The DonMcNay.com Blog

Great article about James Street

2006-01-01T16:27:00.000-05:00

This is an article about my old friend James Street. Many years ago, we both with the same structured settlement company and each broke off and started our own businesses. As noted, he has done tremendously well.

Don

Don McNay
don@mcnay.com

HE QUARTERBACK

James Street's championship legacy

Legendary Longhorn quarterback recalls key games of '69 season and his life afterward.

By Michael Corcoran
AMERICAN-STATESMAN STAFF
Saturday, December 31, 2005

On a wall in a conference room in the shadow of the state Capitol hangs a painting that freezes the pivotal moment of the Texas victory over Notre Dame in the Cotton Bowl that sewed up the 1969 national championship. Senior quarterback James Street is on the sidelines talking to Coach Darrell Royal under a scoreboard showing that it's fourth-and-two on the Notre Dame 10-yard line with just over two minutes to go and Texas trailing 17-14.

The quarterback known for clutch play and the folksy coach who always played for the win could not have looked calmer. After all, this situation was nothing compared with the heart-stopping fourth-and-three call in the fourth quarter at Arkansas a few weeks earlier. In that Game of the Century, as the contest between the top two undefeated teams was hyped, the power-running Horns uncharacteristically called a long pass to tight end Randy Peschel and went on to win 15-14 with President Nixon in the stands in Fayetteville and a spellbound nation watching on TV.

THE UNIVERSITY OF TEXAS

(enlarge photo)

When Texas last won an undisputed national championship, all eyes were on No. 16, quarterback James Street, consulting with Coach Darrell Royal at a key moment in the 1970 Cotton Bowl. On Wednesday, Vince Young and the Longhorns will have a chance to follow in Street's footsteps.

Jay Janner
AMERICAN-STATESMAN

(enlarge photo)

If you twist his arm, you might be able to get former UT quarterback James Street to talk about 'The Play' that was crucial to victory in the Game of the Century against Arkansas in 1969. The Longhorns went on to win the 1970 Cotton Bowl for their most recent undisputed national championship. In his office, Street keeps a painting of him being congratulated by President Lyndon Johnson.

THE UNIVERSITY OF TEXAS

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Meeting a former president is great, but is it better than leading Texas to a national championship? James Street, alongside Coach Darrell Royal, gets congratulations from LBJ after the Longhorns beat the Fighting Irish 21-17 in the Cotton Bowl.

THE UNIVERSITY OF TEXAS

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Jordon Street, the UT sophomore is called a 'finesse-type pitcher' on the team's Web site.

THE UNIVERSITY OF TEXAS

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Juston Street, the red-shirt freshman pitcher 'works the angles effectively,' UT's team Web site says.

Ben Sklar
AMERICAN-STATESMAN

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Hanson Street, the youngest Street brother, a Westlake High wide receiver, shouts words of encouragement to teammates on the field.

Matt Rourke
2004 AMERICAN-STATESMAN

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Former Longhorn pitcher Huston Street's big-time dad, James, still calls him up to give advice. Huston's old man said he was proud that Huston helped his team, the Oakland A's, hold on to beat the Yankees.

That perfectly thrown pass cemented Street as a Longhorn legend, but the Notre Dame game would seal his legacy.

Under pressure from an Irish pass rush on that crucial fourth-down play, Street rolled right and hit a diving Cotton Speyrer for an 8-yard completion. Texas would score the winning touchdown three plays later on a plunge by Billy Dale.

"James Street gave 110 percent on every play," says Happy Feller, whose extra point made the final score Texas 21, Notre Dame 17. "He led by example, was always positive, and the entire team responded to that leadership."

Street's hustle and toughness have also paid off in his business career and are qualities passed down to his sons, including 22-year-old Huston, a star relief pitcher for the Oakland A's who was named the 2005 American League Rookie of the Year.

Sitting in the memorabilia-filled offices of the James Street Group, the ex-quarterback says the painting tells only a part of the story. "Luck is what happens when preparation meets opportunity," he says, reciting his favorite Royal quote. "We got a lot of good bounces, and the defense came through when it had to."

Now 57, Street is head of a company that specializes in "structured settlements," giving long-term financial advice to plaintiffs who've recently settled wrongful death or personal injury lawsuits.

He'll talk football — twist his arm and he'll tell you about "The Play," as the pass to Peschel has been tagged in Longhorn lore — but family and business come first.

"I didn't want to be one of those guys sitting on a bar stool and talking about the glory days and then realizing, one day, that it was 35 years ago and I was still telling the same stories," he says.

Family man

If Vince Young wakes up Thursday as the quarterback who led Texas to a national title, the only man in Austin who can truly identify is Street, who won 20 straight games in almost two full seasons as UT's starter. But where Wednesday's Rose Bowl game against the University of Southern California is an important steppingstone for a quarterback seemingly headed for an illustrious pro football campaign, the Jan. 1, 1970, Cotton Bowl marked the end of Street's football career.

He was the prototype wishbone quarterback, a sleight of handoff wizard nicknamed "Slick," but they didn't use the wishbone in the NFL. Also a standout pitcher at UT, with a perfect game against Texas Tech in 1970, Street figured his best chance at pro ball was on the mound.

But when that career also didn't pan out, he spent a year capitalizing on his Longhorn exploits by singing country standards, Elvis covers and "Raindrops Keep Falling On My Head" in Steiner rodeos all over Texas. He even hung out with Presley, who said he cheered for Texas against Arkansas, for a few hours one night in Las Vegas. When the Longview product came down to Earth, he took a job as an insurance agent in Austin.

"The transition from full-time athlete was difficult," Street says.

"From the time I was 9 years old, I always had to be someplace at 3 o'clock in the afternoon," he says. "Little League practice. Pee Wee football. Pop Warner. Track. Most kids need to learn self-discipline to survive college, but not athletes. You knew, every day, that you had to be someplace at 3 o'clock. Then you get out of school and 3 o'clock comes around, and you don't have to be anywhere and you don't know what to do."

Street's first marriage, to Shanny Lott (now married to Hudson's on the Bend chef/owner Jeff Blank), ended in divorce after six years of marriage right out of college. Their only son, Ryan Street, 31, is an architect in town who's designed Lance Armstrong's homes in Dripping Springs and Spain and the new one in Tarrytown.

Street married his second wife, Janie, who like him has a twin sister, in 1981. Huston was born two years later, followed two years after that by twins Jordon and Juston, both 20-year-old pitchers for the Longhorn baseball team. Westlake High senior Hanson rounds out the Streets.

Friends say James Street's relatively low profile through the years has less to do with an aversion to the limelight than being the father of five active, athletic sons.

"If James is not working, he's coaching kids or watching his sons play," says Feller, who has remained close to Street, as have most members of the '69 team. James Street's name started popping up in the press again in 2002, when Huston Street became a star relief pitcher for the national champion Texas baseball team.

"It's unfair having to be compared to someone else all the time," says the elder Street. "Huston had to grow up as 'James Street's son,' and now that he's having all that success, Jordon and Juston are going to be known as 'Huston Street's brothers.' That's tough. But you just have to be yourself and forget about other people's expectations."

Looking a little like Wayne Newton with graying hair and delivering his "life-isms" with a preacher's flair for drawn-out storytelling, Street could be one heckuva motivational speaker. But even though he occasionally gives formal talks at alumni functions, he says he prefers to impart "all the wisdom I've got from steppin' in chugholes" in a more person-to-person way, especially with his sons.

When Huston played in the College World Series as a freshman, his father pulled him aside and said, "You're gonna see all those people in the stands, and you're gonna think, 'This is the big show — I've gotta do more!' But all you've gotta do is throw strikes and get people out, just like in all the other games you've played. Here's what I want you to do: Pick out a stitch on the catcher's mitt and focus on hitting it. Forget about all those people and what's at stake. Hit that seam."

The Longhorns won that 2002 championship in Omaha, Neb., and Huston Street was named the tournament's outstanding player. Three years later, when he won the AL Rookie of the Year Award, his father, forever the cautionary, ego-checking coach, said, "That award is for something you've already done. What are you gonna do next?"

Last year, the elder Street watched on TV as Huston walked out to the mound at Yankee Stadium to face Derek Jeter and Alex Rodriguez in the bottom of the ninth to preserve an Oakland lead. The closer did his job, calmly retired the big bats in order, and on the phone that night, James told Huston he was proud of the way his son was able to concentrate on the task without getting caught in the fanfare. James Street was thinking back to the lesson in Omaha. Huston said, "Are you kidding, Dad? I kept looking up in the stands and all around me, thinking, 'Oh, my God: Yankee Stadium!' I was nervous as hell!"

James Street says he's also a bundle of nerves when he watches his sons in competition. "I'm a lot more nervous during their games than I was when I played," he says with a laugh.

Game of the Century

Teammates certainly witnessed no jitters when Street came back in the huddle during that 1969 Arkansas game and relayed the call from Royal on fourth-and-three with 4:47 left and Texas down 14-8.

"You're not going to believe this play, but it's gonna work," Street said to the other 10 players, each bearing a reflection of Street's steely gaze. "It's gonna work," he repeated, and then he called the famous right 53 veer pass to tight end Peschel. Almost everyone in the audience was sure the Horns, with the full house backfield of Steve Worster, Jim Bertelsen and Ted Koy, would run for the first down.

"Now I'm lookin' at you, Cotton," Street said to Speyrer in the huddle, "but I'm talking to you, Randy," he said to Peschel, trying to throw off any Razorback spies. "If you get behind 'em, run like hell."

Peschel was covered by a pair of fast-closing defensive backs, but Street laid the ball in perfectly, over the tight end's shoulder and into his hands. The gamble paid off, going for 44 yards to the Arkansas 13; Bertelsen ran it in from the two for a TD a couple of plays later.

The Game of the Century lived up to its billing, with Texas coming back from a 14-0 deficit in the fourth quarter to win 15-14.

Besides having the undefeated No. 1 team face off against the undefeated No. 2 team, in the 100th anniversary of college football, the Texas-Arkansas game gained importance because it came in the midst of so much cultural upheaval. 1969 was the year of Manson, moonwalks, Chappaquiddick, Woodstock, "Midnight Cowboy" and Vietnam. Especially Vietnam.

The game took place the same day a young concertgoer was stabbed to death by Hell's Angels at a free Rolling Stones concert at Altamont Speedway in California. In 1969, America was very much a polarized nation.

"I think a lot of people wanted to watch a football game to get their minds off the other stuff," Street says.

But in the Horns' jubilant locker room after the game, when Nixon declared Texas the national champion, the timbre of the times became evident when a Horn player thanked Nixon. When Nixon said the thanks belonged to the players for such an incredible game, the Horn shot back, "I'm thanking you because my lottery number was 350!" The government had implemented a military draft lottery to shore up troops in Vietnam just six days earlier.

At Robert Mueller Municipal Airport the night of the big win, more than 20,000 fans greeted the team, toppling barricades and running out to the taxiing plane as though it carried the Beatles. Fans clawed at Street's hair and clothes until he asked one of his burly linemen to run a little interference: "Just give me an opening, and I'm gone," and he was. All Street ever needed was a little daylight.

The old and the new

Street has remained close to the Texas program, and every year, Coach Mack Brown invites the leader of the last Longhorn team to win a consensus national championship to address the team that hopes to be the next one. "The gist of what I tell them is to be prepared for a life that's completely different from football," he says.

"In football, you know your opponent well in advance. You study his moves. You look for his weaknesses, and if you and all your teammates do their jobs, you look up at the scoreboard and it declares you the winner. But there's no scoreboard in life. And you don't always know your opponent."

Street never misses a home game, nor the Red River Shootout, so long as one of his boys doesn't have a game the same day. What impresses him most about Vince Young, he says, is the way the people in the stands seem to exhale when No. 10 trots out on the field. "He just instills so much confidence. There's no panic in that guy."

The same could be said for the man who wore No. 16 from '67 to '69. "I see similarities between Vince Young and James Street in terms of leadership," says Feller, who owns TeleDynamics, a wholesale distributor of consumer electronics in Austin. "With James at the helm, we just knew we were gonna win. Never gave a second to the notion we might lose. I can sense the same thing happening now."

Last year, the 1969 Arkansas team invited its legendary adversaries up to Fayetteville for a 35th anniversary reunion, a players-only event Street calls "probably the neatest experience I've had as an ex-player." Street counts Arkansas quarterback Bill Montgomery, now a successful businessman in Dallas, among his closest friends. Players gave testimonials about how The Game changed their lives. Several choked back tears. Street started thinking about what was his favorite memory of the game that will forever define him to many.

"I remembered just being spent — emotionally, physically — as I walked off the field, but also completely re-energized because we won," Street says. "And in the middle of all that pandemonium, I saw (Arkansas Coach) Frank Broyles' kids run over to him and hug him. He had just lost the biggest game of the year, giving up a 14-point lead, no less, and yet his family was there to support him. It didn't mean much to me at the time, but that's what I was thinking about" at the reunion.

"We were kids, just playing a game and living a dream. And then it was over. But the love of your family or your work ethic, or just, I don't know, teaching a Little Leaguer how to hit — those are the things that really matter in life."

NY Times article on Instant Millions

2005-12-06T12:25:00.000-05:00

December 5, 2005

Instant Millions Can't Halt Winners' Grim Slide

By JAMES DAO

CORBIN, Ky., Nov. 30 - For Mack W. Metcalf and his estranged second wife, Virginia G. Merida, sharing a $34 million lottery jackpot in 2000 meant escaping poverty at breakneck speed.

Years of blue-collar struggle and ramshackle apartment life gave way almost overnight to limitless leisure, big houses and lavish toys. Mr. Metcalf bought a Mount Vernon-like estate in southern Kentucky, stocking it with horses and vintage cars. Ms. Merida bought a Mercedes-Benz and a modernistic mansion overlooking the Ohio River, surrounding herself with stray cats.

But trouble came almost as fast. And though there have been many stories of lottery winners turning to drugs or alcohol, and of lottery fortunes turning to dust, the tale of Mr. Metcalf and Ms. Merida stands out as a striking example of good luck - the kind most people only dream about - rapidly turning fatally bad.

Mr. Metcalf's first wife sued him for $31,000 in unpaid child support, a former girlfriend wheedled $500,000 out of him while he was drunk, and alcoholism increasingly paralyzed him. Ms. Merida's boyfriend died of a drug overdose in her hilltop house, a brother began harassing her, she said, and neighbors came to believe her once welcoming home had turned into a drug den.

Though they were divorced by 2001, it was as if their lives as rich people had taken on an eerie symmetry. So did their deaths.

In 2003, just three years after cashing in his winning ticket, Mr. Metcalf died of complications relating to alcoholism at the age of 45. Then on the day before Thanksgiving, Ms. Merida's partly decomposed body was found in her bed. Authorities said they have found no evidence of foul play and are looking into the possibility of a drug overdose. She was 51.

Ms. Merida's death remains under investigation, and large parts of both her and Mr. Metcalf's lives remain wrapped in mystery. But some of their friends and relatives said they thought the moral of their stories was clear.

"Any problems people have, money magnifies it so much, it's unbelievable," said Robert Merida, one of Ms. Merida's three brothers.

Mr. Metcalf's first wife, Marilyn Collins, said: "If he hadn't won, he would have worked like regular people and maybe had 20 years left. But when you put that kind of money in the hands of somebody with problems, it just helps them kill themselves."

As a young woman, Ms. Merida lived with her family in Houston where her father, Dempsey Merida, ran a major drug-trafficking organization, law enforcement officials say. He and two of his sons, David and John, were indicted in 1983 and served prison sentences on drug-related convictions.

John Murphy, the first assistant United States attorney for the western district of Texas, who helped prosecute the case, said the organization smuggled heroin and cocaine into Texas using Mr. Merida's chain of auto transmission shops as fronts.

Mr. Murphy described Mr. Merida as a gruff, imposing man who tried to intimidate witnesses by muttering loudly in court. Mr. Merida received a 30-year sentence but was released in 2004 because of a serious illness, Mr. Murphy said. He died just months later in Kentucky at age 76.

When Dempsey Merida and his two sons went to prison, his wife moved the family to northern Kentucky. Virginia Merida married, had a son, was divorced and married again, to Mack Metcalf, a co-worker at a plastics factory. But he drank too much and disappeared for long stretches of time, friends of Ms. Merida said, leaving her alone to care for her son and mother.

She worked a succession of low-paying jobs, lived in cramped apartments, drove decrepit cars and struggled to pay rent. For his part, Mr. Metcalf drifted from job to job, living at one point in an abandoned bus.

Then one July day in 2000, a friend called Ms. Merida and gave her some startling news: Mr. Metcalf had the winning $3 ticket for a $65 million Powerball jackpot. Ms. Merida had refused to answer his calls, thinking he was drunk.

"Mack kept calling here, asking me to go tell Ginny that he had won the lottery," said Carolyn Keckeley, a friend of Ms. Merida. "She wouldn't believe him."

