Monthly Archives: October 2004

Checking in again on the Nigerian Barge trial

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I was in federal court yesterday, so I had occasion to drop in again (here is my earlier report on the trial) on the ongoing Enron-related Nigerian Barge trial, which was concluding its third week. The prosecution’s second star witness — former Enron treasurer and Andy Fastow favorite son, Ben Glisan — finished his testimony and the prosecution rested. Despite the mainstream media’s continued simplistic analysis of everything related to Enron generally and this trial in particular, the prosecution’s case has not gone well.
There are huge holes in the prosecution’s case. First, the prosecution’s case relies almost entirely on the testimony of former Enron executives Michael Kopper and Glisan, who both admitted that they are prodigious liars and that they copped deals with the Justice Department to hedge their risk of lengthy jail sentences. Moreover, the government inexplicably failed to call the person — that is, Fastow — who supposedly originated the sham side deal between Enron and Merrill. Indeed, the prosecution did not even call an independent expert witness to testify on a key issue in the trial — i.e., that Fastow’s legally unenforceable oral inducement to Merrill that Enron would either buy the barges back or broker a deal for them rendered false Enron’s accounting of the deal and, thus, misleading to Enron’s investors.
For what it’s worth, Glisan’s testimony dovetailed generally with that of Kopper, although Kopper thought Merrill was at real risk with regard to the barge deal while Glisan downplayed that risk. Similar to Kopper, Glisan dumped on former Enron treasurer Jeffrey McMahon, who Glisan contends told him he was “was comfortable” with Fastow’s oral inducement to Merrill. Consistent with its approach to this case, the prosecution failed to elicit from either Glisan or Kopper that Fastow and them did not get along with McMahon, who was not involved in receiving any of the millions of dollars that Fastow, Kopper and Glisan received from “investing” in Fastow’s off-balance sheet partnerships. In fact, Fastow ultimately engineered both McMahon’s firing as Enron’s treasurer (because of McMahon’s criticism of Fastow’s off-balance sheet partnerships to former Enron CEO, Jeff Skilling), and Glisan’s replacement of McMahon as Enron’s treasurer. That the prosecution would allow the Fastow cabal to defame the unindicted McMahon in such a manner without pointing out their well-established acrimony toward him is just one example of how the Justice Department is willing to dispense with a balanced presentation of the facts to obtain convictions in this case.
Meanwhile, two of the Merrill defendants appear to have pretty darn good grounds for a directed verdict of acquittal. Tom Hagemann, defense counsel for Merrill defendant Daniel Bayly, argued persuasively that the prosecution’s case against Mr. Bayly consisted solely of testimony that Mr. Bayly participated in the telephone call in which Fastow made the oral inducement to Merrill to buy the barges, and then that Mr. Bayly directed the Merrill representatives to send an engagement letter to Enron that included Fastow’s oral representation that Enron would take Merrill out of the barge deal within six months. Inasmuch as the prosecution presented no further evidence that Mr. Bayly was involved in the deal in any respect after that point and did not attempt in any way to cover up the fact that Fastow had made the oral inducement, Mr. Hagemann pointed out that it is simply impossible for the prosecution to meet its burden of proof that Mr. Bayly was involved in a wide-ranging conspiracy with Enron to cover up the true nature of the deal.
Equally persuasive was David Spears‘ motion for a directed verdict of acquittal for Merrill defendant William Fuhs. Incredibly, the prosecution did not present even one witness who knew or had ever talked with Mr. Fuhs regarding the barge transaction! Consequently, the prosecution’s case against Mr. Fuhs relies totally on about a half dozen documents and emails that the prosecution could not prove that Mr. Fuhs ever read and which are subject to various interpretations. As Mr. Spears pointed out, based on that evidentiary record, the prosecution cannot sustain its burden of proof that Mr. Fuhs was involved in any type of conspiracy with Enron or that he was involved in fraud on Enron’s investors.
Finally, in a devastating cross-examination of Glisan, Lawrence J. Zweifach, Merrill defendant James Brown’s attorney, elicited that Fastow’s supposed promise to buy back the barges from Merrill made no economic sense and, thus, is of dubious credibility. Inasmuch as such a buy back would have required Enron to restate earnings and endure the market’s bad reaction to such a restatement, Glisan admitted that it would have been far less damaging to Enron in terms of the investor market not to sell the barges to Merrill and simply to take the one penny-per-share earnings hit in the fourth quarter of 1999. In short, reasoned Mr. Zweifach, why would Fastow risk the much worse market effect of a restatement by making the oral side deal when simply holding the barges would not result in much of a market effect in the first place? Glisan had no answer to that question.
Of course, as noted in my earlier post, no one really knows how all of this plays out with either Judge Werlein or the jury. But one thing is crystal clear — the Justice Department believes that it is shooting fish in a barrel even when it puts on as flimsy a case as this because it figures that most jurors will be biased against any defendant having anything to do with the cultural pariah Enron.
Beyond the effect on the individual lives involved in this case, that’s the real societal significance of this case. For if the government can use its power to obtain convictions and long jail sentences in a case as weak as this one, then business executives everywhere should be concerned that the risk of doing business in the United States will have just risen to an entirely new level.

