Monthly Archives: August 2005

DeGabrielle is the choice for U.S. Attorney

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DOJTX.JPGFirst Assistant U.S. Attorney Don DeGabrielle — the favored candidate of most of Houston’s criminal defense bar — was recommended to President Bush today by Texas Senators Kay Bailey Hutchison and John Cornyn to become the next U.S. Attorney for the Southern District of Texas. Mr. DeGabrielle will replace his former boss, Michael Shelby, who resigned in June to join Houston-based Fulbright & Jaworski’s white collar crime section.Chuck Rosenberg, a former chief of staff to U.S. Deputy Attorney General James Comey, has been the interim U.S. Attorney since Mr. Shelby’s resignation.
Inasmuch as Mr. DeGabrielle has been with the local U.S. Attorney’s office since 1986, he is well-known to the local criminal defense bar that has become somewhat frustrated with the revolving door nature of the U.S. Attorney’s job in Houston over the past decade. Given the misconduct of the Enron Task Force in a number of high-profile Enron-related criminal cases over the past year, a huge sigh of relief could be heard from Houston’s criminal defense bar when Mr. DeGabrielle was recommended instead of one of the prosecutors off of the Task Force, at least one of whom was known to have applied for the position. Mr. DeGabrielle and the rest of the local U.S. Attorney’s office recused themselves at the outset of the criminal investigation into Enron, which led to the creation of the Enron Task Force in the first place.
Meanwhile, Senators Hutchison and Cornyn also recommended to President Bush that Fulbright & Jaworski partner and well-known local maritime lawyer Gray Miller replace U.S. District Judge Ewing Werlein Jr., who is scheduled to take senior status at the end of this year.

AG intervenes in Baylor-Methodist squabble

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TMC5.jpgThe Chronicle’s Todd Ackerman continues his fine reporting on the saga of the Medical Center divorce between The Methodist Hospital and Baylor College of Medicine with this report that Texas Attorney General Greg Abbott has engaged the feuding ex-partners in a series of meetings over the past two weeks for the purpose of ending the bickering between the institutions, which has been going on for the better part of two years now.
In the meantime, Mr. Ackerman reports that, even as the talks took place, eleven Baylor cardiologists left for Methodist, bringing to 80 the total number of physician and faculty defections that Baylor has suffered since the split in April, 2004. Previously, Baylor departments of pathology, neurology/neurosurgery, plastic surgery, anesthesiology and orthopedics suffered physician or faculty losses to Methodist.
A former Houstonian, Mr. Abbott clearly is taking a special interest in resolving the Baylor-Methodist feud that has shaken Houston’s Texas Medical Center. Mr. Abbott was a young attorney in private practice in Houston during the early 1980’s when he was paralyzed from the waist down after being seriously injured by a falling tree branch while jogging at Houston’s Memorial Park. Mr. Abbott was treated at Medical Center hospitals, and he has often publicly expressed his appreciation for the extraordinary treatment that he received there, particularly his rehabilitation stint at The Institute for Rehabilitation and Research (known as “TIRR”). As such, he is a powerful voice for the public interest in mediating the Baylor-Methodist dispute.

The David Boies Copy Club

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David Boies.jpgLet’s see if we can keep this all straight.
David Boies — who champions himself as an advocate of honest corporate governance — was Tyco’s outside counsel in connection with investigating corporate fraud by Tyco management, and one of the prosecution’s main witnesses in the corporate fraud trial against former Tyco executives Dennis Kozlowski and Mark Swartz.
On the other hand, Mr. Boies is one of the members of Maurice “Hank” Greenberg’s defense team in connection with defending Mr. Greenberg from Eliot Spitzer’s allegations that Mr. Greenberg perpetrated fraud at AIG.
In the meantime, Mr. Boies just resigned as special counsel for Adelphia for violating the Bankruptcy Code and Rules by failing to disclose to the Adelphia Bankruptcy Court that members of his family indirectly own a substantial interest in a document management services company that did between $5 and $10 million of business with Adelphia. Apparently, other clients of Mr. Boies’ firm also have paid substantial sums to the document management company without knowing of the affiliation to Mr. Boies’ family members.
This Wall Street Journal ($) article has more, as does Larry Ribstein.

Further assessment of Katrina’s economic impact

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mars platform.jpgAs companies involved in the U.S. oil and gas industry continue to assess the damage that Hurricane Katrina has caused to Gulf of Mexico and Gulf Coast production facilities, Royal Dutch Shell PLC announced on Tuesday that its Mars floating production platform, which generates about 220,000 barrels of oil and 220 million cubic feet of natural gas daily, has sustained significant damage, as reflected by the picture on the left. It appears that the platform’s above-water module has overturned as a result of the storm. Here are the previous posts over the past several days on Hurricane Katrina.
Meanwhile, initial damage assessments from the hurricane sent oil and gasoline futures prices sharply higher as the storm appears to have knocked out about 10% of U.S. refining capacity for what could be an extended period of time. Katrina has flooded the areas around several major refineries and possibly the refineries themselves, so even when crude-oil production in the Gulf of Mexico is restored, converting that oil into gasoline and other products requires refineries that may not be online for quite some time. Eight major U.S. refineries in the Gulf Coast that produce gasoline, heating oil and other products for distribution across the Southeast and the East Coast remain closed as damage assessments continue.

