Foreign Corrupt Practices Act

This month the SEC and the Department of Justice published a remarkable work, although its title is uninspiring: “A Resource Guide to the U.S. Foreign Corrupt Practices Act.”

The FCPA makes it illegal to bribe government officials overseas in order to get business.  While there are the usual numerous legal issues, exceptions and confusions, the statute is really painfully simple in its intent, and it has been vigorously enforced of late by the SEC (civil fines) and by the DOJ (criminal fines, jail).  American businesses are now acutely aware of their risks; the statute applies to both public and private enterprises.

The Resource Guide can be downloaded for free and is essential reading for any business, and any individual, operating or shipping abroad, as American businesses can be liable even for the improper actions of their agents.  The Guide can be accessed by clicking here.

The Illegal Finder Problem

Many companies seeking to raise capital use finders as intermediaries to find investors.  Many business owners seeking to sell the stock of their company use business brokers.  These finders and business brokers of course want to be paid and they are entitled to be paid.  The problem is this: if they are not registered under the Securities Exchange Act of 1934 they are not legally permitted to perform these functions and cannot force the payment of their fees.  Further, the transaction may be overturned.

The need for capital formation, or for liquidity though sales of businesses, is so powerful and fundamental within our economy that for decades unregistered finders and brokers nonetheless have functioned with regularity and often with impunity.  But the window for these activities is closing; the details are available in my article that ran in New England In House this past month, which you can see by hitting this link.

Seems the SEC is too busy with Dodd Frank and JOBS Act regulatory burdens to address the simple issue of permitting finders to function legally, an easy fix that will go a long way towards spurring the economy.

A Fearful Step into Politics

Jobs is the mantra of this Presidential election.  What creates jobs?  I do not know.  There is likely an answer but each party has its own, and the electorate is ill-educated to judge.  I suggest that our own personal analysis is fundamentally flawed by this lack of data: we fill the absence of facts with intuitions informed by prior bias.

At the risk of wandering into a storm that this blog has until now avoided – avoided because I have a hard enough time writing about what I actually know or about which I have gathered reasonably solid facts  – I refer to a New York Times article from Sunday September 16 that asks, Do Tax Cuts Lead to Economic Growth?  Simply put, assuming the data is accurate (the article is written by the DC bureau chief of the Times), tax cuts since 1990 do not correlate with US economic growth.

The article goes on to interview “conservative economists” who are quoted as agreeing that tax cuts do not stimulate jobs in any significant degree, for a variety of reasons; the most interesting theory is that historically we were cutting taxes from 90% or 70%, but now the top rate is far more modest.  I discount these conclusions as hearsay and perhaps from a biased source; the Editorial content of the Times today is unabashedly liberal.

But what about the numbers?  It strikes me as unlikely that they are fudged.

Neither candidate has been clear about exactly what they will do with taxes; Romney to my mind is more opaque, and I heard him say that his selection of loop-holes to close is something “I will have to negotiate with Congress” which is of course no answer at all.  But I believe it is fair to say that Romney wants to cut the tax rate to spur job growth.  I do not think I am making a volatile political statement in saying that much.

Tax cuts tend to increase deficits.  In the political battle that would attend the proposed elimination of tax deductions, it is hard to believe that ANY president will be successful in eliminating many broadly based deductions.  For example, if housing is a problem and an indicator, what happens if we eliminate the tax deduction for interest paid on residential mortgages?  If the tax rate does not spur growth so as to increase tax revenues even with a lower rate after we in fact effect substantial tax cuts, but rather has the same effect it has had in the last 20-plus years of slowing growth, we are expanding the deficit even more.

I do not here attempt to make an argument for Obama on these points; but I am troubled by these pesky facts.  You need not be an economist to look at the Times chart: growth after the 1990 Bush tax increase in 1990 and the Clinton tax increase in 1993, and loss of jobs after the 2001 Bush tax cuts  were followed by further Bush cuts in 2003.

