The company has allocated nearly 10 percent of its $1.3 billion research budget to extracting ingredients from carbohydrates — things that grow and can be infinitely replaced — rather than from hydrocarbons, which are mined or drilled and readily depleted. DuPont already makes 10 percent of its products from nonpetrochemical substances, and Charles O. Holliday Jr., DuPont's chief executive, expects to increase that to 25 percent by 2010.
"The issuance of a subpoena to a journalist which seeks to compel production of his or her notes and records of conversations with sources is highly unusual," Mr. Cox said in a statement today. "Until the appearance of media reports this weekend, neither the chairman of the S.E.C., the general counsel, the office of public affairs, nor any commissioner was apprised of or consulted in connection with a decision to take such an extraordinary step. The sensitive issues that such a subpoena raises are of sufficient importance that they should, and will be, considered and decided by the commission before this matter proceeds further. "The subpoena was issued by a lawyer in the S.E.C.'s San Francisco office, which is investigating allegations of a conspiracy by a research firm and several hedge funds and traders to manipulate stock prices. Overstock.com, an Internet company, contends that its stock has been manipulated. In a lawsuit filed in Superior Court in California, it has accused the research firm, Gradient Analytics, and stock traders and hedge funds of working together to put out false information about Overstock just after the traders executed heavy bets that the stock would decline.
Short sellers make market bets that a particular stock will fall in value, and thus have a natural interest in circulating information that shows that the company is overvalued. A famous example is that of Jim Chanos of Kynikos Associates, who mentioned to Fortune reporter Bethany McLean that Enron might be overvalued. McLean and co-author Peter Elkind recount the conversation in their book, The Smartest Guys in the Room:
Chanos said, "Read the 10-K and see if you can figure out how they're making money."
Executives hate short sellers, but shorting a stock is not a crime. As McLean and Elkind point out, short sellers aren't operating with inside information; they're just doing their homework:
Chanos and the others who shorted Enron's stock didn't have any special information that wasn't available to the bulls.
After talking with Chanos in early 2001, McLean wrote a story with the headline, "Is Enron Overpriced?" which raised the question of how the company posted such impressive profits given its meager cash flow. Short sellers perform an important function in our open securities markets: They bring to light information about troubled companies that bullish analysts and overburdened regulators might otherwise overlook. For the S.E.C. to issue subpoenas to reporters who publish this information based on complaints from the offended companies, would be to play into the hands of executives who don't want unflattering information brought to light.
New York State Attorney General Eliot Spitzer has earned many admirers -- and made a few enemies -- in his crusade to clean up corporate America. Now, one enemy, former Home Depot CEO Ken Langone, is doing everything he can to make life difficult for Spitzer, who is seen as an overwhelming favorite to become New York's next governor. Langone is backing Tom Suozzi in a primary challenge to Spitzer. What did Spitzer do to earn the wrath of Ken Langone? He decided to prosecute former New York Stock Exchange head Dick Grasso, after Grasso's sky-high compensation became public. Langone was one of Grasso's strongest allies on the NYSE board, and didn't take kindly to Spitzer's legal actions to rein in Grasso's greed. Judging by his spokesman's comments in the Financial Times, Langone is making it personal:
“As someone who has been irresponsibly targeted by Spitzer, he has come to see the broad harm Spitzer has done to business and jobs in the state,” says James McCarthy, a spokesman for Mr Langone. Mr Spitzer’s campaign points out that Wall Street firms have reported strong results since the settlement of his office’s claims against them.
Just to be clear, working for effective oversight of highly paid executives is not a war against corporate America. To the contrary, corporate governance activists see excessive pay as emblematic of poor board oversight. In the NYSE case, the board (with the possible exception of Ken Langone) was in the dark about the enormity of Grasso's compensation package.
It's been one year and 451 posts since TommyWonk went live on February 23, 2005. My first post (not that anyone was paying attention) was a link to this bit of conceptual art in Central Park, called "The Crackers." A sincere thank you to my dozens of loyal readers. If I've helped make the world a little wonkier, it's been worth it.
