Merck’s board has approved golden parachutes from 230 of its top executives.
On the heels of the problems noted in earlier posts here and here, my sense is that Merck’s board did not have particularly good timing in approving these parachutes.

Dallas Mavericks owner Mark Cuban is fed up with the what he thinks is the roulette nature of the stock market. He has concluded that stock investing is not much different than gambling in Vegas, so for those who like to wager, he has come up with a better idea — a hedge fund that bets on sporting events.

“The goal of the fund would be to make money and to prove that the current equity markets are more Ponzi scheme than efficient markets,” Mr. Cuban said in his blog post announcing the hedge fund. “There is far more hypocrisy in equity markets than there is in non-traditional markets and that impacts those markets’ ability to be fair.”
“I’ve decided to start a new hedge fund. However, this hedge fund won’t invest in stocks or bonds. It’s going to be a fund that only places bets ? a gambling hedge fund.”

Mr. Cuban reasons that stock investing is generally unfair and that most gamblers have better information about their local sports team than investors do about a company. Inasmuch as the media reports on every hangnail suffered by a member of a local sports teams, Mr. Cuban contends that the media releases much more and better information than publicly traded companies.
Mr. Cuban has not yet provided many details about the venture, such as when the fund will be up and running, which sports the fund will bet on or what it will be called. He does say he will not pick the bets and that professionals will run the fund.
While a hedge fund run by professional gamblers may sound a bit far-fetched, the hedge fund industry has a long history of engaging in rather unusual trading strategies. Until recently, hedge funds were lightly regulated on the theory that people participating in them were sophisticated investors and able to take care of themselves. But in recent years, there has been an substantial increase in the number of hedge funds and the SEC has adopted more stringent rules. Accordingly, if Mr. Cuban’s fund raises more than $30 million in assets and has at least 15 investors, the advisers of the fund will have to register with the SEC by February 2006. This means that the advisers would have to disclose to the SEC their identities, the amount of money that they are managing, and the identiay of the fund’s compliance officer. Mr. Cuban will probably set up his fund so that it is open only to accredited investors, which normally have at least $1 million in assets.
Mr. Cuban concludes his blog post with his real purpose in starting the fund:

“By showing that gambling in the traditional sense is less of a gamble than gambling in the stock market, traditional markets will hopefully have to change to the benefit of investors.”

My sense is that this fund is going to be a bit more sophisticated — although no more competitive — than the traditional Kirkendall Family Bowl Game Pool that takes place each holiday season. ;^)

U.S. prosecutors charged five former natural gas traders for allegedly supplying fake trade data to publishers that produce indexes used to value natural gas contracts. This post and this post refer to earlier indictments of the same nature against other El Paso Corp. traders.
Prosecutors alleged that two of the traders – Donald E. Burwell and James P. Phillips – operated as part of a conspiracy at El Paso Merchant Energy run that the government alleges was run by the head of gas trading. The executive who allegedly ran the conspiracy was not identified in the indictments.
Messrs. Burwell and Phillips, along with former El Paso trader Greg Singleton and former Dynegy Inc trader Michelle Marie Valencia were all charged with conspiracy, wire fraud and false reporting. A fifth trader — Jerry A. Futch Jr. — formerly of Reliant Energy Corp, was charged with four counts of reporting false transaction data. All five defendants pleaded innocent at an arraignment Monday and were released on $50,000 bond.
In an interesting twist, all the defendants except Mr. Futch were allowed to turn themselves in to the U.S. Marshal’s Office Monday morning, as is typical in white collar criminal cases. However, for some reason, Mr. Futch was not allowed to do so and was arrested at his home as he was getting ready to take his two children to school. No word yet on the reason for the government’s heavy handed handling of Mr. Futch.
The indictments follow a lengthy investigation into alleged efforts to manipulate the trading indexes, which are used to value billions of dollars in gas contracts and derivatives. 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 these particular trader cases, 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.
Moreover, in an earlier case involving Ms. Valencia in which she was 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 and vague. That ruling is currently on appeal at the Fifth Circuit Court of Appeals in New Orleans, which has already conducted oral argument in the case and is currently preparing its decision.

Most of news over the past two years about the United Airlines chapter 11 case has focused on the legacy airlines operating losses, its unfunded pension obligations, and its need to overhaul or reject its collective bargaining agreements. Here is a series of posts on those various issues.
So, United has established that a legacy airline can lose money for a long time while floundering in chapter 11. However, can United continue meandering in chapter 11 without aircraft? Look at this seemingly innocuous press release that United issued late this past Friday:

A U.S. federal bankruptcy court judge has blocked a group of creditors from repossessing up to 14 airplanes from UAL Corp.’s United Airlines, saving the bankrupt carrier tens of millions of dollars.
Judge Eugene Wed off issued a temporary restraining order Friday barring the group, represented by the Chicago-based law firm Chapman & Cutler LLP, from seizing up to eight Boeing 767s and six 737s.
The group of financiers, which controls about one-third of United’s fleet, had threatened to seize the planes as early as Dec. 1 because of an impasse over their leases.
United, the nation’s No. 2 airline, is seeking to lower aircraft operating costs by renegotiating its leases with creditors. However, it argued that the Chapman group was violating antitrust laws by renegotiating as a bloc instead of as individual leaseholders, forcing United to accept higher lease rates.

Well, you say, what’s so unusual about that? Secured creditors in chapter 11 cases are automatically stayed from repossessing their collateral until they petition the Bankruptcy Court to modify the automatic injunction under Bankruptcy Code section 362 to allow them to exercise their contractual rights. Isn’t the Bankruptcy Judge simply enforcing the stay against United’s aircraft lenders?
Not exactly. Aircraft collateral is treated differently under the Bankruptcy Code than other types of collateral (financial institutions that make aircraft loans lobby well in Congress). Under section 1110 of the Bankruptcy Code, the above-described TRO is on quite shaky grounds:

(a)(1) . . . , the right of a secured party with a security interest in [aircraft] equipment, . . . or of a lessor or conditional vendor of such equipment, to take possession of such equipment in compliance with a security agreement, lease, or conditional sale contract, and to enforce any of its other rights or remedies, under such security agreement, lease, or conditional sale contract, to sell, lease, or otherwise retain or dispose of such equipment, is not limited or otherwise affected by any other provision of this title or by any power of the court.

In plain English, that says “a bank that has aircraft collateral cannot be enjoined from repossessing and selling its collateral in a chapter 11 case.” Section 1110 goes on to provide that the only limitation on an aircraft lender’s collateral rights is during the first 60 days of the chapter 11 case and that the debtor must cure any defaults under its agreement with the aircraft lender if the debtor wants to continue using the aircraft that is collateral for the lender’s loans to the debtor.
Consequently, it looks like the financial institutions that control a third of United’s fleet have had enough. As United’s management, unions, and other parties-in-interest continue to fiddle while Rome burns, I wonder whether they have examined pro formas on operating an airline without a substantial portion of its aircraft fleet? Inasmuch as the Bankruptcy Court’s decision to approve a TRO in the face of section 1110 is almost certainly in error, United’s dithering parties-in-interest better get ready to deal with a few less aircraft sooner rather than later.