The public policy failure of the Texas Robin Hood school finance system

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Virginia Postrel of Dallas, who runs the smart Dynamist.com blog, does an excellent job of explaining in this NY Times article the public policy failure that is the current Texas Robin Hood public school finance system.
As Ms. Postrel notes, the problem is not with equalizing benefits between rich and poor school districts, but rather the structure under which such equalization was to be achieved:

Robin Hood does not just move money from rich school districts to poor school districts. It does so in a way that destroys far more wealth than it transfers, and that erodes the tax base on which school funding depends.
To understand why Robin Hood is so destructive, consider the market price of a given house. The home’s value depends not just on how big the house is or whether it has walk-in closets and granite countertops.
Property taxes depress the value of a house. The amenities those taxes buy, including good schools, increase the value. The final price reflects the net value of the taxes the homeowner pays.
Robin Hood essentially raises taxes while reducing benefits, creating a downward spiral in home values and property tax receipts. For each district, the state divides the total assessed value of property in the district by the number of pupils. (Districts get higher per-pupil weightings for such factors as students with learning disabilities or limited English proficiency.)
The state then compares this number with a confiscation threshold. The district keeps the taxes on the property base below the threshold. But every single penny collected on the property value above the threshold goes to the state.

Not surprisingly, Ms. Postrel notes that, when homebuyers no longer get as much education for their taxes, buyers will not pay as much for houses:

During the 1990’s, “a period of unusually rapid income growth for the wealthy,” the economists note, the property value per pupil actually fell in the state’s wealthiest 5 percent of school districts, even without accounting for inflation.
That drop was bad news for everyone. Robin Hood assumed that house prices would stay pretty much the same, so that property-rich districts would continue to provide ample tax dollars to the rest of the state. Instead, every year the tax base became smaller in the rich districts.
To meet its commitments to poor districts, the state effectively lowered the real value of the confiscation threshold. Corrected for inflation, the threshold was $340,000 per weighted pupil in 1994, when the system was established. By 2002, it had fallen to $305,000.
But lowering the threshold further depresses home values. A death spiral sets in.
As homebuyers switch from the once-rich districts into moderately priced districts, property values hit the threshold in those districts, setting yet another spiral in motion.
And while the state is pushing down the confiscation threshold, districts try to keep up by raising their property tax rates, pushing down home values even more.

Ms. Postrel notes that correcting the system is certainly not impossible:

[The solution is to bring] well-established principles of efficient taxation to bear on school finance. Transfers . . . should be funded through a statewide tax, while local taxes pay for local amenities.
But even local taxes could be more efficient. Instead of confiscating 100 percent of everything above a certain property-value threshold, . . . the state could take a much smaller percentage of the whole tax base.
“One of the principles of public finance is that having a high tax rate on a small base is very inefficient, whereas having a lower tax rate on a larger base is less distortionary, ” observes Ilyana Kuziemko, a Havard University economist who co-wrote with Caroline M. Hoxby a new working paper for the National Bureau of Economic Research entitled Robin Hood and His Not-So-Merry Plan: Capitalization and the Self-Destruction of Texas’ School Finance Equalization Plan.

As noted in this earlier post, the handling of public school finance by the Republican-dominated Texas Legislature has been so inept that it gives rise to reasonable questions regarding whether a Republican-controlled state government is capable of addressing such public policy issues in a responsible and effective manner. However, Professors Hoxby and Kuziemko note that the primary reason for the public policy failure of the Robin Hood public school finance system is much simpler than poor political leadership:

“Lawyers, not economists, designed the system.”

A great post-debate line

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Former Republican senator from Wyoming Alan Simpson attended Tuesday’s debate between Vice-Presidential candidates Dick Cheney and John Edwards. During an interview after the refreshingly contentious debate, Mr. Simpson waxed nostalgic about the bygone days in which such contentiousness was the norm in such political exchanges, such as the time that Republican Sen. Wayne Morse of Oregon in 1957 called his “distinguished colleague” Republican Sen. Homer Capehart of Indiana “a tub of rancid ignorance.”

