Monday, July 30, 2007

Cedar Fair in Takeover Talks

New York Post Exclusive, by Peter Lauria, July 30, 2007:

Cedar Fair Entertainment Co., the nation's third-largest theme-park operator, has entered into quick-moving talks with investment firm Destiny Capital Solutions about a $4.1 billion takeover, The Post has learned.
The Post broke the news three weeks ago that Cedar Fair was reaching out to private-equity firms to gauge their interest in a buyout on the condition that the company's management team remained in place.
That's a caveat Destiny Capital is willing to accept, with a spokesman for the firm saying that it has agreed to keep Cedar Fair CEO Richard Kinzel, 66, and other managers in place for a period of time, should a deal be reached.
While the talks with Destiny Capital are at an early stage and could break down, and while other bidders could emerge, the spokesman said the two sides have had constructive negotiations since first making contact two weeks ago.
The deal Destiny Capital proposed calls for paying $4.1 billion, or a 20 percent premium over Cedar Fair's current market value, to acquire all of the theme-park operator's shares.
The firm also said it plans to commit at least $500 million, and as much as $800 million, to upgrade Cedar Fair's 12 amusement parks, six water parks and six hotels, which include Knott's Berry Farm in California and Star Trek: The Experience in Las Vegas. Only Disney and Six Flags are bigger players in the theme-park world.

Friday, July 27, 2007

Pop Goes the Buyout Bubble

Hear that sound? That was the private-equity bubble finally getting pricked on Thursday, as the market for debt -- the jet fuel that had propelled it to dizzying heights -- slammed shut.The stock market plummeted 311 points as investors erased the takeover premiums that had increasingly propped up share prices for dozens of companies that had been considered buyout targets. The buyout frenzy also helped fuel the large profits made by investment banks and gave companies access to easy money, which was often used to buy back stock.Among the hardest hit stocks was one of the buyout management firms that had managed to go public. Shares of the Fortress Investment Group dropped more than 6 percent, to $19.31. The Blackstone Group fell as much as 8 percent during the day but finished up 19 cents, at $25.70. It went public last month at $31.Some analysts yesterday openly speculated that Kohlberg Kravis Roberts should pull its initial public offering.
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Wednesday, July 25, 2007

Chrysler Throws Salt in Citigroup’s Wounds

Citigroup is one of the banks that will, at least temporarily, be left holding the bag after investors took a pass on the sale of $10 billion of loans at Chrysler’s auto unit for the company’s leveraged buyout. (The others include J.P. Morgan Chase, Goldman Sachs Group, Bear Stearns and Morgan Stanley.)
It’s the biggest chunk of paper forced on investment banks since debt- buyers decided last month to stop financing buyouts with easy terms. It isn’t good news for either the banks or the buyout firms. There will come a point, if we aren’t there already, when banks refuse to make new loan commitments. That’s because they’re too occupied getting rapidly- accumulating paper off their books. (The giant Alliance Boots deal in Europe also is now headed down the same path — though Citigroup doesn’t appear to have a primary role there.)
Chatter among investment bankers lately has focused on Citigroup, which is said to be clamping down especially hard on making new loans. Indeed, according too this story in the Financial Times today, Citigroup could pull the plug on financing for the buyout of EMI, which would be “suicidal” for its relationships with clients, the paper quotes one source.
Citi has the misfortune of having been involved in a lot of the buyout loans that have soured lately, including Allison Transmission, U.S. Foodservice, Dollar General and ServiceMaster. It also has a role in three of the coming megadeals that still need to be financed: First Data, TXU and Clear Channel Communications. Investors are taking notice. Citi’s stock is down 12% this year, even after it reported better-than-expected second-quarter earnings last week, compared with a 7% decline for J.P. Morgan’s stock.

Postponements worsen loan glut

From the, July 25, 2007:

By avoiding the pain of the debt financing markets now, are issuers who are delaying their deals only making matters worse for themselves when they finally do come to market?
That is the fear of some market participants as more and more companies, faced with a precarious loan market, postpone debt financings until after Labor Day. The postponements are adding to an already-large and growing pipeline of debt at a time when demand — in the form of collateralized loan obligation funds — has fallen off dramatically.

Merger season heats up

From The, July 25, 2007:

If the past two years are any guide, August should be one of this year's busiest months for mergers.
According to the Federal Trade Commission's latest report to Congress, filed Tuesday, July 24, 186 mergers were reported to the government last August, more than any other month in the last fiscal year. In the prior year, August missed the top spot by only one, with 170 companies telling the government they were getting ready to make an acquisition.
One reason for August's popularity: That's the latest companies can request government approval for a deal and expect to get a decision in time to close the merger by the end of the calendar year.

