Former WorldCom chairman finally settles

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Bert roberts.gifFormer WorldCom chairman Bert C. Roberts, Jr. — the final settlement holdout among WorldCom Inc.’s former outside directors — agreed to settle the WorldCom investors’ class-action lawsuit claims against him for $5.5 million, including $4.5 million out of his own pocket. Earlier posts on the WorldCom directors’ settlement may be reviewed through this post.
Roberts’ settlement leaves WorldCom’s former auditor Arthur Andersen as the only remaining defendant in the trial of the class action, which is scheduled to begin on Wednesday. With huge litigation exposure remaining in connection with both the WorldCom and Enron class actions cases, Arthur Andersen has apparently decided to use its remaining cash reserves (estimated to be several hundred million dollars) to defend the cases rather than dilute the reserves through settlement. Andersen really does not have much to lose in pursuing such a high risk litigation strategy. It’s not like the firm can be put out of business. The Justice Department has already taken care of that.

AIG sacrifices more to the Lord of Regulation

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AIG.gifFollowing on these earlier posts regarding the increasing threat of criminal indictment that is being place on American International Group executives, AIG canned two of its top executives — CFO Howard I. Smith and VP Christian M. Milton — after the two invoked their Fifth Amendment right against possible self-incrimination in the ongoing investigation into whether whether AIG manipulated its books in connection with a transaction involving General Re Corp., a unit of Warren Buffett’s Berkshire Hathaway Inc.
Both men were terminated pursuant to an AIG company policy that requires employees to cooperate with government authorities investigating matters pertaining to the company. However, the two employees were clearly placed in an untenable position given recent developments in similar criminal investigations. In connection with this investigation involving Computer Associates, three former executives of that company pleaded guilty to obstruction of justice charges that were not tied to alleged misstatements told to federal investigators, but to alleged misstatements made to the company’s own law firm during the company’s internal investigation. Similarly, in this case involving accounting giant KPMG, the government required threatened criminal action against KPMG in connection with a tax avoidance scheme unless the firm forced one of its partners to cooperate with the government, which of course can use the partner’s statements against him in prosecuting a crime.
Accordingly, rather than attempt to facedown the government over its increasingly common use of its odious power to criminalize merely questionable business transactions, the AIG Board has decided to offer several sacificial lambs to the Lord of Regulation in an effort to avoid a meltdown of the company. One can only ponder how many such lambs this Lord will require?

Meanwhile, on the Tour . . .

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Vijah.jpgSpeaking of golf, Vijay Singh‘s past two weekends have been interesting, to say the least.
Last week at the Honda Classic, Vijay jacked a 2 foot putt in a playoff that cost him about half a million in prize money.
Then, while tied for the lead yesterday at Bay Hill, Vijay dunked his approach shot at the 18th hole. That one cost him a cool $460,000.
Thus, those two shots over the past two weekends cost Vijay a cool $960,000. Meanwhile, his second place finishes in those two tournaments allowed Singh to regain the No. 1 World Golf Ranking from Tiger Woods.
Golf is a very cruel game.

A Walk in the Park

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golf hole1.jpgWith Spring Break in the air, golfers’ thoughts turn to fairways, greens and, while sitting at the computer, golf blogs.
In that regard, golfers should take note of a new golf blog that I recently added to my blog role — A Walk in the Park. Jay Flemma is an entertainment, copyright and trademark lawyer in Manhattan who has developed an interesting side career in golf writing, particularly about golf architecture. But Jay also loves to play golf while traveling, and his passion is writing about the hidden golf course gems that do not receive the publicity of the famous tracts, but have just as many (if not more) attributes and, most importantly, are generally far cheaper to play.
In his most recent post, Jay previews the TPC at Sawgrass in anticipation of the upcoming Players Championship. Jay has recently moved his blog to the TravelGolf.com network of blogs, and there appear to be a few technical glitches to work out in the transition (for example, Jay’s post of today renders in FeedDemon, but not in my Firefox browser). Nevertheless, if you are a golfer, then check out Jay’s blog often — his goal is to steer you to the right course wherever you want to play.

John DeLorean, RIP

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delorean-.jpgJohn DeLorean died yesterday at the age of 80 from the effects of a recent stroke.
John Zachary DeLorean was one of the more interesting business characters of the past two decades. His famous stainless-steel sports car project collapsed in the 1980’s, although the use of the futuristic auto as the time travel machine in the Back to the Future movies ensures that the car will never be forgotten.
Moreover, DeLorean’s criminal trial in California in the 1980’s on cocaine trafficking charges introduced America to the entrapment defense as DeLorean’s lawyers persuaded the jury that DeLorean had been the unwitting victim of a government sting operation. Or, as one wag put it at the time, “the government successfully managed to frame a guilty man.”
delorean2.jpgDeLorean was the son of a Ford factory worker and grew up on Detroit’s east side during the Great Depression of the 1930’s. After earning an undergraduate engineering degree and an MBA graduate degree, DeLorean went to work in the automotive industry, first for Chrysler and then Packard.
But when he moved to General Motors in the 1960’s, DeLorean’s star really began to rise and, as head of GM’s Pontiac division, he pulled off a marketing coup by turning the innocuous Tempest LeMans compact coupe into a hot rod called the GTO. The combination of an intermediate body with the most powerful engines available soon became a legend within the automotive industry.
Had he remained with General Motors, DeLorean may have accomplished even greater feats, but he was too flashy for the notoriously buttoned-down GM culture. Handsome and stylish, DeLorean became a celebrity himself, dating such beauties as Ursula Andress and Raquel Welch, and eventually marrying supermodel, Christina Ferrare.
Alas, DeLorean’s life was a struggle over the last two decades. Although he managed to beat the cocaine trafficking charges, he was married and divorced several times, and filed bankruptcy twice. In the most recent bankruptcy, DeLorean sadly was forced to sell his luxurious New Jersey estate to generate proceeds for his creditors. His most recent business venture was a company that marketed watches under his name. In the end, DeLorean’s legacy is that of a talented innovator who did not have the depth of business or management skills to be a successful entrepreneur.
Update: As is typical of British obituaries, the Guardian’s on DeLorean is delicious.