Neither candidate speaks with any credibility on jobs because as far as I can tell, the jobs gap is driven by forces not easily controlled by domestic US tax policy.  If economic contraction is mostly tied to lack of regulation, or cheap money, or poor credit practices, or world events, or a battle for the minds and hearts of European bankers, or hydrocarbon politics, or by some difficult-to-compute combination of these factors, then tax policy will likely have little impact.

My problem is not only that I do not know the answers.  My problem is this: I don’t think the candidates know the answers either.  I wonder what would happen in the voting if one of them said so….

The Jewish Vote and the Generational Divide

There is an old joke that if you have two Jews you will have three opinions.  Former US Congressman and New York Mayor Ed Koch this weekend added, “And also four different temples.”  This joke is not a joke but an indication of the fragmentation of what can no longer seriously be categorized as “Jewish political thought” when that category has been totally deconstructed.

This past weekend I chaired a conference in New York City on the Jewish Vote, the Holocaust and Israel.  Speakers included Mayor Koch, present Republican Congressman Bob Turner, famous talking heads Tevi Troy and Hank Sheinkopf and several academics and authors, all under the auspices of the Wyman Institute for Holocaust Studies.  The conference was excellent in substance, tracing Jewish voting trends from Hoover to the present from both academic and political perspectives.

As interesting were the reactions of attendees.  Much of the audience was older, conservative, angry with Obama, seeing the election in terms of support of Israel.  Younger attendees were almost bemused by what they considered to be a narrow view of the world and of the election, saying “this is not how the younger Jewish community views these issues,” suggesting that a focus on the Holocaust as informing current voting is old fashioned in style and irrelevant on the ground.

And after spending a whole day at the conference, locked in Fordham Law School, attendees stepped out into the bright Manhattan sunshine and confronted a demonstration by a couple of dozen Hasidic Jews, dressed in dark coats and with untrimmed hair, holding signs objecting to the conference itself as purporting to address the US elections from the standpoint of the Jewish community; these observant Jews thought that any involvement in politics as a group was wrong-minded (signs admonishing us not to address political issues “in my name”).

Whether there is a Jewish vote (which implies some sort of bloc) or just a set of statistics reflecting historical voting patterns in Jewish neighborhoods is much a matter of semantics.  How Jews voted historically (typically Democratic from at least the ‘20s onward, almost without regard to attractive Republican positions) or were likely to vote this year (among the aged attendees of the conference, I don’t think Obama could get elected dog-catcher) was explored but without likelihood that the conference would change anyone’s mind.

The more interesting issue is, what if anything can be said about Jewish political views with any confidence that one is speaking for more than a fragment of the alleged cohort.  There are numerous groups speaking (they say) for “the Jews.”  I conclude that we too, this weekend, even as a scholarly and open forum, were viewed as just another one of many fragments.  Is there merit in attempting to bond these fragments, or at least some of them?  Is there any prospect for doing so?

Important here is the gap in defining what is important for the Wyman Institute, or for many of the groups focused on the Holocaust.  A younger view wants relevance to the problems of today: current issues, current genocides not only focused on Jewish victims, issues currently presented to us by the world.  An older view says that yes, we can hear that, but there is another thread here, that Jews must be alert to their personal and special risks as historical punching bags over centuries and across continents.

It seems to me the older view has a fear in delivering overtly the message that Jews should beware of the world even today, even as assimilated peoples in settings where the illogic of societal prejudice actually running wild seems paranoid.  The older view is two fold I think: first, it is not paranoid when “they” are in fact talking about you; second, how many times do we have to replay the same conversation before it sinks in that today’s logical person is well advised to keep a weather eye peeled towards the almost inconceivably irrational beast?

I see a generational disconnect that must be overcome.  I see older elements of the Jewish community hesitant effectively to express the old fears, almost dismissing younger elements as so ill-educated as to be beyond reach.  I see younger elements appropriate offended that their eldest living forbears would so dismiss them after nurturing them and educating them and setting them loose to compete (and succeed) in the world at large.

