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Friday, August 23, 2002
Hiatus
The Man Without Qualities will be out of the country until early September. Postings will probably be scarce, at best, until then.
(1) comments
The Man Without Qualities will be out of the country until early September. Postings will probably be scarce, at best, until then.
An Enron Insider Pleads Guilty II
As noted in a prior post, some of the first reports concerning Mr. Kopper's plea agreement in the Enron case stated that it was unclear whether he would be obligated to cooperate with the prosecutors. Later reports have confirmed that such cooperation is part of his bargain, which is no surprise. What is surprising is that according to the New York Times :
The guilty plea that handed prosecutors their first conviction in the Enron case also raises questions about what executives hoped to accomplish with the complex partnerships at the center of the scandal. Many believe executives were trying to make the company look good by hiding debt and boosting its stock price. But former executive Michael Kopper's plea said that in at least three partnerships he and others tried to skim millions not for the good of the company, but for themselves.
Is the Times reporting that these three partnerships were not intended make Enron "look good by hiding debt and boosting its stock price?" Maybe not. The Times also quotes Duane Windsor, a business ethics professor at Rice University in Houston:
"Within the general corporate scamming to keep up the stock price, there were personal games of enrichment going on -- that's what his confession essentially amounts to."
But is that really consistent with what the Times says above? Professor Windsor is saying that the partnerships served two ends (Enron's and the individuals) - but the Times doesn't seem to be saying that.
What is interesting is that Mr. Kopper's guilty plea is quite clearly based on events entirely unknown to Enron's critics at the time of its bankruptcy filing. That has not stopped those critics from claiming that Mr. Kopper's plea agreement vindicates their original claims. In fact, the facts described in the Kopper plea agreement - even assuming those facts as asserted are completely correct, notwithstanding the coercive manner in which they were obtained - suggest a rogue Mr. Fastow assisted by Mr. Kopper scamming Enron without the knowledge of other officers. If true, that's certainly criminal behavior. But it is also certainly not what Enron's critics have been complaining about these many months.
If the Kopper agreement had not required Mr. Kopper to cooperate and provide meaningful evidence to reduce or eliminate his prison term - a rare kind of plea agreement - the agreement would been more interesting. In that case whatever testimony and information Mr. Kopper provides might not be so self serving and unreliable, qualities that are the inevitable consequences of the agreement's actual coercive format. Of course, without that format Mr. Kopper might not provide any evidence - so the prosecution had a difficult choice, and probably made the right call.
Nor is it obvious that what Mr. Kopper says in connection with his plea agreement is true at this point. Previously, using similar coercive tactics, the Enron task force obtained the confession of David Duncan to the crime of "obstruction of justice." The Andersen jury in the subsequent criminal action refused to agree that Mr. Duncan had committed that crime even with his own confession in evidence. Enron's critics had also pointed to the supposedly massive destruction of documents as a "slam dunk" and "obvious" act of obstruction. The Andersen criminal jury also refused to agree with that. If the same mind set were applied to these developments as Enron's critics routinely employ against that company and its operatives, one would have to be seriously investigating whether the Enron task force has already committed attempted subornation of perjury in its handling of Mr. Duncan. And since then, the heat on them has only gone up.
It is worth keeping in mind that Mr. Kopper cannot reduce his sentence unless he delivers something or someone of note to the prosecutors, and that by his own admission Mr. Kopper is an opportunistic liar. Of course, that doesn't prove that he is lying now - only that he is either lying now or lied previously about the same set of facts. One can be sure that if Mr. Fastow has to stand trial, which appears likely, his jury will be made to keep those facts seriously in mind.
Further, the concealments from Enron that Mr. Kopper alleges do not appear consistent with the conspiracy of senior officers, board members, accountants, investment bankers, and others long posited by Enron's critics. It is worth noting, for example, that the plea agreement entirely avoids matters in which Andersen was involved.
The Information charging Mr. Kopper is worth reading especially to understand that the crimes to which he has confessed concerning Chewco (for example) deal entirely with shenanigans pertaining to a "missing" 1.5% of Chewco's capitalization. That is, under accounting rules Chewco needed to receive 3% of its capital as independent equity contributions, where the scheme in which Mr. Kopper participated placed half of that amount (or 1.5% of Chewco's total capitalization) in an account pledged to one of the banks financing Chewco. The Information says this meant Chewco failed the accounting rules test required for it to be considered "independent" of Enron - which, in turn, meant that Enron was not entitled to remove the roughly $700 Million in debt from its books. But whatever else was or was not wrong with Enron or Chewco, it is just not the case that Enron's actual financial condition was materially affected by this scheme, which concerned less than $9 Million. A reasonable person probably would not think that whether or not it was criminal or fraudulent for Enron's books to omit the hundreds of millions of dollars of Chewco debt depends on whether Mr. Kopper's few million dollars was pledged to a bank. Put another way: most reasonable people would say that to the extent the question is posed in a criminal case, whether the Enron financial statements fairly reflected Enron financial condition in all material respects just does not and cannot depend on whether an immaterial few million dollars of Chewco's capitalization was pledged to some bank. Did Enron lose its credit rating or run huge losses because of this pledged account? Of course not. A big problem for the prosecution (and any private litigant) is that if the pledge of the "missing" 1.5% had not been there, the structure would have complied with those technical accounting rules. How can this immaterial pledge make the difference between criminal guilt or innocence - or even civil liability - with respect to representations of Enron's overall financial condition? Most reasonable people would say that a pledge of less than $9 million just can't make that kind of difference for a multi-billion dollar company - even if it technically violates an accounting rule.
The 3% capitalization rule is not found in any federal or state statute, nor is it a feature of any SEC or GAAP rule or regulation. It is a practical rule for aiding working accountants, originally worked out in off-shore leasing transactions. Justice Department focus on compliance with this 3% "independent equity" requirement is preposterous, and amounts to a post-hoc attempt to criminalize non-compliance with what is basically a rule of thumb. It is nothing short of bizarre that many of the same people who have argued that it is absurd that a mere 3% independent equity contribution could allow a special purpose corporation to be considered "independent" are now giving talismatic significance to compliance with this rule in a criminal (as opposed to a mere accounting rules) context. Such people are wrong twice. One wants to ask such people if they are now prepared to accept the legitimacy of all the off-shore vehicles which do comply with this 3% capitalization rule, now proffered as critical in determining who spends time in prison.
In sum: The amount of money Mr. Kopper says he obtained by defrauding Enron was large for an individual. But it was not material to a corporation the size of Enron. The status of less than nine million dollars may have caused a technical violation of accounting rules for special purpose entity "independence," but did not and could not materially affect Enron's substantive, real economic condition one way or the other. It's therefore probably not an oversight that Mr. Kopper does NOT plead guilty to securities or bank fraud in this Information. And, as an aside, where are the prosecutors left with respect to their larger case if it turns out that the intent behind Chewco was solely to defraud Enron - and not the public - as the Times seems to suggest?
The political aspects of these recent developments are also interesting. Many of Enron's most vigorous critics have also been critics of the Bush administration, including Senator Daschle. Many such dual-critics have suggested that the lack of Enron prosecutions was evidence of Administration enthrallment to Enron and its circle. But as KausFiles points out, in order to claim that Mr. Kopper's plea is a major indication of Enron's broad culpability, those critics must now acknowledge that the Enron task force has been taking effective action all along. But only a little while ago the Administration's critics felt it was in their interest to highlight the lack of progress.
Indeed, just days ago Paul Krugman thought it worth his effort to argue that "Enron executives may have deluded and defrauded their shareholders without actually breaking the law". But the mere fact that such a vigorous critic of the Administration and Enron has so recently doubted in public that Enron broke the law at all does not deter some of the more naively overdetermined observers from claiming matters have been clear as a looking glass from the beginning, cleaving to an "execution now, trial later" mode of thought.
As noted in a prior post, some of the first reports concerning Mr. Kopper's plea agreement in the Enron case stated that it was unclear whether he would be obligated to cooperate with the prosecutors. Later reports have confirmed that such cooperation is part of his bargain, which is no surprise. What is surprising is that according to the New York Times :
The guilty plea that handed prosecutors their first conviction in the Enron case also raises questions about what executives hoped to accomplish with the complex partnerships at the center of the scandal. Many believe executives were trying to make the company look good by hiding debt and boosting its stock price. But former executive Michael Kopper's plea said that in at least three partnerships he and others tried to skim millions not for the good of the company, but for themselves.
