The mercurial F. Lee Bailey, the former high-profile criminal defense attorney who was disbarred in 2002 for allegedly misapplying $6 million in proceeds from the sale of a client’s stock, has applied to regain his law license in Massachusetts..
Now even Rosie O’Donnell has a blog?
Bob Gray, longtime Fulbright & Jaworski corporate securities partner and the head of that firm’s technology practice, has moved to the Houston office of Mayer Brown Rowe & Maw, LLP.
Bob is one of Houston’s most well-regarded lawyers in the corporate securities area and is also involved in many civic causes. He is currently chairman of the advisory boards of directors of the Houston Technology Center and BioHouston, and is a member of the University of Houston C.T. Bauer College of Business Dean’s Advisory Board.
This earlier post told the story of the Snohomish County Public Utility District, which is riding an unparalleled wave of popularity among its customers despite hiking electricity rates 50 percent in the past four years and disconnecting a record number of customers for failure to pay bills.
The reason for this rather incongruous situation? The utility has been leading the public charge against the popular business whipping boy of the moment, Enron Corp.
Well, the utility’s anti-Enron public relations campaign appears to be working. Yesterday, the Federal Energy Regulatory Commission issued an order that determined that Enron was engaging in illegal activity at the time it entered into contracts with West Coast utilities during the West Coast power crisis of 2000-2001. Accordingly, FERC has ordered a hearing to determine whether Enron should be allowed to collect profits it would have received had those contracts been fulfilled. The hearing is expected to occur in May, and that hearing will be followed by FERC’s final decision later this year.
The decision is a landmark for West Coast utilities that continue to fight their Enron contracts because it is the first time that FERC has acknowledged that the contracts were signed under fraudulent pretenses. The utilities and cities involved terminated their contracts with Enron or watched as Enron terminate its contracts with them when the company slid into bankruptcy in late 2001.
When Enron went bankrupt, the Enron bankruptcy estate sued the utilities and cities for the money it would have made had the contracts been fulfilled. Enron is seeking a cool $300 million from a couple of Nevada utilities, and $122 million from the Snohomish County PUD, which signed a nine-year contract with Enron in January 2001 for power that was four times as expensive as it had been just months earlier. To come up with the $122 million, Snohomish contended that it would have to collect about $400 per customer.
As noted in the previous post, Snohomish searched through thousands of pages of Enron documents and paid for hundreds of hours of taped conversation transcripts involving Enron traders. The material turned out to be Watergatesque — the Enron traders joked about stealing money from California grandmothers and about the possibility of going to jail for their actions. With this explosive evidence, Snohomish sought a finding from FERC that it did not have to pay any damages to Enron under the terminated Enron contract. The FERC ruling on Friday means that Snohomish is inching closer to that goal.
Despite the FERC ruling and the tape recordings, the Enron Task Force has not taken much of an interest in pursuing former Enron traders on criminal charges. In October 2002, former Enron trader Tim Belden pleaded guilty to wire fraud for participating in trading schemes to game the California market, and two other former Enron traders — Jeffrey Richter and John Forney — later pleaded guilty to similar charges. However, those are the only former Enron traders who have been charged with crimes to date and, during a deposition in an Enron-related civil case last month, former Enron Online trading desk executive Louise Kitchen disclosed that the Justice Department had never even interviewed her.
Meanwhile, despite all of these legal machinations, the customers of the Snohomish PUD continue to pay much higher utility bills than utility customers in most other parts of the country. Perhaps the excess amount should be called the “flog Enron premium?”
This Chronicle article reports on the imminent closing of the Palace Boot Shop, which is a downtown Houston institution. The nearby Christ Church Cathedral has acquired the downtown city block where the shop is located, and brother-owners Lakis and Steve Xydis have decided to take a break for a year or two before deciding whether to reopen the shop in another location. Any suggestions on where I should buy my boots in the meantime?
Meanwhile, a couple of blocks down the street from the boot shop, this Chronicle article reports that Reece Rondon was sworn in this week as replace Bruce Oakley as judge of the 234th Harris County State District Court. Mr. Oakley stepped down earlier this year to return to private practice.
