Issue #39 for jrmhp
com
God Wants Me to Be Rich
(Portfolio.com: Careers)
Submitted at 7/16/2008 3:00:00 AM
W ho will save us? Who will lift us up from crushing credit-card debt and
resetting mortgage payments and impending foreclosure, from increasing
gas prices and decreasing health-insurance coverage? We are a nation
stumbling through our worst financial crisis in a generation and our worst
housing market in a lifetime. And so we come, seeking gentle salvation,
inspiring prayers, steadying words, soothing notions, and calming thoughts
that will allow us to become, in Joel Osteen’s words, “victors, not victims.”
We are in Greensboro, North Carolina, making our way into the
downtown arena through the hot, buggy air, to worship with the pastor who
will save us, the man anointed, by one of his congregants, as “Reverend
Feelgood.” Sixteen thousand will file in this evening, as have millions more
to coliseums, concert venues, and baseball stadiums around the
country—all, in a way, his churches. ( View a slideshow that tallies the
budgets of some of the biggest churches.)
We are a diverse, representative swath of troubled America: families
struggling under debt, husbands and wives seeking reconciliation, young
couples on first dates, children dragged by pious grandparents who promise
them popcorn and BibleMan action figures. It is religion as escapism,
criticized throughout the Bible Belt as “Christianity lite” or “prosperity
gospel.” But this murmuring crowd, slouching toward a kinder, gentler
salvation, is a more telling indicator of the state of our union than consumer
durables purchased or capital goods ordered. Unemployment they know;
they don’t need to wait for the Bureau of Labor Statistics to publish a
monthly number. O, but come to Joel, lift your hands to Jesus, banish your
negative thoughts, and you can find in these dark times a beacon.
If, in this country, there is great hurting, then Osteen is here to soothe that
suffering. He does not wish that pain on any of us, and the sight or thought
of it will bring forth from him great torrents of tears—his eyes clamped shut,
his fingers pressed into narrow eye sockets, his lips pulled back over pink
gums as he grimaces. The crying has become a visual touchstone of an
Osteen sermon, the born-again equivalent of James Brown’s pre-encore
collapse from “exhaustion.”
Joel feels our pain and has made himself wealthy (reportedly earning $13
million for his last book advance alone) and his church prosperous ($75
million and counting in annual revenue) by urging us to let go of it, to turn it
over to God, to accept God’s favor so that we may be as prosperous as Joel.
There was always a strain of American Puritanism that pointed to
Scripture as justification for asserting that wealth is somehow godly. But
ever since evangelical Christianity separated from the mainline faiths in the
early 20th -century, some preachers have gone further and linked their focus
on personal piety to financial success. The big-tent revivals of the 1930s
promised the dust-bowl destitute the possibility of finding Jesus and their
next meal just by listening to a fire-and-brimstone message. By the late
1970s and early 1980s, televangelists like Jim Bakker and Jimmy Swaggart
made prosperity gospel big business, capitalizing on that era’s economic
uncertainties to win over a new generation of acolytes, before those
ministries were brought down by scandal.
Osteen is one of a new breed of televangelists—Joyce Meyer, T.D. Jakes,
and Creflo Dollar are also rising stars—who are preaching a less
sanctimonious, more inclusive message. His church is in that part of the
economy that thrives in troubled times, that can count on full pews when
wallets are empty and an ever more receptive audience if we do go into a
full-on recession.
Osteen hasn’t necessarily tailored his message for the downturn. Instead,
he has continued his feel-good preaching, his exhortations to focus on the
positive and banish negative thoughts, his reminders that God wants you to
have a good job, a beautiful home, and decent cash flow. His vast ministry
has become, in effect, shelter from the storm. “God wants you to have a big
life,” Osteen reminds his flock. “That is his blessing. God has a big dream
for your life.”
We live in a time of miraculous congregations. Osteen’s Lakewood
Church, in Houston, is the largest in the United States, with 45,000 regular
weekly attendees and 7 million more tuning in. His television show is the
most-watched inspirational program in America and is seen in 100 countries
around the world. He has sold 7 million copies of his two books, Your Best
Life Now and Become a Better You. Podcasts of his sermons are
downloaded 4.5 million times a month. He preaches to more than 15,000
people at a time in the basketball arena turned sanctuary that is Lakewood
Church. His pulpit stands near the spot where Hakeem Olajuwon helped the
Houston Rockets win two consecutive N.B.A. titles. But the Rockets, who
have since moved across town, never put as many people in the seats as
Osteen does.
Osteen will tell you that his success is a result of God’s favor, that his
message is God’s message, and that all that he has achieved is a blessing
from God. Clearly, he is more than just an inspiring pastor; he is also a
master marketer and—pardon me for saying this, Joel—a damn good chief
executive.
He presides over an empire that takes in tens of millions of dollars a year
and has been growing at a boom-time pace. (Though Osteen gives a
significant portion of his book and CD earnings to the church, his take is still
ample enough to allow him and his family to live in 5,000 square feet of
leopard-skinned luxury in one of Houston’s tonier neighborhoods.) Rough
economic times, Osteen believes, make the business of saving souls that
much richer. “I would think that our message would have increased
relevancy in a time of economic uncertainty. I think people want to know
that God is taking care of you. As it gets darker, I think the brighter message
shines.”
Joel’s father, john osteen, was a pastor who dissociated himself from the
Southern Baptist Church to start his own congregation, Lakewood, in an
abandoned feedstore in 1959. It was John who started the family march
toward a more gentle Jesus, focusing on the goodness and love of God and
downplaying the Old Testament anger and wrath. One of John’s prevailing
themes, and the underpinning for much of Lakewood’s current message, can
be found in one of his sermons: “It’s God’s will for you to live in prosperity
instead of poverty. It’s God’s will for you to pay your bills and not be in
debt. It’s God’s will for you to live in health and not in sickness all the days
of your life.”
Joel is the second youngest of six siblings, and the one considered least
likely to take the pulpit. To say that he was a quiet child would be an
understatement. The diminutive boy—he would grow six inches after he
graduated from high school—was easy to underestimate. As his lifelong
friend Johnny McGowan says, “On the basketball court, guys would take a
look at Joel and say, ‘I’ll guard him,’ and then Joel would go right by them.”
After a year at Oral Roberts University, Osteen dropped out to return to
Houston, in part to care for his mother, Dodie, who was then recovering
from cancer (a miracle regularly cited at Lakewood Church). He then
married his wife, Victoria, and took a formal position at Lakewood, helping
out with the television show and the design of the platform, as the stage
around the pulpit is known, and eventually becoming the producer of
Lakewood’s Sunday service. “Victoria would kid me because I would spend
four hours adjusting a light,” Osteen says. “I learned you can’t separate the
message from the presentation of that message.”
It was perfect training for a 21st--century televangelist. Osteen developed
a keen understanding of the television market—time slots, lead-ins, cost per
rating point—and to this day can tell you the top stations in most of his
major markets. So passionate was he about the medium that he invested $2
6/23/2008 - 7/22/2008
million of Lakewood’s money for a stake in a television station, KTBU, in
1998, and an additional $6 million for the remainder in 2005. The
independently operated station would turn out to be a wise purchase,
returning $32 million when Lakewood sold it in 2006.
Even as he was making his father’s church more successful than ever
throughout the mid-1990s, Osteen quietly grew frustrated with his father’s
reluctance to expand as aggressively as Joel would have liked. “My dad
didn’t have it in him. He just wouldn’t feel comfortable with that.” (In fact,
Lakewood’s rapid expansion has put it $45 million in debt, thanks to a $75
million bank loan that is still far from being paid off.)
Nevertheless, though three of his siblings were actively involved in the
ministry, Osteen never considered taking the pulpit. “He was so
uncomfortable onstage,” recalls Phil Cooke, a producer and consultant at
Lakewood. “He was very uncomfortable in public. He always loved being
behind the scenes.”
One Sunday, Osteen agreed to deliver the sermon. He doesn’t know why
and to this day asserts it was a kind of divine intervention, “a strong feeling
of God” that compelled him to say yes to his father after saying no so many
times. The story is often told of how Osteen gave his first sermon on January
17, 1999, as his father, who was suffering from kidney failure, lay in a
hospital bed listening to it over the telephone. John Osteen passed away less
than a week later.
Joel Osteen’s ascension to the pulpit was fraught with uncertainty. He was
so nervous about taking over the ministry that he canceled the time slots he
had purchased for his father, assuming that no one would want to watch the
telecast anymore. Victoria vetoed that. “You call them back right now,” she
told him. He did and stayed on the air. At first, Osteen explains, he just
wanted to maintain Lakewood’s 5,000-person congregation. It soon became
clear, however, that not only was the congregation not shrinking, but the
television audience was actually growing. Osteen was proving himself a
natural, more personable than his father, easy on the eyes, with a kinder,
softer voice.
While Osteen’s message wins over the moderate masses, he has become
anathema to more-traditional Southern Baptists. His appearance on Larry
King Live in 2005, during which he waffled as to whether heaven was
barred to Jews, Muslims, and atheists, was posted on YouTube as proof that
Osteen doesn’t embrace the Gospel. And while Osteen is steadfastly
Christian, he defers to God on the more contentious issues, recusing himself
from condemning gays, for instance, or women who have had abortions.
Spending time with Osteen and his team, one can sense their discomfort
when issues that could anger more--doctrinaire Christians are raised. Don
Iloff, his brother-in-law and chief of communications, almost winces when I
ask Osteen his views on intelligent design versus evolution. “I believe that
God created it all,” Osteen says as he stakes out his usual middle ground. “I
don’t know if it’s six literal days or 6 million years.”
Osteen’s message of prosperity doesn’t always go over well either. Fellow
megapastor Rick Warren has called the idea that God wants everybody to be
rich “baloney.” And some conservative Christian ministers have been quick
to dismiss Osteen as a lightweight or, worse, a heretic. Osteen adamantly
believes that “God wants to give you your own house,” explaining, “He’s
not having financial difficulties. He owns it all.”
Much of the criticism of Lakewood, no doubt, stems from resentment at
Osteen’s ministering to the largest and most financially successful church in
America. He certainly makes an easy target, with the talk-show-host grin,
the gelled hair, the bleached teeth, and the jocular manner. But there is no
denying that his message, and his marketing of that message, is getting out
to the world while so many other pastors are preaching to empty pews.
Osteen dismisses the notion that he has watered down the Scriptures to win
over worshippers. “It’s who we are,” he says. “The accessibility of my
message doesn’t bother me a bit. Look, we deal with people who are
fighting cancer, fighting to save their marriages, dealing with the death of
loved ones. I don’t think they need to be beaten down. And I think the
success of the message in the marketplace is because we are optimistic,
encouraging.”
Phil Cooke, a longtime colleague and the author of Branding Faith, says,
“Oprah has a brand, Nike has a brand, and Joel Osteen has a brand. Joel has
made his brand the inspiration brand.”
In person, the 45-year-old Osteen is certainly both optimistic and
encouraging. As he sits in the family suite after Sunday services, taking a
break before heading up to the editing bay, he has the calm, gentle gravity of
a man who never raises his voice and never has to. Everyone leans in to hear
Osteen. With his too-small eyes, a sharp nose, and thin lips with
parenthetical dimples on each side, his long, drawn face is like a happy,
joyous, and free version of Munch’s Scream. In his preacher’s slacks,
yellow tie, and blue striped shirt, he has a disconcerting habit of seeming to
run out of words before finishing his sentences; the effect is that you’re
always left hanging, waiting for another word that might or might not come.
“Have you read Good to Great?” Victoria asks me at one point, referring to
the phenomenally selling business book. “Joel is a level-5 leader. He knows
there is more than one way to get to a point, and he lets his people get to the
point their way. He’s a true level-5—great delegator, great empowerer, great
big-picture thinker.”
Osteen’s boldest brainstorm was leasing the Compaq Center from the city
of Houston in 2002 and investing $98 million to renovate it. For Osteen,
who had always put a premium on the look and feel of the church,
renovating and refitting a basketball arena as a sanctuary was both a great
opportunity and a daunting challenge.
The scale of the renovation—a five-floor office annex, two 30-foot
waterfalls, and a children’s facility capable of hosting 5,000 kids while their
parents are in the main sanctuary—was a logistical challenge better suited to
Halliburton than a house of God. Osteen’s brother-in-law Kevin Comes, the
chief operating officer and a former construction executive, was the point
man on the project, but like almost all of Lakewood’s top executives, he
deferred to Osteen: “Joel made the decision to do it right the first time. We
gutted the place and started over.” Osteen was consulted on almost every
major decision, responding with his usual quiet nod when he was presented
with, for example, the new lighting scheme or platform design.
The resulting church is a modern technological marvel and perhaps the
most family-friendly worship venue in the world. Kidslife, the $25 million
children’s facility, was designed by a group of former Disney staffers and
provides care and religious services for the children of parents attending
Lakewood. It has the look and feel of a giant version of a McDonald’s play
area, only with neon lettering that refers to a verse in Philippians on the
walls.
Such a sterling facility is the logical extension of the Osteen brand. Last
year, Lakewood generated $76 million in revenue, which amounts to just
over $1,600 for every member of its congregation. Its take includes $44
million donated directly by congregants, who are asked to give 10 percent of
their gross income; $10 million in product sales and sermon tapes; and $13
million brought in through direct-mail solicitations, up from about $6
million two years ago. The church’s greatest expense is the TV airtime it
buys: $22 million last year to broadcast the show in more than 100 markets,
a 10 percent annual increase in spending that is easy to justify. “Cutting
back on airtime would be like saying we won’t be sending any trucks to
deliver our product,” Comes says. An additional $13 million goes to
administrative costs and salaries, and $9 million a year is spent on facilities
and maintenance.
Osteen hasn’t drawn a salary from the church since 2005. He bought his
own home, for $331,500 in 1994, and pays to have his kids homeschooled.
feedjournal.
The considerable income from his books and related products (there were 19
spinoff calendars, daybooks, and inspirational pamphlets from his first book)
goes to Osteen, who gives much of that—-people inside Lakewood say more
than 50 percent of his income—to Lakewood ministries and other charities.
That still leaves Osteen with plenty of “God’s favor.” The operation—the
TV time, the basketball arena, the worship events staged across the
country—should all simply be considered as, Comes points out, the delivery
system for getting the product, Joel’s message, out to the marketplace. The
goal of Lakewood’s 350 employees is to facilitate and spread that message.
The return is measured in souls saved and lives changed. “We’re always
looking for ways to get our message out there more efficiently; in that way,
we’re no different from any other big brand, a Coke or a Starbucks,” Iloff
says.
But it takes revenue to win souls, and within the organization are constant
discussions about how to most efficiently package the message. Osteen’s
podcasts, which are free, consistently rank in the top 10 on iTunes, and
Comes wonders aloud about how to monetize that. The team is not shy
about dreaming big—and commercially. “We sit and try to imagine what
our program would look like with a Coca-Cola logo on the front. We’re just
looking into it,” Comes says.
Still, when it comes down to “message versus revenue,” Comes says,
“message always wins.” At Lakewood, message and revenue tend to work in
blessed harmony. Duncan Dodds, Lakewood’s executive director, took the
podium recently in Greensboro to make a few announcements before
Osteen, the choir, the entertainers, and the rest of the Lakewood team began
their Night of Hope. “We have great worship at Lakewood,” Dodds told the
crowd of 16,000 still settling into their seats, “and that worship is for sale on
CDs out on the concourse level.”
One hears certain words repeated constantly by the Lakewood team.
Meals, services, meetings, and even smoothly flowing traffic over on I-45
are described as awesome. The goal of every operation, sermon, television
production, and even expenditure is excellence. And the ultimate purpose of
all staffers is to spread the message. That message, functionally, serves as
Lakewood’s core product. Sure, it is repackaged into books, CDs, DVDs,
Bible covers, scented candles, cross necklaces, JESUS FREAK T-shirts, and
coffee mugs, but those are all just ways to deliver the message.
The Osteens, like so many American families during the recent real estate
boom, spent the better part of the past decade buying, renovating, and selling
homes, and became so proficient in the process that Osteen and his wife
were able to skip hiring a contractor for their last renovation and go directly
to the subcontractors to complete their mansion. Coming off the boom,
during which the average American dwelling doubled in size, the Osteens’
digs are more modest than one might guess. The house is decorated in a
rococo style that Victoria has called “French” and Osteen calls “fancy.”
Their son, Jonathan, 13, and daughter, Alexandra, 9, are homeschooled, in
part because their parents’ schedule requires that their weekend be shifted to
Monday and Tuesday. During breaks in their lessons, they can play in the
elaborate treehouse or the fenced-in rabbit pen behind the house.
As the actual weekend nears, Osteen rises at 5:30 a.m. to work on his
sermons, which he delivers twice weekly. Osteen labors over them, speaking
the words aloud as he types them into his computer. He considers the
writing, shaping, and memorizing of his sermons to be the single most
important part of his job. The message supports the whole enterprise, and he
frequently turns to God to guide him when the burden of Lakewood, his
success, or the scale of the church and business threatens to overwhelm him.
“It’s just in me, God’s favor, faith, and hope.”
He believes, resolutely, in the value of the product he is crafting in his
office on those quiet mornings. “Very rarely will you find a company that
produces a widget where everyone is mentally and spiritually into producing
a better widget,” Osteen says. “There’s a purpose behind what we’re doing.
We believe in our widget. We’re doing more than giving people a good time
or a better toothbrush, because it’s hard to put in your heart and soul and
sacrifice so much to make a better toothbrush.”
Being backstage at a Joel Osteen worship event is remarkably similar to
being at an N.B.A. game or a rock concert. Beefy security guards tell you
where you can and can’t go. Crew members chow down on a buffet laid out
by a local caterer and bark into walkie-talkies between bites. At some point,
black Town Cars head down the long, curving driveway into the belly of the
arena and drop off the pastors and performers, who retreat into private
suites. The night is a celebration of music, state-of-the-art visual effects,
and, of course, Christ. Lakewood spends a great deal of money attracting top
gospel and Christian talent, and music minister Cindy Cruse-Ratcliff leads a
team of Grammy Award winners, including gospel singer Israel Houghton.
It’s a thumping occasion, with people dancing in the aisles and even the
security guards singing along to “Come Just as You Are” and “We Have
Overcome.” Osteen’s entire family is in the act. His mother, wife, and
children often play parts in the service. But it’s Osteen himself we have
come to see. He wins the crowd over with wholesome jokes and inspires
with his sweet-voiced message. The sermon today is based on the notion of
“hitting the DELETE button when you have those negative thoughts.” He
urges us to banish that voice telling us, “I’ll never get that great job. I’ll
never meet that special someone. I’ll never get married.” Hit the delete
button, he urges, and reprogram your mind. “Just one inferior thought can
keep you off balance and away from your God-given destiny.”
The crowd is eager, multiracial, and well-intentioned. We want to hear
good words, have uplifting thoughts, be inspired by a positive message.
Who doesn’t? We are here to escape our worries, or even better, to
overcome them with hope. These are uncertain times, and we all feel the
pangs of doubt. Can we pay our mortgage? Will we keep our job? When will
we finally achieve the plus-size life we have been visualizing? Listening to
Osteen, it all sounds so easy. Delete those negative thoughts. Focus on the
positive. We are victors, not victims.
The highlight of every service is when Osteen asks those who are willing
to turn their lives over to Jesus to stand up in the vast arena and make their
commitment right then and there. It is an inspiring moment, filled with
raised Bibles and palms outstretched to heaven; Osteen and some of the
congregation are in tears. If we have been suffering, if we have been in pain,
if we have dealt with financial insecurity, then this standing up, this raising
of hands to heaven, this simple vow of faith, Osteen assures us, will start us
on the road to wellness and prosperity.
For a moment, as the choir sings, “When the battle is over / and the
fighting is done / we’ll lay down our armor / the victories all won,” and the
orange, red, and purple stage lights are flashing, and a halolike luminescence
surrounds Osteen as he promises to free us from our fears, to lift us above
our doubts, to lead us to prosperity and joy, I think about my own worries,
my debts, my career, my woes.
How tempting it would be to just stand and turn my will and life over to
Jesus if, in exchange, I will be led down a righteous path of prosperity, taken
in hand by Jesus, and Joel, and delivered to my gilded acre of the American
dream. Yes, yes, why shouldn’t I stand? Because who am I not to want to be
saved? Who doesn’t need a little bit of Joel in their life, tonight, every night,
forever, leading us from this dark place to our promised land? Together,
hands joined, shoulder to shoulder, we will march forward into our glorious
future. Delete the negative thoughts, Joel preaches. Yes, yes, delete them.
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2
Enemy of the State
(Portfolio.com: Executives)
Submitted at 7/16/2008 3:00:00 AM
J ust before midnight, at the plush Moscow Hyatt, several blocks from Red
Square, a loud knocking jolted the American lawyer awake. Robert
Amsterdam heard gruff voices, hard fists striking his door as if attempting to
break it down, and then a man shouting in English.
“Moscow police. Open up!”
He stood, barefoot, dizzy from the vodka he’d consumed with dinner. His
first thought was, They’ve come for me. And then he thought, I’m going to
fucking die.
If he disappeared that night, he wanted people to know. So he started
making phone calls—a Moscow attorney friend, another colleague from his
office. And then, about four minutes after the knocking began, he stepped
into a hotel-issue white robe, opened the door, and went outside.
There were six men in the hallway—muscular, clean-shaven, and wearing
poorly fitted suits—a gang of extras from The Godfather. Bulges at their
waists made Amsterdam think that the men were packing guns. Badges were
flashed. But Amsterdam was convinced that the badges were fake and that
the men were actually enforcers sent by the Kremlin.
“You will come with us, Mr. Amsterdam,” the oldest member of the group
declared. “It is time to go.”
It was September 22, 2005. Earlier that day, Amsterdam’s legal team had
entered a final appeal for his client Mikhail Khodorkovsky, the Russian
billionaire who had chosen Amsterdam to defend him in one of the world’s
most complex (and dangerous) corruption cases. Before his life was
upended, Khodorkovsky ran Yukos, Russia’s largest and highest-profile
private oil company. President Vladimir Putin had sent clear warnings to the
so-called oligarchs—Russia’s ultrawealthy business tycoons—to avoid
politics, but Khodorkovsky had defied him and paid for it.
Even before he was formally charged, Yukos’ offices were raided, and
shareholders were detained by police. After an 11-month trial, at which he
was showcased in a metal cage, he was convicted of looting public assets
and evading hundreds of millions of dollars in taxes.
When Amsterdam stood in the courtroom on that autumn day, his stated
goal was to have the verdict reversed and expose the Kremlin as a kind of
selectively vengeful god. The appeal was rejected, though Khodorkovsky’s
sentence was reduced by one year. The men now standing outside
Amsterdam’s hotel room seemed intent on stomping out any lingering
questions.
“We’ve come to take you,” the thug continued.
Amsterdam then did something that probably saved him: He lied. He
claimed a contingent of journalists were coming to meet him in the lobby
downstairs; he said the State Department was on its way.
The men whispered. One made a phone call. More threats came, but
Amsterdam didn’t move. Soon the Russian lawyer friend he’d called arrived
and started snapping pictures.
The men’s strategy changed. They would not take him away, they said.
Instead the men confiscated Amsterdam’s passport and revoked his visa,
issuing him a “departure pass.” “Tomorrow you will be on a plane by 5
p.m.,” the leader declared. “If you’re not on a plane by 5 p.m., we will arrest
you.”
The message was not obscure: Forget Russia. Forget Mikhail
Khodorkovsky. Your work here, Mr. Amsterdam, is done.
Being around Robert Amsterdam is like living in a spy movie: You sense
that you are being watched but can’t exactly prove it. When I first contact
him about the case, he responds that it’s better not to talk details on the
phone. At his home and office in London, he assumes that his phones are
monitored, his emails are read, and that the Federal Security Service agency,
or F.S.B.—the intelligence outfit that replaced the K.G.B.—keeps tabs on
him. Most people I talk to view the claims as credible, though in time I get
the sense that Amsterdam enjoys the looming risk.
“Sometimes I check myself and say, ‘Well, fuck, you know they have
better things to do than deal with me.’ But then I look at who the hell is out
there talking about what the Kremlin is doing, and no one is really pushing
it,” he tells me one morning over espresso at a café in London. “There isn’t
much doubt that they’re watching me closely. I know this. It’s the nature of
these people.”
Since he moved to Britain, Amsterdam has become the leader of a full-
throated campaign to free Khodorkovsky, Russia’s most famous and richest
prisoner. At home, Khodorkovsky is perceived as a ghost of mobsters past
as well as a sort of martyr for a better, more Westernized future. Few doubt
that he did some shady, unethical things in the 1990s, a period of bare-
knuckled business replete with insider deals and bribery. But he also helped
advance the oil industry. In the end, his mistake seemed to be not only that
he made truckloads of money in a time and place in which most didn’t, but
that he didn’t know when to keep his head down and stay quiet.
After shipping the oligarch off to a Siberian work camp, the Kremlin spent
the past couple of years devouring his company. Yukos, once Russia’s
leading oil concern, declared bankruptcy, then was sold off to state-owned
companies in rigged auctions.
Yet the Kremlin was still not sated. In February, months before he would
have qualified for parole, Khodorkovsky and his partner, Platon Lebedev,
were hit with a new charge: embezzling $20 billion in company money.
Although the Kremlin likely perceives this event as the last chapter in the
story of the oligarch and the oil company, Amsterdam disagrees.
In Russia, the case addresses issues of private wealth, the relationship of
business and politics and, most significantly, the notion of energy
nationalism. What happened to Yukos is seen as an object lesson in how
Putin’s overreaching government is reclaiming privately held natural
resources in a steroidal effort to increase the state’s economic power both at
home and abroad. As Amsterdam and others see it, the Kremlin has gone
corporate.
Amsterdam directs the case with an array of Russian lawyers, some of
whom were associated with Yukos; one is a fugitive from Russian justice.
There are clandestine meetings, ghost offices, and secret messages. As an
American citizen and Canadian attorney, Amsterdam is forbidden from
litigating the new trial, expected to begin in Russia this fall, but nevertheless
he is considered one of the battle’s central strategists. He rallied a veteran
group of Russian lawyers, shaped the line of attack, and became the fight’s
public face. Amsterdam regards the case as the most important in his career;
Khodor-kovsky consumes him.
In part, Amsterdam has become a Soviet-style propagandist. He speaks
about the case at international conferences, runs a popular blog, and writes
op-eds for international newspapers. One afternoon when I’m with him, a
man calls from Mali with an idea for Khodorkovsky’s defense. Amsterdam
shifts from English to French and says thanks but no thanks. “I get that all
the time,” he says. “It’s strange, I know.”
Amsterdam is a squarely built 52-year-old with dark curly hair. The first
day we meet, he’s wearing a blue pinstriped suit with a slightly open white
shirt, silver cuff links, and a bright red tie hanging loose around his neck,
which seems to be his fashion—dapper but slightly disheveled, like he’s just
sprinted the length of a football field. As he goes through the case and the
team’s strategies, he speaks 100 miles a minute, frequently employing the
word fucking to convey how deeply disturbing the situation is. In
conversation, he is didactic, prefacing many statements with “Look...” and
often citing one of the half-dozen or more political science and history
books he’s currently reading. He is evidently not a self-doubter, which helps
in dealing with a country that recently passed legislation sanctioning the
assassination of state enemies. Amsterdam seems to behave as if he has a
death wish. “Sometimes I wake up and have to check myself,” he says. “Is
this a bad dream?”
He was born in White Plains, New York, to Jewish immigrants; his father
died when he was six months old. His mother later married a man who sold
women’s hats, and the family lived in the Bronx.
Amsterdam grew up with an instinctive sense of outrage and a
preternatural political awareness. During the Vietnam War, he took long
weekend drives with his stepfather, and they talked about how many soldiers
were really dying in the war, compared with what the government reported.
When his stepfather got a new job, in Ottawa, the family moved there—
“one cold hell for a New York Jew,” as Amsterdam describes it. He worked
at his school newspaper, where he wrote a story in favor of activist Abbie
Hoffman; the piece got him suspended. He dropped out but ended up at
Carleton University, in Ottawa, where he studied Marx. He then went to
Queen’s University Law School.
When Amsterdam wasn’t studying, he traveled. He was drawn to places in
transition: He went to Eastern Europe, the Caribbean, and the Soviet Union.
In 1975, after being caught in a coup in Ghana, he fled to Lagos, Nigeria,
where he stumbled upon a pile of dead bodies on a beach. Before his law
school graduation, classmates presented him with a joke postcard: “Wish
you were here.”
In 1980, he and a friend, Dean Peroff, set up a legal practice specializing
in business disputes in emerging markets. It was risky work, populated by
dubious characters. In Nigeria, where Amsterdam represented a Canadian
telecom company, 30 government-backed men with AK-47 assault rifles
tried to break up a shareholders meeting at which Amsterdam was making a
presentation. “I’ve lost track of the number of times my life has been
threatened,” he says.
Amsterdam uses the media as much as the courtroom to expose his
opponents, stirring up public outrage over the most salacious—and
sometimes dangerous—facts of the case, which in turn pressures his targets
to rethink or settle. The work requires him to spend weeks abroad.
Amsterdam first heard from Khodor-kovsky in 2003, not long after the
Kremlin began its march on him. The two met at the Washington office of a
mutual friend. “He wasn’t what I expected,” Amsterdam says. “He spoke in
a whisper and looked more like a nuclear scientist than a business guru.”
Khodorkovsky explained that he needed a lawyer. He knew Amsterdam’s
history of trying politically tinged cases and asked him what he thought.
Amsterdam pitched hard; he felt as if he’d been preparing for this his entire
life. “This is going to get extra ugly,” he told Khodorkovsky, looking him
right in the eye. “But I have an advantage over other lawyers. I’ll take your
fate personally and be there no matter how bad it gets. The people who you
think are your best friends now will quit on you. I won’t quit.”
Days later, Amsterdam was in Moscow.
Khodorkovsky was born in 1963. His parents were factory workers, and
the family lived in a two-room apartment in Moscow. After high school, he
attended the Mendeleev Institute of Chemical Technology, where he rose to
a senior post in the Communist Youth League and began to see party
connections as useful. In the late 1980s, just as perestroika’s market reforms
took off, he established a collective that sold desktop computers and
currency. He then opened Bank Menatep, one of the country’s first private
banks. Before he turned 30, he was a millionaire.
The fast and loose financial climate gnawed at his mother. “I said to
Misha, ‘All businessmen in Russia will end up in prison or dead. I’ve seen it
happen before. This is in our history,’” Marina Khodorkovsky tells me one
afternoon at her modest yellow house outside Moscow. “But Misha said,
‘No. It will be different this time. We will be like the West.’” She pauses. “I
never wanted him to be a businessman.”
During the 1990s, Russia was a mess. The economy was tanking, there
was a costly war in Chechnya, and gangsters had infiltrated many of the
nation’s businesses. Russian President Boris Yeltsin, in an effort to save his
skin, called in a dozen or so up-and-coming capitalists, including
Khodorkovsky. In a transaction known as loans for shares, the tiny group of
influential men essentially bankrolled the president’s reelection battle in
return for their pick of Russia’s oil fields, telecommunications firms, banks,
and gold mines.
Khodorkovsky wanted oil—particularly Yukos. At the time, the company
wasn’t in great shape, nor was the country’s oil industry, which had become
a rusting hulk saddled with corruption and inefficiency. Equipment was
outdated, managers siphoned off profits or paid protection money to Mob
bosses, and employees spent more time swilling vodka than working.
The 1995 Yukos auction was a classic example of Yeltsin-style
privatization. Western companies were forbidden to participate, and a
Russian company—a rival of Khodorkovsky’s—was mysteriously
disqualified despite offering more money. In the final agreement,
Khodorkovsky, whose own Bank Menatep arranged the auction, won a 78
percent stake in Yukos for $350 million. Included in the deal was the
company’s $3 billion of debt. Two years later—after the company wrested
control from Soviet-era oil bosses, centralized power, and mandated that
anyone caught drinking on the clock be fired—Yukos shares began trading
on the Moscow stock market, and the company had a market capitalization
of $9 billion. -Yukos was seen as a rising force.
The money brought Khodorkovsky and his fellow titans exceptional
power, with huge influence in the Kremlin, especially after Yeltsin’s
manufactured electoral victory. Like other industry kings, Khodorkovsky
traveled with bodyguards in armed luxury cars. He married, had four
kids—his oldest recently graduated from college and works in advertising in
New York—and helped build a gated community in the Moscow suburbs for
himself and his partners.
Khodorkovsky could occasionally come off as ruthless. He funneled
profits and shifted ownership rights to offshore accounts, moved forcefully
against corporate raiders, and exploited minority investors. His climb
continued through the 1997 financial collapse and the oil-price surge that
followed. All was good until Vladimir Putin, the former K.G.B. agent, came
to power on New Year’s Eve 1999.
The story of KhodoRkovsky’s fall begins in July 2000, seven months after
Putin succeeded Yeltsin. That month, the new president summoned the
oligarchs to the Kremlin, where, in a quiet room, Putin declared an end to
gangster capitalism. The 1990s were history, he announced. It was time for
reform. He issued a warning: Keep clear of politics, and you won’t be
questioned about the murky methods by which you became so rich. But
cross me and you will be buried.
Out of this, three types of oligarch emerged: those who remained neutral
in relation to Putin—for instance Vagit Alekperov, who owned a controlling
stake in Lukoil; those who became Putin’s allies, such as Roman
Abramo-vich, who had investments in oil and steel; and those who decided
to fight. Khodorkovsky fell into the last camp.
For a time, he appeared to be safe. He transformed Yukos into a Western-
style powerhouse and hired American oil executives to modernize his books.
In 2001, he organized the Open Russia Foundation, a nonprofit that spent
millions of dollars advocating investments in democracy, economic
transparency, and human rights. Bruce Misamore, the American chief
financial officer of Yukos at the time, tells me that the oligarch was on a
mission. “I don’t know if you would call it a revelation, but he changed,”
Misamore says. “He brought in McKinsey, Schlumberger, Halliburton, and
decided to become a model.”
Yukos was hailed as a story of Russian triumph; it was suddenly the
largest and most efficiently run company in the country. By 2003, as oil
prices climbed and markets steadied, Yukos was pumping 1.7 million
barrels of oil a day—about 2 percent of the world’s supply. Profits took off,
and the firm became the country’s leading private taxpayer, representing
around 7 percent of the country’s G.D.P.
