The logistics of blogging the Lay-Skilling trial

enron sinking logo6.gifDwight Silverman is the technology columnist for the Houston Chronicle and is primarily responsible for ushering the local newspaper into the forefront of media and citizen blogging.
In this timely post, Dwight outlines the logistics involved in gearing up the Chronicle team of reporters for blogging on and reporting the developments in the criminal trial for former key Enron executives Ken Lay and Jeff Skilling.
Take note, mainstream media, what Dwight and the Chronicle are doing — and what the Wall Street Journal has done with Peter Lattman’s blog — is the wave of the future. Adapt or be left behind. Quickly.

Speaking of that key evidentiary issue . . .

Rules of evidence.jpgPeter Lattman posts this interesting piece on the oral argument in the Bernie Ebbers appeal that could well impact the key evidentiary issue in the ongoing trial of former Enron executives Ken Lay and Jeff Skilling.
In the Ebbers appeal, Ebbers counsel Reid Weingarten — who is also counsel for former Enron chief accountant Richard Causey — is arguing that the Ebbers prosecution team unfairly prevented the defense from calling key defense witnesses by fingering them as targets of the WorldCom criminal investigation. In so doing, Weingarten is arguing that the prosecution effectively prevented the defense from presenting exculpatory testimony to the jury because each of the targeted witnesses declined to testify on the basis of their privilege against self-incrimination under the Fifth Amendment of the U.S. Constitution. The Second Circuit panel appeared sympathetic to the argument during oral argument of the Ebbers appeal, which is potentially bad news for a prosecution team that has taken the tactic of chilling potential defense witnesses to an entirely new level in the Lay-Skilling case and other Enron-related prosecutions. Ellen Podgor comments here along the same lines.

Baylor’s cancer research and care initiative

dan duncan.jpgThe Chronicle’s Todd Ackerman — who does a fine job of reporting on matters relating to Houston’s Texas Medical Center — reports today that Dan Duncan, chairman of Houston-based Enterprise Products Partners, LP, has donated $100 million to Baylor College of Medicine to trigger funding of Baylor’s effort to become the second comprehensive cancer center in Houston’s Texas Medical Center (the other is the University of Texas M.D. Anderson Cancer Center). The gift follows Duncan’s earlier $35 million gift to Baylor last year.
This is a major development for the Medical Center, which — through M.D. Anderson — is already one of the primary cancer care and research venues in the United States. The collaborative effort of M.D. Anderson and Baylor’s new facility may propel the Texas Medical Center to the forefront of cancer research and care in the entire world.

Lay-Skilling, Week One – Jury Voir Dire

To the surprise of no one who has ever tried a case before U.S. District Judge Sim Lake, a jury was empaneled yesterday (NY Times article here) in the Enron Task Force’s legacy case against former key Enron executives Ken Lay and Jeff Skilling, which means that opening arguments will proceed in the trial this morning.

Judge Lake has a way of keeping matters on schedule.

Opening arguments are always anxiously anticipated in high-profile cases such as this, particularly in view of the fact that many of the preliminary matters — such as jury selection — are downright boring.

Contrary to popular belief, jurors do not often make up their minds during either opening or closing arguments, but it remains reasonably clear that jurors often form during opening arguments the framework within which they consider the evidence that is presented during the trial.

Thus, the goal of opening arguments is to establish broad themes that resonate with the jurors. Leave the details for later.

In this case, the prosecution clearly has the advantage in opening arguments because of “the presumption” in business cases. No, that’s not the presumption of innocence. Rather, it’s the presumption that most lay people have that at least some criminal conduct is involved in any business enterprise that collapses, particularly one that does so in such spectacular style as Enron.

The Enron Task Force has played up the presumption effectively in its public relations campaign and in its previous Enron-related prosecutions, so the Task Force prosecutors will hammer the jurors with that presumption throughout their opening argument.

Conversely, one of the primary goals of defense attorneys Dan Petrocelli (Skilling) and Mike Ramsey (Lay) during opening argument will be to challenge the validity of the presumption so that the jurors can form a framework that views the presumption with skepticism while evaluating the evidence that is presented during the trial.

Although the prosecution has the easier task during opening arguments, its job gets much tougher once it has to put on its case.

The Task Force has been much more successful in bludgeoning plea bargains out of former Enron executives than actually obtaining convictions in court.

The only “successful” Enron-related trial for the Task Force to date has been the trial of Nigerian Barge case, which was a narrow trial of a specific transaction. Even then, one of the two Enron executives who were prosecuted in that case was acquitted, and the conviction of the Merrill Lynch executives in that case was anything but a clear-cut victory for the Task Force.

