28 February 2009
You'll remember that Skilling is the former chief executive of Enron who in May 2006 was convicted on 19 counts of securities fraud and related matters and sentenced to 292 months imprisonment (twenty four years and four months). He had appealed both the convictions and the severity of the sentence.
A panel of the appellate court upheld the convictions, but agreed with Skilling that there were improprieties in the sentencing. He'll get a new hearing in the trial court on that.
The decision makes for a fascinating read, and although I've read a good deal about Enron over the last eight years, there are certain points that I've never seen laid out as well as they are here. Take the matter of Enron Broadband Services (EBS) for example. The former finance chief of EBS, Kevin Howard, has been tried twice, yet his fate still hangs in the balance. The first jury hung. The second jury brought in a conviction, which was overturned on appeal. A third trial for Howard is expected some time this year.
Yet the appellate panel in Skilling's case ably summarized the EBS aspect of the case as it relates to JS.
Enron Broadband Services was, as the appellate court says, "Enron's attempt to enter the telecommunications industry." In 2000, EBS met its earning targets but only by means that the government considers suspect in two respects: (1) the core business activities failed to meet the target, non-core activities made up the difference, and Enron failed to make this clear to stockholders, (2) some of the non-core earnings came from the sale of a portion of Enron's fiber optics network to LJM2, one of the Fastow creations, a pseudo-third-party, and (3) improper hedging of EBS' investment in Avici, an internet company, through an SPE that was itself "arguably an instrumnent of fraud."
One of Skilling's arguments against his conviction involved the notion of "materiality." The judge properly instructed the jury that false statements or omissions (about EBS' earnings for example) can support a fraud conviction only if they are "material." The judge instructed the jury on what "materiality" means, but Skilling contended that instruction was inadequate.
Skilling's lawyers at trial submitted their own instruction to the judge on this issue, and he rejected their wording. The defense proposal was that the jury be given a "puffery" instruction, i.e. that some statements are "so lacking in specificity, or so clearly [constitute] the opinions of the speaker, that no reasonable investor could find the statement important to the total mix of information he or she would consider when making an investment decision," and that these statements are immaterial as a matter of law.
It does not appear that the statements on which the prosecution relies fit that description at all. On this, I have to say that the court was right to uphold the instruction actually given, and thereby the conviction.
The litigation will rage on. Skilling gets to fight to have his sentence reduced (I'm too lazy right now to write about that aspect of the decision, but you can find the whole thing here) at the trial court level, and he is appealing the panel's decision to the appeals court en banc.
27 February 2009
Best Actor: Sean Penn, Milk
Best Actress: Kate Winslet, The Reader
Best Supporting Actor: Heath Ledger, The Dark Knight
Best Supporting Actress: Penelope Cruz, Vicky Christina Barcelona.
Five different films honored in the five focal awards. I was just about to write, "that does not usually happen.'
But then I checked into it. (Checking one's presumptions before declaring them as fact. What a concept.)
Actually, this five-way even split among the top awards doesn't seem all that unusual. Last year's winner for Best Picture won only one of the other major awards. The Best Pic was "No Country for Old Men," and Javier Bardem won for supporting actor there.
But the other three biggies last year were split among three very different movies. The best lead actor last year came from "There will be blood." The best lead actress came from La Mome, a biopic on Edith Piaf. And the 2007 Best Supporting Actress ... Tilda Swinton, from "Michael Clayton."
If we go back another year, to the 2006 awards (in February 2007) we get another situation in which the five biggies involve five different movies.
So it isn't all that unusual, though some years some major cultural phenomenon does seem to sweep all before it. Like "Million Dollar Baby," when it won three of the top five of 2005.
Anyway, last Sunday, Slumdog came away as THE winner of the evening. In addition to Best Pic, it won for best song, best original score, best film editing, best sound mixing, best cinematography, and best adapted screenplay.