There is both wisdom and lack of patience on both sides of the divide.  And there are so many ancillary divides, including but not limited to the guys across the street who invoke the Bible to criticize even holding the discussion.

It is not odd that voting, viewed by historians of democracy as the ultimate expression of political freedom, should highlight the schisms within our polity, and within its constituent elements.  But whoever wins the election this November, there is work to be done to bring together some of the older strands of Jewish political thinking with the J-Street crowd.

M&A, AOL StyleM&A, AOL Style

Last week AOL Chair and CEO Tim Armstrong, a young and fast-talking executive of the new media, addressed the season’s first meeting of the Boston Association for Corporate Growth.  He spread witty anecdotes and hints of his view of the electronic future (“every traditional media company is a turn-around, they just don’t know it yet; AOL wants to be the arms dealer to the internet [providing content]”), but also set forth four rules for an effective acquisition (AOL has “traded $3 billion of assets in the last 24 months”):

*Do the Target’s Work.  Find a way to articulate and communicate the value of a deal to the other side and its board.

*Don’t be Stupid.  (Not sure I would have thought of that one….)  Don’t let anyone tell you that “this is the way this kind of deal works.”  Look at the situation and adapt your strategy, even fundamental approaches.

*Show Up.  Be politely in front of your target at all times.  Even socially or, it seems based on anecdotes, by contrived accident.  Don’t go home if you think you have a lock on the deal, as someone else may be waiting to turn the tide.

*Every deal needs a Coach.  He moves people in and out of deals based on the needs of the play, the synergies or lack of synergies with the counter-party.  There needs to be someone like a coach of a team measuring this aspect and reacting as needed.  He also likes having a team with widely divergent viewpoints at first,  to force examination of every aspect of a deal including risks.

Armstrong also counseled against trying to get the last dime out of a deal, making the winning of small points the end-all of negotiation.  Deals should not be adversarial.  How does he contribute to that desired atmosphere?  “I always start in the middle of the field,” avoiding extreme starting positions.

Governance Viewed from the Top of the Heap

Three major players on the New England corporate scene agreed today that American business is over-regulated, and that Boards of Directors are being diverted from their primary task of strategic leadership and are being forced to deal with regulatory compliance.   Further, new regulation is not responsive to recent failures of the economy and thus will not solve our problems.

Speaking at a breakfast session of the New England Chapter of the National Association of Corporate Directors, Robert Reynolds (CEO of Putnam Investments), Joe Tucci (chair and CEO of EMC Corporation) and Ted Kelly (chair of Liberty Mutual) were of one predictable mind on a variety of governance issues:

*the role of the board is strategic and should focus on shareholder return

*investors are interested in board governance as a tool for excellence in performance and not as an independent goal

*with a concentration of corporate wealth on corporate balance sheets, it is ever more critical to have directors of sound judgment, at a time when it is harder to find people willing to serve who have requisite skill sets

*regulation by government, evaluations by ISS, and pressure from bloggers and social media contribute to a “gotcha” mentality, where mistakes (inevitable when businesses take risks, as they must) are met with a focus on who to blame

*the ideal board member asks “the wrong questions” and is independent-minded but can work within the system (we need different ideas but no board factions).

Ted Kelly made the most telling attack on the rise in government regulation.  Noting that the “American corporate form” is unique in the world for creating a wealthy middle class, he sees us now engaged in a political struggle over whether regulation will destroy it.  Compensation should reward success deep into an organizational structure, creating wealth at various levels of society; regulation discouraging risk by casting blame for failure and clawing back previous earnings threatens innovation.

Boards should include some people with deep industry knowledge, and all directors should become as expert as possible in the company business.  Contacts by directors should go deep into the management team to understand from people with hands-on functions the issues faced.

