Sneaking Suspicions

Archives-- October 6-12, 2002


Commentary from a practical perspective

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This page includes posts from October 6-12, 2002 in the usual reverse order. Each week's postings on the home page are perma-linked to these pages.

October 12, 2002

Leave the Greyhounds to Us

This place is full of dogs.

That's not an aesthetic judgment about the tourists.

It's just the truth.

This is the eighth annual Greyhounds Reach the Beach weekend, and it's a visually stunning event.

The organizers expect about 3,000 retired racing greyhounds and 1,500 of their owners to fill all of the pet-friendly accommodations in Rehoboth and Dewey Beach.

The dogs are inordinately well-behaved. They are very, very quiet, and very, very thin. Their current owners are clearly dedicated to their animals, not least of which because the alternative for dogs who can no longer compete is not a pleasant one.

The greyhounds are often decked out in protective clothing, which, considering the last few days of steady rain, is a good thing.

The local merchants are more accepting of their canine customers this weekend than is usually the case, most likely because of the breed's calm demeanor. I spoke with a perfume store manager last night, and she told me that she's fine with the dogs coming into her store: "They're better behaved than the kids," she grinned.

There will be special presentations for the dog owners at various meeting spots, and some vendors are here to sell their greyhound-related wares.

As a local, however, the impressive thing is to see so many dogs of one kind milling about the town, with their very kind, very proud owners enjoying the sights with so many like-minded folks.

NOTE: Click here for the latest golf book review. Driver, by Tim Southgate, is an entertaining novel about a troubled British country club and its new Club Secretary.

October 11, 2002

The limits of advocacy

Every so often, while reading the usually dry, even occasionally boring decisions from appellate courts, one sees a sign of how opposing counsel really feel about each other.

Thomas Sendecky filed for bankruptcy in Minnesota under Chapter 7 about a week after a company filed a notice of wage attachment against Sendecky on his employer. The company obtained the garnishment order after winning a judgment for $16,253.19 for Sendecky’s breach of an oral contract to properly install some flooring.

Shortly after Sendecky sought the cold comfort of the Bankruptcy Code, the company filed objections to his potential discharge from this debt.

As the appellate court recounted the facts, it’s pretty clear that the company’s chances of collecting on its judgment were pretty slight, although the bankruptcy judge's findings probably wouldn’t improve Sendecky’s self-esteem.

For example:

The bankruptcy court found that Mr. Sendecky was poorly educated, that he had no sophistication, that he had little business experience, that he still lived at home with his parents, and that he had neither the motivation nor the ability to keep better records than those he provided….

[T]he bankruptcy court found that Mr. Sendecky had a business that was losing money, that somebody put money into that business, that Mr. Sendecky had a propensity to incur credit card debt, and that the business failed leaving business debt in its wake. In addition, Mr. Sendecky’s father testified that he loaned his son money to satisfy some of the business debt, and Mr. Sendecky testified that he used those funds to satisfy some of the business debt. After making the above findings, the bankruptcy court ruled against Appellants....

While losing the war over the discharge, however, the company won a separate skirmish involving Richard J. Haefele, Sendecky’s attorney, and their counsel, Alfred Stanbury. Haefele made some less-than-kind remarks in his appellate brief:

Mr. Stanbury’s stated intention to various litigants is to force the Chapter 7 debtor to incur such substantial attorney’s fees that he will be forced to persuade his family to pay appellant’s [sic] and their attorney the amounts sought to be discharged in the Chapter 7 proceeding.

Not surprisingly, Stanbury took umbrage, signed an affidavit denying the claim, and requested sanctions.

The Circuit Court agreed with Stanbury's request:

Counsel for Mr. Sendecky…did not respond to the motion, deny the allegations, or request a separate hearing. Without substantiation, Mr. Haefele’s inclusion of such an allegation in an appellate brief is conduct unbecoming to a member of the bar. As such, we will sanction Mr. Haefele in the amount of $100.00, such sum to be payable to Appellants within ten days.

