Issues & Opinions

From the Los Angeles Times, via a WSJ email snippet this morning:

Los Angeles Times: While in private business, Mitt Romney — whose presidential campaign cites his record of closing state tax loopholes as Massachusetts governor — used shell companies in two offshore tax havens to help eligible investors avoid paying U.S. taxes, federal and state records show. Mr. Romney gained no personal tax benefit from the legal operations in Bermuda and the Cayman Islands, but his aides and former colleagues acknowledged that the tax-friendly jurisdictions helped attract billions of additional investment dollars to Mr. Romney’s former company, Bain Capital, and thus boosted profits for Romney and his partners.

Sadly, this tells me nothing I didn’t already know about Mitt Romney - he’s clearly a smart guy, and he’s clearly a competent businessman. Whether either of those makes him the best suited presidential candidate is both another thing completely and a matter which doesn’t concern me at all right now.

However, the intimation that there’s some undercurrent of hypocrisy here strikes me as overbaked by half - he used the system, properly & as designed, to benefit those to whom he had a fiduciary duty. The fact that he and his partners boosted their profits from having satisfied their clients strikes me as precisely the result he expected, and deserved.

Surely there are other crucial things about him we need to know, but this ain’t on that list.

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Who knew? There’s a backlash against tithing, according to today’s WSJ.

Perhaps everyone but me knew, since I’m an irreligious fellow.

That last trait makes it predictable that I’d point out the obvious: that churches are a business, like any other. It is hard to argue otherwise, concerns about heavenly salvation and eternal damnation notwithstanding. Denominations, and the churches within them, compete with one another for congregants, and they do so with a variety of devices.

The Megachurch Effect

Resistance to tithing has been increasing steadily in recent years, as more churchgoers have questioned the way their churches spend money. Like other philanthropists today, religious givers want to see exactly how their donations are being used. In some cases, the growth of megachurches, some with expensive worship centers equipped with coffee bars and widescreen TVs, have turned people off of tithing. And those who object are finding like-minded souls on the Web in theological forums.

(emphasis mine)

Several things could explain churches’ splashing out on such non-eternity-related items as coffee bars or the long-term lease and $100 million renovation of the Houston Compaq Center (nee Summit), but the three most obvious are grandiosity, marketing, and both. A for-profit business might engage in the same sorts of activities, for the same reasons. And bully for both, the secular and the spiritual - it’s all part of the game of making certain your operations remain funded. Customer retention is an issue in both spheres:

Church leaders say tithing isn’t just a theological issue, but a financial one. Americans gave an estimated $97 billion to congregations in 2006, almost a third of the country’s $295 billion in charitable donations, according to Giving USA Foundation, a nonprofit educational organization in Glenview, Ill. But giving to religion is growing more slowly than other types of giving, says Patrick Rooney, director of research at the Center on Philanthropy at Indiana University. That’s partly because people are attending church less frequently, says Mr. Rooney, and are giving to a wider array of causes, including secular ones.

The difference is, that you’d seldom (never?) hear a businessman outside of religion making a comment like this:

That worries some church leaders. “If everyone gives 2% of their income because that’s what they feel like giving, you aren’t going to have money to pay the light bill and keep the doors open,” says Duane Rice, an official with Evangelical Friends International, a denomination that believes that tithing is required by the Bible.

Ignore, please, the nougatty richness of Mr. Rice’s appeal to biblical authority in claiming religion’s right to proportionate payments, and focus just on the plaintive cry that, well, it’s got to be 10%, because if not, well, they’ll not be able to keep the lights on.

He’s badly confused on cause and effect here. For-profit or not, the lights going off is God’s way of saying you didn’t make your customers happy, thus bringing in enough money, and not the other way around.

“From each according to his ability, to each according to his need”

Karl Marx would be so proud. Up to but not including the empire-building, self-importance, and rank perfidy sometimes seen in the clergy.

I could hardly care less how tricked-out any given religion cares to make itself. As long as they can get people to pay for the services offered, more power to them. Offering a service people value is how business is done. Whining when you find that they don’t value your service? Not very businesslike at all.