The president was referring to an embarrassing sidelight of his State of the Union address on Jan. 31, when he called for new research into alternative energy to help wean the nation from its century-old oil habit. But the next day the laboratory announced that a $28 million budget cut was forcing it to lay off researchers in ethanol and wind technology, two of the areas that Mr. Bush cited in his address as full of promise. ... Managers at the laboratory began calling the employees back on Monday, a holiday, and phone calls were continuing on Tuesday. None of the employees were back at work in time for the president's visit, said a laboratory spokesman, George Douglas.
from Political Wire: Bonus Quote of the Day "If he'd been in the military, he would have learned gun safety." -- Sen. Chuck Hagel (R-NE), quoted by the Omaha World Herald, on Vice President Dick Cheney's hunting accident.
Today I'm adding three links to business and economics sites. First up is Environmental Economics, which provides lots of insight into, well, environmental economics. The site provides lots of good stuff for wonks who understand (or would like to better understand) the many ways in which sound environmental policies go hand in hand with sound economic policies. One of the regulars, Tim Haab, a professor at Ohio State, doesn't keep his interest in the environment from spoiling his enjoyment of NASCAR:
I'm totally stoked for the Daytona 500 this weekend...and if you think that looks funny in writing you should hear me say it.
How surprising to find that the administration would shade the evidence to support its case.
Those of a more entreprenuerial bent will want to check out Let the Good Times Roll by Silicon Valley legend Guy Kawasaki, who offers this useful definition what it is we do:
Blogger. n. Someone with nothing to say writing for someone with nothing to do.
The irony of course is that Kawasaki has plenty to say and plenty to do. He's been online less than two months, but his blog provides a treasure trove of useful tips, like the 10/20/30 Rule of PowerPoint presentations:
It’s quite simple: a PowerPoint presentation should have ten slides, last no more than twenty minutes, and contain no font smaller than thirty points. ... If you must use more than ten slides to explain your business, you probably don’t have a business.
These three sites provide plenty of geeky goodness. Coming up: Updates to my local links, which will include something almost unthinkable beyond the Diamond State: links to some of Delaware's conservative blogs.
"More interested in science fiction than science."
Via the New York Times, we read that President Sluggo hosted a secret visit with novelist and global warming doubter Michael Crichton last year:
In his new book about Mr. Bush, "Rebel in Chief: Inside the Bold and Controversial Presidency of George W. Bush," Fred Barnes recalls a visit to the White House last year by Michael Crichton, whose 2004 best-selling novel, "State of Fear," suggests that global warming is an unproven theory and an overstated threat. Mr. Barnes, who describes Mr. Bush as "a dissenter on the theory of global warming," writes that the president "avidly read" the novel and met the author after Karl Rove, his chief political adviser, arranged it. He says Mr. Bush and his guest "talked for an hour and were in near-total agreement." "The visit was not made public for fear of outraging environmentalists all the more," he adds.
Imagine that.
"This shows the president is more interested in science fiction than science," Frank O'Donnell, president of Clean Air Watch, said after learning of the White House meeting.
The Times reports that last month, Mr. Crichton received a journalism award from the American Association of Petroleum Geologists.
Via the Washington Post, we learn that the North Carolina GOP is asking church members to send them their church directories. The Post picked up on a story in yesterday's Greensboro News & Record that the request is not sitting well with some conservative pastors:
"I would not want my church members to have their names given to either political party, Republican or Democrat," said Dr. Richard Byrd Jr. of Cornerstone Baptist Church in Greensboro. "That, in my opinion, would be unethical." Cornerstone accepts "The Baptist and Faith Message" adopted by the Southern Baptist Convention, widely regarded as among a more conservative and Republican-friendly organization. And Byrd said he does not believe people need to separate their religious practice from their politics. But he said members give their contact information to a church to further its spiritual mission, not a political one. "It would be betraying the trust of the membership," Byrd said.
During the 2004 presidential race, the Bush-Cheney campaign sent a similar request to Republican activists across the country. It asked churchgoers not only to furnish church directories to the campaign, but also to use their churches as a base for political organizing. The tactic was roundly condemned by religious leaders across the political spectrum, including conservative evangelical Christians.
