Monthly Archives: January 2007

Judge Gilmore Vacates Kevin Howard’s Conviction

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As anticipated, U.S. District Judge Vanessa Gilmore this afternoon vacated the conviction of former Enron Broadband executive Kevin Howard on five counts of conspiracy, wire fraud, and falsifying books and records. Kristen Hays’ Chronicle article on the decision is here and the NY Times story on the decision is here.

Inasmuch as Judge Gilmore vacated Howard’s conviction, the Justice Department could try him again, which would be the third time on the same charges. Don’t bet against the DOJ doing just that.

The Enron Task Force prosecuted the first two cases against Howard in the same manner as the case against the defendants in the now utterly discredited Nigerian Barge case. The Task Force first asserted an unwarranted expansion of a criminal law intended to punish kickbacks and bribes against a businessman-defendant who did no such thing. Then, the Task Force took the case to trial and blatantly appealed to the strong juror resentment against anyone having anything to do with Enron to obtain a popular conviction against a supposedly wealthy businessman.

Shattered lives, families and careers now lie in the wake of this outrage. Who is going to answer for that?

Doctoring under an increasingly regulated system

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HealthInsurancetax%20013007.jpgChristopher Tozzo recently articulated a troubling thought about the perverse incentives involved in a one payor, government-administered health care finance system:

A key premise in any call for socialized medicine is that physicians (and nurses and dentists and physical therapists and orderlies and equipment technicians and pharmacists and …) will continue to do what they do now, as much as they do it now (and where they do it now and as well as they do it now and for as long as they do it now and …) despite the efforts by government to enslave them. Like a battered spouse, the health care professional will, the bureaucrats presume, simply put up with it forever. [. . .]
If you’re smart enough to become a doctor, then you are smart enough to become a lawyer, accountant, investment banker or a dozen other ultra-skilled occupations that are not price capped. The laws of economics are not subject to repeal by any legislature. An artificial price ceiling creates a shortage, regardless of what “noble goals” underlie it. Doctors, especially future doctors, will not be turned into indentured servants without limit.

Tozzo’s point is a good one, and reminded me of the following note that I recently from one of my old friends, Dr. Jim Bob Baker. Jim Bob is a first-rate internist who was one of my late father’s best and brightest medical students. Jim Bob wrote about a new regulation that is creating similarly-skewed incentives for doctors under the current American health care finance system:

I wanted to let you know about the next new development in the mess that is the U.S. health care finance system. The newest wrinkle is what is being called “P4P”, or “Pay for Performance.” Ostensibly, the program purports to be a budget-neutral process whereby doctors and hospitals who meet certain guidelines in the provision of healthcare in specific illnesses will be given higher reimbursement, while those who fall below the benchmark will see their payments cut even further.
What we expect will happen has more of an Orwellian flavor. Hospitals and private practitioners are already preparing for the first installment of a scheduled 40% cut in Medicare payments to them that will occur over the next several years. In all likelihood, we will see an across-the-board cut to all providers. Then, if you want to see an “increase” in payment to get a portion of that cut reinstated, you have to jump through the particular hoops mandated by CMS. Those who fall below the standard will see their payments cut even further.
Pay for Performance is a noble idea. The doctors and hospitals treating patients most correctly get a higher payment for that treatment. However, as with most governmental programs, implementation of the noble idea falls woefully short of intended result.

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New Orleans may still be a mess, but at least fraud is under control

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New%20Orleans%20map%20013007.gifThis Christopher Cooper/Wall Street Journal ($) article on the inability of the federal, state and local governments to administer the vast amounts of aid appropriated to rebuild New Orleans and the Gulf Coast region was published over this past weekend, so the story was not widely discussed around the blogosphere. But the story it tells is instructive regarding the inefficiency of government administration in comparison to entreprenurial activity in achieving the goal of rebuilding the region:

It’s been almost 17 months since Hurricane Katrina pounded coastal Mississippi and southeast Louisiana, and about a year since Congress authorized the bulk of its rebuilding aid for the region. More than four months have passed since President Bush visited New Orleans on the anniversary of the storm and extolled the “amazing” reconstruction effort.
But a review of the devastated region shows that rebuilding is in a deep stall. Tens of thousands of residents remain displaced as authorities dither over how to disburse housing assistance. Many crucial infrastructure projects have yet to start. Of the tens of billions appropriated by Congress, half remains unspent.
There are many culprits. Among them: the size of the disaster, which continues to overwhelm agencies charged with rebuilding; the crush of competing bureaucracies, which has delayed many projects including the Bay St. Louis bridge; and weak local leadership.
In addition, many reconstruction efforts are ensnarled in spools of red tape spawned by a bevy of old and new government procedures. A prime example: an obscure set of 30-year-old Congressional rules designed to combat corruption known as the Stafford Act.
According to the White House, the federal government has provided $110 billion for the Gulf Coast region. But nowhere near that amount of actual cash has been made available. The total is spread over five states and covers damage done by three separate storms. Some of it consists of loans. A chunk comes from government insurance payouts that ultimately derived from premiums paid by homeowners themselves.
Of $42 billion given to the Federal Emergency Management Agency, the agency has spent only $25 billion, federal records show. Most of that went to temporary housing, debris removal and emergency operations in the early days of the disaster. It has spent more than $4 billion on administrative costs.
Louisiana says the Army Corps of Engineers has spent only about $1.3 billion of the $5.8 billion it received to repair the levees in and around New Orleans. Only about $1.7 billion of the $17 billion received by the Department of Housing and Urban Development has made its way to the streets, the agency says.
In New Orleans, officials say they have received only about 14% of the estimated $900 million in reconstruction money they estimate is needed to fix the ruined city. “We have lots of meetings,” says Cynthia Sylvain-Lear, the city’s liaison with FEMA.