By then, Khodorkovsky was the richest man in Russia, worth an estimated
$8 billion. A year later, his fortune would grow to $15 billion. He began
talking about replacing the state-owned gas pipeline to China with his own,
and there were serious discussions about selling 40 percent of the company
to Exxon Mobil or Chevron. But the Kremlin was pushing in the other
direction, encouraging the expansion of the Russian business empire abroad.
Khodorkovsky then made the mistake of dipping into politics. Clifford
Kupchan, a director at the Eurasia Group, a New York consulting firm
specializing in geopolitical analysis, recalls the oligarch, on a trip to his oil
fields, sitting on the floor of his jet and speaking out against Kremlin
corruption. Khodor-kovsky met with then-National Security Adviser
Condoleezza Rice and Vice President Dick Cheney. But the misstep that
proved disastrous was his spending millions of dollars in support of the anti-
Putin opposition. The president warned him to back off, but Khodorkovsky
kept going. And just as the president had promised, the Kremlin attacked, in
what would become the defining moment in the government’s crackdown on
the oligarchs.
In July 2003, Platon Lebedev, Kho-dorkovsky’s billionaire partner, was
arrested on charges of theft. Months of interrogation followed. Then, on
October 25, masked forces armed with machine guns seized
Khodorkovsky’s jet on a Siberian airstrip and arrested him on charges of
theft and fraud. He was loaded onto a government plane, flown back to
Moscow, and thrown in jail, where he would stay, his bail denied.
By the time Khodorkovsky’s trial began, in the summer of 2004,
Amsterdam had settled in Moscow for the long haul. He moved into a plush
room at the Hyatt, though it was not a comfortable stay. Emails arrived
already read, and men followed him in cars and on foot. The Russians on the
case had it worse: There were 120 raids on company offices and private
houses, documents were confiscated, judges quit, defense lawyers were
intimidated, and one female lawyer was locked up. “The Kremlin came at us
from 100 directions,” Amsterdam says.
Because Russian laws prevent foreigners from practicing in the country’s
courtrooms, Amsterdam couldn’t litigate in defense of his client. So he
passed coded messages through the Russian lawyers to Khodorkovsky, who
stood throughout the trial in a metal cage, gazing much of the time at his
distraught wife. Prosecutors argued that Khodorkovsky had used illegal tax
shelters to avoid paying billions of dollars the company owed. The Yukos
tax bill, spanning the years from 2000 to 2003 and combined with penalties,
would eventually climb from $3.4 billion to $42 billion. On top of this,
Khodorkovsky was accused of evading $700 million in personal taxes.
The defense, meanwhile, argued that the Kremlin had reinterpreted
commonly used tax shelters and selectively applied new laws to Yukos for
political purposes. Yukos was not only the biggest taxpayer in the country,
but government inspectors had already audited the company for the years in
question. Plus, the government’s numbers didn’t always add up: At one
point, prosecutors claimed Yukos owed $8 in taxes for every dollar in
revenue. On breaks, Amsterdam gravitated to the television cameras, where
he attacked the prosecutors. This is a “show trial,” he said more than once,
invoking Stalin.
Putin denied that he had embarked on a politically motivated
housecleaning, and it’s possible that ordinary Russians wouldn’t have
minded if he had. The years after Communism had created a population
suspicious of business giants. Khodorkovsky “is seen as typifying the
Yeltsin era, where a group was allowed to steal the patrimony,” Kupchan
says. “It was seen as Russia’s time of troubles, when things went wrong for
the country because it was weak. Russia was taken advantage of and
stomped on.”
After the 11-month trial, Khodor-kovsky was found guilty of six charges,
including fraud and tax evasion. He was sentenced to eight years in Penal
Colony No. 10, six time zones east of Moscow. Dozens of other Yukos
employees would also face imprisonment, while many more would flee
Russia. Less than a year later, after an appeal was rejected, Amsterdam was
kicked out of the country.
Yukos was promptly forced into bankruptcy, and the company’s core
division, which accounted for 11 percent of the country’s oil, was auctioned
off. Nothing about the sale was transparent—a -throwback to the 1990s. The
winning bidder was a mysterious Russian -company, Baikal Financial
Group, which had $300 to its name and a storefront address. Three days
after the sale, Baikal was bought by Rosneft, the state-owned oil company
run by Igor Sechin, a former K.G.B. agent and deputy chief of Putin’s
administration.
Amsterdam was on fire about the deal and still is. “There’s a tremendous
willingness to give a margin of appreciation to the Russians. ‘Well, their
system is different,’” he says. “I kept screaming, ‘They haven’t nationalized.
They’ve fucking stolen all of it.’”
And the Kremlin kept going. In the spring of 2007, in another rigged
auction, the remainder of Yukos was sold to Gazprom and Rosneft. By the
winter, bankruptcy proceedings had ended and the country’s largest private
oil company had ceased to exist.
What happened to Khodorkovsky’s company has become the template for
Russia’s future. In a 2006 report, the Organization for Economic
Cooperation and Development cited “the legal and political onslaught
against Yukos” as the most alarming sign of Russia’s “shift towards greater
state control.” Anders Aslund, a former economic adviser to Yeltsin and
now a senior fellow at the Peterson Institute for International Economics,
was more blunt: “The Kremlin learned from the Yukos affair that they could
steal companies. But they wouldn’t do it as crudely as they did with Yukos.
Instead of the owners being arrested and thrown in jail, they might just force
them out of the country and pay them 60 percent of the value of their
company. It was Putin turning the tables on the oligarchs.”
By 2006, the Kremlin had seized, in whole or in part, more than 20 other
private companies, most of them gas and oil concerns. Among the prominent
takebacks was the Sakhalin II oil and gas development. After being charged
with environmental infractions, Royal Dutch Shell and other investors were
forced to sell a controlling stake to Gazprom. Most recently, the owner of
Russneft, a midsize oil company, was driven out of the country.
Now all that remains is Khodor-kov-sky’s final trial. Prosecutors allege
that he and his partner, using money transfers through Yukos and its
subsidiaries, embezzled more than $20 billion in revenue. Amsterdam and
his colleagues argue that the charges are again politically motivated, though
other people are convinced that the stakes this time around are much
deadlier.
B ack in London, Amsterdam invites me to join him one morning at the
Landmark hotel for a speech at the Alternative Investment Summit, where
the talk is about the money to be made in Russia. When I mention that he’s
an odd choice for the event, Amsterdam’s assistant laughs and says she
snuck him into the lineup like a Trojan horse.
Standing in front of the seated crowd, Amsterdam’s face tightens. He
grasps the lectern, and soon the words blast out like a gale-force wind. He
sounds like a preacher. He says he loves Russia as a country, but that it has a
regime that does not abide by the rule of law. “Yukos is a verb now—‘to
steal,’” he declares with vigor. “In Russia, as a business, you risk being
Yukosed.”
When the speech is over, the conference leader takes over the lectern and
looks out at the crowd. “I’ve never seen an audience so stunned into
silence,” he says, eyebrows arched. Amsterdam has been running around all
day on a few hours’ sleep, with little to go on but coffee, but he claims he’s
not tired. “That was great,” he says.
It has been Amsterdam’s combative posture, as much as the substance of
his political attacks, that has raised the emotional temperature of the Yukos
case. Earlier in the fall, he’d flown to Australia, where he stirred up
controversy about the country’s decision to sell uranium to Putin. Before he
arrived, it was a non-issue, expected to pass without much debate. But after
Amsterdam’s week of talk-show appearances and his keynote speech at a
summit about human rights and corruption in Russia, the uranium sale ended
up stalled in the Australian Parliament.
Amsterdam keeps turning up the heat. A day before Putin traveled to Italy,
Amsterdam was also there staging media events, talking to politicians, and
raising simple questions: Why is Putin holding political prisoners? Doesn’t
the rule of law matter anymore? He did the same in Spain and Germany,
where he’s been stirring things up for the past few years, especially about
former German Chancellor Gerhard Schröder’s close relationship with
Putin. Schröder was one of the only Western heads of state to come out in
support of the Yukos takeover, and he now has a job at Gazprom. Recently,
Amsterdam met with advisers to current German Chancellor Angela Merkel.
It is more than probable that those conversations had an impact on her. In
March, she visited Putin and told reporters that she would “welcome”
Khodorkovsky’s pardon.
Amsterdam and I talk about the new Russian trial. Preparing for it has
been a challenge, to say the least. Many of -Yukos’ hard drives and
documents are missing. Four years ago, the man who oversaw
Khodorkovsky’s money died in a mysterious helicopter explosion. Another
Russian lawyer is in custody and has had to fight to receive AIDS
medication. Others escaped Russia and are scattered around the world;
Leonid Nevzlin, a Khodorkovsky colleague who now lives in Israel, is
currently being tried for murder in absentia. When I ask Aslund about the
ENEMY page 9

Cold Case
(Portfolio.com: Careers)
Submitted at 7/16/2008 3:00:00 AM
O n what would be the final weekend of his life, Tom Carvel drove to his
country home in upstate New York, deeply depressed. He’d built a
namesake national chain of 850 ice cream shops, developing some of the
fast-food and franchising concepts that changed how America eats. His
sandpaper-voiced pitches in commercials—“Thinny-Thin for your fatty-fat
friends,” he said in one spot—had made Carvel a household name. He
golfed with Bob Hope and did a guest turn on Late Night With David
Letterman. He had recently sold his chain for $80 million, but he held on to
a 100-room motel, 40 properties leased to Carvel franchisees, and a golf
course in Dutchess County, New York. At 84, Carvel still was going to work
every day.
But there were deepening problems inside his empire. Carvel confided to
an associate that he no longer trusted Mildred Arcadipane, his corporate
secretary of 38 years, or Robert Davis, his longtime lawyer and close
financial adviser. Carvel had come to believe that they were scheming
behind his back, maybe stealing from him. After agonizing for months, he
arrived at his country home on Saturday determined to march into his office
on Monday and fire his lawyer and relieve his secretary—a mercurial
woman, according to many who knew her—of her considerable power.
But Carvel never got the chance. He was found dead in his bed that
Sunday morning in 1990, the victim, it appeared, of a heart attack. Instead of
being dismissed and demoted, Davis and Arcadipane returned to work and
began to take command of Carvel’s business and personal finances. The
Carvel estate, officially valued at $67 million, spurred what one lawyer calls
a “feeding frenzy”; nearly 18 years later, a bitter fight rages on. In most
estate battles, family members square off against one another. But the
principal fault lines in this case have put Davis, Arcadipane, and the
multimillion-dollar charity that Carvel -left behind on one side, and Carvel’s
widow, Agnes, and his niece Pamela Carvel on the other. The Carvels had
no children, and Agnes “was frozen out of everything,” Pamela contends.
“She was denied millions that Tom wanted her to receive.”
In 2007, after years of digging by private investigators in Pamela’s
employ, the case took a bizarre turn. Pamela filed a lawsuit in U.S. District
Court in Fort Lauderdale, Florida, alleging that Carvel’s death resulted in
“fraudsters…controlling all Carvel funds to the exclusion of the Carvels.”
She asked that her uncle’s body be exhumed for an autopsy to determine if
he was murdered as part of the alleged scheme. The petition concludes with
a question: “Will the truth finally be known?” And with that, one of the most
contested estate fights in New York history also became a murder mystery.
Pamela says she has circumstantial evidence against several former Carvel
employees, but a great deal of her ire over the years has been aimed at Davis
and Arcadipane, who not only continued to work for the company but also
battled Agnes for years over the Carvel fortune from their seats on the
Thomas and Agnes Carvel Foundation board—seats they gained through a
document whose validity has been called into question. Both eventually
were forced to resign from the board for misappropriating foundation
money. Their families and lawyers scoff at any notion that they would ever
have harmed Tom Carvel, but even if they had, neither will face justice.
They are dead.
By any measure, the Carvel case is a legal colossus. More than 40 lawyers
have had a hand in it. Legal fees and commissions have already drained
more than $28 million from the Carvel fortune, according to Leonard Ross,
one of Agnes’ former lawyers. Save for Carvel’s widow, it is hard to find a
guileless participant. Pamela casts herself as the selfless protector of her
uncle’s millions and her aunt’s interests. To her opponents, she’s just a
desperate relative out for a big financial score. In one of the many lawsuits
involving estate funds, a state judge in Florida ruled that there was “strong
evidence of fraud” in the way she once tried to collect more than $10 million
from the estate. Still, Fred Welsh, a former New Jersey police detective
hired by Pamela, tells me that he has uncovered enough circumstantial
evidence—including the possibility that Carvel’s death certificate was
forged—to warrant a homicide investigation.
The battle has played out in three U.S. district courts; state courts in New
York, Delaware, and Florida; and in London. It enjoys a certain notoriety in
the suburbs north of New York City, where Tom and Agnes Carvel lived in
the gentle hills of Ardsley. Four trials have been held in Westchester
County, New York; a fifth is ongoing. Four of Carvel’s executors have died.
When I phoned the Westchester County Courthouse to ask about examining
case files, a clerk told me, -“I am making the sign of the cross now.-” I spent
most of a day plowing through five large boxes bursting with pleadings and
rulings before a court official said apologetically, “We’ve found more.”
Pamela claims that her uncle once told her that he was worth $250 million,
which would mean that tens of millions of dollars in assets have vanished.
One thing is certain: Events have not turned out as Carvel wished. His plan
to provide for his widow and funnel millions to small charities in the towns
that supported Carvel stores backfired, in part because of the unwieldy,
complex nature of the estate that he himself approved after consultation with
Davis, his lawyer. “He was always fearful that somebody was after his
money,” says Ginny King, a longtime friend.
And in the end, he was right.
Born in Greece in 1906, Tom -Carvel immigrated to New York with his
parents and six siblings in 1910. As a young man, he test-drove Studebakers,
played drums in the Borscht Belt, and fixed cars. After being diagnosed
incorrectly with tuberculosis, he set out for the fresh air of Westchester, and
with $15 borrowed from his future wife, he began selling ice cream from a
beat-up vending truck. One hot weekend in 1934, he suffered a flat in the
village of Hartsdale. Flagging down motorists to buy his melting ice cream,
Carvel re-alized he could do more business from a fixed location. So he
remained for the summer, eventually saving enough to make a down
payment on a nearby building. It became the first Carvel shop.
With some tinkering, Carvel discovered how to instantly freeze ingredients
to produce a creamy ribbon of ice cream at the flick of a switch. It was the
first soft-ice-cream machine of its kind. One store grew to many, and by
1950, 21 stores were operating under the Carvel name. With that, Carvel
joined a group of franchising pioneers, including A&W, White Castle, and
Howard Johnson’s, that were creating roadside chains that served up what
would become known as fast food. Still, the ice cream business was a warm-
weather enterprise, and Carvel needed to generate store traffic throughout
the year. Again, the ice cream gods intervened. Pieces of crumbled cookies
accidentally fell into a vat of soft ice cream placed in a freezer, and when the
hardened batch was discovered, it led to another innovation: the Carvel ice
cream cake.
Carvel’s climb might have been even more astounding had he not rejected
an invitation from a milkshake-machine salesman named Ray Kroc to join
him in a fledgling California hamburger business named McDonald’s. “Tom
claimed it was his biggest error,” says Thomas Kornacki, a Carvel vice
president in the 1990s who worked for the company for 23 years.
Tom Carvel had a special knack for promotion—and self-promotion. He
sponsored Little Miss Half-Pint contests for young girls and made
franchisees attend an 18-day course he called the Carvel College of Ice
Cream Knowledge. His raspy, ad-libbed appearances in the company’s
commercials were ridiculed, but they were memorable and sales soared. The
idea of the C.E.O. as pitchman would catch on and influence other company
heads, like Frank Perdue and Lee Iacocca. In his ads, Carvel seemed benign,
but in real life, he was no Mister Softee. He battled franchisees all the way
to the U.S. Supreme Court, winning the groundbreaking right to require
them to buy all ingredients and supplies from him, even the napkins.
Despite his wealth, Carvel lived simply. He wore polyester suits and
hectored subordinates who didn’t drive modest American cars like he did.
Visitors to the Carvels’ Ardsley home were amazed to find couches
protected by plastic slipcovers. His office was an oversize motel room with
furnishings that would have gone begging at a lawn sale. Yet T.C., as friends
called him, could be generous; each Christmas, he gave gifts of $10,000 (tax
free) to dozens of nieces and nephews.
By the late 1980s, however, Carvel’s fortune had become a burden. By
then, he was in his eighties. Without children, he wondered what would
happen to all he had accumulated. After wavering for months, he reluctantly
sold his ice cream operations in 1989 to Investcorp, a Bahrain-based
company that owned Tiffany & Co. and Gucci. “He didn’t trust anybody in
his family or in his executive group to grow the brand,” Kornacki says. “The
company was his legacy, and he didn’t want it to die.”
Carvel put his personal affairs in order too. One cold Saturday night in
February 1988, Tom and Agnes excused themselves from a dinner party to
sign identical wills naming the Thomas and Agnes Carvel Foundation as the
beneficiary of their fortune after their deaths. Carvel was quite clear about
how he intended to bestow his estate. If he died first, Agnes was to receive
all the income his estate generated, plus quarterly payouts from a trust fund.
The Thomas and Agnes Carvel Foundation was to receive all that was
left—once Agnes died.
Overseeing this estate would be seven executors, Arcadipane and Davis-
among them. That number is unusual, but Carvel was convinced that the
seven would serve to check and balance one another, safeguarding his
money. One of the people who helped fashion the plan was Davis, his
lawyer. Whether Carvel was steered into this plan by unscrupulous advisers
or driven to it by his own fears about the fate of his fortune is an open
question. But he had not been dead for more than a few months before one
thing became clear: The elaborate plan, rather than creating checks and
balances, set up factions that came to feud over and feast on Carvel’s
fortune. It was turning into an estate disaster of monumental proportions.
The wild card in Tom Carvel’s life seems to have been Mildred
Arcadipane. A slight woman, she began working for Carvel in the early
1950s, fresh out of secretarial school. Her job was her life; in the 38 years
that she was employed by the Carvel corporation, co-workers recall her
taking off just two days—to attend her father’s funeral. She never married,
choosing instead to care for her elderly mother at home. By the 1980s,
evidence in the many court cases shows, she had become a force inside the
company. The accounting and payroll departments had begun to report to
her. She “knew the nuts and bolts of the company,” and with her “hot
temper” and “iron fist,” she knew how to get things done, Kornacki recalls.
She could also be despotic. Some employees complained that underlings
who crossed Arcadipane might find themselves without a job or that their
health insurance had lapsed.
She had her way with Tom Carvel too. Arcadipane often cursed and
shouted at the boss and locked him out of his own office dozens of times, a
longtime driver for Carvel testified. On three -occasions, Carvel sent him to
New York City to buy jewelry as a peace offering. “When she lost her
temper,” the driver said in the deposition, “it would require almost a
straitjacket.” Asked why he kept Arcadipane on, Carvel once said
cryptically that she had him “over a barrel,” according to another affidavit.
Employees whispered that Carvel and Arcadipane, far from being just close
business associates, might once have had an affair.
Pamela Carvel was close to Tom too. She grew up in Queens, New York,
the eldest daughter of Tom’s brother Bruce. Tom and Agnes treated her like
the child they never had. As a teenager, she spent her summers living with
them and serving ice cream at their Hartsdale shop. Tom took care of her
college tuition bills and hired her to make inspections of Carvel stores.
When her uncle died, Pamela, who was working and studying abroad, “got a
call to come home,” she says. “My aunt told me she needed help.”
Tom had made Pamela one of the seven executors of his estate. She
returned to New York in December 1990, she says, to find an avalanche of
suspicious transactions involving the Carvels’ finances. Bank accounts were
being closed and opened, apparently without Agnes’ knowledge, and large
sums of money were being transferred between Carvel accounts, her lawyers
told me. In the middle of these matters, Pamela says, were Davis and
Arcadipane. Davis wasn’t a Carvel lifer, but he had a long history with Tom
Carvel. While working for a Manhattan law firm, Davis had taken Carvel on
as a client in 1969 to advise him on how to take his company public that
year. Davis later helped negotiate the 1989 sale to Investcorp.
Hints of trouble surfaced before Carvel was even buried. As Agnes
attended her husband’s wake, Davis entered the Carvel home without her
permission to search for Tom’s will, bringing a locksmith to crack open the
couple’s safe, court documents show. Shortly thereafter, Arcadipane began
shredding -records at the office, defying orders from other Carvel executors
that she stop. The shredder was silenced only after Pamela burst in and cut
the electric cord herself. Through it all, Carvel’s will could not -be found. It
had been given to Arcadipane for safekeeping, but she claimed it was lost.
Its disappearance delayed Carvel’s executors from officially assuming
control of his estate, leaving Davis and Arcadipane in command for months.
Agnes, during this period, seemed overwhelmed. Davis was pressuring her
to loan the business $500,000, saying there were cash-flow problems. Agnes
demurred, on the advice of Pamela, who considered the request improper.
But -Davis persisted. He sent another of Tom’s employees to Florida to talk
to Agnes while Pamela was in New York, and this envoy convinced the
widow to supply the funds. Meanwhile, Thomas Reddy, -a lawyer and a
family friend, got Agnes to sign papers creating a trust account for her
money. Three trustees would manage the funds and have the authority -to
make distributions to her. Known as the Florida trust, it was touted as a
safeguard for Agnes’ assets—but for the widow, it would become a
nightmare.
Unusual things were also happening at the Thomas and Agnes Carvel
Foundation. Davis emerged as the foundation’s first paid president, at a
salary of more than $100,000 a year, and board members—including
Arcadipane—began drawing stipends, records show. The payments were
troubling to Agnes because she and Tom believed that any work for the
charity should be done for free. Agnes also became bewildered by the
foundation’s abrupt shift in direction. Although it bore their names, it was
focused more on making six- and seven-figure grants to big, established
institutions than on making small grants to the grassroots groups Tom and
Agnes favored.
Worse for Agnes, a serious flaw emerged in the estate plan. With the
Thomas and Agnes Carvel Foundation now under the sway of Davis and
Arcadipane, it took an aggressively adversarial position, questioning Agnes’
spending and even challenging her right to continue Tom’s practice of
giving gifts of $10,000 at Christmas, according to Agnes’ lawyers. (The
foundation denies this allegation.) The charity had a reason to be aggressive:
Every dollar that Agnes spent or gave away of her husband’s fortune would
mean less money to the foundation when she died. Agnes and Pamela were
rapidly coming to the conclusion that the two people Tom suspected of
cheating him before his death had become their enemies too.
As Pamela and Agnes plotted to regain control of the foundation, they got
some help. The New York State attorney general’s office opened an
investigation in 1991. Its findings were shocking: The inquiry discovered
that the charity paid $55,000 in tuition for Arcadipane’s nephew and two
others and tried to camouflage the spending as grants. The attorney general
also questioned Davis’ and Arcadipane’s roles in the foundation’s sale of
Carvel stock, which reaped a quick $5 million profit for some company
employees, including $300,000 for Arcadipane.
In August 1993, the attorney general filed a civil lawsuit seeking the
ouster of Davis and Arcadipane from the foundation and the repayment of
nearly $1 million, plus money paid to cover their legal fees. Far from being
chastened, Davis helped prepare a memo to foundation members warning
that his and Arcadipane’s removal would provide the family “with an
opportunity to assume control of the foundation.” The memo found its way
to the Carvels. To Pamela and Agnes, it was a smoking gun. “The
foundation took an attitude that the Carvel family should not have any say in
the operation of the Carvel Foundation,” Agnes’ former lawyer Ross says.
“Davis was behind that.”
Agnes fired off a letter to the foundation. “I am appalled that Mr. Davis
views this foundation as his own private charity, where the Carvel family is
to be treated as the enemy,” she wrote. Pamela sent a scalding note to
Arcadipane: “Obviously, you feel no responsibility nor the slightest twinge
of gratitude” to the man and the company that had “made a secretary into a
millionaire!”
The battle was on. Agnes and Pamela went to court to oust Davis and
Arcadipane as foundation directors and executors of Tom’s estate. The
foundation countersued, accusing Agnes and Pamela of meddling in its
affairs.
3
The fighting turned so nasty that Davis and Arcadipane asked Judge
Albert Emanuelli of the Westchester County Surrogate’s Court, in White
Plains, New York, to investigate Agnes’ mental competency. To Agnes’
lawyers, it was an effort to silence the widow for good. Davis and
Arcadipane said they just wanted to make sure that Pamela was not
controlling Agnes. In an affidavit, Arcadipane said she looked on Tom and
Agnes “in many ways as parents” and believed that “they reciprocated the
depth of feeling.” She continued, “Sadly, since Mr. Carvel’s death, his niece
Pamela has sought to alter Mrs. Carvel’s feelings toward me and view of me
and to rewrite history.... She has undertaken to level accusations at me...that
are scandalous and shameful.”
Pamela Carvel is 59 and single. She cuts a bohemian figure, tying her
bottle-blond hair into a braid that falls to her waist. The estate fight is a full-
time occupation for her. By her own accounting, she has plowed through
millions of dollars and fallen into debt to help her Aunt Agnes and stop what
she calls the plundering of Tom’s estate. Pamela can be strident and
difficult; she has had at least four law firms represent her. She now accuses
some of those lawyers of betrayal. Still, a few of them speak of her with a
weary admiration. “Pamela Carvel is a very tough lady who was fiercely
dedicated to her aunt and to the memory of her uncle,” says John Lang, one
of Agnes’ former lawyers. “My sense is that she was completely sincere in
what she was doing.”
Pamela’s critics ardently disagree. Betty Godley, Agnes’ niece, filed an
affidavit in Surrogate’s Court accusing Pamela of manipulating Agnes for
“her own insatiable greed.” Godley tells me, “I think there were great
expectations on Pamela’s part of money coming her way.” Never close,
Pamela and Godley have not talked in more than 10 years. Their split
demarcates a family fracture in the Carvel case. “From day one, there was a
paranoia to Pamela that was incredible,” Godley says. “Everybody and
anybody was an enemy.”
Since 1991, Godley has received more than $400,000 in commissions as
an executor of Tom’s estate and one of the three people overseeing Agnes’
Florida trust. Still, she talks of her participation as a burden that she wishes
would end. “I have five kids, a family, everything she doesn’t have,” Godley
says of Pamela. “This has been Pamela’s life for 17 years.”
The seeds of Pamela and Godley’s split were planted six months after
Tom’s death, with the creation of the Florida trust that was supposed to be a
vehicle to safeguard Agnes’ money. Godley was the only family member
among the trustees. Pamela has always seen Godley’s appointment as a ruse.
“That was the only way to make it look legitimate, by having a family
member on it,” she says. But after the trust was created, Agnes “no longer
had any money in her own name,” she adds.
Indeed, in the spring of 1994, things turned bleak for Agnes when, at
roughly the same time, the two trusts that doled out her funds—the Florida
trust and the trust set up by Tom, which contained $26 million and was
overseen by Davis, Arcadipane, and two other trustees—both stopped
making payments to her, according to a lawyer for Agnes. Both trusts used
the same rationale—that others were manipulating Agnes, who therefore
couldn’t be trusted with her own money. Ross, her former lawyer, saw a
more sinister motive: “Mrs. Carvel was being squeezed, I think, to stop all
the litigation.”
Agnes and Pamela were furious at Godley for withholding the money. The
breach became permanent in 1995, when Pamela arranged to have $2
million moved from a Carvel corporation account whose ownership was in
dispute into a Swiss bank account registered in Agnes’ name. Pamela said
the money had been owed to Agnes and that she had dutifully notified the
required parties. But Godley went to court to challenge the transfer, and
Judge Emanuelli of the Surrogate’s Court ordered that the money be placed
in escrow. Godley and her aunt would never talk again.
By the middle of 1995, the Carvel widow, now 86, was in turmoil,
bewildered by the endless swirl of litigation. She was upset at her financial
predicament and fearful that Judge Emanuelli, whom she had come to view
as hostile, would declare her incompetent, stripping her of whatever control
she still had over her life. So she sought refuge in London, moving there
with Pamela to live out her days, she hoped, in peace.
Sally Boynton, a Westchester County lawyer appointed by the court to be
Agnes’ legal guardian, took Agnes and Pamela’s side after flying to London
to judge Agnes’ competency for herself. The widow, Boynton would later
tell the court, had become the victim of the “unscrupulous dealings of
untrustworthy people” and had moved to London “to gain control over her
assets to prevent ‘the thieves from stealing from her.’” Boynton also wrote
that Agnes expressed “unequivocally” her trust in Pamela to handle her
affairs.
Godley saw it quite differently. She charged that Pamela had become a
Svengali, “hiding” Agnes in London in an attempt to thwart an inquiry into
Agnes’ competency. “I feel a heinous crime has been done to my aunt,”
Godley wrote in an affidavit filed in the Surrogate’s Court. Judge Emanuelli
forced Boynton to resign her guardianship, and he replaced her with Marc
Oxman, a lawyer who at that time was the executive director of the
Westchester County Democratic Party.
Oxman was far more skeptical of Agnes’ competency and Pamela’s
motives. In his report, Oxman wrote that Agnes had been “manipulated and
controlled by those individuals who did not have her best interests at heart.”
As the battle raged, Agnes died in London in August 1998, at the age of 89.
Yet even in death, she could find no peace. Her body remained in cold
storage for about a month while both sides fought over whether to allow an
autopsy to determine if she had suffered from dementia. Pamela, who
opposed the examination, prevailed and quickly cremated her aunt’s
remains.
Rather than hasten a resolution of the case, Agnes’ death complicated
matters, for now there were two estates to fight over: Tom’s and Agnes’.
Arcadipane and Davis had resigned from the Carvel Foundation in 1996,
in a deal with the New York attorney general’s office to settle allegations of
wrongdoing. Arcadipane died in 2002, at age 74, of a heart ailment. Davis
died sometime later. But that didn’t end the foundation’s fight with Agnes’
representatives. Indeed, the charity has continued to be a fierce and
formidable opponent of Agnes’ attorneys and Pamela in their fight over Tom
Carvel’s millions.
The foundation has approximately $36 million in assets, according to its
most recent published tax records, from 2005.But today, the charity is
connected to the Carvel family in name only. No family member sits on its
board. Its directors have paid themselves more than $1.3 million in salaries
since Tom Carvel’s death, including about $43,000 annually to the
foundation’s president, William Griffin, the multimillionaire chairman of the
Hudson Valley Bank, based in Yonkers, New York. Moreover, the charity
has spent many millions battling for the Carvel fortune. In 1998, it was
instrumental in torpedoing a proposed settlement that would have ended all
litigation and given Agnes $8 million—a fraction of her husband’s estate.
The foundation didn’t respond to a request for comment on this; indeed,
officials declined to be interviewed. The charity issued a statement that said,
in part, that “Thomas and Agnes Carvel established the foundation and left
the bulk of their estates to it to provide charitable grants to needy children,
and the foundation is focusing its energies on fulfilling that mission...rather
than responding yet again to Ms. Carvel’s baseless allegations.”
And still the litigation continues. The latest chapter, playing itself out in
the Surrogate’s Court stems from a rare, albeit posthumous, victory for
Agnes Carvel. In June 2003, five years after she died, a Surrogate’s Court
judge ruled that she had been denied $7 million in income generated by
Tom’s estate during her lifetime. The current trial is about what to do with
this money and $3 million in other assets. The foundation is claiming all of
it as the final beneficiary named in Tom’s and Agnes’ 1988 wills. [Tom’s
will surfaced several months after his death.] Agnes’ lawyers argue that
because she was wrongly denied the funds while she lived, her new London
executor should decide how the money should be spent.
Pamela also made a play for the funds. After obtaining a $15 million
judgment in a London court against her aunt’s estate for money Pamela says
she spent in caring for Agnes and providing for her legal representation, she
then tried in three separate American courts to collect the money from
COLD page 12
4
Gold-Medal Schmoozer
(Portfolio.com: Business Travel)
Submitted at 7/16/2008 3:00:00 AM
B ack in 2001, Sead Dizdar-evic’s name was inseparable from the Olympic
movement—but it wasn’t exactly the association he sought. The smooth-
talking hospitality pitchman had first burst upon the Olympic scene in 1983
by finagling the right to sell, through a modest travel agency he owned in
Staten Island, New York, package tours to thousands of Americans wanting
to attend the Winter Games in his native Sarajevo, Yugo-slavia. But some
two decades of Olympic wheeling and dealing later, he was almost laid low
when he was swept up in a cash-for-favors scandal involving Salt Lake
City’s bid to host the 2002 Winter Games. A number of International
Olympic Committee members were forced to resign when it was discovered
that they had accepted bribes in return for voting to award the Games to Salt
Lake. Two prominent Salt Lake bid officials were indicted for fraud in the
scandal, and one city official intimated, in a memo that ended up in federal
court, that Dizdarevic had pretty much put the idea that the Games could be
bought into local Olympic officials’ heads.
Dizdarevic escaped federal prosecution himself only by agreeing to testify
that he’d assisted in the payoff scheme. He admitted that he’d given
$131,000 to the Salt Lake officials—which they used as bribes—hoping his
favors would win him the Games’ contract to broker travel, lodging, and
tickets. Though a judge ultimately threw out the fraud case, Dizdarevic says
his brush with the law scared him straight.
Well, straight is a relative term, but there is no doubt that the tawdry Salt
Lake episode, rather than ruining Dizdarevic’s Olympic money machine,
rejuvenated and reformed it. Now make the great leap forward to Beijing.
Dizdarevic, pluckier than ever at 57, is sipping sugary espresso in the 26th-
floor executive lounge of the Sofitel Wanda hotel, the French chain’s luxury
flagship in Asia. His Olympic hospitality firm, Jet Set Sports, of Far Hills,
New Jersey, owns the rights to 175 rooms in the Sofitel, plus the $20,000-a-
night presidential suite, for this month’s Games.
That’s nearly half of the five-star hotel, for 18 days, paid in full. And the
Sofitel is but one property in Jet Set’s vast portfolio of high-end Beijing
hotels, making Dizdarevic the must-see man for corporations heading to the
Olympics.
Still, on a recent swing through Beijing to nail down final arrangements,
Dizdarevic is feeling fleeced. A Sofitel manager is asking $65 a head for
buffet breakfasts during the Games, twice the hotel’s normal rate. The
hotelier is also demanding that Dizdarevic pay extra for the grand ballroom,
where Jet Set plans to wine and dine hundreds of clients for BHP Billiton,
the Australian mining colossus. Annoyed, Dizdarevic counters with what he
calls the Jet Set model: a package price for food, drink, and facilities for
7,800 meals, including a “guaranteed” 40 percent profit margin for Sofitel.