At the time, both were barely scraping by, he by driving a forklift and she by making corrugated boxes. But in one shot, they walked away with a cash payout of $34 million, which they split 60-40: he received about $14 million after taxes, while she got more than $9 million.

In a statement released by the lottery corporation, Mr. Metcalf said he planned to move to Australia. "I'm going to totally get away," he said.

But problems arrived almost immediately. A caseworker in Northern Kentucky saw Mr. Metcalf's photograph and recognized him as having been delinquent in child support payments to a daughter from his first marriage. The county contacted Mr. Metcalf's first wife and they took legal action that resulted in court orders that he pay $31,000 in child support and create a $500,000 trust fund for the girl, Amanda, his only child.

Ms. Collins, his first wife, said Mr. Metcalf abandoned the family when Amanda, now 21, was an infant, forcing them into near destitution. "I cooked dinner and set the table for six months for him, but he never came back," said Ms. Collins, 38. They were divorced in 1986.

Even as he was battling Ms. Collins in court, Mr. Metcalf was filing his own lawsuit to protect his winnings. In court papers, he asserted that a former girlfriend, Deborah Hodge, had threatened and badgered him until he agreed, while drunk, to give her $500,000.

Ms. Hodge vowed to call witnesses to testify that Mr. Metcalf had given money to other women as well. Mr. Metcalf's suit was dismissed after he walked out of a deposition, according to court papers.

Still, there were moments of happiness. Shortly after winning the lottery, he took Amanda shopping in Cincinnati, giving her $500 to buy clothing and have her nails done. "I had never held that kind of money before," Ms. Metcalf said. "That was the best day ever."

Pledging to become a good father, he moved to Corbin to be near Amanda, buying a 43-acre estate with a house modeled after Mount Vernon for $1.1 million. He collected all-terrain vehicles, vintage American cars and an eccentric array of pets: horses, Rottweilers, tarantulas and a 15-foot boa constrictor.

He also continued to give away cash. Neighbors recall him buying goods at a convenience store with $100 bills, then giving the change to the next person in line. Ms. Metcalf said she discovered boxes filled with scraps of paper in his home recording money he had given away, debts he would never collect.

His drinking got worse, and he became increasingly afraid that people were plotting to kill him, installing surveillance cameras and listening devices around his house, Ms. Metcalf said. Then in early 2003, he spent a month in the hospital for treatment of cirrhosis and hepatitis. After being released from the hospital, he married for the third time, but died just months later, in December.

Virginia Merida seemed to handle her money better. She repaid old debts, including $1,000 to a landlord who had evicted her years earlier. She told a friend she had set aside $1 million for retirement.

But she splurged enough to buy a Mercedes and a geodesic-dome house designed by a local architect in Cold Spring for $559,000. She kept the furnishings simple, neighbors said, but bought several arcade-quality video games for her son, Jason. For a time, Ms. Merida's mother lived with her as well.

"I was at her house a year after she moved in, and she said she hadn't even unpacked," said Mary Jo Watkins, a neighbor. "It was as if she didn't know how to move up."

Then in January, a live-in boyfriend, Fred Hill, died of an overdose of an opiate-related drug, according to a police report. No charges were filed, and officials said it was not clear if the opiate was heroin or a prescription drug. But neighbors began to believe that the house had become a haven for drug use or trafficking.

"I think we all suspected that some drug problems were going on there because so many people were coming and going," Ms. Watkins said.

In May, Ms. Merida filed a complaint in Campbell County Circuit Court against one of her brothers, David, saying that he had been harassing her. In June 16, a circuit court judge ordered both brother and sister to keep away from each other. It was unclear why she filed the complaint, and David Merida would not comment.

When Ms. Merida's son found her body on Nov. 23, she had been dead for several days, the county coroner's office said. There was no evidence of a break-in, or that she had been attacked, officials said. Toxicological studies on her remains will not be completed for several weeks.

It is unclear how much of Ms. Merida's estate remains, but it appears she saved some of it. That may not have been the case with Mr. Metcalf, his daughter said. Six months after his death, his house in Corbin was sold for $657,000, about half of what Mr. Metcalf had paid for it.

In a brief obituary in The Kentucky Enquirer, Ms. Merida's family described her simply as "a homemaker." On a black tombstone, Ms. Metcalf had this inscribed for her father, "Loving father and brother, finally at rest."

Al Salvato contributed reporting from Cold Spring, Bellevue and Dayton, Ky.

Rachel Marley's website

2005-11-13T13:33:00.000-05:00

This is the story of an extraordinary young women.

http://recallinghope.org/index.php?random=1613930642

Don McNay
don@mcnay.com

Tremendous Wal Mart article by John Dicker

2005-11-06T16:50:00.000-05:00

THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

THINKING BIG

All the rage

Wal-Mart as the great divider

By John Dicker | November 6, 2005

Tell people you're writing about Wal-Mart and count on the following reaction: For or against? Pro or con?

There's a reason for this: Wal-Mart Stores Inc., the nation's largest employer and the most significant Arkansas export since W.J. Clinton, has long ceased to be a place to acquire trashcan liners and bask in the alienation of labor. Like it or not, Wal-Mart is not a discount store, it's a wedge issue. Better than abortion, or even than gay marriage, Wal-Mart simultaneously strikes at the heart of bread and butter issues from globalization to healthcare to the culture wars. From class to race, in states red and blue, Wal-Mart delights and disgusts just by being itself.

Opposing Wal-Mart is akin to an ideological ''choose your own adventure" game. If you're an economic nationalist you'll resent how its business model furthers the push of good manufacturing jobs overseas. If you're a union activist, you can stew on how it shuttered its store in Quebec only after its workers joined the United Food and Commercial Workers Union. You can oppose Wal-Mart for reasons both aesthetic (even its champions don't claim it's pretty) or environmental (Wal-Mart without auto-dependent sprawl is like Paris Hilton without a publicist), or for more recent news contained in a company memo leaked to The New York Times: 46 percent of the children of Wal-Mart workers rely on Medicaid or have no health insurance.

Perhaps because of these economic issues, hating Wal-Mart is often framed as a purely Democratic pastime. After all, the company's hostility to unions hinders a waning but still significant party client: organized labor. But alas, don't be fooled. After all, who was the first woman to sit on the company's board of directors? I think her name was Clinton. Oh, and let's not even get into the Dems in high places who sup from the burgeoning trough of Wal-Mart's political action committee.

Well, maybe we can get into it. Though Wal-Mart's political donations favor Republicans nearly by 80 percent, leading Democratic senators, including Evan Bayh, majority leader Harry Reid, and, yep, Hillary herself have received funds from Bentonville, Ark.

On the other side of the political coin, even conservatives doubt Wal-Mart, albeit less directly: Last year William Kristol's Weekly Standard ran a piece by Geoffrey Norman suggesting that Wal-Mart's push into pastoral Vermont might irrevocably alter the character of the state. And then there's the more fundamental conservative argument against the behemoth, best summed up by UCLA law professor Stephen Bainbridge, who writes: ''By trampling small businesses underfoot, through its mix of volume pricing and subsidies, Wal-Mart and its ilk undermine the possibility of wide participation in businesses."

It's a great point. Compare the rise of big box retailers with, say, the Internet economy. The bubble bursting in 2000 notwithstanding, the Web has birthed a myriad of new businesses, many of which are born from modest amounts of capital. In retail, the trend is less the blooming of a thousand flowers than the sort of ill-advised, closing time merger born from fear of withering alone.

Recent retail marriages include Macy's and Bloomingdale's parent company Federated Stores with its rival May Department Stores (of Filene's Basement fame) and last year's marriage of Kmart and Sears. Expect a larger merger within the grocery sector as well, yet another category dominated by Wal-Mart.

As much as Wal-Mart likes to wrap itself in the flag of free market idealism, one has to look at retailing and wonder how free it is. Where are the new upstarts? Consider that of the top five US retailers only one, Home Depot, has come into existence in the last 25 years. Most have been around before or since 1962, the fateful year that birthed Target (now holding the number four spot) Woolco (RIP), Kmart (recently consolidated with Sears and holding on for dear market share), and Wal-Mart (number one).

Where opening a store was once a viable, if risky, proposition, it was feasible for those who wouldn't know a venture capitalist from a cheesecake. Folks like Sam Walton, who borrowed funds from his father-in-law to open his first five and dime after the Second World War. For all his gumption and evangelical appeal, one is hard pressed to wonder if this business folk hero could've started up in Wal-Mart's America.

Pushing aside the merger mania, the Wal-Mart debate is also fueled by a culture and class schism that comes straight out of the pages of Thomas Frank's ''What's the Matter With Kansas?" Call it the new American Shopulism, or the ontology of ''why pay more?" which posits that being unapologetic about your Wal-Mart habit is an antielitist stance unto itself.

As Gretchen Wilson sings in ''Redneck Woman": ''Victoria's Secret, well their stuff's real nice, but I can buy the same damn thing on a Wal-Mart shelf half price." Wilson doesn't say as much, but implicit in her lyrical salvo is that anti Wal-Mart hysteria is akin to elitism.

The question so appallingly absent from the Wal-Mart debate is almost too obvious to mention. How is helping to enrich a company controlled by a convalescing billionaire widow and her three billionaire children antielitist? And why is organizing to curb the reach and reform this company's policies likened to membership in a Nantucket yacht club?

What's interesting about Wal-Mart's opposition is how political posturing so often takes a back seat to practical concerns. In the dozens (and dozens) of communities where citizens are working to keep the retailer at bay, they're doing so without the ideological ammo one might expect. Issues that keep Wal-Mart in the news such as class action lawsuits, the trade deficit with China, and union turf squabbles don't come up half as frequently as pedestrian concerns.

These boil down to the effects a 24/7 supercenter can have on traffic, or -- and this is a big one -- a store's proximity to residential housing. Call it basic NIMBYism, or perhaps common sense, but when the greater American homeowner envisions a neighborhood grocer they don't conjure up 200,000-plus square feet with 1,000-plus parking spaces open 24/7. At least not yet.

Watching how they're played out in local media, many local ''site fights" seems as scripted as a White House press conference. Residents and community groups on one side, developers and their political allies on the other. But one observation that comes up again and again comes from mayors and city councilors stating that no other issue has brought so many people to a City Hall meeting as the prospect of a Wal-Mart.

Wal-Mart's stock answer is to dismiss the whole thing to a minority of rabble-rousers. According to its army of PR flacks, Wal-Mart is invariably supported by a silent majority. Questioned last year on CNBC, CEO Lee Scott explained it this way: ''. . . Look at the record of the places where we had difficulty getting in, and then go look at how busy the stores are on a Saturday. Is it that the customers didn't want us, or is it that a group -- a particular group -- didn't?"

Funny how an empire built on mastering data can't provide any to bolster these claims of muted solidarity. Nevertheless Scott's response is as illuminating as it is arrogant. What we can deduce from it is this: Once Wal-Mart goes up, uppity citizens acquiesce all the way to the checkout line.

For those inclined to write off the whole debate to the self-interest of organized labor, well, consider that many of these site fights occur far beyond the urban markets where the grocery workers union, UFCW, has its power base. And neither are these exurban hotbeds of Wal-Mart resistance in places like Union County, S.C., West Springfield, Ill., and Southern Colorado home to the predictable contingent of Granola Grannies, Trustafarians, and other easily caricatured activists. Nope, the fight against Wal-Mart is more complex and often more pragmatic than the way it's characterized in the popular political imagination.

Adding fire to this debate is something more abstract, but no less potent: collective ambivalence. Consider a recent survey published in Advertising Age, which found Wal-Mart ranking in the top three of the most and least trusted American corporations.

Another study by the Chicago-based research firm Leo J. Shapiro and Associates found that even in Oklahoma City, a market Wal-Mart has dominated for years, shoppers don't want for mixed feelings. The report surveyed customers for nearly four years between 2000 and 2003 dividing them into categories based on their attitude toward Wal-Mart: champions, enthusiasts, rejecters, and conflicted. Surprisingly the conflicted folks who have social objections toward the big Wal-Mart, turned out to spend more than enthusiasts, averaging over five Wal-Mart trips a month.

Alas, Wal-Mart's friends defend the company on grounds that no one is forced to shop there. That the free market is the ultimate arbiter of Wal-Mart's policies. That shopping and voting are one and the same. Well, sadly, almost everyone shops, while not everyone votes.

Write about Wal-Mart and you soon learn that everyone has a reaction to the place. People are amazed and frightened and fascinated by its potential for growth. By its mastery of technology. You can buy a healthcare plan at Sam's Club. In a few Alabama Wal-Marts you can rent a car. The company's going into gas stations. Convenience stores. Banks. Wal-Mart, it seems, is everywhere.

Whether this is something you fear, embrace, or find merely shrugworthy, it's worth considering where Wal-Mart isn't. And that's in any idealized portrait of America, from paintings to postcards to the opening credits of Hollywood movies. The places we go for our daily bread of deep discounts, the sprawling big box strips, are seldom seen and rarely celebrated.

Call them our retail ghettoes, but they're as American as any Rocky Mountain vista, and their consequences are tearing us apart.

John Dicker is author of ''The United States of Wal-Mart."

© Copyright 2005 The New York Times Company

Frist set up Blind Trust for Children

2005-11-04T17:25:00.000-05:00

Frist set up blind trust for children

WASHINGTON, Nov. 4 (UPI) -- U.S. Senate Majority Leader Bill Frist, R-Tenn., set up a qualified blind trust allowing his children to avoid the estate tax.

The trust includes at least $350,000 worth of shares of HCA, the healthcare corporation founded by his family and was created with assets owned by Frist's mother before she died, The Hill, a Washington newspaper, reported Friday.

The fund allows the Frist family to claim a generation-skipping-tax exemption. The report said such qualified blind trust funds are a common way to bypass the estate tax.

Frist has his stock assets in a primary blind trust. The Senate Ethics Committee approved a second qualified blind trust from his mother's estate in December 2000. A Frist adviser told The Hill, it was Frist's mother's wishes the assets be set aside for her grandchildren.

Frist's stock transactions are at the center of a federal investigation. Frist said he ordered trustees to divest both blind trusts of HCA stock to avoid the appearance of a conflict of interest when his Senate business involves the healthcare industry. But shortly after the transactions were made, HCA stock took a sharp downward turn after an earnings warning. Frist denies any wrongdoing in the stock deals.

Kentucky Ready to Revamp Medicaid

2005-11-03T13:18:00.000-05:00

Kentucky prepares to remake Medicaid
New health plans, restrictions would follow federal approval

By Deborah Yetter
dyetter@courier-journal.com
The Courier-Journal

FRANKFORT, Ky. — People who use Medicaid could be moved into new health plans with higher costs and more restrictions on services as soon as January, state officials said yesterday.

Several basic health plans would be created to cover adults, children, the elderly and the disabled.

Most Medicaid recipients -- low-income adults and children -- would fall under a plan called "Global Choices," with higher co-payments for medical services and maximum out-of-pocket expenses of $450 a year.

To make these changes and others announced yesterday, Kentucky must have permission from the federal government. State officials said they plan to file the request tomorrow.

If the state gets federal approval, Medicaid would no longer be a program without limits for services or one with little or no cost to the nearly 700,000 Kentuckians it serves.

Other previously announced changes will take effect Jan. 1.

Medicaid will not pay for nonemergency use of emergency rooms and will limit prescriptions to four per month. People who need more prescriptions may get them with advance approval.

Some advocates embraced yesterday's proposal, including members of AARP of Kentucky, who said it could help elderly and disabled people remain at home rather than moving to nursing homes or other institutions.

Under the proposal, Kentucky could reallocate funds to cover more services at home, such as housekeeping and health care for the elderly and disabled.

"I think it's good," said Laurel True, an AARP advocate. "It opens the world up for old people and people with disabilities."

But other advocates said they didn't get enough time to review the 74-page draft of the plan, which was posted on the state's Web site Tuesday night, just hours before a briefing yesterday.

"I'm not sure what the rush is," said Sheila Schuster, a mental-health advocate and head of a coalition of about 70 groups representing people on Medicaid.

And Jan Barthle of Louisville, whose adult daughter Melissa has mental illness and mental retardation, worries that the plan lacks details about how to help people such as her daughter stay out of institutions and live in the community.

Her daughter had to move to a state facility after she lost a community placement because of mental illness, Barthle said.

"They don't address that for my daughter," she said.

The state is facing about a $425 million Medicaid shortfall in the current budget year. Future years will be worse unless the program is radically restructured, Mark D. Birdwhistell, state undersecretary for health, told a group of about 40 advocates and others at the briefing.

"Medicaid has to change," he said.

Health plans

The creation of health plans for Medicaid users concerns Maria Puga, 36, of Lexington, whose five children ages 6 though 15 get health coverage through the service.

