Thursday, December 27, 2007

Best, Worst Ideas of 2007

The election, Ford's trial, Peete's plea, big games, news for sale, and more.

Posted By on Thu, Dec 27, 2007 at 4:00 AM

I don't think it's a good idea for anyone to serve five straight terms as mayor, but 42 percent of the people who voted in October thought otherwise. Underestimating Mayor Willie Herenton's political base was not a good idea, and neither was relying on polls to tell you to run against him in a three-way.

It was a good idea for seven City Council incumbents to decide not to run again. (Rickey Peete and Edmund Ford had little choice.) Fresh horses and all that, plus the next four years won't be any picnic if Memphis slides into a recession.

Going to trial against federal prosecutors in public corruption cases was not a good idea. They're unbeaten. John Ford put up a good fight, but the tapes were devastating and a jury convicted him on one count to get him a 66-month prison sentence, slightly more than the 63 months given to Roscoe Dixon, who also went to trial.

Cooperating with federal prosecutors was a good idea. Second-offender Rickey Peete got 51 months, and Michael Hooks, who held three elected positions in his career, is serving 26 months. Darrell Catron, who kicked off Tennessee Waltz, got probation plus a new house and spending money without, so far, even having to testify in a trial. Ralph Lunati pleaded guilty and got 18 months for running what investigators called the wildest and most wide-open, drug-infested strip clubs in the country.

Building a team for the future was not a good idea. The Grizzlies will be eliminated from playoff contention about the time March Madness begins.

Building a team for the present was a good idea. You can complain about college basketball stars leaving school early for the pros or you can accept the fact and go get them, as Coach John Calipari has done. No one has done a better job than Calipari of making the best of a bad situation — competition, Beale Street clubs, a weak Conference USA schedule, early departures, a resurgent University of Tennessee. Memphis against UT will be the hottest ticket of 2008.

Hanging around until the shit hits the fan was not a good idea. Joseph Lee, a nice guy who got terrible press, would be in a lot less trouble today if he had not stayed so long at MLGW or had never gone over there from City Hall in the first place.

Resigning before the shit hits the fan was a good idea. Andy Dolich, a nice guy who got great press, couldn't sell out FedExForum for the Grizzlies. Two weeks later, he landed on his feet as chief operating officer for the San Francisco 49ers. And has anyone seen Jerry West or remember why he was the toast of the town? And why didn't Carol Johnson tell us any of this stuff was going on at the Memphis City Schools before she left for Boston to be superintendent?

More fun downtown, in the form of roller coasters at The Pyramid, is not a good idea. Look at it this way: Nashville has state government and office buildings and corporate headquarters of insurance companies and telecoms, Knoxville has the University of Tennessee, Little Rock has the Capitol and the Clinton library, and the front door of Memphis might be an amusement park in an abandoned landmark?

Less fun and more work downtown is a good idea. If Mud Island is going to be closed more than half the year, then why not let a private developer have a go at it? Closing streets and turning St. Jude Children's Research Hospital and ALSAC into a true campus was another good idea. So was signing a deal to bring the University of Memphis law school downtown to the old Customs House and post office on Front Street.

Monetizing content by selling sponsorships for stories in The Commercial Appeal was not a good idea, unless you're in the public relations business.

But monetizing content somehow in the Internet age is a good idea, unless you think reporters and editors should work for nothing. And so was the CA's decision to admit a mistake and back off before any more damage was done.

Building a new football stadium at the Fairgrounds was a bad idea. The problem is the teams on the field, Conference USA, and the stadium's shabby surroundings.

Flat screens, high def, and the new no-smoking regs in bars were good ideas. The best seat in the house is at a sports bar or on your couch.

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Wednesday, December 19, 2007

Worst In Its Class

Posted By on Wed, Dec 19, 2007 at 4:00 AM

There are two stories about "juicing" in the national news this month. One is about major-league baseball players who allegedly used steroids and human growth hormone to juice their statistics.

The other one got less attention, but, unfortunately, Memphis and Regions Morgan Keegan are at the center of it. It's about a mutual-fund manager named James Kelsoe Jr., who juiced investment returns to Barry-Bonds-like proportions before the funds "crashed and burned," as a columnist for put it this week.

A few days earlier, Morgan Keegan's mutual funds were the subject of The Wall Street Journal's "Money & Investing" column headlined "Morgan Keegan Sued Over Mutual-Fund Woes." The funds and Kelsoe were also written up in a Wall Street Journal page-one story on October 17th.

The lawsuit filed in U.S. District Court in Memphis on December 6th by Richard Atkinson and his wife Patricia seeks class-action status and names as defendants Morgan Keegan, Regions Financial Corporation, funds manager Kelsoe, and 13 directors of the funds, including Morgan Keegan co-founder Allen Morgan Jr.

