Monthly Archives: February 2007

Anthony Buzbee places foot squarely in his mouth

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Buzbee.jpgAs noted previously here and here, it is well known around the U.S. that the Rio Grande Valley and much of the Coastal Plain southwest of the Houston metro area is a plaintiff’s lawyer’s paradise.
It’s just not everyday that a plaintiff’s lawyer — in this case, Friendswood lawyer Anthony Buzbee — brags about it to a roomful of defense lawyers. While being recorded. Which results in a prominent Nathan Koppel/Wall Street Journal ($) article and a blog post in Peter Lattman’s popular WSJ Law Blog.
Not surprisingly, the recording of Buzbee’s talk is being used at the state legislature by lobbyists and legislators wanting to change one of the favorable venue provisions that Buzbee bragged about in his talk.
Longtime Houston plaintiff’s lawyer Ronnie Krist pretty well summed up in the WSJ article how most plaintiff’s lawyers are reacting to Buzbee’s talk:

“Lawyers are always looking for a more favorable venue, but to say in a public forum that notwithstanding the evidence, an Hispanic jury and judge will allow you to win undermines public confidence” in the system, he says. “Those are the sorts of things you shouldn’t whisper to your wife in the middle of the night.”

The remarkable evolution of open heart surgery

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openheartsurgery.jpegGiven the importance of Houston’s Texas Medical Center in the development of open heart surgery (see here and here), a couple of recent NY Times articles focusing on open heart surgery caught my attention.
First, in this article, David Schribman compares his recent open heart surgery to the heart surgery that a childhood friend endured 42 years ago.
Next, following on this earlier post, this NY Times article reports that safety concerns are increasing over the long-term risks of stents used in angioplasty procedures. New data is indicating that the sickest heart patients may actually live longer if they receive bypass surgery rather than the angioplasty, which is prompting some well-known heart surgeons and cardiologists to conclude that the pendulum has swung too far away from bypass surgery.
Finally, the Times provides this extraordinary slide show of open heart surgery. The slide show is a powerful reminder that — despite the now common nature of bypass surgery — it is still not as routine as changing a flat tire.

The curious attraction of the NFL Draft

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nfldraft.jpgThis earlier post noted the institutionalized fanaticism that is involved in the recruitment of big-time college football players. But that fanaticism is really nothing compared to the obsession that many professional football fans will indulge over the next several weeks as National Football League teams prepares for its annual draft of minor league, er . . I mean, “college” players in mid-April.
Inasmuch as many folks in Houston believe that the poor performance of the Houston Texans during their five seasons of existence is attributable to the poor draft picks of Texans’ management (I’m not convinced that’s entirely correct, but oh well), we are bombarded in these football-crazed parts over the next several weeks with media coverage of who the Texans and other NFL teams should choose in the draft. I’ve always had this vague notion that all this attention given to who NFL teams should choose might actually push the teams toward making poor choices, but I’ve never really been able to put my finger on any support for that notion.
Well, American Enterprise Institute scholar Kevin Hassett just might have the answer. According to an ongoing study that Yale University economist Cade Massey and University of Chicago economist Richard Thaler are conducting, Hassett reports that the Texans likely would have been much better off trading their high draft picks from past drafts for mutiple lower draft picks that the team could have used to buy more good players:

To recap, Massey and Thaler studied the draft and found that teams make systematic errors. They tend to place too high a value on the top players and too low a value on draft picks a little farther down.
The problem is, the very top players in the draft receive very high salaries. Even if they compete brilliantly, it’s hard for them to outperform their earnings. But by definition, since all teams have to operate within the same salary cap, winners have to have teams that are filled with players who outperform their paychecks.
Last year’s top overall pick, Mario Williams of the Houston Texans, is a nice example. He received a salary package worth $54 million over six years — and proceeded to play like a fairly mediocre defensive end. He was the sixth-leading tackler on his team, and recorded only 4 1/2 sacks.
While those numbers suggest Williams will be a serviceable NFL competitor, he was compensated as one of the best defensive players in the league. And since the total salary bill for the team is capped by the league, the money spent on Williams is money that can’t be spent on players at other positions. That undermines their ability to compete.
On the other hand, players a little farther down in the draft can be enormous bargains. Take Houston’s second-round pick DeMeco Ryans. He led the NFL in tackles, but only received a contract of $5 million over four years. Good teams fill their roster with such deals and avoid committing huge resources to the big-money players like Williams.