Understanding terrorism

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Although I am generally supportive of the way in which the Bush Administration has conducted the war against the Islamic fascists over the past three years, I have never been comfortable with the Administration’s characterization of the war as the “War on Terror.” Not only does that moniker obscure the real enemy — radical Islamic fascism — but its vagueness risks inclusion of legitimate rebel movements against tyrannical regimes. I mean, really — would the United States be siding with the Iranian or North Korean governments if rebel movements in those countries began to use tactics to undermine those tyrannical regimes similar to those that are used by Islamic fascists against America and Israel?
Dr. Philip Jenkins is a prolific author and an outstanding professor of history and religious studies at Penn State University. He is best known for his recent books The Next Christendom: The Coming of Global Christianity (New York: Oxford University Press, 2002) and The New Anti-Catholicism: The Last Acceptable Prejudice (New York: Oxford University Press, 2003), which are outstanding works on the changing nature of Christianity in the world. The Next Christiandom explores the emergence of Third World countries as the future demographic and cultural center of global Christianity, and The New Anti-Catholicism examines how modern political correctness toward minority groups has not deterred major media outlets from casting the Catholic Church and its teachings in the worst possible light.
However, Professor Jenkins is also an expert on the concept of terror, and his new book Images of Terror: What We Can and Can?t Know about Terrorism (Aldine de Gruyter, New York 2003) explores the social construction of terrorism as a concept and problem. In this review of Images of Terror, reviewer Daniel McCarthy notes that Professor Jenkins asks the salient question: What makes a particular incident an example of terrorism, rather than a conventional crime? Although a generic definition of terrorism is possible to develop, the application of that definition to a particular event is much more difficult as a variety of social forces and media interpretations shape our understanding of the event:

[A]s a new understanding of the problem [of terrorism] takes hold, older interpretations may be forgotten entirely and even retroactively discredited. The interpretation that was plausible in the 1980s became, under the influence of a changing ideological climate, a thing that only crackpots believed in the 1990s. This, says Jenkins, is what happened to the theories of those who warned of the dangers of Islamic terrorism during the Clinton years. In the 1980s, when terrorism was understood as a phenomenon connected to outside dangers?to the Cold War and the Iran-Iraq War, for example?such warnings might have been taken seriously. In the 1990s, however, terrorism increasingly came to be understood as something associated with domestic far-right militants, and those who talked too much about Islamic terrorism risked being dismissed as racists or Islamophobes. After 9/11, the prevailing understanding changed again, and people who may have sounded like cranks five years earlier were now experts on a real and obvious danger.

Indeed, as Professor Jenkins points out, the concept of terror is neither new nor particularly unusual in American history. However, the social and political forces that shape our understanding of terror events make it seem that way:

[W]hile the images of terror shift, the reality of terror may remain constant. Terrorism in United States is certainly not a recent development. Jenkins provides a chart enumerating more than forty-nine major acts of terrorism in the United States between 1939 and 2001; he notes, however, that despite this long history of terrorism, news media would often react to a major terrorist strike within the country as if it were the first time terror had come to the United States. The media, however, are not alone in their forgetfulness and revisionism. Jenkins argues that intelligence agencies and government departments also change the way terrorism is understood, prompted by changing diplomatic and political realities.

As one example, Professor Jenkins points out how the government’s handling of the information that 9/11 hijacker Mohamed Atta probably met with Iraqi intelligence agent in the Czech Republic in early 2001 reflects the conflicting interests within the U.S. government at the time:

Czech intelligence originally claimed that [Atta met with Iraqi intelligence agent in the Czech Republic in early 2001], but the Czech government later disavowed that report. Might the government have had other reasons for discrediting the story? An Iraqi connection to 9/11, no matter how tentative, would have been cause for war, something that Jenkins says the U.S. State Department was eager to avoid at the time.

Professor Jenkins maintains that we can reach a better understanding of terrorism and its implications by asking specific questions that undermine the political or social twists that a societal force may attempt to place on a particular terroristic event:

There may be things we can never know about terrorism, certainly about specific acts. In general, however, consumers of news and information can adopt strategies to arrive at the clearest understanding possible. First, says Jenkins, readers must ask, ?How do we know this?? (p. 193). They must evaluate the sources?and the sources’ sources?carefully. Second, they must ?realize that claims have consequences? (p. 193), asking cui bono while considering also how a certain piece of information may harm the interests of various actors. Finally, ?the greatest weapon for the critical consumer of terrorism claims is memory? (p. 194). Images of Terror as a whole is concerned with that third point: the purpose of a social constructivist analysis, after all, is to show that things have not always been understood the way they now are and that other interpretations are possible. Memory provides some context and some grounds for hope in the effort to understand terrorism.

