Good enough for government work?

georgeRyanl.jpgThis post from last year addressed the jury misconduct issues that former Governor George Ryan and his aide, Lawrence Warner, raised in the trial court after they had been convicted criminal charges that they had improperly steered state contracts for their own benefit. That post-trial motion was denied, so Ryan and Warner made the jury misconduct during the trial and deliberations a central issue in their appeal to the Seventh Circuit Court of Appeals.
Well, as you probably have heard by now, a divided Seventh Circuit panel rejected Ryan and Warner’s appeal earlier this week (the decision is here), concluding that while the trial “may not have been picture perfect,” it was fair enough to uphold the convictions. That comment did not sit well with dissenting Judge Michael Kanne, who called the majority’s “not pretty perfect” comment “a whopping understatement by any measure.” Judge Kanne proceeded to lay out over three pages what went wrong in the trial:

“In a case that was tried over a six month period, the jurors entered and exited the courthouse every day past scores of television and still cameras and reporters.”
“The jurors used public elevators and brushed elbows with anyone who happened to be in them. Although the courtís intent was not to make the jurorsí names public, that effort was compromised when the jurorsí names were used in the in-court voir dire.”
“When jury deliberations were ready to commence in the most high profile case in Chicago in recent memory, there was no thought of sequestering the jury.”
“During the initial eight days of deliberations an apparent holdout juror was purportedly threatened by other jurors with a charge of bribery.”
“Legal research gained by a juror from the internet was ñ contrary to the courtís instruction ñ brought into the jury room in an effort to persuade the recalcitrant juror to change her position.”
“A reporter for the Chicago Tribune advised the district court during jury deliberations that the newspaperís search had disclosed major inconsistencies between answers in a jury questionnaire and public records. Based on the information provided by the Chicago Tribune, the district judge, in concurrence with all parties, requested the U.S. Attorneyís Office to conduct a background check on all jurors.”
“Jury deliberations were halted following the Chicago Tribune disclosure and the hiatus continued during the investigation of the jurors by the U.S. Attorneyís Office.”
“During the five-day hiatus in jury deliberations, the exposÈ by the Chicago Tribune was published revealing that, indeed, false answers had been given on a jury questionnaire and that the sitting jurors were now under investigation.”
“Amidst questions raised by the district judge concerning the necessity of advising the jurors of their constitutional rights and their right to counsel, the individual examination of six sitting and three alternate jurors was begun.”
“Through the judgeís examination it was determined that a majority of jurors had provided false answers under oath and could face criminal prosecution. Many jurors who were interrogated told the district judge that they were scared, intimidated or sorry for what had occurred.”
“During the course of the interrogations, the jurors were granted immunity from prosecution by the U.S. Attorney. Some jurors later hired lawyers in order to represent their own independent interests arising from their participation in the trial.”
“Two jurors who provided untruthful answers were excused from further service while others so situated were retained.”
“Before the hiatus in deliberation, jurors informed the court that they were having a conflict and yet after the interrogations the judge dismissed one of the jurors in the conflict without determining whether she was a holdout juror.”
“Alternate jurors were seated, but not in the order required by Rule 24.”
“After eight days of deliberation by the original jury, and five days in hiatus, a reconstituted jury deliberated for ten days and returned the verdicts in this case.”

Incredibly, even the foregoing does not fully describe just how dysfunctional this jury had become. Shouting and apparently pushing and shoving went on during jury deliberations. The majority opinion explains that the apparent holdout juror sent out a note to the trial judge saying “that other jurors were calling her derogatory names and shouting profanities.” That was followed by a note from other jurors asking the trial judge to remove the holdout juror because “she was refusing to engage in meaningful discourse and was behaving in a physically aggressive manner.”
But things get even worse. Not only was the jury out of control, the trial judge was ineffectual in bringing order to the proceedings. Judge Kanne observes as follows:

At oral argument before this court, Prosecutor Collins stated that ìJudge Pallmeyer is a consensus builder.î . . . This insightful comment is the key to understanding the non-structural juror errors. Consensus building can help in finding common ground in disputes. It can also help to expose decision makers to alternative points of view. But consensus building can have negative consequences as this case demonstrates.
Consensus building by the district judge allowed a continual round robin of discussions between the attorneys and the court especially during the critical period of March 27th and 28th when the parties and the court were addressing the juror related issues. Transcripts from this period reveal a very conscientious but irresolute judge who is willing to contribute her views and concerns to the conversation involving contested issues, but is reluctant to provide firm rulings that end the courtís consideration of those issues. The record from this period is full of conversations but lacks definitive rulings. Consensus building does not always lead to the resolution of difficult issues.