Why are a southeastern regional brokerage firm and a couple of its mutual funds getting so much attention? Because the funds are "worst in class" at a time when the phrases "credit crisis" and "sub-prime lending" have become household words and moved from the financial news to mainstream news. In 2007, the funds lost 50 percent or more of their value, while other funds in their peer group either had positive returns or losses of 8 percent or less.

"Of 439 other intermediate bond funds and 253 other high-income bond funds, none suffered losses of this magnitude," the lawsuit says.

It claims the defendants omitted or misrepresented important facts about the funds and made them appear less risky than they were. Morgan Keegan does not comment on pending litigation, a spokeswoman said.

Silence only whets the appetite of investors and reporters. The danger for Kelsoe and Regions Morgan Keegan is that they will become the symbol — à la Bernie Ebbers and WorldCom and the telecom crash, Mississippi lawyer Dickie Scruggs and class-action lawsuits against tobacco and insurance companies, and former Arkansas governor Mike Huckabee and evangelical Christians — for a regional story that becomes a national story. Fat chance, you scoff; this is just a one-day story. Well, three "one-day stories" in national publications in two months are pretty unusual for a regional financial firm. As The Wall Street Journal wrote last week, "Fund managers and others on Wall Street will be closely watching this case." That's journalese for "test case."

Since its founding in 1969 by Morgan and James Keegan, Morgan Keegan has been a Memphis success story. In 1970, Morgan Keegan purchased a seat on the New York Stock Exchange. In 1978, the company attached itself to Federal Express by making the first trade when it became a public company. And in 1983, Morgan Keegan itself became a public company. Two years later, it moved into its downtown headquarters, which is still the centerpiece of the Memphis skyline. Morgan Keegan was bought out by Birmingham-based Regions Financial in 2001. Allen Morgan has announced that he is retiring at the end of this year.

The sub-prime story has legs, as we say. In other words, it will be around awhile. Class-action lawsuits — and the Atkinson lawsuit has not yet been granted class-action status — can take years to unwind. And that means more publicity as the plaintiffs and their attorneys (the Apperson Crump law firm in Memphis, plus outside counsel) and public-relations firms keep the story alive. Plaintiffs are seeking a jury trial.

The bigger story is homeowners, foreclosures, and a possible recession. Investors and their adventures are a part of that. Thousands of downtown condos and suburban homes in Memphis were financed with sub-prime mortgages with low teaser interest rates that will be reset to higher rates in 2008. Webb Brewer, a lawyer with Memphis Legal Services, said he believes there will be 12,000 to 15,000 foreclosures in Shelby County in 2008, with half of them related to sub-prime loans.

Regions Morgan Keegan isn't the only one hurting. First Horizon, the last big independent bank with headquarters in Memphis, is down more than 50 percent in the stock market in 2007, and its dividend, now 7 percent, may be in jeopardy.

Why didn't we all just invest in Hannah Montana concert-ticket futures instead?

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Thursday, December 13, 2007

Dividing the Spoils

Wharton at odds with county elected officials over pay raises.

Posted By on Thu, Dec 13, 2007 at 4:00 AM

When John Fowlkes was chief administrative officer for Shelby County, he helped advise the county on its ethics ordinance. Now that Fowlkes is a Criminal Court judge, maybe he needs to come back and referee a disagreement over the way his former CAO duties and salary were divvied up among Mayor A C Wharton's top appointees.

In August, Fowlkes was appointed to a vacant judgeship. His CAO duties were assumed by county chief financial officer Jim Huntzicker, who now holds dual titles of CAO and CFO. Other appointees also took on additional duties, according to Huntzicker and Wharton. A total of $44,472 of Fowlkes' $144,600 salary was divided among nine appointed employees, saving the county roughly $100,128, they say. The biggest raise, $14,808, went to the mayor's executive assistant Kelly Rayne. Huntzicker got $5,500.

"It was an opportunity for the team to get together and make some changes that will enable us to advance the mayor's agenda until the end of his term without slowing down," Huntzicker said.

He said it would have been difficult to hire another CAO for three years or less with the likelihood that the person would be replaced when Wharton's term ends in September 2010.

But that's not how some elected county officials see it. They say the salary money should have been swept into the general fund, and raises should only be given after the county's Human Resources Department does an analysis. The raises took effect in October, but apparently the word didn't get out until recently. Elected officials cannot give raises to themselves or civil-service employees, but appointees are diffferent.

"I was appalled that they would split the salary," said Juvenile Court clerk Steve Stamson. "If we are all going to be conservative and try to save the taxpayers as much as we can, then we don't need to be splitting up salaries and giving ourselves increases."

Circuit Court clerk Jimmy Moore said Huntzicker's action "is wrong."

"I told him in a meeting this week that I wanted him to teach me how to do that," Moore said. "Appointed people already make a lot more than elected officials and more than [former mayor] Jim Rout's people did."

In November, Huntzicker asked for and received the resignation of Human Resources administrator Paul Boyd, who had held the job for two years.

"He resigned," Huntzicker said. "It does not have anything to do with this. It involves issues we have been dealing with for several months."