She said she would have to pay more for her children's prescription drugs and emergency-room visits -- though children would not be charged co-payments for office visits to the doctor.

Puga said she and her husband both work but have little extra money for medical expenses. Still, she said she'll find a way if it involves her children's health.

"They're my kids," she said. "Even if I have to borrow money from somebody else, I'll do it."

Judy Warner, a social worker at the Family Care Center in Lexington, where Puga's children get care, said she worries about the effect of even small co-payments on low-income families.

"Some of these families I work with, they are at their margin," she said. "It's every month juggling what little bit of money they have."

More comment expected

Birdwhistell and Medicaid Commissioner Shannon Turner said yesterday that the goal is to get Medicaid members more engaged in their health care -- and helping pay for it is one way to do that.

And both said that they will continue to listen to advocates and people who receive Medicaid and will try to address their concerns as officials develop the final health plans.

"The game is not over," Birdwhistell said. He said the plan outlined yesterday will be used to seek federal approval, called a waiver, to reorganize Medicaid.

Federal officials have said they can't comment on Kentucky's plan until they see it. The government provides about 70 percent of Kentucky's Medicaid money.

But Birdwhistell said at a recent meeting that top officials with the federal agency indicated that they like Kentucky's proposals.

Passport unaffected

The plan won't affect about 135,000 members of Passport, a Medicaid managed-care plan that serves people in Jefferson and 15 surrounding counties. Still, Medicaid will be incorporating some of Passport's methods, including tighter controls on prescription drugs and requiring approval in advance for many costly, brand-name drugs.

Steve Conlon, 51, of Louisville, a Passport member who is disabled from a degenerative spinal disease, said he's satisfied with Passport, although he recently was delayed several months from getting a brand-name pain drug until the plan agreed to approve it.

The drug, a time-release form of morphine, replaced several drugs he was taking each day and is more effective, he said.

Conlon said he would have preferred not to go through the lengthy appeal process but was happy with the outcome. "I was in the military -- I know about the chain of command and that's what I had to do," he said.

Necessary service

Bobby Marcum, 45, of Manchester, said he thinks people probably tend to get prescriptions they don't need or use. Higher co-payments and limits might help cut down on abuse, he said.

"I feel like there's a lot of waste out there," said Marcum, who qualifies for Medicaid because he is blind.

Birdwhistell said Medicaid's proposed health plans will limit some services such as X-rays or physical therapy. But people who need more than the plan allows can get them with permission from Medicaid, he said.

"If it's a medically necessary service, they're going to get it," he said.

First Grader Won't Pay

2005-11-03T13:03:00.000-05:00

Enclosed is an article from the Cincinnati Enquirer about the Bomkamp family. I wrote a column about them a couple of months ago and hope that the legislature will make this a high priority in the next session.

Don

1st-grader stays, won't pay
Parents, schools work out tuition-free solution

By William Croyle
Enquirer staff writer

CRESCENT SPRINGS - The parents of a 5-year-old girl who refused to pay a $3,000 tuition bill appear to have won their battle.

John and Shauna Bomkamp and Kentucky state Sen. Jack Westwood met Tuesday with Kenton County School District officials to try to settle the issue.

They agreed on a pilot program that will allow Alison Bomkamp to stay in first grade, free of charge, while both sides push for legislation that would prevent this circumstance from happening again.

The Kenton school board has to approve the measure later this month, which both sides expect will happen.

"I'm happy that we're working to change the law," Shauna Bomkamp said. "But I'm not happy that we had to go through all this. It didn't have to be this way."

Alison skipped kindergarten and entered first grade this year at River Ridge Elementary School in Villa Hills after testing three times at a second-grade level. But the Bomkamps were told there would be a $3,000 tuition charge for her to enter first grade early.

The reason? A state law and attorney general's opinion that says a child not 6 years old until after Oct. 1 can enroll only in a public school's kindergarten program.

Since the state funds only half-day kindergarten, just half of Alison's first-grade education is being paid for by the state.

The district appealed to the state board of education, asking for a waiver for Alison. The board denied it, citing fear of setting a precedent.

But the Bomkamps still refused to pay the tuition.

One thing the two sides did agree on was that the root of the problem was the law.

"We need legislation that will recognize a child's learning level and provide the necessary funding," said Kenton Superintendent Susan Cook.

"We wouldn't want to work on a waiver every year."

Westwood said he will help work on that legislation.

"The easiest thing to do is clarify the law," Westwood said. "Kids need to get the appropriate education for their abilities."

Shauna Bomkamp said she will also help, even if it means speaking at the 2006 General Assembly.

"I'll help anyway I can."

E-mail wcroyle@enquirer.com

FW: Bloglines - Larry Forgy, You're No Gatewood Galbreath

2005-11-02T19:38:00.000-05:00

Don McNay
don@mcnay.com

From: mcnaysettlement@aol.com [mailto:mcnaysettlement@aol.com]
Sent: Wednesday, November 02, 2005 7:32 PM
To: Don McNay
Subject: Bloglines - Larry Forgy, You're No Gatewood Galbreath

Bloglines user mcnaysettlement@aol.com has sent this item to you.

BluegrassReport.org
An Unfiltered and Candid Look at Politics, Politicians and the Media in Kentucky

Larry Forgy, You're No Gatewood Galbreath

By Mark Nickolas on Partisan Politics

Don McNay pens a wonderfully amusing op-ed in the Richmond Register comparing the parallel political lives of Larry Forgy and Gatewood Galbreath. I'll take Gatewood any day.

The whole piece is worth a read, but here's one amusing excerpt:

Forgy plays an important role in the Republican Party. He is their clown prince and perennial candidate, like Gatewood Galbreath is for the Democrats.

I will argue that Gatewood has had a better political career.

Compare Forgy to Gatewood.

In 1983, Gatewood ran for commissioner of agriculture and lost. Forgy thought about running for governor, but didn't.

Gatewood ran. Forgy didn't. Score that for Gatewood.

In 1987, Forgy started to run for governor and suddenly quit. He got over what caused him to quit by 1991 and lost the primary. He lost again in 1995.

Gatewood also ran for governor three times. He didn't win, but never dropped out. He ran for Congress and lost, too.

You have to give Gatewood the edge on persistence.

In 2000, Forgy ran for the Kentucky Supreme Court. With George W. Bush leading the ticket, a Republican such as Forgy should have walked into it. Instead, he was completely humiliated.

To top it off, his sister ran for Congress. She lost, too.

I've voted for Gatewood several times. Like the majority of Kentuckians, I have never voted for Forgy.

Forgy finally quit running for office, but Gatewood kept plugging away. Gatewood never wins, but he doesn't go around whining about it either.

Forgy lashes out at everybody and everything. He is really sad. He's worked for so many law firms that they ought to issue him office space by the hour.

The End of Pensions

2005-10-30T22:55:00.000-05:00

October 30, 2005

The End of Pensions

By ROGER LOWENSTEIN

I. THE LATEST FINANCIAL DEBACLE

When I caught up with Robert S. Miller, the chief executive of Delphi Corporation, last summer, he was still pitching the fantasy that his company, a huge auto-parts maker, would be able to cut a deal with its workers and avoid filing for bankruptcy protection. But he acknowledged that Delphi faced one perhaps insuperable hurdle - not the current conditions in the auto business so much as the legacy of the pension promises that Delphi committed to many decades ago, when it was part of General Motors. This was the same fear that had obsessed Alfred P. Sloan Jr., the storied president of G.M., who warned way back in the 1940's that pensions and like benefits would be "extravagant beyond reason." But under pressure from the United Auto Workers union, he granted them. And as future auto executives would discover, pension obligations are - outside of bankruptcy, anyway - virtually impossible to unload. Unlike wages or health benefits, pension benefits cannot be cut. Unlike other contracts, which might be renegotiated as business conditions change, pension commitments are forever. And given the exigencies of the labor market, they tend to be steadily improved upon, at least when times are good.

For the U.A.W., Miller noted forlornly, "30 and Out" - 30 years to retirement - became a rallying cry. Eventually, the union got what it wanted, and workers who started on the assembly line after high school found they could retire by their early 50's. "These pensions were created when we all used to work until age 70 and then poop out at 72," Miller told me. "Now if you live past 80, a not-uncommon demographic, you're going to be taking benefits for longer than you are working. That social contract is under severe pressure."

Earlier this month, Miller and Delphi gave in to the pressure and sought protection under the bankruptcy code - the largest such filing ever in the auto industry. It followed by a few weeks the Chapter 11 filings of Delta Air Lines and Northwest Airlines, whose pension promises to workers exceeded the assets in their pension funds by an estimated $16 billion.

The three filings have blown the lid off America's latest, if long-simmering, financial debacle. It is not hedge funds or the real-estate bubble - it is the pension system, both public and private. And it is broken.

II. THE MORAL HAZARD OF INSURANCE

The amount of under funding in corporate pension plans totals a staggering $450 billion. Part of that liability is attributable to otherwise healthy corporations that will most likely, in time, make good on their obligations. But the plans of the companies that fail will become the responsibility of the government's pension insurer, the Pension Benefit Guaranty Corporation. The P.B.G.C., which collects premiums from corporations and, in theory, is supposed to be self-financing, is deeply in the hole, prompting comparisons to the savings-and-loan fiasco of the 1980's. Just as S. & L.'s of that era took foolish risks in part because their deposits were insured, the P.B.G.C.'s guarantee encouraged managements and unions to raise benefits ever higher.

In such situations, individuals are tempted to take more risk than is healthy for the group; economists, in a glum appraisal of human nature, call it "moral hazard." In effect, America's pension system has been a laboratory demonstration of moral hazard in which the insurance may end up bankrupting the system it was intended to save. Given that pension promises do not come due for years, it is hardly surprising that corporate executives and state legislators have found it easier to pay off unions with benefits tomorrow rather than with wages today. Since the benefits were insured, union leaders did not much care if the obligations proved excessive. During the previous decade especially, when it seemed that every pension promise could be fulfilled by a rising stock market, employers either recklessly overpromised or recklessly underprovided - or both - for the commitments they made.

The P.B.G.C. is now $23 billion in the red - a deficit that is expected to grow, significantly, as more companies go under. The balance sheet for the end of September will very likely show a deficit of more than $30 billion. If nothing is done to fix the system, the Congressional Budget Office forecasts, the deficit will mushroom to more than $100 billion within two decades. This liability will almost certainly fall back on the taxpayers, since the alternative to a bailout - letting the pension agency fail - would force aging former auto workers and other retirees onto the street.

As bad as that sounds, the problem of state and local government pensions is even worse. Public pensions, which are paid by taxpayers and thus enjoy an implicit form of insurance, are underfunded by a total of at least $300 billion and arguably much more. While governments have been winking at these deficits for years, they are now becoming intolerable burdens for taxpayers. In San Diego, pension abuse has effectively bankrupted the city. Thanks to a history of granting sweeter and sweeter pension deals that it has neglected to fund, the city has been forced to allocate $160 million, or 8 percent of the municipal budget, to the San Diego City Employees Retirement System this year, with similar allocations expected for years to come. San Diego has tabled plans for a downtown library, cut back the hours on swimming pools, gutted the parks and recreation budget, canceled needed water and sewer projects and fallen behind on potholes.

State or local governments in New Jersey, New York, Illinois, Ohio, West Virginia and elsewhere face similar budget strains aggravated by runaway pension promises. According to Carl DeMaio, director of the Performance Institute, which advocates better government accountability, "There is a San Diego brewing in every community."

Not only are taxpayers certain to suffer, but senior citizens in the future may also have to settle for less secure retirements anchored only by Social Security and whatever they've managed to put away into their 401(k) accounts. A backlash already has begun in state capitals, where the political forces that have been lobbying for Social Security reform have been rallying lawmakers to get out of the pension business altogether. Alaska's Legislature recently passed a shotgun bill to deny pensions to future employees. This mimics a trend in the private sector, in which corporations have been leaving the system, either by paying off their workers and terminating their pension plans or by "freezing" their plans, a step recently taken by Hewlett Packard, so that many current employees will no longer accrue benefits and new employees will not participate at all.

If the pension system continues to wither, it is not hard to envision a darker future in which - as was true until early in the 20th Century, before the advent of pensions - many of the elderly would be forced to keep working to stave off poverty.

III. THE SHRINKING PENSION SYSTEM

Congress has been debating legislation to fix the private system, but it has been unable to resolve a basic tension: anything it does to ease the burden on failing or failed pension plans lessens the penalty for failure and enhances moral hazard. By making it easier for, say, a Delta or a Delphi to offer benefits, it raises the possible cost of a future bailout.

The tough medicine favored by the Bush administration, which would eliminate loopholes in the system as well as much of the subsidy that now exists in the insurance system, would lead to more companies freezing their plans or leaving the system outright. The number of pension plans would continue to shrink and in time all but disappear. This would strip the elderly of the future of what is still the most secure form of retirement income.

The fear of runaway pension costs plainly echoes the Social Security debate, and many suspect that the Bush administration would not much mind if pensions did disappear. "I don't think the administration is very interested in creating a future for traditional pensions," says Julia Coronado, a senior research associate at Watson Wyatt, a human-resources consulting firm. "It doesn't fit very well with their vision of the ownership society."

Bradley Belt, executive director of the P.B.G.C., shrugs off the charge. "The last thing we want to do is chase people out of the system," he says. Besides, the government doesn't need to chase. As Belt points out, the number of workers covered by pensions is shrinking without government help. In 1980, about 40 percent of the jobs in the private sector offered pensions; now only 20 percent do. The trend is probably irreversible, because it feeds on itself. Hewlett Packard, for instance, must compete with younger companies like Dell Computer that do not offer traditional pensions. Freezing its plan, which was a legacy of the company's famously employee-oriented founders, was an embarrassing step for H.P.'s present managers - but freeze it they did.

This may have made economic sense, but federal law has long recognized a social purpose to pensions as well. By allowing companies to deduct from taxes the money they contribute into their pension funds, the government encourages employers to provide a safety net for their workers. This remains a legitimate function, and if pensions were allowed to die, we would need something to take their place.

IV. WHY PENSIONS MATTER

To understand why pensions are still important, you have to understand the awkward beast that benefits professionals refer to as the U.S. retirement system. It is not really one "system" but three, which complement each other in the crudest of fashions. The lowest tier is Social Security, which provides most Americans with a bare-bones living (the average payment is about $12,000 a year). The highest tier, available to the rich, is private savings. In between, for people who do not have a hedge-fund account and yet want to retire on more than mere subsistence, there are pensions and 401(k)'s. Currently, more than half of all families have at least one member who has qualified for a pension at some point in his or her career and thus will be eligible for a benefit. And among current retirees, pensions are the second-biggest source of income, trailing only Social Security.

During most of the 90's the decline in pension coverage was barely lamented. It was not that big companies were folding up their plans (for the most part, they were not) but that newer, smaller companies weren't offering them. As the small companies grew into big ones (think Dell, or Starbucks, or Home Depot), traditional pensions covered less of the private-sector landscape. This did not seem like a very big deal. Younger workers envisioned mobile careers for themselves and many did not want pension strings tying them to a single employer. And most were able to put money aside in 401(k)'s, often matched by an employer contribution.

It happened that 401(k)'s, which were authorized by a change in the tax code in 1978 and which began to blossom in the early 1980's, coincided with a great upswing in the stock market. It is possible that they helped to cause the upswing. In any case, Americans' experience with 401(k)'s in the first two decades of their existence was sufficiently rosy that few people shed tears over the slow demise of pension plans or were even aware of how significantly pensions and 401(k)'s differed. But 401(k)'s were intended to be a supplement to pensions, not a substitute.

From the beneficiary's standpoint, pensions mean unique security. The worker gets a guaranteed income, determined by the number of years of service and by his or her salary at retirement. And pensions don't run dry; workers (or their spouses) get them as long as they live. Because the employer is committed to paying a certain level of benefits, pensions are known as "defined benefit" plans. Since an individual's benefit rises with each year of service, the employer is supposed to sock money away, into a fund that it manages for all of its beneficiaries, every year. The point is that workers don't (or shouldn't) have to worry about how the benefit will get there; that's the employer's responsibility. Of course, the open-ended nature of the guarantee - the very feature that makes pensions so attractive to the individual - is precisely what has caused employers to rue the day they said yes. No profit-making enterprise can truly gauge its ability to meet such promises decades later.

A 401(k), on the other hand, promises nothing. It's merely a license to defer taxes - an individual savings plan. The employer might contribute some money, which is why 401(k)'s are known as "defined contribution" plans. Or it might not. Even if the company does contribute, it offers no assurance that the money will be enough to retire on, nor does it get involved with managing the account; that's up to the worker. These disadvantages were, in the 90's, somehow perceived (with the help of exuberant marketing pitches by mutual-fund firms) to be advantages: 401(k)'s let workers manage their own assets; they were a road map to economic freedom.

