Monthly Archives: June 2006

So far, so good

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rice logo.gifThe Rice Owls are off to a good start in the 2006 College World Series, winning their first two games over Georgia (6-4) and yesterday over Miami (3-2). In so doing, the Owls avoided the dreaded loser bracket task of having to win three games in three straight days just to have the opportunity to play in the best-of-three championship series that begins on Saturday evening. North Carolina is the only other team in the CWS with two wins and no losses, so the Owls and Carolina are currently the favorites to proceed to the championship series.
The Owls’ next game is on Wednesday at 7 p.m. (television by ESPN2) against the winner of today’s Miami-Oregon State game and, if the Owls win that one, then they proceed to the first game of the championship series on Saturday evening. If the Owls lose tomorrow’s game, then they play the winner of that game again on Thursday night at 7 p.m. for the right to play in the championship series. Consequently, a win in tomorrow’s game would be huge for the Owls, who would then be able to preserve key pitching depth for the championship series while avoiding another pre-championship series game on Thursday. Baseball America’s continually updated bracket is here and Baseball America’s excellent CWS page is here, along with Aaron Fitt and Will Kimmey’s blog on the CWS.
By the way, this NY Times article from over the weekend will be of interest to those who follow the Rice baseball program. The article chronicles the surgeries that each of the three top pitchers from Rice’s 2003 NCAA Championship Baseball team have undergone during the initial stages of their professional careers.

The sad state of New Orleans

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andrew-jackson2.jpgOn the heels of this report that New Orleans has lost over 60% of its population since Hurricane Katrina last summer, this NY Times article reports that, despite billions of dollars in federal aid that is available, local New Orleans governmental officials cannot even agree on whether a government plan to faciliate the rebuilding of New Orleans is even being prepared, much less when such a plan will be issued.
Then yesterday, after a weekend of grisly violence, New Orleans Mayor C. Ray Nagin admitted that New Orleans police could not control the city’s crime problems and requested that the state send National Guard troops to help patrol the streets of New Orleans.
Meanwhile, amidst such dire problems, enormous resources are being expended on the civic largesse of supporting the city’s National League Football team.
What a mess.

More guilty pleas in gas trading-price reporting cases

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gas trading2.jpgThree former natural gas traders pleaded guilty yesterday in San Francisco to conspiracy to manipulate the price of natural gas in interstate commerce in connection with criminal cases that are the same as federal prosecutors have pursued in Houston against former local traders. This previous post contains information on the Houston cases.
The three former traders admitted in their plea agreements that they conspired to report fictitious trades to Inside FERC, a natural gas industry newsletter, from roughly July 1, 2000 through Nov. 1, 2000 in an attempt to manipulate the published index prices of natural gas in the direction that would benefit their companies — Atlanta-based Mirant and Cincinnati-based Cinergy — natural gas positions in the market at the time. All three defendants entered into cooperation agreements with the Department of Justice and face up to five years in prison.
The guilty pleas resolve three more of over a dozen cases that the Justice Department has been pursuing in San Francisco and Houston in regard to alleged manipulation of natural gas trading indexes, which are used to value billions of dollars in gas contracts and derivatives. Industry publications such as Inside FERC use data from traders to calculate the index price of natural gas, which affects the level of profits that traders can generate. However, in each of these cases, it remains unclear in what context the allegedly false information was transmitted or whether the publication even used any false information. The government’s theory of criminal liability is that it needs only to prove that fake trades were reported to the publications and not that the trades were actually published or affected the markets.
Most of the traders charged in these cases have pled guilty under cooperation agreements with the DOJ, but several others are fighting the charges and currently awaiting trial, including former Dynegy trader Michelle Valencia and former El Paso trader Greg Singleton. Jury selection in the case against Valencia and Singleton is currently scheduled to begin on July 5, 2006 at 9 a.m. in U.S. District Judge Nancy F. Atlas’ court in Houston.

Have you heard about Dwayne Wade?

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wade515.jpgInasmuch as I’m somewhat ambivalent about the Houston Rockets, I tend not to follow the NBA Playoffs all that closely.
However, even while not following the playoffs closely, it’s a bit hard not to realize that Dwayne Wade is something special.
If you haven’t heard, after losing the first two games of the best-of-seven series, Wade has now led the Miami Heat to a 3-2 series lead over the Mavericks as the series shifts back to Dallas for the sixth game and, if necessary, the seventh.

Dan Jenkins on professional golf and growing up in Texas

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dan jenkins5.jpgAlthough it was mildly interesting to watch Phil Mickelson, Jim Furyk and Colin Montgomerie’s choking competition yesterday afternoon that handed the U.S. Open title to Geoff Ogilvy on an absurdly tricked-up Winged Foot Golf Club West Course, this Anthony Cotton/Denver Post interview of Clear Thinkers favorite Dan Jenkins is far more entertaining. Among Jenkins’ gems are the following:

Q: Do you like professional golf now?
I like the majors. I don’t care about the rest of it. It’s boring. If you take away Tiger (Woods) and Phil (Mickelson), there’s nothing. They’re the only two superstars out there right now. There’s no set decoration like there used to be, no 12, or 13 or 14 guys. It’s just a bunch of people you don’t care about. God forbid Tiger and Phil get hit by a truck, because I don’t know what they’d have left. . .
Maybe it’s just me, but I’m hearing [from] other people who don’t care either. That’s the best thing that’s happened to the LPGA. Everybody likes Michelle Wie and Paula Creamer and all of them. You’ve got to have glamour, you’ve got to have excitement in any sport. This is the worst period in (men’s) golf I’ve ever seen, in all of the thousands of years that I’ve been out here. [. . .]

