Dirt Diggers Digest No. 67

Editor: Philip Mattera

March 9, 2006



-- 1. A closer look at the Enron trial

-- 2. Sudan divestment drive creates new research needs

-- 3. Carbon Disclosure Project seeking more data

-- 4. Bush budget proposal would end access to EPA documents

-- 5. Uncertainty over the rules regarding company disclosure of SEC probes

-- 6. Keeping up with corporate governance

-- 7. “Expect More” or less? OMB assesses federal programs

-- 8. Charging heavily for access to free sites with corporate filings

-- 9. Zillow marries satellite imagery and property records

-- 10. Hedge funds become a little less secret

-- 11. Celebrate Sunshine Week

1. A closer look at the Enron trial


The biggest corporate crime trial of our time—the prosecution of former Enron honchos Kenneth Lay and Jeffrey Skilling—is now at a high level of drama as the company’s one-time chief financial officer, Andrew Fastow, testifies on who knew what when. If you are not satisfied with the coverage you’re receiving from your favorite news outlet, there are two places to turn for a wealth of background information and documents relating to the case. The Houston Chronicle has set up a web page titled The Fall of Enron that contains legal commentary, blogs, court documents, a diagram of the courtroom where the case is being heard, and even an Enron quiz. A no-nonsense site put up by the U.S. Department of Justice has links to the prosecutors’ trial exhibits and their list of witnesses.


2. Sudan divestment drive creates new research needs


In a campaign echoing the South African divestment efforts of two decades ago, institutional investors are being pressed to dispose of their holdings in companies that do business in violence-ridden Sudan. Educational institutions such as Yale and Brown University have committed to divestment, and states such as New Jersey and Illinois have imposed such restrictions on their public pension funds. All this activity has created a demand for more information on which corporations have ties to Sudan. A limited amount of information is available on campaign sites such as Sudan Divestment. To serve the more detailed needs of institutional investors, leading advisory services are coming out with Sudan-related research tools. KLD Research & Analytics has launched its Sudan Compliance Service, while Institutional Shareholder Services offers Compliance Solutions for Sudan Divestiture.


3. Carbon Disclosure Project seeking more data


The Carbon Disclosure Project, a coalition of more than 200 institutional investors that together manage more than $31 trillion in assets, recently issued a request to 1,800 of the largest companies in the world, asking them to provide information on their greenhouse gas emissions. This was the fourth such request by the Project, which was founded in 2000 “to encourage the development of a common emissions measurement methodology and to facilitate its integration into general investment analysis.” The Project’s website contains the responses of hundreds of companies to its previous appeals.


4. Bush budget proposal would end access to EPA documents


The Bush Administration’s proposed 2007 budget would cut funding for the network of 27 libraries and information centers operated by the U.S. Environmental Protection Agency around the country. Organizations such as the Special Libraries Association have strongly criticized the proposal, while Public Employees for Environmental Responsibility has pointed out that, as a result of the budget cuts, “the agency will pull the plug on its electronic catalog which tracks tens of thousands of unique documents and research studies that are available nowhere else.” PEER notes that the biggest users of the libraries and the database are the EPA’s own scientists and enforcement staffers.


5. Uncertainty over the rules regarding company disclosure of SEC probes


Corporate lawyers are increasingly unsure what procedures companies should follow when it comes to disclosing the existence of an investigation by the Securities and Exchange Commission. According to a recent Reuters story, “uncertainty over investigation disclosure has companies playing a guessing game on how, when and whether to tell the world about SEC inquiries and the steps that typically follow.” In an interview with the wire service, Commission Chairman Christopher Cox gave a less-than-completely-helpful answer when he said that companies should use “materiality” in determining whether to disclose. In a recent speech, SEC Commissioner Paul Atkins expressed frustration over the practice by companies of disclosing tentative settlements with the SEC staff rather than waiting until a final agreement has been approved by the Commission. Speaking later with Reuters, Atkins said the SEC “should give guidance” about disclosure procedures. “Right now people are so scared of being second-guessed.”


6. Keeping up with corporate governance


For those of you who cannot get enough of corporate governance discussion, Institutional Shareholder Services has launched a blog on the issue. ISS immodestly says that its Corporate Governance Blog “is expected to be the Web’s most comprehensive compilation of institutional level corporate governance content, including information on emerging corporate governance trends, proxy voting, social and environmental issues, shareholder meeting commentary, compliance considerations and other areas of interest.” The launch of the blog came a few weeks after ISS introduced a print publication called Governance Weekly. Note that ISS Corporate Government Quotients for public companies can be found at no charge on Yahoo Finance (in a firm’s Company Profile).


7. “Expect More” or less? OMB assesses federal programs


The U.S. Office of Management and Budget recently launched a website that is supposed to provide information on the progress of the federal government in its efforts “to ensure its programs perform well.” Called Expect More, the site evaluates 793 programs by labeling each one Effective, Moderately Effective, Adequate, Ineffective or Results Not Demonstrated. In the regulatory area, it’s hard to know whether negative ratings mean that agencies are considered insufficiently aggressive or too aggressive. The SEC’s Division of Enforcement gets a grade of “Results Not Demonstrated,” as do agencies such as the Consumer Product Safety Commission and the Federal Election Commission. FEMA’s disaster response program is deemed “Adequate.”


8. Charging heavily for access to free sites with corporate filings


The migration of public information such as state corporate filings to the open web was supposed to make such records easily available to those who could not afford subscriptions to high-end data providers such as Lexis-Nexis or Westlaw. That does not stop some companies from trying to profit from free services. The latest example is SecSt.com – a service that is charging a whopping $720 a year for a set of links to Secretary of State websites across the U.S. This is more exorbitant than Search Systems, which started charging a fee of $5 a month to users who don’t want to endure a delay of 20 to 30 seconds after clicking on a link. If you don’t have money to burn, try the free BRB links to state and local public records of all kinds and the compilation of info specifically on business filings databases at LLRX.


9. Zillow marries satellite imagery and property records


The marriage of satellite imagery and public records is giving rise to databases that can be quite useful when researching the neighborhood where a corporate facility is located or where an executive (or anyone else) lives. A new arrival on the scene is Zillow, a free service that allows you to zoom in on any street in the United States and see an image of the structures and overlaid estimates of the market value of the homes (based on assessments, transactions and other data) . If insufficient information is available for such estimates, the service will show assessed values.


10. Hedge funds become a little less secret


Hedge funds, the secretive investment vehicles used mainly by the wealthy, became a little more transparent recently, when an SEC disclosure rule went into effect. Under the rule, hedge fund managers must now file Form ADV, which gives investors background information on the people managing their money. ADV forms for managers of hedge funds and other investment advisors can be found on a section of the SEC’s website. For an analysis of the new role of hedge funds as corporate raiders, see the latest issue of our sister publication, the Corporate Research E-Letter.


11. Celebrate Sunshine Week


The week of March 12 to 18 is being celebrated as Sunshine Week by a variety of organizations concerned about the rise of government secrecy in the United States. Among the events will be a public forum sponsored by library groups held at the National Press Club in Washington and transmitted by satellite to sites around the country.


A cumulative index of sources (with links) mentioned in issues of the Dirt Diggers Digest can be found on the web.