Is the Times reporting that these three partnerships were not intended make Enron "look good by hiding debt and boosting its stock price?" Maybe not. The Times also quotes Duane Windsor, a business ethics professor at Rice University in Houston:
"Within the general corporate scamming to keep up the stock price, there were personal games of enrichment going on -- that's what his confession essentially amounts to."
But is that really consistent with what the Times says above? Professor Windsor is saying that the partnerships served two ends (Enron's and the individuals) - but the Times doesn't seem to be saying that.
What is interesting is that Mr. Kopper's guilty plea is quite clearly based on events entirely unknown to Enron's critics at the time of its bankruptcy filing. That has not stopped those critics from claiming that Mr. Kopper's plea agreement vindicates their original claims. In fact, the facts described in the Kopper plea agreement - even assuming those facts as asserted are completely correct, notwithstanding the coercive manner in which they were obtained - suggest a rogue Mr. Fastow assisted by Mr. Kopper scamming Enron without the knowledge of other officers. If true, that's certainly criminal behavior. But it is also certainly not what Enron's critics have been complaining about these many months.
If the Kopper agreement had not required Mr. Kopper to cooperate and provide meaningful evidence to reduce or eliminate his prison term - a rare kind of plea agreement - the agreement would been more interesting. In that case whatever testimony and information Mr. Kopper provides might not be so self serving and unreliable, qualities that are the inevitable consequences of the agreement's actual coercive format. Of course, without that format Mr. Kopper might not provide any evidence - so the prosecution had a difficult choice, and probably made the right call.
Nor is it obvious that what Mr. Kopper says in connection with his plea agreement is true at this point. Previously, using similar coercive tactics, the Enron task force obtained the confession of David Duncan to the crime of "obstruction of justice." The Andersen jury in the subsequent criminal action refused to agree that Mr. Duncan had committed that crime even with his own confession in evidence. Enron's critics had also pointed to the supposedly massive destruction of documents as a "slam dunk" and "obvious" act of obstruction. The Andersen criminal jury also refused to agree with that. If the same mind set were applied to these developments as Enron's critics routinely employ against that company and its operatives, one would have to be seriously investigating whether the Enron task force has already committed attempted subornation of perjury in its handling of Mr. Duncan. And since then, the heat on them has only gone up.
It is worth keeping in mind that Mr. Kopper cannot reduce his sentence unless he delivers something or someone of note to the prosecutors, and that by his own admission Mr. Kopper is an opportunistic liar. Of course, that doesn't prove that he is lying now - only that he is either lying now or lied previously about the same set of facts. One can be sure that if Mr. Fastow has to stand trial, which appears likely, his jury will be made to keep those facts seriously in mind.
Further, the concealments from Enron that Mr. Kopper alleges do not appear consistent with the conspiracy of senior officers, board members, accountants, investment bankers, and others long posited by Enron's critics. It is worth noting, for example, that the plea agreement entirely avoids matters in which Andersen was involved.
The Information charging Mr. Kopper is worth reading especially to understand that the crimes to which he has confessed concerning Chewco (for example) deal entirely with shenanigans pertaining to a "missing" 1.5% of Chewco's capitalization. That is, under accounting rules Chewco needed to receive 3% of its capital as independent equity contributions, where the scheme in which Mr. Kopper participated placed half of that amount (or 1.5% of Chewco's total capitalization) in an account pledged to one of the banks financing Chewco. The Information says this meant Chewco failed the accounting rules test required for it to be considered "independent" of Enron - which, in turn, meant that Enron was not entitled to remove the roughly $700 Million in debt from its books. But whatever else was or was not wrong with Enron or Chewco, it is just not the case that Enron's actual financial condition was materially affected by this scheme, which concerned less than $9 Million. A reasonable person probably would not think that whether or not it was criminal or fraudulent for Enron's books to omit the hundreds of millions of dollars of Chewco debt depends on whether Mr. Kopper's few million dollars was pledged to a bank. Put another way: most reasonable people would say that to the extent the question is posed in a criminal case, whether the Enron financial statements fairly reflected Enron financial condition in all material respects just does not and cannot depend on whether an immaterial few million dollars of Chewco's capitalization was pledged to some bank. Did Enron lose its credit rating or run huge losses because of this pledged account? Of course not. A big problem for the prosecution (and any private litigant) is that if the pledge of the "missing" 1.5% had not been there, the structure would have complied with those technical accounting rules. How can this immaterial pledge make the difference between criminal guilt or innocence - or even civil liability - with respect to representations of Enron's overall financial condition? Most reasonable people would say that a pledge of less than $9 million just can't make that kind of difference for a multi-billion dollar company - even if it technically violates an accounting rule.
The 3% capitalization rule is not found in any federal or state statute, nor is it a feature of any SEC or GAAP rule or regulation. It is a practical rule for aiding working accountants, originally worked out in off-shore leasing transactions. Justice Department focus on compliance with this 3% "independent equity" requirement is preposterous, and amounts to a post-hoc attempt to criminalize non-compliance with what is basically a rule of thumb. It is nothing short of bizarre that many of the same people who have argued that it is absurd that a mere 3% independent equity contribution could allow a special purpose corporation to be considered "independent" are now giving talismatic significance to compliance with this rule in a criminal (as opposed to a mere accounting rules) context. Such people are wrong twice. One wants to ask such people if they are now prepared to accept the legitimacy of all the off-shore vehicles which do comply with this 3% capitalization rule, now proffered as critical in determining who spends time in prison.
In sum: The amount of money Mr. Kopper says he obtained by defrauding Enron was large for an individual. But it was not material to a corporation the size of Enron. The status of less than nine million dollars may have caused a technical violation of accounting rules for special purpose entity "independence," but did not and could not materially affect Enron's substantive, real economic condition one way or the other. It's therefore probably not an oversight that Mr. Kopper does NOT plead guilty to securities or bank fraud in this Information. And, as an aside, where are the prosecutors left with respect to their larger case if it turns out that the intent behind Chewco was solely to defraud Enron - and not the public - as the Times seems to suggest?
The political aspects of these recent developments are also interesting. Many of Enron's most vigorous critics have also been critics of the Bush administration, including Senator Daschle. Many such dual-critics have suggested that the lack of Enron prosecutions was evidence of Administration enthrallment to Enron and its circle. But as KausFiles points out, in order to claim that Mr. Kopper's plea is a major indication of Enron's broad culpability, those critics must now acknowledge that the Enron task force has been taking effective action all along. But only a little while ago the Administration's critics felt it was in their interest to highlight the lack of progress.
Indeed, just days ago Paul Krugman thought it worth his effort to argue that "Enron executives may have deluded and defrauded their shareholders without actually breaking the law". But the mere fact that such a vigorous critic of the Administration and Enron has so recently doubted in public that Enron broke the law at all does not deter some of the more naively overdetermined observers from claiming matters have been clear as a looking glass from the beginning, cleaving to an "execution now, trial later" mode of thought.
(0) comments
Thursday, August 22, 2002
O, Martha III
The evidence of ImClone insider trading against Martha Stewart remains rather thin, in the view of the Man Without Qualities. But evidence of truly terrible judgment on her part is increasingly plentiful. Now there is a suit filed against her by a shareholder in her own company - Martha Stewart Living Omnimedia - alleging that she dumped shares of her own company right after selling her ImClone shares. The theory of the new suit is that Ms. Stewart knew that her ImClone stock sale - even if it was legal and not based on insider information - was so inherently suspicious that it was bound to attract attention and throttle the stock price of Martha Stewart Living Omnimedia. The public, of course, did not know the facts about her ImClone stock sale. Therefore, the new complaint alleges, Ms. Stewart's sale of Martha Stewart Living Omnimedia stock was itself based on insider information.
A separate class action complaint filed by Milberg, Weiss (a law firm strongly identified with the Democratic Party) alleges:
Stewart, along with the other defendants, sold a total of $79 million in MSLO common stock, with many defendants selling nearly all of their MSLO common stock. As alleged in the complaint, the public first learned of Stewart's complicity in the high-profile ImClone scandal on June 6, 2002, with the publication of a media report --setting-off a precipitous decline in MSLO's stock price. The impact of Stewart's involvement in the ImClone scandal on MSLO's business was, according to the complaint, not known to the public until July 24, 2002, when the Company announced that the circumstances were negatively impacting its revenues and earnings, causing MSLO to slash earnings estimates for the third quarter of 2002 by half and reducing guidance for the entire-year 2002. On July 24, the price of MSLO common stock dropped to below $7.50 per share -- a 60% drop in one month.
