Making Congressional voting transparent

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This post by Tom Mighell over at Inter Alia reminded me to pass along GovTrack (www.govtrack.us), a new site that will provide you email notification of up-to-the-minute information about Congress.
GovTrack differentiates itself from other sites devoted to Congress in that it sends users e-mail updates anytime there is activity on legislation that they want to monitor. GovTrack lets users track activity of specific legislators. It can also send updates via RSS, or Real Simple Syndication, which is the most efficient way to organize and review such updates, as well as blog updates. The site collects information from Thomas (thomas.loc.gov), which is the Library of Congress’s legislation tracking site, as well as the websites for the House of Representatives and the Senate. Check it out.

Ernst settles long pending Bank of New England malpractice claim

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Ernst & Young LLP agreed to pay an $84 million settlement two weeks into the ongoing trial of a long pending malpractice lawsuit in Boston over its audit work more than a decade ago for the defunct Bank of New England Corp. Here is an article that set the stage for the trial.
The bank’s bankruptcy trustee filed the lawsuit in 1993 accusing Ernst of malpractice, among other claims. The bank’s demise was triggered by the January 1990 announcement that it would report more than $1 billion in previously undisclosed losses on bad loans for its 1989 fourth quarter. Just four months earlier, the bank had raised $250 million through a public debt offering. The bank filed a chapter 7 (i.e., a liquidation) bankruptcy case in January 1991.
The settlement is yet another reminder of the litigation pressures that the Big Four accounting firms are currently facing over big business failures. Here are earlier posts on Ernst’s other legal problems over the past year.

Clear thinking on Social Security reform

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The Bush Administration’s initiative to reform the Social Security system has been criticized recently as being premature because the system is not really in crisis and there are more pressing fiscal problems, such as reforming the health care finance system. Well, Social Security is clearly not in as bad a shape as say, Medicare, but to put off reforming Social Security for that reason is akin to reasoning that there is no need to tend to that long overdue tune up of the family’s better car because it seems to be driving better than the family’s clunker.
In this Wall Street Journal ($) Capital column, David Wessel interviews Edward “Ned” Gramlich, a U.S. Federal Reserve governor who chaired the Social Security advisory commission during the Clinton Administration and is the former dean of the University of Michigan’s School of Public Policy. Although not enamored of the Bush Administration’s initial proposal for reforming Social Security, Mr. Gramlich nevertheless is a strong proponent for Social Security reform now:

I don’t think the system is in crisis. But we can make much more desirable changes if they’re made early. The problem with waiting until the car is about to go off the road is that our options are constricted. It’s hard to make sensible benefit cuts if people have already retired or are close to retirement. It’s easier to do if cuts are well-advertised. In the past, we have waited, the benefit system has expanded and we’ve raised the payroll tax. At some point, we can’t do that.

We can do much more sensible things if we act early. But it’s hard to generate the requisite urgency when the system is projected to be paying full benefits for the next 40 years or so. I’m not an advocate of the president’s general approach, but I have sympathy for arguments that the president’s people are making about the wisdom of acting now.

Read the entire interview.

The economics of extracting oil & gas

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One of the most interesting (and misunderstood) aspects of the energy business is the economics of extracting oil and gas. Those economics not only have much to do with the price that we end up paying for energy, but also the success or failure of investing in a particular exploration project.
In this instructive Wall Street Journal ($) op-ed, Peter Huber and former Reagan administration staffer Mark Mills — who are authors of the new book, The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy (Basic 2005) — make an interesting point about why energy prices tend to gyrate from time to time:

Oil prices gyrate and occasionally spike — both up and down — not because oil is scarce, but because it’s so abundant in places where good government is scarce. Investing $5 billion dollars over five years to build a new tar-sand refinery in Alberta is indeed risky when a second cousin of Osama bin Laden can knock $20 off the price of oil with an idle wave of his hand on any given day in Riyadh.
By simply opening up its spigots for a few years, Saudi Arabia could, in short order, force a complete write-off of the huge capital investments in Athabasca and Orinoco. Investing billions in tar-sand refineries is risky not because getting oil out of Alberta is especially difficult or expensive, but because getting oil out of Arabia is so easy and cheap.