Thus, the “War on Terror” paints with a broad brush where a more measured stroke is needed. The sooner that we understand that the war is against radical Islamic fascists who seek state power to effectuate totalitarian control similar to what occurred in Iran in 1979 and in Afghanistan in the 1990’s, then the quicker we will be able to develop the military and political policies necessary to defeat these tyrannical forces against progress.

Former El Paso traders cop pleas

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Following on this earlier post on the subject, four former Houston-based El Paso Corp. natural gas traders have agreed to plead guillty under cooperation agreements with the Justice Department after being been charged with making false reports used to calculate the index price of natural gas.
Industry publications, such as the Inside FERC Gas Market Report, use data from traders to calculate the index price of natural gas. Accordingly, movement in index prices often affects the level of profits traders can generate. In this particular case, it remains unclear whether the publication actually used the false information provided, but the government needs only to prove that fake trades were reported and not not that they were actually published or affected the markets.
Each of the traders worked for the Houston company’s El Paso Merchant Energy division and were charged with one count of false reporting. They will enter their guilty pleas later this month. The four who were released on personal recognizance bonds were Christopher Bakkenist, 41; Dallas Dean III, 60; Donald J. Guilbault, 51; and William L. Hamm, 45.
Wednesday’s indictments came nearly two years after former El Paso trader Todd Geiger was indicted for wire fraud and reporting fake trades to an industry publication. He pleaded guilty in 2003 to the fake-trade-reporting charge and agreed to cooperate with prosecutors in the probe.
Earlier this year, ten former El Paso Corp. traders and supervisors received targe letters from the U.S. Attorney’s Office in Houston alerting them that they were targets of a criminal investigation into manipulation of natural gas prices. Moreover, in the last two years, the Commodity Futures Trading Commission has filed civil charges against several companies and subsidiaries in which the CFTC alleges that traders knowingly reported false data to industry publications in an effort to manipulate natural gas prices. So far, the CFTC has settled such allegations against approximately 25 companies for more than $250 million, and El Paso settled such CFTC charges for $20 million in March 2003.
However, in a recent case involving another trader who had been charged with false reporting, a federal district judge threw out the charges after ruling that the part of the Commodity Exchange Act that deals with reporting of false and misleading information on on commodity trades is unconstitutionally broad. That ruling is currently on appeal, and the Fifth Circuit Court of Appeals in New Orleans conducted oral argument on the case earlier this week.

Stros cruise by Braves

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The Stros glided into Atlanta and easily took the first game of their National League Divisional Series with the Braves 9-3 behind Lance Berkman, Carlos Beltran, Jason Lane, and Brad Ausmus‘ yaks and the gutty pitching performance of Roger Clemens.
The Stros won this one with a solid hitting display as they cranked out nine hits in addition to the four above-mentioned taters, including run scoring doubles by Bags and JK. A four run uprising in the third and then three more runs in the fifth put this one away.
Unfortunately, the Stros’ strong hitting display prompted Braves reliever Juan Cruz to nail Beltran in the ribs with a pitch in the seventh, and Lane replaced Beltran in the field for the final two innings. Post-game x-rays on Beltran’s ribs were negative, but the contusion restricted the his arm’s range of motion, so it is unclear whether he will be able to play in today’s game. If Beltran cannot play today, Lane would replace him in the lineup.
Inasmuch as Cruz clearly was throwing at Beltran on purpose (although the umps did not issue any warnings), the bottom half of the frame provided one of the comic moments of the season. With two outs and nobody on, the Braves’ centerfielder Andruw Jones came to the plate against Clemens, who is notorious for being “old school” with regard to retribution for one of his teammates being hit by a pitch on purpose. Inasmuch as Jones is the Braves’ centerfielder and Beltran is the Stros’ centerfield, there is logic in a baseball sense for Clemens to throw at Jones in response to Cruz throwing at Beltran.
At any rate, Clemens worked the count to two strikes against a very antsy Jones. Clemens then started a two strike curveball at Jones that broke over the plate but in the dirt. Jones took the worst swing at the pitch that I’ve seen since I coached my last T-Ball game in striking out, and looked like the most relieved person in the ballpark as he tossed his bat, grabbed his glove and retreated to the relative safety of centerfield.
According to the ESPN reporter near the Stros’ dugout, Clemens’ directive to his teammates as he left the dugout for the clubhouse after finishing seven innings: “Keep kickin’ their ass.”
Clemens showed the effects of the stomach virus that knocked him out of the final game of the regular season. He walked six, which is the most he has given up in a game in over five years. However, Clemens was the quintessential gamer, stranding nine Braves runners in the first four innings. The Rocket lasted seven innings, throwing 117 pitches while giving up two earned runs and striking out seven.
The Stros now hand the ball to Roy O in Game 2 against former Stro Mike Hampton, who has been an average National League pitcher this season. However, Hampton is a gamer just like Clemens and Oswalt, so do not expect another easy game like today’s. But it sure would be nice to steal two games in Atlanta before the series returns to the Juice Box on Saturday afternoon.