Judge Rondon was first appointed to the 334th District Court in October 2003, but he lost a close race in the 2004 Republican primary to Sharon McCally by 307 votes. Judge McCally went on to win the seat in the November election. Between stints on the bench, Judge Rondon returned to private practice at Andrews Kurth, where he had practiced before taking the bench. His new term in office will run until 2006, when he intends to run for a full term.
A French magistrate opened a formal investigation on Thursday of Houston-based Continental Airlines for manslaughter in the alleged role that one of its jets played in the July 2000 crash of the supersonic Concorde. The step of placing Continental under investigation is the process that the French criminal justice system follows prior to formally charging a defendant with a crime, such as the anticipated manslaughter and involuntary injury charges in this case.
Investigators have previously concluded that a titanium strip that fell from a Continental DC-10 onto the runway caused one of the Concorde’s tires to burst, which in turn propelled rubber debris that perforated the Concorde’s fuel tanks. Continental contends that it is not responsible for causing the crash because of defects in the Concorde’s fuel tanks.
Deutsche Bank AG, German bank WestLB AG and Italian bank Caboto Holding Sim joined most of the other financial institution-defendants in the WorldCom class action yesterday in agreeing to settle fraud allegations for their participation in the sale of WorldCom Inc. bonds in 2000 and 2001. The settlements come on the eve of a scheduled trial of the case next week, and leaves JP Morgan Chase and a couple of smaller financial institutions as the only remaining defendants in the case. This link will take you to the previous posts on the WorldCom class action settlements.
Deutsche Bank’s settlement amount is $325 million, while WestLB agreed to pay $75 million and Caboto $37.5 million. Those amounts increase the WorldCom class action settlement pot to about $3.7 billion, which is for the time being the largest recovery ever in in a securities class-action lawsuit. Nevertheless, sharpies on such matters are already betting that the settlement pot and/or damages awarded against the financial institution-defendants in the Enron class action will lap the WorldCom settlement pot by several billion.
The Oregon Public Utility Commission announced Thursday that it had decided not to approve Texas Pacific Group‘s proposed $2.35 billion purchase of Enron subsidiary Portland General Electric because “the potential harms or risks to PGE customers from the deal outweigh the potential benefits.” Here are the earlier posts on this situation.
PGE is Oregon’s largest utility with about 755,000 customers. Texas Pacific is the closely-owned Fort Worth investment firm that has been trying to buy PGE out of Enron’s bankruptcy estate for more than a year despite widespread public resistance in Oregon. Even such major industrial customers of the utility such as Intel Corp. came out against the deal.
State law required the state regulators to decide whether ratepayers would benefit from the takeover and that no public harm would result. Inasmuch as the commission could have approved the deal outright or conditioned approval of a sale on certain additional requirements, the outright denial of the proposed purchase is a crushing defeat for Texas Pacific and Enron creditors.
If Texas Pacific does not win an appeal of the utility commission’s ruling, then Enron’s creditor’s committee will essentially decide what to do with PGE. The two most likely results are just to distribute new stock of the utility among Enron creditors or reopen the bidding for the utiity. Representatives of the City of Portland has publicly stated that it would make a bid for the utility.
Texas Senator John Cornyn‘s staff should think twice next time before sending out a canned response to one of his constituent’s email communications.
Robin Phelan of Haynes and Boone‘s office in Dallas has long been one of Texas’ leading experts in the area of business bankruptcy and reorganization law. As noted most recently here, Congress is getting ready to enact dubious bankruptcy “reform” legislation that has remarkably little public support except for the well-heeled consumer credit card industry.
Robin’s practice is primarily in big corporate reorganization cases, so he does not have any personal or professional stake in the consumer bankruptcy area that is the primary focus of this bad bankruptcy “reform” legislation. Nevertheless, Robin knows bad bankruptcy legislation when he sees it, and so he took the time to write Senator Cornyn a well-reasoned and dispassionate letter offering his expert view of the numerous defects in this legislation. In response, Robin received this canned email from Senator Cornyn’s office:
Dear Mr. Phelan:
Thank you for contacting me about the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (S. 256). I appreciate having the benefit of your comments on this issue.