The presentations were not unexpected from people at the top of huge enterprises.  But it was interesting to see all the panelists completely miss one key question from the floor. They were asked how they would parse their expressed view to fill the board with people who meet exacting standards of skill and ethics with the reality that some boards are forced to accept representatives of VC or PE investors.  The only answer was that if you are ever forced to accept someone on the board who does not fit your own standards, you must be starting from a point of weakness.  Those of us who work in financing corporate growth in companies that lack the capital base of Putnam, EMC and Liberty can only dream of working with a company that is desperate for money, yet has the power and nerve to tell the investor that the investor’s board designee just doesn’t fit the desired mold.  You need Liberty’s checkbook to have that kind of clout.

The Jewish Vote in November

Now that we are finished with both rather conventional and predictable Conventions, the “race” for the Presidency begins in earnest.  The seeming fragmentation of the body politic into discrete and intensely focused “voting blocs” which are fought over between the parties is an example of the growing polarization of American thought.

In this context, the upcoming September 23 conference in New York City entitled “The Jewish Vote, the Holocaust and Israel” takes on enlarged relevance. The allegiance of this constituency (which historically has both voted and contributed at high levels) is important in some of the swing states which may determine the electoral outcome.

There is a lot of history that impacts how Jews are likely to vote.  Notwithstanding the significant contributions to World Jewry by Herbert Hoover and other Republicans, the affinity of Jewish voters for the Democratic Party is deep and long-lasting, rooted in theoretical commonality, the labor movement and the power of inherited fundamental beliefs.  It survived Roosevelt’s failures to address the Holocaust, and numerous subsequent strong endorsements of Israeli positions by Republican politicians, platforms, and constituent blocs attracted to Israeli claims through religious belief.

Will Jews continue to support Obama, who has been deeply criticized by more conservative Jewish elements?   Will the new omission in the Democratic platform of the reference to Jerusalem as the “capital” of Israel weigh into the debate in any lasting way?  What can we learn from the history of Jewish voting in the United States, and its deep-seated historical patterns, that may inform our understanding of November, 2012?  What should each party be doing to court this voting (and financial) bloc?

The one-day conference on Sunday, September 23 at Fordham Law School, sponsored by The Wyman Institute for Holocaust Studies, will explore these issues through the eyes of academics, Congressman Bob Turner (R-NY), former New York Mayor Ed Koch, and Dr. Tevi Troy (whose background includes advisor to the White House, and CNN and Fox News analyst).  If interested in attending or learning more, go to  (Disclosure: the Institute is a pro bono client of DuaneMorris LLP and I am chairing the conference.)

Today’s Public Radio commentary was all about what candidates should do to appeal to various disparate  blocs.  Is that a relevant question, or are we destined by and large to vote as our parents and we ourselves have always voted, slaves to our own personal histories (and thus doomed to not learn from prior experience, but merely to repeat it)?

Sikh Heil

The other day a man, Wade Michael Page, now sketchily described as a neo-Nazi white supremacist, shot some followers of the Sikh religion at their Wisconsin Temple, a patently deplorable action regardless of the backstory of either the perp or the victims.  Beneath the obvious, this has set off a semantic war with unknown ramifications.

At first, knowing nothing about the shooter, the authorities speculated it was an act of domestic terrorism.  Then the ignorant diagnosis was downgraded to a “type” of terrorist attack.  On today’s NPR news program, mention was made in passing that there was an ongoing investigation into whether this was an act of domestic terrorism.  Aside from a spotty military career and a few drunken brushes with the law, we have learned only that Wade played with White Supremacist bands (a category of which I and doubtless many others were hitherto unaware).

What would flow from a conclusion that indeed this action falls under the “T word”?  Why do we seem to have a compulsion to attach some extrinsic categorizing label onto what happened?  It is logical to understand that the shooter was nuts just by reason of acting clearly outside of what our society accepts as human behavior; that societal definition also labels the shooter a criminal who can escape punishment only if he can prove a certain elusive and legally ill-defined supreme level of nutiness.

At first blush one might think this is just another incident of the human passion for categorizing events so as to create a better understanding of those events and the world as a whole; patterns are both mentally comforting and sometimes reveal trends or syndromes that, once identified, may require societal remediation.