“You should capitalize on the Olympics, but that doesn’t mean you have a
license to steal,” he scolds the nattily dressed Frenchman. “Remember, I
have other options, even for breakfast.”
“For everything,” the young manager demurs, in heavily accented English,
“you have options.”
Dizdarevic leaves without a deal, trailed by his son Alan, 25, who runs Jet
Set’s China office. “They’ll learn,” Sead (pronounced Sid) says, driving off
into the smog-filled city, as I tag along for the ride.
It’s a lesson everyone who wants a piece of the action at the Olympics
figures out: It’s Sead Dizdarevic’s world; the rest of us are just guests. Since
Sarajevo, Dizdarevic has perfected the art of what he delicately calls the
“advanced royalty”—paying off Olympic pooh-bahs for the ultimate service
monopoly on the ultimate destination event. For years, “it was almost like an
under-the-rug deal,” Dizdarevic acknowledges. He was the supreme
promoter, schmoozing, boozing, and cajoling Olympic organizers and teams
from around the globe—including the U.S. Olympic Committee—to secure
the best tickets and accommodations, which he bundled at hefty markups for
corporations and ultra-affluent clients. This system, energized by
Dizdarevic’s 1,000-watt salesmanship, a world-class Rolodex, and an
impeccable record for service, pumped millions of dollars of profits into his
pockets—and into the Olympic coffers of several cash-starved countries.
This made Dizdarevic the Games’ indispensable, if unofficial, fixer.
The Salt Lake scandal ended this improvised, quasi-legal system, and
Dizdarevic no longer carries around bricks of cash and unsigned traveler’s
checks, which—according to Ante Jedrejcic, Dizdarevic’s former brother-in-
law, who worked for him before they fell out in the mid-1990s—he once
used to acquire the suitcases of tickets earmarked for, say, the Polish or
Bulgarian Olympic team. (Dizdarevic dismisses his former relative as an
“exaggerator.”) Nor does he still pad his payroll with the wives, girlfriends,
and daughters of the powerful men he needed to grease his exclusive access
to the Olympics. Now he pays millions of dollars in formal sponsorship fees
to the Olympic gods, just as Nike, Hilton, and other corporations do. In
exchange, he gets all the top-tier tickets and hotels he needs, plus a catchy
title: official hospitality operator of the Olympic Games.
But if you think this legally acquired title has quieted controversy around
Dizdarevic, you’re wrong. Competitors gripe that he’s a concierge gone
wild—that Jet Set’s monopoly cuts them out and that it may even violate
U.S. antitrust laws.
Dizdarevic seems oblivious to such bad-mouthing—or perhaps, with the
Games imminent, he’s too busy to pay much attention. After marching out
of the Sofitel, he spends more hours haggling over breakfasts for AT&T and
Medtronic at Beijing’s Novotel Peace hotel and over lunch menus for
HSBC, Herbalife, and Lehman Brothers (among dozens of others) at the
Commune by the Great Wall Kempinski hotel. His mind is a sponge for
details—rooms, wines, snacks, buses, tickets, distances, even wallpaper. He
meets his match in a Kempinski sales director named Adelina Ye, who drags
him clause by clause through their food-and-beverage contract, quibbling
over such unusual demands as Jet Set’s requirement that the hotel chef order
all raw materials 45 days before the Games. “Believe me, we’ve learned the
hard way. There are always scarcities,” Dizdarevic tells her. Later, he
dispatches an aide to find out if Ye will come to work for him.
In traffic between meetings, Dizdarevic works a BlackBerry and answers a
Chinese cell phone from the backseat of a black Audi. “Sergei, how are
you?” he says ingratiatingly. The caller is Sergei Plastinin, the Russian
dairy, fruit juice, and fashion tycoon, who’s inquiring about a luxury suite in
the main Olympic stadium. “It’s $650,000,” Dizdarevic tells him without
flinching, “plus my brokerage fee,” capped at 20 percent by Olympic rules.
Actually, Jet Set’s corporate packages sold out months ago, but
Dizdarevic, like the scalper he professes not to be, always holds certain
“assets” in reserve. In Beijing, he’s husbanding most of the city’s five-star
presidential suites, a dozen in all. “You sit on them, wait for people to come
to you,” he tells me. “Usually the richest people come very late. They think
they can get anything.”
One such request pops up hours later, in the lobby of Dizdarevic’s Beijing
hotel. Over tea, Lynn Robbroeckx of ArcelorMittal says she desperately
needs eight tickets to the opening ceremonies for her boss, Lakshmi Mittal,
the steel magnate ranked fourth on Forbes’ list of billionaires. “We’ve been
so busy running our steel business, we forgot to take care of this,”
Robbroeckx says. The same thing happened in Athens, Dizdarevic reminds
Secondary Sources: No Recession, Food Inflation, ECB
(WSJ.com: Real Time Economics)
Submitted at 7/22/2008 10:01:00 AM
A roundup of economic news from around the Web.• Defying the Gloom:
John Berry of Bloomberg says that the U.S. economy has defied the gloom
in the second quarter. “Even with all the things going wrong — including
the official bear market on Wall Street — growth probably checked in at
about a 2.5 percent annual rate in the second quarter. That’s about as fast as
many economists think it could grow on a sustained basis without generating
more inflation… In spite of the hand-wringers, the U.S. economy isn’t mired
in a recession — and that’s not just a technical matter of definitions. It’s a
matter of how many jobs are likely to be lost as the country works its way
out of the mess created by the bursting of the housing bubble, the resulting
her. The Mittals showed up at the 2004 Games in their yacht without a place
to dock. Dizdarevic had to scurry to find them an official Olympic car—to
drive in the official Olympic lanes—and a berth for their yacht near the
cruise ships that Jet Set had chartered for its guests.
Beijing is more complicated. Though the Mittals want to attend just the
first four days of the Games, Dizdarevic recommends that ArcelorMittal
lock in packages for the entire period to ensure premium access. Jet Set can
meet their plane at the airport, he says, but the private jet will have to land
under Jet Set’s auspices because, during the Games, Beijing is only
accepting the private planes of Olympic officials, heads of state, and official
sponsors like Jet Set. For the opening ceremonies, the Mittals will be
dropped off at Jet Set’s hospitality suite on the main Olympic Green;
hostesses will escort them to their seats in the stadium, based on Olympic
protocol. Afterward, they’ll file back to the Jet Set lounge. “It’s mass
confusion, so we’ll need to calm everybody down with a drink,” Dizdarevic
says.
Robbroeckx looks relieved, especially when she hears that Jet Set will
have plenty of vegetarian food on hand for the Mittals. Dizdarevic requests
that the family, who lives in London, register for the trip through the Yale
School of Management, which is co-sponsoring a leadership conference at
the Games with Jet Set. That should avoid any territorial conflicts, because
Dizdarevic doesn’t hold Olympic rights to solicit business in Britain. “And
tell your boss,” Dizdarevic says, “if he wants to do any entertaining in
London”—at the 2012 Games—“he needs to tell me two years in advance.”
The Beijing games dwarf anything Dizdarevic has done before. Jet Set has
sold more than 70,000 packages for Beijing, compared with 20,000 trips for
the Turin Winter Games in 2006, its previous high. Dizdarevic has plunked
down roughly $130 million on this year’s Summer Games, including more
than $30 million in sponsorship fees, mostly paid to Beijing’s Olympic
organizing committee; $37 million for hotels and meals; $20 million for
management systems and local staff (including a yearlong course to teach
local hires Olympic etiquette and how to deftly handle foreign visitors); and
$15 million for tickets. He expects revenue of nearly $200 million. Beijing
could have been even bigger. “I simply stopped selling,” he says. “With so
much new business, I didn’t want to jeopardize delivery.”
Jet Set’s rivals say that his control of the market is unfair and is possibly
an illegal monopoly. “Jet Set uses tickets as their choke point for everything
they do,” says the president of a sports--management firm, who claims his
company has lost several major clients in recent years because of
Dizdarevic’s hold on tickets. “A service monopoly isn’t like a Coke or a
Visa sponsorship,” says this person, who insists on anonymity because he
fears retribution from Dizdarevic and the U.S. Olympic Committee. “You
can always walk across the street and use your Amex card or drink a Pepsi.
Not with this deal.”
Even the U.S. Olympic team’s own corporate sponsors must go to Jet Set
for tickets—leverage that Dizdarevic uses to sell them full hospitality
packages, according to an executive who runs the Olympic program for one
corporate sponsor. To illustrate the point, a Jet Set competitor recounts a
conference call earlier this year: It was organized by a Canadian corporation
for several firms vying to manage its guest program at the 2010 Winter
Games in Vancouver. During the Q&A, whose participants included
SportsMark Management Group of Larkspur, California, and Iluka of
London, Dizdarevic blurted out, “Where will you get gold-medal-hockey
tickets?”
The answer is, of course, obvious. Dizdarevic has the lion’s share. After a
long, knowing pause, the would-be sponsor chuckled and said, “Oh, Sead,
you ask such good questions.”
Technically, each national Olympic committee controls ticket distribution
in its own country. But in recent years, the U.S.O.C. and the Olympic
committees of Canada, Australia, and several European countries have
anointed Jet Set as their exclusive hospitality and ticket provider. Elbowed
aside, other firms say they’ve explored challenging Jet Set’s monopoly in
U.S. courts but are afraid of saddling the Olympic hierarchy with costly
antitrust litigation. “The time to strike would have been in 2003” after
Dizdarevic signed his initial deal with the U.S.O.C., one rival says. “Now
he’s too big. There just aren’t a lot of people with the stomach for a fight.”
Those who do defy Dizdarevic find a tough adversary. Beijing’s most
popular luxury hotel, the Grand Hyatt, just two blocks from Tiananmen
Square, negotiated for months with Jet Set back in 2005 over a block of
roughly 100 rooms and suites, says Christopher Koehler, the hotel’s general
manager. After six months of talks, Dizdarevic walked away. But Koehler
says he has no regrets.
“They’re sharks,” Koehler says. “They came in very early and tried to
scare us that we wouldn’t fill the hotel for all 18 days.” During the
negotiations, Dizdarevic invited Koehler to attend the Turin Games as his
guest, but the New Jersey native declined. “I didn’t think it was appropriate
to be in his pocket,” Koeh-ler says. The manager says his hotel will earn
more from the Games than what Jet Set had offered. “Why hand over
product to somebody else who’s just going to profit from your work?”
Koehler asks.
Dizdarevic, for his part, says the Grand Hyatt is slashing prices to fill
rooms during the Games, just as he predicted it would. He says Jet Set
recently turned down single rooms going for 50 percent less than what the
hotel was asking in 2005. “‘You’re three years too late,’ I told them,”
Dizdarevic says. (Koehler counters that he’s comfortable that the Grand
Hyatt will earn a healthy profit from the Games.)
It’s perhaps no paradox that some of Dizdarevic’s corporate clients praise
him with the same intensity as his detractors criticize him. “Sead really
understands the Olympics. He’s also a great negotiator,” says Deirdre
Latour, who runs the Olympic--guest program for General Electric, a
worldwide Olympic sponsor. This summer, G.E.’s corporate and business
units are sending 2,000 guests to Beijing with Jet Set. “How do you structure
a day for customers that includes Olympic events, tourist sites, meals,
transportation, drop-offs, signage in multiple languages? Sead gets it done,”
Latour says.
Raised in a secular Muslim family north of Sarajevo, Dizdarevic left the
air force academy at age 20 and moved to West Germany to play club
soccer. In 1972, he went on a shopping junket to New York and stayed. “I
thought, What a great country. No one asks my religion,” he says. Following
a stint as an airline mechanic in Newark, New Jersey, he opened a travel
agency for Yugoslav immigrants on Staten Island. The business
mushroomed, drawing Yugoslavs of every ethnic stripe. “Bosnians were
considered neutral. We worked with everyone,” Dizdarevic says. It was that
very agency through which Dizdarevic—aided by a check he delivered to
the right people in what was then Yugoslavia—won the right to become the
travel and ticket agent for the Sarajevo Games, which launched his Olympic
career. He married a Croatian-American Catholic. They have two sons and a
daughter.
Prosperity and the stress that comes with it have brought him a shock of
white hair and crow’s-feet that nearly engulf his eyes when he laughs, which
is often. Though diminutive, Dizdarevic still moves with athletic grace,
which he puts to good use during the occasional ski trips that the demands of
his Olympic--concierge life still allow. His real love, though, is hunting:
financial-market turmoil and soaring energy prices.”
• Defending Short Selling: Stefan Tangermann, writing for the voxeu blog,
looks at the reasons for food-price inflation. “New research shows that India,
China, and speculators are not the culprits in the food price explosion.
Biofuels were a significant element in the 2005-2007 food price surge as
they accounted for 60% of the growth in global consumption of cereals and
vegetable oils. There cannot be any doubt that biofuels were a significant
element in the rise of food prices. Since new research also shows that
biofuel support policies are disappointingly ineffective on environmental
grounds, governments should reconsider them.”
• ECB Suggestions: On his Maverecon blog, William Buiter says the ECB
should vote on rate decisions and publish its minutes. “The ECB has never
had a formal vote on interest rates. I know this out of the mouths of horses
He’s a little guy with big guns and the trophies to prove he knows how to
shoot them. At Jet Set’s headquarters, in an old mansion in Somerset
County, New Jersey, a pair of giant elephant tusks frame one end of the
main hall; a seven-foot-tall mounted Canadian polar bear stands guard at the
other. But Dizdarevic is proudest of the stuffed African lion and leopard that
adorn his home.
Beijing is his richest prey ever. It took three years of coddling and cajoling
to reach a sponsorship deal with China’s Olympic leaders. “We had to
educate them,” he says. “At first, the Chinese said, ‘Okay, the price is $500
a room, plus tickets.’ We said, ‘You need to talk thousands of room nights,
multiple hotels, 100 percent occupancy, sponsorship rights, staff costs. What
if you sell only 60 percent? How do you factor all that in?’ We explained to
them, ‘The first and last waves of guests, for the opening and closing
ceremonies, you can mark up 100 percent. But you can’t mark up the middle
wave.’ They thought you could just book the Olympics like a hotel.”
Dizdarevic worried that Chinese competitors would undercut Jet Set by
selling Olympic packages overseas. So he paid the Beijing organizers to
become the official hospitality operator for China’s domestic market too.
The sponsorship deal had to be approved by China’s politburo, Dizdarevic
says. His key Chinese associate is a functionary named Li Qibin. Li is
general manager of China’s largest travel company, government--owned
C.I.T.S. Beijing, which procured most of Jet Set’s hotels, restaurants,
vehicles, and local workers.
To an Italian lunch with Dizdarevic in Beijing, Li brings his English-
speaking assistant; Lu Jun, the head of the C.I.T.S. department devoted to
English-speaking clients; Lu’s English-speaking assistant; and Lu’s
assistant’s assistant. None of them speaks English very well. Li, the boss,
speaks French.
Dizdarevic broaches a sensitive subject. “As you know, Jet Set’s guests
are special,” he begins. More than 11,000 of them will tour the Great Wall,
Forbidden City, and Temple of Heaven during the Games, and they don’t
like waiting in lines, Dizdarevic explains. “Can we have special entrances
for Olympic-family V.I.P.’s?” he asks.
“We’ll try our best,” responds Lu. Unsatisfied, Dizdarevic homes in on the
young manager, who will oversee 16 C.I.T.S. supervisors assigned to Jet Set
for the Games. “Is it possible for you to spend a week with us training in the
U.S.?” Dizdarevic asks Lu.
The invitation, translated into Chinese, whirs around the table. “Really?
Not joking?” Lu erupts. “Okay, if my boss says it’s okay.” Across the table,
the C.I.T.S. chief, himself one of seven Chinese officials whom Dizdarevic
hosted at the Turin Games in 2006, nods his approval.
Li says he became a big supporter of Jet Set while visiting Dizdarevic’s
V.I.P. operation as his guest in Turin. Several foreign travel companies came
through Beijing seeking Olympic tie-ins, Li says, but Jet Set was the only
one to offer yearlong training in English and “how to treat the V.I.P.’s.” Li
waves away the question of whether V.I.P.-ism clashes with Communism,
noting that the Chinese government stands solidly behind the country’s
economic rise. “I never imagined that Chinese could afford washing
machines and Walkmans. But now many Chinese have them. I have 300
employees in my agency, and more than 100 have cars. The government is
giving bonheur for the majority.”
Li’s firm interviewed 3,000 university students to select 800 for training at
Jet Set Academy as guides and protocol officers. The students are paid to
spend three hours a week in the classroom learning about Western culture
and etiquette and Olympic history, with one overarching goal decreed by
Dizdarevic: “To get them to think outside the box,” says Elizabeth
Ganschow, the veteran China hand who runs Jet Set Academy.
During one evening class, a trainee asks if Westerners have any special
needs that “Orientals” don’t. “They want downtime, to be left alone,”
answers Jay Liu, a program manager at Jet Set. Another young woman asks
what to say if asked about sensitive topics like Taiwan. First, Liu tells her,
take the guest aside and speak privately. “My answer would be, ‘I think
Taiwan’s part of China, like a younger brother. How can part of the family
leave the family?’” Liu says. “Don’t be too detailed. Keep it ambiguous.”
Before wrapping up in Beijing, Dizdarevic stops by the Sofitel to see if the
manager has come to his senses. This time, the Jet Set boss tells the
Frenchman that his groups will eat breakfast in the main dining room—a
nightmare scenario for a hotel planning to run at 100 percent occupancy.
“What if there are no seats?” the manager asks.
“People will get up earlier the next time,” Dizdarevic says.
A few days later, back in New Jersey, Dizdarevic gets word that the
Sofitel has slashed its quote in half for breakfast and is throwing in use of
the ballroom for free. “If I wanted to play a game with him, I could squeeze
him to death,” Dizdarevic says. “I charge a lot of money too, but I have
never charged anyone three or four times my cost.”
The Highs and Lows of Attending the Olympics Two ways to go: Jet Set’s
corporate packages versus tourist class
Deluxe Corporate Hospitality Program
18 days for up to 30 people.
15 rooms or suites at the five-star Sofitel Wanda hotel, Ritz Carlton, or JW
Marriott.
V.I.P. tickets of your choice for each occupant of each room (two events
per day); could include tickets for the opening or closing ceremonies,
hockey finals, basketball finals, or other premium events.
For every 15 rooms, one deluxe bus or limousine for transportation to and
from the events.
Reserved dining at premium restaurants, including those at Commune by
the Great Wall Kempinski hotel
Guided tours of the Great Wall, Forbidden City, and Temple of Heaven.
Daily breakfast in hotel ballroom.
$2 million to $3 million
Provider: Jet Set Sports,
Far Hills, New Jersey
A Typical Package for the "Civilian" Traveler
Five days’ accommodations at the Tianlun Songhe Hotel.
Tickets to two Level-1 events and two Level-2 events, like boxing or
rowing (surcharges may apply)
Round-trip transportation to and from events.
Guided group tour of Beijing’s tourist attractions with English-speaking
guides.
Access to the trip provider’s Olympic Green hospitality area with English-
speaking guides and concierges
Optional upgrades to Level-1 tickets.
Daily breakfast.
$6,250 per person
Provider: Roadtrips Inc.,
Winnipeg, Manitoba, Canada
Note: Prices are for double occupancy and do not include airfare.—Jessica
Liebman
Related Links
Are the Olympics Worth It?
Strong Interest in Summer Olympics Spurs Vibrant Ad Sales
China's Big Drain
who between them have attended every single one of the ECB Governing
Council’s rate-setting meetings since the first one in January 1999. Instead
of voting on the interest rate, the ECB’s Governing Council ‘reach a
consensus’ without ever taking a vote. The mystical process through which
this consensus is achieved can only be guessed at. Not voting on interest
rates is an essential part of the ECB’s framework for non-accountability.
Since they don’t vote, they cannot of course publish either the aggregate
vote or the individual votes. Since there is a consensus, there is no need for
individual Governing Council members to justify the decision. A collective
statement suffices, like the pre-cooked (that is, written before the rate-setting
meeting) Introductory statement preceding the Q&A, given by the ECB
president immediately following the rate setting meeting.”
Compiled by Phil Izzo

In for a Landing
(Portfolio.com: Business Travel)
Submitted at 7/16/2008 3:00:00 AM
W hen Herb Kelleher started Southwest Airlines in 1967, he was a pariah, a
chain-smoking, Wild Turkey-swilling lawyer-entrepreneur who tried to
undercut his established competitors. The airline was in legal limbo for four
years because of disputes over flight routes before its first plane was allowed
to take off. Four decades later, Kelleher’s upstart airline is now the country’s
largest in terms of market capitalization and has posted a profit for 35
straight years. It’s the only major U.S. carrier making money right now,
even as smaller airlines fold at a rate of about one a month and legacy
carriers, stuck with record-setting fuel prices, stagger toward bankruptcy.
This spring, at age 77, Kelleher retired as Southwest’s chairman and
scaled back his responsibilities to an advisory role, a position he’ll hold for
five years. It’s a good time for him to ease up. The airline business is going
through a difficult period, and Southwest was recently hit with a $10.2
million fine because it had flown planes after their required inspection dates.
But Kelleher leaves Southwest in excellent shape compared with its peers.
With a $10 billion market cap and ample cash reserves, it’s poised to
solidify its -position as the low-fare airline.
Condé Nast Portfolio reporter Matthew Malone met Kelleher at
Southwest’s Dallas headquarters, where the executive, a longtime three-pack
-a-day smoker, elbowed up to a silver ashtray the size of a turkey platter.
Kelleher has never cared much about appearances, and he’s certainly not
changing now. During the 90-minute interview, he smoked four Merits,
kissed a Southwest intern on the cheek, and jokingly picked his nose. He
also talked about the foolishness of mergers, the state of the Federal
Aviation Administration, and why February is the worst damn month of the
year.
Between the lackluster economy and soaring fuel prices, some say that
things are downright apocalyptic for airlines these days. Is the business
model simply one that doesn’t work anymore?
It’s very difficult to make it work when oil is at $130, $135 a barrel.
Southwest has been protected from many of the difficulties of this time: Our
fuel hedges saved us $727 million last year alone. But our revenues are
down as a consequence of higher fuel costs, and I think our principal
advantage at Southwest and in this milieu is the fact that we’re so strong
financially. We have the lowest cost in the industry per available seat mile,
the strongest balance sheet, the most equity of any carrier, so we’ve always
been fit for whatever exigency confronted us. We’ve always been very
conservative and made sure that we’re ready for the bad times, because they
always come.
The last major round of restructurings, after 9/11, allowed the legacy
carriers to cut into Southwest’s cost advantage. More restructurings and
bankruptcies are on the way. Will that make the company more vulnerable?
No. As a matter of fact, I think our competitive advantage is widening.
The other carriers are increasing fares and adding fees so quickly that I think
that we’re regaining our low-cost-fare advantage. There’s another factor: I
refer to Chapter 11 as the washateria—you go to the washateria, and you
wash out all your sins and get a fresh start. Once you’ve been through it,
your opportunities are narrowly constricted with respect to restructuring,
because you’ve already terminated your benefit pension plans, you’ve got a
reduced lease rate on your airplanes, you’ve gotten better financial terms
from your lenders, and it’s very hard to come up with substantial savings the
next time around.
If you had a crystal ball, what would it reveal about where the -industry
will be a year from now?
Shelly Palmer: Ben Silverman's Comments on Margins vs. Ratings
Signal the End of Broadcast Television
By webmaster@huffingtonpost.com (Business on
HuffingtonPost.com)
Submitted at 7/22/2008 7:00:07 AM
In case you haven't noticed, the business of broadcast television is in
trouble. Ratings have been trending down year over year for more than 30
years and there's no end in sight. Most pundits blame this audience
fragmentation on outside forces like the proliferation of cable channels,
DVDs, video gaming, DVR's and most recently online video, personal video
and wireless offerings.
People who should know better constantly parrot misinterpreted data about
the deleterious effect of TiVo (the noun describing the entire genus of
DVR's) on commercial advertising and how the 30 second spot is dead.
Others like to call the medium a vapid wasteland of unwatchable programs.
All of the professional explanations for the decline of broadcast television
ratings seem to agree that the problem comes from outside forces and an
unavoidable changing landscape. I disagree.
Yes, the business is not what it once was, and yes, there is a bit of
empirical data to support the idea that enhanced consumer control over
media consumption has had a significant impact on viewing habits since the
introduction of the "included with purchase" electronic remote control in the
mid-80's. But, none of this has had even a slight impact when compared to
the business culture and business rules that have evolved over the same 30
year time period.
According to the New York Post, Ben Silverman, co-head of programming
for the NBC Television Network said the following: "We're managing for
margin and not for ratings." There is nothing technology can do to help or
hurt this strategy. It is truly the end of broadcast television.
If you want to see TV ratings improve, the business improve and the ROI
improve, try investing in programming, not margins. It will be a refreshing
twist for the 21st century. And, it is really the only thing that will turn the
business around. The recipe for profitable broadcast television is pretty
simple: Develop large audiences that you can accurately measure and sell
them to advertisers who need to reach them. The shows that do this even
have a name: "hits." If, on the other-hand, you want to sunset an
organization and squeeze every last dime out of it before it gives up the
ghost, manage for margins.
By the way, Ben Silverman is a personal friend of mine and I both respect
and admire him. His success is laudable and he is a great guy. In fact, what I
love about Ben is that he actually had the guts to come out and say
something that no one else in his position would ever have the guts to say.
This is not an NBC problem; it's an industry problem. Ben just held up the
mirror. The title of the Post's article was,"Silverman Channeling Jack
Wachovia-Golden West: Another Deal From Hell?
(WSJ.com: Deal Journal - WSJ.com)
Submitted at 7/22/2008 9:54:00 AM
While Goldman Sachs Group banker Ken Wilson– call him “Kenny” only
if you are President George W. Bush–takes up his new job as an adviser to
Hank Paulson, former Paulson adviser and fellow Goldman alum Robert
Steel has his hands full at Wachovia.
The North Carolina bank today posted a net loss of $8.66
billion–compared with net income of $2.34 billion last year–and took $6.1
billion of write-downs. It also slashed its dividend to just five cents a share
from 37 cents. Associated Press
A lot of this pain can be traced back to Wachovia’s errant 2006 acquisition
of mortgage lender Golden West Financial. The entire market value of
Golden West–which Wachovia bought for $25.5 billion–has nearly
disappeared. Even on the day the deal was announced in May 2006,
investors hated it so much that they slammed $1 billion out of Wachovia’s
market value. At the time, Wachovia had a market cap of $90.2 billion and
predicted that with Golden West its combined market cap would be $117
billion; today Wachovia’s market cap is hovering around $25.87 billion, or
I’d love to give 10-year projections. The shorter ones are harder. It
depends on where fuel prices are, but I think you’ll see fewer airlines. That
process has already started, with the airlines that have ceased operations.
Consolidation is something that a number of carriers think is a way to
salvation. I’m not sure it is, as far as fuel prices are concerned, which is the
primary issue. The Delta-Northwest merger is well on its way. They have to
jump the regulatory hurdles, and then, of course, you have to work like
crazy to make sure it actually works out the way you had planned.
Which carriers are the most vul-nerable to going under?
I never get into that. I don’t want to be a party to a run on the bank.
One of your last official duties as chairman was to testify before Congress
about the fine that Southwest had to pay over safety inspections. Some
planes were flown after their official F.A.A. inspection dates. What’s your
take on that incident?
We reported ourselves to the F.A.A.—that we inadvertently and
unintentionally missed these inspections, and the principal inspector said,
You’ve got 10 days to do it. There may have been a technical issue, but
there was never a safety issue. And there were never any planes that placed
passengers at risk. I don’t mean to demean it, but in a sense it was a question
of filing the wrong form, so to speak. Boeing said flying the planes was
okay, and a former lead investigator for the National Transportation Safety
Board said it was okay. There was no threat.
Would you do anything differently?
The appropriate route would have been to go and get an alternative means
of compliance from the F.A.A., and I’m quite sure that they would have
granted it. That’s what I regret, that we didn’t do that.
That whole issue became political pretty quickly, and in the middle of it,
you scrapped plans to outsource some of Southwest’s maintenance to an
operation in El Salvador. Why the change?
It was a question of timing. We didn’t say that we would never do it. We
just said we’re not going do it now, because we don’t need to add a layer of
complications with respect to a new maintainer. Outsourcing is a word that
covers a multitude of different concepts, and you have to realize a lot of the
talk about it is really a product of union activity, where they’d like to keep
the work in the United States. From a safety standpoint, it’s perfectly safe.
Now that you’re stepping down, how much interaction will you have with
the company?
Really, what I am here is C.E.O. Gary Kelly’s servant. He is a superb chief
executive officer, and I would anticipate that he would ask me from time to
time to get involved in some special projects. The dustup with the F.A.A. is
an illustration. I really serve at his beck and call.
Is there some innovation that you think could help save this industry?
Something on the horizon that you look at with great interest?
Well, no. I don’t think there’s any silver bullet. I think the carriers in the
present circumstances are doing exactly what they need to do in order to
survive. For the first time in my memory, they’re very busy reducing
capacity, which of course will provide fewer seats. That saves fuel, and
you’re able to raise fares, I think, fairly substantially. Fewer and fewer
people will be flying, and in a sense that’s a sad thing for me. A lot of the
American public will be deprived of the opportunity to fly. But I think the
carriers have to do it. They don’t have any alternative.
How much will fares go up during the next 12 months?
The latest figures I saw, through April or May 2008, was that average
fares had gone up 4.8 percent already this year. And with reductions in
capacity, I wouldn’t be surprised if average fares went up by another 5 or 6
percent this year. I’m not talking about Southwest, by the way, just the
legacy carriers.
Welch." Not only is this is not a compliment for a television programming
executive, it portends a dismal and disturbing future.
Winston Churchill once said, "The farther you look back, the further you
can see into the future." So, let's look back a few years to the "golden age"
of radio. Back then, disc jockeys ruled. They became the stations' program
directors because they had their fingers on the pulse of the audience. As the
business evolved, very successful program directors were promoted to
station management. It was easy to spot a station with a GM who came from
programming. Talent was treated with respect, content was king and
audiences came first.
As the business of radio matured, professional business people started to
look closely at the cash cow and you could see the focus of management
turn to sales. Radio became extremely competitive from a commercial point
of view (it was always creatively competitive). The new superstars of the
business were the sales guys and you saw a shift in senior management to
sales-oriented executives. It was easy to spot a radio station that was run by
a former GSM, it was all about sales and promotion. These execs knew
where the money came from and managed the stations differently than their
programming predecessors. But the industry kept growing because sales and
programming had always been in a surrealistic paso doble that, when
properly managed, produced excellent financial results.
Ultimately, sales-oriented station management caught the attention of pure
money people from the outside world. If a well programmed station was a
cash cow, a fully sold out, well run station was a cash machine and pure
money people like that kind of ROI.
What happened next was inevitable, but unfortunate. Management evolved
once again. This time, accountants, bankers, lawyers and professional P&L
managers from outside the radio business took over. They looked for
efficiencies, consolidated divisions, rolled up station groups and turned the
entire enterprise into a mass of M&A deals. The term "exit strategy" was the
new goal and everything else was secondary.
Ben Franklin, who, among other things, is the great, great grandfather of
mass media in America, once said, "Those who are unwilling to study
history are doomed to repeat its mistakes." If you look at the radio business
today, it is hard to find a station that has made any meaningful investment in
programming in the recent memory of man or beast. The business is about
consolidated sticks, pre-canned, pre-formatted programming, sales of
aggregated, de minimis audiences and margin. The industry is not about
growth, it's about holding on to what's left.
The television industry has always followed the fortunes of the radio
business. A quick rule of thumb is that changes in the video business are
usually about 10 years behind similar changes in the audio business. I think
this arm-chair research and the associated aphorism is supported with
just a little more than Wachovia paid to acquire Golden West. Wachovia this
year procured a capital infusion of around $8 billion because of that pain.
Wachovia’s net slid last year to $6.3 billion from $7.7 billion in 2006,
mainly because of bad loans made by Golden West. Former Wachovia CEO
G. Kennedy Thompson(left) lost his job last month in large part because of
the fallout. And Wachovia’s stock price today–cover your eyes–was a
piddling $12.24 at the open, or just about a quarter of the 52-week high of
$53.10 in September.
Considering all these signs, it may be time to enshrine Wachovia’s
acquisition of Golden West Financial as a Deal From Hell.
Taking on the mantle of “Deal From Hell” isn’t a casual affair; it is a
difficult-to-achieve level of shame inspired by Robert Bruner, dean of the
Darden School of Business at the University of Virginia, and his book,
“Deals From Hell: M&A Lessons That Rise Above the Ashes.” Bruner’s
requirements for consideration included destruction of market value;
financial instability; impaired strategic position; organizational weakness;
damaged reputation; or violation of ethical norms and laws. Another Deal
From Hell, for instance, is Sprint’s disastrous merger with Nextel.
Wachovia/Golden West now seems to qualify, if only because of the
5
The F.A.A. has been under a lot of pressure lately. What’s your view of
the agency?
The F.A.A. has a splendid record. There’s no question about that.
Commercial airline travel has never been safer, and it’s grown steadily safer
over the past four or five years, so the end result has been superb, absolutely
superb. I think reform of the air-traffic-control system is the major issue
facing the F.A.A. as a whole. It’s an antiquated system, and a lot of the
difficulties that we were talking about earlier for the airlines would go away
if you had a modernized system that was more efficient. I’m hopeful that
we’ll make steady progress toward the adoption of next-gen, as they call
it—an air-traffic-control system that will be G.P.S.-oriented.
What has prevented that from hap-pening so far?
You’re stepping on a sore toe right now, because I became an apostle of
that in 1993, and here we are 15 years later and we haven’t made a lot of
progress. Backpackers are using G.P.S. to find out where they are in the
woods. Truckers are using G.P.S. to find out which routes they should take
to their destinations. Buses are using it. Private aircraft are using it. Let me
see, who are the only ones who don’t have G.P.S.? Commercial airlines.
Isn’t that astounding? You have to be a visionary and say, “We don’t need
this today, but we’re going to need it very badly 10 or 15 years from now.”