Post-bubble, the picture looks different. Various people have studied how investors perform in their 401(k)'s. According to Alicia Munnell, a pension expert at Boston College and previously a White House economist, pension funds over the long haul earn slightly more than the average 401(k) holder. Among the latter, those who do worse than average, of course, have no protection. Moreover, pensions typically annuitize - that is, they convert a worker's retirement assets into an annual stipend. They impose a budget, based on actuarial probabilities. This might seem a trivial service (some pensioners might not even realize that it is a service). But if you asked a 65-year-old man who lacked a pension but did have, say, $100,000 in savings, how much he could live on, he likely would not have the vaguest idea. The answer is $654 a month: this is the annuity that $100,000 would purchase in the private market. It is the amount (after deducting the annuity provider's costs and profit) that the average person could live on so as to exhaust his savings at the very moment that he draws his final breath.

So the question arises: what if he lives longer than average? This is the beauty of a pension or of any collectivized savings pool. The pension plan can afford to support people who live to 90, because some of its members will expire at 66. It subsidizes its more robust members from the resources of those who die young. This is why a 401(k) is not a true substitute. Jeffrey Brown, an associate finance professor at the University of Illinois at Urbana-Champaign and a staff member of the president's Social Security commission, notes that as baby boomers who have nest eggs in place of pensions begin to retire, they will be faced with a daunting question: "How do I make this last a lifetime?"

V. FROM MANAGEMENT TOOL TO EMPLOYEE BENEFIT

The country's first large-scale pension plan was introduced after the Civil War, when the federal government gave pensions to disabled Union Army veterans and war widows. Congress passed an act in 1890 that extended pensions to all veterans 65 and over. This converted pensions into a form of social welfare. Over the next 20 years, states and cities added pensions for police officers and firefighters. By World War I, most teachers had been granted pensions as well. Governments couldn't offer big paychecks for workers - teachers, the police, firefighters - so it offered stability and pensions instead.

In the private sector, the first pension was offered by American Express, a stagecoach delivery service, in 1875. Railroads followed suit. Employees were required to work for 30 years before they qualified for benefits, and thus pensions helped companies retain employees as well as ease older workers into retirement. These employers thought of pensions as management tools, not as employee "benefits." But in the first half of the 20th century, as the historian James Wooten put it, government policies turned pensions into a tool of social policy. First came the tax deduction. This feature was abused, as companies used pensions to shelter payments to their executives. The rules were gradually tightened, however, forcing plans to include the rank and file. World War II gave more incentives to create pensions: punitive tax rates made the pension shelter enormously attractive and a government freeze on wages meant that pensions were the only avenue for increasing compensation.

The effect of these policies was to encourage unions to bargain for pensions and to pressure employers to grant them. After the war, John L. Lewis, the legendary labor leader, staged a strike to win pensions for miners. Ford Motor capitulated to the U.A.W. in 1949. G.M., headed by the reluctant Sloan, followed in 1950. This led to a so-called pension stampede; by 1960, 40 percent of private-sector workers were covered. Meanwhile, in the auto industry, the seeds of the problem were already visible.

Companies might establish plans, but many were derelict when it came to funding them. When companies failed, the workers lost much of their promised benefit. The U.A.W. was acutely aware of the problem, because of the failing condition of several smaller car manufacturers, like Packard. The union didn't have the muscle to force full funding, and even if it did, it reckoned that if the weaker manufacturers were obliged to put more money into their pension funds, they would retaliate by cutting wages.

Thus in 1959, Studebaker, a manufacturer fallen on hard times, agreed to increase benefits - its third such increase in six years. In return, the U.A.W. let Studebaker stretch out its pension funding schedule. This bargain preserved the union's wages, as well as management's hopes for a profit, though it required each to pretend that Studebaker could afford a pension plan that was clearly beyond its means. Four years later, the company collapsed.

The Studebaker failure was a watershed. Thousands of employees, including some who had worked 40 years on the line, lost the bulk of their pensions. Stunned by the loss, which totaled $15 million, the U.A.W. changed its tactics and began to lobby in earnest for federal pension insurance. A union pension expert tellingly explained to Walter Reuther, the U.A.W. chief, that insurance would reconfigure the "incentives" of both labor and management. Though business was skeptical of the idea, a decade later, in 1974, Congress finally passed the Employee Retirement Income Security Act, or Erisa, which, among other protections, established the P.B.G.C. to insure private pensions. Erisa, according to Wooten, who wrote a history of the act, completed the transition of pensions into a part of the social safety net. It was also the birth of moral hazard.

VI. THE SURPRISINGLY PLIABLE SYSTEM OF PENSION ACCOUNTING

Erisa, which would be amended several times, was supposed to ensure that corporate sponsors kept their plans funded. The act includes a Byzantine set of regulations that seemingly require companies to make timely contributions. As recently as 2000, most corporate plans were adequately funded, or at least appeared to be. Their assets took a serious hit, however, when the stock market tumbled. (In retrospect, they had been cavalier in assuming the bull market would continue.) And they were burned again when interest rates fell.

Since pension liabilities are, for the most part, future liabilities, companies calculate their present obligation by applying a discount rate to what they will owe in the future. As interest rates move lower, they have to set more money aside because it is assumed that their assets will grow more slowly. The principle is familiar to any individual saver: you need to save more if you expect, say, a 5 percent return on your investment instead of a 10 percent return. What is much in dispute is just which rate is proper for pension accounting.

Corporations have been gaming the system by using the highest rates allowable, which shrinks their reported liabilities, and thus their funding requirements. The P.B.G.C., when calculating the system's deficit, uses what is in effect a market rate; whatever it would cost to buy annuities for everyone covered in a pension plan is, it argues, the plan's true "liability." The difference between these measures can be extreme. Depending on whom you talk to, General Motors' mammoth pension fund is either fully funded or, as the P.B.G.C. maintains, it is $31 billion in the hole.

What is not in dispute is that when interest rates fell, the present value of pension liabilities (by whatever measure) soared. The confluence of falling stock prices, plunging interest rates and a recession in the beginning of this decade was the pension world's equivalent of the perfect storm. An unprecedented wave of pension sponsors failed and then dumped their obligations on the P.B.G.C. (To do so, a sponsor generally must prove that it could not re-emerge as a viable enterprise without shedding its pension plan.) By far the most costly failures were in airlines and steel, although the list ranges from Kemper Insurance and Kaiser Aluminum to Murray, a lawn-mower manufacturer.

As the P.B.G.C. assumed responsibility for more and more pensioners, it became clear that the premium it charged was way too cheap. Mispriced insurance, like mispriced anything, sends the market a distorted signal. Belt, the P.B.G.C. director, who served as counsel to the Senate Banking Committee in the late 1980's during the savings-and-loan crisis, says that cheap pension insurance gave rise to flawed incentives: namely it kept companies in the pension business who didn't deserve to be there. He also argues, rather convincingly, that lax rules allowed pension sponsors to get away with inadequate funding.

For example, United Airlines did not make contributions to any of its four employee plans between 2000 and 2002, when it was heading into Chapter 11, and made minimal contributions in 2003. Even more surprisingly, in 2002, after two of its jets had been turned into weapons in the Sept. 11 disaster, and when the airline industry was pleading for emergency relief from Congress, United granted a 40 percent increase in pension benefits for its 23,000 ground employees.

Bethlehem Steel similarly enjoyed a three-year funding holiday as it was going through hard times, letting its liabilities swell in advance of turning them over to the government. Meanwhile, in order to gain its unions' approval for plant shutdowns, it agreed to costly benefit enhancements. In 2001 Bethlehem filed for Chapter 11 bankruptcy. It was guided through its bankruptcy by none other than Miller, now the Delphi C.E.O. Miller disputes the notion that capital-scarce companies like Bethlehem intentionally game the system by shirking funding. "Companies don't like falling behind," he says. "When you have a hard choice between starving the capital base to feed the pension plan, or making capital investments to become more productive, to the extent there is permission that's what you do." The point is, they had permission.

Neither Bethlehem nor United broke any laws. Both companies made the full contributions required under Erisa. When the P.B.G.C. seized their plans, however, Bethlehem was only 45 percent funded, and United was only 42 percent funded. For companies that terminate their pension plans, such gross underfunding has become the norm. Either assets suddenly vanish when the P.B.G.C. walks in the door, or, evidently, the system for measuring "full" funding is broken. As Belt testified to the Senate Committee on Finance in June, "United, US Airways, Bethlehem Steel, LTV and National Steel would not have presented claims in excess of $1 billion each - and with funded ratios of less than 50 percent - if the rules worked."

Even leaving aside the debate over which rate to use in calculating pension liabilities, there is no doubt that Erisa permits companies to use some doubtful arithmetic. For instance, the law lets corporations "smooth" changes in their asset values. If the stocks and bonds in their pension funds take a hit (as happened to just about every fund recently), they don't have to fully report the impact. Nor do they have to ante up fresh funds to compensate for the loss for five years. A similar smoothing is permitted on the liability side. And though, in theory, Erisa discourages underfunding by requiring offenders to pay higher premiums, its various loopholes render the sanction toothless. Thanks to another loophole, companies that contribute more than the required amount get to skip future contributions even if they later become underfunded. These companies are awarded so-called "credit balances," which remain in place even if the actual balance is showing red.

Incredibly, when United's plans were terminated, earlier this year, even though they were groaning under $17 billion in pension liabilities and a mere $7 billion in assets, they still had credit "balances" according to Erisa. (By law, the P.B.G.C. will be on the hook for most, but not all, of United's shortfall. The agency guarantees pensions up to $45,000 a year; employees, mostly pilots, who were owed richer pensions are uninsured above the cap.)

Their dubious funding history notwithstanding, corporations - airlines in particular - have been lobbying for greater permissiveness for several years. And they have gotten it. Congress has twice relaxed the rules, permitting pension sponsors to use a higher rate to calculate their liabilities.

VII. WHAT BUSH WOULD DO?

Enter the Bush administration: it has essentially declared the era of permissiveness over. Among other changes, it wants the funding rules tightened. To tackle moral hazard, it wants to stop companies with poor credit ratings from granting benefit hikes, or from doling out unfunded pension benefits to unions who agree to plant shutdowns. It even wants to prevent workers at some companies whose bonds are given a "junk" rating from accruing more years of service. This would be painful to employees at many industrial companies, possibly including G.M.

Indeed, one reading of the administration proposal is that, having seen the steel and airline industries raid the P.B.G.C., it is drawing the line at the auto industry - whose initial distress, of course, prompted the agency's founding. Asked about that before Delphi went bust, Belt admitted: "Eight auto-parts suppliers have come under Chapter 11 so far this year. No question our single largest source of exposure is the auto sector."

Since G.M.'s stock was downgraded to junk status earlier this year, the possibility that it would file for bankruptcy has been the subject of on-again, off-again debate on Wall Street. G.M.'s pension plan totals an astronomical $90 billion; a bankruptcy filing would be the P.B.G.C.'s biggest nightmare. G.M. says the notion is far-fetched. The company seems to have plenty of liquidity and, just two weeks ago, with retiree costs a major concern, it reached an agreement with the U.A.W. to trim health benefits. G.M. and other industrial companies, along with their unions, have harshly attacked the Bush pension proposal, which would force many old-economy-type corporations to put more money into their pension funds just when their basic businesses are hurting.

Alan Reuther, Walter's nephew and the U.A.W.'s legislative director, says the provisions to restrict benefits would be "totally devastating for workers and retirees." He makes no apologies for "30 and out" - a fair reward, he maintains, for hard service on the assembly line - and he wonders at the post-modern notion that blue-collar workers should be responsible for their own retirements because giant corporations can't handle it. Also, a typical G.M. pension for someone with 30 years on the job is about $18,000 a year. That is hardly to be compared with an airline pilot's. "The P.B.G.C. is focused on protecting themselves from claims and not on protecting the claims of workers," he says. "They forget why they were created." Social safety nets have their price - in this case, a little moral hazard - and that is really what the debate is about.

What has emerged from the Beltway skirmishing thus far are bills on either side of Congress that would in some ways tighten funding but give a special break to airlines. Premiums to the P.B.G.C. would rise from $19 per plan participant to $30, and variable premiums on distressed companies would be enforced. The bills would chip away (but not eliminate) gimmicks like "smoothing."

The Senate is still divided, however, on how to treat corporations with junk credit ratings - the ones most likely to wind up in the P.B.G.C.'s lap. Hard-liners like Senator Chuck Grassley insist they should be forced to strengthen their pension plans in a hurry; Senators Mike DeWine and Barbara Mikulski (both from states with blue-collar constituencies) want to give such companies lenience. So after months of lobbying, politicking and deal making, moral hazard is still alive.

VIII. PENSION VS. POTHOLES

The P.B.G.C. does not protect government pensions, but dynamics similar to those in the private sector have also wrecked the solvency of public plans. Even in states where budget restraint is gospel, public-service employees have found it relatively easy to get benefit hikes for the simple reason that no one else pays much attention to them. In the corporate world, stockholders, at least in theory, exert some pressure on managers to show restraint. But who are the public sector "stockholders"? The average voter doesn't take notice when the legislature debates the benefits levels of firemen, teachers and the like. On the other hand, public-employee unions exhibit a very keen interest, and legislators know it. So benefits keep rising.

As a matter of practice, those benefits are as good as insured. Because public pension benefits are legally inviolable, default is not an option. Sooner or later, taxpayers will be required to put up the money (or governments will be forced to borrow the money and tax a later generation to pay the interest). Thus, unions can bargain for virtually any level of benefits without regard to the state's ability, or its willingness, to fund them. This creates moral hazard indeed. At least in the private sphere, there are rules - ineffectual rules maybe, but rules - that require companies to fund. In the public sector, legislatures wary of raising taxes to pay for the benefits that they legislate can simply pass the buck to the future. This explains how the West Virginia Teachers Retirement System has, embarrassingly, only 22 percent of the assets needed to meet its expected liabilities. It also explains how Illinois, a low-tax state, is underfunded by some $38 billion, or $3,000 per every man, woman and child in the state.

California is a good example of the political forces that have driven benefits higher. In the 90's, Gov. Gray Davis, a Democrat who was strongly supported by public-employee unions, pushed through numerous bills to increase benefits. One raised the pension of state troopers retiring at age 50 to 3 percent of final salary times the number of years served. (Previously, the formula was 2 percent at age 50, more if you were older.) Thus, a cop hired at age 20 could retire at 50, find another job and get a pension equal to 90 percent of his final salary.

The higher benefits trickled down to the local level, as counties that feared losing police officers to the state felt forced to copy the formula. Counterintuitively, as benefits were going up, the California Public Employees Retirement System (Calpers), which was boasting high returns in the stock market, allowed state agencies and local governments to reduce their contributions.

Contra Costa County, which adopted the "3 percent at 50" formula for its Police Department, got by with contributing only $55 million to retirement costs in 1999, near the market peak. When the market tanked, the county found itself with lower assets and greater obligations. Six years later, the county's retirement bill had more than tripled to $180 million. Bill Pollacek, the county treasurer-tax collector, says the excess earnings from the bull market were spent, among other things, on higher benefits; "the losses were left for the taxpayers."

This example was repeated with various twists across the country. In New Jersey, for example, Christine Whitman, the Republican governor in the 90's, ultimately relied on buoyant stock-market predictions to finance hefty tax cuts, which were the centerpiece of her administration. In 1997, New Jersey borrowed $2.8 billion, at an interest rate of 7.64 percent. The money was advanced to its pension system, on the convenient theory that its pension managers would make more in the market than the state paid out in interest. For a while, they did. The state even raised benefits.

Meanwhile, Trenton achieved a sort of transitory budget balance by contributing less to its pension system. New Jersey's contribution to the Police and Firemen's Retirement System was zero in 2001 through 2003. But during the dot-com debacle, its investments plunged. And the state came under intense budget pressure because of the recession, and so gave itself a few years more to start paying down its pension liability (which further widened the gap). This year, the last easy-funding year, New Jersey will contribute $220 million to its pension system; by 2010, the annual bill will be an impossible-seeming $2.5 billion.

I spoke to Jon Corzine and Doug Forrester, the candidates in next Tuesday's gubernatorial election, and while each expressed the proper horror with regard to past mismanagement, neither had much to say about how they would replenish New Jersey's pension system. State pension officials say that if New Jersey were a private corporation, its system would be nearly bankrupt. "In the real world this is a P.B.G.C. takeover," Fred Beaver, the head of the pension division, told me. Raising taxes is politically forbidden (Forrester has been campaigning to cut property-tax rates).

And the state's reported pension underfunding, officially $25 billion, is undoubtedly optimistic. It assumes that New Jersey's pension assets will earn 8.25 percent, a number collectively determined - some say pulled from thin air - by the state's pension council. Even Orin Kramer, a private hedge-fund manager who also is also chairman of the council, says that any assumption higher than 7.5 percent is unrealistic. "The published numbers are divorced from economic reality," Kramer says. "No one even does the math for what will happen if you only do 7 percent because it's too serious. You start firing cops and teachers."

