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<nettime> from the dotcom observatory
geert lovink on Tue, 31 Dec 2002 03:27:46 +0100 (CET)


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<nettime> from the dotcom observatory


(2002 closes with wrapping up yet another report of the dotcom
observatory. Thanks to everyone who sent me material. As one could have
predicted we're still living in the aftermath of the large corporate
schandals such as Enron and WorldCom. Soon we can expect a wave of book
publications, I bet. Enough to research. On the critical new economy
front, Andrew Ross lately announced his upcoming dotcom antropology. Ned
Rossiter pointed me at Jean Gadrey's New Economy, New Myths, from a French
professor, that just came out in an English translation (Routledge). All
nettimers, a happy and prosperous 2003! Geert)


1.   Time Magazine's Persons of the Year 2002
2.   Paul Krugman: The Good Guys (NYT)
3.   Yahoo! Snaps Up Inktomi
4.   George Soros convicted
5.   Enron news: Fastow's wife now may face charges
6.   Latest from fuckedcompany
7.   Internet Retailing Is Growing Into a State of Maturity
8.   Analysts and journalists: A case of tainted love?
9.   Kurt Andersen: City of Schemes (NYT)
10. 'Flipping' Goldman Fingered (The Guardian)
11. Doug Henwood: bear culture (LBO)
12. WorldCom Fall Imperils Ed. Tech Aid
13. Lawmakers Joined Executives In Profiting From IPO Access (WSJ)

---

1. Time Magazine's Persons of the Year 2002

http://www.time.com/time/personoftheyear/2002/poyintro.html

Women who took huge risks to blow the whistle on what went wrong at
Worldcom, Enron and the FBI: Cynthia Cooper, Coleen Rowley, Sherron Watkins

They took huge professional and personal risks to blow the whistle on what
went wrong at WorldCom, Enron and the FBI what American courage and American
values are all about

By Richard Lacayo and Amanda Ripley
 Posted Sunday, December 22, 2002; 4:31 a.m. EST

This was the year when the grief started to lift and the worries came in.

During the first weeks of 2002, two dark moods entered the room, two
anxieties that rattled down everybody's nerve paths, even on good days, and
etched their particulars into the general disposition. To begin with, after
Sept. 11, the passage of time drew off the worst of the pain, but every
month or so there came a new disturbance bombing in Bali, a surface-to-air
missile fired at a passenger jet showed us the beast still at our door.

In the confrontation with Iraq, in the contested effort to build a homeland
defense, we all struggled to regain something like the more secure world we
thought we lived in before the towers fell. But every step of the way we
wondered differently?

And all the while there was the black comedy of corporate fraud. Who knew
that the swashbuckling economy of the '90s had produced so many buccaneers?
You could laugh about the CEOs in handcuffs and the stock analysts who
turned out to be fishier than storefront palm readers, but after a while the
laughs came hard. Martha Stewart was dented and scuffed. Tyco was looted by
its own executives. Enron and WorldCom turned out to be Twin Towers of false
promises. They fell. Their stockholders and employees went down with them.
So did a large measure of public faith in big corporations. Each new offense
seemed to make the same point: with communism vanquished, capitalism was
left with no real enemies but its own worst impulses. It can be undone by
its own overreaching players. It can be bitten to pieces by its own alpha
dogs.

Day after day, one set of misgivings twined around the other, keeping
spooked investors away from the stock market, giving the whole year its
undeniable saw-toothed edge. Were we headed for a world where all the towers
would fall? All the more reason to figure out quickly, before the next blow
to the system, how to repair the fail-safe operations trusted with our
money, at the government agencies we trust with ourselves.

This is where three women of ordinary demeanor but exceptional guts and
sense come into the picture. Sherron Watkins is the Enron vice president who
wrote a letter to chairman Kenneth Lay in the summer of 2001 warning him
that the company's methods of accounting were improper. In January, when a
congressional subcommittee investigating Enron's collapse released that
letter, Watkins became a reluctant public figure, and the Year of the
Whistle-Blower began. Coleen Rowley is the FBI staff attorney who caused a
sensation in May with a memo to FBI Director Robert Mueller about how the
bureau brushed off pleas from her Minneapolis, Minn., field office that
Zacarias Moussaoui, who is now indicted as a Sept. 11 co-conspirator, was a
man who must be investigated. One month later Cynthia Cooper exploded the
bubble that was WorldCom when she informed its board that the company had
covered up $3.8 billion in losses through the prestidigitations of phony
bookkeeping.

These women were for the 12 months just ending what New York City fire
fighters were in 2001: heroes at the scene, anointed by circumstance. They
were people who did right just by doing their jobs rightly ferociously, with
eyes open and with the bravery the rest of us always hope we have and may
never know if we do. Their lives may not have been at stake, but Watkins,
Rowley and Cooper put pretty much everything else on the line. Their jobs,
their health, their privacy, their sanity them to bring us badly needed word
of trouble inside crucial institutions. Democratic capitalism requires that
people trust in the integrity of public and private institutions alike. As
whistle-blowers, these three became fail-safe systems that did not fail. For
believing truth is one thing that must not be moved off the books, and for
stepping in to make sure that it wasn't, they have been chosen by TIME as
its Persons of the Year for 2002.

WHO ARE THESE WOMEN?
For starters, they aren't people looking to hog the limelight. All initially
tried to keep their criticisms in-house, to speak truth to power but not to
Barbara Walters. They became public figures only because their memos were
leaked. One reason you still don't know much about them is that none have
given an on-the-record media interview until now. In early December TIME
brought all three together in a Minneapolis hotel room. Very quickly it
became clear that none of them are rebels in the usual sense. The truest of
true believers is more like it, ever faithful to the idea that where they
worked was a place that served the wider world in some important way. But
sometimes it's the keepers of the flame who feel most compelled to set their
imperfect temple to the torch. When headquarters didn't live up to its
mission, they took it to heart. At Enron the company handed out note pads
with inspiring quotes. One was from Martin Luther King Jr.: "Our lives begin
to end the day we become silent about things that matter." Watkins saw that
quote every day. Didn't anybody else?

What more do they have in common? All three grew up in small towns in the
middle of the country, in families that at times lived paycheck to paycheck.
In a twist that will delight psychologists, they are all firstborns. More
unusually, all three are married but serve as the chief breadwinners in
their families. Cooper and Rowley have husbands who are full-time,
stay-at-home dads. For every one of them, the decision to confront the
higher-ups meant jeopardizing a paycheck their families truly depended on.

The joint interview in Minneapolis was the first time the three had met. But
in no time they recognized how much they knew one another's experience.
During the ordeals of this year, it energized them to know that there were
two other women out there fighting the same kind of battles. In preparation
for their meeting in Minneapolis, WorldCom's Cooper read through the
testimony that Enron's Watkins gave before Congress. "I actually broke out
in a cold sweat," Cooper says. In Minneapolis, when FBI lawyer Rowley heard
Cooper talk about a need for regular people to step up and do the right
thing, she stood up and applauded. And what to make of the fact that all are
women? There has been talk that their gender is not a coincidence; that
women, as outsiders, have less at stake in their organizations and so might
be more willing to expose weaknesses. They don't think so. As it happens,
studies have shown that women are actually a bit less likely than men to be
whistle-blowers. And a point worth mentioning whistle-blower. Too much like
"tattletale," says Cooper.

But if the term unnerves them a bit, that may be because whistle-blowers
don't have an easy time. Almost all say they would not do it again. If they
aren't fired, they're cornered: isolated and made irrelevant. Eventually
many suffer from alcoholism or depression.

With these three, that hasn't happened, though Watkins left her job at Enron
after a few months when she wasn't given much to do. But ask them if they
have been thanked sincerely by anyone at the top of their organization, and
they burst out laughing. Some of their colleagues hate them, especially the
ones who believe that their outfits would have quietly righted all wrongs if
only they had been given time. "There is a price to be paid," says Cooper.
"There have been times that I could not stop crying."

Watkins, Rowley and Cooper have kick-started conversations essential to the
clean operation of American life, conversations that will continue for
years. It may still be true that no one could have prevented the attacks of
Sept. 11, but the past year has shown that the FBI and the CIA overlooked
vital clues and held back data from each other. No matter how many new
missile systems the Pentagon deploys or which new airport screening systems
are adopted, if we can't trust the institutions charged with tracking
terrorists to do the job, homeland defense will be an empty phrase. The
Coleen Rowleys of the federal workforce will be the ones who will let us
know what's going on.