KPMG agrees to record malpractice settlement

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KPMG LLP and its Belgian affiliate agreed to pay $115 million to settle a shareholder lawsuit in Boston claiming they had failed in their audit work for Lernout & Hauspie Speech Products NV, the defunct Belgian maker of speech-recognition software. The proposed settlement is one of the largest ever by an auditing firm.
As with many software firms, Lernout & Hauspie soared to prominence in the late 1990’s in the field of speech recognition software. The company had a market capitalization of nearly $10 billion on the Nasdaq exchange at one point. But in all to familiar a story, Lernout collapsed in 2000 and later admitted to a massive fraud, which included falsifying approximately 70% of sales in its largest unit. The company has been liquidated.
The suit alleged that KPMG was responsible for Lernout’s false and misleading financial statements and sought damages on behalf of the company’s shareholders. As usual in such settlements, KPMG and its Belgian affiliate publicly stated that they settled to avoid “protracted legal battles” and that they “deny all allegations and any liability.”
However, the settlement does not end KPMG’s nightmare with regard to the Lernout account. Earlier this year, KPMG and its Belgian unit were sued for $340 million by the trustee in Lernout’s bankruptcy case, who is attempting to recover that sum for Lernout’s creditors. Moreover, the Belgian liquidator for Lernout piled on by filing a separate claim for $427.5 million against KPMG’s Belgian affiliate. Finally, KPMG’s work in the Lernout case also remains subject to a Securities and Exchange Commission investigation.
The settlement is the latest in a string of such large settlements for KPMG and other big auditing firms. Last year, KPMG paid $125 million to settle shareholder claims related to its audit of drugstore chain Rite Aid Corp., and $75 million related to its audit of Oxford Health Plans Inc. The largest amount that an accounting firm has paid in settlement of a private shareholder class-action suit remains Ernst & Young LLP‘s $335 million settlement in 1999 related to its audit of Cendant Corp.
In the meantime, many relatively good size companies are finding that they cannot hire the services of the Big Four accounting firms because of the firms’ staffing problems attendant to their larger audit clients.

Braves outlast Stros

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The Braves jailbird-to-be Rafeal Furcal hit a two-out, two-run walkoff homer in the 11th inning off of Dan Miceli that propelled the Braves to a 4-2 victory over the Stros Thursday afternoon at Turner Field in Atlanta. The Braves’ win tied their NL playoff series with the Stros at one game each.
Furcal was in court just hours before Game 1 of the series where he was sentenced to 21 days in jail and 28 days in a treatment center for violating probation with his second drunken-driving arrest in four years. However, the judge — obviously a Braves fan — put the sentence off until the day after the season ends.
With the Stros on the verge of taking a commanding lead, manager Phil Garner brought closer Brad Lidge into the game in the seventh inning when the Stros had a 2-1 lead, but the Braves rallied to force extra innings. The Braves outhit the Stros 14-4 and held the Stros without a hit for the final 5 1/3 innings.
Realizing the importance of the game, the Braves kept closer John Smoltz on the mound for three innings, which was his longest outing since September 2001. Similarly, Lidge went 2 2/3 innings, which was his longest outing of the season.
Both starters for the respective teams pitched well. Roy O gave up eight hits and a run in 6 2/3 innings while Mike Hampton gave up just four hits in 6 1/3 innings, including solo yaks to Bags and Raul Chavez. Hampton left in the seventh because of tightness in his left forearm, but the injury is not believed to be serious.
The series now moves to the Juice Box on Saturday where the Stros have won 18 straight games with the Stros’ Brandon Backe going up against the Braves’ John Thomson. Game time has been moved to noon on Saturday.

