Houston attorney John O’Neill of Swift Boats Veterans fame is the subject of this American Enterprise Institute interview.
Speaking of O’Neill, that reminds me of this incredibly bad idea that cropped up during last year’s Presidential campaign. Thankfully, the trial balloon that was referred to in that post blew away and that was the end of the speculation.
I am a big fan of Judith Martin, who is the author of the Miss Manners column and various Miss Manners books. In today’s column, she addresses the following question:
Dear Miss Manners:
At an apartment-warming I attended, a couple arrived about 30 minutes into the party. Within seconds, the family dog began making love to the female guest’s leg. Her date grabbed her because she was struggling to stand.
The hostess said, “Down! Down!” The host said, “No, ‘Big Boy!’ No!” and tried to pull Big Boy off, without success. A nearby guest then leaned forward and gave the dog’s tail a single tug. The dog let out a yelp, dropped to his feet and began inspecting his rear.
The yelp brought the party to a halt. In the silence that followed, the hostess said, “Did you jerk my dog’s tail?” The tail-tugger turned red and looked ashamed, but said nothing. The moment passed and the party resumed.
Big Boy walked away. The tail-tugger did, too, in the opposite direction. The female guest later became pregnant, but not because of Big Boy. I don’t think anyone handled this well.
What do you think?
Miss Manners’ answer: That you had far too good a time at this party.
And while the business and legal worlds focus on the implications of the Ebbers conviction, this NY Times article reports on the uneasiness at Berkshire Hathaway as New York Attorney General Eliot Spitzer carves another notch in his anti-business holster with the resignation of longtime American International Group chairman, Maurice “Hank” Greenberg, who is every bit as prominent in financial circles as Berkshire chairman Warren Buffett is in the investment field.
In striking contrast to Mr. Ebbers’ fate, this week’s “retirement” of AIG CEO Greenberg was the result of AIG’s board trying to soften the wrath of AG (i.e., “Aspiring Governor”) Spitzer. AIG remains one of the world’s largest and most lucrative financial services businesses. Mr. Spitzer was about to take Mr. Greenberg’s deposition in his ongoing investigation of transactions between AIG and Berkshire’s General Re Corp., so the AIG board unceremoniously elected to dump the man who had built the company into a giant in the hope of avoiding further legal scrutiny by the Aspiring Governor.
What is unfortunate about all of this is that, in the current anti-business culture that is fostered by films, the MSM, and prosecutors such as Mr. Spitzer, the AIG Board’s throwing of Mr. Greenberg to the wolves just might have been the most reasonable business decision under the circumstances. In light of recent civil settlements by directors in the Enron and WorldCom cases, the main risk for directors now is failing to get rid of a CEO at the first sign of Mr. Spitzer or some other irregularity. Even if that that means showing the door to a CEO with Mr. Greenberg’s long record of great returns for shareholders, that’s just life in the big city.
Based on what is publicly known about Mr. Spitzer’s investigation into the AIG-General Re transaction, it would not be unreasonable for any CEO to run for cover out of fear that she is the next target of this voracious appetite to criminalize even normal business practices. If you believe Mr. Spitzer, Mr. Greenberg arranged a transaction in 2000 with General Re that made AIG’s reserves look slightly better than they really were. However, the deal did not affect AIG’s net income and was the type of transaction that AIG — and many other companies in the insurance industry — have done for years without any adverse market reaction, much less a criminal investigation.
Nevertheless, as Mr. Spitzer continues pressing his campaign to criminalize business, it does not matter whether a transaction was considered proper in the past. Mr. Spitzer knows that he can get what he wants without the details of due process and a trial by undermining a company’s stock price in the media. Such an approach is contrary to the rule of law, but Mr. Spitzer proceeds with the warm understanding that no one in the MSM will ever call him out on the injustice of his ways.