More trouble in one of John Moores’ California investments

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The Justice Department announced Wednesday that a federal grand jury has indicted eight former Peregrine Systems Inc. executives with taking part in a massive conspiracy that inflated the company’s revenue by more than $500 million over several years. Peregrine is in the business of developing software to track corporate assets.
Former Houstonian John Moores — who founded Houston-based BMC Software, has been a major philanthrapist for the University of Houston and is currently the owner of the San Diego Padres Baseball Club — is the former chairman of the board of Peregrine. Dozens of shareholder lawsuits filed over the past several years allege that Mr. Moores and his entities sold over 14 million Peregrine shares worth $630 million from 1999 to 2001 during a time in which Peregrine’s financial reports were being falsified. Mr. Moores denies any knowledge of the falsity of Peregrine’s financial statements and has never been charged criminally in regard to Peregrine or any other venture.
The indictment charged former Peregrine CEO Stephen Gardner and former President and COO Gary Lenz, and other executives involved in sales, finance and accounting at the company. The indictment also charged a former Arthur Andersen LLP audit partner, who oversaw Peregrine’s bookkeeping. Messrs. Gardner and Lenz, and four other executives also face related civil fraud charges filed by the Securities and Exchange Commission.
Peregrine filed for bankruptcy protection in 2002 after announcing an internal probe of its accounting. It later restated financial results for 11 quarters from 2000 through 2002 in which it reduced its previously reported revenue of $1.3 billion by over a half a billion dollars. Peregrine had reported 17 consecutive quarters of rising earnings from 1997 through 2002, and its stock price reached nearly $80 in March, 2002. The plaintiffs in the civil lawsuits against Mr. Moores and others — and now the Justice Department — are taking the position that those results were the result of the Peregrine executives’ cooking of the company’s books.
In the meantime, a former Peregrine sales executive on Wednesday agreed to plead guilty to charges of obstructing justice and will join several others who are cooperating in the government’s ongoing investigation of the company. Moreover, Peregrine’s former chief financial officer previously pled guilty to conspiracy and securities fraud charges, and two other former Peregrine executives also pled guilty to conspiracy charges.

Akin, Gump sued for Pizza Inn golden parachutes

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Colony, Texas-based Pizza Inn Inc. has sued Dallas-based Akin Gump Strauss Hauer & Feld LLP — the company’s former law firm — for $7.4 million in damages alleging that the firm breached its duties to the company when it wrote “golden parachute” severance package agreements for four senior Pizza Inn executives. The lawsuit alleges that the potential payout under the golden parachute agreements was more than twice Pizza Inn’s 2003 net income of $3.1 million and that the firm’s legal services benefited the executives, but not Pizza Inn.
The lawsuit is the latest crossfire in a fight for control of Pizza Inn, of which Dallas-based Newcastle Partners LP owns 32.5 percent. In February, company shareholders approved a plan that gave Pizza Inn board control to Newcastle, including replacing the Pizza Inn chairman with Newcastle’s sole general partner and adding the Newcastle president and two other Newcastle backed members to the board. That development coincided with a Thompson & Knight LLP opinion to the board that that adding the Newcastle-backed board members to the Pizza Inn board did not constitute a change in control. A month later, one of the Pizza Inn executives resigned and sought a $605,882 severance payment under his golden parachute agreement. The other three other Pizza Inn executives with similar severance deals still work at the firm.