In other words, the Texans need more DeMeco Ryans and fewer David Carrs and Mario Williams, although it’s a bit early to write off the Williams pick as a bust on the level of the Carr pick. Hassett’s point is also supported by the success of the New England Patriots, who have used a model of emphasizing quality depth over star players in building one of the most successful NFL teams over the past decade. During most of that time, the Patriots were picking at the bottom of the draft board while, over the past five years, the Texans have been picking at or near the top.

Enronizing the Nacchio trial

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cliff%20stricklin%20022707.jpgPeter Lattman notes this Jeff Smith/Rocky Mountain News article on Cliff Stricklin, the former Enron Task Force prosecutor who is gearing up as lead prosecutor in the upcoming criminal trial in Denver of Joseph Naccio, the former Qwest CEO. Naccio is charged with several fraud counts alleging that he sold over $100 million of stock during the first five months of 2001 while knowing that the telco’s finances were weakening. Naccio contends that he believed that the company’s finances and prospects were fine, and that his stock sales were simply a diversification strategy that he was pursuing at the behest of his investment advisors.
Although the article describes Stricklin’s goal of keeping the Naccio trial simple, it does note Stricklin’s dubious (and rather complicated) handling of the trial of the first Enron Broadband case, which ended in a crushing prosecution defeat:

In the Enron Broadband case in 2005, Stricklin failed to win convictions against the five former executives on trial. Three were acquitted on some charges, and the jury deadlocked on charges against the other two.
During the trial, the prosecution presented a videotape it said had been shown to stock analysts in 2000 when it hadn’t, a mistake Stricklin apologized for in his closing arguments. Stricklin also had to rebut defense arguments that some of the prosecution witnesses had tailored their testimony out of fear of being charged themselves.

That description soft-pedals Stricklin’s performance in the first Enron Broadband trial, which — as noted earlier here — exemplified the DOJ’s “anything for a conviction” attitude toward businesspeople in the post-stock market bubble era. Stricklin might also remember to be careful about what he asks on re-direct examination of cooperating witnesses during the Naccio trial.

The ruse of dieting

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diet%20scales.jpgThis earlier post made the point that a sound understanding of nutritional principles and moderate eating habits are far more likely to result in proper personal weight management than relying on the dozens of fad diets that are available to the American consumer.
Along those lines, this Sandy Szwarc post reports on some rather startling statistics relating to one such diet program:

A study on one of the largest commercial weight-loss programs was just published in the International Journal of Obesity but has been ignored by the press. Understandably, a major media campaign and flurry of press releases have not trumpeted its findings.
Researchers at four major research centers across the country followed 60,164 adults enrolled in the Jenny Craig Platinum program in 2001-2002 to evaluate how long people were able to stick with this program and how much weight they lost.
They found that a quarter dropped out the first month, 42% after 3 months, 22% after 6 months, and only 6.6% were able to stick with the program for a year.
Unlike Kirstie Alley, the weight loss among people not being paid as celebrity spokespersons was considerably less notable. For a 200 pound woman able to keep with the program an entire year, according to this study, she would have lost half a pound a week….except fewer than 7 out of 100 were able to hang in for a full year. Hardly winning endorsement for the success and palatability of the program.

Read the entire post. Research is increasingly concluding that being overweight does not equate with increased mortality risk. Rather, physical activity and fitness have a far greater impact on lowering mortality risk than one’s body mass index or waist measurements. Despite our cultural stereotypes of what ìfitî looks like, research on obese adults has shown that about half rate highly fit on maximal exercise testing, which is not much different from slender people.
Thus, there is nothing wrong with wanting to lose a few pounds, but forget about the latest fad diet. Instead, understanding nutrition and modifying eating habits over the long-term is much more likely to produce the calorie deficit that will eventually result in permanent weight loss. But if the goal is to reduce mortality risk, the better bet is simply to increase the exercise and recreation regimen, and more exercise is not necessarily better ó a couple of hours total spread over 3-5 days a week is fine.