Monday, July 23, 2007

New state law aims to make Ohio more business friendly

Cincinnati Business Courier - July 19, 2007
Gov. Ted Strickland signed a law Thursday designed to make Ohio a more competitive place for public companies and encourage all businesses to reside in the state.
The law, known as House Bill 134, will become effective Jan. 1, 2008, and give corporations the opportunity to use majority voting instead of plurality voting for its board of directors.
Under majority voting, directors can be elected by affirmative votes from a majority of shares eligible to be voted at a meeting.
Plurality gives voters two voting choices, "for" or "withheld" and only "for" votes are counted. This outcome allows someone to be elected on only one "for" vote.
"This bill builds on the successes of our prior corporate modernization legislation from last year, and helps Ohio-incorporated entities remain here by giving shareholders the voting rights they are increasingly demanding," said Ohio House Majority Whip Bill Seitz, R-Cincinnati, in a press release.
Other states that already allow majority voting include California, Delaware, Florida, Illinois and Michigan.
State Sen. David Goodman, R-Columbus, chair of the Senate Judiciary and Civil Justice Committee and one of the bill's cosponsors, said many Ohio-based companies had received shareholder proposals demanding re-location outside of the state for lack of majority voting.

Thursday, July 19, 2007

Why the M&A Boom May Continue

WSJ Deal Journal, July 19, 2007, 11:31 am
Posted by Dana Cimilluca
M&A partiers may get their curfews extended.
Deal Journal popped over to the downtown Manhattan offices of Thomson Financial this morning to hear presentations from a couple of its analysts, Matthew Toole and Robert Keiser, on the state of the red hot mergers-and-acquisitions and private-equity markets. We heard some strong evidence for why all may not be doom and gloom for deal makers.

Exhibit A is the relationship between M&A activity and GDP growth. According to Keiser, a vice president in Thomson’s Proprietary Research group, there is a 67% correlation between the two going back to 1990. Though the economy may be slowing a bit, it’s still growing at a healthy clip of roughly 3%. Additionally, M&A accounts for just 4% of GDP now, down from 7% in 1999, at the height of the Internet bubble, Thomson says. That suggests there might be further room for growth.

Exhibit B is cash. Fourteen straight quarters of earnings increases “has put a tremendous amount of cash on the balance sheets of S&P 500 companies,” says Keiser. Companies have nearly $3 trillion of cash, even after all the increased spending on share buybacks and the like, up from just $500 billion in 1994. Even if tighter credit markets slow down private-equity takeovers, corporations, which still account for most M&A activity, could pick up the slack using all that coin.

Exhibit C is stock prices. Although stocks have been on a tear the past few years, the average expected earnings multiple on the S&P 500 is still just about 15 times, in line with the 20-year average. Since M&A tends to move in lockstep with stock prices, the idea that stocks aren’t overvalued may mean that M&A volume isn’t on the verge of falling off a cliff either.

Wednesday, July 18, 2007

Credit Woes Dampen Deal Makers’ Spirits

Investment bankers, a notoriously overconfident lot, are starting to get a little insecure.
Of the more than 1,000 bankers, lawyers, private-equity executives and corporate deal making types surveyed by the Association for Corporate Growth and Thomson Financial, a full 68% believe the credit markets that have fueled the M&A boom will be worse a year from now. On a separate but related question, the biggest group (37%) listed higher interest rates as the biggest challenge to continued growth in merger activity.

Friday, July 13, 2007

House: Tighten Rules for Private Equity I.P.O.'s

House hearings on regulating private equity investments moved forward this week with Rep. Dennis Kucinich blaming the Securities and Exchange Commission Wednesday for failing to classify the Blackstone Group as an investment company prior to Blackstone’s initial public offering. As a growing number of private equity firms contemplate going public, Mr. Kucinich seeks to tighten regulations so private equity stocks are treated more like mutual funds, required to disclose more information about their holdings, empower independent boards of directors and to cap debt loads. Blackstone’s public offering last month raised $4 billion while critics, including organized labor, argued that the company failed to allow sufficient transparency. Several other private equity firms, including Kohlberg Kravis Roberts & Co. and Och-Ziff Capital Management LLP are preparing to go public later this year.

