Monthly Archives: April 2007

This is a meltdown?

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sub-prime-mortgages-newtxt041807.gifWhat was that about a meltdown in the subprime mortgage market?
This Bloomberg article reports that Fremont General has agreed to sell $2.9 billion of subprime mortgages at a net loss of $100 million. That deal comes on top of another one in which Fremont discounted $4 billion of subprime loans by $140 million. That computes to a loss of 3.5%. Nobody likes to lose money, but that simply is not the type of loss that is going to shatter a reasonably fluid bond market. Perhaps as a result, Fremont shares were trading briskly and enjoyed big gains yesterday.
I wonder what Gretchen will say about that?

Business is good in one mega-church pulpit

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osteen.jpgHouston has several of the nation’s largest churches and business is quite good in at least one of them:

The next book from megaselling pastor Joel OsteenóBecome a Better You: 7 Keys to Improving Your Lifeówill have a first printing of three million and a one-day laydown on October 15. . . . The Osteen first printing is believed to be the highest for a hardcover book in S&S history, said spokesperson Adam Rothberg.
Osteen made big news last year (“Osteen Heads to Free Press,” PW Daily, Mar. 15, 2006) when he jumped the Warner ship for Simon & Schuster for a deal worth some $13 million, according to informed sources, though S&S denied that figure. Osteen’s first book, Your Best Life Now, was published by Warner Faith (now Hachette’s FaithWords division) in 2004 and has sold more than four million copies to date, with a constant presence on the bestsellers lists.
S&S will publish Become a Better You simultaneously in Spanish-language and audio editions.

“Somebody was guilty because they were guilty”

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Mary Flood, the Houston Chronicle’s lead reporter on the criminal trial of former Enron executives Jeff Skilling and Ken Lay, reports that some of the former Lay-Skilling jurors are now hitting the rubber-chicken circuit:

Deliberating the fate of Jeff Skilling and Ken Lay last year was “horribly confusing” and very intense, juror Jill Ford told a group of appellate lawyers at a dinner Thursday night.

Ford, juror Dana Fernandez and alternate jurors Gary Creakbaum, Amanda Perry and Kristine Statham answered after-dinner questions from the inquisitive lawyers at the Four Seasons Hotel. U.S. District Judge Sim Lake, who oversaw the trial, was also in attendance.

Some of the juror observations that Flood reports are quite telling. One of the jurors confirmed that the real presumption in the case was not that of innocence and that Skilling and Lay never really had a chance:

Ford, who was 24 when the jury deliberated last May, said she learned that Diet Coke could keep her awake in the morning and that she took things very seriously. “I felt it was important that somebody was guilty because they were guilty . . . not because we needed somebody to blame,” she said.

Flood goes on to report that the jurors thought that former Enron treasurer Ben Glisan and former investor relations chief Mark Koenig were the most damaging witnesses to Skilling and Lay, and that none of them believed Skilling or Lay’s testimony, although they all agreed that both of the former executives had to testify under the circumstances.

Given the 25 year sentence that Skilling received, one shudders to think what basis the jury would have given Judge Sim Lake to sentence him had he not testified.

Of course, in a trial of such complexity, Skilling’s testimony regarding his under-disclosed investment in his former girlfriend’s fledgling company named Photofete was a key issue for at least two jurors. And apparently no one cared to ask the jurors what they thought about the fact that the Enron Task Force prevented them from hearing from dozens of witnesses who would have provided exculpatory testimony for Skilling and Lay.

This post outlines the case and evidence that was presented at trial against Skilling, and this one does the same for the case against Lay.

But it all still boiled down to Photofete. So it goes in the wacky world of regulating business through the blunt instrument of the criminal justice system.

But what about the Apple Rule?