Everybody seems to be happy about this, and certainly noone could be unhappy with the young boy and girl from Mumbai. They looked thrilled and not-quite overwhelmed. And soooo cute.
Okay, I'm a sentimental fool.
26 February 2009
Watson-Watt demonstrated his ability to track the movements of an RAF bomber, in front of the member of a committee of the Air Ministry. He received a patent on the gizmo in April 2 of that year.
The prototype didn't have much of a range, but the possibility of such bat-like tracking had been established.
By fascinating coincidence, it was on the very same day, February 26, 1935, that Hitler signed a secret order establishing the Reich Luftwaffe, and putting Goering at its head. The order had to be secret because Germany was at this point still claiming to be in compliance with the Versailles treaty, which was blatantly violated by the creation of an air force.
The British headstart on the development of radar would prove of great consequence in the defense of the UK -- and by proxy the defense of civilization -- against the assault of the Luftwaffe in the period 1940-41, so it is a nice novelistic touch that the run-up to that showdown includes these two simultaneous events.
22 February 2009
In German, there is one word "you" for both plural and formal use "Sie" and another word "you" for singular and more informal use: "tu."
In English in the 17th century, if I understand correctly, "thou" was like "tu," it was the informal and singular use. The custom, though, was to call aristocrats "You" just as one would call a plural grouping "you."
Fox resisted this, as the above passgae indicates. He called all singulars by the terms "thou" or "thee," reserving "you" for the plural. So he didn't distinguish between aristocrats and peasants in terms of the form of address.
All are God' children, all are worthy of the same form of address.
21 February 2009
I suppose the Socratic virtue, knowledge of my own ignorance, is a product of advancing age.
I thought I had Madoff figured out because I was thinking of him as a ponzi scammer in the line of other recent ponzi scammers, such as the perpetrators of the Bayou funds fraud.
The Bayou funds started out as legitimate investment vehicles. They even started out with a legitimate auditor. But the trading didn't go well, and the managers succumbed to the temptation to pretend they were in fact making money in defiance of the facts. So they started cooking he books, fired their real-world auditor, hired a "new" auditor whom they invented, and the operation evolved by stages into a ponzi scam. But even at the end there was some actual investment going on.
I've covered that and similar episodes in my work as a reporter, and I mentally categorized the Madoff news when it broke in December under the same heading. Bad trader, unwilling to face reality, turned to book-cooker.
That isn't what happened. Or, to be strict about it, if that transition DID take place at some point n Madoff's career, it took place a looong time ago.
Bankruptcy trustee Irving Picard hosted a meeting of the creditors yesterday and gave them the bad, stunning, news. Not only was Madoff making it all up, he had been making it all up since 1994 or thereabouts. He was not only a fraud on a really large scale, which we knew already, he was a fraud through-and-through.
20 February 2009
AthroCare's pride and joy is its Coblation technology, which (I quote from its website here), "uses low-temperature radio frequency energy to gently and precisely dissolve rather than burn soft tissue."
Boyd conveyed, rather sympathetically, the complaints of the company bigwigs that they were under an unjustified short-seller's siege. The company "has done admirably" he said, "in nearly every area traditionally used to judge a company's performance."
So why, he wondered aloud, was its stock price going down? Perhaps because short sellers (who "by definition" he reminded his readers "have an interest in a stock's going down" -- do Fortune readers need to be told this?) were spreading misconceptions about its relationship with a particular billings services provider.
The billings company, DiscoCare, was in time acquired by AthroCare. That change in the design of the corporate flow-chart didn't bring an end to the questions. Boyd said artfully that the purchase "made the short sellers go nuts."
If the shorts are wrong about this, Boyd cautioned, then ArthroCare had as of a year ago "lost $700 million in capitalization for no good reason," and there is a "human cost" measured for example in the aggravation felt by the CEO's ill father, who surfs the internet and reads the "innuendos."
