Tough night
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R.I.P., Gordo Cooper
Gordon Cooper, one of the original Mercury Space Program‘s astronauts, died of natural causes on Monday at his home in Ventura, California at the age of 77.
Mr. Cooper’s death leaves just three of the original seven Mercury astronauts still living — John Glenn, the former senator from Ohio, Walter M. (“Wally”)Schirra, and M. Scott Carpenter. Virgil I. (“Gus”) Grissom was one of three astronauts killed in a 1967 fire inside an Apollo capsule on the launching pad, and Donald K. (“Deke”) Slayton and Alan B. Shepard died of natural causes several years ago.
As the pilot of the last Mercury mission, Mr. Cooper was the last American astronaut to fly alone in space. His mission on May 15-16, 1963 covered 34 hours and 20 minutes, which was more than all five of the previous Mercury flights combined. When the automatic system that was supposed to control the descent of his Mercury capsule failed, Mr. Cooper took control manually and made a bull’s-eye landing just 7,000 yards from aircraft carrier that picked up the Mercury capsules.
Mr. Cooper subsequently flew a long mission in the Gemini Space Program in which he demonstrated that a trip to the moon was feasible. Mr. Cooper’s second and last trip into space was on Gemini 5, a two-man, eight-day mission in August 1965 that set a space endurance record of over 190 hours.
Among the many firsts in spaceflight that Mr. Cooper achieved was that he was the first person to sleep in space (seven and a half hours like a log, he reported). He was also the first astronaut to fly twice, and the first American to be televised from space.
Mr. Cooper was also immortalized in film by former Houstonian Dennis Quaid‘s excellent portrayal of him in the wonderful 1983 film of Tom Wolfe’s equally superb book, “The Right Stuff.” For anyone who grew up during the early days of the American space program, “The Right Stuff” is a must see. I recently watched it again with one of my teenage sons, and we thoroughly enjoyed watching how the original astronauts took enormous risks to do something that is considered commonplace by many in my son’s generation. I also enjoyed sharing with him many of the stories of the original Mercury astronauts that are now an essential part of Houston folklore.
Rest in peace, Gordo Cooper.
IRS demands a big tip from Brinker
In this Form 8-K filing with the Securities and Exchange Commission today, Dallas-based Brinker International Inc. — the operator and franchiser of Chili’s Bar & Grill and a number of other popular casual-dining restaurants — said the Internal Revenue Service has demanded “the employer’s share of FICA taxes on unreported tips during the examination period totaling $31.4 million.” It is not clear from the statement in the filing whether the $31.4 million represents the taxes owed or the amount of unreported tips.
The company also disclosed that the the IRS is alleging that alleged that Brinker has failed to fulfill its obligations under a 1996 tip-reporting alternative-commitment agreement with the IRS and has retroactively revoked the agreement. As a result, the IRS is alleging that some portion of the unreported tips should have been treated as service charges subject to employment taxes. The proposed assessment is based on the assumption that the cash-tip reporting rate should have been about two percentage points less than the charge-tip reporting rate.
In the filing, Brinker asserted that it has complied with all of the terms of the January 1996 agreement and with the law pertaining to the employment-tax treatment of service charges, and that it is “vigorously” contesting the accuracy of the proposed assessment related to unreported tips.
Restaurant owners and their counsel should watch this situation carefully. Brinker is a big fish in the restaurant industry, and a successful IRS assessment on this issue will send shock waves through the industry.
Fannie Mae Enron?
This Wall Street Journal ($) editorial examines the recent report issued by the Office of Federal Housing Enterprise Oversight (Ofheo) in regard to Fannie Mae‘s accounting machinations and what it found is troubling, to say the least.
By improperly delaying the recognition of income, Fannie Mae created a cookie jar of reserves and by improperly classifying certain derivatives, it was able to spread out losses over many years rather than recognizing them immediately. Accordingly, Fannie Mae’s managers in any quarter could reach into the cookie jar of reserves to compensate for poor results or add to it to lessen good ones. As the WSJ notes, this arrangement gave Fannie Mae “inordinate flexibility” in reporting the amount of income or expenses over reporting periods, which allowed it to manipulate earnings in order to hit target numbers for executive bonuses for Fannie Mae executives:
Ofheo details an example from 1998, the year the Russian financial crisis sent interest rates tumbling. Lower rates caused a lot of mortgage holders to prepay their existing home mortgages. And Fannie was suddenly facing an estimated expense of $400 million.