In comparison, in the two other Enron-related trials — the Arthur Andersen case and the Enron Broadband case — the prosecution alleged broad conspiracies and amorphous charges, and both cases ended disastrously for the Task Force.

Inasmuch as the charges in the Lay-Skilling trial have much more in common with the Andersen and Broadband cases than the Nigerian Barge case, the prosecution has been attempting to shift its strategy and simplify its case against Lay and Skilling during the weeks preceding the trial.

Nevertheless, it remains unclear whether the Task Force will be successful in that approach, particularly when a good part of its case against Lay and Skilling will be based on testimony of impeachable witnesses who have copped pleas and other statements that may not even get into evidence based on how Judge Lake rules on the key evidentiary issue in the case.

Thus, expect a lot of talk today about the presumption of criminal conduct in business collapse cases from the prosecution and broad themes challenging that presumption from the defense.

Frameworks may be built today, but the tougher work of actually filling those frameworks with substance is what will, in the end, determine which side succeeds or fails during this trial.

More muddled thinking on the Bagwell situation

JeffBagwell10.jpgThe Chronicle’s Richard Justice — who ignited a remarkable amount of muddled thinking regarding the Stros’ claim under the club’s disability insurance policy on its star firstbaseman, Jeff Bagwell (related post here) — continues with the nonsense in his column today.
Justice proposes that the Stros waive making a claim for $15.6 million under the disability insurance policy and allow Bags to try and play this season in return for Bagwell’s promise that he would pay the club $7.8 million — i.e., half of the disability insurance claim — if it turns out that Bags really is disabled and can’t play effectively this coming season.
Uh, I don’t think Richard ran that proposed “solution” by Bags and his agent. Bags, the greatest player in Stros history, negotiated a five-year, $85 million contract from a position of strength six years ago under which the Stros agreed that he would receive a guaranteed amount (now down to $24 million) regardless of whether Bags is physically capable of playing major league baseball throughout the term of the contract. And now Justice proposes that Bags place $7.8 million of that $24 million at substantial risk for the opportunity to prove that he is physically capable of playing major league baseball?
Why on earth would Bags do that? Even if the Stros release Bags and collect the entire claim under the disability insurance contract, Bags could still attempt to play major league baseball with another club without risking a dime. Romantic considerations aside, does Justice really think for a moment that Bags would or should be willing to risk $7.8 million for the opportunity of trying to prove that he is capable of playing one final season with the Stros?
Richard Justice should stick to reporting on baseball, not contracts and risk evaluation.

Stealing the 12th Man?

aggieland.jpgIt’s demoralizing enough for followers of the Texas A&M University football program that the Aggie football team has fallen on hard times, but now they have to deal with the theft of their sacred 12th Man tradition:

The Seattle Seahawks are facing the Pittsburgh Steelers in the Super Bowl, but they have an off-the-field battle brewing with Texas A&M.
School officials are upset with the Seahawks’ use of the “12th Man” theme to recognize their fan support. A&M has legal claims to the “12th Man” moniker, a school tradition that dates to the 1920s.
Texas A&M contends the 12th man lives at Kyle Field, not in Seattle.
The Seahawks have celebrated their fans as a “12th Man” since the 1980s, when they used to turn the now-demolished Kingdome into one of the NFL’s loudest venues. . . .
A&M has twice registered trademarks for “The 12th Man” label — in 1990 and 1996 — that include entertainment services, “namely organizing and conducting intercollegiate sporting events,” and products, such as caps, T-shirts, novelty buttons and jewelry. . . .
[A&M Athletics Director] Bill Byrne said A&M has contacted the Seahawks about the issue. He said he wrote the Chicago Bears and Buffalo Bills in the past about halting their 12th man themes once the university made them aware of the trademark registrations. Byrne said Seattle, though, “has been slow-rolling us.”

The Aggies reduced to a post-season lawsuit rather than a post-season bowl game? Well, at least some folks are smiling.
Update: A&M filed a lawsuit in Brazos County on Monday to enjoin the Seahawks from infringing on the university’s 12th Man trademark. Home field advantage — Aggies.