The public policy failure of the Texas Robin Hood school finance system

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Virginia Postrel of Dallas, who runs the smart Dynamist.com blog, does an excellent job of explaining in this NY Times article the public policy failure that is the current Texas Robin Hood public school finance system.
As Ms. Postrel notes, the problem is not with equalizing benefits between rich and poor school districts, but rather the structure under which such equalization was to be achieved:

Robin Hood does not just move money from rich school districts to poor school districts. It does so in a way that destroys far more wealth than it transfers, and that erodes the tax base on which school funding depends.
To understand why Robin Hood is so destructive, consider the market price of a given house. The home’s value depends not just on how big the house is or whether it has walk-in closets and granite countertops.
Property taxes depress the value of a house. The amenities those taxes buy, including good schools, increase the value. The final price reflects the net value of the taxes the homeowner pays.
Robin Hood essentially raises taxes while reducing benefits, creating a downward spiral in home values and property tax receipts. For each district, the state divides the total assessed value of property in the district by the number of pupils. (Districts get higher per-pupil weightings for such factors as students with learning disabilities or limited English proficiency.)
The state then compares this number with a confiscation threshold. The district keeps the taxes on the property base below the threshold. But every single penny collected on the property value above the threshold goes to the state.

Not surprisingly, Ms. Postrel notes that, when homebuyers no longer get as much education for their taxes, buyers will not pay as much for houses:

During the 1990’s, “a period of unusually rapid income growth for the wealthy,” the economists note, the property value per pupil actually fell in the state’s wealthiest 5 percent of school districts, even without accounting for inflation.
That drop was bad news for everyone. Robin Hood assumed that house prices would stay pretty much the same, so that property-rich districts would continue to provide ample tax dollars to the rest of the state. Instead, every year the tax base became smaller in the rich districts.
To meet its commitments to poor districts, the state effectively lowered the real value of the confiscation threshold. Corrected for inflation, the threshold was $340,000 per weighted pupil in 1994, when the system was established. By 2002, it had fallen to $305,000.
But lowering the threshold further depresses home values. A death spiral sets in.
As homebuyers switch from the once-rich districts into moderately priced districts, property values hit the threshold in those districts, setting yet another spiral in motion.
And while the state is pushing down the confiscation threshold, districts try to keep up by raising their property tax rates, pushing down home values even more.

Ms. Postrel notes that correcting the system is certainly not impossible:

[The solution is to bring] well-established principles of efficient taxation to bear on school finance. Transfers . . . should be funded through a statewide tax, while local taxes pay for local amenities.
But even local taxes could be more efficient. Instead of confiscating 100 percent of everything above a certain property-value threshold, . . . the state could take a much smaller percentage of the whole tax base.
“One of the principles of public finance is that having a high tax rate on a small base is very inefficient, whereas having a lower tax rate on a larger base is less distortionary, ” observes Ilyana Kuziemko, a Havard University economist who co-wrote with Caroline M. Hoxby a new working paper for the National Bureau of Economic Research entitled Robin Hood and His Not-So-Merry Plan: Capitalization and the Self-Destruction of Texas’ School Finance Equalization Plan.

As noted in this earlier post, the handling of public school finance by the Republican-dominated Texas Legislature has been so inept that it gives rise to reasonable questions regarding whether a Republican-controlled state government is capable of addressing such public policy issues in a responsible and effective manner. However, Professors Hoxby and Kuziemko note that the primary reason for the public policy failure of the Robin Hood public school finance system is much simpler than poor political leadership:

“Lawyers, not economists, designed the system.”

A great post-debate line

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Former Republican senator from Wyoming Alan Simpson attended Tuesday’s debate between Vice-Presidential candidates Dick Cheney and John Edwards. During an interview after the refreshingly contentious debate, Mr. Simpson waxed nostalgic about the bygone days in which such contentiousness was the norm in such political exchanges, such as the time that Republican Sen. Wayne Morse of Oregon in 1957 called his “distinguished colleague” Republican Sen. Homer Capehart of Indiana “a tub of rancid ignorance.”