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Remember the space shuttle?

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NASA4.jpgAlthough seemingly already mothballed, NASA chief administrator Michael Griffin announced late last week that NASA will launch the space shuttle Discovery as planned on July 1. It will be only the second shuttle flight since the shuttle Columbia disintegrated over north Texas on February 1, 2003 during re-entry into the Earth’s atmosphere.
As noted earlier here, Griffin proposed the shelving of the space shuttle program by 2010 even before he became NASA’s chief administrator, and the latest mission will be the first of about 15 more flights between now and that projected cut-off date. The purpose of most of those missions is to continue construction and maintenance on the International Space Station and service the Hubble Space Telescope.
The Chronicle’s Eric Berger — who, by the way, is the best science blogger around — speculates here that Griffin’s patience for the space shuttle program is scant and that the upcoming Discovery mission is a “make or break” mission for the program. Consequently, if problems arise during any of the next few shuttle flights, then don’t be surprised when Griffin terminates the remaining shuttle flights and moves on. As noted earlier here, it’s time.

Understanding the next business scandal

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backdating options_scandal.03.jpgCovering local business scandals and all, there has not been much time to address certain regulators and media members’ attempts to make the apparent widespread practice of backdating stock options (see this WSJ ($) chart of companies that engaged in the practice) as the next reason to bash business interests.
Inasmuch as the practice is really just another method of providing compensation to corporate executives, the issues surrounding the practice appear to be relatively straightforward — whether the options were properly disclosed (if so, then no big deal; if not, then that’s bad) and whether companies properly accounted for them. Clear thinkers favorite Stephen Bainbridge agrees while breaking down the issues pertaining to backdating options in this TCS Daily op-ed (blog post here):

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This is a compromise on the Wright Amendment?

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wright amendment4.jpgThese previous posts have examined the hopelessly obsolescent Wright Amendment, which protects DFW Airport and its main airline — American — from competition that is beneficial to consumers by restricting Southwest Airlines and other discount carriers from flying passengers from Dallas’ more consumer-convenient Love Field to most states. Despite the absurdly anti-competive and anti-consumer nature of the Wright Amendment, American has done a good job of lining up powerful politicians on both sides of the aisle to oppose repeal of the outmoded law. As this Ft. Worth Star-Telegram article reports, American’s lobbying efforts appear to have paid off.
Rather than an outright repeal — or at least a reasonable phase-out — of the Wright Amendment, politicians and airline officials met Friday at DFW to talk about a “compromise” that would delay long-haul flights into Love Field for at least eight more years. This proposal flies in the face of the latest positive news from the exemption of a state from the Wright Amendment — since Missouri was exempted from the Amendment in November and Southwest started flying directly from Love Field to St. Louis and Kansas City, airfares have decreased dramatically and passenger traffic to those cities increased by almost 45% percent in the first two months. But rather than passing along this obvious benefit to citizens wanting to travel to other locales, our politicians are talking about forcing consumers to wait until almost 2015 to enjoy this benefit of competition.
I can hardly wait to hear the rationalizations for that one. One benefit of publicity over the Wright Amendment is that it provides a clear view regarding the leadership qualities of Texas politicians. Although American has bought support of the Wright Amendment from both sides of the political aisle, it is interesting that most of the Amendment’s supporters are Republicans, which is supposedly the pro-business and pro-competition party. So much for such myths.
Update: Mitch Schnurman has further analysis on the the skinny on the compromise, including Southwest’s conclusion that GOP Rep. Joe Barton would have bottled up an outright repeal of the Wright Amendment.

The Lord of Regulation flunks geography

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spitzernew16.jpgAccording to this NY Times article, Eliot Spitzer needs to bone up a bit on his western New York geography.

Skilling Talks

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In his first meaningful public comment since being convicted on 19 criminal charges, former Enron CEO Jeff Skilling agreed to this Wall Street Journal ($)/John Emshwiller interview in which he concedes, among other things, that his decision to testify before the SEC in the aftermath of Enron’s collapse into bankruptcy provided prosecutors with the information (particularly Photofete) that they were able to use to undermine his credibility with the jury during his trial.

Inasmuch as Skilling made his decision to testify in front of the SEC and Congress against the advice of his counsel, one of the many legal ramifications of Lay-Skilling trial is that any future corporate executive confronted with a criminal investigation into his company’s business will almost certainly assert the Fifth Amendment privilege in connection with any investigation and decline to provide the executive’s perspective about what happened at the company.

Thus, the prosecution’s use of Skilling’s faulty memory about Photofete and his attempted Sept. 6, 2001 Enron stock sale reinforced a perverse incentive for business executives — if an executive declines to assist in determining what really caused the business failure of the executive’s company, then the chance of the executive being successful in what Larry Ribstein calls the lottery of corporate criminal trials improves.

Some public policy, eh?

Meanwhile, WaPo’s Carrie Johnson reports on Skilling’s attempt to use a portion of the $60 million or so that the prosecution has frozen in connection with the criminal charges against him to pay his defense firm.

By my estimate, the Lay-Skilling defense teams have now incurred a total of over $100 million in defending the charges against the two former executives. In the great waste of criminalizing corporate agency costs, the price of asserting innocence continues to increase.

By the way, Skilling and Lay’s sentencing hearing has been postponed for six weeks to October 23.