Monthly Archives: May 2005

The BBC on the NatWest Three

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Natwest three2.jpgIn its inimitable style, the B.B.C. has produced a news video segment on the three U.K. bankers who have been dubbed the “NatWest Three” (earlier posts here) in the Enron case. To view the video:

Go to this site.
Hit the “Launch” button, which produces a new window.
In the new window, scroll down on the right hand side to the April 20 hyperlink, “Million Dollar Manhunt.” The video plays in RealPlayer.

bbc2.gifIt’s always entertaining to hear the British pronounce “Houston.” Also, the piece is definitely not complimentary of the Federal Detention Center in downtown Houston. Finally, it seems in the video as if Philip Hilder (Sherron Watkins‘ attorney) is doubling as a spokesman for the Enron Task Force. ;^)
By the way, this Glasgow Herald article provides an interesting U.K. perspective on the NatWest Three case, including the following comment from a Glasgow University law professor:

“Three questions arise here. Firstly, will they receive a fair trial, second, would the sentence be out of proportion with European norms and thirdly, is there a real risk of other forms of mistreatment either in detention conditions or more usual the infliction of violence?”

Brewing rebellion against Metro?

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metroraillogo2.gifTory Gattis runs the smart blog, Houston Strategies. In this post, Tory notes Metro’s less-than-robust rail ridership figures (see this earlier post) and then describes litigation that Metro could be facing in the near future if Metro’s ridership trends continue.
Great. Add litigation attorneys as another interest group favoring misguided rail plans. ;^)

“It’s not the arrow, it’s the Indian”

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golfer.jpgIf you are contemplating a purchase of new golf clubs, make sure that you read this first.
As David Feherty comments:

“Maybe we’re all supposed to stink at this. It’s our punishment for playing this insane game.”

By the way, if you are really interested in improving your golf game and not just hitting longer drives, read this.

Study favors bypass surgery over angioplasty

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heart surgery.jpgThe New England Journal of Medicine yesterday published the findings of a large-scale study that indicate that angioplasty — an increasingly popular invasive procedure for patients with blocked coronary arteries — carries a higher risk of death over the long term than open-heart bypass surgery. The researchers were led by Edward L. Hannan, chairman of the Department of Health Policy Management and Behavior at the University at Albany School of Public Health.
The study is particularly significant because it raises questions regarding the shift in treatment for blocked coronary arteries over the past decade or so — the shift away from coronary bypass surgery in favor of angioplasty, which involves sliding a balloon into an artery through a small incision and then propping it open with a wire-mesh stent.
Inasmuch as angioplasty procedures require a far shorter recovery time and lower risk of in-hospital complications than bypass surgery, it is currently performed more than one million times a year in the U.S., which is about three times the rate of bypass operations. Bypass surgery generally costs between $25,000 to $35,000 while angioplasties run from around $10,000 to $15,000.
The study involved a review of almost 60,000 patients from 1997 through 2000 with serious heart disease in two government databases in New York state. Researchers concluded that those with three blocked arteries who received stents were 1.56 times as likely to die within three years as those who had bypass surgery. Similarly, those with two blocked arteries who got stents were 1.33 times as likely to die as those who had bypass surgery. Finally, over a third of the angioplasty patients required either surgery or additional stents within three years, while only 5% of the bypass surgery patients required either angioplasty or further surgery within the same period. The researchers note that the study does not include findings on the newer generation of drug-coated stents, which some cardiologists believe will improve the outcome for angioplasty.
This large scale study adds to an increasing number of smaller studies finding advantages of bypass surgery over angioplasty for long-term survival. Last year, a Cleveland Clinic study that followed 6,000 patients found that the risk of death over time was more than twice as high in the angioplasty group of relatively high-risk patients.
Both the Cleveland Clinic and New York studies involved review of registry data and not the controlled clinical trials that scientists consider the best form of evidence. In registry studies, researchers must adjust existing data for various factors, which can lead to debate and criticism over the effect such adjustments have on the ultimate findings of the study. Nevertheless, registry data studies allow the reearchers to involve much larger patient groups than clinical trials and to evaluate medical practices that are being most commonly performed in the medical marketplace.