Judge Kanne succiently sums up the proceedings in the following manner:

In the final analysis, this case was inexorably driven to a defective conclusion by the natural human desire to bring an end to the massive expenditure of time and resources occasioned by this trial ñ to the detriment of the defendants. Given the breadth and depth of both structural and nonstructural errors, I have no doubt that if this case had been a six-day trial, rather than a six-month trial, a mistrial would have been swiftly declared. It should have been here.

What possible public or judicial policy is furthered by allowing such juror misconduct to undermine a trial that could send two men to prison for most of the rest of their lives? As usual, Ellen Podgor has insight comments on the decision here and here, and the Volokh Conspiracy is also all over the decision.

Officially neutralizing a scandal

NBAlogo%20082207.gifAs noted earlier here, I doubted from the beginning that the NBA’s latest point-shaving scandal would have much of an impact on the NBA enterprise. Consistent with that prediction, the NBA just announced that it has just taken the standard step of pushing a scandal into the background:

The National Basketball Association has selected a former United States attorney to review its antigambling policies and the leagueís overall officiating program.
Lawrence B. Pedowitz, a partner at the New York firm of Wachtell, Lipton, Rosen and Katz, will conduct the review, which comes in response to the recent scandal surrounding a referee who conspired with professional gamblers.
ìThere is nothing as important as the integrity of our game and the covenant we have with our fans,î Commissioner David Stern said in a statement. ìIn order to preserve their trust, we will make every effort possible to ensure that our processes and procedures are the best they can be.î

Translation: “We’re going to investigate this matter for a long time and hope you all just forget about it.”

Senior football?

footballStar.jpgIt’s safe to say that the fellow described in this ESPN.com article is not your typical 59-year old:

Mike Flynt was drinking beer and swapping stories with some old football buddies a few months ago when he brought up the biggest regret of his life: getting kicked off the college team before his senior year.
So, one of his pals said, why not do something about it?
Most 59-year-olds would have laughed. Flynt’s only concern was if he was eligible.
Finding out he was, Flynt returned to Sul Ross State this month, 37 years after he left and six years before he goes on Medicare. His comeback peaked Wednesday with the coach saying he’s made the Division III team’s roster. He could be in action as soon as Sept. 1. [. . .]
A longtime strength and conditioning coach at Nebraska, Oregon and Texas A&M, he’s spent the last several years selling the Powerbase training system he invented. Clients include school systems and the military. His colorful life story includes being the son of a Battle of the Bulge survivor and having dabbled in gold mines and oil wells — successfully. [. . .]
Flynt’s position is still being determined, but he used to play linebacker. Wherever he lines up, he’ll likely become the oldest player in college football history. Neither the NCAA or NAIA keeps such a statistic, but research hasn’t turned up anyone older than their mid-40s. And even those are rare, for obvious reasons. [. . .]
. . . his wife wasn’t as fired up by the idea.
“I feel like I’m married to Peter Pan,” she said. . .

The Fed Ex Cup enters the Tiger Chasm

FedExCup1.gifChronicle golf columnist Steve Campbell reports that the Fed Ex Cup — the PGA Tour’s new series of tournaments intended to breath life into the lifeless end of the golf season — has entered the dreaded Tiger Chasm even before the first tournament of the new series has commenced:

They haven’t yet hit a shot that counts in the FedEx Cup playoff series, and the whole thing is beginning to look like the kind of idea that got Ishtar, Gigli and The Adventures of Pluto Nash on the big screen.
Woods doomed the FedEx Cup, which was a risky proposition in the first place, to irrelevancy by opting to skip the first round of the so-called playoffs. At a time when the PGA Tour desperately needs to drum up interest in a radical overhaul of its season structure, Woods invited massive disinterest by passing on this week’s The Barclays at Westchester Country Club. Not so fresh off victories at the WGC-Bridgestone Invitational and the PGA Championship, Woods insists he needs another week of rest and relaxation. [. . .]
. . . what kind of playoff system allows a competitor to duck either an opponent or a site and still win the championship? Answer: not a legitimate one. The tour is damned if Woods wins the Cup, because it exposes the playoff system in place as a sham. The tour is damned if Woods doesn’t win the Cup, or at least stay in contention until the very end, because he’s head, shoulders, knees and toes above the rest of the players in accomplishments and fan appeal.