Preliminary Postseason Report

By L. Reed Walton, Staff Writer, ISS Governance Weekly:

Looking back at the 2007 U.S. proxy season, two themes come to mind: accountability and engagement.
Shareholders gave strong support for proposals that seek greater board accountability, such as those seeking annual investor votes on executive pay and majority voting in director elections.
At the same time, investors withdrew more than half of their proposals on majority voting and stock option reforms after negotiations with companies. These withdrawals suggest that companies are becoming willing to engage with shareholders on certain issues.
Pay-related proposals received the most attention this season; more than 40 proposals that request an annual advisory vote on compensation--or “say on pay”--were voted on. Investors withdrew six resolutions; most of those withdrawals were at firms that agreed to join a new investor-issuer working group on pay votes.

Congress Tightens Exon-Florio 'National Security' Reviews of Foreign Investment in the United States,"

On Wednesday, Congress passed the "Foreign Investment and National Security Act of 2007" to formalize and tighten the process for reviews of foreign acquisitions of businesses in the US that raise potential national security concerns. The new Act amends the "Exon-Florio Amendment to the Defense Production Act" and codifies - as well as extends - recent trends toward more stringent review of foreign acquisitions by the Committee on Foreign Investment (CFIUS), which is an interagency committee chaired by the Treasury Secretary and composed of various representatives of the executive branch. There are also enhanced Congressional reporting requirements.
The new Act cleans up many of the provisions of earlier proposals considered problematic by the business community.

Thursday, July 12, 2007

Delaware Chancery Court Playing Tough With Companies Going Private

In recent back-to-back opinions, the Court has criticized two publicly listed companies that have agreed to sell themselves to private investors. The rulings expressed concern that Topps Co. and Lear Corp. hadn’t disclosed enough information to shareholders about possible incentives the companies’ managements may have to agree to the deals. According to the story, the decisions, both authored by the colorful Vice Chancellor Leo E. Strine, Jr., could slow the pace of some transactions given the five-judge Court’s influence in corporate-governance issues and takeover disputes.
In the case of Lear, an auto-parts maker that billionaire financier Carl Icahn is seeking to buy for $2.9 billion, Strine faulted the company’s board for letting its Chief Executive, Robert Rossiter, negotiate the deal with Icahn on his own. In the case of Topps, Strine ruled that the company should have been more forthcoming about an agreement with its suitor to retain Topps’s management.

Wednesday, July 11, 2007

Plaintiffs Take a Break: Securities Class Action Litigation Remains Low

The Corporate Counsel Net blog, July 11, 2007:

The latest study from Stanford’s Securities Class Action Clearinghouse and Cornerstone Research finds that securities class action filings remain at historically low levels in the first six months of 2007, with only 59 filings made in courts nationwide. We have posted a copy of this study, along with other securities litigation studies, in our "Securities Litigation" Practice Area.
While the study notes that filing activity was up slightly compared to 53 filings in the same period last year, the overall trend for the past two years has been surprisingly low filing rates when compared to historical averages. The types of allegations made in the filings for the first half of 2007 remained relatively steady, with 92% of cases alleging misrepresentations in financial documents (unchanged from 2006), and a slight drop-off in the number of cases alleging false forward looking statements at 64% of all cases (down from 72% in 2006). Among the new developments noted in the study is that there have been at least 3 filings so far this year with allegations relating to the meltdown in the subprime mortgage market.
The obvious question is: are we living in a brave new world where directors and executive officers of public companies have less to fear from securities class action lawsuits? The Securities Class Action Clearinghouse/Cornerstone Research study examines two possible hypotheses for explaining the recent trends, citing the stepped-up SEC and Justice Department as deterring fraud and the overall strength and low volatility of the stock market as providing little reason to sue. Professor Joseph Grundfest of Stanford states his opinion that “increased enforcement activity and a heightened awareness among corporate insiders may have led to a permanent shift in the incidence of securities fraud litigation.” On the other hand, John Gould of Cornerstone Research notes in the study that he “would not be surprised to see filings move back to the 200 per year level if the stock market were to weaken.” I suspect that the market hypothesis may be the stronger of the two for explaining the most recent trends – any observer of the federal securities laws could attest to the fact that the regulatory zeal of the government and the litigiousness of investors each swing with the overall strength or weakness of the markets and the broader economy.
Further, class actions only tell part of the story. As noted in this recent PricewaterhouseCoopers 2006 Securities Litigation Study, the recent options backdating scandal demonstrates that even when federal securities class actions may not be attractive because there is little in the way of potential damages to recover, shareholders still opt to express their disapproval in court by filing state derivative actions. Further, while the number of securities class action cases remains relatively low, the PwC study notes that settlement costs remained high at a whopping $6.17 billion in 2006, which was down 20% from $7.67 billion in 2005.
Is There a Milberg Weiss Effect?
In the Securities Class Action Clearinghouse/Cornerstone Research study, Professor Grundfest rejects the notion that the recent downtick in securities class action filings is attributable to a chilling effect from the indictment of legendary plaintiffs’ firm Milberg Weiss & Bershad. I guess that remains to be seen, as the controversy around the practices of Milberg Weiss and its principals continues to play out. Earlier this week, the US Attorney for the Central District of California announced that name partner David Bershad agreed to plead guilty to a federal conspiracy charge. Under the plea deal, Bershad will forfeit $7.75 million, pay a fine of $250,000 and cooperate with the government’s efforts to prosecute the other participants in the alleged conspiracy. Along with Bershad, one of the former Milberg Weiss named plaintiffs Steven Cooperman also agreed to plead guilty to a conspiracy charge.