As for corporate America, accounting scams of the kind practiced at Enron
and WorldCom will continually need to be exposed and corrected before yet
another phalanx of high-level operators gets the wrong idea and a thousand
Enrons bloom. And the people best positioned to call them on it will be
sitting in offices like the ones that Watkins and Cooper occupied. The new
Sarbanes-Oxley Act, which requires CEOs and CFOs to vouch for the accuracy
of their companies' books, is just one sign of what Cooper calls "a
corporate-governance revolution across the country."

These were ordinary people who did not wait for higher authorities to do
what needed to be done. Literature's great statement on unwelcome truth
telling is Ibsen's play An Enemy of the People. Something said by one of his
characters reminds us of what we admire about our Dynamic Trio. "A community
is like a ship," he observes. "Everyone ought to be prepared to take the
helm." When the time came, these women saw the ship in citizenship. And they
stepped up to that wheel.

----

www.nytimes.com/2002/12/24/opinion/24KRUG.html
December 24, 2002

The Good Guys

By PAUL KRUGMAN

 Time magazine's persons of the year are three whistle-blowers: Sherron
 Watkins of Enron, Cynthia Cooper of WorldCom and Coleen Rowley of the
 F.B.I.

 They deserve to be celebrated. After all, thanks to Ms. Watkins and Ms.
 Cooper, Jeff Skilling, Ken Lay and Bernie Ebbers have been indicted,
 and the politicians who did their bidding have been disgraced. Thanks
 to Ms. Rowley, incompetent officials at the F.B.I. and C.I.A. have been
 removed from their posts, and we've had a searching inquiry into what
 went wrong on Sept. 11.

 Oh, I'm sorry. None of that actually happened. The bravery of the
 whistle-blowers was real enough, but Time seems to be celebrating what
 should have been, not what was.

 This past year brought shocking revelations about how American
 institutions, from corporations to government agencies, really operate.
 But the whistle-blowers haven't been rewarded; Time makes it clear that
 Ms. Cooper and Ms. Rowley are personae non gratae in their
 organizations. And those on whom the whistle was blown have mostly gone
 unpunished. Last week one F.B.I. official singled out by Ms. Rowley --
 he blocked an investigation that might have averted Sept. 11 -- received
 a special presidential award.

 I'm a history buff, so the events of 2002 made me think of a historical
 parallel -- the English peasant rebellion of 1381. The rebels very
 nearly took London, but were turned aside by King Richard II, who
 promised to end the oppression of the common people by the aristocracy.
 As soon as the danger had passed, however, he made it clear that
 promises to little people don't count. "Villeins ye are, and villeins
 ye shall remain."

 During the late spring and summer, amid corporate scandals and tales of
 F.B.I. ineptitude, Americans received many promises of reform. But once
 the political danger had passed, all those promises -- even, incredibly,
 the promise that families of victims would get to choose one member of
 the Sept. 11 commission -- became non-operational. Villeins ye are . . .

 Yet some good guys did win victories.

 Time named New York's attorney general, Eliot Spitzer, "crusader of the
 year." Mr. Spitzer's achievement shouldn't be overstated; he didn't
 "save capitalism," as some would have it. The $1.4 billion settlement
 he wrung out of the securities industry was a small fraction of what
 investors lost on highly touted stocks, stocks that insiders knew were
 worthless. And while the settlement requires that investment banks pay
 for some independent stock research, it probably won't be enough to
 erase suspicions that analysis is slanted in favor of big customers.

 But Mr. Spitzer achieved far more than anyone else, and more than
 anyone could have expected. With no help from federal regulators, who
 should have been taking the lead, he used the limited powers of his
 office -- the power to investigate and to publicize the outrages he
 found -- brilliantly. It's a tribute to his effectiveness that powerful
 congressmen tried to shut him down, by inserting language into reform
 legislation that would have stripped state attorneys general of the
 right to carry out Spitzer-type investigations. (What about states'
 rights? Oh, that only applies when states want to, well, you know.)

 You also have to admire Mr. Spitzer's style. Key to his success was the
 discovery of incriminating internal communications. Addressing an
 investment industry dinner, he told the audience, "It is wonderful to
 be here this evening, because I really want to put faces to all those
 e-mails."

 So I'm glad that Mr. Spitzer has gotten his due. But let me put in a
 plug for another group of good guys who haven't gotten their due:
 California's long-suffering electricity regulators.

 Back during the crisis of 2000-2001, those regulators were ridiculed
 for saying that energy companies were manipulating the market. Nobody
 except an Op-Ed columnist or two believed them. But over the course of
 2002, as incriminating memos and tapes came to light, they were fully
 vindicated. As with Mr. Spitzer, the compensation they have recently
 managed to extract -- $1.8 billion in refunds -- falls far short of the
 tens of billions looted from the public. But also like Mr. Spitzer,
 they've done very well given the lack of cooperation, and often active
 hostility, from Washington.

 If truth be told, 2002 was a very good year for cynics. But it's the
 day before Christmas, so let's be thankful for our gifts: the good guys
 who made a difference.

---

3. Yahoo! Snaps Up Inktomi
The portal giant picks up the Web search technology provider for about $235
million in cash.
http://www.internetnews.com/bus-news/article.php/1560681

---

4. French Court Finds Soros Guilty of Insider Trading
Levied Fine of $2.3 Million Matches
Amount He Made in SocGen Dealings

A WALL STREET JOURNAL ONLINE NEWS ROUNDUP

PARIS -- A French court on Friday convicted U.S. billionaire investor
George Soros of insider trading, fining him 2.2 million ($2.3
million).

The court's fine matches the amount the Hungarian-born magnate was
accused of having made from buying stocks at French bank Societe
Generale SA with insider knowledge 14 years ago.

Mr. Soros, 72 years old, the president of Soros Fund Management,
denies having had privileged information.

He wasn't in court Friday. In court testimony in November, Mr. Soros
said: "I have been in business all my life, and I think I know what
is insider trading and what isn't."

Societe Generale was privatized in 1987. A year later, its stock
price went up during an unsuccessful takeover bid. Mr. Soros was
accused of having obtained and traded on insider information before
the abortive corporate raid pushed up the stock price.

Paris magistrates said Mr. Soros illegally bought shares of Societe
Generale in 1988 after he was asked to join a group trying to take
control of the bank. Though Mr. Soros didn't join that group, he
acknowledges buying Societe Generale shares for his flagship Quantum
Fund, one of the world's first hedge funds.

Mr. Soros's attorneys say the information he had about Societe
Generale didn't qualify as inside information and that French law at
the time defined insider trading more narrowly than it does today.

The fine was in line with the request by prosecutors.

Mr. Soros was tried with two other men, Jean-Charles Naouri, former
top aide to then-French Finance Minister Pierre Beregovoy, and
Lebanese businessman Samir Traboulsi.

The court cleared Messrs. Naouri and Traboulsi of any wrongdoing.

Prosecutors had sought fines of 290,000 for Mr. Naouri and 1.98
million for Mr. Traboulsi.

Mr. Soros has said he was interested in Societe Generale based on
information he claims was widely known: France's government at the
time favored takeovers to change the leadership at recently
privatized companies.

Mr. Soros said he was buying stock in many companies and had no
reason not to include Societe Generale. Afterward, he sold the stock,
saying he felt the takeover attempt was politically motivated and
wasn't going to benefit the company.

Reportedly the first American to earn a billion dollars in a single
year, Mr. Sorors was born in Budapest, Hungary, in 1930. He emigrated
to the U.S in 1956 and became a citizen five years later. He made his
fortune managing investment funds.

Forbes magazine ranked him this year as the 37th richest person in
the world, with an estimated $6.9 billion fortune.

Prosecutors said the case dragged on because Swiss authorities took
years to respond to requests for information. Defense lawyers argued
unsuccessfully that the case should be thrown out because it took so
long to bring to court.