A more cynical view is that people innately want to punish what they find abhorrent;  it is a way to put that action in its place, to distance us from it, to put it into a category that we know we reject and thus to insulate us temporally and morally from that action and the mental set that drove it.

A recent New Yorker article discusses the capsizing of a pleasure yacht after a fireworks display in a fancy area of Long Island, which carried three young children to their deaths as they were trapped in a cabin below-decks.  The reportage noted that the boat was raised and was the subject of intense local police and FBI investigation, reflecting a need to understand the tragedy and indeed see if some punishment was appropriate to such people as may be viewed as guilty of some transgression of law or attentiveness.

The drive to affix blame and punish it is also at work in the case of the Sikh shooting.  The perp is quite dead; it is not likely that punishing him is worth considering.  If we can find that the deceased killer was part of some conspiracy, some movement, some group representing the wrong kind of violence, then we can blame them, and try to punish them by law; perhaps silence or disband them, at least infiltrate and monitor them.  Society wants to protect itself from groups that will harm that society.  (This creates serious problems of balancing civil liberties, a different subject for a different time.)

One of the issues is that a single person can have bad ideas, can get these ideas from groups that espouse them, and can act fundamentally alone in the physical sense (if not the intellectual sense) and thus kill large numbers of Sikhs (or any other group) and there is no one to blame except either the ideas or the deranged killer (who is likely either then already dead or clearly nuts).  An unsatisfactory conclusion.

Hence, we look for available conspirators.  If this cohort does terrible things, they are semantically “terrorists.”  Of course this word now carries heavy freight after 9-11; we know in our deepest part that terrorists are a thing unique, singularly deranged and to be stamped out.  Would it not be nice to find that the Sikh shooter was part of a cohort we can label as terrorists and then treat them violently because that is how one must deal with terrorists in this terror-burdened world?

It is frightening to think about what next happens if someone with a police mind-set, after careful analysis of unclear definitional factors, declares at a major press conference that yes, indeed, the shooter of Sikhs committed an act of domestic terrorism.  What do we do?  Does this just give us comfort psychologically (yeah, they are terrorists, they are bad, they are not like me, they are sort of rare so I am likely safe) and we move on?  Does this lead us to arrest or suppress those whose ideas, but not actions, he shared?  Do we do that only if he had physical contact with these people?  Do we do that if the only contact is that they shared ideas?

I wish the FBI and police would stop trying to classify this event as terrorism.  I get a bad feeling that the classification will achieve nothing but some negative unintended consequence.

Twinkies and Capitalism

There may be a death-knell coming for Twinkies and I know this is true because this week’s Fortune magazine tells me that the corporate parent may not emerge from bankruptcy.  The article explores the allegedly intransigent positions of the private equity owners, the secured lenders and the labor unions.  The broader ramifications have escaped Fortune, of course.  Fortune is the People Magazine of business, and its reportage is about as deep as Cape Cod Bay at dead low tide.

The first ramification is social.  We are talking about an American institution here.  People have dropped Twinkies from office towers and made movies about them.  Lawyers have built insanity defenses around their sugar content.  Generations of New Yorkers, and business travelers in New York making the taxi trek to LaGuardia Airport, have looked at, around and past the Wonderbread sign dominating the Jamaica, Queens skyline and marking the hallowed ground where the Twinkies were, er, manufactured.  Blog posters are uniformly claiming to be crushed, as if the Twinkie were an FDA-approved universal cure-all being lost to mankind through some colossal business error.

The broader ramification is anti-American and surely anti-Fortune.  It is the fact that, when you look at the Hostess Company, now in its second bankruptcy in fewer years than one hand has fingers, you see the raw Darwinian logic of our economic system.  It is hard to believe that good business or social planning would include the Hostess scenario as a success story.

The culprit is capitalism.