A one-year chart of the MSLO stock price helps to bring home just how odd Ms. Stewart's timing was.
It's hard to argue with the allegations in these complaints. If any evidence can be found that Ms. Stewart understood that her ImClone trades would tank her MSLO stock before she sold it, these new allegations could make Ms. Stewart's direct ImClone trouble look positively pastel.
The evidence of ImClone insider trading against Martha Stewart remains rather thin, in the view of the Man Without Qualities. But evidence of truly terrible judgment on her part is increasingly plentiful. Now there is a suit filed against her by a shareholder in her own company - Martha Stewart Living Omnimedia - alleging that she dumped shares of her own company right after selling her ImClone shares. The theory of the new suit is that Ms. Stewart knew that her ImClone stock sale - even if it was legal and not based on insider information - was so inherently suspicious that it was bound to attract attention and throttle the stock price of Martha Stewart Living Omnimedia. The public, of course, did not know the facts about her ImClone stock sale. Therefore, the new complaint alleges, Ms. Stewart's sale of Martha Stewart Living Omnimedia stock was itself based on insider information.
A separate class action complaint filed by Milberg, Weiss (a law firm strongly identified with the Democratic Party) alleges:
Stewart, along with the other defendants, sold a total of $79 million in MSLO common stock, with many defendants selling nearly all of their MSLO common stock. As alleged in the complaint, the public first learned of Stewart's complicity in the high-profile ImClone scandal on June 6, 2002, with the publication of a media report --setting-off a precipitous decline in MSLO's stock price. The impact of Stewart's involvement in the ImClone scandal on MSLO's business was, according to the complaint, not known to the public until July 24, 2002, when the Company announced that the circumstances were negatively impacting its revenues and earnings, causing MSLO to slash earnings estimates for the third quarter of 2002 by half and reducing guidance for the entire-year 2002. On July 24, the price of MSLO common stock dropped to below $7.50 per share -- a 60% drop in one month.
A one-year chart of the MSLO stock price helps to bring home just how odd Ms. Stewart's timing was.
It's hard to argue with the allegations in these complaints. If any evidence can be found that Ms. Stewart understood that her ImClone trades would tank her MSLO stock before she sold it, these new allegations could make Ms. Stewart's direct ImClone trouble look positively pastel.
(0) comments
Wednesday, August 21, 2002
The Fall of the House of Eisner?
Michael Eisner's position at Disney bears an increasing resemblance to Edgar Allen Poe's House of Usher:
No portion of the masonry had fallen; and there appeared to be a wild inconsistency between its still perfect adaptation of parts, and the crumbling condition of the individual stones. In this there was much that reminded me of the specious totality of old woodwork which has rotted for years in some neglected vault, with no disturbance from the breath of the external air. Beyond this indication of extensive decay, however, the fabric gave little token of instability.
Similarly, the stories about Michael Eisner's Disney mostly seem to suggest the silent, serious, internal decay of the individual building blocks of the corporation, even as assurances are offered from various quarters that Mr. Eisner on the whole is "well entrenched," while Mr. Eisner is predicting a quick turnaround for Disney. Only a thin zigzag fissure seems to run through Mr. Eisner's position.
One of the odder things about Mr. Eisner is the apparent disparity between his once-undisputed acuity and what has for many years been an increasingly obvious detachment from the creative and management core of his position. It's difficult to point to where this apparent detachment first emerged. One of the key features of a company such as Disney is that so many of its projects require rather long lead times - parks, movies, television shows. Also, the company's assets (film library, licensing deals, and parks) tend to generate revenue in ways that normally change trends rather slowly (at least absent dramatic developments such as the event of September 11). So if something big did change irreparably at Disney in 1994, one would likely expect to see the trends in corporate performance not shift for at least a few years. So it is at least suggestive that under Eisner-led management Disney's stock way outperformed the market from 1985 to the mid-1990's, but after 1997 Disney stock has not performed over the market. Specifically, the stock's performance is consistent with what one would expect to find if something critical - and negative - happened in about 1994. It is also notable that the stock price is now actually about where it was in 1995. And, by many measures of actual performance (as contrasted with the stock price), Disney has not been much better than the market since 1995 - although such results did not go into an immediate decline.
Of course, Disney lost both Wells and Katzenberg in 1994 - events quite independent of Mr. Eisner. Wells was killed in a crash and Katzenberg left in a huff. Eisner was left running Disney more or less by himself.
But also in 1994, Mr. Eisner underwent emergency heart bypass surgery. His survival was uncertain. It was so uncertain that he put the name of his successor in a sealed envelope whose contents were only to be revealed should if he did not survive.
Why bring this up? Because the cause of Mr. Eisner's decline may be that he is -or has - what cardiologists call "a pump head."
A Duke University study appearing in the New England Journal of Medicine in February, 2001, found that a substantial proportion of patients after coronary artery bypass surgery experience measurable impairment in their mental capabilities. Surgeons privately know this effect as "pump head." In the study, patients were tested for their cognitive capacity (i.e. mental ability) before surgery, six weeks, six months, and five years after bypass surgery. Patients were deemed to have significant impairment if they had a 20% decrease in test scores.
This study had three major findings
1) Cognitive impairment occurs after bypass surgery.
2) 42% of patients became impaired.
3) The impairment was not temporary.
Also, the decline in mental capacity in those who had bypass surgery was 2 -3 times higher over five years than in patients who did not have surgery. "Pump head' is not the same thing as depression - although the symptoms are similar. Earlier studies had indicated that cardiac bypass surgery does not cause true depression.
Similarly, experts such as Guy McKhann, M.D., director of the Mind-Brain Institute, say that "Research has shown that anywhere from 25 to 80 percent of cardiac surgery patients experience postoperative declines in their mental abilities--problems with memory, verbal skills or physical coordination."
While Mr. Eisner does not exhibit effects as serious as those noted by Dr. McKhann, it seems reasonable to ask whether Mr. Eisner's increasingly obvious detachment may be attributable to the effects of, and associated with, his surgery - and therefore not easily amenable to correction by application of financial incentives or otherwise. And such a physiological explanation would help explain the increasing common reports from people who know Mr. Eisner that he seems at bottom uninterested in really engaging with Disney's mounting difficulties - preferring pseudo-solutions of an essentially cosmetic nature.
Things seem to be coming to a head at Disney with a distinct accelerando. The quiet but formidable Roy Disney and his business partner, the also formidable if somewhat less quiet Mr. Gold, seem feisty and willing to fight. Mr. Eisner has made himself the company's second or third largest individual shareholder, and struck out against Mr. Gold by a rather nasty filing with the Securities and Exchange Commissison. The New York Times says Mr. Eisner has at least until November to show he has begun to address the problems - but Mr. Eisner will surely try to serve up Mr. Iger as the sacrificial victim for the likely disastrous fall ABC season.
Similarly, while the opening of Poe's story is on the slow, monumental, brooding side, its ending is more rather dynamic:
The radiance was that of the full, setting, and blood-red moon, which now shone vividly through that once barely discernible fissure, of which I have before spoken as extending from the roof of the building, in a zigzag direction, to the base. While I gazed, this fissure rapidly widened—there came a fierce breath of the whirlwind—the entire orb of the satellite burst at once upon my sight—my brain reeled as I saw the mighty walls rushing asunder—there was a long tumultuous shouting sound like the voice of a thousand waters—and the deep and dank tarn at my feet closed sullenly and silently over the fragments of the “House of Usher.”
Michael Eisner's position at Disney bears an increasing resemblance to Edgar Allen Poe's House of Usher:
No portion of the masonry had fallen; and there appeared to be a wild inconsistency between its still perfect adaptation of parts, and the crumbling condition of the individual stones. In this there was much that reminded me of the specious totality of old woodwork which has rotted for years in some neglected vault, with no disturbance from the breath of the external air. Beyond this indication of extensive decay, however, the fabric gave little token of instability.
Similarly, the stories about Michael Eisner's Disney mostly seem to suggest the silent, serious, internal decay of the individual building blocks of the corporation, even as assurances are offered from various quarters that Mr. Eisner on the whole is "well entrenched," while Mr. Eisner is predicting a quick turnaround for Disney. Only a thin zigzag fissure seems to run through Mr. Eisner's position.