Copyright  2002 Associated Press

Updated December 20, 2002 9:10 a.m. EST

---

5. Enron news: Fastow's wife now may face charges

By MARY FLOOD and TOM FOWLER


http://www.HoustonChronicle.com
Dec. 18, 2002, 10:58PM

The grand jury investigating Enron has heard testimony about the wife of
former chief financial officer Andrew Fastow and her knowledge and control
of
money the government says was obtained illegally.

Sources familiar with the investigation say that among the issues presented
was how much control Lea Fastow, herself a former Enron employee, had over
funds that the family received through various transactions, including those
described in a 78-count indictment against her husband.

Given recent government comments in court documents that more charges may be
added to Andrew Fastow's indictment, the revelation indicates that his wife,
too, may face charges.

The grand jury has also heard testimony from the adult children of former
Enron Chairman Ken Lay as part of an investigation into stock sales Lay made
while at Enron. The children were asked questions about their father's
finances, but they are not targets of the investigation, according to
sources.

Lay's wife, Linda, has not been called before the grand jury and has not
been
told she is a target of the investigation.

Prosecutors are not permitted to comment on grand jury proceedings and would
not comment for this story.

Attorneys for Andrew Fastow and Lay declined comment. An attorney for Lay's
children did not return calls seeking comment.

Prosecutors commonly use the possibility of criminal charges against a
spouse, partner or associate to pressure the other. But this recent
testimony
is the first indication that the Justice Department may be using such
tactics.

"She is the final and ultimate piece of leverage prosecutors have over Andy
Fastow," said Jacob Frenkel, a former Securities and Exchange Commission
lawyer and former federal prosecutor based in Washington, D.C. "He does not
want to go to trial with his wife at the defendant's table instead of in the
gallery."

So far, there are no indications that the government and Fastow's defense
team have been negotiating.

"If he has been cooperating on a level that the government found in the
least
bit satisfactory, they would not have resorted to this kind of pressure,"
Frenkel said. "His dilemma now is if he is willing to go to trial if the
price could include the liberty of a family member."

Lea Fastow, who turns 41 next week, would have a hard time claiming a lack
of
financial savvy. She comes from the Weingarten family, which formerly
operated a chain of supermarkets, has an MBA from Northwestern University,
worked at a Chicago bank with her husband before they came to Enron in 1990
and left Enron as an assistant treasurer in 1997.

She has also been involved in complex financial deals at the company. The
charge against former finance executive Michael Kopper notes that she was
paid $54,000 to act as administrative assistant to Chewco, one of the three
partnerships the government said were run to enrich Kopper, Fastow and
others.

Lea Fastow's name even appears on a list of recipients of an October 1996
presentation by J.P. Morgan officials on finance structures designed to
allow
a company to take project development costs off its books -- transactions
similar to those that were central to Enron's downfall.

Perhaps most importantly, however, her name is on the family bank accounts
targeted by investigators in the indictment against her husband.

The Justice Department's investigation into possible insider trading charges
against Lay has been steady and methodical over the past few months,
according to sources familiar with the case. Lay's personal accountant has
testified before the grand jury, while at least one other witness has been
asked about Lay's financial transactions in 2002 after his departure from
Enron.

To prove insider trading, the Enron Task Force must show Lay personally
benefited from critical information that was not available to the public.

Lay sold more than $70 million in Enron stock last year as the share price
spiraled steadily downward, much of it through pre-scheduled transactions
that involved exercising a fixed set of options and selling them on the
market every weekday.

The grand jury appearances by Lay's children may indicate many things:
Prosecutors are being meticulous as they close in on indicting him, or
they're making sure all their bases are covered because they will not be
able
to charge him.

Lay's attorneys have previously explained that all of the trades were
legitimate and some were made to pay off loans that were due.

Lay's trades are also under scrutiny in a federal lawsuit against former
Enron officials. A study done for the plaintiffs in that case claims that
Lay's stock sales in 2001 showed some patterns associated with insider
trading. Lay's attorneys are aware of the study but said previously they
"believe it misses the mark" and note that it has not been admitted as
evidence.

---

6. Some featured fucks.  As usual, more new ones on the site daily.
http://www.fuckedcompany.com/
Cribs
Rumor has it EDS is about to export 10,000 to 20,000 jobs to India. The
network operations center will primarily be affected. "Hey why pay an IT
worker in the U.S. $30.00 per hour when you can pay one in India $10.00 per
day?" OH here's the best part, EDS CEO Dick Brown's house is for sale for
$5.5 million. Click here for the listing, click here for Mr. Brown's
appraisal. Note that construction is "80%" complete...
When: 12/16/2002
Company: EDS
Severity: 85
Points: 181

Cnot
Looks like Robin Wolaner, the chick who banned Fuckedcompany.com, just quit,
according to this internal memo.
When: 12/16/2002
Company: CNET Networks, Inc.
Severity: 10
Points: 105

Platinum
Rumor has it AOL Time Warner just sent notices to all staff at Warner
Elektra Atlantic (records) telling them that come the first of the year,
headquarters are moving to NY and all CA offices will soon be closed save
for a small sales unit that will be moving from Santa Clarita to Burbank.
Word is major layoffs in the works.
When: 12/16/2002
Company: Warner Elektra Atlantic
Severity: 65
Points: 150

Vice
American Airlines bought ATG's business platform and is therefore scrapping
Broadvision, according to this internal memo. Also, Walmart and Kmart rumors
about in this internal memo.
When: 12/16/2002
Company: BroadVision
Severity: 55
Points: 154

It's the end of the Internet as we know it... and i feel fucked
"It is our sincere regret to inform you that DIRECTV Broadband will
discontinue operations," says their homepage.
When: 12/16/2002
Company: DirecTV
Severity: 85
Points: 185

Fuck or luck?
In July 1999, Clarent's net proceeds from their IPO was $62.7 million. In
November they raised $239.9 million in a secondary offering. So $300 million
later, their now b eing bought for less than $10 million.
> When: 12/16/2002
Company: Clarent
Severity: 50
Points: 150

Goofy paid but not laid
Rumor has it Disney's Dotcast wants to file chapter 11 but Disney said "no".
Word is Dotcast has wasted over $100 million, nearly half from Disney.
Disney stock can't handle the bad news so the mouse will keep a skeleton
Dotcast crew until the market looks better... Seems it's a payoff to delay
the inevitable news conference...
When: 12/16/2002
Company: Dotcast & Disney
Severity: 90
Points: 186

What the hell is Jalva
Rumor has it all the founders of Jalva Media have abandoned ship. Word is
one to another company (where he's been laid off already) and one to pursue
an MBA at Harvard.
When: 12/16/2002
Company: Jalva Media
Severity: 85
Points: 185

Hot chick with a potty mouth
Have you all been listening the Fuckedcompany Audio Report? kinda gives me a
boner. Click here to listen, updated daily.
When: 12/12/2002
Company: Fuckedcompany.com
Lucked: 10
Points: 99

Bling bling
Dumbass at Microsoft steals & sells $9 million worth of MS warez and buys
cars, boats, and jewelery. and can now look forward to being ass-raped by an
inmate named Bubba.  Here's the guy's personal site that was referenced in
the artile.
When: 12/12/2002
Company: Microsoft
Severity: 15
Points: 97

---

7. Internet Retailing Is Growing Into a State of Maturity

And Along With It Comes a Flattening Out of Growth

       By David Colker
       Times Staff Writer


 www.latimes.com/business/la-fi-ecom
October 31 2002

 The good news for electronic commerce is that it isn't just for
 tech-savvy shoppers anymore. The bad news is that e-commerce merchants
 are now at the mercy of the same economic factors that are battering
 traditional retailers.

 Online sales in the third quarter totaled $17.9 billion, according to a
 report this week from ComScore Networks Inc., a market research firm in
 Reston, Va. That's just a 2.3% boost from the previous three-month
 period, and summer is traditionally a slow time for retail. Last year,
 autumn sales were 6.4% higher than summer sales.

 Those figures suggest that e-commerce is reaching a plateau -- and that
 growth will be more difficult to come by. To make matters worse,
 analysts say that online merchants are unlikely to outperform general
 retailers in what is expected to be a less than stellar holiday season.

 "In the early years, the online shoppers tended to be a lot more
 tech-savvy," said Michelle David Adams, vice president of retail at
 ComScore. "Now online shopping is much more mainstream. Online consumer
 shopping has become a very, very strong predictor of consumer shopping
 as a whole."