Prosecution rests in the Enron Broadband trial

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EBS7.jpgThe prosecution rested Wednesday in the Enron Broadband trial, about five weeks after the beginning of the trial. Here are previous posts on the trial.
The trial has been a strange one. Looking like a tap-in for the prosecution at the beginning, the prosecution committed some early blunders, such as allowing its key witness to testify falsely regarding a video shown to the jury and then compounding that mistake by attempting to blame the error on a clearly intimidated woman who previously provided video services for Enron. At that point, the trial was looking really interesting.
Unfortunately, the fireworks did not last long. The trial quickly descended into mind-numbing boredom, noted here and here. Thus, when the Enron Task Force prosecutors advised U.S. District Judge Vanessa Gilmore that they expected that it was going to take at least a week to ten days longer to complete presentation of their case-in-chief than they originally predicted, a jury rebellion nearly broke out. It’s exceedingly difficult to read if a jury is blaming the prosecution or the defense for such delays, but the lawyers on both sides accelerated examination of witnesses over the past week in an attempt to get the trial back on course. Inasmuch as the defense side of this type of case normally does not take as long as the lawyers originally predict, my sense is that the trial is back on track to conclude by late June.
Despite their early mistakes, the Enron Task Force prosecutors ended their case-in-chief by eliciting testimony about the “elephant in the courtroom” — i.e., the large amount of money that three of the former Enron executives-defendants made on stock sales during the period in which the prosecution alleges that they were making false public statements about Enron Broadband’s prospects. That is clearly the strength of the prosecution’s case, and expect the prosecutors to hammer that point again and again throughout the remainder of the trial.
The defense team begins presentation of their case today. Let’s hope they liven things up a bit.

Thoughts about Texas university endowments

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Rice.jpgThis handy document ranks the size of the 741 largest university and college endowments in the United States. Although most of the largest endowments are held by well-known institutions, there are surprises even among the biggest endowments. Not many people realize that little Grinnell College in Grinnell, Iowa has the 34th largest endowment in the U.S. at almost $1.3 billion.
Here are some entries of interest to Houstonians:

1. Harvard University $22.1 billion
2. Yale University $12.7 billion
3. University of Texas System $10.3 billion
10. Texas A&M University System $4.375 billion
17. Rice University $3.3 billion
52. Baylor College of Medicine $972 million
56. Southern Methodist University $914.5 million
57. Texas Christian University $869 million
78. Trinity University $673 million
79. Baylor University $672 million
125. University of Houston System $402.5 million
129. Texas Tech University $392.5 million

Given the institutions’ relative contributions to the welfare and economy of the State of Texas, does it really make sense for the University of Houston to have an endowment that is only roughly 4% the size of the University of Texas endowment and only 10% of that of Texas A&M? Ah, the legacy of the Permanent University Fund. At least UH is providing some serious “bang for the buck” in furnishing a quality educational resource for the State of Texas and Houston at a fraction of the endowed capital of UT and A&M.
On the other hand, one way to ameliorate the effects of the disproportionate size of the endowments would be through merger. How about turning UH into the University of Texas at Houston (UTH) and Tech into Texas A&M University at Lubbock? Or vice versa, in that it actually might make more sense to merge UH with A&M, which is more in need of an urban presence than UT. Inasmuch as it is in the interests of Texas for UH and Tech to achieve Tier I university status, a merger into either the UT or A&M systems would give both institutions access to endowed capital that would facilitate such an effort.
By the way, don’t worry. Both UH and Tech could retain their football teams after the mergers. ;^)

Update on Enron’s “NatWest Three”