The North Carolina GOP has drawn fire from conservative religious leaders:
"Such a request is completely beyond the pale of what is acceptable," said the Rev. Richard Land, head of the Ethics and Religious Liberty Commission of the Southern Baptist Convention.
In Maryland, Republican Lt. Gov. Michael Steele, who is running for the open seat of retiring Democrat Paul Sarbanes, apologized for remarks before Jewish leaders in Baltimore that seemed to compare stem-cell research to the Holocaust. "You, of all folks, know what happens when people decide to experiment on human beings," Steele said. He later expressed conditional support for embryonic stem-cell research but said it should be guided by "a moral compass."
The trouble for Steele is that people understand the difference between a moral compass and a moralistic yo-yo.
All kidding aside, the handling of the Cheney shooting incident does raise serious questions about his appreciation of his role as a public figure. The notion that the vice president would leave it to a private citizen to tell the media the next day that he shot someone is baffling. As the Financial Times reports, it certainly baffled the reporter who took the call Sunday morning:
The [ranch] owner eventually rang the Corpus Christi Caller Times, a local paper. The duty Sunday reporter, after hearing the tale, asked: "Do you mean the vice-president ... You'd better tell me that again."
Mr. Cheney tried to turn the matter to that of dissing the mainstream media, by notifying the Corpus Christi Caller Times instead of the New York Times. But the issue is his abdication of his responsibility as a public figure by leaving the chore of notifying the world to a private citizen. Mr. Cheney loves the power and influence he wields; he just doesn't like the accountability that goes with the job.
Now according to the best intelligence available, there were quail hidden in the brush. Everyone believed at the time there were quail in the brush. And while the quail turned out to be the 78 year old man, even knowing that today, Mr. Cheney insists he still would have shot Mr. Whittington in the face.
"The Democrats were laughing all the way to the funeral of Social Security modernization," White House spokesman Trent Duffy told me in an interview Tuesday, but "the president still cares deeply about this." Duffy asserted that Bush would have been remiss not to include in the budget the cost of something that he feels so strongly about, and he seemed surprised at my surprise that Social Security privatization had been written into the budget without any advance fanfare. Duffy said privatization costs were included in the midyear budget update that the Office of Management and Budget released last July 30, so it was logical for them to be in the 2007 budget proposals. But I sure didn't see this coming -- and I wonder how many people outside of the White House did. Nevertheless, it's here. Unlike Bush's generalized privatization talk of last year, we're now talking detailed numbers. On page 321 of the budget proposal, you see the privatization costs: $24.182 billion in fiscal 2010, $57.429 billion in fiscal 2011 and another $630.533 billion for the five years after that, for a seven-year total of $712.144 billion. In the first year of private accounts, people would be allowed to divert up to 4 percent of their wages covered by Social Security into what Bush called "voluntary private accounts." The maximum contribution to such accounts would start at $1,100 annually and rise by $100 a year through 2016.
"Damn the deficits, full speed ahead!" seems to be the motto. Perhaps the proposed Division of Dynamic Analysis in the Treasury Department will be tasked with explaining how this $712 billion in additional outlays will actually reduce the federal deficit and make us all rich while we're at it.
BushCo Proposes Bamboozlement Division in the Treasury Department
Things are tight all around, but President Sluggo has proposed $513,000 to create a new office in the Treasury Department, to be called the Division of Dynamic Analysis, to come up with arguments why cutting taxes will increase revenues. As the Washington Post reports, we really don't need these supply side geeks, because Dick Cheney already has it figured out:
"It's time to reexamine our assumptions and to consider using more dynamic analysis to measure the true impact of tax cuts on the American economy," Cheney said, explaining why Bush has proposed the new Treasury Department division. "The evidence is in, it's time for everyone to admit that sensible tax cuts increase economic growth and add to the federal treasury."
Actually Mr. Vice President, the evidence is not entirely on your side. This week, the Treasury held its first sale of 30-year bonds since 2001. The long bond, which was rendered obsolete by the budget surpluses created under President Clinton, has been resurrected to finance the deficits created by BushCo's tax cuts.