 After years of triple-digit increases, e-commerce growth is slowing in
 year-to-year comparisons. First-quarter sales for 2002 were 48% greater
 than in 2001, while second-quarter sales rose 40% and third-quarter
 sales grew by 35%.

 No longer able to rely on novelty for continued growth, major online
 retailers are now trying to mine territory they had previously
 dismissed as too challenging. For example, industry bellwether
 Amazon.com Inc. is putting the finishing touches on a plan to open a
 virtual store to sell clothing.

 The Seattle-based company would not comment on the venture, which has
 been anticipated since the summer. But Kate Delhagen, retail research
 director for Forrester Research, said she has been told by
 participating merchants that the launch is imminent so that Amazon can
 reap the benefits of holiday shopping -- such as they may be.

 "Amazon has been making a very predictable march across all retail
 categories," Delhagen said. "First came the easy-to-purchase online
 items like books and CDs and in the next wave came heavier, more
 problematic things such as home electronics."

 But selling apparel has been thought to be even a bigger challenge for
 online retailers. Total sales of clothing online are expected to rise
 to $5.2 billion this year from $4.4 billion last year, but they will
 still represent only about 2% of all clothing sales, according to
 Forrester Research.

 "It's extremely complicated," said e-commerce consultant Lauren
 Freedman, president of the E-tailing Group in Chicago. "It's highly
 seasonal, very diverse and subject to trends. You can have a big hit
 one year and the next you have a dog."

 What's more, offering a complete line of clothing is practically
 impossible.

 "In electronics, you can get together with Circuit City and that covers
 80% of the kind of items in demand," Freedman said. "No one clothing
 chain covers nearly that much of the category."

 Rather than sell clothing itself, Amazon will partner with existing
 online merchants such as Lands' End, which said Wednesday that it has
 been involved in tests for the venture. Published reports have named
 Gap Inc. and Sears, Roebuck & Co. as other partners. Both declined to
 comment.

 Still, Amazon has little choice but to pursue increasingly difficult
 categories. It often has stated it will grow by offering an
 ever-increasing variety of items.

 That's important because as the number of online shoppers grows, the
 average amount each of them spends declines. The number of households
 shopping online during the all-important holiday season is expected to
 reach 36.5 million, 4 million more than last year, according to
 Forrester. But the average amount spent per person is projected to fall
 by $30 to $433.

 Delhagen said the time for selling clothing online has come, due mostly
 to increased sophistication of marketing and online tools.

 "In the early days, it was hard to see exactly what you were getting
 when you looked at the sites," she said. As for fit, customers could
 only guess. Through trial and error, Lands' End and Eddie Bauer have
 learned how to successfully present clothing on the Web.

 Times staff writers Abigail Goldman and Leslie Earnest contributed to
 this report.

---

8. Analysts and journalists: A case of tainted love?
Silicon.com
Tuesday 22nd October 2002   2:50pm
http://www.silicon.com/bin/bladerunner?30REQEVENT=&REQAUTH=21046&14001REQSUB
=REQINT1=56059

Ever wonder why you see particular IT industry analysts quoted again and
again on the pages of silicon.com and other publications?

Analysts remain a major port of call for IT journalists looking for expert
comment. According to a survey of 97 leading hacks by public relations
agency Hotwire PR, 64 per cent of respondents said they make the effort to
contact an analyst.

But the independence of these experts is called into question when the PR
company handling a particular story suggests journalists talk to a specific
individual in the analyst community. And it seems this practice may be
denting the credibility of the analyst community.

Hotwire's research identified a "growing level of cynicism" among
reporters. It's not just that they prefer real-world customer feedback - 54
per cent said that tops their list as opposed to 23 per cent for analyst
comment. It's more that they're suspicious of the motives of the analysts.

"Analyst input is not sought at all cost and must be within the right
context," a Hotwire statement says.

Tellingly, many journalists positively shy away from being set up with
analysts named by the PR machine. Thirty-seven per cent of the respondents
said they would not contact an analyst if suggested by a vendor. They
prefer to know who covers what technologies and issues and find them
directly.

Hotwire suggests the tainting of the image of star Wall Street analysts
such as Morgan Stanley's Mary Meeker, Merrill Lynch's Henry Blodgett and
Salomon Smith Barney's Jack Grubman - now under federal investigation - as
a reason for industry analysts being held in comparatively low esteem these
days.

"That's a different ball game, one with definite conflict of interest
issues," Dale Kutnick, Meta Group founder and co-research director, told
silicon.com. "Some analyst firms, people like Jupiter and Forrester, did
get too carried away [during the late 1990s boom]. It seemed like they were
predicting every 'e' market would be worth a trillion dollars in five
years."

However, Kutnick pointed out that most industry analysts, including Meta,
take only a small percentage of their overall revenues, typically less than
two per cent, from single vendors.

So who are IT journalists turning to? The usual suspects, it seems.
According to the survey, the top five analyst houses UK journalists look
for, in reverse order, are: Yankee Group, Forrester, Ovum, IDC and, ahead
by some distance, Gartner Group - even if the latter is infamous for not
always being the easiest to reach.

 ---

City of Schemes
October 4, 2002
By KURT ANDERSEN

Aren't all these awful crooked C.E.O.'s and C.F.O.'s out in
the sticks just . . . awful? How did this spirit of
shameless greed come to infuse the corporate cultures of
the heartland? Enron: Houston. Arthur Andersen: Chicago.
WorldCom: Clinton, Miss. Adelphia: Coudersport, Pa. Tyco:
Exeter, N.H., and Boca Raton, Fla. Here in New York City,
we've spent the last year selflessly working together
toward physical and psychic recovery, all of us engaged in
a painful but glorious existential civic introspection.
Meanwhile, out there, beyond the Hudson, in the vast
unfathomable America of discount superstores and chain
restaurants and sun-baked suburban business parks, a
decadent amorality had worked its way like some malignant
rot through the nation's fiber. Consumed with the struggle
to rebuild, we New Yorkers were feeling fully American as
we hadn't in decades -- and now, suddenly, the ''real''
America is revealed as a manic, festering hive of greed and
corruption. It turns out all the Bedford Fallses are
actually Pottersvilles. Which makes us, as we observe the
mess from the Upper West Side and TriBeCa, feel all the
more victimized and righteous. And by the way? For the
record? We always had our doubts about the Internet and its
associated financial madnesses.

Would that it were so, that New York could now revel in its
innocence. In fact, if you have to choose the primary
breeding ground for the various business misdeeds now
consuming national attention, New York, I'm afraid, is the
place. I'm not even thinking mainly of Sam Waksal and
Martha Stewart and her socialite stockbroker, or of the
Upper East Side convicts Alfred Taubman and Dede Brooks.
I'm talking about all the ugly corporate implosions all
across the country. No matter where they are, lines of
blame for the companies' current circumstances lead
straight back to our city. And it's disingenuous to pretend
otherwise.

New York's (false) sense of distance from all this
malfeasance derives in no small part from a coincidence of
timing. The first seriously negative news article about
Enron in this newspaper happened to appear Sept. 9, 2001.
The subsequent revelations, which shriveled Enron's share
price from $35 to 29 cents in eight weeks, started
appearing in mid-October, when New Yorkers had more
immediate concerns than the accounting practices of
Houston-based energy-trading companies. Months passed
before we heard about the other big corporate scandals --
WorldCom, Adelphia, Tyco -- and by then we had already
acquired the habit of lordly obliviousness. Financial
monkey business in places like Clinton, Miss., and
Coudersport, Pa., was not really our affair.

But if infectious greed is the virus, New York is the
center of the outbreak. We may prefer to think of it as the
American cultural capital, or as a breathtaking physical
creation, or as simply the place where a plurality of the
country's most interesting people live. But New York is
also, inarguably, the money center of America and the
world, the capital of capitalism.