Boyd sees it differently.

"It was a forced resignation," Boyd said. "They indicated they didn't like the way the compensation program was being run."

Boyd called the action "malicious" because he was coping with the death of his wife six months ago. And he said he objected to the way the raises were given.

"Normally, Human Resources would do an analysis," he said. "I think an analysis should have been done."

A week ago Monday, County Commission chairman David Lillard called a meeting of elected officials, Huntzicker, and Wharton. Huntzicker said the purpose was "to air questions relative to compensation studies done in the five court clerks' offices." Stamson said he and others brought up the salary increases from the Fowlkes fund.

"Anything that happens in county government is going to get out eventually," he said. "You can't hide it."

Wharton told The Flyer that in hindsight it would have perhaps been better to notify everyone sooner, but he is pleased with the outcome and what he sees as cost savings, flexibility, and rewarding key employees who take on extra work.

"In terms of public policy, nobody else has been down this road," he said. "I think this is one of the unforeseen consequences of term limits."

Wharton said the salary decisions were not influenced by his flirtation with backers urging him to run for city mayor this fall. He said he has "every hope and intention" of serving the remainder of his term.

The suggestion that qualified people won't work for the county for a few years for $144,000 a year is likely to start another mini-storm of controversy. Fowlkes came over from the United States Attorney's Office, where prosecutors make less than that. And in 2004, Wharton hired an eager state legislator as assistant CAO for slightly over $100,000. His name was Roscoe Dixon.

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Thursday, December 6, 2007

The Next Superintendent

Break the mold and open the search to candidates who are under 40.

Posted By on Thu, Dec 6, 2007 at 4:00 AM

The next superintendent of Memphis City Schools should be too young for the job.

Too young, that is, by conventional standards. If ever a school system needed fresh blood, fresh thinking, and youthful energy and idealism, it is MCS.

Memphians are familiar with the superintendent search process. Engage some consultants and a local nonprofit or two with no vested interest — which means no children actually attending Memphis public schools — to do a "national search" for a Dr. Gerry House or a Dr. Carol Johnson, who brings along some friends to take the most important and well-paid administrative jobs.

They announce their "reforms," make headlines, burden teachers with extra paperwork, polish their resumes, stay a few years, and suddenly leave for greener pastures. Then the school board names an "interim" superintendent who is over 60 years old and a 30-year employee of the school system: a Ray Holt, Johnnie B. Watson, or Dan Ward. Then the process starts all over.

What if, instead, MCS was run by a superintendent and staff of twenty- and thirtysomethings with recent experience as teachers, coaches, and principals of Memphis public schools or similar urban public schools?

There are two good sources for such candidates. One is the current pool of Memphis teachers and principals who have demonstrated results and earned the respect of their peers. The other is the national Teach for America program, which is now 17 years old and has enlisted 17,000 of America's brightest college graduates into teaching in urban and rural schools. One of the goals of Teach for America is to keep its "corps members" in public education beyond their two-year obligation. One way to do that is to show them they can put their talent, training, energy, and idealism to work on a big stage while they are "too young."

Of course, the truth is they are not too young. Last week, FedEx founder Fred Smith was interviewed by Chris Wallace on Fox News Sunday. "The riskiest strategy is to try to avoid risk altogether," said Smith, who was five years out of Yale and a year out of the Marine Corps when he founded Federal Express.

In The Wall Street Journal last week, there was a story about the American soldiers who are running counterinsurgency classes in Iraq and Afghanistan. One of them is Capt. Dan Helmer, a former Rhodes scholar. He is 26 years old.

Our best and brightest and bravest can start companies and fight wars and command armies, and they can run our failing school systems if we let them.

I have had the pleasure of getting to know several Teach for America teachers working in Memphis since the program came here in 2006. Most of them got placed at the toughest schools, not the optional schools with college-bound students. The good news is that almost all of the corps members are still working here and making a difference. The bad news is that some schools are worse than most people know unless they have close contact with teachers and students.

I often think about getting them to tell their war stories to the Flyer, but that might make their jobs harder. And these young teachers aren't seeking sympathy anyway. They plug away in classes for five periods a day — often classes without textbooks for the first two weeks of school, classes with 40 students and only 30 desks for the first five weeks of school, classes where they are under pressure to get 80 percent of their students to pass the Gateway examinations, classes where a terrified teacher locked herself in her closet.

A "too young" superintendent and staff would make mistakes, but veterans make mistakes too. Look at the MCS transportation mess, the spoiled-food mess, and the grand jury investigation of construction contracts. But a young superintendent with recent classroom and administrative experience in Memphis or similar schools would make a lot of smart decisions too and grow into the job.

Willie Herenton became superintendent of MCS in 1978 when he was 39 years old. Within three years, he closed underused schools and helped start the optional schools program. Name a successor who accomplished as much.

As Fred Smith told Chris Wallace, you can't be afraid to change, because if you are, then inevitably something bad will happen. In Memphis, it already has.

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