Understanding terrorism

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Although I am generally supportive of the way in which the Bush Administration has conducted the war against the Islamic fascists over the past three years, I have never been comfortable with the Administration’s characterization of the war as the “War on Terror.” Not only does that moniker obscure the real enemy — radical Islamic fascism — but its vagueness risks inclusion of legitimate rebel movements against tyrannical regimes. I mean, really — would the United States be siding with the Iranian or North Korean governments if rebel movements in those countries began to use tactics to undermine those tyrannical regimes similar to those that are used by Islamic fascists against America and Israel?
Dr. Philip Jenkins is a prolific author and an outstanding professor of history and religious studies at Penn State University. He is best known for his recent books The Next Christendom: The Coming of Global Christianity (New York: Oxford University Press, 2002) and The New Anti-Catholicism: The Last Acceptable Prejudice (New York: Oxford University Press, 2003), which are outstanding works on the changing nature of Christianity in the world. The Next Christiandom explores the emergence of Third World countries as the future demographic and cultural center of global Christianity, and The New Anti-Catholicism examines how modern political correctness toward minority groups has not deterred major media outlets from casting the Catholic Church and its teachings in the worst possible light.
However, Professor Jenkins is also an expert on the concept of terror, and his new book Images of Terror: What We Can and Can?t Know about Terrorism (Aldine de Gruyter, New York 2003) explores the social construction of terrorism as a concept and problem. In this review of Images of Terror, reviewer Daniel McCarthy notes that Professor Jenkins asks the salient question: What makes a particular incident an example of terrorism, rather than a conventional crime? Although a generic definition of terrorism is possible to develop, the application of that definition to a particular event is much more difficult as a variety of social forces and media interpretations shape our understanding of the event:

[A]s a new understanding of the problem [of terrorism] takes hold, older interpretations may be forgotten entirely and even retroactively discredited. The interpretation that was plausible in the 1980s became, under the influence of a changing ideological climate, a thing that only crackpots believed in the 1990s. This, says Jenkins, is what happened to the theories of those who warned of the dangers of Islamic terrorism during the Clinton years. In the 1980s, when terrorism was understood as a phenomenon connected to outside dangers?to the Cold War and the Iran-Iraq War, for example?such warnings might have been taken seriously. In the 1990s, however, terrorism increasingly came to be understood as something associated with domestic far-right militants, and those who talked too much about Islamic terrorism risked being dismissed as racists or Islamophobes. After 9/11, the prevailing understanding changed again, and people who may have sounded like cranks five years earlier were now experts on a real and obvious danger.

Indeed, as Professor Jenkins points out, the concept of terror is neither new nor particularly unusual in American history. However, the social and political forces that shape our understanding of terror events make it seem that way:

[W]hile the images of terror shift, the reality of terror may remain constant. Terrorism in United States is certainly not a recent development. Jenkins provides a chart enumerating more than forty-nine major acts of terrorism in the United States between 1939 and 2001; he notes, however, that despite this long history of terrorism, news media would often react to a major terrorist strike within the country as if it were the first time terror had come to the United States. The media, however, are not alone in their forgetfulness and revisionism. Jenkins argues that intelligence agencies and government departments also change the way terrorism is understood, prompted by changing diplomatic and political realities.

As one example, Professor Jenkins points out how the government’s handling of the information that 9/11 hijacker Mohamed Atta probably met with Iraqi intelligence agent in the Czech Republic in early 2001 reflects the conflicting interests within the U.S. government at the time:

Czech intelligence originally claimed that [Atta met with Iraqi intelligence agent in the Czech Republic in early 2001], but the Czech government later disavowed that report. Might the government have had other reasons for discrediting the story? An Iraqi connection to 9/11, no matter how tentative, would have been cause for war, something that Jenkins says the U.S. State Department was eager to avoid at the time.

Professor Jenkins maintains that we can reach a better understanding of terrorism and its implications by asking specific questions that undermine the political or social twists that a societal force may attempt to place on a particular terroristic event:

There may be things we can never know about terrorism, certainly about specific acts. In general, however, consumers of news and information can adopt strategies to arrive at the clearest understanding possible. First, says Jenkins, readers must ask, ?How do we know this?? (p. 193). They must evaluate the sources?and the sources’ sources?carefully. Second, they must ?realize that claims have consequences? (p. 193), asking cui bono while considering also how a certain piece of information may harm the interests of various actors. Finally, ?the greatest weapon for the critical consumer of terrorism claims is memory? (p. 194). Images of Terror as a whole is concerned with that third point: the purpose of a social constructivist analysis, after all, is to show that things have not always been understood the way they now are and that other interpretations are possible. Memory provides some context and some grounds for hope in the effort to understand terrorism.