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Natwest three.jpgOne of the more interesting sidelights to the criminal investigations into Enron Corp. has been the saga of the “NatWest Three” — David Bermingham, Gary Mulgrew and Giles Darby, the three former National Westminster Bank PLC bankers based in London who are charged in Houston with bilking their former employer of $7.3 million in a scheme allegedly engineered by former Enron CFO Andrew Fastow. Here are the previous posts on the NatWest Three.
Earlier this morning, English Home Secretary Charles Clarke approved the extradition of the NatWest Three to Houston to face the seven counts of wire fraud that each of them face under the U.S. indictment. The NatWest Three have two weeks to appeal Mr. Clarke’s decision, and an appeal would likely tie the matter up further in U.K. courts.
The case of the NatWest Three is gaining increased public interest in England because the three bankers have contended that, if a fraud case should be prosecuted against them at all, then the case should go forward in England because the men are all British and the alleged offenses were committed against a United Kingdom company. If a British prosecution against the three were to proceed, then the U.S. prosecution would be delayed because the British charges would take precedence over foreign ones. A British prosecution would also raise all sorts of double jeopardy and collateral estoppel issues that could at least complicate any subsequent U.S. prosecution.
The U.K.’s Serious Fraud office decided not to prosecute the three former bankers, but the three bankers last month won a judicial review of that decision. Although Mr. Clarke was not required to consider the judicial review issue in deciding whether to approve the men’s extradition, British legal commentators are now openly questioning why the British government is giving in so easily to a U.S. government extradition request relating to reputable U.K. businessmen, particularly in regard to an extradition that would result in a prosecution of those U.K. citizens in Houston’s anti-Enron environment for alleged crimes that the U.K. government has declined to prosecute?
That’s a pretty darn good question.

Crandall on the Wright Amendment

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crandall.jpgBefore retiring in 1998, former American Airlines chairman and CEO Robert Crandall steered American successfully through the first two decades after deregulation of the American airline industry.
Mr. Crandall was viewed as a hard-knuckled but successful executive during his tenure at American. Always worried about the tendency of airlines to price cut themselves to ruination, Mr. Crandall was tape-recorded (some would say set up) by the CEO of bankrupt Braniff Airlines, who prompted Mr. Crandall to make the unremarkable statement that both airlines would benefit if they raised prices. The Justice Department censured Mr. Crandall for broaching price fixing over that incident. In his campaign to control rising costs during the new era of deregulation, Mr. Crandall took on the airline labor unions, prompting a flight attendant strike in 1993 and a pilot strike in 1997. However, when he retired, American was a much healthier company financially than it is now.
While running American, Mr. Crandall did not enjoy the competition that Dallas-based American faced from Dallas-based discounter, Southwest Airlines. In this WSJ ($) letter to the editor, Mr. Crandall takes the Journal to task for what he considers revisionist history regarding the controversial Wright Amendment, which restricts Southwest from flying most interstate routes from its Dallas Love Field hub:

In the 1960s, the cities of Dallas and Fort Worth made an agreement with the U.S. government and with the airlines then serving the two cities. The U.S. had told the cities that it wouldn’t provide continued support for two airports, but that if they could agree on a single airport, the government would provide help in creating it. The cities agreed to prohibit competition with DFW from any other airport, the airlines serving both city airports agreed to move and to take on the financial burden of paying off the bonds with which DFW would be built and sustained, and the new airport was built. During construction, Southwest was created, and when the airlines moved to DFW, Southwest found a legal loophole that allowed it to remain at Love Field, which is much closer to the businesses, hotels and high-income residential areas of Dallas. Thus, Southwest gained a unique monopoly position in one of the country’s premier markets and avoided bearing any of the cost of creating and sustaining DFW.
The city of Dallas could and should have closed Love Field to fulfill its promise to prevent competition against DFW, as Denver did when it closed Stapleton to prevent it from competing with the new Denver airport. Unfortunately, Dallas lacked the moral courage to fulfill its obligation. In retrospect, it was a mistake for American and others to agree to the compromise that the Wright Amendment represented, for Southwest and others now mischaracterize it at every opportunity.