Airlines need it, but the government has to take the steps to set it up.
If you stop to think about it, we’re really a little slice of salami in a
governmental sandwich. The F.A.A. tells us what we can do with the
airplane, right? You can’t push back from the gate, can’t taxi, can’t take off
without the F.A.A. telling you. Our passengers on the ground are processed
by the Transportation -Security Administration. And guess who owns the
airports. Governmental bodies. That’s why we have so little control over our
destiny. Don’t misunderstand me—all of those things are needed. But it
would be interesting if you said that all department stores are now going to
have X-ray machines. You’re going to have to take your shoes off, your coat
off, before you get into Macy’s. That might cut back on their patronage just
a little bit.
Is there a particular day or incident from Southwest’s history that you
remember most fondly?
For sheer drama, I would have to say that after litigating for four years in
31 different courts and administrative agencies, the arrival of our first
airplane was a pretty dramatic event. I burst into tears when I kissed it on the
nose and then went around and stuck my head in the engine, at which point a
mechanic grabbed me and said that if the thrust reverser went off, it would
decapitate me. I said, “You know? I really don’t give a damn.”
What’s the worst investment you ever made?
Gee, there are so many, it’s hard to pick out one. Enron, I guess. I must
say, I didn’t pick Enron. It was a money manager.
So choose one: the cigarettes or the Wild Turkey.
Ha! It would be the cigarettes, and I’ll tell you why: I stop drinking Wild
Turkey for a month every year in February, but I could never stop smoking
for a month. I’m an addict. I acknowledge it.
Why February?
I was afraid you were gonna ask that. It’s the shortest month. [Laughter]
About 20 years ago, a doctor told me, “As much as you drink on a regular
basis, I think it’d be great for your liver if you took a month off.” So I said
okay—February. I hate leap years! Despise them.
Related Links
The Safe (but Scary) Skies
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enough historical evidence to be taken seriously. "There's nothing to watch
on Saturday night." says the viewer. "There's no audience on Saturday night,
so there's no reason to invest in it..." says the margin-oriented television
programming executive. This is a vortex of logical rhetoric. It is almost
impossible to break free and stop the cycle. What can be done?
The answer is very clear. Super Bowl XLII (February 3, 2008) was the
most-watched sporting event on record and the second most-watched TV
program in history. Nielsen says an average of 97.5 million viewers watched
the Giants-Pats contest. (The most-watched program is still the M*A*S*H
finale, which drew 106 million viewers in 1983.) The big game also broke a
record for total viewership, with 148.3 million viewers (persons age 2+
watching all or part of the game). The previous record stood at 144.4 million
for Super Bowl XXXVIII in 2004. What this tells us is that if you put on a
compelling piece of content, there actually is a television audience to watch
it.
Is it unfair to use an annual emergent sporting event as an example?
Perhaps. The job of television is to inform, enlighten and entertain. So, I will
simply point to the last episode of M*A*S*H as the appropriate benchmark.
You will immediately argue that every show is not M*A*S*H and that most
entertainment shows will never find an audience of that size. I agree. Most
shows will not ever attain that kind of rating. But I can also assure you that
M*A*S*H, Friends, Seinfeld, etc. were not programmed for margin. They
were programmed for ratings to the exclusion of every other benchmark.
Remember, people don't have Internet rooms in their houses, they don't
have video game rooms in their houses, most don't even have reading rooms
-- but most households in America do have TV rooms. And, in most of the
112.8 million television households, there is a TV in more than one room.
TV technology is everywhere; it's the programming that's nowhere!
Shelly Palmer is the host of MediaBytes a daily news show featuring news
you can use about technology, media & entertainment, Managing Director
of Advanced Media Ventures Group LLC and the author of Television
Disrupted: The Transition from Network to Networked TV (2006, Focal
Press). Shelly is also President of the National Academy of Television Arts
& Sciences, NY (the organization that bestows the coveted Emmy®
Awards). He is the Vice-Chairman of the National Academy of Media Arts
& Sciences an organization dedicated to education and leadership in the
areas of technology, media and entertainment. Palmer also oversees the
Advanced Media Technology Emmy® Awards which honors outstanding
achievements in the science and technology of advanced media. You can
read Shelly's blog here. Shelly can be reached at shelly@palmer.net
“destruction of market value” criterion.
It seems a harsh housewarming for Steel, now Wachovia’s cleanup man.
But Steel at least didn’t have to engage in the usual new-CEO ritual of
castigating the work of his predecessors. Instead, Wachovia Chairman Lanty
Smith wore the hair shirt in today’s earnings announcement. Smith called
Wachovia’s results “disappointing and unacceptable.” Investors would be
hard-pressed to argue. He went on to explain, “While to some degree [these
results] reflect industry headwinds and weaker macroeconomic conditions,
they also reflect performance for which we at Wachovia accept
responsibility.”
Contrast Lanty’s take-one-for-the-team mentality with John Thain’s testy
rebuttal to a question on last week’s Merrill Lynch earnings call. Thain
sharply corrected one analyst who asked about the CDOs packaged by “you
guys” at Merrill with this: “First of all, I take exception to the ‘you guys’
comment. I did not create any of these CDOs.” Related Links:
Medlin + Duke + Ole ‘Wachovia Way’ = Robert Steel
Dear CEO: Capital Infusions May Not Save Your Job. Sorry.
Wachovia and Golden West: A Good Idea at the Time
6
Giants Make Shockey a Saint
(WSJ.com: The Daily Fix)
Submitted at 7/22/2008 11:34:00 AM
Jeremy Shockey is headed for the Big Easy.
The New York Giants traded their 28-year-old star tight end, who’d grown
disenchanted with Big Blue because he wanted to be a bigger part of the
team’s passing game, to the New Orleans Saints for second- and fifth-round
picks in 2009. Mr. Shockey will bring his considerable talents to the Saints’
offense (where he’ll rejoin coach Sean Payton, the Giants’ offensive
coordinator his rookie season) and no lack of enthusiasm to the Superdome,
but he’s also been hampered by injuries and self-inflicted distractions: He
missed the Giants’ drive to a Super Bowl upset and expressed his annoyance
by passing up the pomp and circumstance that followed.
Jeremy Shockey will next celebrate in black and gold. (Associated Press
Photo)
Mr. Shockey’s resume contains large portions of accomplishments and
missteps alike, leaving New York columnists wrestling with whether or not
the Giants are better without him.
“Giants fans will miss Shockey every time the defending Super Bowl
champs come out lifeless and flat and a fire is needed inside the stadium,
from some wild-eyed madman quivering with emotion,” Steve Serby writes
in the New York Post. “They will miss him every time some unsuspecting
defensive back needs Rambo-ing. Shockey may have marched to the beat of
a different drummer, may have been high maintenance, may have dropped
too many balls, may have been injury-plagued, but I keep coming back to
what Shaun O’Hara said not too long ago when he was asked about the
Shockey trade rumors: that he’d rather play with him than against him.”
In the New York Daily News, Gary Myers sounds less convinced: “It just
won’t be the same without Jeremy Shockey around to throw a fit after Eli
Manning bounced one at his feet or sailed one over his head or didn’t feed
his ego by throwing him the ball 10 times a game. Repeating as Super Bowl
champions is nearly impossible, but the Giants’ chances dramatically
improved Monday when they dumped Shockey, an All-Pro distraction, on
the Saints. … Shockey was more style than substance, a big talker given to
saying the wrong thing.”
An even-handed portrait comes from Newsday’s Neil Best: “New York
wanted to love Jeremy Shockey from the start, and often did. He was
Mickey Mantle 2.0, a brawny, reckless, untamed Okie who immediately
announced himself by brawling with Brandon Short in the training camp
dining room after a disagreement over some low-level rookie hazing. Soon,
he was bowling over various hapless members of the Houston Texans in his
first appearance as a rookie, the 2002 Hall of Fame Game, causing TV types
to scramble for old tapes of Mark Bavaro.”
But Mr. Best notes that Mr. Shockey capped his rookie season by dropping
a pass in the end zone in the playoffs against the San Francisco 49ers, a
game the Giants would lose and that Giant fans are still scarred by.
“That was Shockey,” he writes. “Inspire the team and its fans with talent
and tenacity, let them down with immature behavior and a maddening
inability to complete a basic job requirement: securing a forward pass. …
Unlike Mickey Mantle, Joe Namath, Walt Frazier, Lawrence Taylor, most of
the 1986 Mets and other charismatic men about Big Town, Shockey in the
end was exposed for what he was: an intriguing, engaging, ultimately
superfluous figure when it came to winning a championship.”
(Extra credit: Newsday’s list of Shockey ups and downs.)
So what’s the reaction in New Orleans? The Times-Picayune’s Peter
Finney doesn’t like the deal, a position that has less to do with Mr. Shockey
What Was Ken Lewis Thinking?
(Portfolio.com: Careers)
Submitted at 7/16/2008 3:00:00 AM
W all Street’s debate over Bank of America’s purchase of Countrywide
Financial is not whether it’s a good or bad deal—but whether it will be
C.E.O. Ken Lewis’ last deal. “If this doesn’t work, at some point
shareholders are going to demand Lewis’ head,” says Josh Rosner,
managing director of Graham Fischer & Co., a New York research
consultancy that specializes in mortgage finance.
But in keeping with the market axiom that any viewpoint unanimously
held is wrong by definition, writing off Lewis so fast may be a mistake. In
fact, there’s a decent—and obviously contrarian—case to be made that the
Countrywide deal plays to Lewis’ strengths, if he can survive long enough to
show them off.
First, Lewis is an old hand at big deals. Bank of America is the product of
more than 3,000 mergers, and Lewis has worked on many of them, including
the epic 1998 union of NationsBank (known as North Carolina National
Bank when he started there in 1969) and Bank of America, California’s
largest bank. It’s telling that most analysts were initially skeptical of the two
Lewis megadeals that clinched Bank of America’s place as the country’s
first (and still only) truly national consumer bank: the $48 billion acquisition
of FleetBoston Financial in 2003 and the $34 billion purchase of credit-card
specialist MBNA in 2005. In both cases, B of A was roundly criticized for
overpaying. In the end, Lewis and his team squeezed so much value out of
FleetBoston and MBNA in integrating them with B of A’s existing
operations that investor opinion on the deals swung strongly to the positive.
Lewis also showed unusual resolve in sitting on his checkbook even as
rivals were paying top dollar to buy mortgage lenders by the dozens in the
1990s. He was deeply ambivalent about the mortgage market, telling
colleagues that he “loved the product and hated the business.” Although he
acknowledged that the home loan was a “cornerstone of the customer
relationship,” he considered mortgage lending unnecessarily risky. Not only
did housing markets go from boom to bust all too often, but the structure of
the industry was too risky because banks outsourced much of their lending
to brokers or others.
As soon as Lewis moved up to C.E.O., he began restructuring Bank of
America’s mortgage-lending operation with the dual aim of reducing risk
and forging a closer, more lucrative relationship with his customers. Within
a year, the bank had stopped making subprime loans and buying mortgages
from other lenders. It also found ways to attract better-quality buyers: It
trained about 10,000 personal bankers in its branches to sell home loans
directly to consumers, along with checking accounts, credit cards, and
certificates of deposit. This might not sound like much, but other banks
relied on referrals from homebuilders and real estate brokers, which meant
that they had less control over customer quality.
Lewis’ conservatism was tested during the housing boom that lasted from
2003 to 2006. Countrywide and other lenders fed the frenzy by amending
conventional standards of creditworthiness to accept almost anybody willing
to fill out a loan application (ability to repay optional). As lending volume
exploded, the issue of whether B of A should jump back into the subprime
game sparked fierce internal debate. Customers by the millions were going
elsewhere for mortgages and taking their banking relationships with them.
“You don’t want to be in a position where you have to say no to customers,”
says a B of A executive who found himself on the other side of the issue
from his C.E.O.
Lewis’ intransigence became prescience when the credit-market
convulsions of mid-2007 brought the subprime house of cards tumbling
down on its architects, including Angelo Mozilo, Countrywide’s 69-year-old
co-founder and C.E.O. While mortgage originations across the industry for
the year dropped 15 percent, Bank of America’s volume jumped 21 percent,
to $93 billion. More important, the $275 billion worth of mortgages the bank
Rendell: I'm Not Being Vetted Because Obama "Has Good Sense"
(The Huffington Post | Full News Feed)
Submitted at 7/22/2008 10:00:14 AM
Pennsylvania Gov. Ed Rendell (D) says that he has not been contacted by
the Barack Obama campaign to undergo the vice presidential vetting process
than with worries about the Saints’ defense. New Orleans, he says, is
“looking at a defense that gave up 14 rushes of 20 yards or more, that gave
up 54 receptions of 20 yards or more. Compounding these problems are
offseason knee surgeries suffered by cornerback Mike McKenzie and
incoming linebacker Jonathan Vilma, a prize free agent. My feeling is the
Saints, even though they’ll be bringing in five defensive free agents and
used their first three draft picks for defense, cannot get enough help across
the board, up front, at linebacker, in the secondary.”
***
Atlanta Hawks restricted free agent Josh Childress would like to go to
another team via a sign-and-trade deal, but he has no particular leverage to
make that happen.
Or does he?
Mr. Childress is reportedly weighing a three-year, $20 million deal with
held on its books remained solidly profitable even as soaring rates of default
and foreclosure pushed many subprime specialists into bankruptcy. For
2007, B of A’s net mortgage charge-offs totaled $57 million, a mere 0.02
percent of its portfolio.
For Lewis to acquire the company that underwrote so much of the
subprime sludge now polluting the global financial system isn’t quite the
betrayal of principle it might seem. Until the late-career meltdown of
Mozilo’s credit judgment, Countrywide was an enterprising, well-managed
company that for three decades had subsisted on exactly the sort of
conventional home loans to which Lewis limited B of A. Countrywide
hasn’t made a material subprime loan in nearly a year, and Mozilo is a self-
correcting problem—for Lewis, anyway. The lavishly paid, superannuated
poster boy of subprime excess will retire as soon as the sale closes, leaving a
horrendous legal mess—including his Friends of Angelo V.I.P.
program—that could take B of A a few years and a whole lot of money to
clean up.
What investors fear above all is that B of A’s $3 billion purchase price will
turn out to be the mergers-and-acquisitions equivalent of a modest down
payment on a grand old mansion that’s now so riddled with termites and
toxic mold that the bank will have to spend an additional $10 billion to $30
billion to bring it up to code. The money pit consists mainly of the
mortgages that Countrywide carried on its books as an investment at the end
of the first quarter. As of March 31, 4.16 percent of those mortgages were in
default or foreclosure, compared with 1.65 percent six months before and
just 0.66 percent at the end of 2006.
This makes for a trend line that big investors might well try to fashion into
a noose for Lewis if housing markets like California and Florida fail to
stabilize soon. In closing on its purchase of Countrywide, B of A must mark
to market its $95 billion mortgage portfolio to something approaching a real
price—a process that analysts expect to be ugly. “A year and a half from
now, Ken Lewis is going to sit down and tell somebody over drinks, ‘I wish
I had walked away from Countrywide,’” says Paul Miller, an analyst at FBR
Capital Markets, who predicts a $28 billion markdown, give or take a few
billion.
People inside B of A, though, insist that Lewis is holding firm. In addition
to being what is still the busiest mortgage lender in the country—Bank of
America is fifth—Countrywide also remains the country’s largest mortgage
servicer, handling the billing and other administrative tasks for nearly $1.5
trillion in loans. Servicing is a business of scale and data-processing
precision in which Countrywide’s growth has long set the pace and Bank of
America has lagged. Shifting B of A’s $530 billion portfolio onto
Countrywide’s servicing platform could result in significant operating
economies and better profit margins.
Like all gamblers, Lewis needs to be lucky as well as good. Bank of
America’s C.E.O. excels at the tricky, painstaking work of postmerger
integration but exerts no control whatsoever over the great X factor on
which his job security apparently now hangs: housing-market fundamentals.
He has told analysts that all is going according to plan. “All I can say is
nothing has happened that is out of the boundaries of what we contemplated
when we did the deal,” he said during a recent Deutsche Bank conference
call.
On the call, Allen Puwalski of Paulson & Co. pressed Lewis, saying that
housing prices could well decline much more than the consensus forecast of
25 percent.
“If that’s the case,” Lewis retorted, “we’ll be worried about Countrywide,
but we’ll be worried about a lot of other things too—and not just at Bank of
America.”
Related Links
Angelo's Many 'Friends'
Mortgage Brokers, RIP
Angelo's Fannie Pack
because the Obama camp "has good sense."
Asked if he is being vetted Tuesday morning on MSNBC, Rendell simply
answered, "no I'm not being vetted."
"I haven't been contacted by anybody, showing the Obama campaign has
good sense."
Olympiakos, which could be a canny way to get the Hawks to see things his
way (a FIBA contract would give them no matching rights) or a sign that the
European leagues are more of a challenge to the NBA than fans have
thought.
On Yahoo Sports, Adrian Wojnarowski analyzes the potential
repercussions; in the San Francisco Chronicle, Gwen Knapp calls his
strategy“great leverage, and quintessentially American. Until now, Childress
basically was a financial hostage of the Hawks. We tend not to discuss
sports business that way, because it would be a real downer to call drafts and
salary caps what they really are — restraint of trade and price-fixing.
Besides, it’s hard to get indignant on behalf of someone like Childress,
whose price was fixed at $3.6 million last season. But as a restricted free
agent, he had virtually nowhere to go this summer, whether for more money
or refuge from a club that, despite its shocking playoff performance against
the Celtics, is not the ideal location for Childress. Most teams lack enough
room under the salary cap to bid for him, and the loopholes in the system
have constricted to the point that only Atlanta realistically can be expected
to give Childress an improved contract.”
So what’s Mr. Childress up to? “He is either playing an elaborate game of
chicken with the Hawks, who made him the No. 6 draft pick in 2004, or
eagerly learning how to say ‘pick and roll’ in Greek,” Ms. Knapp writes. “It
doesn’t really matter which, because Childress’ threat has enough credibility
to serve as a warning shot throughout the NBA.”
***
For the uninitiated, the peloton is one of cycling’s mysteries — but in the
New York Times, cyclist and author Michael Barry offers a gripping
explanation of how it works, and what cyclists endure in a race like the Tour
de France.
“The peloton flows with the roads, and we, the cyclists, blindly hope that
the flow is not broken,” he writes. “A wall of wheels and bodies means we
can never see too far in front, so we trust that the peloton flows around any
obstacle in the road like fish in a current. When in the group, we follow the
wheels, looking a few yards ahead, watching other riders to gauge our
braking, accelerations and how we maneuver our bikes. Over time, cycling
in a peloton becomes instinctual, and our bicycles become extensions of our
bodies. When that flow is broken, reaction time is limited and we often
crash.”
***
Legendary sportswriter Jerome Holtzman died Saturday at 81. Mr.
Holtzman was an orphan who became a copy boy at the Chicago Daily
Times at 17, wrote a column for the Sporting News for 30 years, and (for
better or worse) invented the save.
“He was a gruff man but a gentleman, a newspaper bulldog but an old
softie, a U.S. Marine to his core but a kind, considerate, cultured soul who
always looked to me as if he should have been on his way to meet Damon
Runyon, Grantland Rice and Ring Lardner for lunch,” recalls Mike Downey
in the Chicago Tribune, adding: “Spencer Tracy, Fredric March, take your
pick. A tight, white, starched collar. A set of suspenders, thumbs inserted,
poised to snap. A cigar as large as a clarinet. Chicago’s kind of guy. And
certainly baseball’s kind, back in the day and for all time. A student of the
game and a teacher as well.”
– Tip of the Fix cap to reader Don Hartline.
Found a good column from the world of sports? Don’t keep it to yourself
— write to us at dailyfix@wsj.com and we’ll consider your find for
inclusion in the Daily Fix.
Panic Room
(Portfolio.com: Careers)
Submitted at 7/20/2008 7:00:00 PM
Job Title: Investor Relations Officer
Employers: Public companies
Openings: Search firms and National Investor Relations Institute website
Salary Cap:$350,000
Number of Jobs: About 6,500 P ossibly the only people more stressed out
last week than investors who owned shares in banking companies were the
people in charge of calming them down.
As vice president of investor relations for Huntington Bancshares, a $56
billion regional bank holding company based in Columbus, Ohio, Jay Gould
certainly didn't sleep much.
"Everybody is running through their fire drills rights now," said Gould on
Tuesday. "The stock of some companies is down 50, 60, 70, 80 percent.
We're fighting rumors in the marketplace. We're fighting fear."
Last week, Gould, who has 25 years of experience in I.R., was also
fighting numerous deadlines as his company prepared to issue second-
quarter earnings on Thursday in the midst of an industry-wide panic. The
collapse of IndyMac Bancorp on July 11 sent bank shares into a tailspin,
with the 12-stock Standard & Poor's 500 Regional Bank index sinking more
than 15 percent in the first two days of the week.
It was just the latest and most dramatic blow to an industry that has been
battered all year. Huntington's share price has fallen from $21 last fall, to
under $6 in the days leading up to the earnings announcement.
"I worked through the weekend," Gould said. "I haven't pulled an all-
nighter yet, but tonight may be one. There's been a flurry of phone calls
from investors, probably more than I have time to handle during earnings
week."
Like most veteran I.R. officers, Gould has seen his share of challenges
before. After graduating from California State University–Northridge with a
B.S. and M.S. in finance, Gould began his career in the thrift industry doing
financial and corporate planning in 1965. Eventually, he found his niche as
the head of investor relations at Security Pacific before moving on to
KeyCorp and then Bank One, now a part of J.P. Morgan Chase.
Before Gould joined Huntington in 2002, shareholders had been so
dissatisfied with the bank's performance—the stock was the worst-
performing bank in the S&P 500 in 2001—that hundreds mobbed the
company's annual meeting to complain. A new C.E.O. and Gould were
brought in, and the company's stock rose more than 30 percent in the
subsequent year.
In times of crisis, Gould's job entails far more than just calming investors.
Gould is also the eyes and ears of management, charged with compiling the
most accurate picture of what the marketplace is thinking, and advising them
on what to do about it. Nowadays, he says, it's especially important to stay
vigilant.
"You have to keep your feet in the pool all the time," he says. "I'm
spending an exorbitant amount of time reading press headlines, Bloomberg
business headlines, and reading blogs now like I never read before."
In June, when negative chatter about the company reached a high, sending
the stock down from $9 to just over $5 in a two-week period, Gould took the
unusual step of recommending his company issue a preemptive press release
to calm investors.
In the release, the bank acknowledged the stock price decline but reassured
investors that their outlook remained consistent and that they were pleased
with their performance. That release helped halt the stock's slide, bumping it
up a full dollar.
"You don't want to set a precedent," Gould says of issuing the release. "But
sometimes you just got to say 'Hey, there's a lot of noise out there' [since]
you don't want it to get out of control."
With Thursday's earnings announcement, Gould was able to placate
investors with the most potent balm of decent results, as Huntington
reported a 26 percent increase in second-quarter earnings, although it did
lower its forecast for the rest of the year. The stock increased 40 percent to
$7.68 per share, and Gould was able to breathe a lot easier.Related Links
J.P. Morgan Hits It Out of the Park
J.P. Morgan Ekes Out a Gain
Big Banks, Bad News

What Was Ken Lewis Thinking?
(Portfolio.com: Executives)
Submitted at 7/16/2008 3:00:00 AM
W all Street’s debate over Bank of America’s purchase of Countrywide
Financial is not whether it’s a good or bad deal—but whether it will be
C.E.O. Ken Lewis’ last deal. “If this doesn’t work, at some point
shareholders are going to demand Lewis’ head,” says Josh Rosner,
managing director of Graham Fischer & Co., a New York research
consultancy that specializes in mortgage finance.
But in keeping with the market axiom that any viewpoint unanimously
held is wrong by definition, writing off Lewis so fast may be a mistake. In
fact, there’s a decent—and obviously contrarian—case to be made that the
Countrywide deal plays to Lewis’ strengths, if he can survive long enough to
show them off.
First, Lewis is an old hand at big deals. Bank of America is the product of
more than 3,000 mergers, and Lewis has worked on many of them, including
the epic 1998 union of NationsBank (known as North Carolina National
Bank when he started there in 1969) and Bank of America, California’s
largest bank. It’s telling that most analysts were initially skeptical of the two
Lewis megadeals that clinched Bank of America’s place as the country’s
first (and still only) truly national consumer bank: the $48 billion acquisition
of FleetBoston Financial in 2003 and the $34 billion purchase of credit-card
specialist MBNA in 2005. In both cases, B of A was roundly criticized for
overpaying. In the end, Lewis and his team squeezed so much value out of
FleetBoston and MBNA in integrating them with B of A’s existing
operations that investor opinion on the deals swung strongly to the positive.
Lewis also showed unusual resolve in sitting on his checkbook even as
rivals were paying top dollar to buy mortgage lenders by the dozens in the
1990s. He was deeply ambivalent about the mortgage market, telling
colleagues that he “loved the product and hated the business.” Although he
acknowledged that the home loan was a “cornerstone of the customer
relationship,” he considered mortgage lending unnecessarily risky. Not only
did housing markets go from boom to bust all too often, but the structure of
the industry was too risky because banks outsourced much of their lending
to brokers or others.
As soon as Lewis moved up to C.E.O., he began restructuring Bank of
America’s mortgage-lending operation with the dual aim of reducing risk
and forging a closer, more lucrative relationship with his customers. Within
a year, the bank had stopped making subprime loans and buying mortgages
from other lenders. It also found ways to attract better-quality buyers: It
trained about 10,000 personal bankers in its branches to sell home loans
directly to consumers, along with checking accounts, credit cards, and
certificates of deposit. This might not sound like much, but other banks
relied on referrals from homebuilders and real estate brokers, which meant
that they had less control over customer quality.
Lewis’ conservatism was tested during the housing boom that lasted from
2003 to 2006. Countrywide and other lenders fed the frenzy by amending
conventional standards of creditworthiness to accept almost anybody willing
to fill out a loan application (ability to repay optional). As lending volume
exploded, the issue of whether B of A should jump back into the subprime
game sparked fierce internal debate. Customers by the millions were going
elsewhere for mortgages and taking their banking relationships with them.
“You don’t want to be in a position where you have to say no to customers,”
says a B of A executive who found himself on the other side of the issue
from his C.E.O.
Lewis’ intransigence became prescience when the credit-market
convulsions of mid-2007 brought the subprime house of cards tumbling
down on its architects, including Angelo Mozilo, Countrywide’s 69-year-old
co-founder and C.E.O. While mortgage originations across the industry for
the year dropped 15 percent, Bank of America’s volume jumped 21 percent,
to $93 billion. More important, the $275 billion worth of mortgages the bank
Danny Schechter: Homeowners "March"
Against Foreclosure
By webmaster@huffingtonpost.com (Business on
HuffingtonPost.com)
Submitted at 7/22/2008 9:34:54 AM
NACA's 5 Day DC Event Offers Help, And A Way Forward
WASHINGTON JULY 20: Forty-five years ago this summer I spent a day
Marching on Washington. Everyone remembers it as just four words of the
many uttered by Dr. Martin Luther King: "I have a dream." After that march
for justice (and jobs), the organizers led by Bayard Rustin returned to the
Statler Hilton Hotel, now the Capital Hilton, which was the event's
headquarters. Dr. King was there, and Malcolm X even dropped by for a
press conference of his own to warn that non-violence was unlikely to lead
to change.
It was August 28, l963, a day which is still memorialized in the hotel's
lobby. I was a civil rights worker then, and a small fry organizer of that
historic mobilization. That night, I crashed in a hotel room rented for SNCC,
the Student Non-violent Coordinating Committee.
Within five years, violence would claim the lives of both Malcolm and
Martin, and today, Dr. King's children are, sadly, suing each other in part
over how best to monetize his legacy.
Today, I am back in that very same hotel, although the name Hilton is
better known now for the antics of Baron Hilton's granddaughter Paris. Over
this past weekend, the hotel, just a few blocks from the White House, was
once again playing host to a human rights battle, this time the fight against
foreclosures.
America's largest and most militant homeownership organization, NACA,
The Neighborhood Assistance Corporation hired out the grand hotel for five
days, and brought 460 staffers from 38 offices to Washington for a five day
event to demonstrate that their approach to stopping foreclosures is superior
to everything that is being done elsewhere or proposed in Congress. They
reference "the dream" too, 45 years ago activists wanted to claim it. Today
they fight to save it.
NACA believes that making mortgages affordable is the only way to
stabilize at-risk homeowners. They call on banks to restructure mortgages,
lower interest rates and replace adjustable mortgages and ARMS with low
fixed rates for the long term.
To make its point, and serve the community, NACA publicized an offer of
free counseling and advice for homeowners that included creating modified
and restructured loan proposals and aggressively persuading lenders to
accept them.
A solicitation was made in radio ads and through direct mail. People with
mortgage problems were advised to make appointments on the NACA.com
website and bring their mortgage documents with them. The event was a big
and audacious gamble by NACA's feisty CEO Bruce Marks.
Something amazing happened. Some homeowners started arriving at 6:30
AM. Soon lines stretched around the block. It was a march of the We Don't
Want To Be Homeless, "wearing their troubles on their faces," as one
NACA staffer later observed. A million families face foreclosure this year
and many are trying to do something before their lives go on the auction
block. The statistics are hard to wrap your head around; a parade of real
people can't be ignored.
By day's end, thousands of homeowners had trekked through the NACA
process which included an orientation, the scanning of their documents into
the organization's proprietary mortgage software and then one on one
counseling in a ballroom which had been transformed into a vast arena of
small tables, each with a HUD certified counselor and a computer. The
counselors help the homeowners assess the affordability of their mortgages
and the prospects of their losing their homes. They then draft sustainable
budgets and a plan.
held on its books remained solidly profitable even as soaring rates of default
and foreclosure pushed many subprime specialists into bankruptcy. For
2007, B of A’s net mortgage charge-offs totaled $57 million, a mere 0.02
percent of its portfolio.
For Lewis to acquire the company that underwrote so much of the
subprime sludge now polluting the global financial system isn’t quite the
betrayal of principle it might seem. Until the late-career meltdown of
Mozilo’s credit judgment, Countrywide was an enterprising, well-managed
company that for three decades had subsisted on exactly the sort of
conventional home loans to which Lewis limited B of A. Countrywide
hasn’t made a material subprime loan in nearly a year, and Mozilo is a self-
correcting problem—for Lewis, anyway. The lavishly paid, superannuated
poster boy of subprime excess will retire as soon as the sale closes, leaving a
horrendous legal mess—including his Friends of Angelo V.I.P.
program—that could take B of A a few years and a whole lot of money to
clean up.
What investors fear above all is that B of A’s $3 billion purchase price will
turn out to be the mergers-and-acquisitions equivalent of a modest down
payment on a grand old mansion that’s now so riddled with termites and
toxic mold that the bank will have to spend an additional $10 billion to $30
billion to bring it up to code. The money pit consists mainly of the
mortgages that Countrywide carried on its books as an investment at the end
of the first quarter. As of March 31, 4.16 percent of those mortgages were in
default or foreclosure, compared with 1.65 percent six months before and
just 0.66 percent at the end of 2006.
This makes for a trend line that big investors might well try to fashion into
a noose for Lewis if housing markets like California and Florida fail to
stabilize soon. In closing on its purchase of Countrywide, B of A must mark
to market its $95 billion mortgage portfolio to something approaching a real
price—a process that analysts expect to be ugly. “A year and a half from
now, Ken Lewis is going to sit down and tell somebody over drinks, ‘I wish
I had walked away from Countrywide,’” says Paul Miller, an analyst at FBR
Capital Markets, who predicts a $28 billion markdown, give or take a few
billion.
People inside B of A, though, insist that Lewis is holding firm. In addition
to being what is still the busiest mortgage lender in the country—Bank of
America is fifth—Countrywide also remains the country’s largest mortgage
servicer, handling the billing and other administrative tasks for nearly $1.5
trillion in loans. Servicing is a business of scale and data-processing
precision in which Countrywide’s growth has long set the pace and Bank of
America has lagged. Shifting B of A’s $530 billion portfolio onto
Countrywide’s servicing platform could result in significant operating
economies and better profit margins.
Like all gamblers, Lewis needs to be lucky as well as good. Bank of
America’s C.E.O. excels at the tricky, painstaking work of postmerger
integration but exerts no control whatsoever over the great X factor on
which his job security apparently now hangs: housing-market fundamentals.
He has told analysts that all is going according to plan. “All I can say is
nothing has happened that is out of the boundaries of what we contemplated
when we did the deal,” he said during a recent Deutsche Bank conference
call.
On the call, Allen Puwalski of Paulson & Co. pressed Lewis, saying that
housing prices could well decline much more than the consensus forecast of
25 percent.
“If that’s the case,” Lewis retorted, “we’ll be worried about Countrywide,
but we’ll be worried about a lot of other things too—and not just at Bank of
America.”
Related Links
Angelo's Many 'Friends'
Mortgage Brokers, RIP
Angelo's Fannie Pack
With personal financial data in place, backed by bank statements,
mortgage paper and pay stubs, they proposed affordable "solutions" to
mortgage servicers and banks. These call for cutting interest rates and
restructuring the mortgages at fixed rate for 30 years. NACA negotiators
emailed the proposals to the finance companies and then advocated for their
new members.
Soon, emails started coming back from lenders with letters accepting some
of the proposals. I spoke to some ectstatic homeowners who were leaving
after a frustrating day of waiting for new deal that would allow them to save
money and their homes.
Officials from some banks and agencies dropped by and marveled over
this well organized, business like and passionate first of a kind event. It
clearly showed the enormity of the foreclosure crisis and the anger among so
many homeowners who feel victimized by the subprime ponzi scheme. It
also showed that there is a solution within reach if lenders are willing to
compromise. NACA may take it on the road.
These people--old and young, some with children, others in wheel chairs.
came from as far away as Ohio, North Carolina and Florida. They were
dignified and quiet, perhaps also frightened. Many told me they have had
trouble sleeping because of worries about whether they could keep their
families together.
The event did rate some press attention, but, as is often the case, drug
related murders they night before were, predictably, of more interest to most
local TV outlets. The CBS Evening News and Fox News showed up.
(Afterwards, the Fox cameraman told me he was coming back with his own
mortgage documents.)
A Washington Post columnist had praised the event the day before it
happened, writing, "The Neighborhood Assistance Corporation of America
is doing something that should have been done a long time ago.