The schedule for the trial of the Enron legacy case

LaySkilling2B.jpg9 a.m. today: Jury selection, Ceremonial Courtroom, 11th floor, Bob Casey Federal Courthouse, 515 Rusk. The NY Times’ Alexei Barrionuevo and Simon Romero report on the all-important jury selection process, which U.S. District Judge Sim Lake will handle himself and will complete today.
9 a.m., Tuesday, January 31: Opening arguments, Courtroom 9B, ninth floor. Prosecution gets two hours and each defendant gets two hours.
Late Tuesday afternoon or 8:30 a.m. Wednesday, Feb. 1: The prosecution puts on its first witness, which I am betting is former Enron investor relations chief, Mark Koenig. Given Judge Lake’s desire to move things along, it would not surprise me if he requires the prosecution to put its first witness on the stand on Tuesday afternoon, even after six hours of opening arguments.
The trial will run four days a week with each Friday generally being an off day. The prosecution currently estimates that its case-in-chief will take 36 days of court-time to present. There are about 60-65 spaces available on a first come basis for the general public in courtroom 9B, but a closed circuit telecast of the proceedings is available for overflow spectators on the fourth floor of the courthouse in one of the old Bankruptcy Court courtrooms.
By the way, Chronicle Enron reporter Mary Flood and Chronicle business columnist Loren Steffy are live-blogging the trial, and my old friend Joel Androphy is blogging the trial as KTRK-13’s legal analyst.

The Fazio Course of the Club at Carlton Woods

The day before the beginning of the Enron Task Force’s legacy case, you probably figured that you would find an Enron-related post here today. But before turning to the long slog of that trial, a beautiful late-January Texas day has my thoughts turning to golf.

This previous post reviewed the Golf Club of Houston that opened for play last summer and will host the Shell Houston Open Golf Tournament beginning later this year. However, the Tournament Course at Redstone was only one of two outstanding new courses that opened in the Houston area in 2005. The other one is the Fazio Course of the Club at Carlton Woods in The Woodlands and it is every bit as impressive a new entry on the Houston and Texas golf scenes as the Golf Club of Houston course.

Interestingly, at one time, the construction of the Fazio Course would have meant that the Golf Club of Houston course would have not been built at all. As noted in this previous post, the Houston Open had a tremendously successful, 26-year run at the old Tournament Players Course in The Woodlands as both the tournament and the community literally grew up together. Former Houston Golf Association (which operates the tournament) executive director Eric Fredricksen — who oversaw much of the Houston Open’s growth during his tenure — wanted the HGA and The Woodlands to build the Fazio Course as a new Tournament Players Course and move the tournament from old TPC to the Fazio Course.

Alas, Fredricksen resigned as HGA executive director before such a deal could be cut, new HGA management took over, the HGA and The Woodlands had a falling out and, before you know it, the HGA had divorced The Woodlands and moved its operations and the Shell Houston Open across the far north side of the Houston metro area to Golf Club of Houston.

Nevertheless, the Woodlands Corporation — the fabulously successful developer of The Woodlands — proceeded with the Fazio Course, anyway, albeit on a slower timetable. The Fazio Course is now the second golf course in the ultra-exclusive Carlton Woods subdivision of The Woodlands, which opened about five years ago around the Jack Nicklaus Signature Course that was the first course of the Club at Carlton Woods.

As the sixth golf course built in The Woodlands, the Nicklaus-Carlton Woods course quickly took its place among the best golf courses in the Houston area, and — as The Woodlands’ seventh golf course — the Fazio Course may be better than the Nicklaus Course. With its opening, the members of the Club at Carlton Woods now enjoy two of the best golf courses at any one club in the Houston area and in all of Texas.

Constructed amid beautiful hardwoods on the bluffs of Spring Creek on the far southwest side of The Woodlands, the Fazio Course has something going for it that most Houston-area golf courses do not — significant elevation changes. Inasmuch as the Houston area lies in the flat Texas coastal plain between the Gulf of Mexico and the Hill Country of central Texas, the vast majority of Houston-area golf courses are flatland courses with minimal elevation changes similar to golf courses in Florida. However, the Fazio Course takes advantage of a wonderfully rolling piece of land on the bluffs of Spring Creek to provide golfers with up and down shot values that are rarely seen on Houston-area golf courses.

Moreover, as with the Nicklaus Course, the Woodlands Corporation used the increasingly-popular sandcapping process on the fairways of the Fazio Course, which expedites the return of the course to playability after heavy rains. As a result of the sandcapping process, both the Nicklaus and Fazio Courses are playable within an hour or two of even heavy rains when most Houston golf courses would still be too mushy to play.