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In my time, I’ve seen examples of just about every scam possible via the Internet. It takes a lot any more to even get my attention as I’m one-button flushing my spam folders.

However, when someone goes above and beyond the call of scum-baggish presumption in reader/recipient stupidity, I think it deserves to be highlighted. I’m a “giver” that way.

Below, in its exact form, including the badly mangled HTML formatting, but minus the actual link to the scamster’s site, the silliest and least plausible piece of spam I think I’ve received in at least a couple days:

		After the last   annual calculations of your fiscal activity we have determined that you are eligible to receive a tax refund of $93.60. Please submit the tax refund request and allow us 6-9 days in order to process it. A refund can be delayed for a variety of reasons. For example submitting invalid records or applying after the deadline. To access your tax refund online, please click here Regards,  Internal Revenue Service

© Copyright 2007,   Internal Revenue Service U.S.A. All rights reserved..

• The IRS always communicates with me by sending me email at my blogging email address, natch
• The IRS always speaks to tax payers that way, all courtly-like, and offers its “Regards”
• The IRS always gets things done in 6-9 days
• The IRS claims copyright on all of its email messages, just like normal citizens do
• While claiming said copyright, the IRS always makes sure the recipient knows that it’s the “Internal Revenue Service U.S.A.”, to avoid confusion with all the other Internal Revenue Services around the world.

It occurs to me that if we didn’t have Russian, Romanian, and Slobovian hackers, we’d have to invent them, for our own amusement.

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Your quote of the week:

“Michigan had never played a I-AA opponent in its history. Now we know why, the Wolverines were ducking them.”

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From a WSJ dispatch of a couple minutes ago:

Key Bancroft Family Trust to Vote
Against News Corp. Bid for Dow Jones

The Denver branch of the Bancroft family, Dow Jones & Co.’s controlling shareholder, is to vote against accepting News Corp.’s $60 a share offer, putting pressure on News Corp. to raise its offer, according to a person familiar with the situation.

They think that the B shares held by the Bancrofts should receive a 10-20% premium, based on their supervoting powers.

This, of course, seems to ignore the 60%+ premium that’s already on the table. But that’s not really what’s happening. Like so much else in life, corporate buyouts are a study of relativity, and relative to the much-more-numerous A shares, the B shares have always hit above their weight in corporate decision making at Dow Jones. It seems that the Denver branch of the family is much less concerned with the silly notion that Murdoch is going to destroy a jewel of American journalism than they are with trying to ensure that the family continues to be rewarded far above its due.

I’m happy not to have a dog in this race, given my lack of position in DJ, and am reminded of a joke whose punchline ends with “We’re already settled that issue, now, we’re just dickering over price.”

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John Mackey, CEO of Whole Foods Market, has some ’splainin to do. From the San Jose Mercury News, this was the headline:

Whole Deception: CEO of Whole Foods used fake name to hype stock on Yahoo message board

Along with some analysis and outraged opinionating (with which I take no issue), the Merc’s Vindu Goel points to a free WSJ link, so I will too:

Whole Foods Is Hot,
Wild Oats a Dud —
So Said ‘Rahodeb’

Then Again, Yahoo Poster
Was a Whole Foods Staffer,
The CEO to Be Precise

By DAVID KESMODEL and JOHN R. WILKE
July 12, 2007; Page A1

In January 2005, someone using the name “Rahodeb” went online to a Yahoo stock-market forum and posted this opinion: No company would want to buy Wild Oats Markets Inc., a natural-foods grocer, at its price then of about $8 a share.

This all comes to light as a direct result of the Federal Trade Commission’s attempts to derail, on antitrust grounds, the proposed purchase of Wild Oats Markets by Whole Foods. Much ink has been spilled supporting either the company or the FTC, and the arguments tend to revolve around the definition of the relevant market in which the two should be measured for dominance.

I have no opinion on the matter, and don’t frankly care if they get a deal done, remain independent and separate, or both declare Chapter 7 tomorrow.