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the_wall_street_journal_logo.gifSo, one of the two Wall Street Journal Pulitzer Prizes this year is for the WSJ’s reporting on the backdating of options scandal that has snared hundreds of companies and executives over the past year. Frankly, I’ve been more impressed with the WSJ’s Holman Jenkins’ writing ($) exposing how the media largely made a mountain out of a molehill in regard to the backdating mess (John Carney over at DealBreaker comments along the same line).
So, my question is this — if the WSJ backdating series merits a Pulitzer, then what award does the even more insightful series of blog posts that developed the Apple Rule deserve?

Piling on Lidge, but what about Biggio?

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Lidge%20hurting.jpgNow even the SportsPickle is getting into the act of making fun of embattled Stros reliever, Brad Lidge:

Brad Lidge confident he can help Astros lose in the eighth inning just as much as in the ninth
Although he has been demoted from closer to a setup role, Astros reliever Brad Lidge says he believes he can contribute just as much to team in the middle innings as he can in the ninth inning.
ìIím going to keep going out there, and doing what I do ñ throwing the ball as hard as I can right down the middle of the plate,î said Lidge. ìWhether thatís in the sixth, seventh, eighth or ninth inning, itís no matter. The batter is going to have to put his bat on it. And if he does, good for him. Itís a guaranteed home run.î
Even though he is disappointed to lose his closerís role, Lidge admits he may serve the team better as a setup man.
ìSeeing me come in for the seventh or eighth inning will be motivating for the team,î said Lidge. ìTheyíll know that they still have one or two at-bats to come back from the deficit I put them in. Whereas when I gave up walkoff homers as a closer, they never had a chance to come back. Having me available at any point in the game will ensure the team never gets lackadaisical.î

Lidge is an easy target these days, but there are plenty of other Stros who aren’t exactly lighting up the scoreboard in the season’s early days. For example, through 11 games, Stros icon and lead off man Craig Biggio has an RCAA of -3, an on-base average of .240 and an OPS (OBA + slugging percentage) of .620, he has not yet drawn a walk in 50 plate appearances, has scored only 5 runs and has struck out 10 times while grounding into 2 double plays.
Granted, it’s still early in the season. But coming off his least productive season in 2006, Bidg has no business leading off for a Major League Baseball team at this point in his career. Although maybe good for the box office, it’s looking as if the Stros are going to be paying dearly on the field as a result of indulging Bidg’s quest for 3,000 hits.

Stockman’s story

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david_stockman_nr.jpgFormer Reagan Administration budget chief David Stockman is fighting to stay out of prison for the rest of his life as a result of a federal indictment over his stewardship of the defunct auto parts supplier Collins & Aikman. Stockman is essentially taking the same defense approach as former Enron executives Jeff Skilling and Ken Lay, which cannot be particularly comforting for Stockman. Although the entire Landon Thomas-authored profile of Stockman is interesting, the rendition of how Stockman’s professional life cratered has to be daunting for any businessperson engaged in taking big risks:

Rumors had begun to spread that Collins & Aikman was experiencing a liquidity crisis. On March 17 [2005], Mr. Stockman presented preliminary year-end results to investors. Badgered on the call by analysts about the firmís cash position, Mr. Stockman did his best to stay upbeat, while also laying out the challenges ahead.
On May 9, Mr. Stockman made a last bid to save his company, securing, he says, a promise from Chrysler, Collins & Aikmanís largest customer, to give the company better pricing. Mr. Stockman was ecstatic.
However, on that very afternoon, Mr. Stockman got a call from Dennis E. Glazer, a partner at Davis Polk. The law firm was now questioning whether Mr. Stockman gave overly optimistic forecasts during the March conference call.
Mr. Stockman defended himself, saying that he had provided sufficient caveats. But Mr. Glazer was not convinced. In its indictment, the government would charge that Mr. Stockman drafted the materials and made ìat least three material misstatements or omissions.î
Late the next night, Mr. Stockman received a call in his Troy, Mich., hotel room from Daniel P. Tredwell, his partner at Heartland. The board would ask for his resignation the next day. Mr. Stockman could not believe it. ìThe audit committee had taken over the company and delegated authority to a lawyer from New York wearing suspenders,î he says now. That night, he would add a third Klonopin anti-anxiety pill to the two he was taking each night to bring on sleep quickly.
Mr. Glazer declined to comment on the case, citing confidentiality.
The next day the board demanded his resignation.
ìLeave your office now and donít take anything with you,î Mr. Stockman recalled Mr. Glazer as saying.
It had happened so quickly that he could not even call a lawyer.
ìI was in shock,î he said. ìI had been with the company for 14 years ó I mean I had put this whole thing together. I had put these guys on the board, invested the money, owned the shares and they stabbed me in the back. It was like a Stalinist show trial.î
A week later, on May 17, Collins & Aikman filed for bankruptcy.

