what we read and see abroad
The Wall Street Journal’s ($) Holman Jenkins weighs in today with this column regarding the ideas regarding the psychology of leading of Stanley Renshon, who is a psychologist and political scientist at the City University of New York Graduate Center.
Mr. Renshon has written a new book set for publication in September called “In His Father’s Shadow,” in which Mr. Renshon addresses George W Bush’s emergence from an “erratic commitment to conventional success” in early adulthood to an “embrace of responsibility and sustained success that would have been little expected from his performance until then.” Mr. Renshon is also the author of a number of other works on the psychology of American presidents, inlcuding the award-winning account of Bill Clinton’s first term, “High Hopes.”
Mr. Renshon first notes that the public’s pre-election evaluation of Mr. Bush’s leadership style overlooked an important part of his personality. As Mr. Jenkins notes:
He came to office promising to be a “uniter not a divider”; his reputation in the traditionally weak Texas governor’s office was that of a consensus seeker. Those who expected more of the same in the White House have been pleasantly (or unpleasantly) surprised because, says Mr. Renshon, they overlooked an aspect of Mr. Bush’s character: His rare capacity to “stand apart,” even from friends and supporters, and withstand abuse and criticism when he believes a policy course is the right one.
He also ended up with a political character noticeably different from that of his loved and admired papa, who famously derided the “vision thing” and sought compromise with every critic. “Mr. Bush is a president who is comfortable taking controversial stands and sticking with them,” Mr. Renshon writes. “He is able to do so through sometimes severe storms of public anxiety and critics’ cries to change course.”
Using Mr. Renshon’s analysis, Mr. Jenkins speculates on the probable course of Mr. Kerry’s leadership style if elected president:
GOP harping on Mr. Kerry’s “liberal” record would seem to imply he has philosophical commitments that he’s prepared to sacrifice for. The label “Massachusetts liberal” perhaps points closer to the truth. Unlike Mr. Bush, he built his life and self-image around elective office, and in a state and party where survival required adhering to certain unfashionable and arguably obsolescing norms. He’s risk averse where Mr. Bush is a risk taker.
His leadership style is strongly at odds with Mr. Bush’s — and one that Democrats are hoping Americans are in the mood for right now. That’s the real message of his constant invoking of Vietnam. That’s the real strength of his campaign: I was daring and adventurous then, and had my fill. Witness my career ever since: cautious, “nuanced,” utterly lacking in the “go for it” certainty of my opponent.
Contrary to much campaign rhetoric, the difference probably wouldn’t be felt in the war on terror, to which both parties are now committed. It’s on domestic issues that history has trapped Democrats in the role of reactionary party, reflexively defending a status quo.
On Social Security, Medicare, education, you name it: Republicans at least grapple realistically with the need to reshape these programs to keep them solvent and delivering value in the 21st century. Democrats don’t. A lot of voters would be pleasantly (or unpleasantly) surprised by Mr. Kerry if he turned out to be a politician willing to court controversy and criticism to change that.
I do not agree with Mr. Jenkins’ assessment that the Republican Party is “at least grappling” with the issues relating to reshaping the above-cited governmental programs. On the contrary, the only reason that this Presidential race is likely to be a close one is because the electorate senses that this Republican Administration and Republican-controlled Congress have largely failed to take any constructive action in addressing these issues.
Nevertheless, Mr. Jenkins is correct that the success of either a second Bush Administration term or a Kerry Presidency will likely depend on the willingness of the leader to take risks and to adhere to unpopular positions that will lead to a sound goal. Bush has proven that he has the capacity to do that in regard to his foreign policy against the Islamic fascists. Does Kerry have that attribute?
Read the entire article.
An English court yesterday provided a glimpse of the difference between the civil justice there and the American system as it relates to controversial business practices such as those that Enron Corporation practiced.
In this decision handed down by an English court yesterday, J.P. Morgan Chase & Co. won a lawsuit against a WestLB AG-led banking syndicate related to Morgan’s Enron financing in which the English judge ordered the WestLb syndicate to honor a $165 million letter of credit that the syndicate had previously refused to pay.
That’s the first big difference. In the United States, there is no way that a plaintiff in this lawsuit would not attempt to take advantage of the public bias against Enron by demanding a jury trial. In the English system, jury trials in lawsuits over complicated business transactions are rare.
The case involved Morgan’s involvement in an offshore financing vehicle called Mahonia Ltd. In a complex trading arrangement, Morgan provided money to Enron, which then returned the payments to Morgan in the form of contracts for the future delivery of gas. Those payments — known as “gas prepay contracts” — were paid through an offshore vehicle called Mahonia.
When Enron collapsed in late 2001, Morgan had to commence litigation to collect on its security for the Enron-related financing. WestLB was the leader of a banking syndicate that had posted a $165 million letter of credit, which is a common form of security in which the WestLB syndicate receives a fee for taking the risk of Enron’s insolvency in regard to the financing — i.e., WestLB agrees to pay Morgan $165 million and assume Morgan’s rights against Enron if Enron goes bust on the deal.
Taking advantage of the unprecedented public outcry over Enron’s business practices when Enron collapse, WestLB refused to honor the letter of credit, alleging that the transactions were part of a “fraudulent scheme” that essentially disguised Morgan’s loans to Enron. Given the due diligence that takes place on these types of transactions, WestLB’s claims bordered on the preposterous, but then trying to weasel out of an Enron-related obligation is fair game these days. Morgan sued WestLB, WestLB countersued, and the trial began in London’s High Court of Justice in January.
The London case was just the latest litigation for Morgan over the Mahonia deal. When it set up the deal with Enron, Morgan hedged its risk by arranging to have several insurance companies issue $935 million of surety bonds to ensure Morgan against the risk of Enron’s default on the deal. When Enron filed for bankruptcy protection, those insurers — just like the WestAB syndicate — refused to pay using the same argument that the deal was a fraud designed to disguise loans to Enron. That dispute ended up in a jury trial in federal district court in Manhattan. Immediately before the jury was about to render a verdict in the case in January 2003, Morgan and the insurers agreed to a settlement in which the insurers paid 60% of the costs relating to Enron’s default, leaving Morgan holding the bag for the balance (approximately $400 million).
In the English case, High Court Justice Jeremy Cooke on Tuesday ruled in favor of Morgan and Mahonia by concluding that Enron’s accounting for the transaction did not breach U.S. accounting and securities rules. He ordered the WestLB banking syndicate to pay on the letter of credit, plus interest and costs, which is what the WestLB syndicate would have normally done in the first place but for the public outcry over anything related to Enron.
There is no question in my mind that Morgan would have agreed to settle with the WestAB syndicate on the same terms that it settled with the insurers over the Mahonia deal if this dispute had been tried to a probably biased American jury rather than a dispassionate English judge. Thus, that change in venue just saved Morgan at least a cool $70 million.
The Mahonia-related trading arrangement has been the subject of extensive scrutiny in connection with Enron’s chapter 11 case and related litigation. Last year, Morgan and Citigroup entered into a settlement with the Securities and Exchange Commission and U.S. regulators in which they agreed to pay fines and penalties totaling about $300 million related to their involvement with Enron and Dynegy Inc., a Houston-based energy company that attempted to acquire Enron immediately before the commencement of the Enron chapter 11 case.