Investors pull back leveraged loans

The, Jul-10-2007 :

The financing environment for leveraged buyouts got a lot tougher Tuesday, July 10, as a key index suffered what traders termed a "meltdown" and investors pulled back from leveraged loans as an asset class.
Standard & Poor's Leveraged Commentary & Data unit's composite index of the largest loans trading in the secondary market fell to 99.14 Tuesday morning, its lowest level in four years. Investors punished loans by such large issuers as Univision Communications Inc., whose loan was trading at 96, a 4% discount to par value, and broadly traded off recent loans used to fund high-profile leveraged buyouts of Michaels Stores Inc. and Celanese Corp.
"Traders are using words like 'meltdown' to describe the state of the market today," LCD wrote in a market report. "Hedge funds, they say, continue to sell loans to cover losses in other areas and because they think the loan market remains rich."
LCD added that, while things are "ugly out there," a looming glut of supply is causing the pullback, which indicates a technical, market issue as opposed to a more severe pullback driven by fundamental fears about the economy or the strength of the companies being funded.
Still, market participants say that the negative tone of recent weeks is increasing, which doesn't augur well for the $200 billion-plus of deals that are waiting to come to market over the next few weeks and months. A worst-case scenario, some say, could cause a freezing of buyout activity in general as investment banks pull back from funding deals.
Deals such as the $20 billion financing tied to the buyout of Chrysler Automotive by Cerberus Capital Management LP and the $24 billion financing to fund Kohlberg Kravis Roberts & Co.'s purchase of First Data Corp. will likely have trouble getting sold under current terms, several market participants say. That could cause the private equity firms to force their lending banks to fund bridge loans to finance the deals — as has happened to five deals in the past month — which could ultimately lead to a freezing up of the financing markets as banks with too much risk on their books are forced by their risk officers to step back.
Investment banks often back their private equity clients with committed financing packages on the assumption that the banks will be able to sell those commitments to hedge funds and collateralized loan obligation funds after the deal closes. If they can't do so, the banks are still contractually bound to provide the financings and swallow the losses associated with selling that debt in secondary markets at steep discounts. Failing that, the banks can also hold the loans on their books, which limits their ability to offer financing on future deals.

Tuesday, July 10, 2007

Re: Moody’s report titled "Rating Private Equity Transactions."

From PE Week Wire, July 10, 2007:

I know firsthand that many general partners refuse to take stock in what ratings agencies have to say about their marketplace, at least when they’re speaking on the record. After all, it seems that every time a company is levered up, the ratings agencies pounce on it with a press release that notes how risky the deal is and how much strain the additional debt puts on the company, even though debt is the very life-blood of the LBO industry.
But one is left to wonder how long the current economy, which has easily shouldered the weight of some heavily levered deals, can last. For Q2 2007, Standard & Poor’s Leveraged Commentary & Data, says the average debt-to-EBITDA ratio for buyouts of companies with more than $50 million of EBITDA was about 7x, while companies with up to $50 million of EBITDA command an average leverage ratio of just more than 6x EBITDA. It’s hard to see how LBO firms can go much higher.

Today’s blog is by Ari Nathanson, Senior Editor of Buyouts Magazine.