One of the odder things about Mr. Eisner is the apparent disparity between his once-undisputed acuity and what has for many years been an increasingly obvious detachment from the creative and management core of his position. It's difficult to point to where this apparent detachment first emerged. One of the key features of a company such as Disney is that so many of its projects require rather long lead times - parks, movies, television shows. Also, the company's assets (film library, licensing deals, and parks) tend to generate revenue in ways that normally change trends rather slowly (at least absent dramatic developments such as the event of September 11). So if something big did change irreparably at Disney in 1994, one would likely expect to see the trends in corporate performance not shift for at least a few years. So it is at least suggestive that under Eisner-led management Disney's stock way outperformed the market from 1985 to the mid-1990's, but after 1997 Disney stock has not performed over the market. Specifically, the stock's performance is consistent with what one would expect to find if something critical - and negative - happened in about 1994. It is also notable that the stock price is now actually about where it was in 1995. And, by many measures of actual performance (as contrasted with the stock price), Disney has not been much better than the market since 1995 - although such results did not go into an immediate decline.
Of course, Disney lost both Wells and Katzenberg in 1994 - events quite independent of Mr. Eisner. Wells was killed in a crash and Katzenberg left in a huff. Eisner was left running Disney more or less by himself.
But also in 1994, Mr. Eisner underwent emergency heart bypass surgery. His survival was uncertain. It was so uncertain that he put the name of his successor in a sealed envelope whose contents were only to be revealed should if he did not survive.
Why bring this up? Because the cause of Mr. Eisner's decline may be that he is -or has - what cardiologists call "a pump head."
A Duke University study appearing in the New England Journal of Medicine in February, 2001, found that a substantial proportion of patients after coronary artery bypass surgery experience measurable impairment in their mental capabilities. Surgeons privately know this effect as "pump head." In the study, patients were tested for their cognitive capacity (i.e. mental ability) before surgery, six weeks, six months, and five years after bypass surgery. Patients were deemed to have significant impairment if they had a 20% decrease in test scores.
This study had three major findings
1) Cognitive impairment occurs after bypass surgery.
2) 42% of patients became impaired.
3) The impairment was not temporary.
Also, the decline in mental capacity in those who had bypass surgery was 2 -3 times higher over five years than in patients who did not have surgery. "Pump head' is not the same thing as depression - although the symptoms are similar. Earlier studies had indicated that cardiac bypass surgery does not cause true depression.
Similarly, experts such as Guy McKhann, M.D., director of the Mind-Brain Institute, say that "Research has shown that anywhere from 25 to 80 percent of cardiac surgery patients experience postoperative declines in their mental abilities--problems with memory, verbal skills or physical coordination."
While Mr. Eisner does not exhibit effects as serious as those noted by Dr. McKhann, it seems reasonable to ask whether Mr. Eisner's increasingly obvious detachment may be attributable to the effects of, and associated with, his surgery - and therefore not easily amenable to correction by application of financial incentives or otherwise. And such a physiological explanation would help explain the increasing common reports from people who know Mr. Eisner that he seems at bottom uninterested in really engaging with Disney's mounting difficulties - preferring pseudo-solutions of an essentially cosmetic nature.
Things seem to be coming to a head at Disney with a distinct accelerando. The quiet but formidable Roy Disney and his business partner, the also formidable if somewhat less quiet Mr. Gold, seem feisty and willing to fight. Mr. Eisner has made himself the company's second or third largest individual shareholder, and struck out against Mr. Gold by a rather nasty filing with the Securities and Exchange Commissison. The New York Times says Mr. Eisner has at least until November to show he has begun to address the problems - but Mr. Eisner will surely try to serve up Mr. Iger as the sacrificial victim for the likely disastrous fall ABC season.
Similarly, while the opening of Poe's story is on the slow, monumental, brooding side, its ending is more rather dynamic:
The radiance was that of the full, setting, and blood-red moon, which now shone vividly through that once barely discernible fissure, of which I have before spoken as extending from the roof of the building, in a zigzag direction, to the base. While I gazed, this fissure rapidly widened—there came a fierce breath of the whirlwind—the entire orb of the satellite burst at once upon my sight—my brain reeled as I saw the mighty walls rushing asunder—there was a long tumultuous shouting sound like the voice of a thousand waters—and the deep and dank tarn at my feet closed sullenly and silently over the fragments of the “House of Usher.”
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Tuesday, August 20, 2002
An Enron Insider Pleads Guilty
Former Enron Corp. executive Michael Kopper is reported ready to plead guilty to two charges of conspiring to commit wire fraud and money laundering and surrender $12 million in "criminally derived'' assets.
These would be the first criminal charges in the Enron investigation. Kopper is described as the "chief lieutenant" to former Enron Chief Financial Officer Andrew Fastow. But Enron Chairman Kenneth Lay told investigators he didn't even know Kopper.
Money laundering?
According to Associated Press, "As part of the plea agreement, Kopper has agreed to cooperate with investigators, a potential watershed event in the investigation since he has knowledge of Enron's innermost workings and financial dealings." But another Associated Report says it is not clear whether he has agreed to cooperate.
It isn't clear from the reports what the nature of Mr. Kopper's to-be-admitted wire fraud was, but a previous report by Enron's board of directors said that Mr. Kopper and his domestic partner, William Dodson, made $10 million on a $125,000 investment in one of the now-notorious Enron partnerships, Chewco, and that "Michael Kopper ... enriched himself substantially at Enron's expense."
So it seems likely that Mr. Kopper has a lot of detailed "knowledge of Enron's innermost workings and financial dealings". If the Justice Department can't obtain convictions now, it won't be for want of information and understanding. Some observors quoted in the various articles linked here now predict something of a rush of other Enron operatives to cut similar deals. Of course, the important thing here is whether these charges of crimes against Enron can be leverged though witness cooperation or otherwise into successful charges of crimes by Enron or its officers against the investing public. It is also interesting that Mr. Kopper is not pleading guilty to accounting, securities or bank fraud, which are the principle allegations against Enron and its operatives. But that may just be part of his deal with the prosecutors.
Mr. Kopper's and Chewco's role in the Enron disaster is described by the Wall Street Journal:
To meet the aim of keeping Chewco separate from Enron, it was essential that outside investors put up 3% of its equity, the minimum required under accounting rules. Mr. Kopper raised this money by getting a loan from Barclays PLC, the British bank, for two paper vehicles he helped create. Known as Big River LLC and Little River LLC, they would act as the independent investors in Chewco. But there was a catch: Barclays would only lend the money, $11.5 million in total, if an Enron affiliate turned around and deposited more than half that amount into two accounts at Barclays, helping ensure repayment. The Enron affiliate complied.
The upshot of this was that Enron backed the loan and that Little River and Big River never had enough of their own money truly at risk in Chewco to satisfy the 3% requirement. Yet for the next four years, Enron treated Chewco as if it did meet the 3% standard, allowing the company to tamp down its debt and bolster its earnings. Last year, when Enron decided to buy out Chewco, Mr. Kopper and his domestic partner, William Dodson, received $12.6 million from the company, a huge gain on the $125,000 they had originally provided to fund Little River and Big River. Mr. Dodson couldn't be reached for comment.
The payout was controversial within Enron. Former Treasurer Jeffrey McMahon told a special investigating committee of the company's board that he had suggested a $1 million payment to Messrs. Kopper and Dodson was fair, but he had been overruled by Mr. Fastow. Mr. McMahon said Mr. Fastow told him that "Skilling was OK with buying out Chewco at that price."
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Former Enron Corp. executive Michael Kopper is reported ready to plead guilty to two charges of conspiring to commit wire fraud and money laundering and surrender $12 million in "criminally derived'' assets.
These would be the first criminal charges in the Enron investigation. Kopper is described as the "chief lieutenant" to former Enron Chief Financial Officer Andrew Fastow. But Enron Chairman Kenneth Lay told investigators he didn't even know Kopper.
Money laundering?
According to Associated Press, "As part of the plea agreement, Kopper has agreed to cooperate with investigators, a potential watershed event in the investigation since he has knowledge of Enron's innermost workings and financial dealings." But another Associated Report says it is not clear whether he has agreed to cooperate.
It isn't clear from the reports what the nature of Mr. Kopper's to-be-admitted wire fraud was, but a previous report by Enron's board of directors said that Mr. Kopper and his domestic partner, William Dodson, made $10 million on a $125,000 investment in one of the now-notorious Enron partnerships, Chewco, and that "Michael Kopper ... enriched himself substantially at Enron's expense."