Homeowners won't have to wait weeks for a callback from their loan
servicers. They won't have to fret and fuss -- and in some cases cuss -- to get
a mortgage servicing company to listen to their pleas to save their homes
from foreclosure."
But when the event unfolded, exceeding organizer's expectations, the Post
did not bother to send a reporter. The newspaper is right next door to the
hotel. Only z few of the media outlets contacted bothered to show up.
Early next week, NACA will encourage its homeowners to descend on
Congress to "encourage" their Senators and Representatives to press bankers
to restructure constituent's loans. While congress debates bailouts, NACA
saves homes.
Early next week, NACA will encourage its homeowners to descend on
Congress to "encourage" their Senators and They may be more successful
with bankers who know that getting some payment is better than none, than
with posturing members of Congress who seem paralyzed when it comes to
helping people in need.
Last week, Bill Moyers featured journalist William Greider who
discussed, as Graig Gingold reports, "the abject failure of the politicians in
DC to do what was called for to protect the public from the predatory
lenders."
He cites as evidence a headline from the Washington Post: "Figures in
Both Campaigns Have Deep Ties to Mortgage Giants"
The battle lines are being joined, NACA, a modern day David is taking on
the mortgage Goliath---and, so far, making progress Hopefully the bloggers,
gathered in their own convention in Austin Texas, and other activists, will
take notice and realize there is more to politics than electoral contests.
News Dissector Danny Schechter made the film In Debt We Trust and has
just finished a new book investigating the crisis, Plunder to be published by
Cosimo. Comments to dissector@mediachannel.org
7
Angelo's Fannie Pack
(Portfolio.com: Executives)
Submitted at 7/17/2008 8:00:00 AM
At least five current or former executives at beleaguered Fannie Mae and
Freddie Mac are linked to a controversial Countrywide Financial "V.I.P."
program that provided mortgages on favorable terms to policymakers and
business partners.
The executives include Countrywide's former Washington lobbyist, who
recommended key officials for V.I.P. treatment, as well as four beneficiaries
of preferential loans, among them a former Congressional staffer
specializing in housing issues.
An article in this month's Condé Nast Portfolio discloses how
Countrywide gave cut-rate mortgages to congressmen, journalists and other
V.I.P.'s in an effort to curry favor.
Countrywide's former Washington lobbyist, Jimmie Williams, who often
referred high-profile prospects for special treatment to the lender, currently
works as state director for Freddie Mac.
Countrywide's V.I.P. Club
An exclusive look at the Countrywide Financial loan scandal. Clinton C.
Jones III, who as a senior counsel of the House Financial Services Housing
and Community Opportunity Subcommittee in 2002 was referred for V.I.P.
treatment to Countrywide by Williams, is now a vice president at Fannie
Mae.
They exemplify the close ties between Countrywide and government-
sponsored mortgage buyers Fannie Mae and Freddie Mac. That relationship,
which worked to the firms' mutual benefit during the real estate boom, has
drawn increasing criticism recently as all three narrowly staved off collapse.
Bank of America bought Countrywide at a bargain price, while the federal
government has pledged to extend credit to or buy stock in Fannie Mae and
Freddie Mac if needed. Fannie Mae and Freddie Mac buy mortgages from
Countrywide and other lenders and resell them to investors in the secondary
market. Depending on the year, Fannie Mae purchased 10 percent to 30
percent of its loans from Countrywide, which became the nation's biggest
mortgage lender.
"If Fannie and Freddie catch a cold, I catch the fucking flu," Countrywide
co-founder Angelo Mozilo is quoted as saying in Chain of Blame, a new
book by Paul Muolo. Now the risky loans that sent Countrywide's share
price plummeting and prompted its sale have infected Fannie Mae and
Freddie Mac.
Home buyers pay discount points to reduce their interest rates; one point
equals 1 percent of the loan. Through V.I.P. mortgages, Countrywide
cultivated executives at Fannie and Freddie, members of Congress and their
staffs, and government officials.
Countrywide's former Washington lobbyist, Williams, acting as an
intermediary, would send emails flagging the importance of potential V.I.P.
clients to Countrywide. A person familiar with Williams' thinking said that
he recommended a hodgepodge of prospective customers for loans, from a
security guard to elected officials and Congressional staff. He initially
directed them to local Countrywide branches, but began hearing complaints
that some branches were slow or overwhelmed. To ensure quality service, he
referred more of them to the V.I.P. program, based in Countrywide’s
Rosemead, California, call center.
In November 2002, Williams urged Doug Perry, a call-center manager, to
give "specialized handling" to a loan application from Jones, then senior
counsel of the House Financial Services Housing and Community
Opportunity Subcommittee. "Jones is also an adviser to ranking Republican
members of Congress responsible for legislation of interest to the financial-
services industry and of importance to Countrywide," Williams added.
Perry then emailed Robert Feinberg, a Countrywide loan officer who dealt
with V.I.P. borrowers: "Can you please handle this? 0.5 off. No garbage
fees."
Once Feinberg completed the paperwork on Jones, the lawyer borrowed
$101,800 in February 2003. Countrywide waived five-eighths of a point, or
about $625. Senate rules bar members and staff from knowingly accepting
gifts of more than $100; gifts include loans on terms not available to the
general public.
Jones acknowledges being told that he was in the V.I.P. program. But he
says his interest rate was average or slightly higher and that he's shocked to
learn of his discount. "I thought I was just getting great service," he says. "I
didn't know there was a shaving of points."
Former Fannie Mae vice president Robert Sanborn refinanced several
times through the V.I.P. program. In 2004, for instance, Countrywide
waived three-quarters of a point, or about $2,600, on Sanborn's $345,000
refinance of his Provincetown, Massachusetts, vacation home, according to
a company document.
Sanborn, who worked on risk management and loan servicing in the Dallas
office, left Fannie Mae in 2007 and is now a real estate broker. He said he
learned about the V.I.P. program through Countrywide contacts, and saw
nothing wrong with using it.
"My understanding is that it was simply a centralized service for people in
the mortgage industry to accelerate the process," he says. He said that
Countrywide gave him "the best competitive rates" and "maybe they waived
a fee here or there." But, he said, he did not receive any "deep discounts."
"I would not call three-quarters of a point a deep discount," Sanborn added.
"Loan brokers all over the place have the authority to waive discount points.
It's not unusual."
Sanborn said he knows Mozilo, but that Countrywide's co-founder didn't
refer him to the V.I.P. program. Mozilo did personally arrange a refinancing
for another former Fannie Mae executive: Franklin Raines, its chief
executive from 1999 to 2004.
On June 9, 2003, the same day Raines applied for a nearly $1 million loan,
a Countrywide receptionist took a message from Raines' assistant: "Per
Angelo, Frank needs to refi." A Countrywide manager then instructed
Feinberg by email to take one discount point, or nearly $10,000, off the loan
and not to charge "junk" fees.
Former Fannie Mae chief executive James Johnson, a close friend of
Mozilo, also was given special treatment. As has been previously reported,
Johnson received more than $7 million in V.I.P. loans.
Related Links
Angelo's Many 'Friends'
The Myth of the Walk Aways
The Fed Turns Up the Tap
10 Ways To Change The
World
(The Huffington Post | Full News Feed)
Submitted at 7/22/2008 9:48:01 AM
Like ripples circling outward in a pond, individual acts of kindness, taken
together, can have world-changing effects. We asked Beliefnet users to
describe the most profound act of kindness they ever experienced, witnessed
--or did for another person. We've gathered some of the most moving ones
to inspire us all to do a little something more.
Helping a Homeless Person
The one act of kindness that always touches my heart (whether I do it or I
see it) is when someone helps out the homeless. I'm not talking about giving
money to them either. I'm talking about picking them up and taking them to
a shelter, giving them food instead of money on the train...or even talking to
someone homeless.
What most people don't understand about the homeless is that they have
their pride. A lot of them don't want help. But all of them want to be heard.
They want to feel like a human being and sometimes just talking to a
homeless person makes a world of difference. I have been witness to a man
that would talk to a homeless man for a year...just small talk...but that was
enough for the homeless person to be inspired to get up and get himself
together.
8
Runway Money
(Portfolio.com: Business Travel)
Submitted at 7/13/2008 7:00:00 PM
W henever staffers at Detroit Metropolitan Wayne County Airport discuss
ways to increase income, one person suggests putting Viagra advertisements
on the up escalators and ads for sleep aid Ambien on the down.
While most airports are owned by state or local governments, according to
the Airports Council International–North America, they still operate like
businesses and are required by the federal government to be as self-
sustaining as possible. Traditionally, airports have generated most of their
money from airlines—in the form of landing fees and fees for the use of
terminal facilities—and from non-aeronautical sources such as parking lots,
concessions, and advertising. But while the costs to run an airport have risen
significantly over the years, airlines, pinched by high fuel prices, have
balked at paying increased fees. In the scramble for dollars, some airports,
especially smaller and midsize ones more vulnerable to losing airlines
because of higher fees, have turned to selling everything from branded
products to natural-gas drilling rights.
Some of those efforts are yielding substantial returns, others just a few
dollars. According to the Federal Aviation Administration, in fiscal year
2005, U.S. airports had total operating revenues of $13.1 billion. Non-airline
revenue represented $6.1 billion, or about 47 percent, of that. By 2007, that
figure had inched up: The $6.5 billion airports earned from non-airline
sources represented about 48 percent of overall airport revenues of $13.6
billion.
Due to open in spring 2009, Missouri's Branson Airport may be the most
entrepreneurial of them all. The 922-acre facility expects to serve between
275,000 and 500,000 passengers a year and will be the first privately
financed and operated commercial service airport in the country. The airport
will hawk naming rights and sign exclusive agreements with rental-car and
ground-transportation companies, says executive director Jeff Bourk.
Branson will run its own on-site telephone system, a wastewater treatment
facility, and, probably, the bar. "We'll even create a company to reunite
passengers with their lost luggage," Bourk says.
These new models may end up benefiting passengers, says Kent Vanden
Oever, associate director of the Alexandria, Virginia, consulting firm
AirProjects. "The more airports are able to get revenue from non-airline
sources, the less they have to press airlines for money," he says. That helps
airports keep airlines from looking for other places to land. "And,
theoretically at least, every dollar the airlines save lets them keep fares at a
reasonable level," he says.
Here's what airports around the country are doing to generate cash.
Selling Souvenirs
Once Iowa's Sioux Gateway Airport stopped being embarrassed by its
airport identifier code (SUX), it began profiting from it. In 2007, T-shirts,
caps, mugs, luggage tags, and bumper stickers branded with the airport's
"Fly SUX" logo generated more than $3,500 for the tiny airport. Internet and
in-airport sales of SUX memorabilia should bring in twice that in 2008.
Taking a Gamble
During 2007, the Reno-Tahoe International Airport earned $3.7 million
from 245 slot machines that have been scattered throughout the facility since
1980. And last year, the 1,300 slot machines that have been a fixture at
Déjà Vu Skies
(Portfolio.com: Business Travel)
Submitted at 6/23/2008 9:00:00 PM
T hirty years of plopping myself down in seat 2B has made me older,
balder, and fatter, but I have gained a lot of perspective too. So take it from
this weary, wizened road warrior: Despite all the announced service
cutbacks, commercial air travel is merely changing. The sky isn't falling and
"the system" itself isn't collapsing.
This period of oil-fired chaos actually looks a lot like the travel landscape
after Iraq invaded Kuwait in 1990. Then as now, airlines weren't ready for
the oil shock and they panicked, shedding routes, grounding aircraft, and
slashing in-flight service. Then as now, business-travel demand pancaked,
companies kept their people chained to their desks, and travel and
entertainment expenditures plummeted.
I don't know exactly what's going to happen next. But past is prologue in
the air-travel world, and I'm willing to make a few educated guesses about
what we'll soon see.
Subsidized Air Travel
The nation's top travel destinations, Las Vegas and Orlando, depend on a
high volume of relatively low-priced flights to keep the tourists and
conventioneers coming. But both cities take a hit whenever the airlines cut
back. This time around, US Airways is slicing its Vegas hub in half, and
Delta Air Lines is dropping service to Orlando from more than a dozen
cities.
The solution? Casino resorts and tourist attractions may subsidize airlines
to keep flying passengers into town. Or they'll help fund startups whose sole
mission is to fly into Las Vegas or Orlando. In the late 1990s, for instance,
several Las Vegas casinos helped launch National Airlines. It flew for a few
years, until the other carriers beefed up their Sin City service. And Disney
has frequently toyed with the idea of launching its own airline or going into
a branded partnership with an existing carrier. Don't be shocked if you see
Air Disney shuttling fliers into Orlando in the years to come.
New Airlines With Old Names
The established airlines are shedding planes by the dozen, and some of the
aircraft may be serviceable for fledgling carriers with lower costs. Surprising
as it may seem, startup funding may be available too. "There's always a
hotshot with a business plan and an investment banker who thinks he's
smarter than the room," explains one investor I know who's made some
money funding airline startups over the years.
One quick way to get attention for a new airline with no track record: Use
a familiar name. Over the years, there have been three airlines named
Braniff, three named National, and two called Midway. I've lost track of the
number of times the Pan Am and Eastern names have been revived. Even
blip-on-the-radar airlines sometimes have valuable brand names. Silverjet,
which folded in May after just 16 months in the air, is attracting potential
rescuers.
Vanity Flights
Decades ago, Kimberly-Clark executives were infuriated by the lack of
flights to its hometown of Appleton, Wisconsin. It eventually launched its
own air service, derisively called Air Kleenex, but it morphed into the
Four at Four: How About Those Banks?
(WSJ.com: MarketBeat)
Submitted at 7/21/2008 4:27:00 AM
• Bank stocks are by no means doing well for 2008. But the recent rebound
in the shares of financial-services names has eliminated all of the losses
sustained by broad financial-services sector indexes, thanks today to the
bounce in Bank of America Inc., which led a number of the large banking
stocks higher on the session. The Financial Sector Select SPDRs exchange-
traded fund didn’t mark major gains on the day, but its increase was enough
to put it at a close of 20.44, the highest closing price for that index since
June 26, before falling 15% in the first two weeks of July. Furthermore, the
price action in bellwether Goldman Sachs Group Inc. suggests that investors
are again seeing the financials as a place to go and not run from— for
however long that lasts. Analysts at Asbury Research say the trading in
Goldman of late suggested more bearishness, but the shares turned last
week. “Failed bearish patterns are pretty rare, but when they occur it
indicates that the market has, for whatever reason, aggressively changed its
mind on future price direction,” they write. Goldman shares ended the day
down 1.1%.
• There has been plenty of talk about “ greener” energy sources, but over
McCarran International Airport in Las Vegas since roughly 1985 yielded
more than $40.9 million for the Clark County Department of Aviation.
McCarran's spokesman, Chris Jones, says that represents about 12 percent of
the department's $332.7 million overall revenue for the year.
Making Hay
At the 10,000-acre George Bush Intercontinental Airport and the 2,500-
acre Ellington Field in Houston, airport officials are banking on the land.
"As they say, everything is bigger in Texas, and here in Houston we have
lots of open land at our airports," says Rick Vacar, director of the Houston
Airport System.
A few years ago, Vacar authorized the planting of Bermuda hay and the
higher-protein Tifton 85 hay on airport land. In 2006, 800 acres of airport
hay was sold locally through a broker, bringing in $30,000. More was
planted in 2007, but none was cut because the contractor backed out of the
job. This year airport employees will step in, harvesting more than 2,000
acres of hay and an estimated $500,000. So far, the profits are being plowed
back into the program, but airport officials hope the investment will pay off
in the future.
Digging for Dough
In Denver and Dallas/Fort Worth, the airports reap profits not only from
what's on the ground, but what's beneath it.
The 34,000-acre Denver International Airport leases land for commercial
real-estate projects and to farmers who plant soybeans, sunflowers, and
wheat. The airport also reaps $4 million to $6 million a year from more than
50 oil and natural-gas wells that have been on airport property since it
opened in 1995. (Many predate the airport itself.) While the airport's overall
budget is more than $500 million, "every little bit helps," says airport
spokesman Chuck Cannon.
The 18,000-acre Dallas/Fort Worth International Airport earns about 65
percent of its revenue from non-airline sources, including two golf courses
and the upscale Grand Hyatt D.F.W. in International Terminal D. The
airport also sits on a giant natural-gas deposit, the Barnett Shale. In 2006,
D.F.W. sold drilling rights to an energy company for a $186 million
"signing bonus" and 25 percent royalties. Today, 40 wells bring in about $3
million a month in royalties. A total of up to 300 gas wells on airport
property are planned over the next 15 to 20 years. D.F.W.'s C.E.O., Jeff
Fegan, says the income is a form of "rent control" for airlines and a boon to
passengers—the airport used $40 million from the initial drilling bonus to
renovate its original four terminals.
Naming a Solution
Detroit Metro Airport never installed the Viagra ads, but it is taking a
lesson from the sports world. In 2007, airport officials put naming rights for
the new north terminal, set to open this fall, up for sale. GSA-McConnell,
the marketing partnership created to sell those rights, won't disclose the
asking price, but right now there seem to be about 10 interested parties. Next
up, advertising on your luggage?
Related Links
Tips for a Sky-High Spring
Air Heads
Cartel Members, Beware
highly regarded Midwest Airlines. (Kimberly-Clark has moved to Dallas;
Midwest is now based in Milwaukee.) Companies all over the country are
griping about lousy service in markets where their travelers need to go, so
there's always a chance one of them will step up. And watch the U.S. skies
for the ultimate vanity airline: Kingfisher, named after the well-known
Indian lager. Vijay Mallya, the bombastic boss of India's United Breweries,
plans to bring Kingfisher's lavish in-flight service and crimson-colored
aircraft to the San Francisco-Bangalore route later this year.
The Return of Charter Airlines
Charter airlines have largely disappeared in the United States in the 30
years since deregulation, but they continue to be a potent force in many
other developed nations. If oil prices stay in the triple digits, charters will
make a comeback here too. That's because charter flights are perfect
vehicles for vacation fliers. They run only when they are needed and are
usually sold as part of a package that includes lodging and car rentals.
Spared of the need to advertise and market heavily and fly on profitless days
when traffic is light, charter operators can make money on routes where
traditional scheduled carriers struggle.
Rallying Regionals
The bigger-is-better mentality of the nation's post-deregulation legacy
carriers flies in the face of economic realities: There are very few economics
of scale in the airline business. The legacy airlines have grown in the last 30
years by absorbing or merging with smaller, regional competitors. They
often promptly begin to gush cash on the same routes where the regionals
were neatly profitable.
So logic—the words logic and airlines rarely appear in the same
sentence—dictates that city-specific and regional airlines make a comeback.
As the legacy carriers contract, they'll vacate markets that could be
profitable for smaller, more focused startup airlines. After all, old-timers still
pine for Air Atlanta and New York Air, airlines that reflected the needs and
sensibilities of their hometowns. Californians still carry the torch for the
state's beloved AirCal and Pacific Southwest, both of which disappeared in
mergers. And everyone misses Piedmont Airlines, a stylish midsize carrier
that flew profitably until it was gobbled up by the company now known as
US Airways.
One final thought: Some business travelers, especially those whose
frequent flying is on relatively short routes, will never return to the sky.
They'll outfit their cars with some of the comforts of home and office, grit
their teeth at the price of gasoline, and drive wherever they need to go. It'll
take longer, of course, but they'll travel on their own schedule and will feel
virtuous for having abandoned the indignities of airlines, airports, and
security-checkpoint shakedowns.
The Fine Print…
J.D. Power has released its 2008 airline ratings. Not surprisingly, JetBlue
Airways fared best. Tied for worst: Northwest Airlines and United Airlines.
Related Links
Join the ClubBut Which Club?
The Skies Open Overseas
Why US Airline Service is So Bad
the weekend there was action, as Texas regulators moved ahead on a $4.93
billion wind-power transmission project which one official said would put
the state ahead of Germany in terms of wind transmission. The lines are
slated to carry electricity from the western parts of the state to the largest
cities, such as Dallas, Houston, and San Antonio. Wind-related shares were
stronger in trading today, incluing Zoltek Cos., which gained 3.7%,
American Superconductor, which rose 5.9%, and Otter Tail Corp., which
rose 2%. The lines will handle about 18,500 megawatts of power. “This
amount exceeds the installed wind capacity of the entire United States at
year-end 2007,” write analysts at Raymond James. “It is also larger than the
wind capacity of Australia, Canada, China, France, Italy, Japan, and the
U.K. – combined.”
• Last week’s ascent for airline stocks is unlikely to end in a crash landing
any time soon. After a big slide in oil last week, airlines jumped across the
board, with several carriers posting double-digit gains for the week. And
though oil reversed course Monday, airlines traded relatively flat and are
expected to remain in a relative holding pattern for the time being, as much
of the downward momentum has been built into these stocks already.
“We’re in a temporary recovery. You had a good-enough rally for me to
think they won’t just sell off and instead consolidate for a while and then
Don't Take a Flier on
Airlines
(Portfolio.com: Business Travel)
Submitted at 7/21/2008 9:00:00 PM
E ven as the nation's network carriers began reporting billions in second-
quarter losses last week, a furious rally drove share prices up by 45 to 60
percent. The market shrugged off the $1.4 billion loss reported by the parent
of American Airlines, the nation's largest carrier, and ran its stock up 59
percent. The nation's second-largest airline, United, will report losses in the
$3 billion range this week, yet its shares climbed 58 percent.
Why the irrational aeronautic exuberance? Last week's unprecedented
decline in the price of oil, which plummeted more than $16 and closed
around $130 a barrel. With fuel now accounting for about 40 percent of the
airlines' costs, sharply lower oil prices surely looked like good news to the
markets.
But irrational exuberance is nothing if not irrational. The biggest
airlines—American, United, Delta, Northwest, Continental and US
Airways—can't make money at $130 a barrel. They can't make money at
$100 a barrel, either. Nor can their smaller competitors. Even the double-
digit cuts in passenger capacity and triple-digit aircraft retirements planned
for the fall probably won't restore profitability unless oil drops to about $80.
(That's what oil sold for late last summer, the last time the big carriers were
consistently profitable.) And since both business- and leisure-travel demand
is falling, the price hikes and fee increases announced with metronomic
regularity this spring and summer are likely to be offset by fall and winter
fare sales.
"Don't you dare rain on my parade," an airline executive snapped at me
Friday evening. "I want one weekend this summer when I can fantasize
about not being in bankruptcy next year."
I hope he enjoyed his weekend, because that brutal reality—every U.S.
carrier except Southwest Airlines faces bankruptcy and possibly even
liquidation—cannot be ignored. None are sufficiently hedged against triple-
digit oil prices. None can ground planes or lay off staff fast enough to keep
their corporate heads above the rising tide of red ink. And there's no
playbook to consult.
Think I'm being irrationally pessimistic? Tell it to Fitch Ratings, which
says there could be "multiple bankruptcies and liquidation" among the major
airlines next year. "The industry's current structure is unsustainable in the
current fuel environment," Fitch said last week. And if you don't like
analysts analyzing, listen to Virgin Group's Richard Branson, whose own
worldwide airline empire is shaky. He predicts "spectacular casualties"
among the big carriers in the next 12 months.
Perhaps most frightening is that no one can agree on which of the carriers
are most at risk. Last Friday, for example, J.P. Morgan Chase double-
jumped United shares to "overweight" from "underweight," primarily
because the lead analyst thought the airline would announce a big new
borrowing scheme this week along with its second-quarter loss. But just
hours later, Moody's cut United's debt rating two steps to "Caa1," seven
notches below investment grade.
What's the chaos mean in the long term for business travelers? To be
honest, I don't know. Even 30 years of plopping myself down in seat 2B isn't
particularly preparatory or enlightening. And the longer oil prices remain in
triple digits, the less the lessons of the 1990 to 1995 period seem revelatory.
But I can offer several watch-your-back tips for the next several months on
the road.
Confirm Your Flights
If you've booked travel for any time after Labor Day, make sure your
flights are still on the schedule. Airlines have dropped routes without notice
all summer, but the big tranche of cancellations begins on September 2.
Overnight, most carriers will shrink their schedules 5 to 15 percent . Even if
your airline will still fly on your route, it may have cut frequencies, so check
that it has "protected" you on another flight and remembered to match up
your onward connections.
Avoid Smaller Airports
The airlines are weeding out service to smaller airports, partially because
they bring the least traffic into their hubs and also because the routes are
flown with inefficient regional jets. If possible, book flights from the closest
hub instead.
Expect Less Help
As they scramble to cut costs, airlines are thinning their already depleted
ranks of front-line airport employees. That'll mean longer waits to check in,
check bags, and load passengers and luggage onto planes. Carriers are also
chopping mechanic jobs, so there will be more delays and cancellations for
mechanical reasons. And wherever they had staffed flights above the
federally mandated minimums, they are reducing the number of flight
attendants. That means even less in-flight service.
Have a Plan B—and a Plan C
Although wags now openly speculate on the survival odds of one carrier or
another—Midwest, Frontier (already operating in Chapter 11), US Airways,
Sun Country and Spirit seem to be popular picks in death pools—I wouldn't
assume any carrier will fold. Or survive. Know your options for every flight
you book. And carry your Plan B and Plan C with you in case your carrier
folds while you're on the way to the airport. Seriously.
Drain Your Mileage Programs
Finally, stop "banking" frequent-flier miles. If you've got enough miles to
claim an award, use them now. The value of miles is depreciating even
faster thanks to the route cutbacks and new fees imposed when you redeem
an award. Besides, if your airline collapses, there's no guarantee that another
carrier will step in and honor unused miles.
The Fine Print…
Midwest Airlines, the Milwaukee-based boutique carrier, is the latest to
slash its operations. It announced on Sunday that it would contract its overall
capacity by upward of 40 percent. By September, it will have grounded
about a third of its aircraft and cut a dozen cities off its route map.
Related Links
Why Airline Mergers Don't Fly
Flying on Empty
Deals Taxi for Takeoff
maybe rally,” said Phil Roth, chief technical strategist for Miller Tabak. To
be sure, downside momentum remains strong with traders arguing that the
last week’s momentum served only to provide a “good trade.” – Geoffrey
Rogow
• Some have expressed concern about industrial stocks, expecting that the
high cost of commodities will eventually hurt the margins of these names,
reducing capital spending. But a number of stocks continue to hang in there,
including shares of Timken, which rose 22% Monday after the company
raised its second-quarter and full-year earnings outlook, saying that global
demand is more than offsetting weakness in North American automotive
markets. The company makes engineered bearings ( c’mon, it’s all ball
bearings now) and alloy steel products, and said its forecast for 2008 rose to
$2.95 to $3.10 a share from the company’s earlier estimate of $2.75 to
$2.95. “It appears that global bearings companies continue to enjoy healthy
demand from industrial customers and strong pricing, which helps offset
material cost escalations,” wrote analysts at Merrill Lynch, who cautioned
that its exposure to auto markets suggests the company may still see slowing
of growth in the future.

Why High WiFi?
(Portfolio.com: Business Travel)
Submitted at 7/14/2008 9:00:00 PM
A decade ago we were complaining about the cost of calls from hotel-room
phones. Why, we wondered, did cheap hotels give us free calls, but fancy,
five-star joints ding us even for toll-free numbers? Who made more sense:
The general manager who insisted that telephone calls were an integral part
of the nightly rate, or the one who claimed he wouldn't think of charging a
guest for a service he or she didn't use, so anyone who used a hotel's
telephone system had to pay inflated, à la carte prices?
Mobile phones mooted that debate, and no business traveler even thinks
about using a guest-room telephone today. But the deep, philosophical
disagreements are back—over the price hotels may or may not charge to
access high-speed internet and WiFi service.
Business travelers expect select-service properties (that's politically
correct, 21st-century lodging jargon for "cheap hotels") to offer free wired
and/or wireless internet access. And free access is standard at places like
Courtyard by Marriott, Hampton Inn, and Four Points by Sheraton.
"You can't compete in the [select-service] segment if you don't include free
internet as part of the room rate," says Tony Isaac, president of
LodgeWorks, which operates hotels under the Hilton Garden Inn and Hyatt
Summerfield Suites brands and owns a group of suite properties called Hotel
Sierra. "Guests demand it. They need it to work. They use it for
entertainment. They don't care about 24-hour room service or bellhops.
What they expect is the ability to get on the Net free from anywhere in the
hotel."
When you climb the lodging-price ladder, however, internet access
becomes an add-on service. Hilton may give it away at its Garden Inn and
Hampton Inn brands, but internet is à la carte at its upmarket Hilton and
luxury Conrad and Waldorf-Astoria properties. Ditto for Marriott, which
charges for internet at its eponymous full-service hotels and its ritzy Ritz-
Carltons, but offers it free at its Courtyard and Fairfield brands. Other big
lodging groups—Starwood, InterContinental, Hyatt—follow the same
formula: Free at the lower-priced brands appealing to road warriors, fee at
fancier properties likely to draw more leisure travelers.
"I don't apologize for charging $15 a night for internet," says the general
manager of a luxury resort property who nevertheless demanded anonymity.
"Only a fraction of my guests use the internet when they're staying with me.
Those that want it pay. Those that don't aren't paying for it as part of their
room rate."
The problem with pay-as-you-go internet is that hoteliers look at Web
access as a profit center. Just as they jacked up the price of guest-room
phone calls, they are running up the price of internet access. Although
nightly rates tend to range from $7 to $15 at U.S. hotels, "I've paid as much
as $50 a night for access overseas," says Andy Abramson, globe-trotting
Karls Kitchen
(Portfolio.com: Executives)
Submitted at 7/17/2008 9:00:00 PM
T itans of industry may deal in billions of dollars, thousands of employees,
and dozens of class-action lawsuits, but that doesn't mean their issues are
that different from those of the common man. While my wife and I were
doing a gut renovation of my loft apartment in downtown Manhattan, I took
note of several familiar business issues we encountered and kept track of our
own attempts to wrestle with some of the same problems that continue to
vex America's C.E.O.'s—namely: procurement, accounting, dealing with
regulators, and hiring the right people.
1. Supply-Chain Management
We opted to go with an ultraefficient, just-in-time delivery system for our
fixtures, appliances, and kitchen-countertop stone, recalling that Japanese
carmakers ran Detroit off the road with this approach in the '80s and '90s.
But we encountered unforeseen implementation issues, as it turned out that
nothing was delivered on time—ever.
In particular, our Italian bathtub maker did not seem to understand the
brilliance of our just-in-time plan, or even wish to communicate with us at
all once we placed our order and paid our deposit. After waiting a month, we
ended up buying a completely different bathtub from a different supplier,
which also has not yet arrived. Phil Knight faced a similar supply-chain
mishap in 2001 based on a flawed new "planning system," forcing Nike to
take a $100 million revenue hit that year. The full budget impact of our own
planning system has yet to be calculated.
2. Accounting
We elected to do the accounting for our project with an unconventional
"zero-entry bookkeeping" system (no annoying spreadsheets). The more
quantitatively inclined among you might scoff at our simplistic method, but
what it lacks in transparency is more than made up for in ease of
implementation.
However, flaws in the system became apparent when checks to suppliers
started bouncing, indicating that the zero-entry method had failed to alert us
to the fact that our capital reserve had reached zero. The resulting run-up in
credit-card debt has created some valuation complications, such as, how do
you price a project when the cost of capital has reached 24.5 percent a
month?
While few of America's C.E.O.'s have been bold enough to implement the
zero-entry method, quite a few, notably Enron's Jeff Skilling and C.U.C.'s
Walter Forbes, have tried the related fake-entry bookkeeping system, with
results similar to our own.
3. Regulatory Issues
My wife and I felt that the various regulatory issues regarding our project
would best be dealt with by pretending they did not exist or claiming to not
Thomas Stern: A Kick in the Career: Amazing True Stories of Death by
Overtime
By webmaster@huffingtonpost.com (Business on
HuffingtonPost.com)
Submitted at 7/22/2008 9:15:19 AM
Some guy in Japan just bought the farm by working too hard. You heard
right. He was 45, the lead engineer for a Toyota hybrid car division. While
he was helping us reduce our dependence on oil, the poor guy ran out of gas.
And he didn't even live as long as some of our aging rock stars. You know
the economy's in bad shape when an auto worker doesn't last as long as
Keith Richards. Prior to his death this dedicated worker had been averaging
over 80 hours of overtime per month. Which I guess should now be referred
to as " six feet undertime."
The amazing thing is that his dying from too much work was not just an
opinion, but an official ruling handed down by the Japanese Labor Bureau
Aichi. And recently, they've ruled similarly in other cases. Apparently,
working insanely punishing hours to the point of kicking the bucket is
becoming quite popular in Japan. I wonder if guys in Tokyo are placing bets
over a beer. First guy: "I'll be dead by the weekend." Second guy: "Oh,
yeah? I'll bet you two hundred yen I won't see tomorrow." First guy: "Hey,
that's not fair! You've got the graveyard shift!" The worst part is, if you die
first and win the bet, how do you collect? The problem has become so
widespread that the Japanese even have a word, "karoshi," which means
"death from overwork." Not to be confused with "karaoke," which means
"death by plunging a cocktail umbrella into your carotid artery after listening
to your best friend sing 'My Way' off-key for nine straight hours."
If this story, which happens to be from the Far East, does not resonate with
you here in the West, then either you need to start working harder or maybe
you're already dead. News flash: we work too hard in this country, too. We
founder of Comunicano, a public relations and marketing firm based in Del
Mar, California.
Abramson, who has turned his obsession with travel-technology tools into
the Working Anywhere blog, says he's okay with paid hotel internet, even if
it is overpriced. "If it's free and it doesn't work, how can you complain?" he
reasons. "But if I'm paying, I'll scream bloody murder if I can't get on the
Net and work."
I'm not as sanguine about WiFi fees. I expect free internet access at the
select-service hotels because I know that is part of their value proposition. I
accept that more traditional hotels consider it a pay-to-play option because
they offer different perks (more lavish decor, room service, concierges) as
part of their room rates. But it's ludicrous to pay more for a night of hotel-
room internet than I shell out for a month's worth of access at home. It
makes me angry—and less likely to stay in that hotel again.
"We've warned our franchisees about overpricing," the executive of a
major full-service chain told me last week. "But they live and die with the
bottom line, and they're worried about the rising cost of providing internet
service. Guests are really gobbling up the bandwidth now that they're
downloading movies, playing games, and doing video conferences."