Graglia on judicial activism

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graglia_lino_lg.jpgLino A Graglia is the A. Dalton Cross Professor of Law at the University of Texas Law School and Texas’ foremost Constitutional law scholar. From time to time, he has also been one of the more outspoken and controversial commentators on application of Constitutional law to social issues in American society.
In this Opinion Journal op-ed, Professor Graglia notes that modern Constitutional law is narrowly based:

The essential irrelevance of the Constitution to contemporary constitutional law should be clear enough from the fact that the great majority of Supreme Court rulings of unconstitutionality involve state, not federal, law; and nearly all of them purport to be based on a single constitutional provision, the 14th Amendment–in fact, on only four words in one sentence of the Amendment, “due process” and “equal protection.” The 14th Amendment has to a large extent become a second constitution, replacing the original. . .
The problem is that the Supreme Court justices have made the due process and equal protection clauses empty vessels into which they can pour any meaning. This converts the clauses into simple transferences of policy-making power from elected legislators to the justices, authorizing a court majority to remove any policy issue from the ordinary political process and assign it to themselves for decision. This fundamentally changes the system of government created by the Constitution
The basic principles of the Constitution are representative democracy, federalism and the separation of powers, which places all lawmaking power in an elected legislature with the judiciary merely applying the law to individual cases. Undemocratic and centralized lawmaking by the judiciary is the antithesis of the constitutional system. . .
Plato argued for government by philosopher-kings, but who could argue for a system of government by lawyer-kings? No one can argue openly that leaving the final decision on issues of basic social policy to majority vote of nine lawyers–unelected and life-tenured, making policy decisions for the nation as a whole from Washington, D.C.–is an improvement on the democratic federalist system created by the Constitution. Yet that is the form of government we now have.
The claim that the court’s rulings of unconstitutionality are mandates of the Constitution, or anything more than policy preferences of a majority of the justices, is false. Rule by judges is in violation, not enforcement, of the Constitution. Ending it requires nothing more complex than insistence that the court’s rulings of unconstitutionality should be based on the Constitution–which assigns “All legislative Power” to Congress–in fact as well as name.

Read the entire piece.

Competition in regulation markets

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Spitzer11.jpgAs noted in this earlier post, the Lord of Regulation latest political grandstanding strategy has been to launch an investigation into the sub-prime lending industry, which provides the valuable service of lending money for home loans at higher interest rates to those who cannot qualify for a conventional mortgage because of insufficient income, lack of assets or credit problems. It’s almost certain that his investigation will damage the industry and thus, reduce the number of people it can profitably serve while scaling back the growth rate in home-ownership. As with many of Mr. Spitzer’s investigations, the real victims are not the ones he pretends to threaten.
Well, apparently the banks are not rolling over for Mr. Spitzer quite as quickly as most of his other targets. This Wall Street Journal ($) article reports that certain of the banks in Mr. Spitzer’s latest probe may decline to cooperate because the primary regulator of national banks is the Office of the Comptroller of the Currency and not Mr. Spitzer’s office.
As usual, the Lord of Regulation is not reacting well to competition on his turf of regulating all alleged business corruption. Last week during a speech in Washington, Mr. Spitzer accused the OCC of trying to thwart his lending investigation and, in so doing, noted a telephone call he received from the OCC’s acting comptroller, Julie L. Williams.
That did not sit well with Ms. Williams, who criticized Mr. Spitzer for launcing an investigation into an area that is clearly within the regulatory mandate of the OCC:

“I was surprised and disappointed to see what I had understood to be a personal conversation recounted as part of a speech.”

Given Mr. Spitzer’s general disdain for markets in regulating business, wouldn’t it be delicious irony for one of his investigations to be thwarted by competition within the regulatory marketplace?