According to Barclay's Global Investors, if you use realistic assumptions, the total underfunding in all public plans is on the order of $460 billion. If this figure is even close to true, future taxpayers will be hopelessly in hock to the police, firefighters and teachers of the past.

Cutting pensions (unlike health benefits) is simply not an option. State constitutions forbid public entities, even prospectively, from reducing the rate at which employees accrue benefits. They can tinker with, or abolish, benefits for future employees, as Alaska did, but for a worker already on the payroll, benefits - even benefits that might not be earned for many decades hence - are sacrosanct. These benefits are like headless nails; once driven in they can never be removed. This year, New York's Legislature approved 46 new bills - more headless nails - to increase pension benefits, according to E.J. McMahon, an analyst at the Manhattan Institute. New York's benefits already rank among the most generous in the country, and the new bills would expand categories of workers who can retire early, or who can qualify for higher rates. Such bracket creep is pervasive.

One of the biggest pension offenders is San Diego, where six members of the pension board, including the head of the local firefighters' union and two other union officials, have been charged with violating the state's conflict-of-interest code, a felony. What is interesting about San Diego is that, juicy details aside, its pension mess actually looks rather commonplace. The six board members are accused of making a deal to let City Hall underfund the pension system in return for agreeing to higher benefits - including special benefits for themselves. Explicitly or otherwise, this is what unions and legislators have been doing all over the country. A senior adviser on pensions to Gov. Arnold Schwarzenegger told me he fears that ever higher benefits are inescapable, given the fact that legislators control the benefits of people whose support is vital in elections.

Calpers, the country's biggest state-employee retirement system, responds that the pension system has worked well. And for Calpers's 1.4 million members, it has. The average benefit for retirees is $21,000 a year, more than most at General Motors. But at some point, the interest of the public and the interests of public employees diverge.

Earlier this year, Schwarzenegger tried to move California to a 401(k)-style defined contribution plan (for new employees), but the Legislature refused to go along. Schwarzenegger has vowed to revisit the issue in 2006. This battle is being fought from statehouse to statehouse. Michigan (mimicking Alaska) has closed its pension plan to some new employees, and various states, including Florida, Colorado, South Carolina, Arizona, Ohio and Montana, are taking a partial step of letting employees choose between defined contribution plans and traditional pensions. This compromise does not really change much. Most employees who are given the choice opt, quite naturally, to keep their pensions.

Partly for that reason, the Citizens Budget Commission, a politically neutral watchdog, concluded that only by ending pensions outright (for new employees) could New York avert a future fiscal calamity. "Changes in pension benefits for future workers would yield fiscal gains only slowly," the commission noted in a position paper, "but the service to the future fiscal health of the City and State would be enormous."

Most legislatures are not about to do that anytime soon. There is a legitimate argument for preserving public pensions, however, if only they could be put on a sound fiscal basis. Critics like Grover Norquist, the tax-cut crusader, lampoons pensions as remnants of a stodgy, Old World economy. The desire to collect a pension, he argues, keeps workers from moving to better opportunities and shackles employers to workers who are just marking time.

But while mobility is generally considered a virtue in the modern economy, it isn't appropriate everywhere. It may be desirable for a software engineer to move from job to job, notes Robert Walton, a Calpers assistant executive; "for teachers, firefighters, nurses, engineers, that isn't the type of work force you want." Stability is a virtue. The trick is to force legislatures to commit to funding with the same zeal with which they commit to benefits.

De Maio, the San Diego watchdog, is lobbying for a federal law that would impose Erisa-type rules on public plans. Another solution might be found in the Texas Municipal Retirement System, which represents 800 cities and towns in the state. It has a blended system of automatic employer and employee contributions that are managed by the system and turned into an annuity upon retirement. These sorts of remedies could avert plenty of future San Diegos. In principle they are quite simple. It is only the politics that are difficult.

IX. HOW DO YOU MAKE SAVINGS LAST A LIFETIME?

On the private side, benefits professionals have been touting so-called cash-balance plans, a hybrid that in some ways looks like a 401(k), as the best hope for saving the pension industry. With a traditional pension, employees accrue benefits very slowly during their first 20 years and very rapidly during their next 10 (this is why pension plans act as retention tools; you pay a penalty for leaving early). Thus, an employee who stays at a company for 30 years gets a much bigger pension than one who works at three companies for 10 years each. Cash-balance plans were devised to appeal to younger workers, most of whom do not envision retiring at the firm that hired them out of college. In these plans, employees accrue benefits steadily, one decade to the next. There is no penalty for leaving, and workers who change jobs simply roll their accrued benefits into their next plan, as with a 401(k). Many firms converted to cash-balance plans in the 90's to attract younger and more mobile workers.

But the downside of giving more to junior employees is that senior employees get less. When I.B.M. converted, it reduced the rate at which some employees of long standing would accrue benefits, touching off a firestorm. The company was sued, I.B.M. lost and the legal status of similar plans remains in doubt. The pension industry has been lobbying Congress to clarify the status of existing cash-balance plans, but neither the administration nor anyone on Capitol Hill has done so.

To some people, this is further evidence that the Bush administration would just as soon be done with pension plans altogether. I put that recently to Elaine Chao, the secretary of labor, and while her answer was diplomatic, she made no bones about the fact that, in the administration's view, traditional pensions are losing their relevance. "Defined benefit plans have their advantages," she told me, "but in an increasingly mobile 21st-century work force, the lack of flexibility of D.B. plans is yielding to greater usage of defined contributions plans."

It's hard to argue with her, if you look at the numbers. Although 44 million people are covered by private-sector plans, half are people who have already retired and are collecting benefits or whose plans have been frozen or terminated. In other words, on-the-job employees accruing benefits - once the backbone of the system - constitute only half. At that rate, even without legislation, the private-sector pension community will mostly die off in a generation.

And pension sponsors are likely to get another jolt soon. Under current accounting standards, companies can "smooth" their earnings reports, so that each quarter's net income reflects the average assumed performance of the company's pension assets, whether up or down, but not the actual performance. (Discrepancies from the average are sifted back into the earnings stream over time.) This means that reported earnings are often wildly misleading. Robert Herz, chairman of the Financial Accounting Standards Board, has criticized this practice as "a Rube Goldberg device." If FASB follows up and disallows it, corporate pension sponsors would have to cope with a lot more volatility in their earnings. Managers hate volatility, and such a change would prompt many of them to fold their plans.

If defined benefits are on their last legs, then it would make sense to try to incorporate their best features into 401(k)'s. The drawback to 401(k)'s, remember, is that people are imperfect savers. They don't save enough, they don't invest wisely what they do save and they don't know what to do with their money once they are free to withdraw it. Quite often, they spend it.

Here there is much the government could do. For instance, it could require that a portion of 401(k) accounts be set aside in a lifelong annuity, with all the security of a pension. Behavioral economists like Richard Thaler have demonstrated that you can change people's behavior even without mandatory rules. For instance, by making a high contribution rate the "default option" for employees, they would tend to deduct (and save) more from their paychecks. If you make an annuity a prominent choice, more people will convert their accounts into annuities.

Otherwise, it's not hard to predict that as octogenarians and nonagenarians become commonplace in society, many are going to outlive their savings, which is even more scary than outliving the savings of the P.B.G.C. Promoting an annuity culture is probably the single best way to make up for the demise of pensions. Yet most companies that provide 401(k)'s don't even give the option of purchasing an annuity when people cash in their accounts. As Brown, the Illinois professor, notes, "There is no box to check that says 'annuities."' That is a minor scandal. "I wish someone in Washington were thinking bigger thoughts about what the optimal retirement package should look like," says Watson Wyatt's Coronado.

What are Secretary Chao's thoughts? She bounced the question to the Treasury Department. Mark Warshawsky, the Treasury's top economist, has written about the need for annuities, and in an interview he allowed that as 401(k)'s become the primary, or the only, source of retirement income for more people, "I think it is a concern that annuities are not being offered in those plans." When I asked what the Treasury was doing about encouraging annuities, Warshawsky merely said that it was under study. Anything that smacks of regulation (like rules to make sure employees get a particular menu of choices, whether for annuities or for their portfolios) gives the administration shivers. This is what you would expect, given the administration's strong free-market tendencies.

But the government is already deeply involved, since it shelters retirement savings - pensions, yes, but also 401(k)'s, which are similarly permitted to grow tax-free. When it passed Erisa, Congress agreed that corporations that invested tax-sheltered retirement funds - pensions - should have to live by certain rules. But in the defined contribution world - the world of 401(k)'s - there are no rules. Employers can contribute or not. Employees can diversify or blow it all on the company stock (even if it is Enron). If nothing else, the century-long experiment with pensions has proved that in the absence of the right rules, the money will not always be there. The purpose of pension reform should be not merely to avoid a fiscal disaster but to find a fiscally sound way to preserve the likelihood of secure retirements. If people are going to retire on 401(k)'s, those should be subject to rules, and guidance, as well.

It would be nice to think that reform would include a future for pensions, but on the private side at least, it is doubtful. As Delphi's Miller put it simply: "A pension plan makes no sense in today's world. It's not wise for a company to make financial promises 40 or 50 years down the road." Most American executives would agree. Miller says he has not decided what to do at Delphi. If workers grant wage concessions, he has said, the pension plan, which is $4.5 billion shy of what it needs, might even survive. This has the sound of a bargaining ploy. Knowing that the P.B.G.C.'s guarantee is in place, the unions will probably insist on keeping their wages as close to intact as they can, and Miller will probably end up handing the pension plan over to the agency, just as he did at Bethlehem. Then, Miller and other executives will get stock and dandy bonuses in a new Delphi that is happily stripped of pension obligations, and some 45,000 employees and retirees will, in time, happily collect their pensions - courtesy of the U.S. Government. Moral hazard at work.

Roger Lowenstein, a contributing writer, has written about Social Security and health care reform for the magazine.

Don McNay
don@mcnay.com

Congress Weighs Big Cuts to Medicaid and Medicare

2005-10-30T22:54:00.000-05:00

Congress Weighs Big Cuts to Medicaid and Medicare

By ROBERT PEAR

WASHINGTON, Oct. 29 - Congressional committees have proposed substantial cutbacks in Medicaid and Medicare, the nation's largest health insurance programs, which together cover more than one-fourth of all Americans.

The two houses of Congress are expected to approve the changes in the next two weeks as part of competing bills to slow the growth of federal spending. Negotiators from the two chambers would then try to work out the differences.

The House bill would take all of its savings from Medicaid, the program for low-income people, while leaving Medicare, the program for those 65 and older and the disabled, untouched, as the Bush administration wants. By contrast, the Senate bill would squeeze savings from both programs.

Under the House bill, states would gain sweeping authority to charge premiums, increase co-payments and trim benefits for Medicaid recipients, so benefit packages would look more like the private insurance provided by employers.

The Congressional Budget Office estimated that these changes would save the federal government more than $4 billion in the next five years, with savings of more than $3 billion for the states.

Governors of both parties, troubled by the soaring cost of Medicaid, have been pleading with Congress to let them make such changes. They said their record on welfare showed they could be trusted with the new authority.

Under the current Medicaid law and rules, co-payments for most adults cannot exceed $3 for goods and services like prescription drugs and visits to doctors.

The House bill, drafted by Representative Joe L. Barton, Republican of Texas, would gradually increase the maximum co-payment, to $5 in 2008. In later years, the ceiling would rise automatically, to match increases in the consumer price index for medical care.

States could end coverage for Medicaid recipients who refused to pay premiums, and health care providers could deny services to those who failed to pay the new charges. Poor children under 18 years old would be exempt from cost-sharing requirements.

"I trust the states," said Mr. Barton, the chairman of the Committee on Energy and Commerce.

Representative Nathan Deal, Republican of Georgia, said, "If people have a personal stake in the cost of their health care, they will use it more responsibly."

But Representative Tammy Baldwin, Democrat of Wisconsin, said, "Higher co-payments will lead people to forgo needed medical care."

"To listen to some of the personal responsibility arguments," Ms. Baldwin said, "one might think that people line up to see their doctors the way they line up to see a rock concert or sporting event, and the only way to control this irrational hunger or thirst for medical care is to make it more expensive. I just don't buy that."

Federal auditors and investigators have repeatedly found that Medicaid overpays pharmacies. The Senate and House bills would reduce those payments. The Senate bill would also require drug manufacturers to give larger discounts to Medicaid, a provision not included in the House bill.

Craig L. Fuller, president of the National Association of Chain Drug Stores, a trade group, said he did not understand how House Republicans could cut payments to pharmacies and increase co-payments for poor people without requiring drug manufacturers to make any contribution to the savings.

But Billy Tauzin, president of the Pharmaceutical Research and Manufacturers of America, a lobbying organization for brand-name drug companies, said the price concessions required by the Senate bill could hurt Medicaid recipients and other patients by forcing drug makers to "reduce research and development of life-saving medicines."

The White House has told lawmakers that they should not tamper with Medicare. President Bush does not want Congress to alter the prescription drug benefit, scheduled to take effect Jan. 1, or other provisions of the 2003 Medicare law.

House Republican leaders followed that advice, but the Senate did not. The Senate Finance Committee voted to eliminate a $10 billion fund that can be used to increase payments to private insurers, as an incentive for them to enter and stay in the Medicare program.

The committee chairman, Senator Charles E. Grassley, Republican of Iowa, said the money was not immediately needed because private plans were rushing into Medicare.

The Medicare Payment Advisory Commission, an independent federal panel, has urged Congress to eliminate the $10 billion fund, saying it gives an unfair advantage to plans known as regional preferred provider organizations, or P.P.O.'s.

Karen M. Ignagni, president of America's Health Insurance Plans, an industry trade group, said, "This fund has been described as a slush fund by critics, but the reality is that beneficiaries, not health plans, will be helped by this funding."

With the extra payments, Ms. Ignagni said, more insurers would offer low-cost, high-quality benefits to people in rural areas and other markets where such options were unavailable.

The Blue Cross and Blue Shield Association warned Congress that if it eliminated the $10 billion fund, it would show that "the government is an unreliable business partner." Blue Cross lobbyists said this would cause some insurers to reconsider their participation in Medicare.

Bill Ellis Wins Thomas Clark Award

2005-10-29T23:35:00.000-04:00

This is his acceptance speech.

Don: Below is a speech I gave the other night. Bill

October 25 Talk

After learning that I was to receive The Thomas D. Clark Award, I retitled by Talk to "The Best Is Hardly Good Enough"

I want to thank Joe, The Center for History and Politics, and Eastern Kentucky University for granting me this award.

I could not be prouder of being given an award with Thomas D. Clark's name on it. This is a great honor. Although I never had the privilege of attending his classes, he was my mentor in so many ways. Tom gave me this advice, as I am sure he did many others, "do your research and then sit down and write." He wrote forwards to my books about the Kentucky River and Eastern. When I asked if he would write a forward to the latter he graciously said yes. When I asked if he wanted to see a sample chapter, he said he wanted to read it all and that just after he had reached the age of 100. Within two weeks he returned a forward to me.

Only Tom could begin the forward, thusly: "Writing the history of a century-old academic institution is akin to wandering footloose in a literary canebrake." And, end: "This book has substantial credibility, with a text enshrouded in a comfortable blanket of benevolent understanding." I could not hope for any higher praise.

Many people helped get this book published.

I want to thank Presidents Kustra and Glassser, and Provosts Marsden, Cook, and Chapman for their support, and the many alumni, students, staff, and teachers, who contributed their interviews to our archives, many of which are included in the book.

I want to thank Charles Hay, Chuck Hill, Debbie Whalen, and Jackie Couture of

EKU archives for all their help in researching this book.

To Lowell Harrison of Western and John Ernst of Morehead a special thanks for their readings and suggestions. I want to thank Steve Wrinn, Allison, and the staff at the University Press of Kentucky for their wonderful production of the book.

I greatly appreciate George Robinson and Eastern for taking a chance on a disillusioned 26-year-old high school history teacher and football coach, with a losing record, granting me a graduate assistantship to complete a masters in history in 1967, and for mentoring me in the Department of History. I once told Roy Kidd that I too was well on to road for 300 wins but It would have taken me about 100 years.

Most of all, I want to thank my wife of 45 years, Charlotte, who is my biggest fan, first, best proof reader and my best friend. She is also my "conscience" on a lot of matters, and saves me from many an overstatement, faux pas, and silly mistake.

In the following remarks, I hope that you will understand that some are meant to be serious, some humorous if not downright funny, and some constructive criticism with perhaps a smidgen of cynicism thrown in, born of years of observing the Kentucky body politic.

Let's see if this gets you in the right mood. I have always heard how cold and unfriendly folks are in Frankfort, our state capital, but during a recent trip there, nearly everyone I met said: "Pardon me, Pardon me."

