Enron

Weeping For the Scarecrow

As you may have heard by now, friend of this blog, and our friend at Firedoglake, John Chandley, aka “Scarecrow”, has died. Let the record reflect that I am freaking tired of being on the memorial duty. Seriously tired. If you are a participant in the discussion at this blog, or a related friend thereto, quit dying. Please. Enough.

John Chandley was a man. He stood firm and resolute on his own, in spite of being known probably to you only for blogging at Firedoglake under the pseudonym of “Scarecrow”. But Scarecrow was much more that that; never a merely a straw creature, but one who definitively stood firm for that which was righteous in the income inequality wars:

Scarecrow on a wooden cross Blackbird in the barn
Four hundred empty acres that used to be my farm
I grew up like my daddy did My grandpa cleared this land
When I was five I walked the fence while grandpa held my hand

Rain on the scarecrow Blood on the plow
This land fed a nation This land made me proud
And Son I’m just sorry there’s no legacy for you now
Rain on the scarecrow Blood on the plow
Rain on the scarecrow Blood on the plow

The crops we grew last summer weren’t enough to pay the loans
Couldn’t buy the seed to plant this spring and the Farmers Bank foreclosed

Called my old friend Schepman up to auction off the land
He said John it’s just my job and I hope you understand
Hey calling it your job ol’ hoss sure don’t make it right
But if you want me to I’ll say a prayer for your soul tonight

“Like a scarecrow in the rain”. Aren’t we all. That is the meter of life, and it is transient. Funny thing was, the real John Chandley, at least so far as I even knew him, was not transient in the least; but came out of the Berkeley swamps, cool and slow, like John Chandley’s friend and colleague at the time at Berkeley (John/Scarecrow was present at Berkeley in the moment), Mario Savio, with a backbeat hard to master.

The musical imagery here is mine; I am not sure what would be the preferred cocktail de jour of John. Before I leave, let me offer up one more paean of my own to the life of the one, and only, Mr. John “Scarecrow” Chandley”:

The world’s goin’ crazy and
Nobody gives a damn anymore.
And they’re breakin’ off relationships and
Leavin’ on sailin’ ships for far and distant shores.
You’re my brother,
Though I didn’t know you yesterday.
I’m your brother.
Together we can find a way.

Scarecrow would have, by every right that I knew him, been trepidatious in regards for our future; yet hopeful for the success and greatness that may await us all.

It is hard to tell where we all go in the living, much less where we go beyond. But never let it be said this blog does not care about the voices who were its friends and colleagues. And certainly not tonight.

RIP John “Scarecrow” Chandley.

Glenn Kessler Didn’t USED to Treat SEC Filings as Boilerplate

As gobsmacked as I am that no one can seem to find the people running Bain Capital from 1999 to 2002, when Mitt Romney was officially listed as its CEO, Chairman, and President, I’m equally shocked by Glenn Kessler’s claims that SEC documents are not to be trusted.

Kessler’s scarequoted SEC documents

On Thursday, Kessler suggested SEC filings don’t mean what they say.

There appears to be some confusion about how partnerships are structured and managed, or what SEC documents mean. (Just because you are listed as an owner of shares does not mean you have a managerial role.)

Then on Friday, he mocked the journalistic convention that treated “SEC documents” (his scarequotes) as factual.

There is a journalistic convention that appears to place great weight on “SEC documents.” But these are public filings by companies, which usually means there are not great secrets hidden in them. The Fact Checker, in an earlier life covering Wall Street, spent many hours looking for jewels in SEC filings.

[snip]

We had examined many SEC documents related to Romney and Bain in January, and concluded that much of the language saying Romney was “sole stockholder, chairman of the board, chief executive officer, and president” was boilerplate that did not reveal whether he was actually managing Bain at the time. (For instance, there is no standard definition of a “chief executive,” securities law experts say, and there is no requirement for anyone to have any responsibilities even if they have that title.)

