Stros 2006 Review, Part Five

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Roy Oswalt27.jpgWell, the Stros (39-42) are halfway through their 2006 season and the first half of the season reminds us again of just how much expectations shape our perception of how likely it is for the club to contend for another playoff run.
Remember this same time in 2004? Pessimism surrounded the club. The hitting was lousy and the pitching staff was reeling from the loss of Wade Miller and the sore elbow of Andy Pettitte. However, after reaching a season-worst 56-60 on Aug. 14, the 2004 Stros won an incredible 36 out of their next 46 games (including a 12 game winning streak and nine out of their last 10 to close out the regular season) to take the National League wildcard playoff spot and come within a game of the 2004 World Series.
And remember this time last season? After starting the 2005 season with an atrocious 15-30 record amidst the worst hitting in the club’s history, that Stros club came to the halfway point of the season on a totally unexpected 29-13 run that had everyone brimming with cautious optimism. Of course, that club went on to post a 45-30 record for the remainder of the season to make the playoffs, won the National League Championship Series over the Cardinals and made it to the club’s first World Series.
What about this year? Well, after getting hopes up by blowing out of the gate with a 19-9 record, the 2006 Stros have gone into a 20-33 tailspin that has exhibited not only chronic inconsistent hitting, but also pitching that has been far below the levels of the 2004 and 2005 Stros. As a result, no one seems to be particularly sanguine at this time about the prospects for the Stros making a third straight playoff run.
But you know what’s interesting? The Stros 39-42 record to date this season is not materially different from the 44-43 record at the All-Star break for the 2004 Stros or the 44-44 All-Star break record of the 2005 club. And just like the Stros clubs of the past two seasons, the 2006 Stros have the ingredients to contend for a playoff spot in the second half of the season if certain players elevate their performance to past levels. See what I mean about expectations?

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The amazing Roy Oswalt

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Roy O17.jpgRoger Clemens is one of the greatest pitchers in Major League Baseball history, so he rightly gets most of the publicity among Stros pitchers. However, Roy Oswalt is currently the best pitcher on the Stros’ staff, one of the best pitchers in the National League and is well on his way to becoming the best Stros pitcher ever.
As noted in this recent post on Clemens, the statistic “runs saved against average” (“RSAA) is one of the best measures for evaluating a pitcher’s true effectiveness because it is based on the two most important things for a pitcher in winning baseball games — that is, not giving up runs and getting hitters out. RSAA measures the number of runs that a pitcher saves for his team relative to the number of runs that an average pitcher in the league would give up while obtaining an equivalent number of outs for his team. Inasmuch as the hypothetical average pitcher’s RSAA is always zero, a player can have an RSAA that is either a positive number — which indicates he is an above average pitcher (i.e., Clemens and Oswalt) — or an RSAA that is a negative number, which means he is performing below average (i.e., remember Brandon Duckworth and Tim Redding?).
Moreover, RSAA is a the best measure for comparing pitchers who played during different eras. Inasmuch as RSAA measures a pitcher’s ability against that of an average pitcher in the pitcher’s league for each particular season, a pitcher’s lifetime RSAA measures how that pitcher performed against the average pitcher of his era. That’s really the best way to compare pitchers from different eras because comparing other pitching statistics — such as earned run average, wins and hitting statistics against — is often skewed between pitchers of hitter-friendly eras (i.e., the era in which Clemens and Oswalt have pitched) versus pitchers of pitcher-friendly eras (i.e., such as the late 1960’s and early 70’s).
In pitching a complete game the other day against the Tigers, Oswalt attained another milestone by reaching 150 RSAA for his career. Roy O is easily the Stros career leader in RSAA:

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The Lay-Skilling forfeiture motion

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LaySkilling16H.jpgIn the least surprising post-verdict motion to date, the Washington Post’s Carrie Johnson reports that the Enron Task Force filed its forfeiture motion yesterday against former key Enron executives Ken Lay and Jeff Skilling. A bookmarked pdf copy of the motion can be downloaded here.
As expected, the Task Force requests that the remaining net worth of both Skilling and Lay be forfeited to the government to satisfy the Task Force’s contention that the two should pony up about $183 million as the undeserved fruit of the securities fraud for which the two were convicted. In addition to the defendants, the Task Force’s forfeiture request will probably generate opposition from various parties in the civil litigation still swirling around the Enron case, which parties are also seeking compensation from Lay and Skilling on various business and securities fraud claims. Finally, both Lay and Skilling owe substantial amounts to their respective defense teams, so the claims of those firms will also need to be sorted out in connection with the Task Force’s forfeiture claim. Lay and Skilling have requested that U.S. District Judge Sim Lake schedule a bench trial regarding forfeiture issues sometime this fall, but it remains unclear at this time just how Judge Lake will handle the Task Force’s forfeiture request.

