Is the end of the line near for Foley’s?

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In a deal that may well be the equivalent of Custer’s last stand for department-store retailing, Federated Department Stores Inc. — the owner of Macy’s and Bloomingdale’s — has agreed to buy its longtime and smaller rival May Department Stores Co. for about $11 billion. May is the owner of Houston’s venerable chain, Foley’s.
Federated will pay about $36 a share in cash and stock, and assume about $6 billion in debt, to buy May, which also owns the Marshall Field’s and Lord & Taylor chains. Although the proposed merger will create a huge company of nearly 1,000 department stores, the deal underscores the critical condition of department-store retailing, which has to undergo a transformation to survive in the brutal American retailing market. Big-box retailers such as Wal-Mart Stores Inc. on the low end and upscale stores such as Neiman Marcus Group Inc. on the high end are squeezing the profits of big department chains, which have been losing market share steadily over the past 25 years.
Although Federated operates only one Macy’s store in Foley’s home base of Houston, divestitures are still expected to occur, particularly in the 94 malls across the nation in which Federated and May both maintain locations. The merger is subject to regulatory approval, which is expected given the deteriorating condition of the department store-retailing sector.
Update: Dylan has interesting inside observations about May in this post.

Robert Dawson, RIP

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Robert “Mad Dog” Dawson, who taught criminal and juvenile law to a generation of law students at the University of Texas Law School, died Saturday at his farm in Fentress at the age of 65. Although illness forced him to into a motorized scooter in the last few months of his life, Professor Dawson continued to teach his criminal law class at UT until a week and a half ago.
Professor Dawson taught at UT for 30 years and founded the school’s Criminal Defense Clinic in 1974. The clinic gives third-year law the opportunity to represent criminal defendants in court under the supervision of UT law professors. Dawson authored the state’s juvenile justice laws in 1973 and advised lawmakers on the revision of the Texas Juvenile Justice Code in 1995.
According to his obituary, Professor Dawson’s ashes will be mixed with old horse stall bedding and scattered by manure spreader on pastures at the farm. “They will make good fertilizer for the hay crop,” he wrote before his death.
Arrangements were pending with Weed-Corley-Fish Funeral Home in Austin. A memorial service is scheduled for 2 p.m. April 2 at UT’s LBJ Auditorium.

Tsunami pictures from the beach

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John and Jackie Knill of Vancouver, British Columbia were killed in Khao Lak, Thailand when the December 26, 2004 tsunami struck the resort at which they were vacationing. Afterward, their digital camera was found, and though the camera was destroyed, the photos of the oncoming tsunami on the camera’s memory card were salvaged. Check out these spectacular photos.

NACDL files amicus brief in Andersen SCOTUS appeal

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Here is the amicus curie brief of the National Association of Criminal Defense Lawyers in Arthur Andersen’s appeal of its witness tampering conviction to the United States Supreme Court. The NACDL’s brief addresses the prejudicial impact that the Andersen conviction will have on the attorney-client relationship, and notes the following in its Summary of the Argument:

This case places lawyers at risk of investigation, prosecution, and imprisonment for doing their jobs. When a lawyer represents a client in connection with a potential government investigation, one of the lawyer?s goals may appropriately be to prevent the government from developing evidence against the client. Within the bounds of ethics and the law, that is what lawyers do. . .
In prosecuting the accounting firm Arthur Andersen LLP (?Andersen?), the government singled out the conduct of an in-house lawyer, Nancy Temple. Her crime, in the government?s view, was providing legal advice even before the SEC had issued a subpoena or launched a formal investigation. Specifically, she reminded Andersen employees to adhere to a lawful, established document retention policy and recommended changes to a draft memorandum ? actions that lawyers undertake every day. According to several of the jurors, her edits to the draft memorandum were the principal basis for Andersen?s conviction.
By criminalizing this conduct, the Fifth Circuit disregards the traditional role of lawyers, which includes a duty to protect their clients by deflecting potential government investigations. In the court?s view, this goal itself is ?improper? and reflects a ?corrupt? purpose. Any action by the lawyer ? such as vigorously asserting privileges, counseling potential witnesses about their rights, or, as here, advising employees about a company?s document retention policy and editing a draft memorandum ? can violate the witness tampering statute if it is motivated even in part by this goal. Lawyers in the post-Andersen era now will operate in fear of investigation and prosecution. Those fears inevitably will dampen the zealousness of their advocacy. And that will imperil the fair administration of justice.
If allowed to stand, the decision below also will damage the attorney-client relationship by engendering potential conflicts of interest between lawyers and clients. On every close call regarding tactical and legal issues ? and on many that are not so close ? lawyers will have to weigh in the balance their own potential exposure to criminal liability. Yet the fundamental tenet of the attorney-client relationship is that the lawyer?s commitment to the client must be undiluted by concerns for his or her own personal interests. Moreover, by expanding the government?s ability to investigate counsel, the Fifth Circuit?s decision undermines the communication between attorney and client. If the advice of the Andersen lawyer here amounts to witness tampering, then communications long assumed to be privileged are in jeopardy of disclosure under the crime-fraud exception. Clients who are uncertain of the loyalty of their counsel or the confidentiality of their communications will simply not disclose information their lawyers need to know. That, too, imperils the fair administration of justice.

As a technical aside, neither the Anderson brief nor the NACDL brief in this SCOTUS case are bookmarked or linked in Adobe Acrobat to faciliate ease of review. Get with it, appellate lawyers. As federal courts are increasingly relying on electronic versions of pleadings and briefs, using Adobe Acrobat’s bookmarking and linking tools is an easy way to make such documents more reader-friendly. And, as any judge or law clerk will tell you, a brief or pleading that is easy to read is always easier to adopt.

New ethics complaint involving DeLay?