Thus, the “War on Terror” paints with a broad brush where a more measured stroke is needed. The sooner that we understand that the war is against radical Islamic fascists who seek state power to effectuate totalitarian control similar to what occurred in Iran in 1979 and in Afghanistan in the 1990’s, then the quicker we will be able to develop the military and political policies necessary to defeat these tyrannical forces against progress.

Former El Paso traders cop pleas

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Following on this earlier post on the subject, four former Houston-based El Paso Corp. natural gas traders have agreed to plead guillty under cooperation agreements with the Justice Department after being been charged with making false reports used to calculate the index price of natural gas.
Industry publications, such as the Inside FERC Gas Market Report, use data from traders to calculate the index price of natural gas. Accordingly, movement in index prices often affects the level of profits traders can generate. In this particular case, it remains unclear whether the publication actually used the false information provided, but the government needs only to prove that fake trades were reported and not not that they were actually published or affected the markets.
Each of the traders worked for the Houston company’s El Paso Merchant Energy division and were charged with one count of false reporting. They will enter their guilty pleas later this month. The four who were released on personal recognizance bonds were Christopher Bakkenist, 41; Dallas Dean III, 60; Donald J. Guilbault, 51; and William L. Hamm, 45.
Wednesday’s indictments came nearly two years after former El Paso trader Todd Geiger was indicted for wire fraud and reporting fake trades to an industry publication. He pleaded guilty in 2003 to the fake-trade-reporting charge and agreed to cooperate with prosecutors in the probe.
Earlier this year, ten former El Paso Corp. traders and supervisors received targe letters from the U.S. Attorney’s Office in Houston alerting them that they were targets of a criminal investigation into manipulation of natural gas prices. Moreover, in the last two years, the Commodity Futures Trading Commission has filed civil charges against several companies and subsidiaries in which the CFTC alleges that traders knowingly reported false data to industry publications in an effort to manipulate natural gas prices. So far, the CFTC has settled such allegations against approximately 25 companies for more than $250 million, and El Paso settled such CFTC charges for $20 million in March 2003.
However, in a recent case involving another trader who had been charged with false reporting, a federal district judge threw out the charges after ruling that the part of the Commodity Exchange Act that deals with reporting of false and misleading information on on commodity trades is unconstitutionally broad. That ruling is currently on appeal, and the Fifth Circuit Court of Appeals in New Orleans conducted oral argument on the case earlier this week.

Stros cruise by Braves

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The Stros glided into Atlanta and easily took the first game of their National League Divisional Series with the Braves 9-3 behind Lance Berkman, Carlos Beltran, Jason Lane, and Brad Ausmus‘ yaks and the gutty pitching performance of Roger Clemens.
The Stros won this one with a solid hitting display as they cranked out nine hits in addition to the four above-mentioned taters, including run scoring doubles by Bags and JK. A four run uprising in the third and then three more runs in the fifth put this one away.
Unfortunately, the Stros’ strong hitting display prompted Braves reliever Juan Cruz to nail Beltran in the ribs with a pitch in the seventh, and Lane replaced Beltran in the field for the final two innings. Post-game x-rays on Beltran’s ribs were negative, but the contusion restricted the his arm’s range of motion, so it is unclear whether he will be able to play in today’s game. If Beltran cannot play today, Lane would replace him in the lineup.
Inasmuch as Cruz clearly was throwing at Beltran on purpose (although the umps did not issue any warnings), the bottom half of the frame provided one of the comic moments of the season. With two outs and nobody on, the Braves’ centerfielder Andruw Jones came to the plate against Clemens, who is notorious for being “old school” with regard to retribution for one of his teammates being hit by a pitch on purpose. Inasmuch as Jones is the Braves’ centerfielder and Beltran is the Stros’ centerfield, there is logic in a baseball sense for Clemens to throw at Jones in response to Cruz throwing at Beltran.
At any rate, Clemens worked the count to two strikes against a very antsy Jones. Clemens then started a two strike curveball at Jones that broke over the plate but in the dirt. Jones took the worst swing at the pitch that I’ve seen since I coached my last T-Ball game in striking out, and looked like the most relieved person in the ballpark as he tossed his bat, grabbed his glove and retreated to the relative safety of centerfield.
According to the ESPN reporter near the Stros’ dugout, Clemens’ directive to his teammates as he left the dugout for the clubhouse after finishing seven innings: “Keep kickin’ their ass.”
Clemens showed the effects of the stomach virus that knocked him out of the final game of the regular season. He walked six, which is the most he has given up in a game in over five years. However, Clemens was the quintessential gamer, stranding nine Braves runners in the first four innings. The Rocket lasted seven innings, throwing 117 pitches while giving up two earned runs and striking out seven.
The Stros now hand the ball to Roy O in Game 2 against former Stro Mike Hampton, who has been an average National League pitcher this season. However, Hampton is a gamer just like Clemens and Oswalt, so do not expect another easy game like today’s. But it sure would be nice to steal two games in Atlanta before the series returns to the Juice Box on Saturday afternoon.