As with most new courses these days, the Fazio Course is long — almost 7360 yards from the championship tees and includes a 506 yard par 4 (no. 15) and a 623 yard par 5 (no. 4). However, this is not just a flogger’s course — three of the course’s 10 par 4’s are well under 400 yards, including the creative 307 yard par 4 seventh hole. Similarly, two of the course’s four par 3’s are well under 200 yards. Moreover, most of the greens on the course slope dramatically from back to front with subtle undulations that are made more vexing because of the sloping of the greens. Consequently, the Fazio Course actually places more emphasis on the short game than being able to hit the long ball.

Having played the course just once, it’s a bit difficult to predict what hole will ultimately become the Fazio Course’s signature hole, but my sense is that the 445 yard par 4 eighteenth (pictured above) will definitely be in contention. The fairway narrows into a ribbon the further you hit your drive, but laying too far back gives you a devilish long-iron shot into a thin, severely undulating green that is protected in front by water and the Fazio Course’s signature deep bunkers. Just hit it straight and long on this hole, and you will have no problem. ;^)

Criticisms of the Fazio Course are hard to come by. The course is a subdivision course, so — unlike the Golf Club of Houston — it will eventually have homes built on a good part of the course. As a result, it is not quite as walkable a course as the old TPC Course in The Woodlands. However, that’s the only negative that I could think of in regard to this extraordinary new addition to the top Houston-area golf courses. Here is slideshow of photos from the course.

“You’re fired, but you better keep selling our products”

Greenberg21.jpgAIG21.jpgLet’s get this straight.
Last year, American International Group’s board effectively canned its chairman and CEO, Maurice “Hank” Greenberg — the man responsible for building the company into an insurance industry behemoth over the past generation — in order to make nice with New York AG Eliot Spitzer.
Meanwhile, Mr. Greenberg is only 80 years old, so he needed to find something to do after AIG unceremoniously dumped him. Accordingly, Greenberg began paying more attention to the affairs of C.V. Starr & Co., the company closely-owned by Greenberg and other former and current AIG executives that used to provide a compensation perk for AIG executives. C.V. Starr’s relationship with AIG dates from the late 1960s when AIG became a public company — in fact, among C.V. Starr’s major assets are its shares in AIG.
Several subsidiaries of C.V. Starr have long sold AIG insurance policies to big manufacturing companies, so Greenberg last year decided to expand C.V. Starr’s sales operations by selling insurance policies for other companies. Two of those companies are Ace Ltd. an insurer run by Mr. Greenberg’s son, Evan Greenberg, and a unit of billionaire businessman Warren Buffett’s Berkshire Hathaway Inc. By the way, Mr. Buffett may have ratted out Greenberg to Spitzer to save his own skin, but that’s another story.
With that backdrop, it’s with more than a touch of irony that AIG is now suing C.V. Starr to stop Starr’s subsidiaries from selling insurance policies for companies other than AIG. The lawsuit accuses the Starr subsidiaries of “flagrant misconduct and self-dealing contrary to the best interests of AIG” by diverting a third of a business portfolio otherwise intended for AIG to the Berkshire unit. C.V. Starr counters by pointing out the knotty little detail that the six-page contract governing the relationship between the Starr subsidiaries and AIG does not provide that the Starr agencies will exclusively sell AIG policies.
Thus, even though AIG may have hedged the risk of an Enronesque experience by dumping Mr. Greenberg, it remains far from clear that the AIG board’s sacrifice of Greenberg at the altar of the Lord of Regulation was in the best long-term interests of AIG’s shareholders. Not only did AIG lose the executive primarily responsible for the company’s value, but it also gained a formidable — and a particularly motivated — competitor.

We have seen the enemy, and it is us

medical insurance scam.jpgThe Washington Post’s Robert J. Samuelson has seen the problem with the American health care finance system — it’s us:

Americans generally want their health care system to do three things: (1) provide needed care to all people, regardless of income; (2) maintain our freedom to pick doctors and their freedom to recommend the best care for us; and (3) control costs. The trouble is that these laudable goals aren’t compatible. We can have any two of them, but not all three. Everyone can get care with complete choice — but costs will explode, because patients and doctors have no reason to control them. We can control costs but only by denying care or limiting choices.
Disliking the inconsistencies, we hide them — to individuals. We subsidize employer-paid health insurance by excluding it from income taxes (the 2006 cost to government: an estimated $126 billion). Most workers don’t see the full costs of their health care; a reported Bush proposal to add new tax subsidies would magnify the effect. A similar blindness applies to Medicare recipients, whose costs are paid mainly by other people’s payroll taxes. Despite complaints about rising co-payments and deductibles, out-of-pocket costs are still falling as a share of all health spending. In 2004, they were 12.5 percent; in 1993, they were 15.8 percent.
We’re living in a fantasy world.

Continue reading