Have we now come to the point where a chief executive officer of a financially-troubled publicly-owned company cannot speak optimistically of the company’s prospects for pulling out of a tailspin because of the risk of a criminal indictment if the company cannot pull it off?

Texas parole shenanigans

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jailimage.jpgDon’t miss this Chuck Lindell/Austin American Statesman that reports on the bizarre case of Jimmy Lee Page, a man who was acquitted of murder twenty years ago, but was never released from prison:

Now 52, Page is in prison today because state officials revoked his parole ó trumping the juryís verdict with their own finding of guilt. Itís a common practice. Last year, 91 Texas parolees were returned to prison after being charged with a new crime, even though the charges against them were later dropped or they were acquitted in court.
Bound by looser rules than a court of law, parole officials reached their verdict on Page after hearing testimony from only one witness, a police detective who declares Page is ìguilty as homemade sin.î In the years since, he was denied parole a dozen times, most recently in early 2006.

Page is certainly no saint. He was convicted of murder in 1975 and sentenced to life in prison, but he was paroled on that conviction after eleven years. Maybe he still ought to be serving time for that murder. However, he is serving time for a crime for which he was acquitted. That’s wrong.
Lindell goes on to address the lax parole hearing process, noting that the system gives undertrained and unprepared people mere moments to look at a case before making a decision and moving on to the next one. In such an environment, maintaining the status quo becomes the most convenient outcome. Constitutional guarantees such as due process, confrontation of witnesses, and a reasonably competent defense are mere afterthoughts.
This looks to me like a process that is ripe for a Constitutional challenge.

More costs of the new Prohibition

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speakeasy-prohibition.gifThese earlier posts discuss the high cost of the government’s prohibition of internet gambling, but this Sallie James/TCS Daily op-ed reports that those costs are about ready to go up another level entirely:

On March 30, a World Trade Organization tribunal handed down a potentially significant finding against U.S. restrictions on internet gambling.
The panel was set up at the request of Antigua and Barbuda, who complained that the United States had not complied with the WTO’s earlier decision that it must change the way it regulates gambling over the internet. The previous ruling, in April 2005, found that while the United States was within its rights to restrict the import of goods and services on “public morals” grounds, as it had argued in its defense, those rules must be applied in a non-discriminatory manner. If the United States finds online gambling offensive, it must be consistent in its restrictions and apply them equally to domestic and foreign providers.
And therein lies the rub: the United States allows interstate online betting on horseracing. The United States had also agreed during the Uruguay Round to open its markets to foreign suppliers of gambling and betting services, although the United States Trade Representative (through a spokesman) claimed in 2004 that the previous administration “clearly intended to exclude gambling from U.S. service commitments” when they signed the deal. Both of those inconsistencies lost it the original case.
The United States Congress passed the Unlawful Internet Gambling Enforcement Act in October 2006, ostensibly to bring its laws into conformity with the April 2005 ruling. But the compliance panel ruled that the United States has taken no satisfactory remedial action that would bring its laws into conformity with its previously-established obligations. Moreover, it appears that the United States applies its laws in a discriminatory manner, by prosecuting foreign gambling entities more than it does U.S. gaming firms. Game, set and match: Antigua and Barbuda.

Frankly, the WTO decision sounds about right to me.

This is the high road?