Well, in its wisdom, Fannie decided to recognize only $200 million, deferring the other half. That allowed Fannie’s executives — whose bonus plan is linked to earnings-per-share — to meet the target for maximum bonus payouts. The target EPS for maximum payout was $3.23 and Fannie reported exactly . . . $3.2309. This bull’s-eye was worth $1.932 million to then-CEO James Johnson, $1.19 million to then-CEO-designate Franklin Raines, and $779,625 to then-Vice Chairman Jamie Gorelick.
The WSJ concludes:
Fannie Mae isn’t an ordinary company and this isn’t a run-of-the-mill accounting scandal. The U.S. government had no financial stake in the failure of Enron or WorldCom. But because of Fannie’s implicit subsidy from the federal government, taxpayers are on the hook if its capital cushion is insufficient to absorb big losses. Private profit, public risk. That’s quite a confidence game — and it’s time to call it.
2004 Weekly local football review
Texans 30 Raiders 17. With the Stros winning the Wild Card playoff spot at the Juice Box downtown, the Texans did their part at Reliant Stadium to make Sunday a very good day for Houston sports fans. David Carr easily had his best game of the season as he was 14-22 for 238 yards, one TD pass in finding Andre Johnson as a secondary receiver on the play, no interceptions or fumbles, and 35 yards rushing on 8 carries. The Texans offensive line played well, protecting Carr sturdily and allowing third team running back Jonathan Wells to run for 105 yards. On the defensive side, the Texans were able to turn a Jamie Sharper sack into a TD and, while they did not ever really stop the Raiders’ offense, they did pick off three Kerry Collins‘ passes and force two fumbles. The high-scoring Vikings come to town next Sunday, so the Texans’ defense better plug the holes or else the Texans offense may need to score 40 just to stay in the game. Will the over/under on that game break 60?
Longhorns 44 Baylor 14. The Horns endured their final scrimmage of the pre-season before the real season begins next weekend in Dallas against Oklahoma. Although the Arkansas win from three weeks ago was a solid one, the three other teams that the Horns have played are not remotely comparable to Oklahoma’s talent level. Similarly, Oklahoma’s only reasonably tough game to date was this past weekend’s win over Texas Tech, which was not particularly impressive. So, to a certain extent, next week’s Red River Shootout will involve two talented, but largely unproven, teams. Although I think the addition of Dick Tomey to UT’s defensive coaching staff will improve that unit, I’m not sure that the improvement will be sufficiently developed at this stage of the season for the Horns to hold the Sooners under 28 points, which I think is a requirement of beating them. And the Horns still have to figure out now to deal with the fact that the Sooners head coach Bob Stoops is a far superior game day tactician to UT’s head coach Mack Brown.
Texas Aggies 42 Kansas State 30. This was a strange game. The Aggies really never stopped Kansas State, but four Wildcat turnovers allowed the Ags to have a short field for several of their scoring drives. Moreover, the Wildcats were behind for much of the game by double figures, so they abandoned their potent rushing attack behind Darren Sproles, despite the fact that it appeared to be working quite well. Nevertheless, with two and a half minutes to go, the Wildcats were driving the ball in Aggie territory and down only 35-30. Then, the KSU coaching staff inexplicably makes several questionable play calls and, for one of the only times in the game, the Aggie defense holds and KSU turns the ball over on downs with a minute and a half to go. As the Ags are running out the clock, Reggie McNeal takes off around left end and scoots 62 yards for a TD to put the game away. The Ags travel to Ames, Iowa next Saturday to play the Iowa State Cyclones, who are coached by my old friend Dan McCarney.
Memphis 41 Houston 14. On their way to a 1-6 record, the Coogs lay an egg against a good Memphis team. The problem with junk offenses such as the one the Coogs run is that, once the opposition’s defensive coordinators have seen it, they make adjustments and force the offense to do something else. If the junk offense does not have something else that it can do well, then it gets ugly in a hurry, and that’s where the Coogs find themselves now. Art Briles‘ second season is quickly turning into a rocky one. The Coogs play Southern Miss next on this week’s ESPN Thursday night football.