So it seems likely that Mr. Kopper has a lot of detailed "knowledge of Enron's innermost workings and financial dealings". If the Justice Department can't obtain convictions now, it won't be for want of information and understanding. Some observors quoted in the various articles linked here now predict something of a rush of other Enron operatives to cut similar deals. Of course, the important thing here is whether these charges of crimes against Enron can be leverged though witness cooperation or otherwise into successful charges of crimes by Enron or its officers against the investing public. It is also interesting that Mr. Kopper is not pleading guilty to accounting, securities or bank fraud, which are the principle allegations against Enron and its operatives. But that may just be part of his deal with the prosecutors.
Mr. Kopper's and Chewco's role in the Enron disaster is described by the Wall Street Journal:
To meet the aim of keeping Chewco separate from Enron, it was essential that outside investors put up 3% of its equity, the minimum required under accounting rules. Mr. Kopper raised this money by getting a loan from Barclays PLC, the British bank, for two paper vehicles he helped create. Known as Big River LLC and Little River LLC, they would act as the independent investors in Chewco. But there was a catch: Barclays would only lend the money, $11.5 million in total, if an Enron affiliate turned around and deposited more than half that amount into two accounts at Barclays, helping ensure repayment. The Enron affiliate complied.
The upshot of this was that Enron backed the loan and that Little River and Big River never had enough of their own money truly at risk in Chewco to satisfy the 3% requirement. Yet for the next four years, Enron treated Chewco as if it did meet the 3% standard, allowing the company to tamp down its debt and bolster its earnings. Last year, when Enron decided to buy out Chewco, Mr. Kopper and his domestic partner, William Dodson, received $12.6 million from the company, a huge gain on the $125,000 they had originally provided to fund Little River and Big River. Mr. Dodson couldn't be reached for comment.
The payout was controversial within Enron. Former Treasurer Jeffrey McMahon told a special investigating committee of the company's board that he had suggested a $1 million payment to Messrs. Kopper and Dodson was fair, but he had been overruled by Mr. Fastow. Mr. McMahon said Mr. Fastow told him that "Skilling was OK with buying out Chewco at that price."
O, Martha II
UPDATE: Martha has apparently been more generous and loyal that previous reports indicate. The Washington Times says:
So far in the 2002 campaign cycle, Mrs. Stewart has donated $173,665 to Democrats personally or through her company, putting her among the top 100 contributors to either party, according to the Center for Responsive Politics, which describes her as "solidly Democratic." ,,, [The former Chairman of now-bankrupt ImClone], Waksal also is a donor to Democratic candidates, according to the Center for Responsive Politics.
_______________________________________________________________
"The fact is, Martha Stewart has been very generous to us Democrats," one top congressional source said on Tuesday. "She's been a generous supporter of Hillary Clinton, John Kerry, Torricelli, Bayh, Schumer and others... We must treat her fairly, pursue the facts, not single her out or punish her because she has been a leading fundraiser for one party of the other."
Who knew? Is this tact good for Martha? Is embracing this tact good for the Democrats? Hard to see how that could be in either case, especially if she is found to be an inside trader? Lucky for all of them, the evidence there is still pretty slim and circumstantial - although the New York Times doesn't seem to agree.
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UPDATE: Martha has apparently been more generous and loyal that previous reports indicate. The Washington Times says:
So far in the 2002 campaign cycle, Mrs. Stewart has donated $173,665 to Democrats personally or through her company, putting her among the top 100 contributors to either party, according to the Center for Responsive Politics, which describes her as "solidly Democratic." ,,, [The former Chairman of now-bankrupt ImClone], Waksal also is a donor to Democratic candidates, according to the Center for Responsive Politics.
_______________________________________________________________
"The fact is, Martha Stewart has been very generous to us Democrats," one top congressional source said on Tuesday. "She's been a generous supporter of Hillary Clinton, John Kerry, Torricelli, Bayh, Schumer and others... We must treat her fairly, pursue the facts, not single her out or punish her because she has been a leading fundraiser for one party of the other."
Who knew? Is this tact good for Martha? Is embracing this tact good for the Democrats? Hard to see how that could be in either case, especially if she is found to be an inside trader? Lucky for all of them, the evidence there is still pretty slim and circumstantial - although the New York Times doesn't seem to agree.
Black Arts
Reading public opinion polls is among the darkest of the modern black arts of politics. But it can be fun if it is not taken too seriously. Some recent poll results are out, and there are some interesting suggestions in them.
For example, the FOX News/Opinion Dynamics Poll for Aug. 6-7, 2002 asked all registered voters (not likely voters) "Thinking ahead to the 2004 presidential elections, if the elections were held today, for whom do you think you would vote if the candidates were?" In a Bush/Gore rematch, the August, 2002 results were Bush 50% to Gore 37%, where the corresponding December 2001 results were Bush 61% to Gore 23%, and the corresponding June 2001 results were Bush 50% to Gore 38%. That might be read a bad news for Bush, since these results suggest that the boost he received in the aftermath of September 11 has worn off.
But if there is one lesson we should have learned from the fall of the current President's father and the irrelevance of his post-Gulf war poll numbers, it is that the current President is not going to be re-elected on the basis of a post-September 11 afterglow and that whatever boost that afterglow gave his poll numbers will come down.
So it seems to me that the more interesting feature of this poll is that January 2001 results were Bush 39% to Gore 36% - immediately following their bitterly contested election. But by June 2001 (long before the September 11 disasters) Bush had widened the gap to Bush 50% to Gore 38%, as noted above - and bush continues to enjoy what amount to favorable new-President "honeymoon" ratings, even long after the "honeymoon" period has ended and even in the face of the Democrat assault predicated on the July decline in the stock markets.
Also interesting is that Hillary Clinton has lost considerable ground in a hypothetical match-up with Bush, even as the media coverage has suggested that Hillary's star is on the ascent and she has played a high profile role in criticizing the President on behalf of the Democrats. In January 2001, Bush led Ms. Clinton by 45% to 34%, but by August 2002 he has widened his lead to 58% to 28%. What's going on there?
The polls also suggest that Al Gore's lock on the Democratic nomination may be becoming all but absolute. From mid-July 2002 to the beginning of August 2002, the percentage of Democrats saying they will vote for Gore in the primaries rose from 38% to 41% - with his nearest challenger being Tom Daschle at 9%! This rise in Gore's "inevitability" corresponds with vastly nastier and more vigorous criticism of him from within the Democratic Party (including Senator Lieberman) and those in its orbit, such as the New York Times. Many Democrats seem to see Mr. Gore looming in their futures as an inevitable disaster - and some, such as the Times and Senator Lieberman, are making a last-ditch effort to do something about it, including inducing once-faithful Gore donors to back off. But if Gore really has become inevitable, doesn't all this anti-Gore activity within Democrat ranks just create a greater risk of a damaged, bitter, underfunded, schismatic Democratic Party once Gore accomplishes the inevitable?
The Ipsos-Reid/Cook Political Report Poll for August 16-18, 2002 asked: "If the election were held today, would you definitely vote to reelect George W. Bush as president, consider voting for someone else, or definitely vote for someone else as president?"
............................................Definitely Bush..........Consider Someone Else............Vote For Someone Else............Not Sure
......................................................%..............................%............................................%...................................%
8/16-18/02.....................................41..............................27............................................29...................................3
8/2-4/02.........................................41.............................30.............................................27...................................2
....
6/21-23/02......................................49..............................26............................................22....................................3
This is a curious question. Why is everyone not in the second column? Personally, the Man Without Qualities would definitely consider voting for someone other than George Bush. Why not? So my vote would go in the second column. But it would unwise for the Democrats to seek much comfort in that.
What is also striking to the Man Without Qualities is that the number of people who say they will definitely vote for Bush over anyone else plus the number of people who say they will only "consider" voting for someone else (which one would hope is the norm in any democratic republic) is still fully sixty-eight percent of all registered voters - down from seventy-five percent in June 2001. It is my understanding of polls that when one shifts to "likely voters" from "all registered voters," the Republican showing tends to improve. How could they? These numbers already seem akin to the voting results in the old Soviet Union.
Similarly, the Zogby America Poll for July 19-21, 2002 asked: "Do you think President Bush deserves to be reelected or do you think it is time for someone new?"
...................................................Deserves Reelection..............Someone New......................Not Sure
................................................................%..................................%......................................%
7/02..........................................................47..................................32.....................................21
6/02..........................................................51..................................28.....................................20
This question is even more peculiar than the Ipsos-Reid/Cook question because by omitting the phrase "If the election were held today..." the question seems to invite the respondent to evaluate whether, solely on the basis of what has occurred to date, the President "deserves re-election" almost regardless of what happens in the next two years. Or, conversely, to decide whether, solely on the basis of what has occurred to date, someone new "deserves election," also almost regardless of what happens in the next two years. Why is everyone not in the third column? And what is the respondent to make of the phrase "it is time" where the "time" won't occur for more than two years?
