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22 posts categorized "Business "

November 15, 2004

Conrad Black charged with fraud

Gotta focus on the positive: S.E.C. Files Fraud Charges Against Ex-Hollinger Chief [NYT]

All my conscious life I have waited to see Conrad Black get his due. His deliciously prolonged undoing comforts me in these dark times.

November 04, 2004

Five more Enron convictions

You want moral values? I'll show you moral values: Five Convicted in Enron-Merrill Barge Trial [Reuters]

October 06, 2004

Business profs indict Bush

Open Letter to President George W. Bush

[Via MaxSpeak and Thad.]

September 25, 2004

KBR worthless, Halliburton will likely cut and run

It's official, the invasion of Iraq has been a universal and unqualified bust. Even Halliburton isn't making any money off it!

Neither billions of dollars in no-bid contracts nor a theft dividend can make KBR turn a profit.

Troubled Unit of Halliburton May Go on Block [NYT permalink.]

September 06, 2004

Black Prince delisted from Friendster

Perle Asserts Hollinger's Conrad Black Misled Him [NYT permalink]

Perle used to be one of Black's staunchest defenders. They were a good team, the conservative media mogul and the foreign policy guru:

But last week, Mr. Perle's view of Lord Black changed. Issuing his first public statements since being heavily criticized in an internal report for rubber-stamping transactions that company investigators say led to the plundering of the company, Mr. Perle now says he was duped by his friend and business colleague. [...] Mr. Perle, a top Pentagon official in the Reagan administration, wielded considerable influence in foreign-policy circles as recently as 2002 as an intellectual parent to the neoconservatives. He was named to the Hollinger board in 1994, joining other like-minded men selected by Lord Black, a self-made businessman from Canada who surrounded himself with conservative thinkers. He particularly did that at Hollinger, a global media company whose holdings at the time included The Chicago Sun-Times, The Jerusalem Post, The Sunday and Daily Telegraph and The Sydney Morning Herald.

Now, their mutually gratifying relationship is at an end. It's so sad to see a friendship end over something as simple as five million bucks.

In the face of federal investigations and a scathing internal report for Hollinger by Richard C. Breeden, a former chairman of the Securities and Exchange Commission, Mr. Perle has broken ranks and turned on Lord Black.

The report contends that Lord Black improperly took hundreds of millions of dollars for himself and associates - and that Mr. Perle was the enabler, approving some questionable transactions at the same time he was being heavily compensated at the direction of Lord Black. The report said that Mr. Perle told the committee he often signed documents without reading them, and it singled him out among the directors for conflicts of interest.

"With the notable exception of Perle, none of Hollinger's non-Black group directors derived any financial or other improper personal benefit from their service on Hollinger's board," the report said. "It is, of course, possible for a conflicted board member to act at least somewhat responsibly. As a conflicted executive committee member, however, Perle did not. Rather, his executive committee performance falls squarely into the 'head-in-the-sand' behavior that breaches a director's duty of good faith and renders him liable for damages."

It's been a tough year for the Perle. Kevin Drum reflects on just how tough. Clearly, in the current climate, Perle has little choice but to divest himself of unprofitable friendships and restructure his affections. Despite his aggressive downsizing, analysts expect Black Prince to be de-listed from Friendster.

For Mr. Perle, the Breeden report is the latest of several setbacks in both policy and business arenas.Less than two years ago, he had forged a place for himself at the pinnacle of power where Washington policy-making and corporate money-making intersect.

He advised George W. Bush on foreign policy during his 2000 presidential campaign and went on to become chairman of the Defense Policy Board, an influential advisory board to the Defense Department. His protégés were placed in important administration jobs; he was on the boards of several start-up companies and advised others about how to deal with the administration. He was preparing to open a venture capital fund, Trireme, to make investments in industries related to defense and homeland security. Hollinger made an initial investment of $2.5 million in the fund, but at last accounting it had lost $1 million in value.

[Via Chris of Crooked Timber.]


August 26, 2004

GSK to release all Paxil data

Bravo, Eliot Spitzer:

In a settlement that the New York State attorney general said would transform the drug industry, GlaxoSmithKline agreed today to post on its Web site the results of all clinical trials involving its drugs.[NYT permalink]

Mr. Spitzer filed suit in June against GlaxoSmithKline, contending that it committed fraud by publicizing the results of only one of five trials studying the effect of its huge-selling antidepressant, Paxil, in children. That single study showed mixed results. The others not only failed to show any benefit for the drug in children but demonstrated that children taking Paxil were more likely to become suicidal than those taking a placebo.