It’s entirely possible that the next time these particular attorneys meet, there might be a sharp look or two exchanged.

October 10, 2002

Three Claudes for a grudging, not-quite admission

Our friends from Yemen have their reasons for not leaping to common sense conclusions that others reach much more quickly.

Concerning last Sunday's explosion that blew a hole in the side of a French oil tanker just offshore, the Yemen government is now grudgingly moving to a not-quite admission of reality, worth at least three Claudes as expressed in this headline:

Yemen Says French Tanker May Have Been Attacked

The story itself details the painfully slow steps taken by Yemen toward belatedly recognizing the obvious, as well as why its leaders have been so shy:

Yemen, trying to shed an image as a haven for Islamic militants, had earlier maintained that a fire caused Sunday's explosion in the Gulf of Aden, not an attack similar to the October 2000 suicide bombing of the U.S. destroyer Cole in the Yemeni port of Aden….

[On Thursday] Transport Minister Saeed Yafai … told reporters it was possible the explosion that gouged the ship's hull had been deliberate.

"We are not ruling out anything, but we don't want to take a hasty decision before the end of the investigation,'' the minister, who heads the Yemeni committee probing the blast, told a news conference in Mukalla.

Certainly mustn’t be hasty. Wouldn’t be prudent, even when faced with the following inconvenient fact reported the same day:

"We found debris of a boat which obviously does not belong to the tanker," Jean-Francois Perrouty told Reuters, noting the debris was made of fiberglass.

Now, it’s not as if a certain major power has forgotten what recently happened to one of its own vessels in Yemen.

Also, it’s not as if that major power hasn’t gathered together the ingredients for a major-sized can of whoop-ass, placed not too far from Yemen.

In addition, it’s not as if that same major power doesn’t have the resources to divert some of that whoop-ass in the general direction of Yemen, even as it directs most of its firepower elsewhere in the region.

Therefore, it's perfectly understandable that the folks in Yemen would much prefer to have everyone believe that only Gallic incompetence explains why this here tanker’s got a big ol’ hole in its side, with fiberglass remnants from a bomb-bearing speedboat stuck in all sorts of interesting places on a double-hulled steel tanker.

Of course, I may be wrong, but I doubt it.


Call me crazy, but holes like this don't blow into a ship's hull, if the explosion is coming from the inside.
If it's an explosion is coming from a bomb-laden speedboat running alongside the tanker, however....

October 9, 2002

The odds of deducting all of one’s meals and entertainment are pretty slim, no matter who you are.

A certain amount of self-esteem is usually considered a good thing.

Too much of it, however, can produce some unsettling effects. For one thing, the extent to which one feels uniquely superior to others may blind one to the fact that others do not share that assessment.

A reminder of this fundamental truth appears between the lines of yesterday's Sixth Circuit Court of Appeals decision concerning Churchill Downs, the extremely proud home of the Kentucky Derby.

In 1994 and 1995, the company that owns and operates the famous racetrack hosted a series of parties and special events relating to the two Derbies and the 1994 Breeder's Cup races held there. For the Kentucky Derbies, these invitation-only, limited access functions included the following:

(1) a "Sport of Kings" gala, (2) a brunch following the post position drawing for the race, (3) a week-long hospitality tent offering coffee, juice, and donuts to the press, and (4) the Kentucky Derby Winner's Party.

For the Breeder's Cup, the company paid for good press relations with these fun items:

(1) a press reception cocktail party and dinner, (2) a brunch, and (3) a press breakfast.

In addition, the racetrack spent even more money on receptions, cocktail parties, and similar attempts to woo the horsey set for these three races.

Because it was Churchill Downs, of course, the company spent quite a bit on all this entertaining--in fact, a total of just under $400,000.

When it came time to file its tax returns, however, the racetrack decided that the rest of the country's taxpayers should offset the entire expense of the caviar and canapés.

Churchill Downs deducted the full cost of the meals and entertainment for these affairs.

The IRS disagreed, and limited the deduction to the usual 50% limitation set forth in the Internal Revenue Code and regulations.