This seems to be one of a growing list of cases (Enron itself was one, so was the now-forgotten AremisSoft click here) in which a company starts off criticizing the short sellers for spreading vicious rumors and ends up admitting that, yes, there was some truth to them.
Michael Baker, the CEO who complained to Boyd about the harm the "innuendo" was doing to his sick father, has now vacated that office. The company said Wednesday that it is under formal investigation by the SEC and is the subject of investigations as well by two US Attorney's offices.
The release telling us this also says: "The Company has sent a notice of claim pursuant to the Escrow Agreement established in connection with the Company's acquisition of DiscoCare to the sole selling stockholder of DiscoCare alleging breaches of certain representations and warranties in the stock purchase agreement. The notice of claim is intended to have the effect of preventing the release of $1.5 million in escrow and can lead to further proceedings against the sole selling stockholder. The Company expects the notice of claim to be disputed in arbitration proceedings."
So: "we bought a pig in a poke when we bought DiscoCare" is now the official company position -- it is no longer a possibility stigmatized as "innuendo"!
I am reminded of comments by Jonathan R. Macey, in his recent book Corporate Governance, in which he compares short selling with corporate "whistle blowing" of the Sherron Watkins sort. "Short selling is likely to be a far more credible signal [of real trouble at a company] than whistle-blowing, because the talk involved in whistle-blowing is cheap, while the trading involved in short selling is costly to the short seller whose information about the underlying company is erroneous."
19 February 2009
The invention behind the company, the notion that you could sell cereal in the form of toasted flakes suitable a small bowl and softened by milk, had come to Kellogg years before, while he was helping his physician brother run a sanitorium.
One observant guest of the sanitorium in the 1890s was C.W. Post, who was fascinated by the new breakfast idea. C.W. founded Post Cereal in 1895.
It was CW' success that ticked off WK to the point that he left the sanitorium determined to create his own company.
I can't say on the basis of my quite superficial research how Bolin entered the picture. He is usually mentioned as the co-founder but apparently soon dropped out, and the company started calling itself Kellogg.
It seems like a worthy way to be remembered -- marketing inexpensive and nutritous food to the masses. So remember him I do today.
Have a glass of wine with your cornflakes this morning in honor of WK. [Actually, yuuuck. Forget that.]
15 February 2009
He is in the news of late because the British prime minister, Gordon Brown, recently compared himself to Titian. Brown was apparently just trying to say that one can keep learning throughout life, and one can end up doing one's best work late -- even perhaps as old as ninety. As a comparison, though, it sounds like Brown was a bit full-of-himself, and it isn't surprising that the head of the Tories, David Cameron, pounced.
Cameron may have hurt himself in the process. Here's a link to what a 1970s American radio personality would have called "the rest of the story".
As you'll see if you follow that link, the good name of wikipedia has become entangled in the brawl over Titian.
This weekend's issue of the Financial Times runs a huffy editorial on the subject of wikipedia. "Any attempt to turn mob opinion into the test for truth is pernicious. That a thought might be popularly believed does not make it true," and so forth.
Valid enough, but still huffy. As for Titian's age at his death, it doesn't seem that anyone is quite sure.
Deal with it.
14 February 2009
That is the meme under examination. As I noted yesterday, there's no reason to believe it, but all of a sudden over the last two weeks it was everywhere in the blogosphere and beyond.
On Tuesday, Feb. 10, Rush Limbaugh picked up on it. He played a bit of the YouTube clip of Kanjorsky's CSpan diatribe. Then he, Limbaugh, interrupted the clip, told he listeners there was more, and played some more of the clip.
What was the point of the interruption? Dramatic effect? Or was he working from the presumption that two 'witnesses' are better than one? Even if the two-ness is created by artificial splicing? Kanjorski a few seconds later 'confirming' what Kanjorski had said a few seconds earlier.