Meanwhile, PGA Tour member Jeff Maggert of The Woodlands lays the blame for the Fed Ex mess squarely on PGA Tour headquarters and Commissioner Tim Finchem:

Maggert . . . says none of the touring pros are enthusiastic about the tour’s playoff.
“Probably half the players out here couldn’t care less about [the FedEx Cup],” he told Hardin. “The other half are indifferent.”
Maggert said tour commissioner Tim Finchem should take the blame for the indifference in the clubhouse.
“I hear a lot being written, but I don’t see anybody writing anything about Finchem,” Maggert said. “I mean, this was his idea. He really didn’t consult any of the players. He kind of shoved it down our throats and said, ‘This is what we’re going to do.'”

But dispositive confirmation that the Fed Ex Cup is in serious trouble is the fact that The Onion is already making fun of the concept. Note the following statement at the end of this article spoofing that Tiger Woods was annoyed that his three month old daughter was “looking the other way when he won” the recent PGA Championship:

Woods later stated, however, that he couldn’t find fault with his daughter’s apathetic feelings towards the upcoming FedEx Cup events, saying that he himself thinks of it as a forced and unoriginal attempt to inject excitement into the final part of the golf season.

One of downtown Houston’s charms

tunnelmap.gifThe New York Times discovers one of the literally coolest characteristics of downtown Houston — the pedestrian tunnel system:

Where is everybody?
Seared by triple-digit heat and drenched by tropical storms, midday downtown Houston appears eerily deserted, the nationís fourth-largest city passing for a ghost town.
On the street, that is.
But below, there are tunnels at the end of the light ó nearly seven color-coded miles of them connecting 77 buildings ó aswarm with Houstonians lunching, shopping and power-walking in dry, air-chilled comfort. [. . .]
Other cities, notably Montreal, Toronto and Minneapolis, are renowned for their extensive tunnel and skyway networks. But Houston may be alone in the extent and nature of its pedestrian circulation system of tunnels and skywalks that become particularly popular on days like Aug. 12, 13 and 14 when temperatures hit 102 and 101, or last Thursday, when Tropical Storm Erin flooded many streets.
It was not centrally planned; it just grew, inspired by Rockefeller Center in New York. But it is not connected to a transit network. And, befitting Texansí distrust of government, most of it is private; each segment is controlled by the individual building owner who deigns to allow the public access during business hours ó and then locks the doors on nights and weekends. Some parts, like those belonging to the former Enron buildings now leased by Chevron, are closed to outsiders altogether.
Few claim mastery of the labyrinth.
ìItís one of Houstonís best-kept secrets,î said Sandra Lord, widely known as the Tunnel Lady, a Yankee transplant who dispels the mysteries for $10 a head and roams the downtown underworld with proprietary aplomb, sometimes stopping strangers to ask, ìAnd you are?î Corporations pay Ms. Lord to orient new employees below ground, and nearly 45,000 natives and visitors have taken her Discover Houston Tours since 1988. [. . .]
The tunnels are remarkably diverse, lined with restaurants and coffee bars, boutiques, florists, shoe-repair shops, jewelers, dry cleaners, dental clinics, optometrists, pharmacies, beauty salons, barbers, copy and printing services, banks and post offices.
And they are clearly amenities. ìItís extremely difficult to be a Class A building without being on a tunnel,î said Laura Van Ness, business development director of Central Houston Inc., the nonprofit downtown organization. . . .

As the article notes, the tunnel system is largely the product of private enterprise. Sort of makes you wish that the decision on whether to invest in this to private enterprise, as well.