On February 1, 2005, Senator Grassley introduced S. 256, legislation which I am proud to co-sponsor. This legislation would amend the federal bankruptcy code and reform many areas of bankruptcy practice such as consumer bankruptcy filings, small business bankruptcy, and family farmer reorganization. Additionally, it would address abuse of creditor practices and bankruptcy filings. On February 24, 2005, S. 256 was approved by the Senate Judiciary Committee and now awaits a vote on the Senate floor.
I support bankruptcy reform because America needs to restore a greater sense of personal responsibility to its financial system and must act to prevent the abuses of bankruptcy law that we have witnessed in recent years. Bankruptcy relief should be available to those who are unable to pay, not to those who are simply unwilling to pay.
I appreciate the opportunity to represent the interests of Texans in the United States Senate. You maybe certain that, as a member of the Senate Judiciary Committee, I will keep your views in mind as the Senate considers S. 256. Thank you for taking the time to contact me.
Sincerely,
JOHN CORNYN
United States Senator
Most folks receiving such a response would simply sigh and say, “Oh well, that’s politics” and move on to the next task of the day. Not Robin. Here is his reply to Senator Cornyn’s canned email:
Dear Senator Cornyn:
Nice unresponsive canned statement that parrots the line given to you by the consumer lenders.
You have ignored the comments of substantially all of the professionals and academics that are familiar with the issues. It is beyond me why you would believe the consumer lenders who have a distinct economic interest in squeezing as much as they can out of consumers and disregard the opinions of almost everybody else.
I don’t have an economic interest in consumer bankruptcies, but I’m close enough to the system, and have reviewed the bill in connection with professional activities, to have a working knowledge of the issues. Campaign contributions by the consumer lenders aside, you have a responsibility to consider that almost everyone else thinks that this is a really bad bill.
Sending an unsolicited credit card to many people is like sending a case of Jack Daniels to an alcoholic and then sending him a bill for the booze a month later. Throwing bankrupts into indentured servitude to the credit card companies isn’t the solution to the non-existent problem manufactured by the lenders.
By the way, “maybe” in the next to the last sentence should be “may be”.
Robin Phelan
H’mm, I wonder if Senator Cornyn’s staff has a canned response to that one?
Following on this post from a couple of weeks ago, this NY Times op-ed by University of Texas law professors Bernard Black and Charles Silver, University of Illinois law professor David Hyman, and Columbia law professor William Sage contends that there recent study of malpractice awards in Texas indicates that there is scant evidence that a crisis in states’ tort systems is the driving force behind the increases in medical malpractice insurance premiums. Here is how they summarize the results of their review of all closed claims in Texas between 1988 and 2002, which was the year before the Texas Legislature enacted sweeping tort reform measures:
Large claims (with payouts of at least $25,000 in 1988 dollars) were roughly constant in frequency.
The percentage of claims with payments of more than $1 million remained steady at about 6 percent of all large claims.
The number of total paid claims per 100 practicing physicians per year fell to fewer than five in 2002 from greater than six in 1990-92.
Mean and median payouts per large paid claim were roughly constant.
Jury verdicts in favor of plaintiffs showed no trend over time.
The total cost of large malpractice claims was both stable and a small fraction (less than 1 percent) of total health care expenditures in Texas.
In short, as far as medical malpractice cases are concerned, for 15 years the Texas tort system has been remarkably stable.
The authors conclude as follows:
Malpractice premiums have risen sharply in Texas and many other states. But, at least in Texas, the sharp spikes in insurance prices reflect forces operating outside the tort system.
The medical malpractice system has many problems, but a crisis in claims, payouts and jury verdicts is not among them. Thus, the federal “solution” that Mr. Bush proposes is both overbroad and directed at the wrong problem.
Unfortunately, this is not an unusual approach for the Bush Administration to follow in enacting legislation, as reflected by this legislation.