More trouble in one of John Moores’ California investments

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The Justice Department announced Wednesday that a federal grand jury has indicted eight former Peregrine Systems Inc. executives with taking part in a massive conspiracy that inflated the company’s revenue by more than $500 million over several years. Peregrine is in the business of developing software to track corporate assets.
Former Houstonian John Moores — who founded Houston-based BMC Software, has been a major philanthrapist for the University of Houston and is currently the owner of the San Diego Padres Baseball Club — is the former chairman of the board of Peregrine. Dozens of shareholder lawsuits filed over the past several years allege that Mr. Moores and his entities sold over 14 million Peregrine shares worth $630 million from 1999 to 2001 during a time in which Peregrine’s financial reports were being falsified. Mr. Moores denies any knowledge of the falsity of Peregrine’s financial statements and has never been charged criminally in regard to Peregrine or any other venture.
The indictment charged former Peregrine CEO Stephen Gardner and former President and COO Gary Lenz, and other executives involved in sales, finance and accounting at the company. The indictment also charged a former Arthur Andersen LLP audit partner, who oversaw Peregrine’s bookkeeping. Messrs. Gardner and Lenz, and four other executives also face related civil fraud charges filed by the Securities and Exchange Commission.
Peregrine filed for bankruptcy protection in 2002 after announcing an internal probe of its accounting. It later restated financial results for 11 quarters from 2000 through 2002 in which it reduced its previously reported revenue of $1.3 billion by over a half a billion dollars. Peregrine had reported 17 consecutive quarters of rising earnings from 1997 through 2002, and its stock price reached nearly $80 in March, 2002. The plaintiffs in the civil lawsuits against Mr. Moores and others — and now the Justice Department — are taking the position that those results were the result of the Peregrine executives’ cooking of the company’s books.
In the meantime, a former Peregrine sales executive on Wednesday agreed to plead guilty to charges of obstructing justice and will join several others who are cooperating in the government’s ongoing investigation of the company. Moreover, Peregrine’s former chief financial officer previously pled guilty to conspiracy and securities fraud charges, and two other former Peregrine executives also pled guilty to conspiracy charges.

Akin, Gump sued for Pizza Inn golden parachutes

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Colony, Texas-based Pizza Inn Inc. has sued Dallas-based Akin Gump Strauss Hauer & Feld LLP — the company’s former law firm — for $7.4 million in damages alleging that the firm breached its duties to the company when it wrote “golden parachute” severance package agreements for four senior Pizza Inn executives. The lawsuit alleges that the potential payout under the golden parachute agreements was more than twice Pizza Inn’s 2003 net income of $3.1 million and that the firm’s legal services benefited the executives, but not Pizza Inn.
The lawsuit is the latest crossfire in a fight for control of Pizza Inn, of which Dallas-based Newcastle Partners LP owns 32.5 percent. In February, company shareholders approved a plan that gave Pizza Inn board control to Newcastle, including replacing the Pizza Inn chairman with Newcastle’s sole general partner and adding the Newcastle president and two other Newcastle backed members to the board. That development coincided with a Thompson & Knight LLP opinion to the board that that adding the Newcastle-backed board members to the Pizza Inn board did not constitute a change in control. A month later, one of the Pizza Inn executives resigned and sought a $605,882 severance payment under his golden parachute agreement. The other three other Pizza Inn executives with similar severance deals still work at the firm.