The two global superbanks, Citigroup and J. P. Morgan
Chase, are here. The New York Stock Exchange is, of course,
here. And most important for this discussion, the big
investment banks -- Morgan Stanley, Goldman Sachs, Merrill
Lynch, Credit Suisse First Boston, Lehman Brothers, Bear,
Stearns, J. P. Morgan and Citigroup's Salomon Smith Barney
-- are all here, too. It was New York investment bankers
who drove the mergers-and-acquisitions deal culture of the
80's and 90's and who most aggressively oversold the myth
of synergy that justified it. It was New York investment
bankers and their Wall Street brothers who trained a
generation of obedient American C.E.O.'s (by means of
stock-option-based compensation) to worry more about
jacking up their share prices in the short term than about
running their companies well for the long haul. It was they
who permitted the digital-technology giddiness of the late
90's to spread beyond Silicon Valley; Palo Alto venture
capitalists may have doled out most of the initial dot-com
money, but it was New York investment bankers who took all
those companies public for billions of dollars, thus
enabling the national festival of greed. It was they who
created an inherently corrupt equities research
establishment. It was they -- with their lawyers at the big
New York firms -- who invented the novel financial
architectures of Enron and WorldCom, just as it was the New
York consulting firm McKinsey & Company that provided Enron
with its egregiously go-go, ultra-fast-company ideology.

Moreover, it was the example of New York investment
bankers, earning gigantic salaries for doing essentially
nothing -- knowing the right people, talking smoothly,
showing up at closings -- that encouraged businesspeople
out in the rest of America to feel entitled to
smoke-and-mirrors cash bonanzas of their own.

New Yorkers didn't create the digital-technology mania of
the 90's. But while nearly all of the real achievements of
the Wired Decade -- laptops, flat screens, faster chips,
cheap and huge memories, P.D.A.'s, WiFi, instant messaging,
browsers, the Web itself, all the actual stuff -- were
accomplished by people elsewhere, it was New Yorkers who
made the scramble for instant wealth the endeavors'
overriding purpose. The dreamers and tinkerers of Silicon
Valley were not innocents, but they were, at worst, Drs.
Faustus willingly seduced by the slick Mephistophelean
agents of New York's blue-chip money culture.

At least one of the emigres from the Northeast was more
like Conrad's Kurtz, seducing the natives as he went
extravagantly native himself. Frank Quattrone, the
Manhattan banker turned Palo Alto-based technology
consultant for Morgan Stanley, ''was the first guy in the
New York investment banking world to take Silicon Valley
seriously,'' the technology investor Roger McNamee told the
magazine Business 2.0 last year.

Irrational exuberance bloomed around San Francisco in 1995,
but most of Quattrone's New York peers remained skeptical
until around 1997, and the national news media -- the
overwhelmingly Manhattan-based national news media -- held
out until at least 1998. Yet like eager latecomers in all
situations, when the Manhattan establishment finally did
sign on to the digital revolution, they came as born-again
enthusiasts. In just a year or so, the local conventional
wisdom changed from supercilious bemusement to stunned
resentment to bedazzlement and longing. In 1998, Conde Nast
bought the San Francisco-based Wired magazine. In 1999,
Gerald Levin, a smitten New Yorker, began courting Steve
Case and AOL on behalf of Time Warner. (That crush, of
course, has already become a very unhappy marriage.) Even
later in the game, the fall of 2000, six months after the
bubble had started to burst, the New York media company
Primedia bought the Web site About.com for $690 million, or
almost three times Primedia's current market value.

And just last year Primedia, for which I worked in the
mid-90's as editor of New York magazine, acquired
Inside.com, the online news service that I helped start in
1999. Inside had its offices in the Starrett-Lehigh
Building, the chic, brutalist Moderne block of lofts in
west Chelsea that was packed with dot-com enterprises
(including, still, Martha Stewart's). One day in the late
winter of 2000, an investment banker from Bear, Stearns
knocked on our door. Were we financed? Did we need capital?
Incredibly, she was going up and down the grungy halls,
making cold calls. This, we half-joked, must be a sign of
the top of the market. In fact, the actual market top came
a few weeks later -- and a few weeks after that was ''Black
Friday,'' April 14, the day Nasdaq stocks declined by an
average of nearly 10 percent. Inside.com closed its
financing -- from Chase, Goldman Sachs and Lehman Brothers,
among others -- the following week.

Probably the most significant media inflation of the bubble
came from CNBC, the New York-based cable channel, which by
1998 had become the ESPN for Americans' new national
pastime -- that is, sitting alone for hours, monitoring the
growth of your 401(k) and I.R.A. wealth, a kind of merry
Scrooge McDuck greed that before the mid-90's was socially
acceptable only in Manhattan. A 24/7 financial cable
service required a steady flow of credible stock-pickers;
as a result of their relentless exposure on CNBC and on
CNN's ''Moneyline'' (also broadcast from New York) and
CNNfn (ditto), equities analysts left their cubicles to
become quasi-glamorous minor media celebrities in a way
that can happen only in New York. And the best way for
these analysts to maintain their new, lucrative celebrity
was by continuously increasing their exuberance -- by
insisting that the Manhattan-based
ice-cream-and-video-delivery service Kozmo.com would
transform retailing, that Amazon's share price would hit
$400, that the merger of Time Warner with AOL portended the
dawn of a new era of civilization. The three most
important, bullish tech-stock analysts of the era were all
New Yorkers: Mary Meeker at Morgan Stanley, Henry Blodget
at Merrill Lynch and Jack Grubman at Salomon Smith Barney.

Moreover, the analysts -- ostensibly objective judges of
companies' prospects, the reality check to
investor-relations hype -- had become active participants
in the white-hot sales efforts of New York investment banks
and brokerages. No one was more responsible for that new
complicity than Frank Quattrone, who in 1998 persuaded his
employer, Credit Suisse First Boston, to give him direct
authority over the firm's technology-stock research staff.
He was therefore in an unprecedented position to enforce
his analysts' optimism about the stocks of companies that
C.S.F.B. took public. And it worked: in short order,
Quattrone turned C.S.F.B. from a minor I.P.O. player into
the second-largest underwriter in the business. Quattrone
worked in California, but the company's world headquarters
is on Madison Square in Manhattan.

At Salomon, meanwhile, Grubman was also very lucratively
combining the roles of analyst and investment banker. It
was he and his Salomon colleagues who engineered the
improbable acquisition of M.C.I. by scrappy little WorldCom
in 1997; without him, both companies, and all their
investors, might be doing just fine today. Since 1997,
Citigroup and Salomon have underwritten telecommunications
I.P.O.'s worth $17 billion, including those of Global
Crossing (whose board Grubman privately advised) and
Teligent; both companies are now bankrupt. Grubman attended
WorldCom board meetings and schemed with Salomon Smith
Barney bankers to funnel shares of hot I.P.O.'s to WorldCom
executives and directors. And who was the scrappy
Mississippi company's biggest customer? AOL Time Warner,
the huge New York company, which paid $900 million a year
to run its Internet traffic on WorldCom's network -- and
which in return demanded hundreds of millions' worth of
dubious WorldCom advertising in AOL Time Warner media.

And did the putatively tough New York-based press
scrutinize all this profligate fast-and-looseness? Ummm . .
. no. Only now, months and years after the fact, are we
hearing about the roles New York financial institutions
played in maintaining the illusion of Enron's health --
indeed, that it was gangs of ingenious New Yorkers who
choreographed nearly all of the most outlandish financial
and legal acrobatics. J. P. Morgan Chase supposedly
packaged Enron debt as ''credit derivatives'' and sold it
off to investors, and it also helped devise Enron's
questionable ''prepays'' -- that is, loans disguised as
commodity trades intended to make the company's huge debt
look more manageable. Citigroup supposedly provided loans
that were misleadingly recorded on Enron's books as cash
flow from oil-trading operations. In 1999, Merrill Lynch
decided to buy several Nigerian barges from its client,
Enron, seemingly increasing Enron's annual profit. The next
year, Merrill decided it didn't need them and sold them
back -- at a profit for itself. And although Enron's
headquarters are in Houston, its two financial evil
geniuses -- the former C.F.O. Andrew Fastow and his former
No. 2 Michael Kopper (who has pleaded guilty to wire fraud
and money laundering), both grew up in the suburbs of New
York, 45 minutes from Wall Street.

As for the accounting industry that gave its imprimatur to
these shenanigans, it does not have a geographical locus
(partly because the big firms try to project an image of
both ubiquity and localism), but the headquarters of two of
the Big Five -- PricewaterhouseCoopers and Ernst & Young --
are in Manhattan, and a third, Deloitte & Touche, is in
suburban Connecticut. If anywhere on earth can be
considered the accountancy capital, it's New York.