The Print Center, near Rittenhouse Square in Philadelphia, features one of the more unique installations in recent memory: Richard Torchia has turned the second floor galleries into camera obscurae, using pinholes and lenses to give the viewer an eerie, upside down look at the neighborhood. The Print Center is devoted to presenting printed art, but these images are fleeting. The camera obscurae (literally dark rooms) project their images in real time instead of capturing them on film or paper. The installation is up until February 25, but if you go tomorrow (Saturday) you may get to see snow falling up in your field of vision.
The Bush administration came under fire in Congress on Thursday for proposing deep cuts in energy-efficiency programmes while increasing funding sharply for longer-term programmes whose payoff are far more uncertain. ... The administration has trumpeted proposals to increase funding for research on hydrogen, which would get an extra $43m, taking its funding to $199m, and biomass, which would see its funding rise by $59m to $150m. The Energy Department will also get $250m to work on the reprocessing of spent nuclear fuel from reactors.
Meanwhile, BushCo is proposing to cut the grants to help homeowners better insulate their homes by one third. Senator Bob Menendez doesn't think that makes sense:
The programme has helped to improve fuel efficiency in 5m American homes, saving the average household receiving assistance an average of $235 (€196, £134.7) per year. The energy saved, Mr Menendez said, was equivalent to 15m barrels of oil a year.
What does this tell us about our President's skewed priorities? First, it once again reveals BushCo's love of subsidies for the energy industry and disdain for programs that help actual families. Second, it demonstrates that our MBA president doesn't have anyone who can perform the most elementary cost/benefit analysis. While research on hydrogen, biomass and reprocessing nuclear fuel may be useful, the payoff is unclear and wouldn't be seen for many years. When you improve the insulation in someone's home, the savings start immediately and last for the life of the home. The present value of $235 a year over 30 years based on a the federal government's 30 year bond (which is yielding 4.5%) is $3,827.88 -- assuming no increase in the cost of energy for 30 years. But wait, there's more, or should I say less:
There are also heavy cuts in energy efficiency research. Aside from the $91m cut to weatherisation assistance to $225m, the administration has suggested an $11m cut in spending on energy efficiency in industry to $46m. Research on vehicle efficiency would also be cut by $6m to $166m, despite the president’s enthusiasm for advanced batteries that could improve vehicle efficiency. A $25m programme to promote energy efficiency technology would be cut altogether. Energy experts believe that the administration’s neglect of more short-term measures is a mistake. “The research is allocated in a way that is very high risk, on projects that are often very long term,” said Bill Prindle, deputy director of the American Council for an Energy Efficient Economy.
James Hansen is a senior scientist and director of NASA's Goddard Institute for Space Studies. But George Deutsch, the political appointee who lied about having graduated from college, thinks he's better able to judge what Dr. Hansen should or should not discuss concerning science and the public interest. The New York Times reports that Mr. Deutsch, who's job it was to muzzle scientists like Dr. Hansen, replied to his critics in a radio interview:
Mr. Deutsch contended that although Dr. Hansen was a scientist, he wanted to talk about policy as well as science. "He wants to demean the president, he wants to demean the administration and create a false perception that the administration is watering down science and lying to the public," Mr. Deutsch said. "And that is patently false." The interview was conducted by Brian Cain, 25, a reporter for the station and a senior at the university who worked with Mr. Deutsch briefly at The Battalion, the school newspaper, in 2004.
So if you're a senior scientist, you can't talk about science and policy, but if you're a junior political hack with a few month's experience with the Bush campaign, you can decide who says what about the future of the planet. You can listen to the guy whine at WTAW's Website.
This week, the White House announced its 2007 federal budget, which projected a shortfall of $423bn (€355bn) for the current fiscal year. The good news: budgeters predict diminishing deficits in years ahead, even while accounting for extending the Bush tax cuts. The bad news: for that to happen, Iraq will have to turn into Canada next year, Afghanistan into Sweden and the US Congress into an order of mendicant monks. Mostly, the new numbers are shameful for the fiscally unbalanced Republicans who run the government.
Weisberg goes on to ask:
If deficits are so terrible, why is the economy so good?