Isaac of LodgeWorks is concerned too. "We used to have one T1 line for a
hotel of 120 to 150 rooms, and we knew guests were getting good, speedy
access. But in our hotels in high-tech areas like Santa Clara [in California's
Silicon Valley] or Fishkill [in New York's Hudson Valley, where many
guests are I.B.M. employees], we need two or even three T1 lines now."
A T1 line, which data transfers at 1.5 megabits a second, costs a hotel
$500 to $700 a month to rent. T1 providers also impose a monthly service
charge of about $2 a room. "And the price is only going up as guests
demand more bandwidth and faster access speeds," Isaac predicts.
So what's the bottom line? If you think free internet is your right, stay at
the hotels that offer it. If you insist on staying at the fancier joints, consider
high internet fees part of the high cost of living the high life on the road.
Like the decades-long battle over the cost of a hotel-room phone call, I think
this argument is going to be around a while.
The Fine Print…
One way to mitigate the high cost of on-the-road internet access is with
Boingo, a network of WiFi hotspots. Among the company's 100.000
participating locations are more than 19,000 hotels and 850 airports. Boingo
charges $21.95 a month for unlimited access in North America or $39 a
month for global coverage. T-Mobile's hotspot network is also available in
monthly gulps, but prices are higher than Boingo.
Related Links
A Good Place to Lay Your Head
Eat Sheet: Tea
The High Cost of a Low Dollar
be aware of them—a "don't ask, don't ask policy," you might call it. Readers
may again be tempted to scoff at our decision, but when you are running a
ruthlessly efficient, just-in-time supply chain and accounting for it all with a
sloppy mental ledger, you really can't afford to get bogged down in legalese.
The executives at Exxon who allowed a relapsed alcoholic to pilot a 200,000
-ton oil tanker through the Prince William Sound in 1989 probably know
what we're talking about.
However, since our loft is situated in a cooperative apartment building and
our fellow shareholders had deeply held beliefs (stated in building by-laws)
about what should be allowed in their building, we were very quickly forced
into compliance with a host of regulations regarding such things as electrical
load, Jacuzzi power, interior soundproofing, and grout-density
specifications. The resulting delays have been both costly and catalyzing of
certain process inefficiencies. Who knows? Had we been more compliance-
minded, perhaps we would have hot water in our unit by now.
4. Management
On this crucial issue, my wife and I elected to manage on a consensus
basis, allowing important decisions to be delayed or forgotten about and
then hastily resolved by my wife at the job site at the last minute. This
system consistently resulted in late, ill-informed, and badly thought-through
orders that tended to backfire, bringing on later, even worse choices (the
consensus approach seems to have worked much better for Google's Eric
Schmidt, Sergey Brin, and Larry Page).
More specifically, there was a complete breakdown in horizontal, vertical,
lateral, peripheral, and even collateral communication between all parties on
the management team, leaving the downstream managers like the architect,
the contractor, and various subcontractors to make decisions on their own.
These field-level orders often resulted in costly order changes that our zero-
entry system did not account for and that the management team discovered
when we found out a creditor who hadn't been paid on time was threatening
to take out a lien on our property.
5. Staffing
Our human-resources strategy was to approach the best in their fields, and
when they turned out to be prohibitively expensive, hire anyone willing to
do the job at our price point. The resulting head-count issues caused
considerable delay in the project. Middle management itself was often
unavailable and seemed completely uninterested in manpower issues—that
is, when we were actually able to reach them on the phone. Staffing
continues to be an area for improvement, and we intend to bring this up with
our contractor when and if we ever see him again.
Related Links
Detroit Shoots Itself in the Foot on Fuel Efficiency
Detroit: Automakers Back to Business. But What Business?
Showing New Colors
have long been in denial about our capacity for pounding the keyboards of
our Blackberries until the letters and numbers are worn off. We know it's
time to get a new one when our text messages asking a friend to meet us at
Starbucks are so unintelligible they look like a hieroglyphic missive sent
from Cairo to Rome by carrier snake. And corporations are already
aggravated enough shelling out for maternity leave and on-site day care,
imagine how furious they'll be when they have to start paying death benefits
to the families of deceased workaholics. I don't think an angry widow will
be happy with the "My Husband Bought It At His Job And All I Got Was
This Lousy T-Shirt" consolation prize.
All the more reason to kill the very concept of death from overwork in its
tracks before it can make it into Western society.
Corporations can start including the virtues of death in their mission
statement.
Our goal is to combine superlative customer service with extraordinarily
high product quality and at least nine employee deaths per quarter. We stand
behind our company motto: "Here Today -- With A 2.8 Percent Chance of
Not Making It Till Tomorrow."
Shareholder meetings will provide another opportunity to get people used
to new corporate language:
"Ladies and gentlemen, in order to help launch our new product line on
time and under-budget, over 300 people died horrible, stress-related deaths.
299 of them did so willingly; and that's just the kind of commitment we
make here at Bed, Bath & The Great Beyond. Oh, and please go out the
back way: the families of the people who croaked are in the lobby, menacing
our receptionist with crudely-made street weaponry."
Soon, just to survive, employees will create the illusion of overworking.
They'll stack their desks with paperwork, stay after hours and wear the same
9
ENEMY
continued from page 2
new trial, he is straightforward: He says it’s about revenge. “Putin is a very
nasty man, and he wants to make sure that Mikhail is as broken as possible.
You can see it with the murders abroad—Alexander Litvinenko, for
instance. The message is, We go after the people we dislike, and we destroy
them.”
Amsterdam communicates with the imprisoned oligarch via encrypted
messages passed along by Russian attorneys. Tactics are discussed, as is
progress. New hearings are being pursued in Europe, particularly at the
European Court of Human Rights in Strasbourg, France. Khodorkovsky
scored a victory in Switzerland, where a court refused to help Russian
prosecutors reclaim Yukos’ assets. Many believe Khodorkovsky could
personally possess about a billion dollars in assets, though there is no way to
prove it. (Amsterdam insists he has no idea how much money
Khodorkovsky has.)
There are about a dozen other people working with Amsterdam on the new
fight. Some have fled Russia; one is wanted by Interpol. Britain has thus far
refused extradition requests for former Yukos employees. For the most part,
the Russians live quietly, allowing Amsterdam to be the target. Among the
most important is Anton Drel, who has been one of Khodorkovsky’s
Russian lawyers since 2000 and now works alongside Amsterdam.
When I visit Drel one afternoon, the receptionist at his office building
claims she has never heard of him. “I think you have the wrong address,”
she says. Only when I give her a phone number does she learn of his
presence on the second floor.
Drel is a boyish 40-year-old with gelled hair and stylish glasses. Through a
translator, he says the case has been tough on him and his family. His office
in Russia was raided three times. Like everyone else involved in the case, he
says Khodorkovsky is not easy to defend. “He’s not a saint,” he says.
“But he didn’t do anything that others weren’t doing. Everything he did
was within the accordance of the laws. If laws weren’t perfect, then it’s not
his fault.”
amsterdam is considering an appearance at the trial, regardless of the fact
that almost everyone says it’s a dangerous idea. If he goes, people tell me,
there is a good chance he will not come back. One of his friends put it this
way: “The Kremlin probably won’t kill him, but they’ll throw him in jail on
trumped-up charges—plant drugs on him, stick a gypsy girl in his hotel
room and accuse him of rape.”
The trial could be the last opportunity for Amsterdam and company to
attack the Kremlin on its own turf. It was moved from Moscow to Siberia to
reduce press coverage, but the ploy could backfire, some say. If this saga
becomes as all-encompassing as the first, it will serve to remind
international investors that in Russia, property is provisional, the law is
unpredictable, and the state is a mad -dictator—which is, of course, what
Amsterdam wants. “The system wants Mikhail Khodorkovsky to fade,”
Kupchan tells me. “If it becomes another show trial, it will reawaken all
sorts of investor fears, both domestically and internationally, and that’s not
in anyone’s interest.”
A conviction, which is probable, will send Khodorkovsky and his partner
away to prison for another 10 to 15 years, if not more. Many I spoke to are
betting that he won’t ever make it out, because they expect him to be sent to
a more remote work camp. Amsterdam’s team is hoping a favorable ruling
from the European Court could place unbearable pressure on Putin’s
handpicked successor, President Dmitri Medvedev, thus forcing him to
rethink things. In other words, Khodorkovsky’s saga is likely to continue for
some time.
This is especially true given the way things are going for Russia. The
Kremlin remains strong, with much public support. Economic growth is up
almost 8 percent, and there is a broadening middle class that is content with
the transition away from the dreary bandit days. The country is now the
world’s largest exporter of natural gas and second-largest oil exporter after
Saudi Arabia. Russia is on a roll. Even with inflation creeping up, as long as
the petrodollars keep pouring in, the Kremlin will continue to have wealth to
spread around and few, in the short term, are likely to wonder about the
fairness of Khodor-kovsky’s being locked away in Siberia.
On one of the last occasions that I meet with Amsterdam, I mention all of
this and ask if he ever thinks of giving up. “I don’t see it as an option,” he
says. He gave the oligarch his word, and he’s invested unbelievable amounts
of time helping his Russian colleagues, who will not be able to reclaim their
lives until the matter is resolved. “This case is more than just a lawsuit,” he
goes on. “If Yukos is allowed to fade into history without justice being done,
it will significantly retard Russia’s ability to become a rule-of-law state.”
He pauses, then adds, “Fact of the matter is, Khodorkovsky was the
beginning—and the most important piece of this thieving virus that has
taken over Russia. And the only way to stop the -virus is to go to the root,
and Yukos is the root.” In this way, the story is bigger than just one man and
one oil company. “It is not only about Yukos and Mikhail Khodorkovsky,”
Amsterdam says. “It’s now about saving Russia.”
Related Links
Putin's Power Grab
Putin Reacts to 'Time' POY Pick
Boris Yeltsin, Capitalist
Daily Show Asks Elderly Jewish Voters About
Obama (VIDEO)
(The Huffington Post | Full News Feed)
Submitted at 7/22/2008 9:48:04 AM
Daily Show correspondent Wyatt Cenac travels to South Florida to find out
if Barack Obama can win the elderly Jewish vote.
[WATCH]
clothing for days, stinking up the office with their apparent dedication
through lack of personal hygiene, all in the hopes of being recognized
simply for their willingness to die on the job. People will pretend to have
very urgent phone conversations in hushed tones when their bosses walk by,
to give the impression that the company is their number one priority.
"Sweetheart, I know our wedding is in fifteen minutes, and I appreciate that
you've invited over 700 people and that your parents, who are paying for all
this, have flown in from the Ukraine and have endured being held for over
seven hours at the airport and cavity-searched by Homeland Security, but I
promised our office manager I 'd go to Office Depot and pick up some toner
and a 36 by 40 inch polyurethane mat for his swivel chair, so it doesn't
encounter carpet resistance when he pushes it under his desk."
We can blame the corporations all we want, and certainly they need to take
responsibility for how they wrap the bottom line around our necks. But so
many of us overwork to avoid personal lives that we have allowed to
become unmanageable. I'm fairly confident that work will never kill me,
because I make sure to spend a lot of time around a wife who's always there
for me, and two kids who love me no matter what. So you see, I know I
won't get caught up in a horrible cycle of work obsession to the point of
risking my life. And why? Because my entire family has been trained on,
and are more than capable of using, my high-tech, state-of-the-art portable
defibrillator. I'm ready for the day when my family is gathered around me at
the breakfast table and my wife is rubbing two stainless steel paddles
together screaming, " CLEAR!" and I'm thinking, " As soon as I'm done
with this heart attack, I've got to get back to work." Norman Rockwell
would be proud.
10
Facebook Creeps Me Out
(Portfolio.com: Executives)
Submitted at 7/16/2008 3:00:00 AM
Bill Gates doesn’t get a lot of credit these days for being a visionary. But
when it comes to his relationship with Facebook, he may still be a step
ahead of the rest of us. The Sun, a British tabloid, reported this year that
Gates had quit his half-hour-a-day Facebook habit, partly because he was
getting more than 8,000 “friend” requests daily but also because he was
finding “weird fan sites about him.”(View a slideshow of several "weird fan
sites.") A Microsoft representative confirms that the boss has gone cold
turkey but wouldn’t disclose whether Gates knew of a Facebook group
called “Would you have sex with Bill Gates for half of his money?”
Actually, it’s a wonder that Gates was on Facebook in the first place
(Microsoft’s $240 million investment in it notwithstanding). Bill Gates
obviously doesn’t need to schmooze on Facebook. And neither do you,
despite the pressure you’ve doubtless felt to join it ( because, y’know,
everyone is on Facebook). Perhaps you’re like Ben Rosen, who co-founded
venture-capital fund Sevin Rosen, which has bankrolled such companies as
Electronic Arts and Compaq (which he once led as C.E.O.). Rosen is hardly
averse to sharing personal information online; he says his blog,
BenRosen.com, has become a small social network of sorts. But he has yet
to use his Facebook account. “I’m trying to figure out the utility for me,” he
says.
Or perhaps, like Gates, you just find Facebook a little…creepy.
Businesspeople often claim to use Facebook for vague “market research”
purposes or to satisfy idle curiosity. But the social norms of social
networking are still in flux, making privacy a real issue, says internet-
marketing writer David Weinberger. “Younger people violate older people’s
idea of proper behavior when it comes to privacy,” he says.
“It’s kind of eerie how much information is available about you on a social
network,” says Michael Fertik, C.E.O. of online-privacy service
-Reputation-Defender, “and how many conclusions, tentative or otherwise,
can be made so handily, fairly or unfairly, based on that information.” Fertik
estimates that all 55 of his employees use Facebook, and although he
doesn’t, he’s unsettled by the all-consuming, constant-update M.O. it
encourages. “I’ve seen a lot of quiet, passive-aggressive resentments and
rumors that come from people just knowing that much about your business,”
he says. “If you’re updating people, like, ‘I’m at a barbecue at my
Facebook Creeps Me Out
(Portfolio.com: Careers)
Submitted at 7/16/2008 3:00:00 AM
Bill Gates doesn’t get a lot of credit these days for being a visionary. But
when it comes to his relationship with Facebook, he may still be a step
ahead of the rest of us. The Sun, a British tabloid, reported this year that
Gates had quit his half-hour-a-day Facebook habit, partly because he was
getting more than 8,000 “friend” requests daily but also because he was
finding “weird fan sites about him.”(View a slideshow of several "weird fan
sites.") A Microsoft representative confirms that the boss has gone cold
turkey but wouldn’t disclose whether Gates knew of a Facebook group
called “Would you have sex with Bill Gates for half of his money?”
Actually, it’s a wonder that Gates was on Facebook in the first place
(Microsoft’s $240 million investment in it notwithstanding). Bill Gates
obviously doesn’t need to schmooze on Facebook. And neither do you,
despite the pressure you’ve doubtless felt to join it ( because, y’know,
everyone is on Facebook). Perhaps you’re like Ben Rosen, who co-founded
venture-capital fund Sevin Rosen, which has bankrolled such companies as
Electronic Arts and Compaq (which he once led as C.E.O.). Rosen is hardly
averse to sharing personal information online; he says his blog,
BenRosen.com, has become a small social network of sorts. But he has yet
to use his Facebook account. “I’m trying to figure out the utility for me,” he
says.
Or perhaps, like Gates, you just find Facebook a little…creepy.
Businesspeople often claim to use Facebook for vague “market research”
purposes or to satisfy idle curiosity. But the social norms of social
networking are still in flux, making privacy a real issue, says internet-
marketing writer David Weinberger. “Younger people violate older people’s
idea of proper behavior when it comes to privacy,” he says.
“It’s kind of eerie how much information is available about you on a social
network,” says Michael Fertik, C.E.O. of online-privacy service
-Reputation-Defender, “and how many conclusions, tentative or otherwise,
can be made so handily, fairly or unfairly, based on that information.” Fertik
estimates that all 55 of his employees use Facebook, and although he
doesn’t, he’s unsettled by the all-consuming, constant-update M.O. it
encourages. “I’ve seen a lot of quiet, passive-aggressive resentments and
rumors that come from people just knowing that much about your business,”
he says. “If you’re updating people, like, ‘I’m at a barbecue at my
Aspen City Guide
(Portfolio.com: Business Travel)
Submitted at 6/25/2008 9:00:00 PM
I t's no longer Aspen's best-kept secret. Visitors have discovered what
locals have always known—though the town's average temperature is 75
degrees, summertime is really hot.
More than 50 years of cultural events, from the nine-week Aspen Music
Festival to Dance Aspen, have encouraged C.E.O.'s such as Michael Eisner
and Les Wexner to build homes here. But perhaps no warm-weather
happening is as much of a draw as the 4-year-old Aspen Ideas Festival, an
offshoot of the Aspen Institute, which has been a gathering place for world
leaders since 1949. This year the weeklong meeting of the minds takes place
from June 30 to July 6. More than 250 speakers are expected, including
Supreme Court justices, actors, generals, scientists, and leading journalists.
Tickets sell out a year in advance. But the size of the town (one square
mile) means it's easy to run into speakers in the grocery store, a local shop,
or a favorite restaurant. Here's where to:
Park the Plane: Aspen's Sardy Field is small, but it rates as one of the
busiest airfields in the state. The "Aspen Air Force"—corporations such as
General Mills, PepsiAmericas, Whirlpool, Johnson & Johnson, and Hilton
Hotels—all use the private-aviation section of the airport, along with Bill
Clinton, Rupert Murdoch, and many more. Commercial planes also fly into
Aspen, but direct flights from cities other than Denver are few.
Rest Your Head: Ideas Festival speakers generally stay at the Aspen
Meadows Resort, a Herbert Bayer-designed, Bauhaus-style hotel located on
the Institute campus. If you can't get one of its 98 suites, try the Little Nell,
Aspen's only five-star hotel; it has regular shuttles to the Institute, less than a
mile away. The St. Regis is another hotel at which to see and be seen,
particularly for those who can pay. If you can't, try the 35-room Annabelle
Inn (formerly the Christmas Inn) right on Main Street, completely
remodeled in 2005.
Dine Alfresco: Dining outside in summer is a good way to increase your
visibility. Forget about privacy on favorite patios such as the one at Cache
Cache, a hugely popular French bistro. Just next door, Campo de Fiori draws
a beautiful crowd who pick at fish and authentic pastas. Or try Bill Clinton's
favorite sushi spot, Matsuhisa, where he's often found holding court with
Icahn On Yahoo's Board Makes Microsoft Deal More Likely (VIDEO)
By webmaster@huffingtonpost.com (Business on
HuffingtonPost.com)
Submitted at 7/22/2008 5:39:42 AM
Now that Yahoo has given in and supplied "shareholder activist" Carl
colleague’s house,’ someone you work with might ask, ‘Why am I not at
that barbecue?’’’
The ease with which Facebook can be used to broadcast your whereabouts
adds a particularly disturbing dimension for executives who would surround
themselves with security in real life but are lulled into complacency by
Facebook’s tidy veneer. Last year, the British military sent a directive to its
army units to avoid revealing their service connections online—“Be
particularly careful if you are on Facebook, MySpace, or Friends
Reunited”—fearing that, yes, Al Qaeda could use them to track prey. Your
business competitors might not be terrorists per se, but Facebook can be
useful for anyone trying to poach your M.V.P.’s.
Even social-networking evangelists are legitimately nervous about
Facebook, given its fiasco last fall with Beacon, an advertising engine that
automatically announced users’ activities on other sites—revealing their
purchases, for example—without the users’ necessarily realizing that their
every click was being chronicled. Facebook apologized, but that sort of
unwitting dissemination of potentially sensitive information has
strengthened the market for Connect-Beam, a consultancy that sets up secure
social networks for the corporate intranets of Fortune 500 companies.
“-Companies like Honeywell,” says Puneet Gupta, ConnectBeam’s C.E.O.,
“could not take a chance to put their information on someone else’s
cloud”—meaning on the servers of a social-networking site the company
doesn’t control.
But Facebook’s ick factor in the executive suite might have as much to do
with its shiny, happy world of “friendship” as with security. “There’s almost
an inverse relationship between seriousness and how much you participate
in social networking,” says -ReputationDefender’s Fertik, laughing. That
basically nails it: Facebook is simply unserious—particularly given how it
prompts hard-driving business executives to regress into adolescent
vernacular. “Poking” people, requesting “friends,” writing on someone’s
“wall”: It’s cute when you’re in high school or college. But in a corporate
environment, it sounds disingenuous and downright silly.
Ultimately, Facebook candy-coats the true nature of business relationships.
And it will rot your teeth.Related Links
Facebook Page? Or Exhibit A in Court?
MySpace and Friends Need to Make Money. And Fast.
Meebo and Facebook Chat
colleague’s house,’ someone you work with might ask, ‘Why am I not at
that barbecue?’’’
The ease with which Facebook can be used to broadcast your whereabouts
adds a particularly disturbing dimension for executives who would surround
themselves with security in real life but are lulled into complacency by
Facebook’s tidy veneer. Last year, the British military sent a directive to its
army units to avoid revealing their service connections online—“Be
particularly careful if you are on Facebook, MySpace, or Friends
Reunited”—fearing that, yes, Al Qaeda could use them to track prey. Your
business competitors might not be terrorists per se, but Facebook can be
useful for anyone trying to poach your M.V.P.’s.
Even social-networking evangelists are legitimately nervous about
Facebook, given its fiasco last fall with Beacon, an advertising engine that
automatically announced users’ activities on other sites—revealing their
purchases, for example—without the users’ necessarily realizing that their
every click was being chronicled. Facebook apologized, but that sort of
unwitting dissemination of potentially sensitive information has
strengthened the market for Connect-Beam, a consultancy that sets up secure
social networks for the corporate intranets of Fortune 500 companies.
“-Companies like Honeywell,” says Puneet Gupta, ConnectBeam’s C.E.O.,
“could not take a chance to put their information on someone else’s
cloud”—meaning on the servers of a social-networking site the company
doesn’t control.
But Facebook’s ick factor in the executive suite might have as much to do
with its shiny, happy world of “friendship” as with security. “There’s almost
an inverse relationship between seriousness and how much you participate
in social networking,” says -ReputationDefender’s Fertik, laughing. That
basically nails it: Facebook is simply unserious—particularly given how it
prompts hard-driving business executives to regress into adolescent
vernacular. “Poking” people, requesting “friends,” writing on someone’s
“wall”: It’s cute when you’re in high school or college. But in a corporate
environment, it sounds disingenuous and downright silly.
Ultimately, Facebook candy-coats the true nature of business relationships.
And it will rot your teeth.Related Links
Facebook Page? Or Exhibit A in Court?
MySpace and Friends Need to Make Money. And Fast.
Meebo and Facebook Chat
owner Michael Goldberg and former Secretary of State Madeleine Albright.
Find a Meeting of the Minds: The place to find festival speakers is
(appropriately) at Plato's bar and restaurant, right on the Institute campus.
Not only does it have the best views of the Roaring Fork Valley, but you're
bound to run into Mort Zuckerman or Institute head Walter Isaacson
entertaining anyone from Colin Powell (a regular) to Katie Couric to Justice
Stephen Breyer.
Party: The Crown family, which owns the Aspen Skiing Company among
many other things, throws an annual Fourth of July party that is absolutely
the place to be. At the top of Aspen Mountain, you'll find former United
Airlines C.E.O. Gerald Greenwald and journalist and Harvard professor
David Gergen mixing with local waiters and a wide variety of socialite
types. If you can't snag an invite, try Belly Up (also owned by Michael
Goldberg), a nightclub that during the Ideas Festival hosts seminars instead
of rock bands. On a given night it might be Arlen Specter, Andrea Mitchell,
or Thomas Friedman.
Go Local: Aspen's Fourth of July parade is quirky, funny, and sometimes
out of control. Consider the year there was a golden retriever march and
someone threw a bucket of balls into the fray. Each year, Leonard Lauder,
president of Estée Lauder, and his family show up dressed in red, white, and
blue. For outdoor recreation, hop a bike. The year Lance Armstrong came to
the festival, he led a group of attendees on a ride up Independence Pass.
Former Harvard president Larry Summers likes to sit on the lawn outside the
music tent for a Sunday afternoon concert during the Aspen Music Festival.
Buy Cashmere and Cowboy Boots: Prada, Dior, Gucci—they all have
Aspen outposts. Cashmere and frocks are found at the tiny boutiques of
Nuages and Distractions, patronized by celebs such as Goldie Hawn.
Everyone shows up at sports store Performance Ski, even in summer, when
owner Lee Keating brings out sexy bikinis and surf lines. Queen Noor
recently picked up a pair of cowboy boots at western shop Kemo Sabe. For
the real bling, join Paula Zahn in picking up a pearl necklace by local
jeweler Susan Walker at Cindy Griem Fine Jewels.
Related Links
Government-Sponsored Trust Funds
Is No News Really Good News?
Deficit, Schmeficit
Icahn with three seats on the Yahoo board of directors, Citi analyst Mark
Mahaney thinks that Microsoft may have a better chance at completing a
deal to buy part of -- or all of -- Yahoo.
WATCH:
Bruce Kluger:
Laughter and the '08
Campaign
(The Huffington Post Full Blog Feed)
Submitted at 7/22/2008 10:11:31 AM
In discussing the 2008 election last week, Jon Stewart cracked jokes about
orphans, Viagra and prehistoric monsters.
God, I love politics.
As someone who moonlights as a satirist, I'm often intrigued by the ever-
merging traffic on the election news highway, as the campaign bus brigade
bumps along just barely ahead of the tailgating funny cars. This year
especially, the laughter is welcome, from The Daily Show's smart and
smirky antics to Stephen Colbert's spoofy "truthiness." And Saturday Night
Live continues its 33-year legacy of tossing a whoopee cushion beneath
anyone--from pol to pundit--who dares to sit in the political hot-seat.
While it's tempting to dismiss the comic relief as an inconsequential
sideshow targeted at casual viewers looking for an easy laugh, new data
reveal that political satire has become increasingly relevant to the 2008 vote,
and that its audience is a pretty savvy group.
A year-long study by the Project for Excellence in Journalism reports that
16% of Americans regularly watch Comedy Central's late-night follies, and
that The Daily Show in particular "not only assumes, but even requires"
viewers to be hip to the headlines.
"We concluded that the show is much funnier if you know the news,"
project director Tom Rosenstiel told me. "They're playing to the
cognoscenti, and the jokes are designed to make you think more about the
stories."
To be sure, satire is as old as politics itself, and today's voters are expected
to toggle easily between reading a sober op-ed about a campaign and
watching a faux-news analyst squirt seltzer down the candidates' pants. Yet
the new study suggests a growing conscientiousness among younger
Americans, a demographic too often dismissed as uninformed and apathetic.
And a lot of these voters, notes Rosensteil, are angry about the news media.
"Many young people are dissatisfied with the way news is delivered," he
says, "so journalists are often as much a target of the satire as the stories
themselves. When the youth see flaws in the traditional media, they tune in
to The Daily Show. One complements the other."
And who can blame viewers for wanting a little cavorting with their
reporting? After all, what sounds more fun: combing through a dense and
distressing story about, say, Fox News' efforts to foment distrust of Barack
Obama, or watching The Daily Show's "Baracknophobia" segment, a biting
rehash of the bash-fest, pitch-perfectly subtitled "An Irrational Fear of
Hope?"
Satire on the Internet has also played a significant role in attracting
younger voters to the electoral process. Thanks to the exploding wave of
clever mash-ups and parodies on sites like YouTube and The Onion News
Network, web-hoppers have grown accustomed to campaign news laced
with joy-buzzer high jinks. In fact, embroidering headlines with punch lines
may be driving potential voters to pick up their morning papers, if only to
watch Stewart and company tear it to shreds that night.
Poorly executed satire, however, is another story. Last week's New Yorker
cover depicting Barack and Michelle Obama as terrorists was intended as
wry commentary, but landed with a thud as racist and unfunny. Ditto John
McCain's joke about "killing Iranians" with cigarettes, which led (real)
satirist Andy Borowitz to whip off a column titled, "McCain Issues Top Ten
Funniest Ways to Kill Iranians." Message to McCain: Leave the gags to the
pros.
Still, as we move toward the conventions, I hope the laughs keep coming,
as the nation's comedy contingent continues to enlighten, even as it
entertains.
Then again, we're talking fish in a barrel here. As Will Rogers once noted,
"There's no trick to being a humorist when you have the whole government
working for you."
***
This essay ran in USA Today on July 22, 2008.
Bruce Kluger is the co-author, with David Slavin, of the new satricial
biography, Young Dick Cheney: Great American.
Let's Not Make a Deal
(Portfolio.com: Executives)
Submitted at 7/16/2008 3:00:00 AM
Biopic
After Brown’s death in 2006, Imagine Entertainment (which produced A
Beautiful Mind) hoped to make a biopic directed by Spike Lee. Drafts of the
script were circulated, but the project is on hold until the family settles its
conflicts.
Museum
Graceland, James Brown style? The singer’s children had considered
turning his 62-acre estate in Beech Island, South -Carolina, into a museum.
So far, the property, assessed at less than $1 million, sits unoccupied and has
leaking pipes.
Slot Machines
This summer, casinogoers can play the Godfather of Soul video slot
machine. The deal with Global Gaming Group could bring in about
$500,000 a year for the estate.
Reality TV
Think American Idol with soul music. In -January, investors proposed
projects worth six figures or more, including a reality-TV show, Who Will
Be the Next Godfather of Soul? But the trustees of the estate never
responded to the pitch.
Golf Course
Terry Cox, an Atlanta businessman, offered to buy the singer’s property—
intellectual and physical—for up to $100 million. His plans with Brown’s
grandson Forlando included ideas for a satellite-radio show, a restaurant,
and a golf course.
Related Links
Summertime Slump
Breaking News: Hillary Hearts 'American Idol'
Jordin Sparks of 'American Idol' Fame to Sing Anthem at Super Bowl

What's Project Runway Worth?
(Portfolio.com: Careers)
Submitted at 7/16/2008 3:00:00 AM
Hollywood insiders have been waiting for Harvey Weinstein’s bubble to
burst ever since he and his brother, Bob, split from Disney in 2005. Despite
$1 billion in equity from Goldman Sachs, the Weinsteins have yet to
produce a huge hit—except Project Runway, the cult cable-TV show hosted
by supermodel Heidi Klum, which features competitions among aspiring
fashion designers. This spring, the Weinstein Co. surprised the industry by
pulling the show off Bravo and striking a $150 million, five-year licensing
deal to air Runway on Lifetime. But if the Weinsteins really want to hit the
jackpot, maybe they should consider selling the show. They wouldn’t talk,
but we spoke to entertainment bankers-—including Dave Davis of Arpeggio
Partners—and production executives to estimate what the Weinsteins might
earn by selling.
1. Existing Episodes
The first step in valuing a TV franchise is determining the revenue from
home-video sales, second runs, and the syndication of already aired
episodes. Project Runway earns an estimated $10 million in DVD sales and
about $700,000 in second runs per season. It has yet to be syndicated, but
our industry sources believe that it could make about $350,000 a season in
syndication fees. The show completes its fifth season this summer, and its
first three seasons are already out on DVD. A new owner would probably
collect fees from five seasons of syndication and two of second runs and
DVD sales.
Estimated Value: $22.5 million
2. Future Episodes
The next step is estimating the value of all future episodes, including
licensing fees, promotional partnerships, home-video sales, and rerun and
syndication fees. Under its new deal with Lifetime, the Weinstein Co.
reportedly will earn $800,000 an episode (for a total of 140 future episodes).
-Promotional partnerships have always played a prominent role on the show:
Wachovia Loses $8.9B, 6,350 Jobs
By webmaster@huffingtonpost.com (Business on
HuffingtonPost.com)
Submitted at 7/22/2008 6:09:20 AM
CHARLOTTE, N.C. — Wachovia Corp. reported a surprisingly large
second-quarter loss Tuesday, deflating Wall Street's hopes that the nation's
big banks are weathering the credit crisis well. The nation's fourth-largest
bank by assets said it lost $8.86 billion, is slashing its dividend and
eliminating 10,750 positions after losses tied to mortgages soared.
Even excluding one-time items, the results substantially missed Wall
Street estimates.
"These bottom-line results are disappointing and unacceptable," Chairman
Lanty Smith said in a statement. "While to some degree they reflect industry
headwinds and weaker macroeconomic conditions, they also reflect
performance for which we at Wachovia accept responsibility."
Wachovia said it lost the equivalent of $4.20 per share in the April-June
period. In the same timeframe last year, the bank earned $2.34 billion, or
$1.22 per share.
Excluding $6.1 billion in write-downs to the value of its intangible assets
and merger-related and restructuring charges of $128 million, Wachovia lost
$2.67 billion, or $1.27 per share. Second quarter results include the bank's
October acquisition of A.G. Edwards Inc.
Analysts on average expected a loss of 78 cents per share on revenue of
almost $8.4 billion.
Earlier this month, Wachovia had projected a $2.6 billion to $2.8 billion
quarterly loss, equal to $1.23 to $1.33 per share, excluding goodwill items.
The Charlotte-based bank cut its quarterly dividend to 5 cents per share
from 37.5 cents, which will conserve approximately $700 million of capital
per quarter. In April, Wachovia slashed its dividend 41 percent.
As part of a plan to cut 2009 expenses by $1.5 billion, the bank said it
would lay off 6,350 workers and eliminate 4,400 open positions and
contractors.
The Mansion Family
(Portfolio.com: Executives)
Submitted at 7/16/2008 3:00:00 AM
W hen the housing market was booming, nobody benefited more than Bob
Toll, C.E.O. of Toll Brothers and creator of the McMansion. Sales of Toll
Brothers’ trademark homes topped $6 billion at the peak of the market,
making the company the largest luxury-home builder in the country. Now,
with the homebuilding industry suffering, Toll acknowledges that we’re in
uncharted territory. Here, he shares strategies for navigating it.
You’ve been quoted as saying that the housing business is in a depression.
Do you still think that?
Yes, things are real tough. It’s tough to sell. It’s easy to buy, but nobody
wants to. The lack of confidence in the market is greater than it was in 1981,
greater than it was in 1990. And 1974 was perhaps as bad, but it was for a
shorter period of time.
How will we know when a turnaround is coming?
Every week, we track new-home sales in the 300-plus communities we sell
from. We have been pretty much sticking with the same number in traffic
and deposits. If we continue with that, we might be willing to say we’ve
reached the bottom now. The demand is there. When we do everything we
can—run a special, work the phones—we can sometimes make it happen.