Interesting graph on the historic price of oil

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price of oil.jpgOil prices are a common theme of many posts on this blog, and this interesting Forbes magazine graph does a great job of placing current oil prices in historical perspective over the past 145 years.
Though some grades of crude have recently set record price highs on New York and London futures markets, the Forbes graph shows that, when adjusted for inflation, the price of oil is still only 60% as expensive as it was in 1980.

More on “Conspiracy of Fools”

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Conspiracy of Fools.jpgFollowing this earlier excerpt, The New York Sunday Times is running this second excerpt from Kurt Eichenwald’s new book on the Enron scandal, Conspiracy of Fools.
I am about halfway through Conspiracy of Fools and it is excellent. With more information and the benefit of more hindsight, Mr. Eichenwald’s book will likely replace the earlier Smartest Guys in the Room as the best book on the Enron scandal.

More on the impact of the Baylor-Methodist split

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baylormed.gifOn the heels of this fine earlier series on the breakdown of the primary teaching hospital relationship between Baylor College of Medicine and The Methodist Hospital in Houston’s famed Texas Medical Center, the Chronicle’s Todd Ackerman teams with fellow Chronicle reporter Eric Berger to provide this story on the initial impact that the split is having on research planning at both institutions and the threat that the richer Methodist will pluck the prime Baylor researchers for its own research facility.
methodist.gifMr. Ackerman’s reporting on the Baylor-Methodist split has been outstanding over the past year, and well-known Texas Monthly journalist Mimi Schwartz chimed in with this article ($) in the March edition of the magazine on the background and personalities involved in the negotiations leading up to the split. The Chronicle series and Ms. Schwartz’s article are both providing much grist for the gossip mill in the Medical Center community regarding this historic readjustment of professional relationships in the Medical Center.

Good news from Kissimmee

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Berkman.jpgThe Stros have scheduled a news conference for this afternoon in which they will announce that the club and All-Star Lance Berkman have agreed to a six year, $85 million contract.
Berkman is one of the best hitters in Major League Baseball, and the contract avoids the possibility of the Stros losing their best homegrown player since Bidg as Berkman could have become a free agent after the 2005 season. To understand just how good a player Berkman is, consider how many many more runs that Berkman has created compared to the number of runs an average Major League player generates.
That statistic — called “runs created against average” or “RCAA” — is particularly valuable to evaluate hitting because it focuses on the two most important things in winning baseball games ? that is, creating runs and avoiding making outs. RCAA basically computes the number of outs that a particular player uses in creating runs for his team and then compares that number to the amount of runs that an average player in the league would create while using an equivalent number of outs. A player can have either a positive RCAA — which indicates he is an above average hitter (i.e., Barry Bonds) — or a negative RCAA, which means he is performing below average (i.e., Brad Ausmus).
Over the past 4 years, Berkman ranks 6th in all of Major League Baseball in runs created against average:
1 Barry Bonds 597
2 Todd Helton 284
3 Albert Pujols 281
4 Jim Thome 250
5 Manny Ramirez 240
6 Lance Berkman 236
7 Jason Giambi 225
8 Alex Rodriguez 218
9 Jim Edmonds 216
10 Gary Sheffield 210
Kudos to Drayton McLane and Tim Purpura in locking Berkman up. It’s a happy day in Stros land.

McGuire’s sleight of hand

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McGuire testimony.jpgLegal issues involving public figures often have a public-relations dimension as well as a political angle, and this past week’s Congressional testimony of Mark McGuire regarding Major League Baseball’s steroids scandal is a case in point.
The key legal issue in regard to McGuire’s testimony was whether he should assert the privilege against self-incrimination under the Fifth Amendment of the United States Constitution. Congressional investigators had already declined to grant immunity from use of the Congressional testimony in any criminal prosecution of Mr. McGuire, so McGuire and his attorneys had to address the knotty public relations issue of having McGuire assert the Fifth in front of glare of national television, just like, say, one of those disgraced Enron executives.
So, what did McGuire do? Best I can tell, he took the Fifth without actually saying that he was taking the Fifth, which is pretty darn clever if he gets away with it. Fortunately for McGuire, none of the Committee members pressed the issue and required McGwire to answer directly or take the Fifth to the question of whether he had ever taken steroids. However, when he was asked the question, McGwire answered by presenting himself as the kind of “stand-up” guy who does implicate his former teammates. The following is a passage from his prepared statement to the Committee:

“I have been advised that my testimony here could be used to harm friends and respected teammates, or that some ambitious prosecutor can use convicted criminals who would do and say anything to solve their own problems, and create jeopardy for my friends . . . My lawyers have advised me that I cannot answer these questions without jeopardizing my friends, my family, or myself.”

Thus, McGuire’s lawyers and P.R. advisors appear to have accomplished the nice trick of having McGuire take the Fifth without actually coming out directly and saying so. It will be interesting to watch whether the grand jury that is currently investigating baseball’s steroids scandal will press the issue with McGuire that the Congressional investigators decided not to push.