San Jose State 70 Rice 63. When I first heard this score, I thought that Rice’s basketball season had started early. The Owls uncharacteristically blew leads of 34-7 and 63-49, and somehow figured out a way to lose despite gaining 634 yards. In case the Owls had any doubts that their decision to move to Conference USA is the correct one, the attendance at this game was only 4,000, which means that this game drew less than a large number of Texas high school football games each week. Rice plays SMU next Saturday night at Rice Stadium.
And remember that Kevin Whited has the best weekly review of Big 12 games over at PubliusTx.net.
Stros 2004 Review: A playoff drive for the ages
The Stros charged into the playoffs on Sunday afternoon with their 18th consecutive home victory by beating the Colorado Rockies 5-3 to win the National League WildCard playoff spot.
The win capped an incredible late season turnaround for the Stros, who were a season-worst 56-60 on Aug. 14. From that point on, the Stros won 36 out of their next 46 games, which included a 12 game winning streak. They then closed the season out in a tight race with the Giants and Cubs by winning nine out of their last 10 and their final seven straight. The Stros now go to Atlanta for Game One of the National League Division Series on Wednesday against the Braves, who have eliminated Houston three times in the past seven postseasons. The first playoff game in Houston will be next Saturday, October 9.
Brandon Backe filled in admirably on Sunday for the ailing Roger Clemens, who came down with a stomach virus last night and could not pitch today as expected. Backe — who slept in today thinking that Clemens was starting and thus, did not learn that he was starting until a couple of hours before game time — pitched five strong innings and drove in the Stros’ first two runs.
After closer Brad Lidge‘s final pitch in the ninth, the Stros ran out of the dugout to meet near the mound for hugs and high-fives while red and white confetti rained down on the fans from the Juice Box roof.
Assuming he recovers from his stomach virus, Clemens is scheduled to pitch game one of the division series against the Braves, with Roy O slated to start game two. I will break down the matchup between the Stros and the Braves in a post in the next day or so.
“We’ll Getcha & Mangle Ya”
New York-based Weil, Gotshal & Manges is a major international law firm that is particularly well-known in bankruptcy and reorganization circles. The firm is counsel for the debtors-in-possession in both the Enron and MCI/WorldCom reorganization cases, which are two of the largest chapter 11 cases in history. Over the past 20 years, Weil has built upon its reorganization expertise to become a well-regarded and well-balanced full service firm.
However, the firm’s nickname within the legal profession — which is the title of this post — makes fun of the firm’s traditionally high fees charged to its clients, and this New York Sunday Times article reports on two pending lawsuits against the firm that reflect another image problem at Weil and other big law firms — i.e., that the firm is more incentivized to make money than to protect the interests of its clients:
Weil Gotshal is embroiled in two lawsuits by former clients who contend that the firm breached its duty to provide them with its undivided loyalty, as state rules on ethics require. The cases – one by the owners of a luxury shop, now defunct, in the Mall at Short Hills, N.J., and one by the pop singer Michael Bolton – stem from very different circumstances. But each case is a cautionary tale for big law firms, experts say.
The fashion boutique’s allegations against Weil are particularly troubling:
[The owners of] Fashion Boutique of Short Hills [are pursuing] their contention that the law firm represented them in a suit against the fashion house Fendi even as it also agreed to represent Prada in another case. A few months earlier, Prada had teamed up with LVMH Mˆet Hennessy Louis Vuitton to buy a 51 percent stake in Fendi.
Weil Gotshal did not tell the owners, Annette C. Fischer and her daughter, Randi Fischer, that it was also representing Fendi’s new owner until seven months after it started working with Prada; by then, a jury was already deliberating the Fischers’ contention that Fendi had used unfair business practices to run them out of business to protect its new flagship store on Fifth Avenue in Manhattan. In the case against Weil Gotshal, Fashion Boutique is seeking $15.5 million, an estimate of the value of lost business.
Despite these troubling allegations, Weil, Gotshal is not shying away from the fight — the firm has asserted a counterclaim against the firm’s former clients in the Fashion Boutique lawsuit for $2.7 million in unpaid attorneys’ fees.