I do find interesting, however, the fact that the CEO of a non-trivial public company thinks, or thought, that posting anonymously on Yahoo boards was legal, proper, or even marginally sane.

Internet sockpuppets are a disgusting phenomenon, even when financial markets aren’t their targets. Pretense to have support for a stock, a company, or an opinion, lacking an actual instance of support, is offensive. It’s made worse, in the case of Whole Foods, by the fact that for much of the period in which Mackey was sockpuppeting the stock, it had no need of any support, having been a steady gainer up until the end of 2005.

Mr. Mackey declined to be interviewed. But he soon posted on the company Web site, saying that the FTC was quoting Rahodeb “to embarrass both me and Whole Foods.” He also said: “I posted on Yahoo! under a pseudonym because I had fun doing it. Many people post on bulletin boards using pseudonyms.” He said that “I never intended any of those postings to be identified with me.”

Mr. Mackey’s post continued: “The views articulated by rahodeb sometimes represent what I actually believed and sometimes they didn’t. Sometimes I simply played ‘devil’s advocate’ for the sheer fun of arguing. Anyone who knows me realizes that I frequently do this in person, too.”

Let’s see - he’s been the CEO since he founded the company, and was the CEO for the two months that I owned the stock after its IPO, late last century. (I was jammed into the IPO by my broker, because that’s the way things were done in the early 1990s - I didn’t like the stock, don’t particularly like the company, and have minimal tolerance for sanctimonious vegans in any event).

Sometime in the last 27 years, it should have been made clear to him, perhaps by either his general counsel or his yogi, that CEOs of public companies get their “sheer fun” by playing Pebble Beach or Augusta National, or by throwing themselves into philanthropic ventures, or by any number of other things that are both legal and not likely to bring the humiliation associated with letting the public markets know, definitively, that you’re a nincompoop.

Here are just a few examples of other actions he could have taken, all potentially embarrassing to some degree, but which would have been less embarrassing than what he’s done:

• Have his phone number identified on Deborah Palfrey’s call logs
• Have a voicemail rant against his daughter made public
• Throw a lavish birthday party for his wife
• Post on a Yahoo message board under his real name

None of the above would necessarily indicate good temperament, and three of them could exhibit potential for moral or ethical lapses, but none of them is an explicit indication of stupidity.

For about eight years until last August, the company confirms, Mr. Mackey posted numerous messages on Yahoo Finance stock forums as Rahodeb. It’s an anagram of Deborah, Mr. Mackey’s wife’s name. Rahodeb cheered Whole Foods’ financial results, trumpeted his gains on the stock and bashed Wild Oats. Rahodeb even defended Mr. Mackey’s haircut when another user poked fun at a photo in the annual report. “I like Mackey’s haircut,” Rahodeb said. “I think he looks cute!”

What Mackey actually did? Yeah, it’s an indication of stupidity, arrogance, and, as seen above, no small amount of immaturity. Arrogance, the markets can handle. Stupidity and immaturity? Less so. We like to at least believe our corporate titans are smarter than their average counter-person.

The WSJ piece is from the issue to be delivered later this morning, so the market hasn’t yet reacted to his grave mistake. It doesn’t take Fellini to hazard a guess that by this time next week, he’s going to be the ex-CEO of Whole Foods Markets, and the FTC is likely to be no longer needed to watchdog the alleged consumer interest in keeping Wild Oats out of Whole Foods’ clutches.

This looks like a business-mortal error on Mackey’s part. But it should provide good theater, for at least a short time.

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I bring you David Gross of San Francisco, who not only:

…asked his bosses for a radical pay cut, enough so he wouldn’t have to pay taxes to support the war.

but

In any event, his employer turned him down and he quit.

Which, I guess, good for him, standing up for his convictions that way and all. Left unanswered, at least for now, is whether federal taxes are levied on the wages of “guests of the Federal Government”. Why would I be curious about that? Because

Gross, 38, now works on a contract basis, and last year he refused to pay self-employment taxes.