The article notes a particularly stark example of the difference in effectiveness between government adminstration and private enterprise:

In August, 2005, Hurricane Katrina flattened two bridges, one for cars, one for trains, that span the two miles of water separating this city of 8,000 from the town of Pass Christian. Sixteen months later, the automobile bridge remains little more than pilings. The railroad bridge is busy with trains.
The difference: The still-wrecked bridge is owned by the U.S. government. The other is owned by railroad giant CSX Corp. of Jacksonville, Fla. Within weeks of Katrina’s landfall, CSX dispatched construction crews to fix the freight line; six months later, the bridge reopened. Even a partial reopening of the road bridge, part of U.S. Highway 90, is at least five months away.

So, the government cannot invest the funds appropriated to rebuild New Orleans and the Gulf Coast region in a prompt manner. But at least fraud in the administration of those funds is under control. My sense is that the residents of New Orleans and the Gulf Coast would be willing to risk a good dose of fraud to achieve some results at this point. Harry Siegel, who has been studying the recovery of New Orleans over at the Manhattan Institute, has more.

A quick note about Barbaro’s death

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BARBARO1_lg%20013007.jpgThe sad but not unexpected end for Barbaro came earlier this week (prior posts here). Alas, thoroughbreds are born to race, not to convalesce. So, Barbaro was simply not able to fend off the multiple infections that increasingly afflicted his legs and hoof areas.
Although those in horse racing circles knew that the Kentucky Derby champ’s recovery was always a longshot, Barbaro’s death has generated a surprising amount of over-the-top public emotion. Thankfully, the Washington Post’s Sally Jenkins does a good job of placing Barbaro’s death in the perspective of the high-risk nature of thoroughbred racing, as does NY Times Joe Drape in analyzing the advancement in treatment of thoroughbreds that resulted from Barbaro’s attempted recovery.
But the same thing cannot be said for NY Times Select ($) columnist Harvey Araton, who is utterly overwrought in attempting to interpret the public displays of emotion over Barbaro’s death:

Maybe Barbaro, as the fallen champion, was reminiscent of a country that was seriously wounded on 9/11 and has been wobbly ever since. Maybe the horseís medical roller coaster struck a chord at a time when a great American city, ravaged by nature and neglect, still canít stand up. Maybe only in such context can we rationalize such widespread passion for the health of a horse that has exceeded that for any single American soldier killed or wounded in Iraq.

Harvey, get a grip. Sheesh!

So, where does Bob Dylan holiday?

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dylan_newport_2002.jpgThe same way that I would like to — he goes to his new vacation home in the Scottish Highlands to play golf:

Bob Dylan said in one of his songs that his heart was in the Highlands. Now he has proved the point by paying more than £2 million for a secluded Edwardian mansion with a view of the hills.
The notoriously reclusive American star and his brother David have bought Aultmore House in the foothills of the Cairngorms.
The house was built at the turn of the 20th century for the millionaire owner of a department store in Moscow and has been described as one of the finest homes in the Highlands. [. . .]
Dylan is a keen golfer and plays off a 17 handicap at Malibu Country Club in California. His new home is close to the more utilitarian Abernethy golf club, where a day ticket costs just £10, but membership is never a foregone conclusion.
Jack McCool, the treasurer, said: “Mr Dylan would have to apply in writing just like everyone else and be vetted by the committee.
“If there were no objections then he would be a member after paying the membership fee, which at present is £105.”

Golf at Malibu and the Highlands? Sweet.

Food myths

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doughnuts.jpgAmericans love their myths and their food, so it makes sense that some of our most active myth-making occurs in the realm of eating and nutrition.
Michael Pollan, author of “The Omnivoreís Dilemma,” (Penguin 2006) provides this excellent NY Sunday Times magazine piece in which he reviews the food and nutrition myths that have been developed and dispelled over just the past two decades in America. It’s a fascinating story, particularly how Americans’ willingness to accept the latest food or nutrition fad co-exists with a huge fast-food industry that is largely based on high-calorie processed food of dubious nutritional value.
Pollan is spot on in his observation that most Americans know just enough about nutrition to be dangerous, which is also the case with medical matters generally. Few people can accurately recount how many calories they consume in a day, and even fewer still can tell you how many calories they need to consume to lose weight or maintain their optimum weight (do you know what 200 calories looks like?). Similarly, few of those overweight folks torturing themselves on the treadmills or stationary bicycles at the local gym have a clue of how long they would need to exercise to work off the excess calories that they have consumed. Despite their tenacity, most of those overweight exercisers almost always overestimate the amount of calories expended during exercise.
As my wise father used to say: “What would you rather do? Eat one less helping of mashed potatoes? Or go ride the stationary bicycle for an hour?”
By the way, the following are a couple of terrific resources on nutrition that approach the subject from very different, but quite insightful, perspectives — Junkfood Science by nutritionist Sandy Szwarc, who exposes many food myths that are based on studies of questionable merit, and Art De Vany’s blog, where he frequently explores the physiological impact of diet, obesity and exercise.