Sports talk radio overload

radio_microphone_hg_wht.gifWhy on earth are there now four sports talk radio stations in Houston? Chronicle sports media columnist David Barron reports (related blog post here) on the rather rocky first day of the city’s newest sports talk radio station:

KGOW (1560 AM), the city’s fourth sports-talk station, launched Monday with the usual shakedown issues that accompany any new venture, plus a new glitch that prevented the station’s signal from being heard in parts of metropolitan Houston.
David Gow, the station’s president, said equipment called an exciter failed last weekend at the station’s 50,000-watt transmitter southwest of Houston. The station signed on Monday at 1,000 watts from a backup transmitter on the city’s south side.
“We anticipate the situation being remedied shortly,” said Richard Topper, KGOW’s general manager. “We hope to be at full strength as soon as possible.”
Listeners commenting at the Sports Media blog at www.chron.com reported hearing KGOW’s signal in Pearland, Kemah and Cypress, but others reported problems listening in downtown Houston, the Heights, Kingwood, Spring and northwest Harris County. [. . .]
Some hosts struggled with telephone problems. Chronicle columnist Richard Justice, the station’s late-morning host, began an interview with a greeting from Oklahoma football coach Bob Stoops, but Stoops was off the line by the time Justice finished asking his first question.
After a break for a station promotion, Justice returned with a telephone interview with baseball commissioner Bud Selig. [. . .]
After its last local talk show ended at 6 p.m. Monday, the station went to automated music rather than a syndicated sports talk show because it has not received the satellite equipment needed to download the program.

Having Richard Justice talk about sports is bad enough. But does anyone else have the sense that this latest venture in local sports talk radio sounds a bit like a junior high science project?
By the way, in other sports media news, Houston Chronicle sports columnist John Lopez announced yesterday that he is leaving the Chronicle after almost 20 years as a reporter and columnist.

Landry’s cuts a deal with its bondholders

Landry%27s%20logo%20082107.gifHouston-based Landry’s Restaurants Inc cut a deal with its main group of bondholders on Monday afternoon, resolving litigation that had consumed the company over the past month (prior posts here). Essentially, the bondholders gave Landry’s an 18 month window to refinance the $400 million in debt in return for Landry’s agreeing to bump the interest rate on the bonds from 7.5% to 9.5%.
Although the deal allows Landry’s to avoid refinancing the debt now at an even higher rate of interest, my sense is that the entire episode has been fairly disastrous for Landry’s. First, as noted here awhile back and as Loren Steffy recently pointed out, Landry’s has not been doing all that well in a brutally competitive restaurant market even before this dustup with its bondholders. A couple of weeks ago, Landry’s CEO Tilman Fertitta publicly claimed that refinancing of the bond debt “was no big deal,” but then testified during the injunction hearing this past Friday that forcing Landry’s to refinance the bond debt now would irreparably harm the company. That sounds like a pretty big deal to me. Meanwhile, Landry’s will now be looking to refinance a large chunk of junk debt in a shaky credit market that knows that the company just got done acrimoniously suing the holders of the debt. That approach generally does not induce favorable terms from debt refinanciers.
Landry’s looks as if it is heading for some very choppy waters.

Judge Hughes finalizes his Hyde Act ruling

Judge%20Hughes%20in%20robe%20082107.jpgThese earlier posts reported on U.S. District Judge Lynn Hughes’ decision to sanction the Department of Justice under the Hyde Act for its sloppy indictment and handling of a criminal fraud prosecution of Oklahoma lawyer John Claro. The always alert Ellen Podgor passes along that Judge Hughes has issued his formal ruling on the Hyde Act sanctions, in which he observes:

The United States Attorney indicted an Oklahoma businessman in conscious indifference to the legal and factual basis of the charges that they brought against him. The fifty-four-count indictment was a jumble of claims and stray facts ñ a garbled press release about working men who cannot get insurance. The court dismissed all counts of the indictment. The businessman seeks defense costs. He will be repaid because the prosecution was not substantially justified. [. . .]
Criminal prosecution casts a shadow on defendants that can linger even after an acquittal. The discretion the government has to prosecute those it thinks guilty of crimes must be grounded in a sound facts and articulated law. The Hyde Amendment was passed to give some recompense to those prosecuted without this most basic discretionary safeguard from prosecutorial oppression. The case against [this individual] lacked even a semblance of responsible work by the government. His attorneys had to work with a jumbled array of facts and theories, a mountain of documentary evidence, and unresponsive government lawyers.