Barack Obama’s questionable economics

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Thomas%20Sowell%20022607.jpegThe exceedingly clear thinking Thomas Sowell (earlier posts here and here) is reviewing Democratic Party Presidential candidate Barack Obama’s positions on economic policy and doesn’t much like what he sees:

Senator Barack Obama recently said, “let’s allow our unions and their organizers to lift up this country’s middle class again.”
Ironically, he said it at a time when Detroit automakers have been laying off unionized workers by the tens of thousands, while Toyota has been hiring tens of thousands of non-union American automobile workers. [. . .]
Senator Obama is being hailed as the newest and freshest face on the American political scene. But he is advocating some of the oldest fallacies, just as if it was the 1960s again, or as if he has learned nothing and forgotten nothing since then. [. . .]
Senator Obama is not unique among politicians who want to control prices, as if that is controlling the underlying reality behind the prices. [. . .]
The underlying reality that politicians do not want to face is that here, too, prices convey a reality that is not subject to political control. . .

One of the hardest things for politicians to resist is indulging most voters’ tendency to believe economic fallacies. Unfortunately, most politicos do the easy thing and give the voters what they want to hear. That is probably a good approach to getting elected, but it’s a lousy one for governing.

Who are the top all-time Stros hitters and pitchers?

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stros%20logo%20022607.jpgThe Chronicle’s Brian McTaggert gets it right in naming the four best hitters in Stros history:

Jeff Bagwell: The club’s most prolific power hitter is the Astros’ all-time leader in homers (449), RBIs (1,529) and walks (1,401). He won the NL Rookie of the Year in 1991 and the Most Valuable Player in 1994.
Lance Berkman: At 31 years old, the four-time All-Star is in the prime of his career and already has 225 homers and 753 RBIs. He’s currently the club’s all-time leader in slugging percentage (.567) and average (.304).
Craig Biggio: Seven-time All-Star ranks first on many of the club’s career offensive charts, including hits (2,709), at-bats (10,359), runs (1,776), hits (2,930), doubles (637) and total bases (4,514).
Jose Cruz: Perhaps the best Astros hitter not with a last name starting with “B.” Ranks third on career club list in games (1,870), at-bats (6,629), hits (1,937), RBIs (942), steals (288) and first in triples (80).

The following are the top ten Stros hitters of all-time based on how many more runs they created during their respective careers with the Stros than an average National League hitter created during the same time frame (“RCAA,” explained here
But McTaggert does not do nearly as well in rating Stros pitchers, getting just one of the top four all-time correct:

Larry Dierker: Although his career has been over for 30 years, he still ranks first on Astros’ career charts in games started (320), complete games (106), innings pitched (2,294 1/3) and shutouts (25).
Joe Niekro: The knuckleballer who died in October is the club’s all-time leader in victories (144), ranks second in complete games (82), innings (2,270) and shutouts (21) and is third in starts (301).
Roy Oswalt: Still 29 years old, he’s on pace to become the club’s all-time winningest pitcher. With a 98-47 record (.676), he has the highest winning percentage in franchise history of pitchers with 100 or more decisions.
Nolan Ryan: The Texas legend spent one-third of his 27-year career with the Astros and was 106-94 with a 3.13 ERA and threw a no-hitter. He still ranks third in starts (282), innings (1,854 2/3) and is first in strikeouts (1,855).

Oswalt is the best pitcher in Stros history, but of the other three, only Ryan is even in the top 10 Stros pitchers of all-time. The most reliable measure for comparing pitchers is the Lee Sinins-created statistic, runs saved against average (“RSAA,” explained here). Based on how many runs they saved in comparison to an average National League pitcher during the time that they played, the following are the top ten Stros pitchers of all-time along with their RSAA score:
Best%20RSAA%20through%202006.gif
Dierker, Niekro and Ryan were all popular with Stros fans while they played for club, but popularity doesn’t make them among the top four pitchers in Stros history. Dierker was the best manager in Stros history, though.

Ben Stein’s blinders

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ben_stein.jpgThis earlier post noted that the NY Times financial columnist Ben Stein has some rather odd notions about private equity buyouts. Amidst criticizing rich folks for spending their money in a different way than Stein would if he had their money, Stein in this column continues to strap his blinders on closely regarding private equity-backed, management-led buyouts of publicly-owned companies:

“I saw an article about the chairman of Herbalife leading a private equity firmís offer to take the company private. He must be trying to underpay his shareholders for it ó otherwise thereís no built-in profit for him. Of course, heís a fiduciary for those same shareholders, obliged to put their interests ahead of his in every situation. Never mind. This is about money.”