Moreover, the authors point out that new technology is having a dynamic impact on the cost of extracting oil and gas:

The cost of oil comes down to the cost of finding, and then lifting or extracting. . . But these costs have been falling, not rising, because imaging technology that lets geologists peer through miles of water and rock improves faster than supplies recede. Many lower-grade deposits require no new looking at all.
To pick just one example among many, finding costs are essentially zero for the 3.5 trillion barrels of oil that soak the clay in the Orinoco basin in Venezuela, and the Athabasca tar sands in Alberta, Canada. Yes, that’s trillion — over a century’s worth of global supply, at the current 30-billion-barrel-a-year rate of consumption.

Here is the entire piece. Also, Tyler Cowen over at Marginal Revolutions has this comment on Messrs. Huber and Mills’ new book.

Juror Questionnaire in the Enron Broadband case

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This is the questionnaire that prospective jurors in the upcoming Enron Broadband criminal trial will be given. Here are the prior posts on the Broadband case, which is scheduled to crank up on April 1 in Houston before U.S. District Judge Vanessa Gilmore.

Philip Johnson, RIP

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Philip Johnson, the innovative architect whose collaboration with local Houston real estate developer Gerald Hines defined Houston’s modern skyline, died Tuesday at the age of 98 in New Canaan, Conn. Mr. Johnson designed many buildings in Houston, including Pennzoil Place, Bank of America Center, Williams Tower, the Gerald Hines College of Architecture Building at the University of Houston, and the Rothko Chapel on the campus of the University of St. Thomas in the Montrose area of Houston, which was discussed in this earlier post.

Second Circuit reverses “Super Size Me” lawsuit dismissal

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Super Size Me is the Morgan Spurlock documentary that chronicled Spurlock’s health as he as he ate nothing but McDonald’s food at least three times a day for a month. Although certainly not a balanced treatment of the fast food industry, Super Size Me is quite clever and certainly worth watching. Last week, the film was nominated for an Academy Award in the best Documentary Feature category.
One of the criticisms of Super Size Me was that it was a transparent attempt to promote frivolous lawsuits against the fast food industry, although the onslaught of such litigation has not occurred. Nevertheless, such lawsuits received a glimmer of light yesterday from the Second Circuit Court of Appeals. In this decision, the Second Circuit reinstated part of a highly publicized lawsuit that accused McDonald’s of misleading young consumers about the healthiness of its products.
The Second Circuit’s decision concluded that the trial judge in the case incorrectly dismissed parts of the lawsuit brought on behalf of two New York children on the grounds that the lawsuit complaint failed to link the children’s alleged health problems directly to McDonald’s products. For the trial court to dismiss the case on those grounds without a trial, the Second Circuit essentially held that such a ruling could only come in summary judgment proceedings after discovery and presentation of summary judgment evidence. Thus, the decision at least opens the door a crack for the plaintiffs’ lawyers to demand in discovery from McDonald’s the type of previously secret documents regarding the company’s promotion of unhealthy products that ultimately led to a string of multi-billion dollar verdicts against Big Tobacco companies.
John F. Banzhaf III, a George Washington University professor of public-interest law who has advised plaintiffs in the big tobacco cases, is an unpaid adviser to the McDonald’s plaintiffs in this case.
Despite McDonald’s protestations to the contrary, Super Size Me has already had an effect the way in which McDonald’s promotes its menu. In early 2004, McDonald’s removed the “super size” option from the menus of its 13,000 U.S. restaurants and it began promoting a new line of premium salads. The company also began promoting milk as an alternative to soft drinks and sliced apples as a substitute for French fries in its famous Happy Meals for children.
I suspect that those apples have not competed particularly well against McDonald’s French fries. ;^)

The end of the imperial CEO?