But that’s not terribly meaningful. If you stay at the bottom, it doesn’t feel
good. It’s hard to make a guy feel good if he’s stuck in the mud up to his
neck, even though it’s not getting any worse.
Would you buy a house right now if you were in the market?
Actually, new-home prices are moving up. If you’re waiting for another 10
percent drop in new-home prices, you may have missed your chance.
The problem is that people are having a hard time selling their old homes
in order to move into other ones. It isn’t that there are no buyers. It’s that
Christina Bellantoni: Some Germans think Obama's already the
POTUS
(The Huffington Post Full Blog Feed)
Submitted at 7/22/2008 10:19:56 AM
BERLIN — Check out that poster.
That's how Sen. Barack Obama's campaign is advertising his big speech
Thursday night here in Berlin. The few residents I've chatted with since I
touched down this morning were well aware of the event, which has been
the buzz around the city for days and is getting a lot of play in the papers
and on television.
A hotel staffer where I'm staying told me she was "very excited" that
"President Obama" would be speaking just down the street, and mentioned
her parents' emotions of love for the United States when JFK spoke there in
the 1960s. My African seatmate on the hop across the pond said he likes
Obama because he is "something new, something fresh."
Obama is in Jordan now, and CNN International is reporting this
afternoon's tractor rampage was just outside the spot in Jerusalem where the
senator plans to be this evening. No word yet from the campaign if this
security scare will change today's agenda.
The Boston Globe's Sasha Issenberg curtain-raises the Obama trip from
On one episode, contestants were required to modernize various -fashion
icons—like Marilyn Monroe—for Tresemmé’s print ads; on another, they
were -ordered -to design outfits using only materials found in the -
Hershey’s store in Times Square. By the end of season five, the -Weinsteins
were charging major partners like Tresemmé, L’Oréal, and Macy’s as much
as $1 million a season to participate. A partnership with Elle recently fell
apart after the brothers demanded that the magazine pay $75,000 an episode.
The company is now in talks with - Marie Claire.
Estimated Value: $209 million
3. Brand Value
The final step is assessing a premium (if one is -warranted) for brand
value. Project Runway played a key role in making Bravo a reality-TV
powerhouse, but the show’s impending move will serve as a real test of its
brand appeal. Not only is it leaving an up-and-coming network for an ailing
one, but the show’s producers are also staying at Bravo. And compared with
similar programs, Runway hasn’t fared as well in ratings and international
spinoffs: America’s Next Top Model has more than 30 international
versions; Runway has six. “ Project Runway is not terribly differentiated
relative to other talent competitions,” says Andy Bateman, C.E.O. of
branding consultancy Interbrand. Some investors would put scant value on
Runway’s brand, but more entrepreneurial types might be willing to pay a
premium of as much as 5 percent.
Estimated Value: Up to $12 million
The Bottom Line: The Weinsteins haven't said they're selling, but maybe
they ought to think about it. Total Estimated Value of Project Runway: As
much as $243.5 million
NOTE: Future cash flows have been adjusted to reflect present value.
Related Links
Legal Fight Erupts Over 'Project Runway' Move
Vogue Snubs, Covets Project Runway
Summertime Slump
During the quarter, the Wachovia boosted its provision for loan losses to
$5.57 billion from $179 million a year ago, and added $4.2 billion to its
reserves for bad loans.
Wachovia has been suffering from its 2006 acquisition of Golden West
Financial Corp. The bank paid roughly $25 billion for the California
mortgage lender known for exotic loans.
The so-called "Pick-a-Payment" loans, which Wachovia inherited from
Golden West, have proved a headache for the bank and a lightning rod for
shareholders, defaulting at higher rates than other mortgages.
Wachovia recently discontinued offering the "Pick-A-Payment" loan
option, which allows customers to pay a less-than-full interest payment on
all new home loans. The bank also had hired The Goldman Sachs Group Inc.
to conduct an analysis of its loan portfolio and advise it on strategic
alternatives.
Late Monday, Wachovia announced plans to leave the wholesale mortgage
lending business. And beginning Friday, the company will no longer offer
mortgages through brokers, joining other lenders making similar moves to
exit the troubled sector.
Big banks, such as Bank of America Corp. and National City Corp., have
stopped making loans through brokers entirely, relying instead on their loan
officers. National City said it was forced to do so by a continuing downturn
in loan demand, while Bank of America said it saw better "long-term
opportunity" in working through its own loan officers.
Wachovia spokesman Don Vecchiarello said in a statement that the
company "recognized some opportunities to re-position our business" given
the current market conditions.
Earlier this month, Wachovia named former Treasury Undersecretary and
Goldman Sachs executive Robert Steel as chief executive, replacing the
ousted Ken Thompson. Within a week of being on the job, the bank's shares
tumbled to a new 17-year low.
people are reluctant to drop their prices by more than 10 percent to find a
buyer. So the market is frozen.
What about real estate as an investment? Is this a good time to hunt for
bargains?
Real estate has been a pretty great investment over the past 200 years. If
you look at things from farther away than 10 feet, buying a home has created
most of the wealth for families in the U.S. But this is like advising people on
whether they should jump into the stock market. When the market is down,
people are reluctant to do it. Over a longer period of time, the market can
usually be counted on to go back up 10 percent. But people get scared. And
they’re scared right now.
Which real estate markets will turn around first?
Everybody thinks Phoenix is down-and-out and will be for a long time to
come. I don’t think so. Florida is also counted out. But that will also turn
around faster than people expect.
And the laggards?
Las Vegas. It’s been over-the-top.
What about Barack Obama impresses you?
We need some excitement to get things moving again. Obama is an
exciting candidate. If he can excite people enough that they would again
view the cup as half full as opposed to half empty, then you would have
some restoration of confidence in the homebuilding industry.
Stocks, real estate, gas prices—got a question for Condé Nast Portfolio’s
overqualified advisers? Email experts@portfolio.com.
Related Links
After the Bust
Housing Grousing
Housing Head Fake
Jerusalem today, suggesting his visit to Israel may bring him the most
"skeptical welcome" of his overseas tour. Lynn Sweet is having some fun
photo blogging the trip.
On a personal note, it turns out when you're surfing the Web
internationally, your bookmarks all default to that country.
I thought it was cute at first until I tried to do a Google search and all my
results came back in German. If you're a tech wiz and can tell me how to fix
this setting, please help!
Finally, I have a story in today's Plugged In Politics section about the
veepstakes using the argument that running mates don't matter:
There will be breathless speculation, short lists and long lists as Democrats
and Republicans in the veepstakes are vetted and weighed in the next two
months. Yet the choice for the No. 2 slot rarely matters.
Pundits will analyze demographics and states that might just swing for one
candidate with the right choice. Sen. Hillary Rodham Clinton can help Sen.
Barack Obama win over women, they will muse. Florida Gov. Charlie Crist
will make sure the crucial Sunshine State remains in the Republican column
for Sen. John McCain, they will ponder.
For all the fuss over who the presumptive nominees will select next
11
Fedspeak Highlights:
Plosser Sees Rates
Rising ‘Sooner’
(WSJ.com: Real Time Economics)
Submitted at 7/22/2008 8:51:00 AM
Philadelphia Fed President Charles Plosser expressed concerns about
inflation in a speech prepared for delivery before the Philadelphia Business
Journal Book of Lists Power Breakfast . Plosser, who is currently a voting
member of the interest-rate-setting Federal Open Market Committee, has
dissented from two rate cuts this year, but agreed with the majority last
month the keep rates unchanged. His speech today indicated that he may not
be willing to stand pat for much longer, saying rate may have to rise “sooner
rather than later.”
Plosser
Keeping policy too accommodative for too long worsens our inflation
problem. Inflation is already too high and inconsistent with our goal of —
and responsibility to ensure — price stability. We will need to reverse
course — the exact timing depends on how the economy evolves, but I
anticipate the reversal will need to be started sooner rather than later. And I
believe it will likely need to begin before either the labor market or the
financial markets have completely turned around.
…
In recent months I have heard some analysts suggest that the current
economic situation is not like the 1970s because unions are less prevalent
and there is no evidence as yet of a wage-price spiral. Thus, a weak
economy, with rising unemployment and declining payroll employment, will
presumably prevent workers from demanding higher wages. But, again, that
story has things backwards. It is not demands for higher wages that kick off
the spiral, but the loss of confidence that the central bank will keep inflation
controlled, which, in turn, leads to a rise in inflation expectations. The wage-
price spiral is not the cause of the inflation, but the result.
This means that if monetary policymakers wait until they see the evidence
of a wage-price spiral, they will be too late — the public will have lost
confidence in the Fed’s ability to keep inflation under control, and this will
make the job of bringing inflation down much more costly and difficult.
Moreover, we could end up with a period of both low economic growth and
high inflation.
…
In sum, this year and next will be quite challenging. The economy will
grow this year but at a slow pace, and the unemployment rate is likely to get
worse before it gets better. At the same time, inflation will be uncomfortably
high for a while.
I am more optimistic about the outlook for 2009 and I expect we will see
economic growth return to near its longer-term trend. But to prevent recent
inflation from continuing to plague the economy and to avoid a rise in
inflation expectations, I believe the current very accommodative stance of
monetary policy will need to be reversed, and depending on how economic
conditions evolve, I anticipate that this reversal will likely need to begin
sooner rather than later.
As policymakers, we must remember that the path of inflation over some
intermediate term is not independent of our policy decisions. While
monetary policy cannot control relative price movements, sustained inflation
is not something that is imposed on us. As policymakers we have a choice.
If we remain overly accommodative in the face of these large relative price
shocks to energy and other commodities, we will ensure that they will
translate into more broad-based inflation that — once ingrained in
expectations — will be very difficult to undo. I believe we must and will
take the appropriate steps to ensure that does not happen.
Payouts in Peril
(WSJ.com: MarketBeat)
Submitted at 7/22/2008 10:35:00 AM
Bank Reduces Dividend — Go Back 4 Squares and Pay $20 (Parker Bros)
How desparate are major banking institutions to preserve capital? Let’s put
it this way: 19 financial-services firms in the S&P 500 have reduced their
dividends in 2008, and the total dollar value of those dividend reductions
exceeds the additional dividends from the 165 companies that have boosted
dividends in 2008.
Wachovia Corp. and Regions Financial Corp. became the latest in the
financial-services sector to slash their dividends in an effort to horde as
much cash as possible. Shares of both firms are down sharply on the session,
with Wachovia losing 4.9% and Regions off by 14%.
All told, the 19 companies that have cut dividends in 2008 in this sector
have lopped off $14.4 billion in dividend income from the S&P 500,
according to Howard Silverblatt, index analyst at Standard & Poor’s. The
165 companies that have boosted dividends are adding in $13.4 billion. “
There’s no precedent for this,” says Mr. Silverblatt.
Overall, there have been 23 dividend cuts in 2008, which includes cuts
made by Altria Group in its reorganization. By contrast, just 12 companies
cut dividends since 2002, and a number of those were financial-services
issues who reduced their payout at the end of 2007, when the credit crunch
first erupted.
“ This has been the worst quarter of the last 18 years,” says Mr. Silverblatt,
who also notes that small-cap and mid-cap stocks are expected to show more
reductions in dividends. “A lot of issues have been a little late on declaring
their dividend, which is not a positive sign.”
Regions dropped its quarterly dividend to 10 cents a share from 38 cents a
share, while Wachovia lowered its rate to five cents from 37.5 cents. Mr.
Silverblatt notes that Bank of America Inc. has made a habit of late of
declaring its annual dividend on the fourth Wednesday in July (a few days
after second-quarter earnings are released), so tomorrow might be a day to
watch for that news. The bank has increased its dividend 30 years in a row,
and is the second-largest dividend payer behind General Electric Co.
month, recent history suggests a vice presidential choice won't impact the
results of race for the White House.
"This is not an open vote; this is a decision of one person," former Vice
President Dan Quayle told The Washington Times in an interview.
Vice President [Richard] Cheney is fond of joking that President Bush
chose him to deliver Wyoming's whopping three electoral votes.
Sen. John Kerry was applauded for choosing an optimistic Southern boy
who could deliver states that usually go to the Republicans.
The reasons abound for why it didn't happen - John Edwards didn't even
win his home state of North Carolina - but the fact remains that his presence
on the ticket factored little when voters headed to the polls.
Read the full story here.
Christina Bellantoni, national political reporter, The Washington Times
B o o k m a r k m y b l o g a t
http://www.washingtontimes.com/weblogs/bellantoni
Find my latest stories here and visit my YouTube page.
12
XM-Sirius: Regulatory Approval Is for the
Weak
(WSJ.com: Deal Journal - WSJ.com)
Submitted at 7/22/2008 10:47:00 AM
The American pragmatist philosopher William James advised readers who
fervently wanted a quality to act as if they already had that quality. “Belief
creates the actual fact,” he said.
XM Satellite Radio Holdings and Sirius Satellite Radio may have taken
that classic advice to heart. The two companies Monday started preparing a
bond offering to finance their merger– a deal that, as you may remember, is
hung up in probably the most torturous regulatory approval process of all
time. No matter. XM tapped J.P. Morgan Chase, Morgan Stanley and UBS
to sell $400 million of bonds to refinance outstanding debt related to the
deal. Associated Press
XM plans to use the proceeds from the offering to finance some of its
outstanding debt, which has “change of control” puts that allow investors to
cash in when the company merges. XM and Sirius agreed in February 2007
to merge.
The offering can be unwound if the deal isn’t consummated. Still, the
move is a bold indication of confidence on XM’s part that the merger will
go through.
But, back at the Federal Communications Commission ranch, there is a
significant amount of regulatory flailing. The Deal’s Ron Orol reported that
the two swing voters on the five-person commission–Republican
Commissioner Deborah Taylor Tate and Democratic Commissioner
Jonathan Adelstein–are putting up a fight and demanding fines for XM and
Sirius. (You can read Deal Journal’s take on where the Commissioners stand
in last month’s post, XM-Sirius and Five Angry Men.)
According to Orol, both Tate and Adelstein allege that XM and Sirius
have committed numerous infractions of FCC rules and must be fined before
their deal can be approved.
Here are the three major violations XM and Sirius have committed,
according to Orol:
1. Tate and Adelstein maintain that the wireless devices XM-Sirius use to
transmit audio signals from satellite radio devices to car radios are
noncompliant with FCC limits. These devices have been interfering with
terrestrial radio, he said.
2. They worry about hundreds of XM-Sirius antennas they say either
aren’t in FCC approved locations or are emitting signals that are too strong
and violate agency rules.
3. They complain that Sirius CEO Mel Karmazin promised to build an
COLD
continued from page 3
Agnes’ U.S. assets. But she did so without informing the Carvel
Foundation—conduct that caused a Florida judge to suggest that Pamela
may have committed fraud. In June 2007, a judge in London removed
Pamela as the executor of Agnes’ British estate and concluded, “Her every
act has been calculated to promote her own personal interests and prejudice
those of the foundation.”
Meanwhile, the case, which is expected to drag on at least through the end
of this year, continues to devour the Carvel fortune.
And what of Pamela’s most provocative theory, that the ice cream king,
rather than succumbing to heart disease, was murdered?
Arcadipane’s brother, Charles, now 78, says suggestions that his sister
might have killed Carvel are ridiculous: “My sister could not hurt a fly.”
Davis’ last lawyer, Katharine Conroy, says the murder allegations “should
be taken in the context they are made and weighed against the person who is
making them.” Boynton, Agnes’ former guardian, says “nothing would
surprise me in this case” given “the sense of entitlement and greed some of
these people had toward the Carvel money.”
Indeed, questions persist. Welsh, the former New Jersey detective Pamela
hired to investigate the case, says he uncovered circumstantial evidence that
suggests someone might have fatally tampered with Carvel’s heart medicine.
Old friends of the Carvels who were staying at the Carvel home the weekend
Tom Carvel died told Welsh of an odd development: They got a call from a
Carvel employee within hours of Tom’s death telling them to remove all
prescription drugs from his medicine cabinet. The request befuddled them,
Secondary Sources: Test Taking, Pay and
GSEs
(WSJ.com: Real Time Economics)
Submitted at 7/21/2008 11:18:00 AM
A roundup of economic news from around the Web.
Test Taking, Wealth and Gender: On VoxEU, Evren Örs, Frédéric
Palomino and Eloïc Peyrache look at the gender gap among high-income
earners, and use entrance exam data to suggest that part of the explanation
may lie in the way people react to competitive pressure. Their study looked
at about 5,750 students who took entrance exams over three years for
admission to the HEC School of Management in Paris, a top business school
and a ticket to a high-paying job. On average, men perform slightly better
than women in both the written and oral exams despite evidence the female
candidates were stronger, based on earlier tests and classwork. Also, male
performance had greater variance (more at high and low end), while female
candidates’ performance was more concentrated around the median. The
authors write that the results suggest “competitive pressure generated by
relative performance evaluations has a different impact on men than on
women. This provides an alternative (albeit, by no means exclusive)
explanation for under-representation of women in top management
positions, if one takes the perspective that these positions are the rewards of
performances in a series of competitive tournaments during one’s
professional career, as opposed to pass/fail type of evaluation processes. …
Finally, if the structure of the selection process indeed impacts performance
differently across genders, then the under-representation of women may start
as early as the professional schools that select students based on competitive
Airlines' Fallout Effect
(Portfolio.com: Business Travel)
Submitted at 6/24/2008 10:30:00 AM
When an airline sneezes, does the entire travel business catch a cold?
Maybe. Experts say that as airlines raise fares and cut routes, they'll squeeze
other businesses who depend on a constant flow of passengers to keep the
money rolling in.
Tourism is one industry that's bound to be impacted. Fewer flights and
higher prices will cause some travelers to forgo the big summer trip and do
something closer to home (though if gas prices don't come down they might
just sit home in their air conditioning).
The chairman of the Caribbean Tourism Association says the airlines'
moves are putting thousands of regional jobs and billions of dollars of
investment at risk. Caribbean markets are especially susceptible to the cuts,
he says, because struggling American Airlines handles a majority of traffic
into the region. American recently announced that it's cutting its daily flights
Presented By:
(Portfolio.com: Executives)
Submitted at 7/16/2008 3:00:00 AM
interoperable radio the agency ordered when the commission created the
Satellite Digital Audio Radio System. It hasn’t reached the market.
Connoisseurs of broadcast mergers will recognize a lot of these concerns
align with the same concerns that the National Association of Broadcasters
has about the deal. (So much so that wags have dubbed the NAB as the
National Association of Satellite Radio Killers.)
Of course, as Sun Tzu would say, the enemy fights hardest when it is
cornered. The fact that the commissioners are pushing for fines may be an
actual indication of faith that the merger will go through. Otherwise, it is
difficult to see why they would bother. Related links:
XM and Sirius Get Downgraded. Yippee!
XM-Sirius and Five Angry Men
XM-Sirius: Still No End in Sight
but they complied. Welsh also says he was suspicious of how quickly
Carvel’s body was whisked away to a New York City funeral home.
In the Carvel case’s vast paper trail, one item stands out. Pamela’s
investigators say they tape-recorded Tom’s longtime physician, Robert
Athans, saying that he does not remember signing Tom’s death certificate
even though it bears his signature. The doctor declined to comment for this
story. If the death certificate was forged, who did it, and why? Was it to
prevent an autopsy?
A federal judge in Fort Lauderdale ruled in May 2007 that Tom’s
exhumation is a matter for New York courts to decide. Pamela says she
hopes to file an exhumation request in New York soon.
And if the request is denied, or if an autopsy proves nothing, will that be
the end of it?
In one of my last conversations with Pamela, she talked of the exhumation
request as if it were her final card to play, but later she recanted. “In Florida
and in Delaware...I am still going to go after the bastards,” she says,
cataloging a list of possible lawsuits and legal actions. “I have nothing left
now. So what do I have to lose?”
Related Links
The Irrational Allure of Free Stuff
Food Inflation Datapoint of the Day
Chief Executive Vintners
exams.”
Sideways Pay: Bloomberg’s Vivien Lou Chen looks at income growth.
“The current U.S. economic expansion is the first in 60 years that may end
before many Americans have recovered from the last slowdown. Annual
family incomes adjusted for inflation have grown just 0.8% since the end of
2001. … ‘The world has seen, over the past 20 years, an increase in the
supply of labor,’ said Robert Solow, a winner of the Nobel Prize in
economics who’s now at the Massachusetts Institute of Technology. ‘When
you have a big increase like that, the wages of the person in the middle are
likely to be held down.’ ”
Enron Analogy: James Surowiecki looks at the status of Fannie Mae and
Freddie Mac in the New Yorker. “The G.S.E.s are curious, because there’s
no obvious reason for them to exist in the form they do: instead of creating
private companies to do all these jobs, the government could just do them
itself. In fact, that’s how Fannie Mae got started, back in 1938: originally, it
was a government agency endowed with the authority to buy mortgages, in
the hope that this would expand the supply of credit to homeowners. It
wasn’t until 1968 that Fannie was privatized. … The main reason for the
change was surprisingly mundane: accounting. At the time, Lyndon Johnson
was concerned about the effect of the Vietnam War on the federal budget.
Making Fannie Mae private moved its liabilities off the government’s books,
even if, as the recent crisis made clear, the U.S. was still responsible for
those debts. It was a bit like what Enron did thirty years later, when it used
’special-purpose entities’ to move liabilities off its balance sheet.”
at its San Juan hub from 93 to 51 and will no longer serve Santo Domingo,
Antigua, St Maarten, Aruba, or Samana from San Juan.
And that in turn messes things up for the cruise lines. Ten ships use San
Juan as their home port, and if getting to the island becomes too much of a
hassle, vacationers may blow off the cruise altogether.
Vegas might also take a huge hit. Wachovia Bank thinks the airlines will
reduce service into Vegas by 12 percent, resulting in 2.4 million fewer visits
each year. This in a year when over 11,000 new hotel rooms will open on
the strip.
There are a whole slew of other industries that depend on the airlines to
keep the money flowing. Airports are watching the amount of money they
collect in landing fees shrink. Rental car companies, nervous about fewer
travelers flowing through airports, are opening new location in the burbs.
Hotels located around airports are concerned that as passengers trade in
flights for road trips, they'll choose to stay at properties further out of town.
Web-based travel agencies like Orbitz are anticipating that as number of
Zachary Karabell: The
Arabs are coming, the
Arabs are coming
(The Huffington Post Full Blog Feed)
Submitted at 7/22/2008 10:06:08 AM
This just in: General Electric and the government of Abu Dhabi announced
an $8 billion joint venture for commercial finance in the Middle East.
Through Abu Dhabi's investment arm Mubadala, the emirate will contribute
$4 billion and GE the other $4 billion, growing to $40 billion in the coming
years, with the aim of supporting various energy and infrastructure projects
in the region, including an aggressive plan to sponsor green, clean and
sustainable water and energy plants. As part of that, the fund will support
several projects in Abu Dhabi's Masdar City, a utopian project to build a
carbon-neutral city in the desert.
With Obama in the Arab heartland this week (first Iraq, then Jordan) the
headlines have focused on foreign policy defined as national security - the
future politics of Iraq, troop withdrawals, Palestinian-Israeli peace (or lack
thereof). Little has been said in public about the economics of the region, or
the position of the United States vis a vis economic development. It would
be deeply surprising (and a bit disturbing) if those questions were not
discussed in private between Obama and his interlocutors, but while the
domestic economy in the United States is a source of constant public debate
and a major campaign issue, the economics of the Middle East are at best an
afterthought.
But while Iraq, Israel-Palestine, Iran and nuclear weapons are critical
security issues of the present, the emerging economic clout of the region is a
critical security issue of the future. The influx of money into the Gulf region
in particular as a result of sharply higher prices for oil has resulted in a vast
wealth transfer from the United States and Europe to the Middle East. The
emirates alone already have sovereign wealth funds that control trillions of
dollars, and that figure is growing daily. What's more, there is a new
determination on the part of the custodians of that wealth to invest it in the
region, rather than buying up pleasure palaces on the Costa del Sol as they
did in the 1970s during the last oil boom. That investment, both in the region
and globally, is reshaping the global economic system.
We are used to viewing the Arab world (which just to be clear does not
include Iran) as a source of political and religious crisis, but the challenge
ahead is to recognize the economic implications. Businesses like GE have
already seized on the Gulf as a new area for growth, as have rather desperate
Wall Street institutions that have been setting up shop in Dubai and turning
that emirate into a next center of global finance. Any incoming US
administration will have to consider the implications of the wealth transfer,
of the fact that the United States is increasingly turning to the Gulf not just
for oil but for capital and for much-needed help financing our debts - and of
course, to buy the Chrysler Building. This may be the worst thing in the
world, or the best, but whatever one thinks of it morally, it simply is.
Ignoring it, decrying it, hoping it will go away, those aren't viable options.
Yes, the Arabs are coming, and they are loaded, with dollars.
Tech Giants Give
Mixed Signals
(WSJ.com: Business Technology)
Submitted at 7/17/2008 6:33:00 AM
Three tech giants – IBM, Microsoft and Google — reported earnings today.
The lessons: 1) It’s a good time to sell technology overseas and 2) We’ve
yet to figure out this whole Internet thing.
Like a good martini, news for tech stocks was mixed
IBM reported that revenue jumped 13% from the year-ago quarter to $26.8
billion and that net income rose 22% from the same period to $2.8 billion.
Both numbers beat expectations and the stock was up about 1.5% after
hours. Most of the growth came from IBM’s consulting and software sales –
and most of it came overseas. Revenues in the Americas grew just 8%.
Microsoft reported revenue of $15.8 billion, an 18% increase from one
year ago, and net income of $4.3 billion, up 42% from a year-ago quarter
that included one-time charges. The company narrowly missed analysts’
income projections and issued lower-than-expected earnings guidance,
sending share prices down 6% in after-hours trading.
Dissecting the numbers, Microsoft was helped by strong demand for PCs
overseas. Revenue for the division responsible for the Windows operating
system grew 15% from the year-ago quarter, a nice rebound from last
quarter, when slow operating-system sales triggered questions about the
success of Vista, the most recent version of Windows. Given all the bashing
Vista gets, it’s nice to see that Microsoft increased the amount it spent on
sales and marketing for the operating system by 22% from last year.
One area that stood out from Microsoft’s earnings report is the online
services business, which is a financial black hole. The group responsible for
online advertising and other Internet-based services boosted its revenue 24%
to $838 million from the year-ago quarter, but still managed to lose $488
million, more than twice as much as last year.
Which takes us to Google. The search giant’s income, while up 35% from
the year-ago quarter was significantly lower than analysts expected – this,
despite revenue of $5.37 billion, up 39% from last year. The most alarming
trend is that the rate of growth for paid clicks, Google’s chief revenue
source, is slowing year-to-year. Paid clicks were down on a quarter-to-
quarter basis.
Most businesses would kill to have results like Google’s. But in this weird
Web 2.0 world we live in, 35% income growth sent the company’s shares
were down 8% after hours.
We realize we’re just adding our voice to the chorus here, but given
Microsoft’s struggles turn a profit from search and Google’s announcing
results that make it look like a real company and not the U.S. Mint, maybe
it’s time we stopped thinking about search as Internet equivalent of an ATM.
-Ben Worthen
airlines shrinks through mergers, passengers will feel less need to
comparison shop online.
Long suffering airline employees are facing another round of pink slips,
but they're not the only ones. Employees at the companies contracted by the
airlines are also likely to get the axe. And with what's left of airlines'
domestic food service gone or likely to go, the kitchens that provide in-flight
catering are likely to make cuts as well.
Of course, not everyone loses. Airport shops and restaurants may see
fewer passengers wandering the concourse, but the ones who are there might
be more likely to pay $19 for a plate of Buffalo Wings and $4 for a bottle of
water before boarding their bare-bones flight. Related Links
Steer Clear
Tips for a Sky-High Spring
More Cuts "Inevitable," BA Chief Says

Bernanke Reasserts Dominance Over Wall
Street
(WSJ.com: Real Time Economics)
Submitted at 7/22/2008 12:21:00 PM
Federal Reserve Chairman Ben Bernanke has reasserted his dominance as
by far the most market-moving Fed official, a study released Tuesday
showed, after having ceded some of the spotlight to regional Fed presidents
in his first year as chairman. Bernanke
According to Macroeconomic Advisers, Bernanke’s speeches in 2007 and
2008 accounted for over 0.60 percentage point of movements in the two-
year Treasury yield, which is sensitive to monetary-policy expectations.
That’s five times the market effect of the second-most influential official
over the last 18 months, Fed Vice Chairman Donald Kohn.
“It may be that the markets looked increasingly to the “heavyweights” on
the FOMC to deliver the policy message, discounting the comments from
other FOMC members,” Macroeconomic Advisers’ Laurence Meyer, who is
a former Fed governor, and Brian Sack, a former Fed economist, wrote.
Their analysis excluded Bernanke’s twice-yearly monetary-policy
testimonies, “which would have made the imbalance even greater,” they
said.
In Bernanke’s first year as Fed chairman in 2006, his speeches had only
twice the market effect of the second-most market-moving official that year,
St. Louis Fed President William Poole. That year regional Fed presidents
including Poole, Richmond Fed President Jeffrey Lacker and Kansas City
A Network for the 21st Century
(WSJ.com: Business Technology)
Submitted at 7/18/2008 2:27:00 AM
Two years ago, when France Telecom decided to form a unit to co-produce
movies in Europe, industry insiders were left in a quandary as to why one of
France’s largest telecommunication providers would make such a move. A
phone company getting into film?
The move was part of an ambitious plan to differentiate the
communications company from the phalanx of competitors that had arisen in
France. And while some may consider France Telecom’s increased activity
in media, distributing music, movies, games and television as a tough bet,
Didier Lombard, France Telecom’s chief executive and chairman, believes
it’s the only way for the company to survive.
To further push his strategy and quash any misunderstanding of his ideas
about the changes underway in telecom, Lombard has authored a new book .
He made an appearance Thursday at Café De La Presse in San Francisco to
autograph the book for well wishers and chat with the Biz Tech Blog. The
book, entitled The Second Life of Networks, is an attempt to chart the
evolution of the telecommunications industry and its acceleration over the
last five years, due mostly to the explosion of the Internet.
In describing the new dynamics at play and its effects on
telecommunication companies, Lombard partially examines the impact of
the usual Web 2.0 companies – the one whose name starts with an F, the
A Few Banks Rediscover Making Money the
Old-Fashioned Way
(WSJ.com: MarketBeat)
Submitted at 7/21/2008 2:14:00 AM
Geoffrey Rogow of Dow Jones Newswires has this report on net interest
margin.
The simple practice of lending money at a higher rate than it costs to
borrow is helping some banks move past the credit crisis, while others
continue to struggle under a mountain of complex securities.
The Federal Reserve’s steady lowering of the federal-funds target has been
blamed for bloating the credit market with excess liquidity and driving
inflation. But as lending standards tightened and asset-backed deals dried
up, banks’ net interest margins (the difference between its cost to borrow
and cost of lending) increased, allowing them to make a better profit through
traditional lending.
For the banks with strong-enough balance sheets to withstand the
downturn in credit and the economy, an increase in margin rates drives
earnings growth. “People say the whole business is on its deathbed, and it’s
not true — banks can rebuild themselves by earning more on what they’re
lending, which the early evidence is showing,” said Bill Stone, senior vice
president for PNC Wealth Management.
While the government’s decision to curb short-selling in 19 securities has
been widely credited as giving a lift to financials in the last few sessions,
Is the World Finally Ready for Online Stock
Trading?
(WSJ.com: Business Technology)
Submitted at 7/22/2008 12:01:00 PM
During the dot-com bubble, businesses raced to develop Web sites that
could be accessed via mobile phones, the idea being that life without the
ability to trade stocks from the back of a taxi wasn’t worth living. We all
know how that turned out. But despite the earlier failures, Web software for
cellphones is now a hot topic.
Or you could just use your BlackBerry
E*Trade is one of the businesses hoping that the mobile Web is about to
take off in a big way. The online bank and brokerage firm this month
launched software that allows people who use Research In Motion’s
BlackBerry device to—you guessed it—trade stocks from their phones.
E*Trade won’t disclose how many people use the service but did say that
both the number of visitors and the number of trades has doubled from 12
months ago, when E*Trade had more primitive mobile-trading software,
according to Greg Framke, the company’s chief information officer.
Framke says the software that E*Trade developed for the BlackBerry
made sense because the stereotypical BlackBerry owner—a young, affluent,
always-connected professional— is the online bank’s target demographic.
Framke believes that despite the hype back in 2000, people weren’t ready
No Tomorrow for SAP’s Oracle-Baiting Subsidiary
(WSJ.com: Business Technology)
Submitted at 7/21/2008 5:57:00 AM
SAP will close down a subsidiary that provided technical support to
businesses that used software sold by rival Oracle. But don’t write off the
third-party-support business model just yet.
TomorrowNow customers will have to get their tech support somewhere
else
When Oracle bought management-software maker PeopleSoft in 2005,
rival SAP had a bright idea: It bought TomorrowNow, a company run by
former PeopleSoft execs. At the time, some PeopleSoft customers were up
in arms about the prospect that Oracle might force them to move over to
Oracle software. TomorrowNow promised to help businesses run PeopleSoft
Fed President Thomas Hoenig, had a bigger market impact than the
Washington-based Board of Governors, excluding Bernanke.
In contrast, in 2007 and 2008 three board members — Bernanke, Kohn
and Fed governor Frederic Mishkin– held three of the top five spots on
Meyer and Sack’s list.
Unlike 2006 when Bernanke was the most dovish FOMC official —
meaning his speeches led to the biggest decline in the two-year Treasury
yield — in the past 18 months he has been the most hawkish.
But Meyer and Sack noted that most of Bernanke’s hawkishness came
from a speech on the evening of June 9 that led to a 0.19 percentage rise in
the two-year yield the next day. In that speech, Bernanke said the Fed “will
strongly resist an erosion in longer-term expectations, as an unanchoring of
those expectations would be destabilizing for growth as well as for
inflation.” Excluding that one speech, Bernanke “was dovish on balance,”
they wrote.
Meanwhile, FOMC policy statements have risen in market importance at
the expense of meeting minutes that are released with a three-week lag.
“Market participants put a premium on the timeliness of information given
the fluidity of the economic circumstances over this period,” Meyer and
Sack wrote.