Well, yes, it is about money and the private equity buyers could be wrong in their bet. Stein ignores that Herbalife’s stock price could go down below the price that the chairman and his private equity partners are willing to pay for it, which means that they would absorb the loss rather than the Herbalife public shareholders. Isn’t the more mature analysis here the assessment of the relative risk that Herbalife’s stock price will rise above or below the price that the private equity buyers are willing to pay for it?
But Stein isn’t finished with his blather:

Then I read an article about the head of Four Seasons Hotels and Resorts, Isadore Sharp, taking that company private. His family owns the supervoting shares that control the Four Seasons, and Mr. Sharp says he wants to simplify succession issues with his children. (Donít we all?) Several people have been quoted as saying heís underpaying for the company. Why does he have to do the deal at all? The potential for conflicts of interest is simply overwhelming.
Four Seasons declined to comment when I called to ask, but I assume Mr. Sharp wants to buy the company on the cheap. Every buyer does. The shareholders for whom Mr. Sharp is a fiduciary want ó and by all legal history, deserve ó the highest possible price. Again, why do the deal at all? If he controls the votes of the company, canít he work out succession issues by parceling out those super shares in his will or a living will? Something does not smell quite right here. At least, not to me.
And, hey, lookie here whoís investing along with Mr. Sharp. Why, itís the richest man in the world, Bill Gates. See, heís not rich enough now. He has to get into this ethically dodgy deal to get even richer. Very nice. I guess heíll use that money to do ethical things.

Let’s assume for a moment that the risk is greater that the Four Seasons stock price will fall below the price that Mr. Sharp is willing to pay for it than it is that stock price will rise above it. However, Mr. Sharp disagrees with that risk assessment and is willing to put his money up to back up his belief. Hasn’t Mr. Sharp done precisely the ethical thing for Four Seasons shareholders? I don’t know if the foregoing risk analysis is right or wrong, but it occurs to me that it is at least as likely a scenario as the “ethically dodgy” deal that Stein suggests.
If not for Gretchen Morgenson, I would be amazed that the Times editors would allow Stein’s shallow analysis to pass as a business column in the paper.

Big Weekend Deals

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Big%20Deals.jpgO.K., so the offer of private-equity firms Texas Pacific Group and Kohlberg Kravis Roberts & Co. to acquire Dallas-based utility TXU Corp for about $45 billion was the big deal that was buzzing around financial circles over the weekend. As the NY Times’ Landon Thomas reports, it’s always fun when one of the original barbarians arrives at the gate.
But also catching my eye was that Houston-based Marble Slab Creamery — a longtime success story in the premium ice-cream parlor wars — announced on Friday that it was selling out New York-based NexCen Brands Inc. for $16 million. As noted earlier here, Marble Slab is well-positioned to make a run at becoming the Starbucks of premium ice-cream and NexCen — a brand acquisition and management company that is focused on assembling a portfolio of companies in the consumer branded products and franchise industries — has the capital to pull it off. Bully for the Hankamer family, the owners of Marble Slab.

Larry Ribstein’s big day

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ribstein.jpgGreat teachers are a popular topic on this blog (see here and here), so I would be remiss if I didn’t note that the University of Illinois College of Law conducted the investiture ceremony earlier this week honoring Clear Thinkers favorite Larry Ribstein as the holder of the Mildred Van Voorhis Jones Chair at the school.
The blawgosphere has undergone such explosive growth over the past several years that we are still too close to it to realize the full extent of the seismic shift that it has caused in the area of legal research and analysis. But make no mistake about it, Professor Ribstein has been at the forefront of this sea change, literally pushing legal scholarship from what had been mostly closed conversations between fellow academics into a hugely valuable resource that is now readily available to millions over the Web. Already the leading expert in the U.S. in the area of unincorporated business associations, Professor Ribstein has become one of the blawgosphere’s most insightful thinkers on corporate governance issues and the effects of regulation on markets and business. His Ideoblog blog has contributed at least as much to the understanding and appreciation of business law issues over the past three years as any Web resource of which I am aware.
The video of Larry’s investiture ceremony is here. Larry’s acceptance speech begins at about the 14 and a half minute mark of the program and is essentially a review of the impact that the study of markets has had on his marvelous career. Having the opportunity to watch a top notch academic at the top of his game is always an enjoyable experience, so pull up a chair and watch Larry’s speech. Besides, unless you watch the video, how else are you going to learn the story of how Larry’s blog is really the result of failed entrepreneurial ventures involving hamsters and an animal cemetery?