As you know we are not celebrating quite as lavishly as we did the centennial of higher education on this campus in 1974. Bob Martin was quite interested in statuary and some of you will recall the dedication of the Centennial Statue, often dubbed "The Streak." I can now reveal for the first time that the model for the statue was none other than Skip Daugherty.

Or, back to Frankfort. When I passed the Governor's mansion, a man handed me a monopoly card reading, "get out of jail free."

If you thought I was going to give you a long dissertation about the historical connection between Richmond, Madison County, and Eastern through the years, I might disappoint you tonight. You can read my book for much more detail or read the frequent Fred Engle and Bob Grise articles in the Richmond Register.

If you read the opening chapter, which is about Central University, you will begin to see several themes throughout the book. Some readers have told me that they started at the last chapter and then read earlier chapters. Would you do that with a David McCullough book just to see how it turns out or a Hal Charles novel? Or, there is a fifteen page "Cliff Notes" version called School of Opportunity: Eastern Through the Years that you can also read, but I would compare that to kissing your momma rather than your sweetheart, only whetting your appetite for the real thing.

I hope that I got it right. If not, let me know. I can take criticism. A critical readership is important, as are critical reviews. However, I don't know what to make of a review of my book in the Courier-Journal, the first paragraph ending thusly: "The only thing missing in A History of Eastern Kentucky University by William Ellis is sex." Go figure. I want to thank Bill Robinson for his perceptive review in the Richmond Register and wait with excited anticipation, if and when, the Lexington Herald-Leader publishes a review.

I have been humbled several times in my writing career. In 1997, after writing Robert Worth Bingham and the Southern Mystique, it did not make the New York Times best seller list. However, a few months later, when I went to a signing at a Barnes and Noble bookstore in Louisville, I noticed a long line. Wow, I thought, fame at last. Alas, it was a line of people getting tickets to attend a signing by Charlton Heston the next evening. However, on the plus side, the Bingham book did win the 1999 Governor's Award.

Well, darned if it didn't happen again recently. The line at my signing in

Walnut Hall was considerably shorter than Frank McCourt's a few days earlier, so I hear. While his stretched around the block, mine in Walnut Hall never exceeded three deep.

Research can be exciting. Once, while on an oral history collection trip to Nashville, I stayed at a motel. While taking in my luggage on a cold wintry evening, a lady in a Cadillac pulled up beside me, rolled down her window, and

said: "Would you like a companion for the evening?" This intrepid historian immediately cupped his right hand to his ear and said: "Ma'm?" After she repeated her question somewhat louder, I replied: "No thank you, Ma'm." And she thanked me and went on her way.

Writing a book about something you have been involved in since 1966 is daunting. The main problem is objectivity when you are so entrenched in the life of an institution. You can't write such a book without making judgments, what to include and not include, whom to include and not include. Not everyone in Eastern's history can be mentioned in such a short, and, I hope readable, book.

I tried to write a book about Eastern and this community, warts and all, that would be a credible but understanding book, as Tom said.

I can't help but feel nostalgic about Eastern. What do I miss about Eastern?

A Larry Martin buffet with the chicken in a basket and spoonbread; the Eastern neon sign at the corner of Main and Lancaster; A Bob Martin scowl and a humorous aside about a misstep by the "flagship" in Lexington; Mrs. Berge challenging students and faculty members trying to sneak an unchecked book out of the library. I miss the cow barn across from Hanger Stadium and the not always faint whiff of manure on a fall afternoon, and I miss the recently removed shrubs spelling out EKU beside the baseball field.

I miss most of my colleagues at Eastern, who were hard working and some are chronicled in the book. There are a couple of exceptions however, not mentioned in the book.

Tell story about a prospective history major losing a scholarship when two colleagues on a college committee voted for a prospect from another department who had much lower test scores.

I sure won't miss the committee work at Eastern. Hell for me would be sitting on a Promotion and Tenure committee for eternity.

I miss the students at Eastern, most were like me wanting a chance to prove themselves. I have always thought that about 25% of Eastern students could make it anywhere, about 50% need help and can prosper at our university, and about 25%, for one reason or another might be better off doing something else.

Some of those latter come back and make it through after serving in the armed forces, working for a while, or finally realizing that college is not a place to party all the time.

However, sometimes a student like the following comes along.

Tell story of smoker at first class in Corbin.

I will now say some things I felt constrained not to stress in the book that I hope will be taken in the spirit of constructive criticism.

As several historians have pointed out, Kentucky became more "southern" after the Civil War. Unfortunately, Richmond, Madison County, and Eastern have been too closely aligned with the southern "Lost Cause" mentality that stifled social, political, and economic development in the commonwealth after the Civil War. The "southern myth" which held that segregation was "American, Christian, and natural" found a home here for too many years. That is one reason why I told the story of Central University in the first chapter rather than starting with the founding of Eastern in 1906.

The setting, the context, is crucial in understanding our role in higher education.

For better or worse, this is a southern community and school. I consider myself a southerner with all the impedimenta of the past. We were much too slow in accepting desegregation and in giving first class citizenship to African

Americans. Eastern has changed and so have I. And so have you. But we still

have a lot of work to do.

I would not be unhappy if we changed the name of our athletic teams back to "Maroons." Ironically, the nickname "Colonels" was adopted about the time Eastern began heavily recruiting black athletes and seriously trying to increase the African American presence in the faculty, staff, and student body on our campus.

For the most part, the people of Richmond and Madison County have been supportive of Eastern through the years. Madison County has the largest number of alumni and the greatest number of students at the present time attending Eastern. Eastern is the largest engine that drives the economy of Richmond and Madison County.

However, there has always been unfortunate meddling by people who have selfish personal agendas. The rumor mill is always generating stories about this and that at Eastern. Even now there are rumors circulating about folks seeking control of the school. I hope these are only rumors. That is non-productive, but I reckon fully understandable in the always highly-charged Kentucky political atmosphere. As Jim Mulligan said in his immortal poem, "And politics the damnedest in Kentucky." We can and should do better.

I have known Hunter Bates since his student days and when hearing of his elevation to the chairmanship of the EKU Board of Regents, I immediately emailed

him: "Whatever you do don't move to the Virgin Islands!"

Some of the carping can be downright silly. President Glasser has even been criticized for the thing she is least able to change: being a woman.

None of us individually owns Eastern. We all do collectively. This school was not Bob Martin's private fiefdom. We're all in this together. As a his torian I understand that we cannot change the past, only live in the present, wisely, and prepare for the future.

Eastern is no longer a "stare supported" but a "state-assisted" regional university. It is time for Madison Countians to step up in this capital campaign and give generously to Eastern, and not just alumni. Increasingly, if you want to see Eastern grow, the money will have to come from fund-raising. Owing to the Kustra interlude, we got behind in the fund-raising curve. Now is the time to get over that, forget the past and get on with taking EKU to the next level of excellence. For those of you who attended the big school in Lexington, which I did, Eastern needs your help now. UK will get by nicely because of its state-wide appeal and sports teams.

Just as much as Eastern needs long-term commitments from the community, it needs continuity. It needs long-tenured presidents, and stability in the provost's office. It needs faculty who come here dedicated to teaching, research, and service, and not viewing Eastern as a short stop-over on the way to a bigger university. Eastern faculty must be dedicated to a lifetime of service, not just "lifers" waiting for that first teacher's retirement paycheck.

While Eastern should never be a "publish or perish" institution, faculty should be encouraged to do hard research and rewarded for publications.

Schools like Eastern, that began as normal schools, have been the true democratizing feature in American higher education, not the land grant college.

Don't worry about UK making it as a top 20 public university, it will some day, though apparently not before its president gets a top 20 salary. Worry about and work for EKU, first, last, and always.

Maybe, its time for a break and a non sequitur story. A Madison County farmer was having trouble getting his bulls to produce enough calves. His neighbor suggested he go to a veterinarian and get some medicine for his bulls. Which he did. Several months later as the two farmers watched calves gamboling in the green pastures, the neighbor said: "What was in that medicine?" The proud owner of the new calves replied: "I don't know, but it tasted like

chocolate."

Now, my critique of other problems. We need more male students. Over sixty percent of students today are female. There is nothing wrong with that, proving that EKU can develop a diverse school population. However, where are the young men? Nationally, 80% of high school dropouts are boys. In our service area we need to increase high school graduation rates, which are especially low for young males.

As Bob Martin was fond of saying, "this ain't Harvard." The majority of Eastern's students are still first-generation college students. We should be proud of Eastern as a "school of opportunity," but constantly push for higher standards.

We have hovered at 16,000 students for several years after the booming Martin years and the maturing Powell years. It is time for higher education in the commonwealth to regain the emphasis that it had then. Kentucky needs to double the number of its citizens holding baccalaureate degrees from 400,000 now to 800,000 by 2020 just to arrive at the national average.

Get with it Richmond, Madison, and Eastern, as well as the rest of the commonwealth. We must change our culture to an acceptance of a college degree as the norm for a graduating high senior rather than an exception. This is the 21st century.

As Dusty McCoy said in his remarks during the Eastern Gala a few weeks ago, we must also change the culture of giving for our fund raising efforts.

Remember, EKU now a state-assisted, not state-supported.

My primary hope for A History of Eastern Kentucky University is that it will be benchmark for how far we have come and how far we still have to go in the future. We aren't just competing with Western and Morehead, but with Chinese, Indian, and European institutions of higher learning. We have to continually search for our niche.

My time of teaching at Eastern is over. I may be getting into writing a history of education in Kentucky. If it took six years of research, writing and production to publish A History of Eastern Kentucky University, it may take twice as long to produce this next book. Besides, I like to travel with Charlotte, visit grandkids, trout fish the Cumberland, and play golf, badly, occasionally. But I can still hear Tom in the back of my mind saying: "Do your research, then sit down and write."

In this Centennial celebration over the coming year, we must rededicate ourselves to Eastern Kentucky State Normal School's first motto: "The Best is Hardly Good Enough."

Thank you. I hope I haven't bored you. I will take questions or you can make comments if you please.

Don McNay
don@mcnay.com

Bomkamp Kindergarden Saga

2005-10-27T16:39:00.000-04:00

Family, officials to discuss tuition charge

By William Croyle
Enquirer staff writer

Enquirer file

John and Shauna Bomkamp with their daughters Andrea, 9, (left) and Alison, 5. Alison skipped kindergarten and is in first grade.

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CRESCENT SPRINGS - The parents of a 5-year-oldgirl who refuse to pay a $3,000 tuition bill will meet with schooldistrict officials to try to resolve the issue.

Johnand Shauna Bomkamp are scheduled to meet Tuesday with Kenton CountySuperintendent Susan Cook and school board president Carl Wicklund.

EdMassey, an attorney and president-elect of the Kentucky School BoardsAssociation, said he arranged the meeting and is representing thefamily for free.

"We're going to try and find a way to solve it," Massey said. "I'm doing it because I believe in their cause."

AlisonBomkamp is a first-grader at River Ridge Elementary School in VillaHills. After testing at a second-grade level three times, includingonce in June by the district, Alison skipped kindergarten this year andstarted in first grade.

But when they let thedistrict test her, the Bomkamps signed a form that said they would pay$3,000 if Alison qualified to skip kindergarten. The Bomkampsquestioned the legality of the charge, putting an asterisk next to itwith the words "still in discussion."

The tuition isthe district's policy and stems from a state law and attorney general'sopinion that says a child not 6 years old until after Oct. 1 can enrollonly in a public school's kindergarten program. Since the state onlyfunds half-day kindergarten and because the law says that's the gradeAlison should be in, the state is paying only half of her first-gradeeducation.

In August, the district asked the stateboard of education to waive the fee for Alison. The board denied therequest, citing the law and fear of setting a precedent.

Wicklundsaid the purpose of Tuesday's meeting is to find out the family'sthoughts since all he's heard has been through the media. He defendsthe district's position.

"In this case, we'refollowing the law," Wicklund said. "It was sent to the state board fortheir consideration and they denied it."

But Massey said there's room for flexibility.

"KentonCounty does not have to charge them if they don't want to," Masseysaid. "An attorney general's opinion is just that. It hasn't beenjudicially resolved."

The family ignored the first payment of $600, due Sept. 30.

OnOct. 17, Cook wrote the Bomkamps: "As per the written agreement, youagreed to make payment to Kenton County School District in the amountof $3,000."

"It all goes back to equity ineducation," Wicklund said. "If I don't waive the fee for any otherstudent, how do I do it for this one student?"

The Bomkamps argue the district provides free full-day kindergarten at two of its schools, Piner and Ryland.

"There'snothing in the state law that requires them to charge us," Shauna Bomkamp said. "They pick who they want to charge. They made a policy tocharge only intelligent children."

Parents ignore school billBy William Croyle
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CRESCENT SPRINGS - The battle over a $3,000tuition bill between the parents of a gifted 5-year-old girl and theKenton County School District continues after the parents ignoredFriday's payment deadline.The district plans to send the family a late-payment notice.AlisonBomkamp, 5, is in first grade at River Ridge Elementary School in VillaHills. After she was tested three times at a second-grade level, Johnand Shauna Bomkamp had Alison skip kindergarten and go into first gradethis year.But the Bomkamps were told when she wastested that there would be a $3,000 tuition bill. The paper they signedto give the district permission to test Alison states that, but theBomkamps claim they questioned the legality of the charge and made anotation on that paper that it was under discussion.Thereason for the bill is a state law and 20-year-old attorney general'sopinion that says any child not 6 years old until after Oct. 1 canenroll only in a public school's kindergarten program. Since the statefunds only half-day kindergarten and Alison is in full-day first grade,only half of her education is being paid by the state.The first payment of $600 was due Friday."Theschool board or state has not contacted us as far as any decision ormovement," John Bomkamp said. "All I know is we have no intention ofpaying the bill."The district asked the Kentucky Board of Education to waive the tuition. It denied the request.Since The Enquirer first reported on this story last Saturday, Kenton County Superintendent Susan Cook said nothing has changed.E-mail wcroyle@enquirer.com

Don't penalize student for being smart
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Alison Bomkamp, a gifted 5-year-old Kenton County girlwho skipped kindergarten, is learning that her precociousness comeswith a cost.The public school bureaucracy wants tocharge Alison's parents, John and Shauna Bomkamp, $3,000 on the dubiousrationale that Kentucky only funds public school districts for half-day kindergarten, Alison jumped to all-day first grade, and $3,000 is roughly half of what it costs per year to educate a Kenton County student.Kenton County schools should waive the $3,000.TheBomkamps asked for a waiver, but in August the state board of educationturned them down. The board relied on a 20-year-old opinion of thestate attorney general that says according to the law and the child'sage, she can enroll only in kindergarten and not in first grade. Theboard also didn't want to set a "precedent."Publiceducation costs are a huge concern, but it's an even worse precedent ifschools enforce a rigid age-based policy that smacks of penalizingstudents for being bright.Was it ever the intent ofthe legislature to tell public school parents: Sure, we'll make anexception; your kid can skip a grade, but it'll cost you?Rep.Harry Moberly, D-Richmond thinks not. Moberly wrote many of theamendments to Kentucky's primary school law. He says the AG's opinionis wrong and the Bomkamps shouldn't pay the $3,000 bill. "I don't thinkthey need a waiver," Moberly said. "That's absolutely ridiculous." Ifnecessary, he says he might introduce legislation in the 2006 sessionto remove the snag from the law, but meanwhile what happens to Alisonif the Bomkamps refuse to pay? Should she be a kindergartner or afirst-grader? She actually tests at second-grade level or above.KentonPublic Schools also can be accused of imposing a double standard. Theyoffer full-day kindergarten at two schools with many "at-risk" children- and don't charge those parents for the extra half-day.Schoolingneeds to be unfailingly student-based, whether for at-risk, gifted orall those in between. The last thing schools should cling to is rigidage-based limits on students.