Tiger Woods, DB

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Not only did Tiger Woods win his seventh straight PGA Tour event over this past weekend, but he debuted a pretty clever commercial in which he fends off a course rat from stealing his clubs on the range by nailing him in the head with a golf ball.
But frankly, the outtake below from the filming of the commercial is even better than the commercial itself. As they say in football evaluation circles — “good closing speed.”
Hat tip to Waggle Room, a solid new golf blog.

The ethanol con

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ethanol.jpgWhile President Bush on one hand made a productive health care finance proposal in his State of Union Address last week, his big push for alternative fuel development was not as well-conceived. As this OpinionJounal op-ed notes, the development of ethanol as an alternative fuel source has been mostly a con job of epic proportions.

[F]ederal and state subsidies for ethanol ran to about $6 billion last year, equivalent to roughly half its wholesale market price. Ethanol gets a 51-cent a gallon domestic subsidy, and there’s another 54-cent a gallon tariff applied at the border against imported ethanol. Without those subsidies, hardly anyone would make the stuff, much less buy it–despite recent high oil prices.

Jerry Taylor of the Cato Institute has done a ton of work exposing the ethanol boondoggle, and this recent post links several of his works. The ethanol con is a quintessential example of special interests manipulating market conditions and political rhetoric to capture a windfall that would not otherwise be available. It’s also a reminder to all of us to grab our pocketbooks whenever we hear a government official touting the next big government program to develop something at a supposedly cheaper or more stable price than what the markets are providing.

Local attorney accused of bankruptcy fraud

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cash%20on%20scale.jpgBankruptcy is strong medicine with serious side effects, so it’s not a remedy for legal problems to be taken lightly. I don’t know if local attorney Jose Antonio Villalon took the notion of filing bankruptcy lightly, but his multiple bankruptcy filings several years ago have resulted in a three-count indictment accusing him of bankruptcy fraud in connection with his alleged failure to disclosed an interest in an oil and gas lease that he either owned or had transferred shortly before commencing his bankruptcy cases. The U.S. Attorney’s press release on Villalon’s indictment is here.
Notably, Villalon did not even receive a discharge of his personal liability for his debts, which is the primary benefit of enduring a bankruptcy case in the first place. Both of Villalon’s bankruptcy cases were dismissed before he received a discharge, and the second one was reopened after the trustee discovered the allegedly undisclosed asset. Thus, Villalon’s creditors still can recover their claims against his non-exempt assets, assuming that they can find them, and Villalon has only a criminal indictment and no discharge for all his bankruptcy trouble.
Serious side effects indeed.

Risky Business

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David%20Carr%20grimacing%20012907.jpgAs we endure the overblown run-up to Super Bowl XLI this week, there will invariably be much blather about the high incomes of the participants and professional football players generally. Frankly, given the risks of what these players face, they deserve every dime they make.
As this NY Times article reports, the life of even a relatively high-income NFL football player is no picnic:

[F]ootball playersí careers resemble life as Thomas Hobbes described it in the 17th century: theyíre nasty, brutish and short. The average football career lasts less than four years, . . .
The minority of players who do make it past a fourth year are still treated like (highly paid) temporary or contract workers. In baseball and basketball, teams must honor multiyear contracts, even if players suffer career-ending injuries or if their skills decline.
Not so in football. ìA person with a five-year contract will get paid only for the current year if he suffers a career-ending injury,î Professor [Skip] Sauer [of The Sports Economist fame] noted.
Star players with bargaining power have been able to protect themselves by negotiating guaranteed multimillion-dollar signing bonuses. But less-valued players are not able to extract those bonuses, and the relatively weak playersí union has not been effective in getting many concessions from owners, nor much protection for players hurt on the job.

The article goes on to mention the examples of former Houston Oilers Hall of Fame running back, Earl Campbell, who is partially disabled from the punishment he took during his football career, and the more recent case of former Philadelphia Eagles defensive back Andre Waters, who committed suicide after battling depression and brain damage caused by the multiple collisions he endured while playing football.
Along those same lines, San Francisco Chronicle reporter Stan Kroichick recently wrote this fine series of articles (see also here, here and here) on the 1981 San Francisco 49er’s, the first of that franchise’s four Super Bowl championships of the 1980’s (the 1994 team won another one) in which he chronicles the physical problems that the players on the 1981 team have endured over the 26 years since that magic season (and here’s another one examining the health problems of Wilbur Marshall, one of the stars of the 1985 Bears Super Bowl championship team). It’s a daunting tale and one that will be simmering just beneath the surface of the NFLís pomp and circumstance during Super Bowl week.