Trillions of dollars are traded based on what these documents say, but a purportedly respectable journalist who used to cover Wall Street says they’re just boilerplate.

Only, he didn’t used to say that.

As Kessler reminds his readers, he used to cover finance. So to see how he, as a finance reporter, treated SEC documents, I thought I’d review what he wrote during precisely the period Mitt’s corporate whereabouts are in such dispute, 1999 to 2002. Kessler covered finance at the WaPo from the time he moved there in 1998 until about May 2, 2002, when he started covering foreign affairs. Thus, Kessler stopped covering finance just weeks after the time Mitt resigned from the boards of Marriott and Staples (presumably Mitt’s severance deal with Bain was around the same time).

SEC filings, more SEC filings, and no boilerplate

It was an interesting time to cover finance, too. In addition to a slew of articles engaged in one-side, other-side journalism citing experts warning that Bush’s tax cuts might bring back deficit spending but Pete Domenici and Ari Flesicher saying they wouldn’t so he couldn’t really be sure, Kessler covered growing awareness about tax havens, the end of the Dot-Com bubble, the AOL Time-Warner merger, and Enron. And in a number of those stories he treated earnings reports and other SEC documents as transparent truth.

Kessler pointed to corporate earnings reports for a January 29,1999 story predicting the economy would begin to slow.

Corporate earnings are closely watched on Wall Street because, in a world of dreams, deals and wild bets, earnings are real; they are the equivalent of batting averages for baseball addicts. Corporate earnings also provide hints on the general direction of the economy, which is why some analysts remain downbeat about the economy in the coming year despite the string of positive earnings reports. [my emphasis]

And he looked at them in very close detail.

Individual corporate earnings reports also turn up nuggets of how companies have boosted their profits. Compaq Computer Corp., the world’s number two computer maker, said Wednesday that fourth-quarter earnings rose a better-than-expected 2.2 percent. Profits rose to 43 cents a share, compared with 42 cents in the same period of 1997. But tax credits from Compaq’s purchase of Digital Equipment Corp. last year significantly cut the company’s tax rate, boosting net income about 5 cents a share.

In a January 13, 2000 story explaining different estimates for the value of the AOL Time-Warner deal, Kessler reveals the WaPo was the only paper to look beyond stock price in its calculations; it included Time-Warner’s debt, presumably gleaned from SEC documents.

Continue reading

Angelo Mozilo Will Not Be Charged

In news that will not surprise you in the least–but will put you off your breakfast–Countrywide CEO Angelo Mozilo will not be charged.

Federal prosecutors have shelved a criminal investigation of Angelo R. Mozilo after determining that his actions in the mortgage meltdown — which led to $67.5-million settlement against him — did not amount to criminal wrongdoing.

Perhaps the most insightful comment in LAT’s coverage of Mozilo’s escape of any liability is this:

Columbia University law professor John Coffee said mortgage cases like Mozilo’s were muddied by the numerous parties involved, unlike Enron and other “cook the books” cases in which executives were convicted.

Countrywide’s model was to make or buy mortgages only to sell them off immediately to Fannie Mae or Wall Street as fodder for securities.

Given that model, Coffee said, blame could be assigned to an entire chain of players: mortgage brokers who falsified applications; investment bankers who concocted complex and “opaque” mortgage bonds; rating firms that provided high ratings on the bonds but said they were lied to; and institutional investors that relied on dubious ratings because the securities carried above-market interest while promising to be risk-free.

“All share responsibility, but none are culpable enough by themselves to compare with [Enron's] Ken Lay, Jeff Skilling or the WorldCom CEO,” Coffee said.

I guess we could write a new corollary to the line, “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” If you commit massive amounts of fraud by yourself, even George Bush’s DOJ will indict you; but if everyone in an industry conspires to commit the same kind of fraud, Barack Obama’s DOJ won’t charge anyone.

Emptywheel Twitterverse
bmaz @kirkmurphy I am consistent.
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