And Mr. Bolton’s allegations against the firm stem from the firm’s attempt to represent the conflicting interests of co-defendants who have potential claims against each other if the claim against them is established:
Mr. Bolton . . . sued Weil Gotshal in New York Supreme Court in Manhattan last December, seeking $30 million. The firm had defended him, along with his publisher, Warner-Chappell Music Ltd. of Britain, and his record label, Sony Music Entertainment Inc., in a 1994 suit contending that Mr. Bolton had infringed someone else’s copyright with his 1991 hit “Love Is a Wonderful Thing.” When a jury found that the song was too much like a 1964 tune of the same name by the Isley Brothers, [Mr. Bolton and the other defendants] were ordered to pay more than $5 million in damages. Mr. Bolton, however, soon learned that he was personally responsible for the entire judgment because his contracts with both Warner-Chappell and Sony said that he would indemnify them in the event of a judgment of copyright infringement.
Expect both of these cases against Weil to be resolved or settled before trial. If Weil cannot resolve the cases through summary judgment, then the firm will not risk allowing a jury to tabulate the damages against the firm. Jurors tend to get out their calculators when assessing damages against a law firm defendant.
Stros clinch tie for Wild Card playoff spot
Roy O became the National League’s first 20-game winner, and JK and Bidg each cranked two yaks to lead the Stros to a 9-3 victory over the Rockies and move the club to within one win from completing a late-season playoff drive for the ages.
The Stros are now a game ahead of the Giants, who lost 7-3 to the Dodgers on Sunday. The Braves eliminated the Cubs from the playoff race on Saturday afternoon by handing the Cubbies their fifth straight loss.
With a win in the regular-season finale Sunday or a Giants loss to the Dodgers, the Stros will clinch the National League’s final playoff spot. This was unimaginable a little over a month ago when the Stros were struggling four games below .500 and seven games behind the Cubs. Since August 15th, the Stros are an incredible 35-10.
Roger Clemens was set to take the mound against the Rockies on Sunday afternoon after only three days’ rest, but he came down with the stomach flu on Saturday night, so Brandon Backe gets the nod in the potential clinch game. Inasmuch as the Dodgers clinched the National League West Division title with their dramatic win on Saturday over the Giants, they have little to play for in the last game and thus, the Giants are likely to win the Sunday game between those two clubs. So, the Stros really need to pull out all the stops to win on Sunday, because it is not clear whether Clemens will be well enough to pitch in the Monday afternoon playoff game in San Francisco if the Stros lose and the Giants win their Sunday games.
Morgan Ensberg and Eric Bruntlett also hit solo taters as the Stros set a season high with six homers and extended their record home winning streak to 17 games.
Oswalt (20-10) won 20 games for the first time in his career, while allowing only one run and five hits in seven innings. His 20 win season is the eighth 20-win season in club history. Larry Dierker, Mike Hampton, Jose Lima, J.R. Richard, Mike Scott and Joe Niekro (who did it twice) are the other Stros 20 game winners.
Over 110,000 people will be attending the Stros game and the Texans game tomorrow afternoon in Houston. It might just be quite a party!
ConocoPhillips’ ambitious Russia play
Houston-based ConocoPhillips announced earlier this week a $2.36 billion “strategic alliance” with Moscow-based OAO Lukoil under which Conoco will buy a 7.6% stake in the Russian oil company and get a share in joint projects. The deal provides Conoco access to Russia’s enormous but largely undeveloped oil and natural-gas reserves and opens a possible avenue for it to become the first Western petroleum producer to return to Iraq.
For energy producers looking to increase reserves, Russia represents one of the few places in the world where large reserves are available to private investors.The agreement will contribute to Conoco’s proved reserves and production, which are closely watched market measures of an oil and gas company’s prospects.
The move catapults Conoco ahead of most of the other major oil companies, which have have been largely unsuccessful in seeking a Russian partner. The deal also reflects the strong interest in Russia from foreign investors despite increasing concern over a recent Kremlin clampdown on political life and control over the energy industry. To ensure Conoco’s minority stake is protected, Lukoil agreed to give the company one seat on the 11-member board and change its corporate charter to require unanimous board approval of top corporate decisions.
Conoco plans to raise its stake to 10% by year end and to 20% within two to three years, which would cost about $3 billion at current prices. As Conoco’s stake rises, it would gain another board seat. This corporate governance arrangement addresses a problem that has tubed earlier Western investments in Russian oil and gas companies. For example, BP PLC sold its 7% ownership in Lukoil in 2001 because the stake was too small to have an effective voice in company decisions.