One reason he cites is that a deficit of 3.2 percent doesn't immediately bring the economy crashing to a halt. As Weisberg puts it, "our metaphors have become stale." Budget deficits don't cause immediate pain, which is why Dick Cheney can smugly assert that deficits don't matter. Weisberg concludes:
Running a deficit is not so much like going on a spending spree or shooting yourself in the foot, which hurts immediately. It is more like smoking, drinking to excess and not exercising. It will in fact kill you -- just not tomorrow.
RICHMOND, Feb. 7 -- James Webb, who served as President Ronald Reagan's Navy secretary, said Tuesday that he will seek the Democratic nomination to run against U.S. Sen. George Allen (R-Va.) this year, hoping to challenge the one-term incumbent on foreign policy and the conduct of the war in Iraq.
That's right, Reagan's Navy Secretary will run for the U.S. Senate--as a Democrat. Harris Miller, who recently quit his job as head of the Information Technology Association of America, is also seeking the nomination. I don't know much about either candidate, but I'm happy to welcome Webb, a decorated Vietnam veteran, to the Party. And for those who are uncomfortable with former Republicans running as Democrats, here's how it works: When enough folks cross over from the other side to our side, we win.
The top climate scientist at NASA says the Bush administration has tried to stop him from speaking out since he gave a lecture last month calling for prompt reductions in emissions of greenhouse gases linked to global warming. The scientist, James E. Hansen, longtime director of the agency's Goddard Institute for Space Studies, said in an interview that officials at NASA headquarters had ordered the public affairs staff to review his coming lectures, papers, postings on the Goddard Web site and requests for interviews from journalists.
Odds are you hadn't heard of George Deutsch, until you picked up the Times this morning:
George C. Deutsch, the young presidential appointee at NASA who told public affairs workers to limit reporters' access to a top climate scientist and told a Web designer to add the word "theory" at every mention of the Big Bang, resigned yesterday, agency officials said. ... Mr. Deutsch, 24, was offered a job as a writer and editor in NASA's public affairs office in Washington last year after working on President Bush's re-election campaign and inaugural committee, according to his résumé. No one has disputed those parts of the document.
The part that is disputed is his claim to have earned a BA in journalism from Texas A&M University. Dr. Hansen, by the way, earned his BA, MS and PhD from the University of Iowa, all well before Mr. Deutsch was born. You can access his recent publications via his bio. Likewise, you probably haven't heard of Nick Anthis unless you read the same article in the Times this morning. Mr. Anthis, a Rhodes scholar studying biochemistry at Oxford, started his blog The Scientific Activist exactly four weeks ago. Mr. Anthis, who did graduate from Texas A&M last year, (Oxford being more careful about these things than NASA) discovered what NASA didn't bother to check: Mr. Deutsch didn't graduate. Dr. Hansen doesn't see Mr. Deutsch's bogus resume as the big issue:
Yesterday, Dr. Hansen said that the questions about Mr. Deutsch's credentials were important, but were a distraction from the broader issue of political control of scientific information. "He's only a bit player," Dr. Hansen said of Mr. Deutsch. "The problem is much broader and much deeper and it goes across agencies. That's what I'm really concerned about."
Mr. Anthis agrees:
Hansen is really on to something here, and instead of the story being about a 24-year-old lying, it should be about this: how did this guy, who already had dubious qualifications, make it into NASA with such an obvious lie on his resume?
John McCain is unhappy that Barack Obama chose not to join him in cleaning up the Republican's lobbying mess. In his letter to Obama published in the Chicago Tribune, McCain did what was once considered bad form by questioning a colleague's motives:
I would like to apologize to you for assuming that your private assurances to me regarding your desire to cooperate in our efforts to negotiate bipartisan lobbying reform legislation were sincere. When you approached me and insisted that despite your leadership's preference to use the issue to gain a political advantage in the 2006 elections, you were personally committed to achieving a result that would reflect credit on the entire Senate and offer the country a better example of political leadership, I concluded your professed concern for the institution and the public interest was genuine and admirable. Thank you for disabusing me of such notions...