After losing an appeal to the Tax Court, the racetrack bet on winning in the Sixth Circuit.

Their wager on being able to apply all of these expenses to offset their income lost out, however:

The Commissioner does not dispute that all of the expenses at issue qualify as "ordinary and necessary" business expenses "directly related" to the "active conduct" of Churchill Downs' business, and thus that some deduction of these expenses is allowed. However, he argues that [the applicable code provision] limit[s] deduction of these expenses because they qualify as items associated with activity generally considered entertainment....

The Commissioner argues that ...they are not saved from this classification by the fact that these amounts were spent to publicize Churchill Downs' racing events....

The Commissioner puts it succinctly: "taxpayers were in the horse racing business, not the business of throwing parties."...

[W]e conclude that the expenses associated with these events ... are subject to the 50% limitation as items "generally considered entertainment."

I seriously doubt that the Churchill Downs managers will take their accountant out to the barn and shoot him in the head as a result of this decision.

On the other hand, anyone with any experience with the IRS meals and entertainment rules would probably conclude that the racetrack's attempted deduction was pretty lame.

I'm just glad the rest of us weren't saddled with bearing the effects of this novel approach to corporate taxation.

Puns? Of course there are puns. That's part of the fun here, after all.

October 8, 2002

Census 2000 update

Last week I discussed a Ninth Circuit Court of Appeals decision that upheld the choice by Secretary of Commerce Evans to reject the use of statistically adjusted Census data for redistricting and other purposes, even though Congress directed him to adopt the adjusted results if he deemed it feasible.

He didn't.

Now the other shoe has dropped.

In the newest Ninth Circuit Census appeal, the Commerce Department lost its attempt to block access to the unadopted, adjusted data version of the 2000 Census.

Two Oregon state legislators filed a Freedom of Information Act (FOIA) request for the statistically adjusted data, broken down to the smallest “block-level” estimates.

As the previous post explained, in October 2001 a high level committee within the Department recommended to the Secretary that only the unadjusted data should be released.

At the Census website, however, the committee’s reports and recommendations about the choice of data to be used are available.  In addition, the Census Bureau released the national compilation of the adjusted figures, but without the block-by-block breakdown.

Taking much the same approach as it did in similar litigation over the 1990 Census, the Commerce Department denied access to these legislators, relying upon the “deliberative process” privilege contained in Exemption 5 to FOIA.

The Department fared no better with this argument than it did ten years before. After losing in the District Court, the agency appealed.

The Circuit Court recognized the general privilege against disclosure under FOIA of

“documents reflecting advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated.” [citation omitted.]

Nonetheless, such data

must be both "predecisional" and "deliberative". [citation omitted.]

The Circuit Court agreed with the trial judge that the adjusted data were neither.

First, the adjusted data did not directly contribute toward the Secretary’s decision. It was the Bureau’s evaluation of the adjusted data that drove the decision where it ended.

Second, the point of the “deliberative privilege” is that ready access to documents that could disclose the thinking processes of the decision-makers would create a goldfish bowl atmosphere, in which candid expressions of belief and argument would be discouraged. As the court noted, however, 

...disclosure of the adjusted numbers would not expose any protected deliberative process.

The last argument was that there would be inevitable confusion if the Bureau were forced to release the unadopted Census data. The Court suggested this contention didn’t count for much, and referred to two prior decisions dismissing this contention in other contexts:

(“[I]naccuracy is not a basis for FOIA exemption.”). See also [citation omitted], (noting that any concerns with public confusion caused by release of erroneous information could be allayed by warning FOIA requesters that the information is unofficial and disclaiming responsibility for “any errors or gaps”).

It might be fun to see how the Census Bureau takes up the Court’s suggestion to provide a clear warning of just how unofficial and potentially unreliable these adjusted data are. Perhaps they could place on the top of every page, in a format that discourages editing, something like

THE CENSUS BUREAU DOESN’T TRUST THIS STUFF.
NEITHER SHOULD YOU.
DON’T COME CRYING TO US IF THERE’S A PROBLEM WITH THESE NUMBERS.

