Monthly Archives: August 2006

A disturbing growth industry

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swat teams.jpgThis Newspaper.com story summarizes several articles and resources that examine a troubling growth industry among Texas municipalities:

Red light cameras and cash seizures are taking money from motorists and funding uncontrolled spending sprees in small Texas cities. . . . In the South Texas city of San Juan, population 26,200, police have begun seizing ever greater amounts by taking both cash and vehicles from motorists. In 2005, officers collected $4400. This year, however, the force has collected $67,000. Pharr, with a population of 47,000, collected $422,000 last year. McAllen, a bigger city with 106,000 residents, collected $484,000. A federal appeals court ruling this week concluded that driving with a large amount of cash is sufficient justification for police to confiscate it, even if there is no evidence that a crime has been committed.
Each South Texas city has said its priority is to use the money to fund or expand a SWAT team, . . .

As Cato Institute policy analyst Radley Balko shows in this Cato study, small municipalities frequently misuse SWAT squads for routine police work, which has led to an increasing number of botched raids resulting in injury or even death to innocent citizens. And local politicians of small Texas cities are encouraging liberal confiscation policies by police as a convenient means to funding this type of questionable activity?

Muddling the understanding of insider trading

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insider trading.jpgThe NY Times business columnist Gretchen Morgenson — who regularly writes with a curious anti-business agenda — weighs in again in the Sunday Times with this frontpage article about trading in anticipation of merger announcements that begins with this proclamation:

“The boom in corporate mergers is creating concern that illicit trading ahead of deal announcements is becoming a systemic problem.”

Morgenson then goes on to report on a recent study that confirms the particularly unsurprising news that trading frequently increases in the stock of companies immediately before public announcements concerning deals involving the companies.
Morgenson’s article is so disingenuous I struggled to know where to start. She doesn’t explain cogently why insider trading is illegal — just that honest investors are victims of the practice — but even her argument in that regard makes little sense. She contends that sellers of stock are injured by insider trading because they could have held their stock until after the merger announcement and received more value, but that argument assumes that the seller would only sell at the higher price generated by the insider trading and not at the lower price that existed before the insider sales. This is strained, to say the least, as sellers generally sell at the market price (whatever it is at the time of the sale) and take the risk that they are selling the bird in the hand instead of the potentially more valuable one in the bush if they were to wait and sell later.
With such basic flaws in Morgenson’s analysis of insider trading, I was shuddering at the thought of how long it would take me to critique Morgenson entire piece. Thus, I was heartened to discover that Larry Ribstein had already done so, in which he concludes with the following observation:

In sum, this page 1 story on one of America’s leading papers is a particularly egregious example of shoddy and slanted reporting by, perhaps, America’s leading practitioner of shoddy and slanted reporting. No doubt Morgenson’s influence will lead to misguided regulatory and legislative activity, which will impose additional costs on American business. Shame on Morgenson, and even more importantly, shame on her editors for failing to see the dangers of mixing news and commentary, for propogating these phony scandals to sell newspapers.

Taking stock in New Orleans

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new_orleans.gifThe NY Times continues today with another installment in its excellent The Katrina Year series focusing on the status of the rebuilding of New Orleans. To the surprise of no one who has ever been involved in the interplay of business development nad government bureaucracy, the re-development of areas of the city that are most attractive for investment has actually gone reasonably well, while the areas in which government subsidies are necessary to induce private capital to invest have lagged. Also not surprising is the fact that local governmental entities still have not been able to put together a plan for providing basic governmental services for redevelopment. So it goes.
As noted in posts here and here last year in the immediate aftermath of Hurricane Katrina, one of the biggest problems confronting redevelopment of the New Orleans area was the storm’s destruction of small businesses, which on an aggregate basis was the largest provider of jobs in the New Orleans area. This NY Times article reports on the struggles that small businesses in New Orleans have confronted in attempting to stay afloat in the year after Katrina and how many of the pre-Katrina small businesses have little hope of coming back.
Update: In this Opinion Journal editorial, the Wall Street Journal editorial board eviscerates the federal government’s handling of the enormous amount of federal aid thrown at New Orleans in the year since Katrina.

Stros 2006 Review, Part Eight

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Garner pensive.jpgWhen we last checked in on the Stros at the 7/10’s pole, the club had shown signs that it was going to climb back into legitimate contender status in the National League playoff race. Unfortunately, those signs of a playoff run were as illusory as Brad Ausmus’ swing and the Stros promptly turned in a 6-10 record in their eighth 1/10th segment of the season. In so doing, the Stros (61-68) effectively took themselves out of the race for a playoff spot.
As regular readers of this blog recognize, it’s not surprising that this Stros club is continuing to struggle. It has been a mediocre club almost all season, reflected by the team’s record in each of its 1/10th segments of the season (previous 10% segment summaries are here):
1. 11-5
2. 8-8
3. 6-10
4. 7-9
5. 7-10 (halfway mark)
6. 7-9
7. 9-7
8. 6-10
As noted in the each of the pre-season reviews of the club over the past three seasons (here, here and here), the Stros’ overall hitting has been declining steadily for six straight seasons and that lack of punch has finally caught up with the club. Superior pitching and playoff appearances over the past two seasons tended to camouflage the club’s abysmal hitting, but merely better-than-National League-average pitching this season has exposed the Stros’ imbalance — it is now a club with better-than-average pitching, one legitimate slugger, a few average or slightly-above average hitters, and a troubling number of regular players who are among the worst hitters in the National League.
The Stros hitting woes continued in the most recent 1/10th segment of the season as the club’s aggregate runs scored against average (“RCAA,” explained here) declined to -42, which is 13th among the 16 National League teams. While the pitching staff’s overall improvement during the second half of the season increased the staff’s runs saved against average (“RSAA,” explained here) to 35 (4th in the NL) midway through this current segment, a couple of rocky starts by the back-end of the staff lowered the staff’s RSAA to 30, which is currently 5th among National League teams.