In any event, it is striking that about half of all registered voters think the President already "deserves re-election." If half of the "not sure" 21% broke each way, Bush would receive over 57% of the vote - a near landslide, and about ten percentage points more than he received in the 2000 election.
And then there are those curious "approval" ratings - which are sampled not just from voters, but from "Americans 18 & older." The Investor's Business Daily/Christian Science Monitor poll says Bush's "job approval" rating dropped to 61% (with 27% disapproving) for the period August 5 through 9 from 65% (with 22% disapproving) for the period July 8 though 11.
The CNN/USA Today/Gallup Poll for August 5 through 8 says 68% approve (26% disapprove), down from the July 9 though 11 results of 73% approval (21% disapproving).
Bush's related (but not the same) "favorability" ratings for August 5 through 9 are 57% favorable (29% unfavorable) according to the Investor's Business Daily/Christian Science Monitor poll, but were an astronomical 72% favorable (22% unfavorable) according to the FOX News/Opinion Dynamics Poll for August 6 -7, up from 69% favorable (19% unfavorable) for June 4-5.
There are various ways to construe these results. But considering the continuing fade of the post September 11 afterglow, the almost terrifying behavior of the stock markets, the rising reports of corporate scandals in July, and the full-scale effort the President's political critics waged against him on the basis of such developments, Mr. Bush's numbers seem remarkably sturdy. More interestingly, their positive qualities seem increasingly independent of disproportionate influence from September 11.
Reading public opinion polls is among the darkest of the modern black arts of politics. But it can be fun if it is not taken too seriously. Some recent poll results are out, and there are some interesting suggestions in them.
For example, the FOX News/Opinion Dynamics Poll for Aug. 6-7, 2002 asked all registered voters (not likely voters) "Thinking ahead to the 2004 presidential elections, if the elections were held today, for whom do you think you would vote if the candidates were?" In a Bush/Gore rematch, the August, 2002 results were Bush 50% to Gore 37%, where the corresponding December 2001 results were Bush 61% to Gore 23%, and the corresponding June 2001 results were Bush 50% to Gore 38%. That might be read a bad news for Bush, since these results suggest that the boost he received in the aftermath of September 11 has worn off.
But if there is one lesson we should have learned from the fall of the current President's father and the irrelevance of his post-Gulf war poll numbers, it is that the current President is not going to be re-elected on the basis of a post-September 11 afterglow and that whatever boost that afterglow gave his poll numbers will come down.
So it seems to me that the more interesting feature of this poll is that January 2001 results were Bush 39% to Gore 36% - immediately following their bitterly contested election. But by June 2001 (long before the September 11 disasters) Bush had widened the gap to Bush 50% to Gore 38%, as noted above - and bush continues to enjoy what amount to favorable new-President "honeymoon" ratings, even long after the "honeymoon" period has ended and even in the face of the Democrat assault predicated on the July decline in the stock markets.
Also interesting is that Hillary Clinton has lost considerable ground in a hypothetical match-up with Bush, even as the media coverage has suggested that Hillary's star is on the ascent and she has played a high profile role in criticizing the President on behalf of the Democrats. In January 2001, Bush led Ms. Clinton by 45% to 34%, but by August 2002 he has widened his lead to 58% to 28%. What's going on there?
The polls also suggest that Al Gore's lock on the Democratic nomination may be becoming all but absolute. From mid-July 2002 to the beginning of August 2002, the percentage of Democrats saying they will vote for Gore in the primaries rose from 38% to 41% - with his nearest challenger being Tom Daschle at 9%! This rise in Gore's "inevitability" corresponds with vastly nastier and more vigorous criticism of him from within the Democratic Party (including Senator Lieberman) and those in its orbit, such as the New York Times. Many Democrats seem to see Mr. Gore looming in their futures as an inevitable disaster - and some, such as the Times and Senator Lieberman, are making a last-ditch effort to do something about it, including inducing once-faithful Gore donors to back off. But if Gore really has become inevitable, doesn't all this anti-Gore activity within Democrat ranks just create a greater risk of a damaged, bitter, underfunded, schismatic Democratic Party once Gore accomplishes the inevitable?
The Ipsos-Reid/Cook Political Report Poll for August 16-18, 2002 asked: "If the election were held today, would you definitely vote to reelect George W. Bush as president, consider voting for someone else, or definitely vote for someone else as president?"
............................................Definitely Bush..........Consider Someone Else............Vote For Someone Else............Not Sure
......................................................%..............................%............................................%...................................%
8/16-18/02.....................................41..............................27............................................29...................................3
8/2-4/02.........................................41.............................30.............................................27...................................2
....
6/21-23/02......................................49..............................26............................................22....................................3
This is a curious question. Why is everyone not in the second column? Personally, the Man Without Qualities would definitely consider voting for someone other than George Bush. Why not? So my vote would go in the second column. But it would unwise for the Democrats to seek much comfort in that.
What is also striking to the Man Without Qualities is that the number of people who say they will definitely vote for Bush over anyone else plus the number of people who say they will only "consider" voting for someone else (which one would hope is the norm in any democratic republic) is still fully sixty-eight percent of all registered voters - down from seventy-five percent in June 2001. It is my understanding of polls that when one shifts to "likely voters" from "all registered voters," the Republican showing tends to improve. How could they? These numbers already seem akin to the voting results in the old Soviet Union.
Similarly, the Zogby America Poll for July 19-21, 2002 asked: "Do you think President Bush deserves to be reelected or do you think it is time for someone new?"
...................................................Deserves Reelection..............Someone New......................Not Sure
................................................................%..................................%......................................%
7/02..........................................................47..................................32.....................................21
6/02..........................................................51..................................28.....................................20
This question is even more peculiar than the Ipsos-Reid/Cook question because by omitting the phrase "If the election were held today..." the question seems to invite the respondent to evaluate whether, solely on the basis of what has occurred to date, the President "deserves re-election" almost regardless of what happens in the next two years. Or, conversely, to decide whether, solely on the basis of what has occurred to date, someone new "deserves election," also almost regardless of what happens in the next two years. Why is everyone not in the third column? And what is the respondent to make of the phrase "it is time" where the "time" won't occur for more than two years?
In any event, it is striking that about half of all registered voters think the President already "deserves re-election." If half of the "not sure" 21% broke each way, Bush would receive over 57% of the vote - a near landslide, and about ten percentage points more than he received in the 2000 election.
And then there are those curious "approval" ratings - which are sampled not just from voters, but from "Americans 18 & older." The Investor's Business Daily/Christian Science Monitor poll says Bush's "job approval" rating dropped to 61% (with 27% disapproving) for the period August 5 through 9 from 65% (with 22% disapproving) for the period July 8 though 11.
The CNN/USA Today/Gallup Poll for August 5 through 8 says 68% approve (26% disapprove), down from the July 9 though 11 results of 73% approval (21% disapproving).
Bush's related (but not the same) "favorability" ratings for August 5 through 9 are 57% favorable (29% unfavorable) according to the Investor's Business Daily/Christian Science Monitor poll, but were an astronomical 72% favorable (22% unfavorable) according to the FOX News/Opinion Dynamics Poll for August 6 -7, up from 69% favorable (19% unfavorable) for June 4-5.
There are various ways to construe these results. But considering the continuing fade of the post September 11 afterglow, the almost terrifying behavior of the stock markets, the rising reports of corporate scandals in July, and the full-scale effort the President's political critics waged against him on the basis of such developments, Mr. Bush's numbers seem remarkably sturdy. More interestingly, their positive qualities seem increasingly independent of disproportionate influence from September 11.
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Monday, August 19, 2002
Kissinger and Iraq
KausFiles says this excerpt from Henry Kissinger's recent op-ed article on invading Iraq indicates that Kissinger is in favor of delaying invasion:
It is necessary to propose a stringent inspection system that achieves substantial transparency of Iraqi institutions. Since the consequences of simply letting the diplomacy run into the ground are so serious, a time limit should be set. The case for military intervention will then have been made in the context of seeking a common approach.
KausFiles admits nobody else seems to be taking serious note of this Kissinger reservation.