Jack Grubman, like all analysts really just a glorified
business beat reporter, was paid tens of millions of
dollars by Salomon during the last half-decade. From
Salomon's perspective, there was, of course, a real (albeit
unethical) economic rationale for such compensation, but
from Grubman's perspective, there was one additional
factor: he lives and worked in Manhattan. The culture of
Manhattan generates in normal successful people (and by
''normal,'' I mean people who do not perform music or act
professionally or lead their league in scoring) a hunger
for insane as opposed to merely neurotic amounts of wealth.
And those pathological Manhattan norms helped fuel the
C.E.O. crime wave.

The C.E.O. crooks all yearned to be playas, and playas have
to have at least a foot in New York. They needed to wake up
in the city that never sleeps, to find they were kings of
the hill, tops of the heap. Dennis Kozlowski, his little
town blues just melting away, made Tyco buy him a New York
apartment, and he rationalized it as a legitimate business
convenience. But the scale and opulence of his convenience
were all about living the only-in-Manhattan, M.B.A. Cribs
lifestyle: an $18 million duplex on 5th Avenue dressed up
with perhaps $7.5 million in decorations (including a
$6,000 shower curtain) and another $4 million worth of
supposedly sales-tax-free art. Such is the order of
magnitude required to impress the Manhattan money culture.

The pharmaceutical entrepreneur Sam Waksal, now under
indictment for forgery and insider trading, is routinely
identified in terms of his deluxe Manhattan real estate --
the ''art-filled SoHo loft,'' where he was arrested at dawn
one Wednesday this summer. The cable TV company Adelphia is
based in unglamorous western Pennsylvania, but its founder,
former chairman and supposed looter, John Rigas, was
arrested (also at dawn on a summer Wednesday) in his
corporate apartment on East 75th Street -- one of
Adelphia's two fancy Manhattan apartments occupied by
Rigases. Jean-Marie Messier, the former C.E.O. of Vivendi,
is not a crook -- but when he decided last year he was
going all-out to become a global media presence, he had his
company provide him a $17.5 million duplex apartment on
Park Avenue. To his enemies back in France, this New York
ostentation reportedly was proof that he'd been co-opted.
And although he had famously derided other executives'
''golden parachutes,'' now that he has been fired himself,
he reportedly would like to keep the duplex. In New York,
the greed really is infectious, like glee.

Now that the Enrons and WorldComs have imploded, the
endgames, too, are playing out between the Battery and 59th
Street. Having been effectively concocted by Salomon five
years ago, WorldCom is today relying on different New York
investment bankers, the Blackstone Group and Goldman Sachs,
to broker its deacessions and possible dissolution. And the
best $600-an-hour New York criminal and bankruptcy lawyers
are as furiously busy now as the best $600-an-hour New York
securities and corporate lawyers were during the late 90's.
WorldCom has retained the firm of Weil, Gotshal & Manges.
Sam Waksal is represented by Paul, Weiss. Dennis
Kozlowski's criminal counsel is the Park Avenue lawyer
Stephen Kaufman. Another Park Avenue criminal lawyer, Peter
Fleming of Curtis, Mallet-Prevost, Colt & Mosle, represents
John Rigas of Adelphia, as well as Michael Odom, who had
been one of Arthur Andersen's chief Enron-minders in
Houston. Fleming, who defended Drexel Burnham Lambert in
the late 80's, as well as John Mitchell and Don King,
recently told this newspaper, ''I've never had a client I
thought was guilty,'' thus demonstrating another very New
York trait -- well-compensated, self-righteous chutzpah --
that runs like a Day-Glo red wire through all these cases.

On the other hand, New Yorkers are also leading the
efforts to nail the wrongdoers. Eliot Spitzer, the state
attorney general, struck a settlement earlier this year
with Merrill Lynch concerning the independence of its stock
analysts; he's now investigating how Citigroup's Salomon
Smith Barney became the lead underwriter on the AT&T
Wireless I.P.O. in 2000, earning Salomon a $45 million fee,
after Sanford Weill, the Citigroup chairman and AT&T board
member, encouraged his star analyst -- Grubman -- to
rethink his negative rating of AT&T. The U.S. attorney's
office for the Southern District of New York is prosecuting
the Rigases of Adelphia as well as the former financial
executives of WorldCom. The Manhattan district attorney is
prosecuting Kozlowski, and investigating the Enron
''prepay'' schemes contrived by Citigroup and J. P. Morgan
Chase. And the New York financial cable channels and
newspapers and business magazines, of course, are now
zealously on the case. The downside is not as exciting to
report as the upside was, but it's a story.

However, except for a few unlucky, overreaching dweebs like
Jack Grubman, forced out of Salomon in August, the New
Yorkers who enabled the excesses of late-90's-style
American business are still running the show. And Frank
Quattrone, for instance, was rewarded last November with an
appointment to C.S.F.B.'s executive board -- which
presumably means he'll be spending more time at
headquarters here in New York.

In other words, it's all about us -- still, and again. A
big reason people in this city were initially reluctant to
drink the New Economy Kool-Aid was the sense that the
digital revolution threatened our primacy in the national
economy and culture. And indeed it did. So when the
revolution was declared a failure two years ago, New
Yorkers could, gloatingly, revert to their complacent
status quo. And now? Now that we understand it was New
Yorkers who pulled (and are pulling) the important strings
behind the Enrons and WorldComs, that a Manhattanoid
psychology fed the despotic grandiosity of C.E.O.'s all
over America? Will we mumble apologies, lie low, try to
atone? No: it will only make us more insufferably smug. New
Yorkers by definition want to think of their city as the
great imperial metropolis, the national locus of power and
excitement, whatever forms the power and excitement assume.
In addition to their official pride (in skyscrapers and art
and baseball teams and firefighters and the glorious human
mosaic), New Yorkers have always been happy to take
perverse pride in this city: in high-end gangsterism, in
the secret shadow zones, in the sharpers who seem to get
away with it just because they're New Yorkers. For better
and for worse, New York rules.

Kurt Andersen is the author of the novel ''Turn of the
Century'' and the host of the Public Radio International
program ''Studio 360.''

http://www.nytimes.com/2002/10/04/magazine/06BLAME.html?ex=1034830126&ei=1&e
n=fb96ba541954aade


---

10. 'Flipping' Goldman fingered

Congressional report offers damaging summary of bank's dotcom boom years

David Teather in New York
Friday October 4, 2002
The Guardian

Goldman Sachs was yesterday dragged into the scandals that have
shaken Wall Street when a congressional panel detailed a litany of
alleged abuses designed to enrich the bank and its clients.

The allegations were made in a report from the House financial
services committee, which provided a damaging indictment of Wall
Street practices in the 1990s boom.

Goldman was accused of allocating shares in sought-after stock
market flotations to executives of 21 companies as an inducement for
investment banking business. The shares were distributed to, among
others, former Enron chief executive Kenneth Lay, disgraced Tyco
chiefs Dennis Kozlowski and Mark Swartz, and John Legere of Global
Crossing.

Other Goldman clients to have received shares in oversubscribed IPOs
included the last remaining dotcom favourite, Meg Whitman, chief
executive of online auctioneer EBay, Jerry Yang, the co-founder of
Yahoo! and William Clay Ford, of Ford Motor Company. Ms Whitman is a
Goldman director and EBay has paid the firm $8m in investment
banking fees since 1996.

But the report also highlights broader abuses during the
internet-driven frenzy of the last decade. They included the use of
research to hype companies that were investment banking clients, the
possibly illegal underpricing of IPO shares to enable quick profits,
and potentially improper due diligence in bringing companies to
market.

Two thirds of the 22 firms brought to market by Goldman examined by
the committee have since lost at least 96% of their value, and
several have filed for bankruptcy protection. The committee noted
that Goldman dropped analyst coverage of 17 but did not, in a single
case, issue a "sell" recommendation. "Our goals are to correct
abuses in the markets and to make the system fair for the average
investor," said the committee's chairman, Michael Oxley.

"People are willing to take a risk with their money, but they're not
willing to gamble when the system seems rigged against them. There
is no equity in the equities market."

The report also noted alleged abuses at Salomon Smith Barney and
Credit Suisse First Boston, which have both been under the spotlight
of markets regulator the SEC and New York State's attorney-general,
Eliot Spitzer.