Underreporting of unfavorable trial data is a threat to clinical research. All scientists prefer to publish results that support their theories, but pharmaceutical companies have even more motives and greater opportunities to do so. A single unfavorable trial of a promising new drug can send a company's shares tumbling. It's not just company scientists whose work is affected. As public funding shrinks, independent researchers are becoming increasingly dependent upon research grants from pharmaceutical companies. These grants may restrict the investigators from publishing unfavorable findings.

I'm glad to see Spitzer taking the lead on full disclosure of clinical trials. This isn't just about consumer protection, academic integrity, free markets. Selective publication is also undermining the credibility and comprehensiveness of large swathes of the biomedical literature. Over time, systematically skewed incentives distort the scientific record.

The worry is not just that some bad drugs may come off looking good. The problem is far more serious. Corporate publication bias has the potential to distort the scientific record and thereby to impede scientific progress on a larger scale.

Philosopher Susan Haack has famously compared science to a partially completed crossword puzzle. Each answer constrains subsequent answers. Our willingness to entertain subsequent answers to depends, in part, on how confident we are in the answers we've pencilled in so. So, the effects of incorrect or poorly supported answers can't be encapsulated, they warp our entire strategy for solving the crossword puzzle.

The recent GSK settlement is small but important step towards scientific transparency. The current judgment applies only to GSK, but Spitzer hopes that other pharmaceutical companies will follow GSK's lead.

Many journals have already moved to safeguard the scholarly literature against various forms of bias. Mandatory disclosures of funding sources and conflicts of interests are a step in the right direction. The key journals should do even more to address publication bias, especially the corporately-mediated species. For example, journals should require all contributors to sign a declaration that they are free to publish all data resulting from their investigations according to their professional judgment. Prestigious academic journals should not publish anything from anyone who admits to publication restrictions on unfavorable results.

Here's an idea I've been toying with for a while. How about a public repository of irreproducible results? A kind of National Biomedical Data Cemetery... Here's how it might work. If a publicly funded scientist failed to get her study published, or decided not to publish her results, she could submit her data to a national archive (anonymously, if she wished). These records would be made available to scientists, historians, policy makers, and other scholars. Such an archive would be an invaluable resource. It might help answer some of the niggling questions about publication bias that plague the biomedical literature.

I'd love to hear input from readers about the desirability/legality/feasibility of such a project.

August 14, 2004

The Corporation: Organization as psychopath

A few thoughts on Ezra's post at Pandagon, Movie review: The Corporation.

Ezra writes:

The thesis of the movie, which is inexplicably dropped as the film progresses, is that the corporation, since it's legally defined as an individual, can be psychologically understood as a psychopath. The methodology used to achieve this outcome, examples of the worst in corporate excess and evil-doing, is pretty flawed. It'd be like diagnosing the human race based on the horrors inflicted by our worst members.

Many astute viewers have voiced similar complaints, including A.O. Scott of the New York Times. There's a misunderstanding here. The Corporation is using "psychopath" in a narrow technical sense without explaining the difference between medical/psychiatric construct and the layman's understanding of the term. "Psychopath" has entered our language as a quasi-clinical epithet. To a layman, psychopath means something like "sicko", "bastard", "villain", or "monster."

Psychologists and psychiatrists apply the term much more narrowly. Here is an example of the professional use of the term "psychopath" taken from a recent issue of Psychiatric Times (fascinating article, BTW):

The killers' characteristics referred to as antisocial personality in the FBI report were as follows: sense of entitlement, unremorseful, apathetic to others, unconscionable, blameful of others, manipulative and conning, affectively cold, disparate understanding of behavior and socially acceptable behavior, disregardful of social obligations, nonconforming to social norms, irresponsible. These killers were not simply persistently antisocial individuals who met DSM-IV criteria for ASPD; they were psychopaths- remorseless predators who use charm, intimidation and, if necessary, impulsive and cold-blooded violence to attain their ends.[Emphasis added.]