Obama, in last week's letter, promoted a bill backed by House and Senate Democrats that would take similar action on members becoming lobbyists, disclosure and corporate jets. It also bans gifts, meals from lobbyists or organizations that employ lobbyists and creates a new office of public integrity in the House to monitor compliance of lobbying rules. Obama also questioned the effectiveness of McCain's proposal to set up a task force to further study the lobbying ethics issue. Aides to McCain confirmed that McCain saw Obama's first letter as partisan. "I'm embarrassed to admit that after all these years in politics I failed to interpret your previous assurances as typical rhetorical gloss routinely used in politics to make self-interested partisan posturing appear more noble," McCain wrote. "During my short time in the U.S. Senate," Obama responded Monday, "one of the aspects about this institution that I have come to value most is the collegiality and the willingness to put aside partisan differences to work on issues that help the American people. It was in this spirit that I approached you to work on ethics reform, and it was in this spirit that I agreed to attend your bipartisan meeting last week."
The program "is in flat violation of the Foreign Intelligence Surveillance Act," said the chairman, Senator Arlen Specter of Pennsylvania, who will open committee hearings on Monday.
Spying on terrorists is hardly controversial and is permissible under current law. But Bush, Cheney and their allies will continue to claim that compliance with the law slows them down when they are in hot pursuit of the bad guys. There are two problems with this line of argument: First, the current law can hardly be seen as an impediment; the law allows the the Justice Department to seek a warrant from a special court up to 48 hours after surveillance begins. Second, the Bush administration has had ample opportunity to change the law since 9/11, having had control of the executive and legislative branches for most of the last five years. If this program is so important, why not introduce a bill to make it legal?
Koenig said that in an April 2001 phone call with analysts and investors, Skilling didn't disclose $230 million in first-quarter retail division losses, and that in July 2001 Skilling didn't disclose the then-$726 million debt for the half year. Instead, Skilling told investors the division was doing "great."
You don't need a CPA to understand that losing $230 million in three months does not make for a "great" quarter. The court also heard a tape of the infamous April 2001 conference call in which Skilling lost his composure:
"You know, you are the only financial institution that can't produce a balance sheet or a cash flow statement with their earnings," [stock analyst Richard] Grubman said. Skilling, laughing, shot back, "Thank you very much, we appreciate it ... asshole."
Skilling used to be dismissive of those who didn't "get it" but Enron's failure to provide a balance sheet and cash flow statement made it more difficult for investors to uncover the techniques the company used to hide losses and make its numbers to keep Wall Street happy. Holding off on publishing complete financial statements gave Enron extra time to cover its tracks and maintain the fiction that the company was making money, when the actual cash flow from operations told a very different story.
Former Oil Exec Notices that We Have an Oil Dependency Problem
Five years after the White House was hosting secret meeting with oil execs like Ken Lay, President Sluggo announced in his State of Disunion speech that we are too dependent on oil. As the New York Times reports, our President was not quite as bold as he sounded:
In one of his most striking declarations, Mr. Bush said "America is addicted to oil" and set a goal of replacing 75 percent of the nation's Mideast oil imports by 2025 with ethanol and other energy sources. But even that goal was less ambitious than it might have appeared — the United States gets less than 20 percent of its oil from the Persian Gulf — and the speech was notable largely for a lack of big new proposals from a president who for five years has not shied from provocative and politically risky initiatives.
Oil companies are already gearing up to use ethanol in gasoline, so Bush wasn't proposing something that oil companies weren't already working on.
"This is a simple case. It is not about accounting, it is about lies and choices," Hueston said, adding that when shareholders buy stock they buy the right to trust the top company officers.
Instead of getting bogged down in the fiendishly complicated accounting contraptions used to make losses go away, prosecutors are focusing on the reason for the mad machinations: Enron's obsession with lifting its share price far beyond any rational number. The company even had a ticker flashing the share price in its elevators. Unlike the elevators, the share price was expected to keep rising forever. The first witness up today isn't an accountant, but Mark Koenig, Enron's top investor relations exec, who will likely describe the rosy scenarios painted for Wall Street while the company's unstable financial structure was collapsing. Daniel Petrocelli, representing Jeff Skilling, may be helping the prosecution by repeating the assertion that there was nothing wrong with Enron:
"Enron was no house of cards. ... It was a wonderful company, a shining star," Petrocelli said.
The choice for the jury may come down to a simple question: Was Enron in good shape or not? If not they may conclude that Skilling and Lay are still lying.