Moody's warns of dividend recaps, July10, 2007:
Are private equity firms guilty of playing bait-and-switch with credit rating agencies while drawing off a mother lode in dividends from the companies they own?
In a five-page report released Monday, July 9, Moody's Investors Service said that many of the dividend recapitalizations engineered by buyout houses since 2004 have taken it by surprise.
The comments on recaps were part of a wide-ranging, often caustic critique of the private equity industry's recent behavior, which the ratings agency accused of focusing too much on short-term returns to the detriment of long-term value creation.
Without accusing sponsors of duplicity, Moody's points up cases where it had assigned a target company a rating based on sponsors' assurances that they would use surplus cash flow to pay down debt.
Instead, the new owners turned around and paid themselves huge dividends, often within 12 months of the original LBO. Some dividends even surpassed the sponsors' equity investments.
Go to article:

Ex-Partner at Milberg Pleads Guilty to Conspiracy

NY Times, July 10, 2007:
A seven-year federal investigation into accusations that a leading securities class-action law firm, Milberg Weiss, paid secret kickbacks to plaintiffs gained traction yesterday when David J. Bershad, a former partner with extensive knowledge of the firm’s finances, pleaded guilty to conspiracy and agreed to cooperate with prosecutors.
Mr. Bershad’s guilty plea is the latest blow to a powerhouse firm that once dominated the landscape for class-action securities lawsuits and spurred fear as well as contempt in corporate boardrooms. But over the last year, the firm has struggled to retain its major clients, its lawyers and its hold on numerous lawsuits even as the number of securities-related cases has declined, in part because of the strong performance of the stock market.
Yesterday’s guilty plea also put renewed pressure on William S. Lerach and Melvyn I. Weiss, two of the industry’s leading lawyers who founded the New York-based law firm and have long been the focus of the federal investigation. Mr. Lerach split from Milberg Weiss in 2004 to form a firm in San Diego, and last month, he announced that he was considering retirement. Neither Mr. Lerach nor Mr. Weiss has been indicted. Calls to their lawyers were not returned.

Kucinich to Hold Hearing on Blackstone IPO

Last month, Mr. Kucinich failed in his last-minute attempt to get the Securities and Exchange Commission to delay the Blackstone Group’s $4.7 billion I.P.O., which he said could pose new dangers for ordinary investors. But he is not giving up: On Wednesday, he plans to hold a congressional hearing on the implications of allowing small investors to buy shares in hedge funds and private equity funds.
In doing so, he continues Capitol Hill’s recent scrutiny of the private equity and hedge fund industries, which have raised their profile through a series of proposed public offerings and a run of big buyout deals.According to a news release, the hearing will examine “whether existing investor protections are sufficient to protect ordinary investors from new risks, and whether new regulation is necessary.” Mr. Kucinich points out that the recent public offerings will allow mom and pop investors — who would normally be barred from investing in buyout funds and hedge funds — to buy shares in the companies that run these funds.
And he is not alone: Many others in Washington have set their sights on private equity. On the same day as Mr. Kucinich’s hearing, the Senate Finance Committee will hold a hearing on a bill that would raise the tax rate on a major source of income for private equity fund managers.

Monday, July 09, 2007

No Let Up In Private-Equity Fund Raising

From WSJ Deal Journal:

If investors in private-equity funds are nervous about recent hiccups in the credit markets, they aren’t showing it.
According to this story today from our colleagues at LBO Wire, Carlyle Group, the leveraged-buyout titan, boosted the fund-raising target on its new fund to $17 billion from $15 billion. The new pool, which will be used mainly for buyouts of U.S. companies, probably will be more than double the size of Carlyle’s last U.S. buyout fund, a $7.85 billion pool. As a sign of how good times have gotten for private-equity firms, that fund, raised a mere two years ago, for a time held the distinction of being the biggest ever.
Now, even $17 billion won’t come close to breaking any records. That is because firms including Goldman Sachs Group, Blackstone Group and Kohlberg Kravis Roberts have broken — or are in the process of breaking — the $20 billion barrier. The new round of fund raising comes amid heightened worries by deal makers, investors and buyout executives themselves that the good times of ever larger buyouts and easy credit can’t last much longer. (See more on that in this Wall Street Journal article today about upcoming tests for the credit market.)
Given the bountiful times for fund raising, it is a wonder KKR says that one of the purposes of its recently unveiled IPO plan is to raise money for the firm to invest. (And lends credence to BreakingViews’ suspicion that the share sale may be more about the founders cashing out than KKR is letting on.) It’s also curious that one of the first members of the chorus of caution that has been building this year about the buyout boom is none other than Carlyle co-founder Bill Conway.
Of course all the recent fund raising could be part of a virtuous cycle for the buyout boom. With all that money in their coffers, private-equity firms should be able to keep plowing money into deals even if financing conditions continue to deteriorate.