The Corporation's thesis that corporations are psychopaths is neither a slur nor a conceit. It's a fact. Corporations are legal persons. Unfortunately, they are persons with "no souls to save, and no bodies to imprison."

A corporation exists to dissolve the responsibilities of the human beings who run it. Say the board of Acme Inc decides to pollute a river. If anyone has a problem with that, they'll have to sue Acme, not the 12 members of the board or the investors. Most individuals would be ashamed to be named in a pollution suit, a fact which might deter them from committing such a crime. Acme has no shame, though.

Jail is a great equalizer. The richer you are, the less a fine will harm you--but a year is still worth as much to a rich person as to a poor one. Unfortunately, you can't lock up an abstraction and the directors have little or no criminal liability. Fines become another cost of doing business. Of course, when pollution turns a profit, individuals divide the money.

Corporations are also legally required to put profit above every other good. A small business owner might decide that, on the whole, a 5% rate of return is plenty, even though she knows she could get 10% by raising prices and cutting jobs. It's her business, so she gets to decide how to balance profits against other values. By contrast, the Acme Board is required to make as big a profit is it possibly can, no matter what. For all its power, the directors aren't allowed to place jobs over profit, or sustainability over quarterly return. For that, they could be fired.

Normal human beings are enmeshed in a network of obligations and competing goods. We'd all like to make money, but we recognize that other people's rights and feelings matter, unlike psychopaths who feel entitled to do whatever they want.. If empathy and ethics aren't enough to keep us normals on the straight and narrow, we can be deterred by punishments ranging from social ostracism to death. Even human psychopaths can be deterred by the threat of punishment.

Corporations have the same rights as people, plus more lawyers, guns and money. Terrifyingly, they are also designed to be amoral, immortal, and insatiable. For example, corporations enjoy free speech, and property rights including the right to own own other corporations (ironic, that, considering the 14th Amendment established corporate personhood).

The Corporation's message is not simply that corporations do bad things. Nor is the movie about what terrible people corporate executives are. On the contrary, the movie goes out of its way to show how sympathetic and thoughtful corporate leaders can be. The point of the movie is that a legal fiction has unleashed a dangerous self-perpetuating entity which is designed to slip the bonds of individual human decency and personal responsibility. That's why corporations are literally psychopaths.

[Lightly copy edited 8/22/04.]

August 06, 2004

Corporate freeloader list columnist Steve Bailey writes about Massachusetts' list of Corporate Freeloaders. The State is compiling a list of corporate offenders whose underpaid employees get publicly subsidized healthcare for want of insurance:

We have a list of deadbeat dads. We have a registry of sex offenders, which we now post on the Internet. Coming soon: a list of Massachusetts' corporate freeloaders. This could be good reading.
With no fanfare and over the veto of Governor Mitt Romney, the Massachusetts Legislature last month became the first in the nation to require the Commonwealth to compile an annual list of which companies' employees and their dependents use state health benefits the most, and what it costs taxpayers. The requirement, included in the state budget, applies to employers with more than 50 workers.

[Via Metafilter.]

July 29, 2004

Shell fined $120 million for lying about reserves

LONDON (AP) -- The Royal Dutch/Shell Group of Cos. agreed to pay a $120 million penalty to U.S. authorities for the company's misstatement of its oil and gas reserves.. [NYT permalink.]

The crime?

The Anglo-Dutch company stunned shareholders in January when it downgraded 20 percent, or 3.9 billion barrels, of its reserves from ``proven'' to less certain categories. Three other downgrades followed, for a total reduction in reserves of 23 percent, or 4.47 billion barrels, from previously reported levels.[Emphasis added.]

July 23, 2004

More proof that crime either does or doesn't pay

Halliburton Reports $663 Million Loss, reports the AP. [Permalink to the NYT.]

An unexpected charge on a troublesome project off the coast of Brazil pushed Halliburton Co. to a $663 million net loss in the second quarter, the company announced Friday.

I hate it when that happens.

The losses came despite revenues of $4.96 billion, up 38 percent from year-ago revenues of $3.60 billion. Halliburton said the increase in revenues was ``largely attributable'' to its KBR subsidiary's government contracts in the Middle East. Congress is investigating allegations that Halliburton overcharged the government on contracts related to the U.S.-led invasion of Iraq, and the company denies any wrongdoing.

How frustrating. Dick will be so pissed when he reads about this in his deferred compensation report.