There is a growing sense among Wall Street critics that the
investment banks which made it rich in the 1990s not only profited
from the boom but were the driving force behind its creation - and
the damaging slough that has accompanied its bust.

The SEC yesterday reached agreement with Mr Spitzer, the New York
stock exchange and others, to coordinate efforts on their
investigations. In the next few weeks they will develop a template
that can be used to work out settlements for the inquiries still
under way.

Many sold the shares within days for a huge profit - so-called
flipping. Eight of the firms Goldman underwrote gained at least 173%
on the first day of trading. Tyco has given Goldman $57m in banking
fees since 1996, Global Crossing has paid $45m and Enron $19m.

A spokesman for Goldman said the report was "an egregious distortion
of the facts". Recipients of the IPO shares were clients of the
bank's private wealth management business who had placed orders for
shares. "Any suggestion that we were involved in improper practices
is simply untrue."


---

11. bear culture

Date: Mon, 23 Sep 2002 14:41:17 -0400
From: Doug Henwood <dhenwood {AT} panix.com>


The folks at the Elliott Wave Theorist have just put out a special
report, saying that the bear market in U.S. stocks is about to get
very nasty - what we've seen so far is merely prelude.

They include this bit of cultural criticism:

>The social scene is littered with additional signs of the
>polarizing, dissonant, ugly and destructive themes of a bear market
>in social mood. The results range from an emerging interest in
>unions and a return of labor strife to escalating levels of office,
>shopping and road rage and a sudden lurch forward for separatist
>campaigns from Kashmir to the San Fernando Valley. In addition to
>its own falling stock prices (shown in the chart on page 6) and the
>omnipresence of long skirts in the latest catalogues, the fashion
>industry offers a number of confirming indicators. These include an
>end to casual dress codes and a "shocking blood-spattered dress" and
>"death hoods" at a recent fashion show. The burqa-look was part of a
>show in Spain where models sported "nooses, execution-style hoods
>and body covering bandages." Bear market momentum must still be
>building, because instead of embracing the gloomy style, the
>audience broke up the show with boos and whistles. Still, the
>impulse behind it is clearly bearish, as the basic instinct of
>fashion in a declining phase is to cover up. The urge to veil the
>face and head - a part of the human anatomy that has been on display
>for centuries - and the angry response to it probably speaks to the
>high degree of the trend change. So, don't count the "hooded look"
>out.
>
>The widespread allusion to death is important, too. Years ago, The
>Elliott Wave Theorist identified "deliberately ugly or 'dead'
>patterns and structures" as the expression of a negative mood in
>public art. As the current decline gathered steam, death literally
>became a medium. It emerged as a form of avant garde expression last
>year when a collection of "corpse art" was put on display in Berlin
>by an anatomy professor. A pioneering preservation technique called
>"plastination" was used to produce an odorless, extraordinarily
>preserved corpse. "At least one person a day faints at the
>exhibition," reports its proud proprietor. This year, the collection
>moved to London, where it has become a popular tourist attraction.
>HBO's "mordant hit series" is Six Feet Under, a drama about a
>dysfunctional family of undertakers. "They do amazing things with
>dead bodies on Six Feet Under," says Newsweek. It praises the show
>as "one of the smartest, funniest and deepest shows on television."
>Every episode begins with someone dying. The New York Post reported
>September 18 that another "violently disturbing sculpture popped up
>last week in the middle of [Rockefeller] Center's busy underground
>concourse - right in front of the ice-skating rink. It depicts a
>naked woman, limbs flailing, face contorted, at the exact moment her
>head smacks pavement following her leap from the flaming World Trade
>Center." The sentiment surrounding its appearance is unlikely to
>mark a bottom, though, because once word of the Tumbling Woman hit
>the newspapers, public outrage led to its removal. Poor taste is a
>hallmark of a bear market. Tastes today are poor enough to inspire
>but not yet support such a display. By the end of the decline, works
>that are at least as ugly as the junk that got banished in the first
>half of the 1980s will occupy public spaces across the country.
>
>At the outset of the long topping process, At the Crest of the Tidal
>Wave said the downturn would lead to the creation of a whole new
>bear market social order. These cultural seedlings will eventually
>become the "dramatic upheaval" called for in the final chapter of At
>the Crest. So far, the effects have only impacted a small percentage
>of the population. Eventually, the forces will reshape the lives of
>just about everyone. When all is lost and things can only get worse,
>the bottom will be in place. The first signs of the clearing skies
>won't be perceptible until the market is rising again in a third
>wave.

---

12. WorldCom Fall Imperils Ed. Tech Aid
http://www.edweek.org/ew/ewstory.cfm?slug=03marcopolo.h22

An Internet training program for educators that was adopted by 50 states and
has been used by more than 180,000 teachers has been struggling for survival
because of the financial free fall of its primary benefactor, WorldCom Inc.

The program, called MarcoPolo, offers teachers free Web-based educational
resources and face-to-face training in how to use the Internet in their
classrooms. WorldCom and MCI Communications, which started the program
before
WorldCom purchased MCI in 1999, have together given the MarcoPolo program
$50
million since 1997.Before WorldCom filed for Chapter 11 bankruptcy
protection
this past July, MarcoPolo aimed to train 2.4 million teachers by 2005.

 But that goal is now in serious jeopardy as the fate of the program itself
hangs in the balance. "It is a very bad time," said Caleb M. Schutz, who is
in charge of MarcoPolo, which is based at WorldCom's headquarters in
Ashburn,
Va. "You couldn't have much of a worse climate economically for federal and
state government funding, which I'm trying to get, or for private and
foundation funding, which I'm trying to get.

"Without major new funding sources, MarcoPolo's training programs will
probably shut down sometime in this school year, he said.Undoubtedly,
experts
said, MarcoPolo's troubles are an extreme example of what can happen to any
philanthropically supported education initiative during sluggish economic
times.

 But they also said the program's shaky future further illustrates the
difficult challenges facing corporate- sponsored education initiatives.
"When
companies face financial hard times, in order to make a profit, they have to
cut expenses, and philanthropy is an expense," says Melissa S. Brown, the
managing editor of "Giving usa," an annual report on individual, corporate,
and foundation giving by the Indianapolis- based American Association of
Fundraising Counsel Trust.Overall, she said, corporations are either giving
fewer dollars or just maintaining their funding levels for philanthropic
purposes.

Corporate giving fell by 12 percent last year, according to the AAFRC
report.
Since the WorldCom bankruptcy filing, which has been surrounded by
allegations of accounting fraud by the Securities and Exchange Commission
and
the arrests of key officers, MarcoPolo has distanced itself from the
telecommunications giant by getting the company's permission to remove its
once-ubiquitous logo from the program's Web site.

The program also has formed the independent, nonprofit MarcoPolo Education
Foundation, although Mr. Schutz, who is serving as the foundation's
president, and the rest of the program's staff of 40 remain on WorldCom's
payroll. As of last week, the foundation had received only pledges of
$96,000
from a bank in Seattle and $10,000 from the Mississippi state education
department.

One potential wellspring of support is state education departments, Mr.
Schutz said. He said that he had received letters of support from state
schools superintendents in Mississippi, South Carolina, Wisconsin, and
Virginia, and added that "more are in the works.

"Ironically, when WorldCom filed for bankruptcy protection, Marco Polo had
just achieved the rare status of being adopted by all 50 states. The extent
of those relationships varied, but generally consisted of arrangements to
add
MarcoPolo training to the states' professional-development programs, linking
the MarcoPolo site to the state education departments' Web pages, and
correlating MarcoPolo materials with states' academic standards.

Theoretically, states could support the program with federal block grants
for
teacher training under the recently reauthorized Elementary and Secondary
Education Act. But that's "really a lot to ask of states, as it's been cut
off with no lead time," said Mr. Schutz, who has been traveling across the
country to enlist state officials to help save his program. In an Aug. 21
letter to Mr. Schutz, South Carolina's state schools chief, Inez M.
Tenenbaum, wrote that her state favored supporting the Marco Polo program
with state money while the foundation searched for funding.

Mississippi has also pledged $10,000.Ms. Tenenbaum wrote that MarcoPolo
lesson plans were an "integral part" of South Carolina's collection of
online
resources for teachers. Maryland, however, pulled back from the program over
the summer, although state officials said they were just adjusting their
priorities.