Perhaps the Aspiring Governor will yet turn up something more damaging at AIG and Berkshire than what has been reported to date. But the AIG morality play is turning out about the same as other Spitzer investigations — a CEO gets canned, the company pays a big fine, and the Aspiring Governor gets good P.R. with perhaps a few crimes sprinkled in to titillate public interest in the matter. Although the dubious policy of criminalizing business generally is bad enough, Spitzer’s manipulation of huge companies by publicly attacking common business practices — without any measure of prosecutorial discretion or due process — is taking governmental regulation of business to an entirely new and more dangerous level.
Update: Don’t miss Professor Ribstein’s observations on the foregoing process, which he insightfully characterizes as the “Imperial Regulator and the Divine CEO.”
Bernie Ebbers’ honest idiot defense fails as he is convicted on all counts.
The conviction is further bad news for former Enron chairman Ken Lay and former CEO Jeff Skilling who are claiming — as did Mr. Ebbers — that former Enron CFO Andrew Fastow kept them in the dark regarding the dire implications that Mr. Fastow’s creation and management of several off-balance sheet partnerships had on Enron’s true financial condition.
In fact, in many respects, Messrs. Lay and Skilling’s defense is harder than Mr. Ebbers’ because both Lay and Skilling supported Fastow’s involvement in the off-balance sheet partnerships and their co-defendant — former Enron chief accountant Richard Causey — approved the dubious accounting relating to the partnerships. It is going to be risky for Messrs. Lay and Skilling to criticize Mr. Causey’s accounting for Fastow’s machinations with off-balance sheet entities during a trial in which all three are defendants. The bet here is that Mr. Causey cops a plea prior to trial and Messrs. Lay and Skilling end up defending the case between themselves. In that regard, Mr. Ebbers’ defense counsel — Reid Weingarten — is one of the lawyers on Mr. Causey’s defense team.
However, a key difference between the Ebbers theory of the case and that of Messrs. Lay and Skilling is that the latter two are not arguing that they were left in dark because of ignorance, but because of Mr. Fastow’s desire to hide the enormous income that he was making from managing the partnerships. Thus, where Mr. Ebbers was forced to argue that he simply did not understand WorldCom’s complicated accounting, Messrs. Lay and Skilling are contending that Mr. Fastow’s greed to generate huge income from Enron’s off-balance sheet partnerships incentivized him to lie to Lay and Skilling regarding the true nature of Enron’s off-balance sheet partnerships. Of course, a complicating fact in Messrs. Lay and Skilling’s defense is that they engineered the Enron board’s dubious approval of Fastow’s management of the partnerships, but that’s another issue.
Moreover, another difference between the Ebbers case and the case against Mr. Lay is that the government’s indictment against the three former Enron executives attributes a much larger role in the alleged crimes to Messrs. Skilling and Causey than to Mr. Lay. Messrs. Skilling and Causey are charged charged with crimes all the way back to 1999, and are identified as the men who “spearheaded” the purported conspiracy to hide Enron’s true financial condition from the marketplace. On the other hand, the charges against Mr. Lay are focused on his actions during the months following following Mr. Skilling’s resignation as CEO in August, 2001, when the government alleges that Lay “took over leadership of the conspiracy.”
This past weekend, Mr. Lay continued an unusual public relations campaign that he has mounted since his indictment in which he has claimed that he was ignorant of wrongdoing at Enron. During an interview on CBS’ 60 Minutes, Lay contended that Enron was a huge company in which senior management was delegated enormous trust to do the right thing. Mr. Lay contended that Mr. Fastow had “betrayed that trust” and “ultimately caused Enron’s collapse. To the extent that I did not know what he was doing, and he obviously didn’t share with me what he was doing, then indeed I cannot take responsibility for what he did.”
Similarly, although Mr. Skilling has not been spoken publicly since his indictment, he did raise eyebrows in legal circles by testifying before Congress in February 2002 in which he asserted that “while I was at Enron, I was not aware of any financing arrangements designed to conceal liabilities or inflate profitability.”