All by itself, that doesn’t distinguish him from a lot of people. The AP story notes that between 8 and 10 thousand people fail to pay their taxes for reasons similar to those of Gross. Contained in the story, at a meta-level, is the fact that this particular non-Rhodes Scholar allowed the AP to write a story about him evading taxes. Nothing like calling out the IRS by name to get them to leave you alone. Posing in two pre-mug shots for the story? A priceless addition, though I’m sure the Feds could already have found him whenever and wherever they needed to.

Of course, these days, he won’t end up becoming a guest of the Federal Government:

Unlike the days when Thoreau was sent to prison in a tax protest against the Mexican-American War, modern war tax protesters rarely go to prison, according to tax resisters. The IRS may take their money from wages and bank accounts - with penalties and interest - after sending a series of letters.

“They’re very polite, which makes it a little boring,” said Rosa Packard of Greenwich, a longtime anti-war tax protester.

But if he thinks he is going to avoid collection of his taxes owed, by hook or by crook, after having trumpeted his resistance on a national newswire, he’s perhaps not smart enough to be gainfully employed, as a contractor or otherwise.

Will his protest, and others like his, have the desired effect? As James Taranto said in the OpinionJournal piece where I first saw this story, “Something tells us the economy will survive.”

Addendum - Mr. Gross expands on his and his fellow protesters’ thoughts and methods, with emphasis on the actual question I posed:

A frequent challenge to conscientious tax resisters whose resistance leads to fines and penalties is “won’t the government just end up with more in the end?”

The Ghandi quote that follows the snippet above is interesting and informative, if not completely dispositive.

Unlike Mr. Gross’ first commenter Ken (bottom), I have no desire to see Gross locked up, and wish him the best in what I consider to be a Quixotic quest, even though I disagree with it.

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Found in today’s PE Week Wire email {sic}:

Gulfstream International Group, a Florida-based passenger flight operator, is to listed on the New York Stock Exchange. The company is looking to raise $14.05 million by selling 1 million shares with an estimated price range between $11 and $13 a share, according to a prospectus filed with the SEC. Weatherly Group backed Gulfstream in March 2006. http://www.twgco.com

The arithmetic there is compelling. But only because of imprecision in editorial form - their S1 filing is a tad more precise, as such things tend to be, and makes clear that they hope to raise $14.95 million via 1,150,000 shares sold at $13.00.

Additional imprecision, or at least confusion, appeared in the fact that the Weatherly Group, at least the one at the link provided in the story, is a recruiting firm, apparently unrelated to the Weatherly Group LLC, which actually invested in the company back in 2006.

It’s easy to pick nits, and so I do - PE Week Wire is always a good read, though its staff occasionally seems to get a bit fancy free during daily creation. Well worth a slot in the day’s email in any event, and signup is available here.

As a side matter, this looks like it’s a strange deal. Witness, from the red herring:

We were formed by Taglich Brothers Inc. and Weatherly Group LLC exclusively for the purpose of effecting the acquisition of Gulfstream and the Academy. In March 2006, we acquired approximately 89% of G-Air, which owned approximately 95% of Gulfstream at that time, and 100% of the Academy, which held the remaining 5% of Gulfstream. Subsequently, we acquired the remaining 11% of G-Air, which has been merged with and into our wholly-owned subsidiary, GIA.

Since 1999, Taglich Brothers and Weatherly Group have jointly pursued the sourcing and sponsoring of management buyouts of small private companies. The acquisition of Gulfstream and the Academy was their fourth such transaction. Thomas A. McFall, the Chairman of our board of directors, is an affiliate of Weatherly Group and Douglas E. Hailey, a director, is an affiliate of both Taglich Brothers and Weatherly Group.

I don’t know why, but I always prefer to see at least the pretense of arms-length between companies selling stock and their underwriters. It’s an affliction of mine, even though I know that the standard “arms-length” is typified by arms that would make a dwarf feel well-endowed.

So I was amused to see the name of the firm to which the company had assigned the underwriting role. Microcap or not, this one seems like a bit of a turd.