Although Lukoil was overshadowed in recent years by faster-growing Russian competitors such as Yukos, Lukoil is run by Russian oil and gas veterans, and its management maintains extraordinarily close ties with the Kremlin. That political stroke has come in handy lately since Yukos and its founder Mikhail Khodorkovsky ran into trouble with the Kremlin and Russian President Vladimir Putin last year, as related in these earlier posts. Those troubles scuttled Yukos’ negotiations with Exxon Mobil Corp. over a large investment in the Russian company.
The deal also gives Conoco an interest in Iraq’s vast oil fields. A part of the deal gives Conoco a 17.5% interest in a 1997 contract granted to a Lukoil-led group to develop Iraq’s West Qurna oil field, which is a major prospect with estimated reserves of 15 billion barrels. Although the contract was canceled just before the U.S.-led invasion in March 2003, all such Saddam Hussein-era contracts are currently being reviewed by Iraqi oil and gas officials.
Meanwhile, the stampede to gain a foothold in the Russian oil and gas market continued on other fronts this week as Royal Dutch/Shell Group executives met with Russian oil and gas officials in The Hague. Shell has recently expressed interest in a joint venture with OAO Gazprom, the big Russian natural-gas company. Those discussions have become more serious since Gazprom’s announced merger with Russian oil company OAO Rosneft, which will transform the company into a huge state-controlled oil and gas company.
Stephen Kotkin, a Princeton history professor who specializes in the business politics of Russia, analogizes doing business in Russia right now to a rugby scrum with market reformers, hard-line security advisers and members of Mr. Putin’s inner circle all wrestling for the upper hand in policy making. If market reforms are allowed to gain traction, then the rule of law will become established and likely supersede Russia’s notorious security apparatus. However, I remain skeptical that such reforms will take place so long as Mr. Putin remains in power.
Stros get closer; Giants keep pace
Jeff Bagwell hit a massive two-run Crawford Street yak and the Stros overcame some jittery fielding with solid relief pitching as they remained on top of the NL Wild Card standings with a 4-2 victory over the Rockies on Friday night at a rocking Juice Box. The Stros have now won a team record 16 straight games in the increasingly friendly confines of the Juice Box, have won seven of their last eight games, 11 out of their last 14, and are an incredible 34-10 since August 15.
The Stros entered the game tied for the Wild Card lead with the Giants, and they remained tied as the Giants won their game against the Dodgers late Friday night. However, with their wins, the Stros and Giants moved two games ahead of the fading Cubs, who have lost four straight, six of their last seven, and have been reduced to bitching at their television color man. I maintain that they should be blaming Michael Barrett.
During this final weekend of the season, the Stros are trying to avoid a repeat of last season when they needed to win three of their final four games against last-place Brew Crew to force a division tiebreaker with the Cubs. The Stros went 2-2 against the Brewers, which allowed the Cubs to win the NL Central title.
Mike Gallo (2-0) earned the win on Friday night against the Rockies by getting the last out of the third inning, and Brad Lidge nailed down the last three outs for his 28th save. They were two of seven Stros pitchers to scatter 12 Rockies’ hits. The Rockies’ starter Joe Kennedy (9-7) actually pitched very well, allowing four runs on eight hits in eight innings.
In addition to Bags’ heroics, Jason Lane again contributed mightily to the Stros’ win. Pinch hitting in the seventh, Lane first knocked in pinch running Adam Everett with an insurance run. Then, the following inning, Lane played the rebound of a line drive adroitly off of the Crawford Box wall and then made a perfect throw to nail Brad Hawpe trying to stretch a single into a double.
Finally, with the capacity Juice Box crowd tonight, the Stros have now drawn 3,001,511 fans through 80 games this season, which is the second time that the club has drawn over 3 million in attendance. The other time was in 2000, the Stros first season at Enron Field, er, I mean, Minute Maid Park a/ka/ the Juice Box.
The hottest ticket in Major League Baseball will be tomorrow night at the Juice Box as Roy O goes for his 20th win while attempting to put the Stros in even a better position in the Wild Card race. Still no decision on the Sunday starter, but rest assured that the Rocket is getting ready to return on three days rest.