DuPont Photomask acquired

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Japanese technology and printing company Toppan Printing Co. announced on Tuesday that it will acquire Round Rock, Texas-based DuPont Photomasks Inc. for about $650 million. The deal will create the world’s largest maker of photomasks, which are like stencils that are used to etch circuits onto silicon and, thus, are key components in semiconductor production. The transaction is expected to close in early 2005.
Under the deal, DuPont Photomasks shareholders will receive $27 a share. After the completion of the deal, the U.S. company will become a wholly owned Toppan unit named Toppan Photomasks Inc. DuPont Co., which is DuPont Photomasks’ largest shareholder with about a 20% stake, has agreed to the deal.

Stros 2004 Review: Stros-Braves Playoff Preview

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The media is all aflutter with the fact that the Stros have never beaten the Braves in three previous playoffs (in 1997, 1999, and 2001), but that fact is irrelevant to the current series. Only five of the Stros’ 25 man roster were even on the 2001 club (Bags, Bidg, Ausmus, Viz, and Berkman) and the same roster turnover is true for the Braves. So, these are different teams at a different time, and what has occurred in the past is largely just the stuff of baseball myths that media types enjoy discussing while trying to figure out something perceptive to say.
In its essence, baseball is a simple game. While at bat, a club tries to score more runs than its opposition. While in the field, the club tries to get three outs each inning before the opposition scores as many runs as the club has scored. Thus, creating runs while hitting, and saving runs while pitching and playing defense, are the most important indicators of success in baseball. That’s why I like the statistics of runs created against average (“RCAA”) and runs saved against average (“RSAA” and RCAA are explained here) — they are solid reflections of how a player and a team stacks up against an average player and an average team in their league at any particular point in time.
Based on RCAA and RSAA, the Braves should beat the Stros in this series, but not by much. Moreover, based on RCAA and RSAA, the Cubs and the Giants should have beaten out the Stros for the Wild Card Playoff spot, so the statistics are simply indicators of probable performance, not dispositive predictive tools. The nature of human performance generally and the charm of baseball in particular is the unpredictability of it all.
Since my most recent periodic review of the Stros hitters’ RCAA and the pitchers’ RSAA, the Stros overtook both the Giants and the Cubs in the NL Wild Card playoff race, and the clubs’ final RCAA and RSAA bear out what happened. Here are the Stros hitters’ final RCAA numbers, courtesy of Lee Sinins, through the end of the regular season:
Lance Berkman 69
Carlos Beltran 46 (28 with the Stros, 18 with the Royals)
Jeff Bagwell 17
Jeff Kent 12
Mike Lamb 11
Craig Biggio 8
Jason Lane 3
Eric Bruntlett 2
Willy Taveras 0
Chris Tremie 0
Jason Alfaro -2
Chris Burke -3
Orlando Palmeiro -4
Richard Hidalgo -9
Adam Everett -11
Morgan Ensberg -12
Jose Vizcaino -14
Raul Chavez -19
Brad Ausmus -26
After falling back to ninth a week before the end of the regular season, the Stros’ seven game winning streak to close out the season was bolstered by another surge in hitting that resulted in the Stros finishing seventh out of the 16 National League teams in RCAA (50), while the Braves finished fifth (60 RCAA). Frankly, that means the teams are about equal in hitting, as the Stros RCAA would be 8 points higher than the Braves had Beltran played with the club the entire season.
Insmuch as the Stros were at 17 RCAA a week ago, their hitting over the last week of the season was flat remarkable. Berkman and Beltran concluded monster years, and Bags and Bidg rebounded nicely after their lull following the earlier 12 game winning streak. Moreover, after being essentially an average National League hitter for the entire season, Jeff Kent went nuclear in the last week of the season and improved his RCAA from 1 to 12. Jason Lane also improved notably over that time, raising his -2 RCAA to a plus 3 by the end of regular season.
Now, here are the Braves’ individual RCAA figures:
J.D. Drew 66
Eli Marrero 14
Marcus Giles 13
Chipper Jones 11
Johnny Estrada 9
Julio Franco 6
Charles Thomas 5
Adam LaRoche 2
Rafael Furcal 1
Damon Hollins 1
Andruw Jones 0
Dewayne Wise -5
Wilson Betemit -6
Nick Green -8