Smaller Reporting Company Regulatory Relief and Simplification Proposal Published

At Securities Law Prof Blog:

The SEC published its proposed rules to extend the benefits of the current optional disclosure and reporting requirements for smaller companies to a much larger group of companies. The proposal would allow companies with a public float of less than $75 million to qualify for the smaller company requirements (up from the current $25 million for most companies). The SEC states that of the 11,898 companies that filed Annual Reports in 2006, 4,976 of them (or 42%) had a public float of less than $75 million. The proposed rules would also maintain the current scaled disclosure requirements in Regulation S-B, but integrate them into Regulation S-K and eliminate the Commission's "SB" forms. The SEC expects that these changes will simplify regulation for smaller businesses, reduce costs, and mitigate the reported lack of market acceptance associated with smaller filers. These proposals stem from the recommendations of the Advisory Committee on Smaller Public Companies.

PWC reaches $225 Million Settlement In Tyco Case

PricewaterhouseCoopers has agreed to pay $225 million to settle fraud claims relating to the Tyco International securities class-action suit, according to attorneys for the plaintiffs. Here are stories from Dow Jones Newswires and Reuters.
The suit, filed in New Hampshire federal court, alleged that as Tyco’s auditor PricewaterhouseCoopers failed in its auditing duties. The settlement with PricewaterhouseCoopers, combined with a recent settlement with Tyco, will bring the total class-action settlement to more than $3.2 billion by the time it is presented to the court for final distribution. By comparison, to date, payouts in the Enron and Worldcom suits have topped $7 billion and $6 billion, respectively.
Dennis Kozlowski, Tyco’s former chief executive, and Mark Swartz, Tyco’s former finance chief, were convicted in 2005 of looting Tyco and are serving prison sentences in New York. Tyco is pursuing its own claims and those of shareholders against the two men.

Thursday, July 05, 2007

K.K.R. I.P.O., Hilton Buyout: The Deals Keep Coming

TOP STORY in today's NYT DealBook:

As many on Wall Street were making their pre-holiday getaways Tuesday afternoon, private equity giant Kohlberg Kravis Roberts was filing for a $1.25 billion public offering and Blackstone Group was announcing a $26 billion deal to buy Hilton Hotels.
Either development can be seen as a sign of gloom or good fortune for buyout firms. But something else may be happening: The private equity industry may simply be taking advantage of favorable market conditions while it can, before the market, Congress or both force Blackstone, Kohlberg Kravis and their brethren back down to earth.
"It feels like there's a window," Douglas A. Cifu, a partner at the law firm Paul Weiss Rifkind Wharton & Garrison, told The New York Times. "It feels like everyone wants to get in and get deals done because there's a lot of concern that the credit markets will tighten.
"Who is considering going public next? A better question is: Who isn't? Carlyle Group, Apollo Management and TPG are all believed to be exploring such a move, according to The Telegraph. Jeremy Warner, writing in a column for The Independent, says that while many will interpret KKR's public offering and the Hilton deal as signs that the private equity boom is peaking, "it doesn't feel like that to me."
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Tuesday, July 03, 2007

What President Bush's commutation of Libby says

From the Sentencing Law and Policy blog by Douglas A. Berman, William B. Saxbe Designated Professor of Law
Moritz College of Law at The Ohio State University:

July 2, 2007
What President Bush's commutation of Libby says: "I'm the sentencer ... for my pal"
Distilled to its essence, President Bush's decision to commute the imprisonment portion of Lewis Libby's sentence is a sentencing decision. The President has not formally excused Libby or changed his status as a convicted felon, and the President's statement indicates "respect" for a federal jury's determination that Libby committed numerous federal crimes. What the President apparently does not respect is the within-guideline prison term that Judge Reggie Walton concluded was "sufficient, but not greater than necessary" under federal law for Libby's numerous federal crimes.
As I noted here, many federal defendants and their attorneys have argued in many fora that guideline imprisonment levels should not be shown undue respect, but Bush's Justice Department has argued in many fora that the guidelines merit faithful allegience. It will be interesting to see if, after the President has made clear that he views the guidelines are "excessive" for one of his pals, others with sentencing power begin to give less respect to the guidelines when the fates of less connected defendants are in the balance.