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Gosh, this is getting monotonous.
This Raw Story article reports that the National Journal is prepared to report that prominent lawyer and former lobbyist Jack Abramoff, who federal authorities are investigating for his lobbying efforts on behalf of an Indian tribe and his relationship with House Majority Leader and Houston area congressman Tom DeLay, paid thousands of dollars for DeLay and DeLay?s staff?s stay in an expensive London hotel in mid-2000. Earlier posts on the Abramoff-DeLay investigation can be reviewed here.
House rules stipulate that members or members? employees cannot accept payment from a registered lobbyist to cover travel costs.

Nebraska v. OU Spirit Squad

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The University of Nebraska football team has not been fairing well lately in its football rivalry with the University of Oklahoma. So, last year, a Nebraska lineman got confused and thought that NU was going to play the OU Spirit Squad instead. Oklahoma criminal authorities are not pleased (bugmenot login: “privatecitizen@msn.com”; password: “password”).

A different question

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The question being batted around the sports world the past couple of days is whether the suspension of Temple University basketball coach John Chaney is sufficient punishment for Chaney directing a goon on his team to hammer an opposing team’s player, resulting in the player suffering a broken arm.
My question is different: How much will Chaney and Temple have to pay in money damages to the player? Looks to me that the liability phase of that civil case is a dead cinch winner for the injured player.
Update: Although I wouldn’t want him sitting on the jury if I am representing the plaintiff, Greg Skidmore over at the Sports Law Blog has a nice analysis of the potential civil liability arising from Coach Chaney’s actions. Also, Professor Palmer over at the Sports Economist is already thinking about potential damage calculations. Sounds like a budding expert witness on damages to me! ;^)

Ebbers is going to testify

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In the key strategic decision of the criminal trial of former WorldCom CEO Bernard Ebbers, Reid Weingarten advised U.S. District Judge Barbara Jones on Friday that he intends to call his client Mr. Ebbers to the stand on Monday.
The prosecution rested its case on Wednesday and the defense began its case on Thursday. The defense intends to conclude by the end of next week, which means the case should go to the jury early in the following week. Here are previous posts on the Ebbers case.
Inasmuch as juries in white collar criminal cases expect to hear from the defendant, the decision to have Mr. Ebbers testify is only surprising because of how well the trial appears to have gone to date for Mr. Ebbers.
In their case in chief, prosecutors relied almost entirely on former WorldCom CFO Scott Sullivan‘s testimony in attempting to prove that that Mr. Ebbers helped direct a massive accounting fraud that inflated WorldCom’s publicly-reported earnings and revenue numbers. Mr. Ebbers’ alleged motive was to forestall a decline in WorldCom’s stock price in an effort to protect his personal net worth, which was almost entirely based on WorldCom stock.
The Ebbers defense team has countered with a theory of the case that it was Mr. Sullivan who masterminded the fraud and that he concealed it from Mr. Ebbers, who was an “honest idiot.” This past week, the defense put on its first witnesses, including Bert Roberts, WorldCom’s former chairman, who testified that Mr. Sullivan did not implicate Mr. Ebbers when he was initially confronted with the $11 billion fraud in June 2002. Moreover, Cynthia Cooper, the internal WorldCom auditor who first uncovered the fraud, testified for the defense that Mr. Ebbers directed her to disclose negative accounting information to the WorldCom audit committee that Mr. Sullivan had wanted withheld.
Thus, the Ebbers defense team probably feels reasonably good at this point about establishing reasonable doubt in the minds of the jurors. However, I agree with the decision to put Mr. Ebbers on the stand. Although a bad performance could give the jurors second thoughts about reasonable doubt, a good or even neutral performance could clinch an acquittal.

Would you like to buy a note on a Houston downtown hotel?

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There is an old saying among investors and insolvency lawyers that a hotel is such a bad investment that no owner makes any money on it until at least three prior owners have gone bust.
Well, it appears that the City of Houston is about ready to experience the truth of that observation. Following on the news from last week that the downtown Hyatt Regency Hotel has been posted for a foreclosure sale, the Chronicle reports that two other hotels — The Magnolia downtown and the Crowne Plaza Hotel in the Medical Center — have defaulted on a total of $15 million in redevelopment loans that the City provided in connection with the recent rehabilitation of the hotels.
It occurs to me that if I were a downtown or Medical Center hotel owner, and the City of Houston had subsidized two competitors of mine with a tax on my business, I’d be rather angry right now.

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Feds start investigating Krispy Kreme

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A couple of weeks ago it was the sale of the corporate jet. This week it’s a federal criminal investigation as formerly high-flying retail doughnut franchisor Krispy Kreme Doughnuts, Inc. moved a step closer to what appears to be an inevitable chapter 11 reorganization.
Krispy Kreme announced yesterday that the U.S. attorney for the Southern District of New York had launched an investigation that appears to be focused on the company’s franchise repurchases and a profit warning that the company issued in May, 2004. As is typical in such announcements, the the Winston-Salem, N.C.-based company said that the company is “cooperating fully” with the investigation. Here are the previous posts over the past year on Krispy Kreme’s mounting troubles.
The investigation deepens the problems facing Krispy Kreme, which is facing a liquidity crisis by the end of March. The company has been struggling with slowing sales and an SEC probe of its accounting practices that began last year. The company is cutting about 25% of its nonstore work force as part of a turnaround plan under Stephen F. Cooper, the Enron restructuring expert who became chief executive at Krispy Kreme in January.
Krispy Kreme stock was trading at $5.36 at the close of New York Stock Exchange composite trading yesterday, leaving the stock at about one-tenth of its peak price in August 2003. The company has also been blasted by multiple shareholder lawsuits over the past several months, which are another reason that chapter 11 appears to be an inevitable part of the company’s reorganization.