On the other hand, as last week’s post noted many people would very much like to continue the argument about the utility and viability of making statistical adjustments in Census data, as part of the continuing controversy over undercounting or overcounting of various groups. They can now obtain the statistically adjusted data and make what use of it they can for that purpose, even if the data aren’t “official.”

For these folks, the lesson to be learned from this litigation could be expressed as a variation on an old Rolling Stones lyric, such as:

“You can’t always get what you need,
but if you try sometimes
you just might find,
you get what you want.”

October 8, 2002

A Clarification

Contrary to rumors one may hear or read elsewhere, there is no connection between the owner/operator of this site and the “Deep Fritz” computer that is currently losing a chess competition in Bahrain.

None, that is, except for the nickname.

My last significant computer programming experience ended after a short intense fling with BASIC over 30 years ago.

And I don’t particularly enjoy playing chess, either.

Link via Larry Simon.

October 7, 2002

Charity is not dead—and it’s not an antitrust law violation, either

Last week the Fourth Circuit Court of Appeals decided that it’s okay to donate land for charitable purposes, even when there’s a tax benefit involved. Under the right circumstances, companies can engage in this public-spirited activity without running afoul of the antitrust laws.

One would think that this short statement of the law would be uncontroversial.

One would be wrong, at least when it comes to cat litter.

Vermiculite is a clay-type substance, obtained by surface mining, and used in a wide variety of industrial and agricultural products.

Most folks, on the other hand, know that it’s also a key ingredient in cat litter, and a soil supplement for their home gardening projects.

It just so happens that there are only three places in the United States where vermiculite is mined: Montana, South Carolina, and Louisa County, Virginia. Only two companies operated vermiculite mines in Louisa—W.R. Grace and Virginia Vermiculite , Limited (VVL).

In 1991, Grace decided to leave the vermiculite business, at least in Louisa County, by selling the property it owned there. After negotiations with VVL to buy the land fell through, however, Grace switched its thinking. It approached a local preservation society, The Historic Green Springs, Incorporated (HGSI), about accepting the donation of the corporation’s holdings in the area. 

HGSI’s mission is to preserve the historic features of the area, which are extensive.

It readily accepted the donation, complete with deed restrictions that prevented any vermiculite mining on the property.

VVL did not absorb this news well. It sued Grace and HGSI under the antitrust laws, under the theory that the two entities conspired to restrain trade in vermiculite mining rights.

Going after Grace met with limited success. VVL lost on most counts, and eventually settled out of court with Grace. VVL kept going after HGSI, however, and lost in the District Court after a bench trial.

On appeal, the 4th Circuit explained the standard to be applied to such claims:

It is incontestable that "concerted action" in restraint of trade lies at the heart of a Sherman Act section 1 violation. [citations omitted.] … Under this well-established framework, it is incumbent on VVL, if it is to survive summary judgment, to proffer evidence that can establish the existence of illegal, concerted activity by the defendants in restraint of trade.

For VVL, however, the problem was twofold.

First, Grace had the unilateral power to act to limit any uses of its property, including vermiculite mining restrictions:

In the instant case, VVL proffered no evidence that the donation by Grace to HGSI was not a genuine (i.e., unilaterally given) gift…. VVL did not proffer evidence that HGSI joined any resource to Grace's in order to establish the covenants, or to affect the land transfer. Nor did VVL allege that HGSI exercised a right or economic power in consideration for the gift. In other words, insofar as the record discloses, only Grace, not HGSI, exercised any form of right, resource, or economic power. … Grace alone had the right and power to attach the covenants. Its unilateral action in doing so was, for the reasons discussed above, beyond the reach of section 1.

Second, there was no evidence that HGSI provided any benefits to Grace as an inducement. In fact, the provider of significant benefits for this particular transaction is found by reference to the Internal Revenue Code:

[I]in the absence of an exercise by HGSI of a right, resource, or economic power to induce Grace to act as it did, HGSI contributed nothing to Grace. All the benefits, not attributable to the covenants, that Grace expected to enjoy as a result of the gifting, e.g., tax benefits, were benefits that did not stem from an act by HGSI. Tax deductions, for example, are the result of the government's largesse, not the giftee's reciprocation.