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The real issue in the Grasso case

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Spitzer62.jpgEliot Spitzer’s long-running propaganda campaign and lawsuit against former New York Stock Exchange chairman and CEO Richard Grasso has been a frequent topic on this blog, so I couldn’t help but notice this NY Post article (hat tip to Peter Lattman) in which Grasso is derided for defending his lucrative pay package during a recent television interview. I mean, why should anyone make that much money, right?
Meanwhile, for a much more lucid analysis of the true issues should be in the Grasso lawsuit, check out this Larry Ribstein post:

[T]he main thing to keep in mind is that [Grasso’s] pay was approved by a highly sophisticated board. The only issue should be whether that board was informed. This is the way it should and would be in a standard fiduciary duty case (e.g, Disney). There is significant reason to believe it was, . . .
Alas, this isn’t the end of the matter because the NYSE was a non-profit that comes under Eliot Spitzer’s tender care. Grasso’s trial has been broken into two parts, so that the trial judge first rules on reasonableness separate from board process. In the first part, . . . Spitzer will try to prove “that the pay judgments of executives who worked in the highest echelons of the business community were not ‘reasonable.'” In other words, a NY trial judge may end up substituting his judgment for that of a board that included the likes of the Treasury Secretary and former head of Goldman Sachs.

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Gripping already for the Ryder Cup

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Rydercup06logo2.jpgThe United States has lost four out of the last five Ryder Cup competitions, so it’s not particularly surprising that some U.S. golf fans are viewing the 2006 Ryder Cup competition next month at the K Club in Ireland with some trepidation. However, former Houstonian and noted teaching professional Butch Harmon is already gripping particularly hard in anticipation of the competition, and Brett Wetterich — who will be playing in his first Ryder Cup competition for the American team — is the target of Harmon’s nervousness:

Brett Wetterich, who squeezed into the US Ryder Cup team in the last available qualifying spot, will have to greatly improve his attitude at next month’s Ryder Cup match at the K Club.
At least that’s the way widely-respected US swing coach and Sky Sports analyst Butch Harmon sees it.
Harmon told Sky Sports he was “appalled” by what he saw on day two at the 9th hole at last week’s PGA Championship where Wetterich, destined to miss the cut by nine shots after shooting a 2nd-round 77, took four shots to get out of some greenside rough.
Harmon says he was infuriated by Wetterich’s attitude.
“I was appalled by what I saw with Brett Wetterich,” he told Sky Sports. [. . .]
“This isn’t the kind of guy you want on your Ryder Cup team,” Harmon said of Wetterich.

H’mm. I guess Wetterich will at least have something to talk about with Tiger Woods during the Ryder Cup competition.

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The drift of the Nacchio prosecution

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cliff stricklin.jpgThis Denver Post article reports on the appointment of former Enron Task Force prosecutor Cliff Stricklin as the lead prosecutor in the Justice Department’s criminal case against former Qwest CEO Joe Nacchio on insider trading charges. Stricklin was a member of the Task Force’s team that handled the Lay-Skilling trial, although he sat about fourth chair and did very little in the courtroom during the trial.
However, neither the fawning Post article nor the other media accounts of Stricklin’s appointment that I have seen mention Stricklin’s dubious conduct in the first Enron Broadband trial, which did not turn out quite so “successfully” for the Task Force as the Lay-Skilling trial. As noted in this earlier post, Stricklin was one of the lead prosecutors during that debacle in which the prosecution was caught eliciting false testimony from one of the Task Force’s main witnesses and threatening two defense-friendly witnesses (Beth Stier and Lawrence Ciscon). Then, to top it off, U.S. District Judge Vanessa Gilmore cut off Stricklin from further cross-examination of one of the defendants and rebuked him in open court during the latter stages of that trial when Stricklin violated one of the court’s limine orders. That trial — which appeared to be a tap-in for the Task Force at the outset — ended in a crushing defeat for the Task Force.
In the Post article noted above, Colorado U.S. Attorney Troy Eid issued the following statement about Stricklin:

“Cliff’s extraordinary background, including his work on the Enron Task Force, makes him the ideal leader to handle the Joseph Nacchio case while serving Colorado as first assistant U.S. attorney.”