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Situation in New Orleans deteriorating

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hurricane4.jpgThe already dire situation in New Orleans has taken a turn for the worse this morning as the breach in the 17th Street Canal Levee is now 200 feet wide and slowly flooding the entire city. In short, the worst-case scenario may be occurring as flood waters completely fill the below sea-level bowl that is New Orleans, potentially turning Lake Pontchartrain and the city into one big toxic lake.
For those of you who cannot monitor developments via television, Brendan Loy has been doing an incredible job of blogging developments as they occur, so check on his site frequently for updates. Also, WWLTV in New Orleans has established this blog that provides continual updates on developments in the city. Finally, the Interdictor is also providing up-to-date eyewitness accounts of developments in New Orleans.
In addition, the Chronicle’s Eric Berger has been doing an outstanding job of analyzing Hurricane Katrina developments on a more thorough basis on his SciGuy blog. The Chronicle’s Loren Steffy has also been doing a fine job of keeping up with the financial implications of the hurricane over at his Full Disclosure blog. Finally, here is an excellent Washington Post article that summarizes the difficult situation well.
The disastrous situation in New Orleans is exhibiting how weblogs are becoming an increasingly important medium for disseminating urgent and specialized information. The Chronicle’s excellent technology writer, Dwight Silverman, pushed the local newspaper into the blogosphere, and the brilliance of his vision is now being fulfilled by the his work and that of his colleagues. Kudos to Chronicle management for embracing this important information medium.

“You’re a bully, Mr. Lanier, and you’re not going to get away with it now”

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merck_logo4.jpgThat was one of the comments of Richard A. Epstein, the James Parker Hall Distinguished Service Professor of Law at the University of Chicago and the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, during this heated exchange with Merck slayer Mark Lanier on Larry Kudlow’s show over the merits of the Ernst v. Merck verdict. The debate comes on the heels of Mr. Epstein’s impassioned criticism of the Merck/Vioxx fiasco in this Opinion Journal op-ed, in which he accused Mr. Lanier of intentionally misleading the jury during the trial. Here are the previous posts on the Merck/Vioxx case.

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More on the Originalists

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constitution.gifFollowing on this post from last week, Yale Law School Constitutional Law professor Jack Balkin (of the popular Balkinization blog) pens this Slate op-ed in which he makes the case against originalism and in favor of the “living Constitution” approach to interpreting the U.S. Constitution. He notes:

Nobody, and I mean nobody, whether Democrat or Republican, really wants to live under the Constitution according to the original understanding once they truly understand what that entails. Calls for a return to the framers’ understandings are a political slogan, not a serious theory of constitutional decision-making.

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Evaluating Katrina’s damage to oil and gas production facilities

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refinery.sunset.web.jpgOfficials of oil and gas companies and refineries with facilities in the path of Hurricane Katrina were scurrying around yesterday somewhat helplessly attempting to evaluate the extent of the storm’s damage on key oil and natural-gas production facilities that rattled energy markets early yesterday. The bottom line is that it’s going to take at least a few days — and perhaps weeks — to assess the damage fully and determine how long those facilities will be off-line.
Oil futures surged past $70 per barrel in overnight electronic trading on Monday, but fell back during the day. Oil for October delivery settled at $67.20, up $1.07 from Friday’s price, but still below the previous record. When adjusted for inflaction, oil prices overall are still well below the high of $95.26 reached in April 1980.

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The Enron Task Force attempts to muzzle Sherron Watkins

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sherron watkins.jpgWhen the Task Force fingered the record number of 114 co-conspirators in their legacy case against former Enron chairman Ken Lay, former CEO Jeff Skilling and former chief accountant Richard Causey, the Task Force effectively ensured that most defense witnesses would be chilled from testifying during the upcoming trial out of fear that their testimony would result in a retributive Task Force indictment. Moreover, when a targeted witness (Lawrence Ciscon) decided to testify on behalf of the defendants anyway during the recent Enron Broadband trial, the Task Force threatened him in an attempt to induce him not to testify. Rumors have been circulating in Houston for months of similar incidents involving other defense witnesses in regard to Enron-related trials, but the threatened witnesses are relunctant to describe such threats on the record out of fear of Task Force reprisal.
However, the lengths to which the Enron Task Force will go to suppress testimony in Enron-related cases reached truly absurd levels this past week when the Task Force filed this motion in the main Enron securities fraud class action attempting to postpone the testimony of the one witness who may talked more about Enron publicly than any other person — Sherron Watkins.

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Shoe drops on eight former KPMG partners

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kpmg logo22.jpgWith its deferred prosecution agreement with the government finalized, the first criminal indictments were filed today against former KPMG partners in connection with the creation and promotion of tax shelters that still threatens the firm ability to survive as a going concern. Today’s indictment charges eight former KPMG executives — including former KPMG deputy chairman Jeffrey Stein and four other lawyers (including one former Sidley Austin partner) — with conspiracy for designing and marketing the fraudulent tax shelters. Here are the previous posts on KPMG’s tax shelter woes, and here is the indictment.
Although the criminal charges and probable future charges against other KPMG personnel ensure bad publicity for the firm for years, the government’s controversial decision to terminate former accounting giant Arthur Andersen by indicting that firm is ironically the reason that KPMG just may survive the fallout over the tax shelter indictmetns. With large public companies having so few other choices for auditors left, KPMG’s still stout audit practice may be able to generate enough business to makeup for the loss of KPMG’s once lucrative tax shelter practice.
The admissions that KPMG made today in connection with its deferred prosecution agreement will assist the government in prosecuting the indicted individuals and in future cases against other former KPMG partners, bankers, lawyers, and outside advisers who participated in creating and promoting the shelters. For example, KPMG admitted the tax shelter that it sold under the name “Bond Linked Issue Premium Structure” (“Blips”) was a fraudulent tax shelter and admitted that the firm engaged in fraudulent conduct in connection with two other shelters, known as “Flip” and “Opis.” Among the major banks that provided financing for the shelter transactions were Deutsche Bank AG, HVB Group and UBS AG, whose former executive — Domenick DeGiorgio — has already pled guilty to fraud and conspiracy charges in connection with the Blips transactions.
Here is the KPMG statement on the deferred prosecution agreement.