Anyway, I think with Limbaugh's involvement we get to the heart of why the Kanjorsky meme became so popular so quickly. It gave everyone what they wanted. If you believe that those nasty capitalists are always on the edge of destroying the world unless the wise central planners in Washington step in: this is the meme for you. That appears to be the basis of its attraction to PK himself.
Conservatives like Limbaugh, on the other hand, like it because it lends itself to conspiratorial spin -- some dark source behind the scenes created this alleged $5oo billion run on the money markets -- and that gives them the comforting sense that George W. Bush was really one of them at heart after all, and turned against them in the final months only because he was bamboozled by this manufactured emergency.
So it gives everyone what they want. How nice. How apt. How still untrue.
Credit goes to Felix Salmon for setting up an effective counter-meme. Look for a source! Since he has been addressing the subject on his blog (part of the website of Conde Nast's Portfolio), some of those who originally took the diatribe at face value have changed their tune.
Take Ben Smith, a blogger on Politico. On Tuesday, Smith simply posted the CSpan video, a transcript, and a believer's headline, "The near miss." [What we had "nearly missed," if you haven't heard, is "the end of our economic system and our political system as we know it," Kanjorski's words, bold-faced in Smith's posting.]
But then Salmon started urging people to look for Kanjorski's sources -- to look, that is, to the question of whether he has any or whether he has talked himself into his account of the late morning of September 18th. Salmon's countermeme has had its effect on Smith, who posted this very different entry two days later.
On February 11th, Alice Cherbonnier of the Baltimore Chronicle had this to contribute, "I apologize to those on our news list to whom I sent the Kanjorski C-Span link."
A lot of hairy stuff did happen in the middle of September 2008, which included the withdrawal of a good deal of money from mutual funds. But the scale of the "near-miss" Kanjorski has talked himself into would be something else again and, no matter how neat a story it makes, it is only that: a story.
As Cherbonnier aptly says, "Kanjorski in this case is just another sorry political bit player who's trying to deflect blame from himself and his cohorts on the impotent congressional financial oversight committees."
The story of Kanjorski and Salmon, of the meme and counter-meme, may make a fascinating case study for some future student of the "sociology of knowledge."
13 February 2009
That is certainly a scary sounding figure. $500 billion in an hour? Simple arithmetic: that would mean average withdrawals of $8.33 billion in each minute of that awful hour.
The Fed and the Treasury first froze funds in and then moved to create a backstop for money market accounts, and the Bush administration started preaching the unlucky gospel of a "Troubled Assets Relief Program," entering into its brief twilight alliance with Pelosi.
That's the story, and it has spread with amazing speed since Paul Kanjorsky broke it down for us all in an appearance on CSPAN on January 27.
The evidence for it comes down, in essence, to Kanjorsky's say-so. The nugget of truth here sees to be that on September 19, the Treasury announced that it would guarantee eligible money-market mutual funds. It didn't freeze them.
(Unless the freeze was a super-secret sort of thing, word of which was disseminated by black helicopters or something: there is certainly no public record of any such freeze, nor has Kanjorsky or Limbaugh or anyone else pointed to one.)
Heck the Treasury's guarantee didn't come into effect with the immediacy of the freeze Kanjorsky imagines. Two days later, the Treasury was still saying it was "continuing to develop the specific details surrounding the termporary guaranty program."
Likewise, there is no reason to believe that the non-freeze guarantee of that day was a response to the withdrawal of $550 billion in an hour from such funds or some such thing.
So why has the notion of a September 18th run-on-money-markets and a resulting Treasury "freeze" that saved the world found such a receptive audience? Why is it so successful as a meme?
I'll save further comments on the subject for tomorrow. In the meantime, I'd like to say that the inspiration for this post, and tomorrow's as well, comes from recent entries by Felix Salmon in his Portfolio blog. Good work, happy fish!
12 February 2009
This year, on this day, Abe does get some special attention, throwing George into the shade, because it's his 200th. Still, even on this occasion, Abe has to share props with Charles Darwin.