Parents of smart kid told to pay
Kenton County charges tuition for advancing a gradeBy William Croyle
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CRESCENT SPRINGS - The parents of a 5-year-old girl and the Kenton County School District are battling over a $3,000 tuition bill.It's a situation caught up in bureaucracy that has left the gifted child's academic future in doubt.John and Shauna Bomkamp's daughter, Alison, is in first grade at River Ridge Elementary School in Villa Hills.Aftershe was tested twice last winter at a second-grade level by anindependent psychologist and River Ridge, Alison's parents decided tohave her skip the school's half-day kindergarten this year and startfirst grade.She was tested once more during thesummer by the district, which told the Bomkamps if Alison qualified toskip kindergarten, there would be a $3,000 tuition bill to place her ina higher grade. Alison passed the test."We agreed to have her tested, but we did not agree on the tuition," John Bomkamp said.Why a $3,000 tuition bill for a public school?That'sabout half of what it costs to educate a child in Kenton County for ayear, according to Superintendent Susan Cook. But the state only fundsdistricts for half-day kindergarten.And a20-year-old attorney general's opinion of the state's primary schoolprogram law says if a child "would not be 6 years old until after Oct.1 (as is Alison's case), the child would be eligible to enroll only ina public school's kindergarten program rather than first grade."So Alison is attending first grade for a full day, but only half of her education is paid by the state."Thedistrict is following state statute," said Lisa Gross, spokeswoman forthe Kentucky Department of Education. "The law does not give a districtflexibility on how a child tests. It's age-specific."Thedistrict appealed to the state board of education, asking for a waiverfor Alison. State Sen. Jack Westwood also fought on the family'sbehalf, but the board denied the request in August."One reason the waiver was refused was because it's state law," Gross said. "And because they didn't want to set a precedent."Westwood said he's not buying the precedent argument."Idon't think that many kids will test at a higher level each year,"Westwood said. "There has to be thinking of what can we do to help thischild get the best education."The Bomkamps say thedistrict has already set a precedent by offering free full-daykindergarten at two of its schools - Piner and Ryland. Cook said itdoes that because of the location of the schools and because many ofthe students are classified as at-risk.State Rep.Harry Moberly, D-Richmond, wrote amendments to the primary schoolprogram law in the 1990s and said the attorney general's interpretationwas wrong.He said the Bomkamps should not pay the bill and should hire a lawyer if necessary."Idon't think they need a waiver," Moberly said. "The tuition isabsolutely ridiculous. The law says kids have to be continuallyevaluated and regrouped in their best interest. The issue is, onceenrolled, what are her needs?"Cook said thedistrict could meet Alison's needs by differentiating her instruction.For example, she could take second-grade reading while in kindergarten.The Bomkamps and Westwood say the district cannot meet all her needs ina half-day.The family got the bill Sept. 17, about a month after Alison settled into her first-grade class.Cooksaid it will probably take a change in the law for the district not tocharge the Bomkamps. Moberly said he may look at doing that at the 2006General Assembly.But what happens now?Thefirst tuition installment is due Friday. Cook said she has a papersigned by the Bomkamps before the district tested Alison that says theyagreed to the payment.The Bomkamps say theyquestioned the legality of the tuition at that time and made a notationon that paper that the tuition issue was still being discussed."I'm going to protect my daughter no matter what," Shauna Bomkamp said. "We will fight it tooth and nail."Will the district remove Alison from first grade if the bill is not paid?"I would hope that we could work with the family to come to some agreement," Cook said.E-mail wcroyle@enquirer.com

Bureaucrats Gone Wild in Kenton County .                                           You see stories about how China 's economy is growing while America 's is not.                                           I have never been to China but will bet they don't have as many bureaucratic rules as we do.                                           Especially in the school systems.                                           I'm embarrassed that an example of bureaucrats gone wild occurred in my native county, Kenton County , Kentucky .                                           TheCincinnati Enquirer told the story of a brilliant pre school student.The schools gave her a test to skip kindergarten. She passed it.                                           Since she didn't need kindergarten, he parents sent her directly to the first grade.                                           The Kenton County public school system sent her parents a bill for $3000.                                           The bureaucrats want her parents to pay for the grade that she skipped.                                           There are several things wrong with this story.                                           Thefirst is that she is going to a PUBLIC school. When did PUBLIC schoolsstart charging tuition? If they are trying to make a profit, will theygive me some of my tax money back?                                           It is not just about the money.                                           Thebigger issue is that bureaucrats could be screwing up this girl's life.Children need to be challenged, especially brilliant children.                                           Dumping the student in a class beneath her abilities will bore her and could turn her off to school forever.                                           We might waste a talent that could someday cure cancer or be President.                     The fire she is showing in childhood could be doused by idiots following a stupid rule.                                           The paper pushers are not only enforcing a terrible rule, they don't understand the rule they are trying to enforce.                                           StateRepresentative Harry Moberly, who wrote the law the bureaucrats areciting, said the school board interpretation was wrong and told theEnquirer that the parents should hire a lawyer.                                           I hope they do.                                           Iknow most of the good trial lawyers in Kentucky . If the parents callme at 1-800 Mr. McNay, I will put them on to several lawyers who wouldtake the case.                                           Imight even chip in on the legal fee. I won't chip in for the tuition.The PUBLIC school system should not have charged it and I hope theparents don't pay it.                                           I don't know the parents but they live in a nice neighborhood. They can probably afford $3000.                                           Whatwould have happened if the bureaucrats pulled the stunt on a poor childthat lived in a housing project? What would have happened if the childdid not have parents with enough savvy to contact their legislators andthe media?                                           A brilliant mind could be wasted. The bureaucrats would have won.                                           Moberlysaid he might fix this problem in the next legislature session and I amsure he will. He understands that education is about pushing forwardand not holding back.                                           Iam angry that it got this far. Every person at the school board and inthe school system should be working to get the child the best educationshe can possibly get.                                           I thought that was what school was all about.                                           IfI were running the school system, I would have put her in the firstgrade at all cost. Even if I had to tear up the rule book.                                           If some paper pusher told me I was violating an idiotic rule, I would tell them to get a lawyer and sue me.                                           I think the jury would see it my way.                                           I am afraid that the incident in Kenton County is a symptom of a nationwide problem.                                           Paperpushers and bureaucrats forget that they are molding the lives of youngpeople and enforce rules that have no meaning, purpose or logicalsense.                                           Other countries aren't doing that. That is why they are eating our lunch on the economic front.                                           I hope the American school system gets it together. If they don't, they need to make sure American students learn a new skill:                                           How to eat with chopsticks. Their future employers will require it.

   DonMcNay is President of McNay Settlement Group in Richmond Kentucky wherewe fight any rule that hurts people. You can write to him at don@mcnay.com or read other things he has written at www.donmcnay.com

Frist Accumulated Stock Outside Trust

2005-10-11T20:31:00.000-04:00

AP: Frist Accumulated Stock Outside Trusts

By LARRY MARGASAK and JONATHAN M. KATZ, Associated Press Writers 45 minutes ago

Outside the blind trusts he created to avoid a conflict of interest, Senate Majority Leader Bill Frist earned tens of thousands of dollars from stock in a family-founded hospital chain largely controlled by his brother, documents show.

The Tennessee Republican, whose sale this summer of HCA Inc. stock is under federal investigation, has long maintained he could own HCA shares and still vote on health care legislation without a conflict because he had placed the stock in blind trusts approved by the Senate.

However, ethics experts say a partnership arrangement shown in documents obtained by The Associated Press raises serious doubts about whether the senator truly avoided a conflict.

In that case, the HCA stock was accumulated by a family investment partnership started by the senator's late parents and later overseen by his brother, Thomas Frist. The brother served as president of the partnership's management company and as a top officer of HCA. Sen. Frist holds no position with the company.

The senator's share of the partnership was placed in a Tennessee blind trust between 1998 and 2002 that was separate from those governed by Senate ethics rules. Frist reported Bowling Avenue Partners, made up mostly of non-public HCA stock, earned him $265,495 in dividends and other income over the four years.

Edmond M. Ianni, a former Wilmington, Del., bank executive who established blind trusts for corporate executives, questioned why the senator's brother was able to manage assets "when the whole purpose of a blind trust is to ensure lack of not only conflict of interest — but appearance of conflict of interest?"

Kathleen Clark, a government ethics expert at the Washington University in St. Louis School of Law, said she doesn't believe the Senate trusts or the Tennessee trust insulated Frist from a conflict because the senator or his brother were advised of transactions and could influence decisions.

"What I find most appalling is the Senate calls it a qualified blind trust when it's not blind," Clark said. "Since the Senate says it's OK, the Senate has made it a political question. It's up to the voter. But there's no doubt it's a conflict of interest."

Frist's interest in Bowling Avenue Partners and the Tennessee blind trust were listed on the annual disclosure reports he filed with the Senate. Thomas Frist's ability to influence HCA stock decisions in the partnership was detailed in separate trust and partnership documents obtained by the AP.

Those documents show Thomas Frist was listed as the "general partner" and "registered agent" of Bowling Avenue Partners. He also was listed as president of the partnership's management company.

Thomas Frist founded HCA, the nation's largest for-profit hospital chain, with his and the senator's father. He currently is the company's chairman emeritus.

Frist advisers confirmed the senator's brother could influence investment decisions in the Bowling Avenue partnership and said the partnership was placed in a Tennessee trust because Senate ethics rules didn't allow the non-public HCA shares to be included in Senate-approved trusts.

"His interests in the family partnership were not held by his Senate blind trusts because Senate rules did not permit it. Senator Frist did not control the assets in this partnership and he annually disclosed his interests to the public as required," Frist spokesman Bob Stevenson said.

Thomas Frist did not return repeated phone calls to his office at HCA seeking comment.

Bowling Avenue Partners' HCA shares became marketable securities when the estate of Frist's mother was settled in probate. Frist then began transferring those shares in stages from the Tennessee blind trust to the Senate-approved trusts in 2001 and 2002.

The value of all the transferred shares, calculated on the dates they went into the Senate trusts, was between $775,000 and $1.57 million, according to letters the trustees sent to Frist and the Senate. That stock was on top of millions of dollars in various investments Frist already owned in the Senate blind trusts.

With his background as a heart surgeon as well as majority leader, Frist has been at the forefront of legislation that would affect the hospital chain. Among the issues: a Medicare prescription drug benefit and limits on medical malpractice lawsuits.

Frist kept HCA stock in Bowling Avenue Partners and the Tennessee blind trust — but outside the Senate-approved trusts — between 1998 and 2002.

His investments in Nashville-based HCA are being investigated by federal prosecutors and the Securities and Exchange Commission after an AP report that the senator had asked administrators of his Senate blind trusts to sell his HCA holdings.

Frist ordered the stock sold June 13 and all sales were completed by July 1. HCA stock peaked on June 22 and then gradually declined. On July 13, it dropped 9 percent.

Reports to the SEC showed insiders sold about 2.3 million shares of HCA stock worth at least $112 million from January through June 2005.

Frist has denied having insider company information when he ordered the stock sold in June. The profit the senator made from the sales is not known.

The Bowling Avenue name came from the street of the Frist family home in Nashville.

Copyright © 2005 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.

Don McNay
don@mcnay.com

Media reports on Frist stock sale investigation largely omit company's history of fraud

2005-10-07T17:40:00.000-04:00

Media reports on Frist stock sale investigation largely omit company's history of fraud

Out of hundreds of newspaper stories on Senate Majority Leader Bill Frist's (R-TN) stock sale currently under investigation by the Securities and Exchange Commission (SEC) and the Justice Department, only a handful have noted that, in December 2002, HCA Inc. -- the company whose stock Frist sold off before share prices dropped sharply -- agreed to pay the government $1.7 billion in fines and penalties related to 14 counts of defrauding Medicare and Medicaid. HCA Inc. is the for-profit hospital chain founded by Frist's father. The total in penalties is the largest settlement ever recovered by the federal government in a health care fraud case, although many observers -- including a prominent Republican senator -- criticized the Bush administration's withholding of information in the case and aired concerns that the government may not have been adequately compensated.

Media Matters previously noted that network news broadcasts devoted little air time to coverage of Frist's stock sale. As first reported on September 19 by Congressional Quarterly, and subsequently by the Associated Press, Frist ordered the trustee managing his blind trust to sell all shares in HCA owned by his family on June 13. Frist's shares were then sold on July 1, and those owned by his wife and children were sold one week later. On July 13, the price of HCA shares dropped considerably after the company reported weaker-than-expected earnings [Associated Press, 9/20/05]. On September 29, HCA announced that the SEC had opened an investigation into the circumstances surrounding the transactions.

But few print stories have mentioned the company's history of fraud and its precedent-setting fine to settle charges stemming from kickbacks to doctors and overcharging the Medicare program. Media Matters has reviewed all 350 articles in the Nexis database that mention the Frist stock sale; only six articles -- five by print news outlets and one by a wire service -- have mentioned the record $1.7 billion settlement in their coverage of the investigation: Gannett News Service [9/21/05], The New York Times [9/22/05], Roll Call [9/26/05 (subscription required)], The New York Observer [10/3/05], and The Tennessean [9/22/05 and 10/1/05 (subscription required)].

Frist's defenders have highlighted his family wealth in claiming that he would have no incentive to try to profit from insider information. For instance, Nicholas E. Calio, a former aide to President Bush, defended Frist in a September 25 article in The Washington Post, noting, "To me, it's inconceivable that he [Frist] would sell stock based on inside information. He doesn't need the money." Readers might have thought it relevant that the Frist family might owe its underlying fortune in part to the family-founded company's illegal practices.

In addition, at the time of the record settlement, at least one Republican lawmaker raised concerns about the way the investigation into HCA concluded and was frustrated with the response from the Bush departments of Justice and Health and Human Services (HHS). Following years of litigation with the Justice Department, HCA agreed to a settlement on all remaining charges of fraud just prior to the anticipated testimony of Sen. Frist's brother Thomas Frist Jr., according to a December 19, 2002, Tennessean article:

Attorneys for the whistle-blowers who accused HCA Inc. of Medicare fraud say they were within weeks of taking testimony from HCA co-founder Tommy Frist Jr. and Chairman and Chief Executive Officer Jack Bovender Jr. when the company agreed to a final settlement.

[...]

HCA, the attorneys suggested, tossed in the towel to avoid the spectacle of Frist, a physician and an icon in the Nashville business community, being questioned about the former business practices of the company. He founded what is now HCA in 1968 with his father, Dr. Thomas Frist Sr., and businessman Jack Massey, both deceased.

Many of the questions, and the executives' answers, eventually would make their way into public court records, the lawyers observed.

"I speculate Bovender and Frist didn't want to be put under oath to explain what they knew (about) the worms under the rocks that were being uncovered," said Stephen Meagher, a San Francisco attorney with a firm that represented two whistle-blowers.

HCA spokesman Jeff Prescott said the company agreed to settle because it was "comfortable" with the amount it would have to pay.

In April 2003, following the final settlement, Sen. Chuck Grassley (R-IA), who was then the incoming chairman of the Senate Finance Committee, sent a letter to Attorney General John Ashcroft and HHS secretary Tommy Thompson demanding that the details of the HCA settlement be made available to congressional scrutiny. A press release Grassley's office sent out with the letter summarized the senator's concerns:

The most important question is unanswered.... That's whether the taxpayers will get their money back from any fraud perpetrated by HCA. I haven't seen the statistical evidence to show this settlement will fairly compensate the taxpayers for their losses. Until I see the math, I'll remain skeptical. I look forward to learning more about the government's case, although I'm getting tired of asking.

From Grassley's letter:

Given that HCA's track record includes several guilty pleas relating to Medicare cost report fraud, it is especially troubling that its cost reports allegedly were not subjected to heightened scrutiny. At this point, and because DOJ and CMS [Centers for Medicare and Medicaid Services] decided to withhold information pertaining to my inquiries, the Committee is unaware of whether CMS conducted even a cursory review of the thousands of cost reports mentioned above. Despite my repeated attempts to cast sunlight on the basis behind this tentative settlement, it has been crafted in the dark for apparently a fraction of the damages. In light of the failure of DOJ and CMS to provide satisfactory and timely responses to my concerns, I am forwarding them by this letter to DOJ Inspector General, Glenn Fine, and HHS Acting Principal Deputy Inspector General, Dennis Duquette.

During the previous July, Grassley had submitted inquiries to Ashcroft concerning rumors that investigations by the Justice Department into cases pertinent to the False Claims Act (which provides for financial compensation to whistleblowers of medical kickbacks) were being scaled back. Grassley also raised concerns to Thompson about the involvement in the HCA case of Thomas A. Scully, the administrator of CMS. Scully was president and CEO of the Federation of American Hospitals, a lobbying organization of for-profit hospital chains, immediately prior to joining the CMS. Thompson responded by rejecting the notion that Scully's role in the federal settlement with HCA constituted an ethical conflict [Thomson Financial, August 12, 2002]. (The HCA settlement did not mark the end of ethical questions about Scully. Medicare chief actuary Richard Forster testified before Congress in 2003 that Scully, under orders from the White House, instructed him not to advise Congress of the real cost of President Bush's Medicare drug benefit plan and threatened to fire Forster if he did disclose the real cost [The New York Times, 3/25/05 and 3/14/05].)

From the September 22 edition of The Tennessean:

2000

November -- Frist is elected to a second Senate term.

December --Frist sets up new blind trusts, in accordance with stricter Senate Ethics Committee guidelines, to help minimize the HCA conflict-of-interest charges.

2000-03

Columbia/HCA pays a total of $1.7 billion to the federal government to settle charges of Medicare and Medicaid fraud. The company changes its name back to HCA to avoid public relations problems caused by the charges.

December 2002

Frist is elected Senate Republican leader, replacing Trent Lott of Mississippi after Lott made racially insensitive comments. Interest in Frist's ties to HCA rises in the national media.