I am not against capitalism.  I am not smart enough to be against capitalism.  I am sure there are numerous analyses proving it the best system net on a utilitarian basis, far superior to other forms of social organization (many of which I cannot, no doubt, even name).  My point is so much simpler: the failure of this company appears to be a disaster for absolutely everyone involved and it was accomplished in about four years by people we consider to be smart, and we are about to brush it off and forget about it.

When one openly says that our economic  system unexplainably produces failures,  the typical  reactions to such a statement  are these: clucks of condescension from business folk who look at such remarks as so painfully naïve as to be below reply; reports to government agencies that subversives are in our midst; well-trained functionaries in the capitalist system who are well enough off, and poorly enough educated, think that this must be Valhalla.  Classify me what you will for saying that the emperor has bad clothes and for not knowing the address of another tailor who can cut a better fit to human need, but as Hostess joins an almost unmeasurable parade of failures that bring economic tragedy one has a choice: to casually observe that such is the nature of free enterprise; OR to say that there is a problem if this is the best we can do.

And why write this blog post when it fails to advance our thinking on anything?  It at least advances our understanding of what we do not understand.

Well, you know how it goes.   That’s how the Twinkie crumbles….

Red Sox to Win World Series

I am about to ensure 2012 World Series victory for the Red Sox by declaring that the team will win it all.  I am the sort of pundit who is always wrong; if I were to declare the world to be round, some damned fool in a sailboat off the coast of Malaysia would promptly fall off the edge and into empty space just to prove me wrong.

Here is the analysis.  Last night our “ace” pitcher gave up four runs in less than 7 innings which was, remarkably, one of his better starts.  A series of three relief pitchers, two of whom I (a season ticket holder) had never heard of until last week, each gave up one run.  Against those six runs the Red Sox managed three, on a home run by the kid replacement for Kevin Youkalis (whom we never should have traded) whose homer, in turn, was set up by a fielding error by the Rangers and thus almost doesn’t even count.

In other developments, Sox management took enough time away from its soccer interests to assure the public that it was not blaming manager Bobby Valentine, the very fellow they will fire in the off-season no matter what happens including my predicted World Series triumph, just because they can.  Big Papi, one of only three big league players on this year’s roster, remains sidelined with an achilles problem and is at the stage of taking shots to control the pain which, I can tell you from personal experience, is an inadequate temporary palliative that does not address the basic issue; my achilles sojourn with shots deep into my heel resulted in half a year on a cane as an alternative to surgery and half a year on a cane — but then again Big Papi is a professional athlete and hopefully can be cured while I was relegated to a lawyerly limp.  And finally the Sox have carefully explained why they did so little at the trading deadline: the team is so darned good as it is that tinkering with it was a mistake.

All this plays on the backdrop of the Yankees losing 7 of their last 10, the entire American League drifting together with no team playing consistently good baseball (no one approaching .600), and yet the Sox are this morning only the ninth best team out of the 14 in the AL.  That means there are eight teams ahead of us, three will win divisions and make the playoffs automatically, and so we need to overtake four of the five other teams ahead of us to get the wild card slot that will allow us to slip into contention and thus win the World Series, as I have promised (see paragraph #1 above).

Did I mention our team is below .500, having lost more games than we have won?  (That’s how it works, by the way; when you lose more than you win, you are below .500!)

SO, per Sox management we have them right where we want them.  I predict, along with John Henry and Ben Cherrington, that the Sox will take the Series this year; I say 6 games.  I have already looked onto MLB’s website, put the dates on my calendar, and made sure I do not schedule anything that might conflict with those dates and any possible rain (or snow) postponements.

I am offering World Series Seats to you readers for all home games in the playoffs, American League championship series, and the World Series at a flat $1000 per seat per game, first come first served.  Reservations are non-refundable and must be accompanied by bank checks for the seats committed.  You really don’t want to miss this Series; it will blow away 2004 and 2007 for drama, and allow you also to say good-bye to half the team that will join Valentine in the off-season by trying on different uniforms for their new employers.