 Many Maryland school districts still use MarcoPolo training, the program's
officials said. Stipends Cut MarcoPolo officials underscore that WorldCom's
situation has not yet stopped the training programs: More than 17,000
teachers have been trained since the company announced its bankruptcy
filing.
The continued service is due largely to the grace of the programs' 100
"cadre
trainers," who teach teachers and administrators, who in turn are expected
to
train educators in their schools and districts.

Susan DePlatchett, a professional-development coordinator at the University
of Maryland's college of education and a MarcoPolo trainer in her state, has
conducted four one-day training sessions in Maryland and Virginia school
districts since the WorldCom bankruptcy filing. She is planning to fulfill
her commitment to do several more between now and November, even though she
will no longer receive compensation for her expenses, and the $300 daily
stipend the program has paid trainers has been slashed to $200.

Still, she did cancel a training appointment in Alabama because she would
had
to have paid for the plane ticket herself. "When the bankruptcy hit, I said
I
believe so strongly in the program I would be willing to fulfill my
commitment to the training on a voluntary basis," she said.

Training revolves around learning to use the MarcoPolo Web site, which is a
combination of carefully integrated Web sites by the John F. Kennedy Center
for the Performing Arts, the National Council on Economic Education, the
National Endowment for the Humanities, the National Council of Teachers of
Mathematics, the American Association for the Advancement of Science, and
the
National Geographic Society. Partner sites by the International Reading
Association and the National Council of Teachers of English are due to be
added to the Web site in October.

 Each site has some of the best resources that the group has to offer-all
correlated to national, and in some cases, state academic standards. The
sites are also integrated with one another and can be searched with a common
search engine. That makes the site especially useful to teachers who use an
interdisciplinary approach, Ms. DePlatchett said.Staff Writer Rhea R. Borja
contributed to this report

---


Hi Geert--

Here's a bizarre twist that you might be interested in: Apparently,
some of the members of the congressional committee investigating IPO
corruption were THEMSELVES given access to IPO shares.  Whew.

Hope all's well with you.

   --D.

--------------------

13.  Lawmakers Joined Executives
In Profiting From IPO Access

By CHRISTINE B. WHELAN and TOM HAMBURGER
Staff Reporters of THE WALL STREET JOURNAL
September 6, 2002

WASHINGTON -- Several members of congressional committees now
investigating how Wall Street doles out lucrative initial public
offering stocks to favored bigwigs have themselves gotten access to
coveted IPOs.

The most prominent is New York Rep. John LaFalce, the House Financial
Services Committee's top Democrat. In calling for hearings last week,
he contended that IPO allocations based on inappropriate
considerations was one of many investment-banking practices "that are
atrocious but not illegal." Long an active investor, Rep. LaFalce in
1995 secured $15,000 of IPO stock in Healthcare Services Corp., some
of which he sold three months later for a $5,000-plus profit.

Mr. LaFalce denied getting favorable treatment from his broker and
said he lost money overall on the investment, which he called a
"once-in-a-life" event. "There's no awkwardness at all," said
Mr. LaFalce of his participation in the IPO inquiry. "I'm not speaking
against IPOs. Companies need to come to the marketplace and we want to
encourage that. [But] we want to make it as open as possible."

Mr. LaFalce is one of numerous members who dabbled in such shares
during the IPO salad days, when it was almost certain that prices
immediately would spike. Others include Gary Ackerman, another New
York Democrat on the Financial Services Committee, and California
Democratic Sen. Barbara Boxer, who sits on the Senate Commerce
subcommittee on consumer affairs, which is likely to hold IPO hearings
this month.

Wall Street's habit of favoring big institutional and individual
investors, celebrities, corporate chieftains and other VIPs with IPOs
leaves average investors with almost no chance of securing
them. Neither Congress nor past administrations have ever tried to
force Wall Street to allocate in a more egalitarian fashion. But the
atmosphere seems to have shifted in the aftermath of revelations that
Citigroup Inc.'s Salomon Smith Barney unit allocated nearly one
million hot IPO shares to WorldCom Inc. executives who were giving the
firm tens of millions of dollars in investment-banking business.

The House Financial Services Committee has subpoenaed documents on
those allocations and asked Credit Suisse First Boston, part of Credit
Suisse Group, and Goldman Sachs Group Inc. to disclose documents on
their IPO allocations. Salomon has said its allocations conformed to
industry norms. Goldman and Credit Suisse First Boston pledged to
cooperate with the inquiries.

Meanwhile, Securities and Exchange Commission Chairman Harvey Pitt
late last month called for the National Association of Securities
Dealers and the New York Stock Exchange to review the IPO process and
consider additional antifavoritism rules beyond the ones the NASD
recently proposed sending to the SEC for approval.

"It's never been a level playing field," says Neil Weisman, general
partner at Chilmark 21st Century Capital, a New York hedge fund. "But
if Congress is getting shares, my guess is it's because they may give
a favor down the line, not because they generate big commissions."

The congressional ethics committees have never issued rules on IPOs,
though House and Senate rules and federal law prohibit members from
taking anything in exchange for official action. "If a member really
has a relationship with a broker that would entitle them to
participate in an IPO, that's fine," said Stan Brand, a Washington
ethics lawyer. "But if the shares could be seen as provided based on
the individual's status as a public official, that's going to draw
scrutiny."

Before the IPO craze petered out in 2001, there were always at least a
few members each year whose financial disclosure statements revealed
IPO trades.

Mr. Ackerman reported profits of between $1,800 and $6,700 on several
IPOs in 1993. Mr. Ackerman said he lost money on other IPOs and called
any suggestion that he got special treatment "absolutely absurd." He
said he didn't even know what an IPO was when his broker purchased the
shares without his knowledge. Nevertheless, he said he discontinued
investments with that broker after an article in The Wall Street
Journal mentioned the trades.

"I was not making the decisions; no one was rewarding me for
anything," Mr. Ackerman said. "Making investments in American
companies is not a crime and is not something someone should be
ashamed of," he said. On the coming hearings, Rep. Ackerman added:
"The IPO process is problematic in and of itself."

Ms. Boxer and her husband frequently trade stocks, and they
participated in five IPOs in 2000, producing thousands of dollars in
profits. For example, they purchased stock in the high-tech company
Avenue A at its opening price of $24 per share and sold the next day,
when its price hit $72. A spokesman said Ms. Boxer's financial adviser
made the trades without her knowledge and gave her no preferential
treatment. Ms Boxer has since placed her investments in a blind trust.

Lawmakers' IPO trades first got media attention in 1993, when it was
disclosed that then-House Speaker Tom Foley made more than $150,000
over five years through IPO deals arranged by a longtime friend. He
promised to stop investing in IPOs.

When he was in the House in 1992, Sen. Robert Torricelli made $70,000
from a New Jersey bank IPO. Responding to criticism when the deal was
disclosed the next year, he promised not to trade in future IPOs, but
in 1997 he reported making $1,692 on nine IPOs. The senator's staff
said his brokerage firm recommended the deals but afforded him no
favoritism.

Former New York Sen. Al D'Amato, a Republican, made a $37,125 profit
in one day trading on Computer Marketplace Inc.'s IPO in 1993. He
denied that he had received favored treatment from his Stratton
Oakmont Inc. broker, but an inquiry conducted for the SEC concluded
that Stratton had bent its own rules "to service a United States
senator." The Ethics Committee found "no improper conduct."

Despite those controversies, many other members of Congress have since
traded in IPOs. Among them are California Democrat Nancy Pelosi, now
the House minority whip; and Sens. Fred Thompson, a Tennessee
Republican; and Judd Gregg, a New Hampshire Republican. The wives of
Reps. Peter Deutsch, a Florida Democrat, and Lloyd Doggett, a Texas
Democrat, and Sen. Jeff Bingaman, a New Mexico Democrat, also have
been given access to IPOs. The members denied getting inappropriate
treatment.

While he was a corporate chief executive in 1999, Vice President Dick
Cheney flipped some of the year's most sought-after IPOs, producing
$45,000 in profits. During the presidential campaign, a spokeswoman
said his broker gave him "no special consideration whatsoever."

-- Gregory Zuckerman and Ryan Dezember contributed to this article.





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