Jesse Garcia -9
Mike Hessman -9
Eddie Perez -11
Mark DeRosa -20
In effect, the Braves have an outstanding hitter in Drew, who is almost equal to Berkman, but then a big dropoff to their second best hitter — there is clearly no Beltran-caliber second best hitter on the Braves. That is an advantage for the Stros, but it is offset by the fact that the Stros are pulled down by the amount of play that deficient hitters Ausmus, Chavez, Viz, and Ensberg receive. Stros manager Phil Garner would be well-advised to play the much more productive Lamb during the playoffs over Ensberg.
The big difference in the Braves and the Stros is in pitching, where the Braves are stronger even though the Stros’ pitching staff is quite good. Here are the Stros pitchers’ RSAA:
Roger Clemens 32
Brad Lidge 26
Roy Oswalt 22
Wade Miller 10
Dan Miceli 6
Octavio Dotel 5
Andy Pettitte 4
Chad Qualls 3
Russ Springer 3
Dan Wheeler 3
Darren Oliver 1
Brandon Backe 0
Mike Gallo -2
Chad Harville -2
David Weathers -2
Jeremy Griffiths -3
Ricky Stone -3
Kirk Bullinger -6
Jared Fernandez -6
Pete Munro -9
Carlos Hernandez -10
Brandon Duckworth -11
Tim Redding -15
The Stros are fourth among the 16 National League teams with a team RSAA of 46, which is the position that the Stros’ staff has been for most of the second half of the season. On the other hand, the Braves staff’s RSAA is a stout 89, which is second only to the Cubs’ staff that measured a heady 121 on the season (how again did the Cubs blow their lead in the Wild Card Playoff race?).
Clemens, Lidge and Oswalt are three of the best pitchers in baseball, and that’s a good nucleus for a short series. Miceli has bounced back well from his three week stint on the DL with pink eye, but beyond those four pitchers, the Stros are relying on a slew of young and not so young pitchers who are average or barely above average. Inasmuch as all of those pitchers seem to be pitching well right now (particularly the irrepressible Backe), the Stros may be able to bob and weave through a five game series with this bunch. However, in the longer seven game series in the LCS and the World Series, that lack of quality depth might get exposed. Unless, of course, these fellas simply step up on this national stage and continue to improve as they have over the past couple of weeks. I’m through doubting this bunch of competitors.
Here are the Braves pitchers’ individual RSAA:
Jaret Wright 21
Antonio Alfonseca 14
John Smoltz 14
Horacio Ramirez 13
John Thomson 13
Juan Cruz 12
Kevin Gryboski 8
Paul Byrd 5
Russ Ortiz 4
Roman Colon 2
Chris Reitsma 2
Tom Martin 1
Dan Meyer 1
Tim Drew 0
Mike Hampton 0
Sam McConnell 0
C.J. Nitkowski 0
Armando Almanza -2
Will Cunnane -4
Jose Capellan -6
Travis Smith -9
Jaret Wright, the Braves first game pitcher against Clemens, has pitched basically as well as Oswalt this season, so he is darn good pitcher. But interestingly, the rest of the Braves staff is essentially a bunch of well above-average and just above average pitchers, but none which had the seasons of Clemens, Lidge or Oswalt. Thus, the depth of the Braves’ pitching gives them an advantage, but the starting pitching matchups for the first three games favor the Stros:
Game One: Clemens (32 RSAA) v. Wright (21 RSAA)
Game Two: Roy O (22 RSAA) v. Mike Hampton (0 RSAA)
Game Three: Brandon Backe (0 RSAA) v. John Thomson (13 RSAA)
So, despite the Braves greater depth in quality pitching, this is really a very even series based upon the production of the respective teams’ players at this time. That’s why small adjustments such as playing Lamb over Ensberg and perhaps giving the emerging Lane some swings for Bidg could be the difference between winning and losing this series. Here’s hoping that Manager Garner can continue to pull the right strings that he so effectively selected during the drive for the Wild Card playoff spot.
Now, here are some other observations on the final statistics from the regular season:

Although the Cubs pitching was the best in the National League by far, their hitting went into the tank. As the Stros climbed from an RCAA of 18 to 50 in the last week of the season, the Cubs’ RCAA fell from 17 to 2 during the same week. Say bye-bye, Sammy!

Although the Giants’ 90 RCAA was stout and second best in the league behind the Cards’ astronomical 152, they lost the Wild Card Playoff race because of their lack of balance. The Giants’ pitching staff’s RSAA was only 16. And even the Giants’ RCAA is somewhat deceptive because of how top-loaded it is — the incredible Barry Bonds had a league-leading RCAA of 152 alone!