I don't agree with KausFiles' take, mostly on the basis of Mr. Kissinger's caveat that "a time limit should be set." No serious person (including Mr. Kissinger) believes that Iraq will agree to anything similar to what Mr. Kissinger's proposes because Saddam Hussein has already rejected such proposals repeatedly. Mr. Kissinger most likely intends his proposal as a last-line-in-the-sand, a rhetorical device. I believe it is larely to make this point that Mr. Kissinger says quite definitely: "The case for military intervention will then have been made..." There is no effort to explore what might happen if Iraq accepts the demand in Mr. Kissinger's article - and none is needed. It will take the United States a while to gear up for an invasion. Setting a time limit well within the time needed to gear up guts this proposal as a serious potential delaying tactic.
On the other hand, Kissinger's sentences such as "Regime change as a goal for military intervention challenges the international system established by the 1648 Treaty of Westphalia, which, after the carnage of the religious wars, established the principle of nonintervention in the domestic affairs of other states" simply suggest that Kissinger is getting too old for this game. Even for Kissinger that's esoteric silliness. Regardless of whether one agrees with intervention in Iraq, or on any particular set of criteria justifying intervention, asserting that there exists any "international system established by the 1648 Treaty of Westphalia" just stretches to the point of absurdity the concept of an "established system." Such a "system" can be established only in outdated, rarified and theoretical international law. Did Teddy Roosevelt re-read the 1648 Treaty of Westphalia when he took Panama? It seems as though he did intend to affect a regime change by creating a new country. What about all the US incursions in Latin America just in the 20th century? What about the eighteenth century vivisection of Poland? Napoleon's conquest of Europe? The Greek civil war? Did all of that eighteenth and nineteenth century colonialism - including the European conquest of most of Africa, and Britain's complete absorption of what are now the nations of India, Pakistan, Australia, New Zeeland and much else - stem from some mass European librarians' error resulting in all those governments losing access to their copies of the 1648 Treaty of Westphalia? Are we suppose to pretend that these conquests were not interventions in the domestic affairs of the states conquered and turned into colonies? Did France forget to re-read THE TREATY just before French troops took the Ruhr Valley? Wasn't France attempting to change the way things were being done in Germany at the time? Or was a national insolvency resulting in the mere inability of Germany to make payments to France enough to satisfy whatever conditions of the 1648 Treaty system allowed intervention, which Iraq's efforts to acquire nuclear bombs and chemical and biological weapons for use against other nations does not? What about recent actions in Yugoslavia? Would Mr. Kissinger see invasion of Iraq as less of a disturbance of his "established system" if the goal was totally to conquer, absorb, split and exploit Iraq - running it indefinitely from Washington after the invasion - rather than just to change the regime and a few key policies?
In short, what the heck is Mr. Kissinger talking about here, anyway?
(0) comments
KausFiles says this excerpt from Henry Kissinger's recent op-ed article on invading Iraq indicates that Kissinger is in favor of delaying invasion:
It is necessary to propose a stringent inspection system that achieves substantial transparency of Iraqi institutions. Since the consequences of simply letting the diplomacy run into the ground are so serious, a time limit should be set. The case for military intervention will then have been made in the context of seeking a common approach.
KausFiles admits nobody else seems to be taking serious note of this Kissinger reservation.
I don't agree with KausFiles' take, mostly on the basis of Mr. Kissinger's caveat that "a time limit should be set." No serious person (including Mr. Kissinger) believes that Iraq will agree to anything similar to what Mr. Kissinger's proposes because Saddam Hussein has already rejected such proposals repeatedly. Mr. Kissinger most likely intends his proposal as a last-line-in-the-sand, a rhetorical device. I believe it is larely to make this point that Mr. Kissinger says quite definitely: "The case for military intervention will then have been made..." There is no effort to explore what might happen if Iraq accepts the demand in Mr. Kissinger's article - and none is needed. It will take the United States a while to gear up for an invasion. Setting a time limit well within the time needed to gear up guts this proposal as a serious potential delaying tactic.
On the other hand, Kissinger's sentences such as "Regime change as a goal for military intervention challenges the international system established by the 1648 Treaty of Westphalia, which, after the carnage of the religious wars, established the principle of nonintervention in the domestic affairs of other states" simply suggest that Kissinger is getting too old for this game. Even for Kissinger that's esoteric silliness. Regardless of whether one agrees with intervention in Iraq, or on any particular set of criteria justifying intervention, asserting that there exists any "international system established by the 1648 Treaty of Westphalia" just stretches to the point of absurdity the concept of an "established system." Such a "system" can be established only in outdated, rarified and theoretical international law. Did Teddy Roosevelt re-read the 1648 Treaty of Westphalia when he took Panama? It seems as though he did intend to affect a regime change by creating a new country. What about all the US incursions in Latin America just in the 20th century? What about the eighteenth century vivisection of Poland? Napoleon's conquest of Europe? The Greek civil war? Did all of that eighteenth and nineteenth century colonialism - including the European conquest of most of Africa, and Britain's complete absorption of what are now the nations of India, Pakistan, Australia, New Zeeland and much else - stem from some mass European librarians' error resulting in all those governments losing access to their copies of the 1648 Treaty of Westphalia? Are we suppose to pretend that these conquests were not interventions in the domestic affairs of the states conquered and turned into colonies? Did France forget to re-read THE TREATY just before French troops took the Ruhr Valley? Wasn't France attempting to change the way things were being done in Germany at the time? Or was a national insolvency resulting in the mere inability of Germany to make payments to France enough to satisfy whatever conditions of the 1648 Treaty system allowed intervention, which Iraq's efforts to acquire nuclear bombs and chemical and biological weapons for use against other nations does not? What about recent actions in Yugoslavia? Would Mr. Kissinger see invasion of Iraq as less of a disturbance of his "established system" if the goal was totally to conquer, absorb, split and exploit Iraq - running it indefinitely from Washington after the invasion - rather than just to change the regime and a few key policies?
In short, what the heck is Mr. Kissinger talking about here, anyway?
Good Moral Character
Stephen Glass wrote many high profile stories that appeared in the New Republic, Rolling Stone and George and which were filled with fabrications.
He was bounced from journalism. Where did he end up? Why, he's reported to have graduated from Georgetown University Law School and is reported to be working as a law clerk with Washington Superior Court Judge A. Franklin Burgess Jr. or a lawyer in Washington or New York.
What does it say about the legal profession that Georgetown retained and graduated Mr. Glass as a law student? What does it say about the Washington Courts (especially Judge Burgess, who seems rather unconcerned with the rather obvious appearance of impropriety of having a notorious fabricator assisting and influencing the judge's work product) and law firms that he could find employment with one of them? What does it say about the state regulation of attorneys that he could hope to gain admission to the bar of any state?
Whatever it says, it's not a compliment.
(0) comments
Stephen Glass wrote many high profile stories that appeared in the New Republic, Rolling Stone and George and which were filled with fabrications.
He was bounced from journalism. Where did he end up? Why, he's reported to have graduated from Georgetown University Law School and is reported to be working as a law clerk with Washington Superior Court Judge A. Franklin Burgess Jr. or a lawyer in Washington or New York.
What does it say about the legal profession that Georgetown retained and graduated Mr. Glass as a law student? What does it say about the Washington Courts (especially Judge Burgess, who seems rather unconcerned with the rather obvious appearance of impropriety of having a notorious fabricator assisting and influencing the judge's work product) and law firms that he could find employment with one of them? What does it say about the state regulation of attorneys that he could hope to gain admission to the bar of any state?
Whatever it says, it's not a compliment.
O, Martha!
The Man Without Qualities continues to believe that the Marthagate matter is a sideshow worthy only of ordinary regulatory and investigative processes, and that all of the Congressional committees investigating it should get on to something important, such as calling Robert Rubin to talk about Enron. [Incidentally, this includes the House Energy Committee, run by Republican Billy Tauzin, which is contrary to Counterspin's assertions that "Musil... [is only] attacking Joe Lieberman for not calling Rubin to testify ... Why not go after the ... House Energy Committee Chairman, Republican Billy Tauzin? ... [Musil's] silence is defeaning." Lieberman's committee has been the most germaine, so it is appropriate to have the main focus there. Tauzin's committee is a secondary venue. But the "silence" has only been deafening to those who have plugs in their ears.]
But Martha herself seems determined to make her case a possibly high profile embarrassment for the Democrats - at least according to Matt Drudge. Drudge reports that Martha and her friends are spreading the word that the insider trading investigations are just a Republican persecution, even as the liberal, Democrat-aligned media - especially the New York Times - has led the charge against her.