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David_Carr%20032307.jpgWhat was that about David Carr taking the high road about his divorce from the Texans? Check out the following remarks from this ESPN.com article:

As the losses and sacks kept piling up, football stopped being fun for David Carr. [. . .]
Now with Carolina Panthers, Carr is smiling again — even though he will be a backup for the first time.
“I’ve been on an expansion team and it’s not fun. … I’ve been on teams that aren’t winning and it wasn’t exciting. Football is a hard enough game when you go out there and you’re battling everything and you go out and lose it makes it hard.”
“You get to a point where you’re in survival mode, which is hard for me,” Carr said Friday, a week after agreeing on a two-year, $6.2 million deal to be the Panthers’ No. 2 QB behind Jake Delhomme.
“Honestly in the last five years we haven’t had much spark. If we were stuck in the forest it would be hard to light a fire with what we had going on.”
Carr expressed some resentment Friday toward the Houston Texans, who released him last month after they acquired Matt Schaub in a trade with Atlanta. Schaub was then quickly anointed the starter.
Carr may have had chances to start elsewhere — he visited Oakland — but chose Carolina because he wanted to play for a team that has a chance to win.
“I’ve been on an expansion team and it’s not fun,” Carr said of being the first pick by the Texans. “I’ve been on teams that aren’t winning and it wasn’t exciting. Football is a hard enough game when you go out there and you’re battling everything and you go out and lose it makes it hard. I wanted to be on a team that was fun and exciting and whether I had a chance to play right away, it didn’t matter to me.”
Carr also made it clear he wanted to play for a team with an established offensive line. Carr completed 60 percent of his passes with the Texans, including a career-high 68 percent last season. But Carr also 65 interceptions over five seasons as he faced nearly constant pressure.
So it wasn’t surprising Carr quickly sought out members of Carolina’s line. Tackle Jordan Gross was one of the first Panthers he met.
“If I learned anything in the last five years, that’s where football games are won and lost,” Carr said. [. . .]
It’s believed the 6-foot-3 Carr, who won’t turn 28 until July, could blossom when he has time to throw. With Delhomme and the Panthers coming off a disappointing 8-8 season, it’s been suggested Carr could quickly challenge for the No. 1 job. [. . .]
Carr also insisted Friday he’s content as a backup — and ready take a break from running away from defensive linemen.
“I need to take a deep breath and be around a good environment and just start enjoying the game again,” Carr said. “In the last week or two, it’s brought back a lot of excitement that I had when I was younger.” [. . .]
Carr said he’s returning to Charlotte Monday with his wife, and will take part in the team’s offseason conditioning program, while pouring over the playbook.
“It’s funny, the day I was signed by Carolina, I was throwing balls the next day. I’ve never done that before,” Carr said. “I was out there throwing a ball for two or three hours and I couldn’t really explain it except I was excited to get a new opportunity and a chance to show what I can do.”

H’mm. I wonder what Carr’s former offensive line teammates would say about his poor pocket presence, defective throwing motion, inability to pick up secondary receivers and dubious leadership qualities? I guess none of that contributed to the Texans’ poor performance over the past five seasons.

Good rhubarbs

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billy_martin_autograph.jpgStros manager Phil Garner was ejected in the Stros’ win last night over the Phillies as home plate umpire Greg Gibson was putting the squeeze on Roy O, who gave up a career-high six walks and balked in a run. After Oswalt balked in the run, Garner had had enough and chewed out Gibson pretty well. Maybe it worked because a line of Stros pitchers (including Brad Lidge) held the Phils without any runs the rest of the way.
But Garner’s rhubarb with Gibson was rather tame in comparison to those that the late Billy Martin used to engage in with various umpires during his rough and tumble career of managing the Twins, Yankees, A’s and Rangers. Martin’s hair trigger temper led the Oakland A’s to feature him in the clever commercial below to sell tickets for the club’s opening home game of the 1981 season. Martin had much to be content about that season as A’s started out 8-0 on their way to an early-season record of 20-3. They went on to win their division in that strike-shortened split season before losing to the Yankees in the ALCS. Enjoy.