This week's items: Sliding toward corporate governanceBergmann wins reprieveBanking analyst Richard X. "Dick" Bove has switched teamsSupreme Court to consider government takings
Coffee Talk (Tampa edition)
Sliding toward corporate governance
The regulatory burden on small public companies from the Sarbanes-Oxley Act of 2002 is only beginning to pain. But does Bank of America Corp. have a right to yelp as well?
Alison "Lynn" Reaser, chief economist for the mega-bank's capital management arm, came through town recently on a between-hurricanes tour of Florida. The evening before her downtown Tampa stop, Reaser showed up on the Public Broadcasting Service's "Nightly Business Report," a show produced in Miami.
The Florida Venture Forum, a nonprofit that brings together entrepreneurs and venture capitalists, hosted Reaser here at the Hyatt Regency Tampa. Her topic was supposed to be: "Countdown to the Election - An Economic Outlook." But Reaser was slow to warm to it.
In fact, Coffee Talk didn't hear her specifically address how the election of either major-party presidential nominee might influence the American economy until the question-and-answer period.
That's because her view seems to be that national elections don't have as many economic repercussions as some other experts think. "The economy will affect the election more than the election will affect the economy," Reaser says.
A more interesting revelation came later, also during the Q&A session. A gentleman in the audience of corporate finance professionals asked something about the economic impact of Sarbanes-Oxley on small business.
It ain't just the small fry, fella.
Reaser, who works at one of the world's 15 biggest banks, told the crowd that BofA's regulatory compliance staff goes over her PowerPoint presentations before she hits the road. That's a slide-by-slide review, so Reaser isn't spilling any secrets that all investors should know about.
"The regulatory climate may have over-reacted," Reaser says of the reforms inspired by Enron and other corporate malfeasance.
She diplomatically suggests the feds and other watchdogs might be letting up ever so slightly. "A year ago, everybody was in lockdown," she says.
Bergmann wins reprieve
Count William J. Schifino Jr. among those who disagreed with the decision by the Hillsborough County Judicial Campaign Practices Committee to rule against 13th Circuit Judge Charles "Ed" Bergmann.
Schifino, president of the Hillsborough County Bar Association, asked the committee in a Sept. 3 letter to re-examine its decision last month to cite Bergmann over statements he made prior to his victory against Tampa family law attorney Beth Gilmore Reineke at the Aug 31 primaries. Bergmann, a family law judge, publicly claimed the majority of family law attorneys in the county support him.
The committee originally ruled that Bergmann knowingly made a misleading statement in violation of the state's judicial code of conduct.
On further review, however, the committee reversed itself. Now the committee says there is a dispute of a material fact as to what Bergmann said. Whenever there is a dispute of a material fact, the committee takes the position that it will issue no opinion.
Bove changes firms
Widely quoted Pinellas County banking analyst Richard X. "Dick" Bove has switched teams.
Bove, 63, has joined Punk Ziegel & Co., a New York specialty investment bank that focuses on the health care and technology industries.
Naturally, the reason boils down to money. "It's a function of how the payment of commissions is structured," says Bove.
The 63-year-old watcher of the bigger national banks says he was saddened to leave San Francisco investment boutique Hoefer & Arnett Inc.
His old firm gave his research reports plenty of exposure, according to Bove. "There was no problem with getting my product out there, so to speak," he says.
But, when it came to compensation, Bove says Hoefer & Arnett didn't have the sales traders in place to ensure that he got his cut of commission income from deals. So-called sell-side analysts like Bove depend on their firm's trading desk to collect the commissions from large investment banks that put together the transactions.
"When you work for a boutique firm, you always wonder if the big firms are going to allot you commission funds," says Bove.
Punk Ziegel, which has seven traders, was founded by William J. Punk Jr., an old colleague of Bove's. "He'll collect the commissions that are owed us," says Bove.
Bove hasn't missed a beat since changing firms, appearing regularly on Bloomberg television and fielding an average of three or four calls a day from business journalists around the country.
A Sept. 24 Reuters report quoted Bove on the burgeoning accounting scandal at Fannie Mae, in his new capacity as a managing director at Punk Ziegel.
That's the good news.
The bad news, says Bove: "In this market, I'm getting more calls from people who lost money on stocks that I've recommended than people calling up to tell you that you're a genius."
Supreme Court to consider government takings
Bill Moore, managing partner of the property-rights law firm of Brigham Moore LLP, has a good reason to look forward to next year. On Tuesday (Sept. 28), it was announced the U.S. Supreme Court has agreed to hear a court case considering eminent domain condemnation for economic redevelopment.
In the case (Susette Kelo, et al., v. City of New London, et al.), New London wants to condemn and raze several homes - including Kelo's - to create a riverfront hotel, health club and offices as part of a plan to revitalize the area. In March, the Connecticut Supreme Court voted 4-3 for New London. The central question of the case relates to economic growth as a "public purpose" for a condemnation taking.
Although, the court's decision is uncertain, for Moore it holds out the possibility of correcting what he sees as government abuse in areas such as Murdock Village in Charlotte County and the Southern Corkscrew Regional Ecosystem Watershed in Bonita Springs.
"I think it's wonderful," Moore says. "It's about time that they take up the issue. This could have a big effect on the constitutional requirement of a public purpose. Although the case does not involve blight, the underlying issues are very similar. Government believes that the need for economic redevelopment is enough of a reason to use eminent domain."
What would be the economic effect if the Supreme Court reduced governments' ability to use eminent domain? "If we win," Moore says, "it would reduce the number of cases we have. It would actually be to our economic disadvantage. But that is not really the issue that we are concerned about. What they are doing is wrong and somebody needs to stop them."
The Supreme Court is expected to rule late next year.