It will be bad news for Democrats if Martha succeeds in recasting herself as a partisan Democrat figure, especially if she is then shown - even if only in the media, if not in a criminal case - to have engaged in insider trading. If Ms. Stewart is willing to strongly identify herself with Democrats and their causes, she can probably cause the public to see her in this light. That creates a significant downside risk for democrats. However, given the amount of circumstantial evidence accumulated against her, and especially given the way the liberal media - especially the New York Times - have presented that evidence to the public, it is hard to see how she can persuade the public she is the victim of Republican nastiness. So there seems to be little downside risk for Republicans.
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The Man Without Qualities continues to believe that the Marthagate matter is a sideshow worthy only of ordinary regulatory and investigative processes, and that all of the Congressional committees investigating it should get on to something important, such as calling Robert Rubin to talk about Enron. [Incidentally, this includes the House Energy Committee, run by Republican Billy Tauzin, which is contrary to Counterspin's assertions that "Musil... [is only] attacking Joe Lieberman for not calling Rubin to testify ... Why not go after the ... House Energy Committee Chairman, Republican Billy Tauzin? ... [Musil's] silence is defeaning." Lieberman's committee has been the most germaine, so it is appropriate to have the main focus there. Tauzin's committee is a secondary venue. But the "silence" has only been deafening to those who have plugs in their ears.]
But Martha herself seems determined to make her case a possibly high profile embarrassment for the Democrats - at least according to Matt Drudge. Drudge reports that Martha and her friends are spreading the word that the insider trading investigations are just a Republican persecution, even as the liberal, Democrat-aligned media - especially the New York Times - has led the charge against her.
It will be bad news for Democrats if Martha succeeds in recasting herself as a partisan Democrat figure, especially if she is then shown - even if only in the media, if not in a criminal case - to have engaged in insider trading. If Ms. Stewart is willing to strongly identify herself with Democrats and their causes, she can probably cause the public to see her in this light. That creates a significant downside risk for democrats. However, given the amount of circumstantial evidence accumulated against her, and especially given the way the liberal media - especially the New York Times - have presented that evidence to the public, it is hard to see how she can persuade the public she is the victim of Republican nastiness. So there seems to be little downside risk for Republicans.
Senator Dorgan Enquires
Senator Dorgan wrote to Attorney General John Ashcroft to ask why there has been no indictment in the Enron case. Dorgan wrote:
"The Enron scandal was the corporate scandal first to be uncovered. Yet the investors, the employees and the American public have seen no action taken against those who were involved.''
A Justice Department spokesman replied that the Enron task force ``is working as fast as they can and as aggressively as they can," that the Enron investigation is extremely complex and that any prosecutions will be ``based solely on the evidence and the facts,'' rather than politicians' calls for action.
The reader is invited to decide for herself whether a fair translation of that reply is: THE JUSTICE DEPARTMENT DOES NOT BELIEVE IT CAN OBTAIN A CONVICTION OF ANY MAJOR ACTOR IN THE ENRON MATTER AT THIS POINT. The Man Without Qualities inclines to that interpretation.
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Senator Dorgan wrote to Attorney General John Ashcroft to ask why there has been no indictment in the Enron case. Dorgan wrote:
"The Enron scandal was the corporate scandal first to be uncovered. Yet the investors, the employees and the American public have seen no action taken against those who were involved.''
A Justice Department spokesman replied that the Enron task force ``is working as fast as they can and as aggressively as they can," that the Enron investigation is extremely complex and that any prosecutions will be ``based solely on the evidence and the facts,'' rather than politicians' calls for action.
The reader is invited to decide for herself whether a fair translation of that reply is: THE JUSTICE DEPARTMENT DOES NOT BELIEVE IT CAN OBTAIN A CONVICTION OF ANY MAJOR ACTOR IN THE ENRON MATTER AT THIS POINT. The Man Without Qualities inclines to that interpretation.
New News Is No News
Today the media, including Associated Press reports, say that "A key gauge of U.S. economic activity fell in July, a further sign of a shaky economic recovery as stock market gyrations affected consumer and business spending."
But the stock market was well up, especially the retail sector. How can this be?
Does it matter that the Conference Board, which issues the Leading Economic Indicators, seems sure that there will be no "double dip" recession and itself pointed out that "This month’s decline in the leading index was primarily caused by weak equity markets and lower consumer expectations."
That equity markets declined in July was already known and the fall in "consumer confidence" (a variable that may not even exist) was also already old news. All of which means that today's "news" about the Leading Economic Indicators was hardly news at all. The only hint of this in the media reports is the observation that "Leading Economic Indicators fell 0.4 percent ... . Analysts had expected a July decline of 0.5 percent." Which means that today's real news - that is, the new information relative to what was expected - was good news. But you wouldn't know that from the headlines or overall tone of the articles. No wonder the markets went up - although that increase is certainly not all attributable to the Conference Board.
Today the media, including Associated Press reports, say that "A key gauge of U.S. economic activity fell in July, a further sign of a shaky economic recovery as stock market gyrations affected consumer and business spending."
But the stock market was well up, especially the retail sector. How can this be?
Does it matter that the Conference Board, which issues the Leading Economic Indicators, seems sure that there will be no "double dip" recession and itself pointed out that "This month’s decline in the leading index was primarily caused by weak equity markets and lower consumer expectations."
That equity markets declined in July was already known and the fall in "consumer confidence" (a variable that may not even exist) was also already old news. All of which means that today's "news" about the Leading Economic Indicators was hardly news at all. The only hint of this in the media reports is the observation that "Leading Economic Indicators fell 0.4 percent ... . Analysts had expected a July decline of 0.5 percent." Which means that today's real news - that is, the new information relative to what was expected - was good news. But you wouldn't know that from the headlines or overall tone of the articles. No wonder the markets went up - although that increase is certainly not all attributable to the Conference Board.
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Sunday, August 18, 2002
TIME Out of Joint!
TIME is now offering as a scoop its report that ENRON had some rather close relations with federal energy regulators during the Clinton-Gore administration:
Documents obtained by TIME show the energy giant enjoyed much closer ties with Clinton Administration regulators than was generally known. Long before Cheney's task force met with Enron officials and included their ideas in Bush's energy plan, Clinton's energy team was doing much the same thing. Drafting a 1995 plan to help facilitate cash flow and credit for energy producers, it asked for Enron's input—and listened. The staff was directed to "rework the proposal to take into account the specific comments and suggestions you made," Clinton Deputy Energy Secretary Bill White wrote an Enron official. Clinton officials also made efforts to help Enron get business overseas.
The story should hardly be surprising. Could anybody reasonably think that a meaningful, realistic energy policy could be developed by any administration without private consultation with the main commercial actors in the field?
Previously, many in the liberal media and some Democrats leveled criticism at Vice President Cheney for speaking to energy company executives in private in the course of developing the Bush administration's energy policy. I suppose the new "scoop" from TIME may susprise those media critics and Democrats - who may think government policy is extracted from consulting a crystal ball and without need for frank, expert conversations.
Of course, the federal government is supposed to help American business on a non-partisan basis. Perhaps the real "scoop" here is the thought of anyone in the Clinton administration actually helping an American company more associated with Republicans than Democrats?
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UPDATE: Rand Simberg wasn't surprised.
TIME is now offering as a scoop its report that ENRON had some rather close relations with federal energy regulators during the Clinton-Gore administration:
Documents obtained by TIME show the energy giant enjoyed much closer ties with Clinton Administration regulators than was generally known. Long before Cheney's task force met with Enron officials and included their ideas in Bush's energy plan, Clinton's energy team was doing much the same thing. Drafting a 1995 plan to help facilitate cash flow and credit for energy producers, it asked for Enron's input—and listened. The staff was directed to "rework the proposal to take into account the specific comments and suggestions you made," Clinton Deputy Energy Secretary Bill White wrote an Enron official. Clinton officials also made efforts to help Enron get business overseas.
The story should hardly be surprising. Could anybody reasonably think that a meaningful, realistic energy policy could be developed by any administration without private consultation with the main commercial actors in the field?
Previously, many in the liberal media and some Democrats leveled criticism at Vice President Cheney for speaking to energy company executives in private in the course of developing the Bush administration's energy policy. I suppose the new "scoop" from TIME may susprise those media critics and Democrats - who may think government policy is extracted from consulting a crystal ball and without need for frank, expert conversations.
Of course, the federal government is supposed to help American business on a non-partisan basis. Perhaps the real "scoop" here is the thought of anyone in the Clinton administration actually helping an American company more associated with Republicans than Democrats?
_____________________________________________________________________
UPDATE: Rand Simberg wasn't surprised.
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