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It seems that the excitement never ends.

This just in - “HCP to buy Slough Estates USA for $2.9 billion“. They’re buying it from Segro, a UK-based…uh, a UK-based something or other. From the name, I’d guess that Slough, the subsidiary being sold, has something to do with cosmetic surgery, dead skin, marshy bogs, or a sense of deep despair.

Hey, wait a minute. I’ve never heard of any of the three parties in this deal. Not to seem provincial, but what a waste of a press release.

Please forget I even mentioned it.

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What do these two suits have in common?

“Couple sue Wal-Mart over slip in vomit” (AP/Nashville Tennessean) and
“ACLU: Boeing offshoot helped CIA” (AP/Houston Chronicle)

Simple:

• They each have a distinct odor associated with them
• They’re both based on slippery circumstances
• They’re both as baseless as the day is long

Only one of them, however, appears to have been categorized by the Associated Press as an “Odd Story”. So let’s look at that one first:

Couple sue Wal-Mart over slip in vomit

DAVENPORT, Iowa (AP) — A woman’s fall in a puddle of vomit has resulted in a lawsuit against Wal-Mart. June Medema, slipped in the vomit at a Davenport Wal-Mart on June 13, 2005, according to the lawsuit, filed by Medema and her husband, James, in Scott County District Court earlier this month.

Medema claims that she was seriously injured in the fall.

The lawsuit alleges that Wal-Mart’s negligence led to Medema’s fall, but it does not specifically say how the store was negligent.

John Simley, a Wal-Mart spokesman, decline comment saying he hadn’t seen the lawsuit.

The lawsuit claims that Medema suffered serious neck and upper back injuries in the fall and has undergone several surgeries and is unable to work.

It’s a mercifully short story, so it’s included here in its entirety. All you need to know is in that third paragraph - “…but it does not specifically say how the store was negligent.” In order to prove negligence, of course, the Medemas will have to prove that Wal-Mart knew the vomit was puddled on the floor. Which will be rather difficult - if they didn’t see it, why should Wal-Mart have done so?

As to the second story, I can completely understand the ACLU going after a Boeing subsidiary - They can’t sue the US government or the CIA on a classified matter, so they simply picked someone else in the transaction chain to sue.

NEW YORK — A Boeing Co. subsidiary that may have provided secret CIA flight services was sued Wednesday by the American Civil Liberties Union on behalf of three terrorism suspects who claim they were tortured by the U.S. government.

The lawsuit charges that flight services provided by Jeppesen Dataplan Inc. enabled the clandestine transportation of the suspects to secret overseas locations, where they were tortured and subjected to other “forms of cruel, inhuman and degrading treatment.”

The ACLU, of course, has been known to provide valuable legal services. They’ve also been known to tilt at windmills in pursuit of an agenda that tends to be decidedly leftist. Not “liberal” - leftist. As I said, I can understand their grasping at straws to find someone to sue, because money-grubbers have to go where the money is, even if they expect to get no money out of the matter.

I can’t understand why they think their suit will survive a summary judgment request. Jeppesen Dataplan didn’t man the flight, didn’t own the plane, and didn’t load or unload alleged passengers from the alleged extraordinary alleged rendition alleged mission. Jeppesen provides flight planning services. Logistics.

Undaunted by this bit of reality, the ACLU soldiers on:

The ACLU said the company “either knew or reasonably should have known” that they were facilitating the torture of terrorism suspects by providing flight services for the CIA.

That’s one of the ten most absurd things I’ve read in the last 48 hours. Having been on flights which used the services of flight planning companies like Jeppesen, and having occasionally been with the pilot when he was planning the flight, I’m comfortable asserting that in no case did a flight services vendor demand to know, let alone show even the slightest interest in, what the purpose of the flight was. Which is just as well - it would have been none of their business, and they’d have been told as much.

It occurs to me that there are two other things these two suits have in common - they’re both weakly disguised fundraising attempts, and neither one will be successful at anything other than garnering publicity for its plaintiff.

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