The fraying KPMG tax shelter defense

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kpmg logo46.jpgU.S. District Judge Lewis Kaplan’s decision earlier this week was a major victory for the defendants in the KPMG tax shelter case because it at least gives the defendants the basis for obtaining the financial means for defending the case effectively. However, as this Lynnlee Browning/NY Times article points out, the deck is still stacked firmly in favor of the prosecution in such multiple-defendant, business fraud criminal cases. The conflicting interests of the multiple defendants are now rising to the surface of the case, as is the prosecution’s ability to cherry-pick certain defendants for attractive plea deals:

In pretrial hearings since their clients’ indictments last August and last October, defense lawyers have presented a unified front, filing joint motions and refraining from public squabbling. Lawyers for all of the defendants, countering prosecutors’ assertions of criminal intent, are expected to argue that their clients thought at the time that what they did was aggressive but legal.
But increasingly, defense lawyers speak of different camps forming over recent weeks, with lawyers for the junior defendants indicating that they will focus on proving that their clients took orders from the senior defendants, who were responsible for designing and approving the tax shelters.
“You’re beginning to already see the finger-pointing,” said a lawyer for one of the KPMG defendants, declining to be named or to name his client, saying he did not want to jeopardize the case. “It’s going to get antagonistic.”

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The increasingly sensitive energy markets

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o'reillyhand2.jpgBill O’Reilly contends that it’s all just an energy company conspiracy, but this week’s price hike for gasoline and crude oil is actually showing just how sensitive U.S. energy markets have become to disruptions that just a few years ago would have barely registered a blip in those markets.
Gasoline and crude-oil and prices surged after the June 20 spill of 47,000 barrels of oil waste snarled the Calcasieu Ship Channel, a major Louisiana waterway that connects the Port of Lake Charles to the Gulf of Mexico. The stoppage stranded oil barges and tugs that are delivering crude oil to three refineries that together refine about 775,000 barrels of crude oil a day into fuels such as gasoline. The Coast Guard reported yesterday that it might open the channel to limited traffic by this weekend.
Primarily as a result, gasoline futures on the New York Mercantile Exchange have risen by almost 15% over the past week to yesterday’s close of $2.29 a gallon, the highest level since the aftermath of last summer’s Gulf Coast hurricanes. Meanwhile, August crude-oil futures rose over $1.30 to $73.52 a barrel, which is about $3 higher since the spill and an 11% increase for the current quarter. The spill is merely the latest in a series of supply disruptions over the past year that have increased average U.S. gasoline prices by almost 25% and crude-oil prices by 15% since the beginning of the 2005 hurricane season.

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Feds finally get Scrushy

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scrushy8.jpgAfter failing to convict former HealthSouth chairman and CEO Richard Scrushy in a highly-publicized business fraud prosecution almost exactly a year ago, federal prosecutors obtained a conviction of Scrushy and former Alabama governor Don E. Siegleman on multiple bribery, conspiracy and mail fraud charges relating to Scrushy’s alleged bribe to Siegleman of $500,000 to procure a seat on a state regulatory board that oversees hospital construction projects. Two other defendants — a onetime Siegleman aide Paul Hamrick and former head of the Alabama transportation department, Gary Roberts — were acquitted on all charges.
Interestingly, the Scrushy-Siegleman jury had reported to the judge on several occasions over the 11 days of deliberations that It was deadlocked, and it is not immediately clear from news reports what ended the deadlock. In this particular case, Scrushy’s defense team attempted to sway the predominantly black jury by comparing Scrushy to civil-rights figures of the 1950’s and 60’s who suffered injustice in Alabama and the deep South. Scrushy’s defense team even included Alabama lawyer Fred D. Gray, who represented Rosa Parks when she was arrested in 1955 for refusing to give up her seat on a Montgomery, Alabama bus. As you might expect, prosecutors denounced the Scrushy defense team’s strategy as a racially-motivated attempt to influence the jury while contending that Scrushy was simply using his money and power to gain political influence to help HealthSouth.
The 53-year-old Scrushy was convicted on six counts and faces a potential sentence of over 20 years in prison. Sentencing is expected to take place this fall.

Colbert on Buffett’s big donation

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colbert2.jpgStephen Colbert‘s comment on Warren Buffett’s decision to donate $30 billion to the Bill and Melinda Gates Foundation qualifies as the line of the week:

“Warren Buffet is so rich, he just hired Bill Gates to spend his money for him.”