The Circuit Court therefore concluded that there was no antitrust law violation in the way in which this prime source of vermiculite was taken from prospective private exploitation.

There can always be an argument about the benefits of land preservation activities, especially when a valuable resource is removed from the prospect of economic development. Under these circumstances, however, it’s not as if the world supply of cat litter and other beneficial products derived from vermiculite was being eliminated by incredibly misguided charitable impulses. VVL couldn’t show that Grace’s donation of its own land to someone else, instead of selling it to VVL, was anything more than a rational business decision with favorable tax consequences.

Being rejected from a potentially lucrative purchase of mineral rights must have hurt, but that didn’t make it a valid antitrust claim.

October 7, 2002

Traffic Report

Today begins the ninth month of this site's operation. Thus far there have been 54,112 visitors, reading 66,743 pages.

Thanks very much for your patronage. Stop by again anytime.

October 6, 2002

Mashed Potatoes for Homecoming

It’s high school homecoming weekend.

On Saturday evening we hosted a group of eight high school sophomores for dinner. This gave us the opportunity to ooh and aah over beautiful young ladies in their little black dresses, take formal group and couple photos in front of the house, and watch young men come very close to being stabbed with needles during the boutonniere attachment process.

Among the side dishes for the dinner, at the request from the sophomore that lives with us I made my mashed potatoes:

  • 5 lbs white or yellow potatoes, peeled and chopped into about 1” size chunks

  • ½ lb butter (two sticks or quarters)

  • skim milk

  • salt

Place the peeled and chopped potatoes in a large wide pan (6 qt minimum) with about 1 tsp of salt, and cover with water. Place on range set on high heat to boil the water.

Remove butter from refrigerator, unwrap the quarters, and set within a hand’s reach of the range, along with the milk.

Search pantry and drawers to find electric mixer and its two mixing paddles. These will rarely be found together, and you may need extra time for this critical portion of the process. Once found, set up near the range.

After 8-10 minutes of strong boiling, begin testing the potatoes to see if they’re done.

“Done” means that each piece stabbed with a fork falls apart with little or no effort by the person holding the fork. These potatoes need to be exhausted.

After the potatoes are done, drain the water from the pan and return it to the range, remembering to turn off the heat. Experience tells us that forgetting that little step is not helpful.

Add 1 ½ sticks of the butter to the mixture, along with a splash or two of skim milk. Set mixer to highest setting, and begin whipping the potatoes. Add a dash or two or three of salt while the mixer whirls away.

After a few minutes of whipping, begin taste-testing (others may volunteer—let them).

The goal is to have no lumps. If necessary for this purpose, add the rest of the butter, and perhaps a little more skim milk. If in doubt, add more butter rather than the milk. If the first two quarters just don’t seem sufficient, add more butter. This is a matter of personal preference, but in our house it’s hard to add too much butter to this dish during its preparation.

When the tester(s) approve(s) of the overall texture and taste (listen carefully for the “Mmmms”), remove mixer and place potatoes in large serving bowl. (Remember to turn mixer off before lifting it above the pan rim. Experiences tell us many things, especially those experiences others might describe as “mistakes”.)

This recipe will serve eight high school sophomores, as well as several mothers, aunts, sisters, and others who come to help with the dinner and take pictures. There should be enough left over for fried potato pancakes in the morning.

There is always hope.



Contact Information:

Fritz Schranck
P.O. Box 88
Nassau, DE  19969
USA

fschranck-at-
sneakingsuspicions.com


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Official small print disclaimer: This is, after all, a personal web site. Any opinions or comments I express here are my own, and don't necessarily reflect the official position of my work as a government attorney or any of my clients.

That fact may become obvious later on, but it needs to be said here anyway.


© Frederick H. Schranck 2002