This blog has done its bit for Darwin already -- last week Link here. So I'll devote the remainder of this entry exclusively to Lincoln.
In the filing cabinet of my mind, as in that of most conemporary Americans, there are any number of Lincoln myths, along with a more-or-less clear understanding that they are myths. There's the notion, for example, that the immortal language of the Gettysburg Address was dashed off on the back of an envelope while he was riding on the train to give the speech.
Lincoln actually showed a "rough draft" of this speech to James Speed, his Attorney General, on November 17, two days before it was to be delivered. He admitted to Speed that he had been laboring over it and was having difficulty.
That train ride from DC to Gettysburg, by the way, was a long one. It would take two hours today. It took fifteen in 1863. The train arrived at Gettysburg at 5 PM pm the 18th, and Lincoln (who may for all we know have continued to labor on the speech over those 15 hours -- that would hardly be a matter of dashing it off!) stayed overnight at the home of David Wills, the principal organizer of the dedication ceremonies.
We know that Lincoln was still working on the speech that evening. He apparently went to another home, where his Secretary of State William Seward was staying, at 11 PM and read him the speech looking for reactions. We don't know what Seward said or what revisions may have resulted.
So this was a product of turmoil. The point is important, I think, because the myth that eloquence is casual, just a 'gift' some people have when they toss things off, has had a pernicious effect. It helps contribute to the general notion that achievements are the product of talent, that effort is secondary, and that if something doesn't come easily to you, there's no point working at it.
"I can't write an immortal speech in a few moments on the back of an envelope, so why should I worry about composition at all?"
I doubt many people would put it just that way, but I do think it should be understood that eloquence, like so much else is life, is the product of effort, though perhaps effort working in co-ordination with talent.
Rest in peace, Mr. Lincoln.
08 February 2009
07 February 2009
So: why is such a company named after an orchestral composer?
I presume the reason is simply that until quite recently Elgar's face graced the 20 pound note, the most common note in circulation in the UK. There are many such notes with his visage still in use, although they are being phased out in favor of a note with the face of Adam Smith.
Anyway, I've recently received a catalog of EE's new 2009 titles and I thought I'd list a few of the more intriguing ones here. I'll add a word of explanation where it seems necessary -- some of the titles explain themselves pretty well.
Alice de Jonge, Corporate Governance and China's H-Share Market. The H-Share Market consists of mainland Chinese companies listed on the exchange in Hong Kong, with prices denominated in HK dollars rather than in the yuan. The catalog says that the book is "a story of individual firms being pragmatic in mediating the different agendas of state agencies that own or control them."
Klaus Liebscher, Josef Christl, Peter Mooslechner, and Doris Ritzberger-Grunwald, eds., Currency and Competitiveness in Europe
Richard A. Iley & Mervyn K. Lewis, Untangling the US Deficit: Evaluating Causes, Cures and Global Imbalances
Donato Masciandaro, Elod Takats, Brigette Unger, Black Finance: The Economics of Money Laundering
Philip Arestis & Malcolm Sawyer, eds., A Handbook of Alternative Monetary Economics What is "alternative monetary economics"? The basic idea of the AME theorists is that mainstream economics treats money as essentially a unit of exchange, a more efficient substitute for barter. The aternative, though, is to treat money as in essence a unit of account, a way of incurring and keeping track of debts.
Jorge Martinez-Vazquez & Jose Felix Sanz-Sanz, Fiscal Reform in Spain: Accomplishments and Challenges. Franco has been dead for a long time now. What happens in the budgeting and taxing institutions of a nation making a peaceful transition away from fascism?
06 February 2009
UVM had invited him, and just as a stink was developing over this (his anti-Darwinism movie especially has made this an unpopular choice in many circles) Stein gracefully withdrew.
Richard Dawkins himself had written to the president of UVM to complain and that individual, Daniel Mark Fogel, wrote back in a letter that praises Dawkins' work and "scientific leadership," before letting Dawkins know, "We have recently learned that Mr. Stein will be unable to receive the honorary degree here or to serve as Commencement speaker."