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Don’t miss the discussion between the two foremost corporate law experts in the blawgosphere — Professor Bainbridge and Professor Ribstein (with an update here) — over the implications to the corporate model of the Hewlett-Packard Co. Board’s deliberations over limiting HP CEO (and notorious micro-manager) Carly Fiorina‘s managerial role in the company. Here is the Wall Street Journal ($) article and a free CNN Money article on the HP Board’s discussions.
Professor Bainbridge suggests that the HP Board’s actions foreshadow the end of the Imperial CEO era, while Professor Ribstein observes that HP’s troubles indicate a fundamental problem with the way in which control decisions are made within the inflexible corporate structure.
Meanwhile, HP shares are flat at $19.95 in morning trading on the New York Stock Exchange. In comparison, HP’s closing stock price was $18.22 on May 6, 2002, the day on which the company finalized its merger with Compaq Computer Corp that Ms. Fiorina orchestrated over strenuous opposition from several of HP’s longtime directors. Thus, two and a half years after Ms. Fiorina had HP pay $19 billion for Compaq, the market attributes virtually no value to the acquisition.
Given that scoresheet, it appears that HP has succumbed to both an Imperial CEO and a broken business model. In this Wall Street Journal column, Jesse Eisinger essentially says the same thing, and passes along this comment about Ms. Fiorina’s performance:

Ms. Fiorina has had more than 2Ω years since completing the merger in May 2002 to make it work. But H-P is still stuck in between high-end services provider IBM and master of the PC-as-commodity market Dell.
“I’m not sure anyone could have pulled this off,” says Merrill Lynch analyst Steve Milunovich. “I wouldn’t give her a high grade, but I wouldn’t call her a disaster.”
Alas, few CEOs envision epitaphs reading, “Not Disastrous.”

PW pays $87.5 million settlement in Safety-Kleen case

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Houston business plaintiffs’ firm Susman Godfrey recently obtained an $87.5 million settlement from Big Four accounting firm PricewaterhouseCoopers in connection with a negligent misrepresentation claim of over $1 billion that arose from Laidlaw Environmental Services’ ill-fated 1999 takover of scandal-ridden Safety-Kleen Corp.
Susman Godfrey represented a syndicate of lenders headed by Toronto Dominion Bank that provided almost $3 billion in financing to Laidlaw in connection with the Safety-Kleen adverse takeover. Shortly after Laidlaw acquired the company, Safety-Kleen filed a chapter 11 case amidst revelations of an internal accounting scandal. As a result of the scandal and Safety-Kleen’s reorganization, the value of the bank syndicate’s loans declined dramatically.
The banks sued PW and alleged that the loans would not have been made but for the fact that PricewaterhouseCoopers had provided audit reports indicating that Safety Kleen was financially healthy. PricewaterhouseCoopers contended that Safety-Kleen’s management had misled it in connection with the audits (former Safety-Kleen executives were sanctioned by the SEC and at least one criminal proceeding arose from the scandal), and that besides, the banks had not relied on the PricewaterhouseCoopers’ audits anyway in making the loans to fund the takeover. The case settled on the courthouse steps before trial last October, but the details of the settlement are just now becoming public.
The settlement is interesting in that it was came in mediation after the parties had engaged in a summary jury trial last May, in which the parties engage in a non-binding, streamlined presentation of their cases to a jury, which then gives each side feedback on how the jury would decide the key fact issues in the case. Although not used nearly enough in complex litigation, summary jury trials are an efficient and effective tool for parties involved in such mattrs to assess the risks of proceeding to trial versus a pre-trial settlement.

Remembering Johnny

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Don’t miss former Tonight Show writer Raymond Siller’s piece on Johnny Carson in today’s Wall Street Journal ($).