“This may have shifted some of the focus away from the minutes and onto
the statements themselves,” they said.–Brian Blackstone
other beginning with an M and of course the Big G company. He urges
politicians, consumers and, yes, journalists to not look at the phenomenal
growth and popularity of such companies as a fad or even a bubble. Instead,
see them as the initial rain droplets of a great downpour.
“I did not write this book to make a profit or to be regarded as a writer,”
Lombard tells us. “It’s a tool to show what’s happened in the past, what’s
happening now and the impact these events may have on the future.”
He says no longer will consumers just consume media and
communication. It’s now an exchange where consumers now have much
more of a say in what it is they’re interacting with and watching, making
demands on those who provide those services. As a result of the changes,
Mr. Lombard says a company of France Telecom’s size, with its 200,000
employees, needs a clear directive on how it tackles the brave new world. So
he also considers the book a guide for how the French telecommunications
company will negotiate the new terrain.
“I’m probably the only telecommunications chief executive to lay out his
strategies in a book for the public to see,” says Lombard.
All proceeds from The Second Life of Networks will be donated to the
non-profit Orange Foundation.
Bobby White and Lee Gomes
France Telecom Ad
Uploaded by thomevincent
there was little stock movement on Tuesday last week when the move was
first disclosed. Traders have instead keyed in on earnings reports that
highlighted net interest margin as a key driver of growth.
BB&T Corp. posted better-than-expected earnings Thursday and its shares
rose 13% on the day. For the quarter, net interest margin was 3.65%. Wells
Fargo& Co. posted a 23 basis point gain from the first quarter and its shares
rose 33%. And Monday morning, Bank of America Inc.’s net interest yield
climbed while the company also reported higher income from service
charges, both showing that though it may be providing fewer loans, it is
gaining more money from the loans it is able to underwrite.
However, central bankers could easily shift gears and once again begin
raising rates and dampen net interest margin growth. Moreover, gains in net
interest margin can’t save every financial firm. Financial-services firms and
broker-dealers continue to post massive write-downs on their debt portfolios
and regional banks, lenders and thrifts, which are most likely to be able to
take advantage of stronger net margins, are often speculated to be the next
area to fall under pressure of the yearlong credit squeeze.
“There are certainly haves and have-nots. Some of these banks have
cancer. You may be giving them eyeglasses to fix their sight, but they still
have cancer,” said Mark Sunshine, president of West Palm Beach, Fla.-
based commercial lender First Capital.
then to visit Web sites—let alone trade stocks—from mobile phones. At the
time, people were just getting comfortable buying things from Web sites
accessed through their personal computers. The mobile Web was slow,
expensive and ugly in comparison.
Now, phones have bigger screens and sometimes come with service
contracts that include unlimited Internet access. The cost of developing the
software is also substantially cheaper and less complicated than it was back
in 2000, making it a lower-risk bet for businesses. “Two or three years ago,
this wouldn’t have worked,” says Framke.
There’s ample evidence that the mobile Web is gaining traction: In the
U.S., 16% of cellphone owners routinely access the Internet from phones,
according to Nielsen, while 57% use some kind of nonvoice service, such as
sending text messages. The ability to access the Internet is a key selling
point for many new phones. For example, Apple recently launched an online
store dedicated to distributing software for its iPhone and bases its ad
campaign for the phone around the idea that people want Internet access
wherever they are.
Businesses are paying attention: Forrester Research reports that the
number of inquiries it received from businesses and service providers
wanting to talk about the mobile Web jumped 40% last year.
-Ben Worthen
and other older software in perpetuity – for less than Oracle or SAP charged
for support services. Cynics also saw it as a vehicle through which SAP
could steal customers from its rival.
At its peak, TomorrowNow had several hundred customers, most of whom
would have otherwise bought support services from Oracle. Then two things
happened: Instead of forcing people to install its software, Oracle decided to
keep selling PeopleSoft, weakening TomorrowNow’s raison d’etre. And in
March, 2007, Oracle sued TomorrowNow, alleging that it repeatedly stole
Oracle’s intellectual property. A trial is set for February 2010.
SAP, which had been shopping TomorrowNow around, on Monday said it
will shut down the subsidiary in October. SAP will use the time that’s left to
help TomorrowNow’s 225 customers find support from Oracle or a different
third party. An SAP spokesman tells the Business Technology Blog that the
13
Economy’s Dip May
Take Longer to
Overcome in Europe
(WSJ.com: Real Time Economics)
Submitted at 7/22/2008 10:28:00 AM
European Central Bank officials are increasingly suggesting it may take
longer than expected for the euro-zone to limp out of a weak second quarter.
“It could be that recovery takes more time,” said ECB executive board
member Lorenzo Bini Smaghi in Italy’s La Stampa newspaper, when asked
about the outlook for the fourth quarter, stressing that the ECB has always
said there were downside risks to its growth forecasts.
ECB Governing Council member Klaus Liebscher, meanwhile, said the
ECB expects weaker euro-zone growth of around 1.7%-1.8% this year,
slightly below projections of around 1.8% it issued in June. Those
projections assumed an oil price of $113 per barrel this year and $117.7 next
year. On Tuesday, the going price for brent spot was above $131.
“The problem is 2009, when growth weakens (further),” said Mr.
Liebscher, who also heads Austria’s central bank, in an interview with
Austria’s Salzburger Nachrichten newspaper. “Downward risks are
predominant.”
The ECB’s June forecasts called for growth around 1.5% next year.
ECB president Jean-Claude Trichet also downgraded his growth
assessment slightly last week, saying in an interview with four European
newspapers that the euro-zone economy would “trough” in the second and
third quarters before staging a progressive recovery. Mr. Trichet had
previously maintained that the “trough” would come in the second quarter.
“These comments continue to suggest that the next set of ECB staff
projections will feature further downward revisions,” Nick Matthews at
Barclays Capital said. Barclays expects the revisions, due September 4, to
come in at 1.6% for this year, and 1.3% for 2009. Such forecasts would still
be more optmistic than those of many private-sector economists, who
believe the euro-zone could be heading for a hard landing and perhaps a
recession.
But ECB policymakers Tuesday also stressed persistent inflation
pressures. With euro-zone inflation at 4% in June, more than double the
bank’s preferred range, the ECB raised its key rate by 25 basis points to
4.25% earlier this month.
Mr. Bini Smaghi said that the July increase has already produced a
“visible benefit” on inflation expectations. But he also said that with
inflation at more than double the bank’s preferred range, the ECB’s key
4.25% rate “can’t plausibly be called restrictive,” suggesting policy makers
remain focused on keeping high commodity and food prices from pushing
up domestic prices including wages.–Monica Houston-Waesch
Thrift Oversight Chief Wants
More Loss Provisions, Fewer
TV Stakeouts
(WSJ.com: Real Time Economics)
Submitted at 7/21/2008 12:13:00 PM
U.S. thrifts may have set aside a record amount to cover expected losses
from loans during the first three months of 2008, but the industry’s regulator
is urging them to do more.
John Reich (Photo: OTS)
“All institutions must be proactive in provisioning for loan losses and
building sufficient loan loss reserves,” Office of Thrift Supervision Director
John Reich said in a speech at a banking industry conference in Orlando,
Fla.
Reich also used his speech to decry the media coverage — particularly on
TV — and market rumors that he said have “stoked public fears” about the
health of the banking system.
“Seemingly oblivious to the fact that they could drive otherwise healthy
banks to fail and push troubled institutions away from potential solutions
toward ruin, TV reporters staked out banks on these rogue lists, interviewed
customers and stoked public fears. In a time when consumer confidence is
already flagging and the general public is skittish and understandably
concerned about what their financial futures will hold, this behavior goes
beyond irresponsible,” Reich said. “It’s reprehensible.”
The OTS recently had to shutter IndyMac Bancorp Inc., which had $32
billion in assets.
Reich kept up the refrain from federal banking regulators that banks must
do more to deal with problem assets, particularly mortgage loans. He urged
banks to increase loan-servicing staff numbers, set specific standards for
modifying a loan or selling a house at a discount, and appropriately account
for troubled loans.
The nation’s thrifts, which have traditionally focused on mortgage lending,
reported a first-quarter loss of $617 million, compared with net income of
$3.61 billion in the first quarter of 2007. The OTS said that thrifts set aside
an industry-record $7.6 billion in loan loss provisions during the first quarter
of 2008, up from $3.5 billion and $5.5 billion, res pectively, in the third and
fourth quarters of 2007.
Reich also specifically urged the Securities and Exchange Commission to
“aggressively pursue” any rumors that are being spread with the intention of
manipulating a stock price.– Michael R. Crittenden
Paulson’s Sunday Talk
(WSJ.com: Real Time Economics)
Submitted at 7/20/2008 12:03:00 PM
U.S. Treasury Secretary Henry Paulson said Sunday it will take months for
the economy to recover from high energy prices, declining property values
and financial market woes. Paulson
Appearing on CBS’s “Face the Nation,” Paulson said: “We’re going
through a challenging time with our economy. We’re going to be in a period
of slow growth for a while…I think it’s going to be months that we’re
working our way through this period.”
Paulson also said he is optimistic Congress will pass an administration
proposal concerning Fannie Mae and Freddie Mac that would allow the
government to rescue the two federally-chartered mortgage giants.
He said he is “very optimistic we’re going get what we need from
Congress. Congress understands how important these institutions are.”
software maker had hoped to sell TomorrowNow, but that it would have
been a “complex transaction.” He said closing TomorrowNow won’t have a
material impact on SAP. An Oracle spokeswoman declined to comment.
This isn’t the end of third-party support. While TomorrowNow was the
best known practitioner, there are other companies that offer the service,
including Rimini Street, which was started by one of TomorrowNow’s co-
founders. Support from these companies can cost half as much as support
from the software maker, Ray Wang, an analyst at Forrester Research, tells
us. And so these companies will be around as long as there are businesses
looking to save money.
-Ben Worthen
14
Kitchen Confidential
(Portfolio.com: Careers)
Submitted at 7/16/2008 3:00:00 AM
Was Martha as tough to work for as people say? Martha is a force of
nature. The first time I went to meet her in prison, I’d seen our designers’
plans for a new bedding line. I said, “God, they were really beautiful,
Martha.” She said, “Did you want them? If you don’t want them, they’re not
good enough.” So, yeah, she can be a real taskmaster. But there’s a pursuit
of excellence that’s hard to deny.
What was it like visiting her in prison? I went to see her every other week.
I wasn’t allowed to ask what I should do, but I could inform her of what we
were doing. We’d spend four or five hours together. We played a lot of
Scrabble.
You’ve been rumored to be in line for a number of jobs, including Time
Inc. C.E.O. What’s it going to be? Honestly, I don’t know. I want to spend
some time traveling, reading, thinking, and listening.
Why are you leaving? I said to Martha when I came to the company that I
would put a great management team in place. At a certain point, you need to
step aside so they can do what they came to do.
A Closer Look at Troubled Job Picture for
Teens
(WSJ.com: Real Time Economics)
Submitted at 7/21/2008 3:57:00 AM
Teens can have a tough time finding work, but this summer’s weak job
market means more time pounding the hot pavement, particularly for
younger job-seekers.
Almost one in four 16- and 17-year-olds can’t find work, and the
Northeastern University Center for Labor Market Studies says this summer’s
teen employment rate could reach a post-war low. That could mean tougher
times later: “Less work experience today leads to less work experience
tomorrow and lower earnings down the road,” a study by the center says.
The overall teenager unemployment rate declined to 18.1% in June from
18.7% in May. The unemployment rate for older teens fell to 15.6% from
17.5%, but the rate for younger teens rose to 23.3% from 21.2%. That
difference is more than twice the 60-year average of 3.3 percentage points.
Overall, the U.S. unemployment rate held at 5.5% in June, after rising
sharply in May.
Howard Rosen, an economist with the Peterson Institute for International
Economics, said while teenage labor data are volatile, the figures could
Life of the Party
(Portfolio.com: Careers)
Submitted at 7/16/2008 3:00:00 AM
T rue, he was buried with a cell phone in his hand. But despite that modern
touch, Warren Cowan’s death, at 87, signaled the end of an era.
If celebrity is a commodity in Hollywood, then Cowan was one of its
pioneer traders. ( View slideshow.)
Rogers & Cowan, the company that he and Henry Rogers started in 1950,
remains one of the powerhouse imagemaking outfits in town. (It was bought
in 1987 by Shandwick, which is now a subsidiary of the Interpublic Group
of companies.)
Cowan’s life spanned the rise of the celebrity publicist. Every powerful
flack in town started out at his firm: Pat Kingsley was his secretary; Alan
Nierob and Paul Bloch—who were among the pallbearers at his
funeral—fetched his coffee.
The consummate Hollywood P.R. man, who in recent years had
announced other passings (most recently Joey Bishop’s) to the world,
received his sendoff at a standing-room-only service in May at Mount Sinai
Buggy Software is Your Fault, Too
(WSJ.com: Business Technology)
Submitted at 7/21/2008 6:00:00 AM
Hackers’ preferred method of breaking into businesses these days is
exploiting flaws in Web browsers, word-processing documents and other
software. The reason these applications are vulnerable to attack: No one
wants the responsibility for making sure this software is secure.
To write better code
The man pointing the finger at, well, everybody is Howard Schmidt, a
security consultant who used to be the top-ranking cyber-security official in
George W. Bush’s Whitehouse. Schmidt spoke to the Business Technology
Blog while waiting in line to get the software on his iPhone upgraded -
although he called us on his BlackBerry.
The problem, according to Schmidt, is that the people who oversee
software development focus on finishing projects on time and under budget.
It’s not that security is incompatible with coding cheaply and fast, but it
does make development a little more complicated, because programmers
“Wi-Fi Squatting” a Crime – By the Victim
(WSJ.com: Business Technology)
Submitted at 7/18/2008 5:13:00 AM
It’s a federal offense in the U.S. to use someone else’s unsecured wireless
network for illicit purposes. It’s a crime in Germany, too – committed by the
network owner.
Is this a way to send an enemy to jail?
We’ve always thought that so-called Wi-Fi squatting was largely a
victimless crime. We’ve done it, and, based on the comments our previous
posts on the topic received, so have most of this blog’s readers. The FBI has
told us that it isn’t a federal offense to squat, as long as the squatter doesn’t
use the connection to do anything illegal. Wi-Fi squatting is against the law
in some states, however: A few unlucky folks have been arrested for
checking email or surfing the Web while parked in a car outside a coffee
shop or library.
But a court in Germany ruled that the owner of an unsecured Wi-Fi
Bearish Schering Options Explode on Drug Study
(WSJ.com: MarketBeat)
Submitted at 7/21/2008 1:32:00 AM
Shares of Schering-Plough Corp. and Merck& Co. were both down after
the companies postponed their earnings releases until after today’s close as
they await the impending update on a study of whether their Vytorin
cholesterol drug reduces heart-attack risk.
The press conference discussing the findings is taking place currently in
London, led by Terje Pedersen of the Ulleval University Hospital in Oslo,
who was spearheading the Simvastatin and Ezetimibe in Aortic Stenosis
(SEAS) study.
In your prior job as head of programming at ABC, you helped launch
Desperate Housewives. Which housewife are you? Felicity Huffman. The
idea of carrying a significant job and raising kids, and the chaos that ensues,
certainly rang a bell.
What was your worst day at Martha Stewart? The day we met with Eddie
Lampert to see if there was a new contract to be done with Kmart and
realizing we were so far apart, it was hopeless. We knew the value of our
brand to them, and I think he felt we had no other options and could hardball
us.
Best day? The day Martha came back to the company. And the day we
could say we were profitable again. That was a fun earnings call.
Is there one Martha Stewart product you can’t live with-out? The lemon
zester. It’s just a miracle.
Related Links
Martha Stewart: Banned in Britain
When Public Companies are Still Private Fiefs
More Influence than Anxiety at the 'Time 100'
indicate a problem in the teenage job market. He said higher minimum wage
requirements may be leading employers to favor older workers or that the
U.S. is in a recession. “We’ve seen in the past that the teenage
unemployment rate has followed the national rate, and now we have a
divergence,” he said. “That’s big.”
Renee Ward, founder of the teen job search Web site Teens4hire.org, said
some companies have set higher age requirements for jobs. “They feel that,
by that time, people have a better understanding of customer service,” she
said.
The lackluster economy is helping to shrink the job market, including
positions at retailers that hire many teenagers. The retail industry has lost
194,000 jobs since March 2007. At the same time, labor laws may make it
harder for younger teens to find work. The Fair Labor Standards Act
requires teens under 18 work “non-hazardous” jobs. Some say that could
prohibit them from jobs that require the use of box cutters to open shipments
at retail stores and lawn-products with chemicals qualify as hazardous.–
Christina M. Wright
Memorial Park in Los Angeles.
Eva Marie Saint read a statement from longtime client Paul Newman, who
praised Cowan for bringing an “uncommon dignity” to his work. Among the
mourners, more than one person remarked, were the ghosts of those whose
press Cowan had finessed, among them Lucille Ball, Gary Cooper, Judy
Garland, Cary Grant, and Frank Sinatra.
Cowan invented the modern Oscar campaign in 1944 by leaking a story
about Mildred Pierce’s “promising” Academy Award chances when the film
was just three weeks into shooting. “If we don’t have anything to publicize,
let’s create it,” he once famously said. Cowan founded his last firm, Warren
Cowan & Associates, in 1994. He learned he had melanoma only three
weeks before he died, and the tireless P.R. man spent part of his final day
with his staff gathered around him: He wanted to make sure everything was
ready for an event honoring Wayne Newton.Related Links
Idle Chatter: Actors' Strike, 'Arrested Development,' more
Peeking Under the Table
Hollywood Ending: Guilty
can’t take many of the shortcuts they’re used to. Schmidt says that writing
software with security in mind from the outset is the tech equivalent of
building a house without flammable materials.
But it’s one thing for a business to insist that software developed internally
is done so with security in mind. It’s another to make sure that the software
it purchases is vulnerability-free. That’s where businesses - and individuals -
have really dropped the ball. “A lot of people think that it’s someone else’s
job,” Schmidt tells us. The result is that no one ever checks most software
for flaws.
Making sure that software is secure from the ground up will become
increasingly important as people store more information and install more
software on mobile devices like the iPhone Schmidt was waiting to upgrade.
Schmidt offers this reminder: Just because a piece of software was
distributed through Apple’s App Store, don’t assume that it is vulnerability
free.
-Ben Worthen
network that a squatter used to illegally download rap songs is responsible
for the crime – even though he proved that he wasn’t the one who stole the
files, TechDirt reports. (Here’s the news story in the original German and
Google’s translation.)
Most of this blog’s readers compared Wi-Fi squatting to listening to music
blasting through an open window or getting sprayed by the mist from a
sprinkler that’s spilling onto that sidewalk. A few thought that it should be a
crime, arguing leaving an unlocked bicycle on the sidewalk doesn’t give a
passerby the right to take it. No one suggested that the person committing
the crime was the network owner.
Nonetheless, the German court said that network owners are responsible
for securing their networks — and can be held liable if they don’t (Although
TechDirt points out that a different German court ruled just before this one
that another network owner wasn’t responsible for the behavior of squatters
in a similar case.)
-Ben Worthen
They’ve found that the drugs Zetia and simvastatin, the two components of
Vytorin, did not cut the risk for heart attacks and reduce the need for aortic-
valve replacement any more than a placebo (the primary goal of the study).
However, the combination did produce a statistically significant reduction in
certain secondary events such as non-fatal myocardial infarction or coronary
artery bypass surgery (a secondary goal).
A study done earlier this year that said Vytorin was no better than
simvastatin alone in slowing the clogging of arteries. Shares of Schering-
Plough were hit the hardest during trading, but as the release came out,
shares recoverd a bit. Lately they were down 3.5% while Merck lost 1%.
In addition, options activity has exploded, with more than 25,000 put
A Cloud Over the U.S.
Solar Push
(WSJ.com: Business Technology)
Submitted at 7/17/2008 1:28:00 AM
Won’t it be great when America wises up and starts generating a big
percentage of its electricity from the sun? Well, one of Silicon Valley’s
major players in the field sees a snag.
A solar cell
Applied Materials, a maker of machines used to manufacture chips and flat
-panel displays, is starting to get some traction in selling its tools for clean
energy applications. The company has now outfitted a dozen factories for
making solar panels.
But Michael Splinter, Applied’s chief executive, is quick to point out that
not one of those factories has been in the United States. Two well-known
U.S. panel makers, First Solar and SunPower, chose to set up major factories
in Asia. If the trend were to continue unabated, he argues, the dollars the
country now sends to foreign oil countries would simply shift to foreign
panel makers. And America would lose a chance to create manufacturing
jobs. “This is the biggest miss in a long time,” Splinter says.
This not a case where lower wages abroad are the primary factor. But
other countries–Germany is the best-known example–offer a range of
incentives that subsidize installation of solar panels and aid companies that
make them. Even some Indian panel makers have set up their first factories
in Germany, says Mark Pinto, an Applied senior vice president and chief
technology officer. By contrast, the U.S. research and development tax
credit expired at the end of December, and a renewable energy tax credit
that could help spur solar panel installations is bogged down in Congress.
There are reasons to think the situation should improve. Solar-panel
factories should become profitable, even without incentives, Splinter says.
And the panels, being fairly large, are not that convenient to ship great
distances. After all, notes Joe Pon, an Applied corporate affairs spokesman,
making the solar panels is much like making sheets of glass. “Glass factories
are all over the world, they are not all in Taiwan,” he says.
-Don Clark
Bank Analyst Sued by
Bank
(WSJ.com: MarketBeat)
Submitted at 7/21/2008 2:44:00 AM
Some companies, when confronted with negative share activity and analyst
commentary, rail against short-sellers and the like. Others go ahead and sue
analysts, which is what BankAtlantic did today against Richard Bove.
Richard Bove of Ladenburg Thalmann.
One week ago today Mr. Bove, of Ladenburg Thalmann, released a wide-
ranging report titled “Who Is Next,” which assessed the possibility of further
troubles for financial institutions based on various metrics, including non-
performing assets to total outstanding loans, and non-performing assets to
capital. BankAtlantic sued Mr. Bove for this analysis, asking for damages
related to defamation and negligence.
“ The problem is that, while Bove’s report purports to consider which
banks might fail, he failed to examine the health of the banks and thrifts in
his report,” they write. “Instead, he only examined holding company data
which, in at least our case, is meaningless information. This is simply
shocking.”
Mr. Bove noted in a later commentary that BankAtlantic had disputed his
figures, noting that the holding company had purchased $100 million in non-
performing assets from the bank. He didn’t give in entirely, saying investors
could “either choose the numbers for the holding company as published, or
use the number provided for the underlying bank.”
The bank still isn’t thrilled, saying in a release that the method —
comparing non-performing loans at the bank with the total capital of the
holding company — is misleading. “The problem we face is that the
indisputable facts are now buried in the sensational headlines Bove and
Ladenburg have falsely created— and, for whatever reason, have refused to
retract,” they wrote.
An assistant at Mr. Bove’s office said he was unable to comment, on the
advice of counsel. A Ladenburg spokesman said that “ we’ll defend
ourselves against this meritless lawsuit.”
Jeremy Haft: Olympic
Security and the Media
(The Huffington Post Full Blog Feed)
Submitted at 7/22/2008 10:04:50 AM
Two city buses exploded Monday morning in southwest China during the
rush hour. The authorities think they can tamp down on such violent protest
during the Olympics, but they've got another thing coming.
Even with a staggering 100,000 police officers deployed on the streets to
keep order for the Games (that's twice the size of NYC's police force, twice
the size of the Italian standing army!) -- they won't be able to prevent every
single act of civil disobedience and violence.
Nor will they be able to choreograph the media coverage of these events.
Much to NBC's chagrin, the Chinese authorities are curtailing the hours
when press can film in Tiananmen Square, and they'll try to censor the
dominant television narrative. But they won't be able to prohibit 24/7
coverage via the Internet of protests as they happen on the ground.
As the authorities learned from the Sichuan earthquake, sometimes the
public's need for information can supersede the government's ability to
control it. Information cascades across digital networks like water flowing
over a dyke. Sticking fingers in that dyke can't stop the flow.
Hopefully, the inevitable bad pres coverage will lead to greater openness
and more press freedom, not less. Regardless, the authorities are in for a
rude awakening.
options at the $17.50 strike traded in Schering, exceeding existing open
interest of less than 10,000 contracts. Call-buying in the $20 strike, where
about 20,000 contracts have changed hands, exceeds the existing open
interest of 13,400 contracts. Overall volume is more than seven times the
usual daily volume.
Sveinn Palsson, Credit Suisse U.S. derivatives strategist, notes that the
activity in the options market suggests investors are taking a more bearish
view. Prices of the puts are increasing, while prices of the call options are
increasing. “ It means that the demand for protection is higher than for the
upside,” he says. The view “is definitely tilted toward the downside.”

Police Arrest, Try to
Hire Computer Hacker
(WSJ.com: Business Technology)
Submitted at 7/18/2008 6:00:00 AM
The FBI hailed the arrest of an alleged computer hacker known as
“AKILL” as progress against “one of the most serious cyber security
threats” facing the civilized world. But a judge this week dismissed the
charges and now authorities are preparing to offer the hacker a job.
Really good hackers have more cards to play
In a press release last November, the FBI claimed that the hacker, 18-year
old Owen Thor Walker of New Zealand, was “ the ringleader of an elite
international…group,” which illegally took control of more that a million
computers and used them to steal more than $20 million. Even though
Walker only made $40,000 personally, his arrest was hailed as a sign that
different governments could work together to stop online crime.
We wrote about the arrest at the time in a post titled “ Cyber-Crime
Crackdown Won’t Stop Cyber Crime.” But even we aren’t cynical enough
to guess that this would happen: Despite the fact that Walker confessed, a
judge in New Zealand let him off the hook. She said that a conviction might
hurt Walker’s career potential, according to the BBC. In fact, if press
accounts are to be believed, both the defense and the prosecution spent most
of the trial fawning over Walker’s computer-programming skills. Not only
was he likely to get a job offer from the police, headhunters from several
other tech companies were outside the courthouse, the Telegraph reports.
Granted, most hackers won’t get the Walker treatment. But this looks like
a case where crime may not pay well, but getting caught will.
-Ben Worthen
Despite Earnings,
Stocks Display
Resilience
(WSJ.com: MarketBeat)
Submitted at 7/22/2008 11:32:00 AM
Certainly, there are plenty of bearish factors for motivated sellers to hang
onto, but the market is displaying unexpected resilience as the morning
wanes.
Underpinning the rally, of course, is another decline in oil prices, but
outside of the usual beneficiaries of such news (the transports), the bounce is
curious. Technology shares are reasonably firm despite a poor outlook from
Apple Inc. and disappointing results from Texas Instruments Corp., and
financials are outperforming the market, disregarding the losses from
Wachovia Corp. and a number of regional banks.
“I think everybody is interested — I don’t want to say excited — about
finding a bottom in the financials, but I don’t think we’re at that point,” says
Stephen Carl, head trader at Williams Capital. “If some are alluding to it, I
think they’re forcing it.”
Analysts suggest that the rally reflects a desire by investors to find points
of resistance in the near-future. They’re seeking clarity on how far such a
rally can run after stocks declined dramatically through the first two weeks
of July. “ The market is showing that it believes that the low was real, and so
this is a test if you want to call it that,” says Marc Pado, U.S. market
strategist at Cantor Fitzgerald.
He adds that the market has a “ways to go” before finding true resistance
levels, which he puts at about 11800 on the Dow industrials. “If we get up
there, people are going to get cautious again.”
Technology Is Boring. And
That’s Good.
(WSJ.com: MarketBeat)
Submitted at 7/21/2008 12:15:00 PM
One of the larger technology bellwethers reports earnings after the close —
Apple Inc. Others have already released their news, including Google Inc.,
Microsoft Corp., and International Business Machines. And strategists at
Merrill Lynch have noticed so far that if there’s any one sector that can be
considered boring and predictable in today’s market, it’s technology.
Technology, according to Brian Belski, U.S. sector strategist at Merrill, is
“exhibiting the lowest standard deviation of earnings growth over the past
five years of any sector within the S&P 500.” Basically, that means that this
sector has experienced less volatility in its earnings from quarter-to-quarter
and year-to-year, unlike the financials, which now have all the dependability
of Lotto tickets.
He notes that between the end of 2007 and July 17, the overall growth rate
for the S&P 500 declined by 18 percentage points — but expectations for
tech fell by just 9 percentage points.
Happy Endings...For Her?!
One Woman Gives It A Whirl
(The Huffington Post | Full News Feed)
Submitted at 7/22/2008 9:50:00 AM
Luckily, any "rules" restricting female sexuality are dying as fast as Sex
and the City repeats can slay them, and it was only a matter of time before
women embraced the notion that "quick releases" aren't just for men. And
with competition among spas getting ever more intense, customers are
starting to demand more than just Enya and free herbal tea with their
Shiatsu, according to massage therapists. "It's such a well-known thing for
guys, and women are finally getting more comfortable asking for it," said
Anna, a self-described "massage healer" who has worked at several upscale
spas and performed happy endings on female customers. (Names have been
changed to protect the less-than-innocent.) "Women are finally getting
comfortable with the idea that it's ok to feel erotic in what's already a really
erotic setting."
15
Secretary Paulson's New
Gig: Fannie And Freddie PR
Man
By webmaster@huffingtonpost.com (Business on
HuffingtonPost.com)
Submitted at 7/22/2008 6:20:30 AM
Bank examiners from the Federal Reserve and the Comptroller of the
Currency are inspecting the books of the nation's two largest mortgage
finance companies, Fannie Mae and Freddie Mac, as the Bush
administration prods Congress to approve a plan that would enable it to
inject billions of dollars into the companies.
Treasury Secretary Henry M. Paulson Jr., in a meeting on Monday with
reporters and editors of The New York Times, said the Fed and the
comptroller's office began combing the books of the two companies after
their declining stock prices caused widespread anxiety in the market. The
NEC's ad system pumps out
two companies guarantee or own almost half of the home mortgages in the
United States. The Bush administration is hoping they can be the engine that
spots based on gender, age
pulls the housing market out of its yearlong slide. (Engadget)
Read the full story here
-OR- Submitted at 7/22/2008 10:19:00 AM
Read more about Secretary Paulson and the lending crisis: Filed under: Wireless
::Vince Farrell: Fannie and Freddie in Layman's Terms For better or worse, targeted advertising isn't going anywhere. Seemingly,
:: No More Bailouts Expected it's not getting any more discrete, either. NEC's Digital Signage Solution
combines a camera, a large display and a FeliCa contactless IC card reader /
writer in order to dole out advertisements that cater to certain demographics.
This Time, Earnings Don’t The system includes the innate ability to determine "gender, generation and
other attributes" of a person in order to serve up advertisements that will
cause him / her to spend some dough. From there, the individual can scan
Help their phone in order to access related content on their mobile internet
browser. That's all and fine and dandy we suppose, but how on Earth do you
(WSJ.com: MarketBeat) convince busy citizens to stop by and have a look at an otherwise
Submitted at 7/22/2008 9:07:00 AM
So much for boosting stocks on earnings news that isn’t as bad as expected.
uninteresting flat-panel?
[Image courtesy of NEC] Read| Permalink| Email this| Comments
A number of earnings reports out following Monday’s close and today’s
open are indeed, bad as expected — or worse — and it looks set to take a Kohlberg Kravis IPO: If It
toll on the market.
Shares of Apple Inc. were down 9.8%, as this once-Teflon stock continues Happens, It'll Be A More
to struggle after hitting an all-time high at the end of 2007. Peter
Oppenheimer, Apple’s chief financial officer, said he expects the company’s Diversified Firm
gross profit margin to decline in the coming quarter.
Other technology names that reported earnings overnight are struggling, By webmaster@huffingtonpost.com (Business on
such as Texas Instruments Inc., down 13% in premarket action after the HuffingtonPost.com)
chipmaker said net income fell due to sluggish sales of wireless-handset Submitted at 7/22/2008 5:50:24 AM
chips. Sandisk Corp. dropped 19% after it had its ratings cut by Citigroup
analysts. Kohlberg Kravis Roberts on Monday said it had hired William Sonneborn
to further develop its asset management business, in a move that The
The financials were not providing solace. Wachovia shares fell 6.7% and
American Express Co. was off by 10% after both reported disappointing Financial Times speculated may be an effort to diversify ahead of a possible
initial public offering.
earnings.
The Financial Times noted that the fees that assets under management
generate could be more attractive to public investors, as they tend to be more
Ford To Drastically Shift predictable that business of buying and selling companies. Whatever the
reason, K.K.R.'s public offering appears to be on hold for the time being.
Production Away From SUVs Go to the blog here
-OR-
Watch Lewis Black's "rant" against K.K.R. from earlier this year
By webmaster@huffingtonpost.com (Business on
HuffingtonPost.com)
Submitted at 7/21/2008 9:00:49 PM
The Ford Motor Company, which devoted itself for nearly 20 years to
putting millions of Americans into big pickup trucks and sport-utility
vehicles, is about to drastically alter its focus to building more small cars.
The struggling automaker, reacting to what it sees as a rapid and
permanent shift in consumer tastes brought on by high gas prices, plans to
unveil its new direction on Thursday, when it will report quarterly earnings.
Among the changes, Ford is expected to announce that it will convert three
of its North American assembly plants from trucks to cars, according to
people familiar with the plans.
And as part of the huge bet it is placing on the future direction of the
troubled American auto industry, Ford will realign factories to manufacture
more fuel-efficient engines and produce six of its next European car models
for the United States market.
Transistors on paper become a
reality
(Engadget)
Submitted at 7/22/2008 9:51:00 AM
Filed under: Misc. Gadgets Check it, nerds. A team over at the
Universidade Nova de Lisboa has reportedly figured out a way to use paper
(yes, paper) as an interstrate component of a Field Effect Transistor (FET).
In testing, the group "fabricated the devices on both sides of the paper
sheet," thus causing the paper to act as the "electric insulator and as the
substrate" simultaneously. Remarkably, results showed that performance
actually rivaled that of best-in-class oxide thin film transistors, giving
revived hope for the realm of disposable devices like paper displays, labels,
intelligent packaging, tracking tags, etc. The findings are scheduled to be
published this September, after which we're sure any firms interested in
taking this stuff commercial will be putting their best foot forward.
[Via Scientific Blogging] Read| Permalink| Email this| Comments