Sort of makes you wonder what Judge Hughes would have done with a number of the Enron-related prosecutions, doesn’t it? Here’s a hint.

Looking for wide-outs

jabar%20gaffney.jpgAmidst the Chronicle’s incessant pre-season cheerleading for the Texans, most objective observers concede that the team is thin at the wide receiver position after Pro Bowl WR Andre Johnson.
Sort of makes you wonder why one of the team’s top draft choices at the wide receiver position is excelling with one of the top teams in the NFL rather than the Texans? And the guy who the Texans brought in to replace him is no longer with the team?
Count me as still skeptical of the Kubiak regime.

Making subprime sense

dominoes%20082007.jpgThe New York Times continues to do a reasonably thorough job of reporting on the downturn in the subprime mortgage business and its impact on the recent crunch in the credit markets (see here and here), although it’s not at all clear that the reporters and columnists understand how markets will adjust and resolve these problems. A case in point is this Paul Krugman column in which he decries the impact of securitization of mortages on the willingness of lenders to engage in workouts with financially-strapped borrowers:

In the past, as Gretchen Morgenson recently pointed out in The Times, the bank that made the loan would often have been willing to offer a workout, modifying the loanís terms to make it affordable, because what the borrower was able to pay would be worth more to the bank than its incurring the costs of foreclosure and trying to resell the home. That would have been especially likely in the face of a depressed housing market.
Today, however, the mortgage broker who made the loan is usually, as Ms. Morgenson says, ìthe first link in a financial merry-go-round.î The mortgage was bundled with others and sold to investment banks . . .
My guess is that [the solution] would involve federal agencies buying mortgages ó not the securities conjured up from these mortgages, but the original loans ó at a steep discount, then renegotiating the terms. But Iím happy to listen to better ideas.

Here’s a better idea — how about allowing the parties that took the risk of the mortgages to endure the consequences of that risk-taking? Krugman is correct that one of the disadvantages of securitization (which is far outweighed by its many benefits) is that the rules for servicing the loans are established when the loans are pooled and cannot be changed without providing legal problems for the seller of the securitized mortgage pool. For example, if a pooled loan were sold at a discount, then the proceeds of the sale would be treated as a prepayment of the loan, which would benefit certain investors and disadvantage other investors. Inasmuch as the disadvantaged investors would seek damages from the seller of the securitized mortgage pool, that’s why the sellers of the security don’t allow the servicing terms of the mortgage to be changed after the loan is contributed to the pool.
Krugman’s proposal is essentially that borrowers should be allowed to remain in their houses on renegotiated terms and that the investors in the securitized pools should absorb the cost of such a modified arrangement. But borrowers can already file a bankruptcy case and attempt to extend the payment terms of the loan under either a chapter 11 or 13 plan so long as their income and the value of the collateral for the mortgage support such terms. However, if the borrower’s income or the value of the underlying asset will not support extension of the loan terms, it’s far better that the lenders be allowed to exercise their contractual right to conduct a foreclosure sale of the collateral for the loan. That way, the investors who bought the securitized mortgages absorb the losses, which is precisely the risk of investing in a securitized mortgage pool.
By the way, one of the Times articles linked above starts by passing along the following story, which is testimony to the creativity and resilience of American markets:

All through last year, Jim Melcher saw the signs of a rapidly deteriorating American housing market ó riskier mortgages, rising delinquencies and more homes falling into foreclosure. And with $100 million in assets at his hedge fund, Balestra Capital, he was in a position to do something about it.
So in October, as mortgage-backed bonds were still flying high, he bet $10 million that these bonds would plunge in value, using complex derivatives available to any institutional investor. As his gamble began to pay off in the first months of 2007, Mr. Melcher, a money manager based in New York, plowed the profits into ever bigger wagers that the mortgage crisis would worsen further, eventually risking some $60 million of the fundís money.
ìWe saw the opportunity of a lifetime, and since then events have unfolded on schedule,î he said. Mr. Melcherís flagship fund has since doubled in value, even as this summerís market turmoil cost other investors billions, forced the closing of several major hedge funds and pushed the stock market down 7 percent since mid-July. This week, Mr. Melcher is heading to Paris for a vacation with his wife.