Yeah, right.

Hoop Nazis

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Basketball Hoop of the Rich and Lazy.jpgI recognize that the University Park area of Dallas is a nice place to live and all, and I also concede that the residents there are rightly attentive to maintaining property values and the decorum of the area. But this recent Dallas Morning News article reports on an initiative that establishes fairly convincingly that a number of the UP residents simply do not have enough to do:

Hoops could be shot down in this wealthy community thanks to a proposed ordinance banning basketball goals in front yards. The reason? To some city officials, they don’t look too good.
That’s the basis of a proposed University Park ordinance prohibiting portable and permanent basketball hoops. On Tuesday, council members postponed a decision on the ordinance until their Aug. 22 meeting so revisions could be made, . . .
Under the proposal, violators could be fined up to $2,000 a day. [. . .]
The ordinance the Planning and Zoning Commission and city staff originally recommended would have allowed residents to keep portable basketball goals in their front yards for up to 30 days a year. Council members wanted none of that, though.
They went back and forth for about 15 minutes at their Tuesday meeting on whether to allow swings, soccer goals and basketball goals in front yards at all. Some wanted to allow them certain months of the year, others only during daylight hours.
Portable soccer goals and badminton nets were deemed allowable because they could be moved inside every night. So were one-seat swings, provided they don’t swing into the street.
Trampolines and basketball goals weren’t as lucky.
“It’s just not as pleasing to the eye,” [the] Mayor . . . said about the goals.

The sinking Milberg Weiss ship

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Milberg Weiss new11.gifClass action securities powerhouse Milberg Weiss Bershad & Schulman has been attempting to keep a stiff upper lip in the face of the Justice Department’s decision to go Arthur Andersen on the firm earlier this year (previous posts here), but this New York Observer article (related NY Times article here) reports that the firm’s demise is imminent, well before the criminal trial of the firm:

A lawyer for a competing firm, who asked to remain anonymous, said that he had interviewed several Milberg Weiss employees seeking a position with his firm.
He said they have the same sense of the mood at the firm.
ìThat itís sad, itís a sinking ship, itís like a funeral home. Itís extremely upsetting,î he said. ìItís like waiting for them to turn out the lights and close the door; theyíre running for the exits.î
Published reports have documented the departure of about two dozen attorneys since the indictments were handed down. Thatís a lot in a firm of 125 lawyers.
And of the offices once listed on the companyís Web siteóLos Angeles; Boca Raton, Fla.; and Manhattanóonly the New York and California branches remain.
The firm once employed close to 500 people, including paralegals, investigators, messengers, secretaries, forensic experts and lawyers. [ . . .]
The ìexperience with Arthur Andersen indicated that partnerships are fragile entities,î said [New York University law professor and Milberg Weiss advisor Samuel] Issacharoff. ìThatís the reality.î

The government’s prosecution of Milberg Weiss out of business will have nowhere near the economic impact that the government’s effective shuttering of Arthur Andersen had. And certainly a plaintiff’s firm is not the type of victim that elicits much sympathy. However, that does not make any less outrageous what the government is doing here — effectively killing the accused after investigating it for over five years and before it is determined whether it has committed a crime. That there is not more of an outcry over this injustice reflects a troubling deference that even the legal community is now giving to the abuse of the criminal justice system by federal prosecutors. As Sir Thomas More reminds us “do you really think you could stand upright in the winds [of abusive prosecutorial power] that would blow” if that power were applied to you?

The risk of supporting a former girlfriend

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Hecht and Miers.jpgIt’s reasonably clear that Texas Supreme Court Justice Nathan Hecht didn’t think anything of it when he gave dozens of media interviews last year supporting President Bush’s nomination to the US Supreme Court of his former girlfriend and fellow parishoner, trusted Bush White House advisor Harriet Miers.
But the Texas Commission on Judicial Conduct didn’t view Justice Hecht’s politicking on behalf of Miers in the same way. In May, the Commission issued an ethics rebuke to Justice Hecht, determining that he had improperly used the prestige of his office to support the nomination of Miers. Earlier this week, Justice Hecht appealed that decision to a three-judge panel during a hearing in Ft. Worth (hat tip to Peter Lattman for the link).
The Commission accused Justice Hecht of going ìon a specific mission, a campaign, in connection with certain parties in the White House and their operativesî and, in so doing, violated two canons of the Texas Code of Judicial Conduct:

ìA judge shall not lend the prestige of judicial office to advance the private interests of the judge or others;î and
ìA judge . . . shall not authorize the public use of his or her name endorsing another candidate for any public office.î

In response, Justice Hecht contends that the Commission misapplied the canons because Miers was not a political candidate, was not involved in a political election race and had no election opponent. Moreover, Justice Hecht observed that reporters were interested in his views about Miers because of his three-decade friendship with her, not because of his status as a Texas Supreme Court Justice.
The three-judge panel has 60 days in which to issue a ruling. The panel’s decision may be appealed directly to the US Supreme Court, which Hecht lawyer Chip Babcock contends that he will if the Commission’s rebuke of Justice Hecht is upheld.