And let’s take a look at the key players that the Stros traded away either before or during this season:

Billy Wagner: 10 RSAA or slightly better than Dan Miceli.

Octavio Dotel: 3 RSAA or about like Chad Qualls.

Richard Hidalgo: -20 RCAA or worse then Raul Chavez (19). Ugh!

John Buck: -9 RCAA or about like Adam Everett.

Inasmuch as the Stros essentially got Beltran in return for Dotel and Buck, even a numbskull could evaluate that as a good trade. However, GM Gerry Hunsicker and Stros’ owner Drayton McLane both came under severe media criticism for the Wagner and Hidalgo trades, which got rid of huge salaries on players of declining production. Those critical media types owe Messrs. McLane and Hunsicker an apology, but I doubt that they will even get an objective evaluation of the trades in the mainstream media, much less an apology. So it goes.

Another Enron-related plea deal

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Timothy DeSpain, Enron’s assistant treasurer from 1999 to 2002, was arraigned before a federal magistrate Tuesday and released on a $100,000 bond in connection with securities fraud criminal charges that he conspired with other Enron executives to present Enron’s financial picture in a false light to investors.
Late Tuesday, Mr. DeSpain entered into a plea agreement (his statement in support of the plea deal is here) in which he pled guilty to a single count of securities fraud in return for the Justice Department’s agreement to grant him immunity from prosecution for any other crimes that he committed at Enron or his subsequent employer so long as Mr. DeSpain truthfully testifies in Enron-related criminal trials and cooperates with the Justice Department’s on-going Enron criminal investigation.
According to the Justice Department criminal information pleading, Mr. DeSpain was in charge of keeping Enron in touch with credit-rating agencies and was involved in schemes intended to make Enron appear healthier than it was to pump and maintain investment-grade credit ratings. Low or below investment-grade credit ratings make it expensive for companies to borrow money, which was critical to Enron’s online energy trading business. Under his plea agreement, Mr. DeSpain alleged that, at the direction of Enron treasurers, he and others frequently misrepresented cash flow from operations in order to hide the nature of the transactions and benefit from the pumped-up credit rating.
Mr. DeSpain worked for three treasurers at Enron. Ben Glisan, who is currently serving a five year prison sentence after pleading guilty to one count of conspiracy to commit wire and security fraud in September 2003; Raymond Bowen, who resigned last week as Enron’s chief financial officer and treasurer and who has never been charged with a crime; and Jeffrey McMahon, who has never been charged with a crime, but whose name was recently mentioned by Michael Kopper during his testimony in the ongoing Enron-related Nigerian Barge criminal trial as Andy Fastow‘s proposed “fall guy” if Enron’s accounting treatment of the barge transaction were ever to fall apart.
Another transaction mentioned in Mr. DeSpain’s plea bargain involves Project Nahanni, an Enron deal that arose in 1999 when Enron was at least short of its cash flow target. Enron reported cash from the sale of Treasury securities as a result of Profect Nahanni, but Mr. DeSpain alleges in his plea bargain that he was aware of no business purpose for the transaction other than to create cash flow. As a result, Mr. DeSpain claims that Enron falsely advised credit agencies that Project Nahanni was the sale of a merchant asset rather than explaining the true nature of the transaction, which Mr. DeSpain contends would have undermined Enron’s credit rating.
Finally, in his plea bargain, DeSpain also alleges that he was involved in fraudulent conduct in connection with Enron’s “prepay” strategy where the company reported that it had sold an asset and generated cash, but did not disclose that it had incurred a future debt obligation. Mr. DeSpain alleges that Enron’s treasurers ordered him no to reveal to the credit rating agencies the true nature of the prepay transactions.
The Justice Department’s plea deal with Mr. DeSpain is consistent with the strategy for generating witness testimony that the prosecution is currently using in the Nigerian Barge trial. Four of the prosecution’s first six substantive witnesses in that trial intially denied any wrongdoing in connection with the transaction. However, after reaching plea bargains with the Justice Department, those witnesses now contend that they were involved in a coverup of an alleged “side deal” between Enron and Merrill Lynch. The prosecution contends that the alleged side deal, if disclosed to Enron’s auditors, would have required Enron to restate earnings that it booked from the transaction with Merrill Lynch.