By the way, Larry Ribstein has an interesting perspective on the Buffett donation in relation to the growing effort of certain shareholders to pursue social causes through their corporate ownership.

Criminalizing corporate agency costs and the KPMG decision

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kpmg logo44.jpgAs noted earlier here, U.S. District Judge Lewis Kaplan earlier this week slapped the Department of Justice upside the head for threatening KPMG with indictment in the KPMG tax shelter case unless the firm threw its partners to the wolves by rescinding the firm’s policy of paying its partners’ defense costs in such cases. Although Judge Kaplan concluded that it was premature to dismiss the indictment against the KPMG partners as the remedy for the DOJ’s misconduct and fashioned a financial remedy for the partners instead, Larry Ribstein believes that Judge Kaplan’s opinion is a landmark decision that calls into question the DOJ’s dubious policy of criminalizing corporate agency costs in reaction to Enron and other recent corporate scandals:

My basic problem with criminalization of agency costs is precisely that it ignores internal corporate arrangements. The complex set of contracts and incentive devices that comprise a corporation simply doesn’t fit with the sort of moral condemnation that criminal penalties necessarily involve. The nuances of an agency contract are the proverbial square peg in the round hole of criminal law.
But Judge Kaplan emphasizes that indemnification serves an important function in an agency contract: If directors and other agents are over-exposed to liability, they simply wonít work for the firm. One might add that even if they do work for the firm, they wonít take the risks that are necessary to maximize shareholder value and to make capitalism work. Corporate criminal liability essentially seeks to reengineer the firm to change incentives so that agents are no longer maximizing profits, but attempting to root out fraud at all costs.
The fundamental importance of this case is that Judge Kaplan is telling the government that the contract matters, even if it gets in the way of prosecution. By doing this, Judge Kaplan is re-reengineering the firm to make it, once again, a profit-maximizing entity rather than a government agent. [. . .]
Of course this one case isnít going to solve all of the problems of corporate criminal liability. Corporate defendants will face the basic problem that it is hugely burdensome to defend these cases, which gives the government considerable leverage. The case’s precise implications for other uses of government leverage are unclear. But by saying that there is a limit to what the government may do in criminalizing agency costs, the judge has taken an important first step. I predict the opinion will be a landmark.

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Another milestone for Clemens

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clemens following through.jpgAlthough the 2006 Stros are quickly sliding into oblivion (I will post my next periodic analysis of the club’s 2006 season this weekend after the Stros reach the halfway point in the season on Saturday), Roger Clemens is still likely to make baseball interesting in Houston for the remainder of the season.
Earlier this week, Clemens pitched well (6 1/3 IP, 3 H, 2 R, 1 ER, 2 BB, 3 SO) in his second game of the season and, in so doing, became the first pitcher in Major League Baseball who has pitched after 1900 to reach 700 runs saved against average (“RSAA”) in his career. The following is the top ten pitchers in career RSAA who pitched after 1900, courtesy of Lee Sinins:

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In a split decision, the winner is the Texas GOP. For now.

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redistricting3.jpgThe Supreme Court issued its long-awaited decision yesterday (earlier posts here) ordering congressional districts in south Texas redrawn because a 2003 redistricting map orchestrated by former House Majority Leader Tom DeLay was designed to disenfranchise Hispanic voters so that vulnerable Republican incumbent Rep. Henry Bonilla could maintain his seat. However, a sharply-split Court rejected a broader Democratic challenge to the DeLay redistricting plan that prompted the new Republican majority in the Texas Legislature to throw out existing districts in favor of new ones designed for partisan benefit. Charles Kuffner, who has followed the redistricting case closely, has more here and an extensive archive on the case here. Amy Howe passes along what appears to be an interesting error in the opinion, a pdf of which is here.
The bottom line on this incredibly split-decision (the justices filed six separate opinions concurring and dissenting from parts of the ruling) is that that Justice Anthony Kennedy’s controlling opinion leaves open the possibility that the Court could step in someday to set limits for partisan gerrymanders if future litigants find “a manageable, reliable measure of fairness” for doing so. Four liberal-leaning justices joined Justice Kennedy in concluding that the south Texas districts violated the Voting Rights Act and must be redrawn. But Justice Kennedy and the four more conservative justices concluded that the state-wide map complied with Constitutional requirements and that a second district — which Democrats claimed disenfranchised black voters in Austin — posed no voting-rights violation. Just to give you an idea of how the Court is all over the place on these issus, Justices Thomas and Scalia would have simply dismissed the case as beyond the scope of the courts to resolve, while several Justices — including Samuel Alito and John Roberts — were in a group that left open the possibility that the Court might in the future come up with a legal test to be applied in this type of case.