Daily Archives: August 24, 2007

Copland on Stoneridge v. Scientific-Atlanta

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golfplated%20scales%20082407.jpgJim Copland, the director of the Center for Legal Policy at the Manhattan Institute, provides this particularly lucid analysis of the important legal and public policy issues involved in the pending Supreme Court case of Stoneridge Investment v. Scientific-Atlanta, which could seriously erode the longstanding Central Bank rule against holding financial institutions secondarily liable for damages in providing financing for a company that defrauds its investors:

Nothing in the securities laws as written enables private investors to file lawsuits over alleged frauds. Courts have inferred such ìprivate rights of actionî stemming from section 10(b)(5) of the Securities Exchange Act of 1934, but the Supreme Court limited such private suits to ìprimaryî violators in 1994 in a case called Central Bank of Denver v. First Interstate Bank of Denver. The court expressly declined to embrace liability for companies ìaiding and abettingî frauds that injured shareholders.
After Central Bank, Congress quickly jumped in to clarify that the Securities and Exchange Commission itself had authority over an entity that ìknowingly provides substantial assistance to anotherî in securities-related frauds. But Congress wisely decided not to extend such authority to private lawsuits.
If the Supreme Court decides to endorse such suits notwithstanding congressional inaction, the implications for U.S. competitiveness could be profound. Anyone doing business with a publicly listed American company would be subject to a potential lawsuit should that companyís stock price tank ó and would thus have to hire extra auditors and take out insurance policies to protect against such lawsuits. The disadvantages for listing on American stock market, already significant, would be that much more substantial.

And if you want an example of the absurdity of what would happen if the Central Bank rule is overturned or eroded, read this.

The Slade trial begins

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slade%20082407.jpgThe criminal trial of former Texas Southern University President Priscilla Slade on charges of misappropirating TSU property begins today at the county criminal courthouse in downtown Houston (previous posts here). Harris County prosecutors and Mike DeGeurin, Ms. Slade’s defense counsel, spent the last several days picking the jury.
Meanwhile, life goes on as usual over at TSU:

Texas Southern University’s accrediting agency is taking a deeper ó and unscheduled ó look into financial accountability and leadership at the state’s largest historically black university.
In an extraordinary move, the Southern Association of Colleges and Schools, the regional accrediting body for 780 colleges and universities in 11 Southern states, has ordered TSU to provide audits, rehabilitation plans and other documents by Oct. 1. [. . .]
The worst-case scenario for TSU is the loss of its accreditation. Without it, the federal government would stop providing financial aid to students.
Nearly two-thirds of TSU’s 11,000 students receive Pell Grants, which are awarded to low-income students.

There are many sad aspects to this entire affair, but one of the saddest is that Ms. Slade’s trial will almost certainly garner far more of the public’s attention than the continuing failure of local and state officials to take any meaningful steps to begin solving the chronic problems at TSU.

Cheerleading the Cowboys?

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wade-phillips.jpgWe already know that the Chronicle sportswriters lead the nation in pre-season puff pieces about local professional football team. But now the Chron sportswriters are expanding the reach of their incessant cheerleading to Dallas with this soft toss about new Cowboys head coach, Wade Phillips, who happens to be the son of the still hugely popular former Houston Oilers head coach, Bum Phillips:

So after all these years, Wade is who he is, something of a rumpled, unprepossessing presence on the sideline and not the most silver-tongued of news conference orators. The only thing overtly sexy about him is his latest job title: head coach of the Dallas Cowboys, one of sport’s most lustrous brands. [. . .]
Funny thing. If you ask the Cowboys about their new coach, they’re wont to speak about how Wade also sees stuff. For that reason, quarterback Tony Romo calls him the smartest coach he has ever been around.

Let’s just say that there is a slight difference of opinion about Wade’s head coaching abilities at one of his previous stops, Buffalo, New York. The Buffalo News’ Jerry Sullivan laid out the case against Phillips as a head coach in a column (not available online) at the time the Cowboys hired Phillips last February:

When I heard that Jerry Jones had hired Wade Phillips to be the Dallas Cowboys’ new head coach, I had the same reaction as when Jones signed Drew Bledsoe two years ago:
Good luck, fella.
Is this what it’s come to for the once-great Dallas franchise? When times get tough, go out and grab a castoff from the Buffalo Bills’ recent, sorry past? Maybe Jones’ next move will be luring Rob Johnson out of retirement to compete with Tony Romo for the quarterback job.
Ralph Wilson has to be smiling. Maybe he can’t get Jones and the other rich NFL owners to give him a bigger share of the revenue pie. But at least Wilson gets the satisfaction of seeing the Cowboys picking through his table scraps — you know, the way the Bills did with Patriots discards during the Donahoe era.
Jones can spin it any way he likes. But it’s clear that the Cowboys owner, who has the title of general manager, decided it was time to meddle again and wanted a puppet as coach. Jones gave Bill Parcells control for four years and didn’t get a single playoff win for his trouble. That makes 10 years without a playoff win for the storied Cowboys — nearly as long as Buffalo’s playoff drought.
Phillips was the ideal candidate, a retread who is close to 60 and was desperate for one last shot at a top job. Phillips is a nice, self-deprecating guy, a native Texan who wore ostrich-skin boots to his introductory news conference.
“Wade wanted it so bad,” Jones said when he announced Phillips’ hiring.
Phillips wanted it badly enough to accept Jason Garrett as Jones’ hand-picked offensive coordinator. He didn’t get to pick his offensive staff. I suppose he’d have taken the Cowboys cheerleaders as coaches if Jones had required it.
Jones favors the 3-4 defense. Phillips is a 3-4 guy, a good defensive coach. Some would say great, but it’s funny how his defenses have failed to rise to the ultimate test over the years. The Chargers’ playoff collapse against the Pats last month was the most recent example.
Of course, the Cowboys aren’t hiring Phillips to run a defense. They’re hiring him to be the head coach. As Bills fans have discovered to their horror (Gregg Williams, Mike Mularkey), it’s a huge step from coordinator to head man. All too often, owners elevate men beyond their intellect and abilities.
Why would Jones expect great things from Phillips in his third go-round? Phillips is a proven mediocrity as a head coach. His supporters point to his 29-21 record with the Bills. I’m sorry, those teams were loaded. It didn’t take a Vince Lombardi to produce a winning record.
Phillips isn’t big on detail. A former assistant told me Phillips didn’t account for a short practice week before the Music City Miracle, which was played on a Saturday. He wasn’t a stickler for conditioning. He was not a commanding presence on the sideline.
Phillips didn’t win a playoff game in Buffalo and made some classic blunders along the way. He made Johnson his starting QB before a playoff game, after Doug Flutie got the team to 10-5. He made Bruce DeHaven the scapegoat for the playoff loss. Then he brought in Ronnie Jones, an unqualified crony, to coach the special teams. It was a disaster.
Before a Monday night game late in the 2000 season, Phillips went on national TV and said the Bills and Colts (who were tied at the time) were essentially out of playoff contention. The Colts won and found a way into the playoffs.
My mind throbs at the memory of Phillips fumbling his way through the Flutie-Johnson flap. He was in over his head as the spokesman for a franchise. If he thought he had it tough here, wait until the Texas media gets hold of him.
They’ll chew the guy up and spit him out, ostrich skin boots and all.

Funny how none of the foregoing made it into the Chron article. Everything remains peaches and cream at the Chron during the pre-season.