[Here's my slightly early shout-out to Charles Darwin. Happy 200th birthday, CD!]
Intriguingly, Fogel thought it necessary to add that it wasn't the movie on biology that induced UVM to invite Stein in the first place. It was "our expectation that his remarks would address the global economic crisis and that he would speak from his widely acknowledged area of expertise on the economy."
That intrigues me because, first, if a college gives someone an honorary degree and invites him to give the commencement address, isn't it pretty much up to hom what he then talks about? What were they planning to do if he started to discuss how evolutionary theory is all a fraud and the practitioners a cabal? Call campus security and have him dragged away?
Second, though: why would they want him to talk about economics? He seems to be something of a numbskull on the subject, as I've documented on my other blog, Proxy Partisans from time to time.
I suppose if they wanted some enlightening inside stuff about the Nixon administration, or the backstage story of the making of Ferris Bueller, or suggestions on "how to produce a game show that is all about how smart you are," ... in any of those cases he could be their go-to-guy.
But his economics babble in recent months has been awful stuff about something he calls "trader Realism".
And while I have your ear ... why is the University of Vermont abbreviated UVM? Is it just a way of distinguishing itself from the University of Virginia by using a letter to stand for the second syllable of its state name? It's in Burlington, so why not UVB?
05 February 2009
There were a few, though, that were pretty lame. I think in this connection of "MacGruber," which was a warmed-over version of an old Saturday-Night-Live parody of the even older sitcom MacGyver. You might as well parody the Dick van Dyke show at this point!
I also wasn't especially impressed by an over-produced ad in which a bunch of bugs steal the coca-cola from a sleeping picnicker. "Gee, look what we can do with computer generated imagery!" Wow, Wally.
But there were lots of good ones. I'll list my favorite three in ascending order.
The Clydesdale in love. He rescues his gal, a trick pony in a circus, and they run off into the surrounding woods together. The idea is funny, its timing in the wake of the merger of Anheuser-Busch into a European beer company makes it funnier, and the sound track was Marvin Gaye singing "Ain't no Mountain High Enough," which is a classic.
But even better: The Career Builder "Its' Time" commercial. Ways to know that you hate your job enough to be looking for a better one. This is a classic use classic use of repetition and variation, that included neat non sequiturs like a punch in the face of a koala.
Best of all, my personal favorite ... the Conan O'Brien promo in which we (and apparently everyone in Times Square) witness a commercial that was only supposed to have been seen in Sweden. THAT was hysterical.
01 February 2009
This is from p. 91, for those keeping score.
"Pennsylvania's founding came in 1682, relatively late; thus, it had a briefer, more attenuated involvement with witchcraft [than several other colonies]. ....Still, in 1684 the 'proprietor' William Penn and his council conducted a full-blown prosecution of charges that had come from within the ranks of the colony's Swedish minority. Two women, Margaret Mattson and Greta Hendrickson, stood accused of bewitching cows and practicing other 'sorceries' over a span of at least 20 years. The jury returned an unusual sort of split verdict: 'guilty of the common fame of a witch, but not guilty in manner and form as she stands indicted.'"
Then we're on to another subject. Mattson and Hendrickson never re-appear. Still, the passage bugs me.
Did the split verdict mean "they probably are witches, but we can't punish them because they weren't caught in the act"?
Or does it mean "guilty of acquiring the reputation of being witches, but nothing more"?
if it meant the latter, why was that different from a simple "not guilty" verdict in the laws in force in the early Pennsylvania colony?
Knowledge is warranted belief -- it is the body of belief that we build up because, while living in this world, we've developed good reasons for believing it. What we know, then, is what works -- and it is, necessarily, what has worked for us, each of us individually, as a first approximation. For my other blog, on the struggles for control in the corporate suites, see www.proxypartisans.blogspot.com.