April 2004

The Foundation for Taxpayer and Consumer Rights, a California-based watchdog group, files a complaint to the Senate Ethics Committee over Frist's HCA stock, saying he should be forced to recuse himself from voting on legislation to reform medical malpractice laws. The committee rejects the complaint.

2005

June 13 -- Frist asks the managers of his blind trusts to sell all of his and his family's shares of HCA.

July 1 -- Equitable Trust, based in Nashville, reports that it has sold Frist's HCA shares.

July 8 -- Northern Trust, based in Chicago, reports that it has done the same.

July 13 -- HCA reports that it will miss second-quarter earnings expectations. Its stock price falls 8.9%.

* Nexis search of U.S. newspapers and wire services for "Frist and HCA and stock; Frist and HCA and stock and 1.7 billion," September 19-October 7.

— R.M.

Posted to the web on Friday October 7, 2005 at 1:10 PM EST

Ark. Editorial about Bill Frist

2005-10-05T15:52:00.000-04:00

Wednesday, October 05, 2005

EDITORIAL >> Sen. Frist insists he knew nothing

The word is “beware and don’t engage in this type of conduct because it will not be tolerated,” David Kelley, U.S. attorney for the Southern District of New York, said outside the courthouse after Martha Stewart was convicted of obstructing justice and lying to investigators about dumping stock before it tanked.
“This is a victory for the little guys. No one is above the law.” Those were the words of one of the Martha Stewart jurors.

We remember those prophetic words because we wondered at the time, what planet are they on?
If they are big enough, corporate crooks usually do not pay for their crimes or at least pay very dearly. Bigger crooks than Martha Stewart, who really didn’t profit in the long run for her shallow treachery, are still running free.

Now comes Sen. Bill Frist of Tennessee, the majority leader of the U. S. Senate and a likely applicant for the presidency next year, who insists like Martha Stewart that he knew nothing — nothing!— about the impending collapse of the family company’s stock before he dumped it last month for a nice fortune.
Neither his brother nor anyone else told him a thing about the impending financial report that would cause the stock to tank, Majority Leader Frist said.

If he had a hint of what was coming, Frist would be subject to big criminal and civil penalties for using insider knowledge.
Be assured that the Securities and Exchange Commission is investigating.
Frist explained that since he might run for another office he decided that it might look better if he did not hold a giant bundle of stock in HCA, the health-care company founded by his father, since the company is affected by so much federal legislation and other decisions by the government.

The conflict just happened to strike him by coincidence a few days before the stock would take its inevitable tumble, although the conflict of interest had existed from the moment he went to the Senate.
Only two years ago, Frist maintained that he did not know if he owned any HCA stock since all his holdings were in a blind trust. He found out that he owned them apparently just as the stock was about to tank.
Martha Stewart avoided a potential loss of about $51,000 by selling her stock in Imclone a day before regulators rejected the company’s application for approval of a new cancer drug.
The stock took a big tumble but recovered.

The drug was later approved. Her story about not having insider knowledge wilted when a broker said he passed along knowledge of insider stock sales to her broker.
Frist will not be so unlucky.

But the SEC must investigate. Presi-dent Bush’s new SEC director, former Congressman Christopher Cox, says he will remove himself from supervising the investigation of his friend.
There, do you feel confident that an independent and fearless inquiry is under way?
We cannot help but remember when young George W. Bush, a director and member of the audit committee at the energy company Harken, dumped his 212,140 shares of Harken stock for $848,000 in 1990 just before the company disclosed a huge quarterly loss, causing its stock to plunge.

The future president did not report his transaction to the SEC, which was controlled by his dad, for 34 weeks, a violation of the law. He would later explain that the SEC must have lost the forms that he had filed.
Ten years later, his spokesman admitted that was a lie and that the failure to report his stock sale had been caused by a “mixup” with his attorneys.

The SEC investigation concluded at the time that it couldn’t conclude if the president’s son knew anything when he unloaded his stock and that it was best for all concerned to just drop the matter.
Make your own prediction about how the investigation of Bill Frist will turn out.

Don McNay
don@mcnay.com

ABCNEWS.com: Bankruptcy Bill May Not Produce Payoffs

2005-10-03T14:10:00.000-04:00

You have received this ABCNEWS.com mail from:

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I thought you might find this story interesting.

Bankruptcy Bill May Not Produce Payoffs
http://abcnews.go.com/Business/wireStory?id=1171713

Newsweek article on Frist

2005-10-02T02:14:00.000-04:00

MSNBC.com

The Senate: Doubting a Trust
The SEC is trying to show politics won't play into its scrutiny of a stock sale by Sen. Bill Frist. Easier said than done.

By Charles Gasparino

Newsweek

Oct. 10, 2005 issue - The Securities and Exchange Commission is known as Wall Street's top cop for good reason, boasting a list of past targets that's supposed to show it doesn't play favorites—including celebrities like Martha Stewart, as well as companies run by executives who became vice president (it investigated Halliburton, where Dick Cheney was once CEO). Now the SEC is investigating whether Senate Majority Leader Bill Frist had any insider information when he unloaded shares of HCA Inc., a hospital chain his family helped found, just weeks before the company announced news that made its stock tank.

The SEC seems intent on showing that it can probe Frist, a Republican and potential presidential candidate, without fear or favor. Its chairman, Chris Cox, a presidential appointee and former Republican congressman, recused himself from any involvement in the investigation "to avoid any appearance of impropriety,'' he said in a statement. Meanwhile, the agency's enforcement division is flexing its muscles; the initial probe is now a full investigation, a technical change that gives it power to subpoena phone records and e-mails. The SEC intends to look at e-mails and other communications between Frist and his brother Thomas, an HCA director and the company's former chairman, NEWSWEEK has learned. Through an HCA spokesman, Thomas Frist had no comment, and an aide says the senator denies any wrongdoing. The SEC declined to comment on the investigation.

But all this doesn't mean the process is completely devoid of politics. Even with Cox's recusal, two other Republicans on the SEC's ruling commission could block a recommendation for formal charges against Frist. John Coffee, a securities-law professor at Columbia University, says the practical effect of Cox's recusal is that he can "stay clean and distant'' while letting any suspicions fall on the two Republican commissioners, who can vote together to prevent any proceeding (there are four commissioners besides Cox).

Frist may well have the facts on his side. Attorneys with knowledge of the case say Frist has what appears to be a valid explanation—he apparently indicated in a letter his intention to sell shares in April, long before the earnings announcement in July (a Frist aide says the senator will turn over documentation to the SEC proving this). Insider trading is notoriously difficult to prove—so, barring an e-mail or other document showing he was tipped, the case could evaporate. Still, there is the tricky matter of the "blind trust'' in which the HCA stock was held. A former SEC official, who spoke on the condition of anonymity because he may at some point represent a party in the case, notes that if the trust was indeed blind, as its name suggests, why was Frist directly involved in selling the stock?

Frist understands the value of connections, and his lawyers have plenty. He's retained the firm of Wilmer Cutler Pickering Hale and Dorr, which just hired former SEC enforcement chief Stephen Cutler as an attorney to work on securities issues. Cutler left the SEC last spring, and is barred for the next year from working on the case because of government ethics rules. But one of Frist's lead attorneys is William McLucas, who served as SEC enforcement chief in the 1990s. By all accounts, the investigation is likely to take several months. By the end of it, Frist will likely know as much about insider-trading law as he does about horse-trading inside the Beltway.

Don McNay
don@mcnay.com

Wonder Drugs for PPH

2005-10-01T17:13:00.000-04:00


	"Wonder Drugs" May Work Wonders for Pulmonary Arterial Hypertension
	By Neil Osterweil , MedPage Today Staff Writer Reviewed by Zalman S. Agus, MD; Emeritus Professor at the University of Pennsylvania School of Medicine.

	MedPage Today Action Points Inform patients who ask that the benefit of Gleevec treatment for PAH was seen in experimental animals and in only a single case report, and needs to be confirmed in larger, randomized trials.
	Review GIESSEN, Germany, Sept. 30-The "wonder drugs" Gleevec (imatinib) and Viagra (sildenafil) make strange bedfellows, but they both appear to improve pulmonary function in patients with pulmonary arterial hypertension (PAH), report researchers here. They described the Gleevec case in a letter published in the Sept. 29 New England Journal of Medicine. In a last-ditch attempt to save a 61 year-old man with severe, familial idiopathic PAH that was rapidly progressing despite other therapies, Friedrich Grimminger, M.D., Ph.D., and colleagues at the University Hospital Giessen here gave him oral Gleevec (imatinib) 200 mg daily on a compassionate basis. Gleevec, which is approved for chronic myeloid leukemia, has potent antiproliferative properties that the researchers hypothesized might be able to reverse the lung vascular remodeling -- uncontrolled proliferation of the vascular wall -- that is the underlying pathogenic mechanism of PAH. The use of Gleevec in this situation was motivated in part by experimental studies in animals performed by the authors. "We have described the successful use of imatinib in two well-established experimental models of progressive pulmonary arterial hypertension; this treatment resulted in virtually complete reversal of lung vascular remodeling, pulmonary hypertension, and right-sided heart hypertrophy" they said. These studies are in press in the Journal of Clinical Investigation. In contrast, Viagra (sildenafil), which has also been shown in randomized placebo-controlled trials to improve function in patients with PAH, works by prolonged vasodilation, allowing better oxygenation. In addition to taking Gleevec, the patient described in the case report continued on his other medications, including Tracleer (bosentan), Ventavis (iloprost), Viagra, oral anticoagulants and diuretics. After three months of Gleevec, the patient's condition "improved impressively," as indicated by improved exercise capacity, hemodynamics, mean pulmonary artery pressure, cardiac index, and New York Heart Association (NYHA) functional class. Although this was only a single case report, Dr. Grimminger and colleagues had previously demonstrated in a randomized placebo controlled trial (SUPER-1) that patients who received 80 mg of Viagra three times daily increased six-minute walk results by 50 meters after 12 weeks. Patients on 40 mg Viagra t.i.d. increased their six-minute distance by 46 meters, and those at a 20 mg three times daily dose increased by 45 meters. The difference were significant at P < .001. Among all patients on Viagra in that study, 35% had a functional class improvement, compared with 7% of patients in the placebo group, and there was a non-significant trend toward reduction in mean pulmonary arterial pressure. The results of the SUPER-1 study were first reported at CHEST 2004, the 70th annual meeting of the American College of Chest Physicians. In the current case report letter, Dr. Grimminger and colleagues report that five years prior to starting their patient on Gleevec, he presented at their PAH referral center with signs of right-sided heart failure. During the previous year, his condition had progressively worsened, despite advanced combination therapy with oral bosentan (125 mg b.i.d), inhaled iloprost (nine inhalations/day), and Viagra 50 mg t.i.d., plus anticoagulants and diuretics. The patient's six-minute walking distance had progressively declined during the previous nine months, from 323 m to 260 m, and pulmonary vascular resistance increased from 1056 dyn/sec/cm^-5 (mean pulmonary-artery pressure 59 mm Hg and a cardiac index of 2.08 liters/min/m²) to 1,538 dyn/sec/cm^-5 (mean pulmonary-artery pressure 58 mm Hg and a cardiac index of 1.36 liters/min/m²). At the time of the case report, the patient was in NYHA functional class IV. Other causes of his deterioration, including occult neoplasms, were ruled out, and the patient was then offered Gleevec on a compassionate basis. "After three months of imatinib treatment, the patient's condition had improved impressively, as indicated by improved exercise capacity (six-minute walking distance, 383 m), improved hemodynamics (pulmonary vascular resistance, 815 dyn/sec/cm; mean pulmonary-artery pressure, 56 mm Hg; and cardiac index of 2.33 liters per minute per square meter), and an improved functional class (NYHA class II)," Dr. Grimminger and colleagues wrote. After six months, his walking distance improved to 395 m, his NYHA status remained at class II; and he had improved right ventricular performance as assessed by echocardiography. There were no apparent adverse responses to Viagra, the investigators reported. "We recognize the limitations of a single case report, but we believe that antiproliferative treatment with an antagonist to the platelet-derived growth factor receptor may be a promising new targeted therapy for pulmonary hypertension," they write. The authors are currently planning a controlled clinical trial with Gleevec in patients with PAH.

Don McNay
don@mcnay.com

Frist pondered HCA stock sale in April: report

2005-10-01T15:25:00.000-04:00

This story was sent to you by don@mcnay.com with these comments:

From MarketWatch, online at:

http://www.marketwatch.com/news/story.asp?guid=%7BBF4B3705-D993-478C-91DE-C575E7D7B696%7D&siteid=google

FRIST PONDERED STOCK SALE IN APRIL

10/1/2005 10:46:27 AM

By MarketWatch

10:46 AM ET Oct 1, 2005

WASHINGTON (MarketWatch) - Senate Majority Leader Bill Frist pondered the sale of
his stock in HCA Inc. in April, before it was clear that shares of the hospital
company would fall, the Washington Post reported, citing e-mails provided by sources
sympathetic to the Tennessee Republican.

Frist and six HCA insiders sold shares in HCA earlier this year, shortly before the
company issued a profit warning that sent its stock tumbling 9%. The Justice
Department and the Securities and Exchange Commission have launched separate probes
into the sale. HCA was founded by Frist's family.

Frist announced last week that he and his immediate family sold all the shares they
owned in HCA in June. The majority leader has said he acted properly and that he had
no inside information on the company's prospects at the time of the sale. See earlier
story.

The Washington Post said an April 29 e-mail message from G. Allen Hicks, chief
counsel to the majority leader, informed Frist he could talk about the senator's
"blind trust question" that day. Frist also traded email with his Nashville-based
accountant, telling her he wanted to discuss disposing of "all hospital stock in all
accounts that I have control of."

Frist advised his brother, HCA board member and former chairman Thomas Frist, of his
decision in late April, several weeks before telling the official who controlled his
blind trust about the decision, the report said.

Analysts said Frist may still face difficulty explaining to the SEC why he sold when
he did, the Post said. Frist held the stocks in trust for years and maintained they
didn't constitute a conflict of interest, despite numerous complaints by public
interest groups.

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Frist Sold During Blackout Period

2005-09-30T18:24:00.000-04:00

Frist stock sales overlap company's 'blackout' period

By RICHARD POWELSON
Scripps Howard News Service
September 30, 2005

WASHINGTON - Senate Majority Leader Bill Frist's HCA stock was sold almost entirely during a blackout period when the hospital company barred its executives from buying or selling because they were hearing about quarterly earnings.

HCA's second-quarter blackout for insider stock trading was June 15 to July 27, HCA spokesman Jeff Prescott said in an interview. Frist's blind trust sold his stock from June 13 to July 1, Senate records show. But he has said he did not fix a sales date in his June 13 letter to the trustee of the trust ordering the sale. The letter has not been made public.

Frist legally could sell stock at the time since he is not an HCA executive, Prescott said, assuming he did not have insider financial information about HCA that had not yet been announced.

Two federal investigations looking at Frist's stock sales likely will explore whether any HCA insiders tipped the senator about selling near the blackout period. Frist's brother Thomas is an HCA board member, its largest shareholder and HCA's former chairman. Thomas Frist Jr. and his father, now deceased, founded the hospital management company in the 1960s.

Sen. Frist has said he had no HCA information not available to the public and that he and his brother never discuss HCA business.

Both the Securities and Exchange Commission and a U.S. Attorney's Office in New York are reviewing the sales, HCA and Frist's office disclosed earlier. The value of all assets in Frist's trusts last year was $7 million to $35 million, Senate records show.

Frist's trust sold his stock near the time of its 12-month peak price - $58.22 a share June 22, and before the price dropped to $49.90 July 13 due to a preliminary earnings report. His trust has not disclosed how many HCA shares it sold or when or their total sales price.

Frist spokeswoman Amy Call said Frist began consulting experts in April about whether he legally could direct his blind trust to sell all remaining HCA stock. He dated the letter to his trust June 13.

"This (April review) was before HCA could have even foreseen second-quarter earnings trouble," Call said. "Also, Senator Frist had no control over the timing of the stock sale. That was at the discretion of the trustees."

Two experts said proving illegal insider trading can be challenging.

Joan Heminway, a visiting professor of law at Boston College, has studied and written about the handling of the prosecution of Martha Stewart, who served five months in prison for lying to authorities about a 2001 stock sale.

She said in an interview that showing someone received inside information in a fraudulent way in connection with a securities transaction "is very difficult."

In Frist's case, Heminway said, if Frist could not control the date of sale that could help his case: "How could he have bad intent if he ... doesn't have control over when they sell?"

Warren Neel, executive director of the Corporate Governance Center at the University of Tennessee, is a former dean of the university's College of Business Administration, former state commissioner of finance, has served on nine corporate boards and lectures on corporate ethics.

"It's extremely difficult to prove" illegal trading, Neel said, unless there is evidence in documents, board minutes or committee minutes, e-mails or phone logs that show an insider used financial data not yet made public to benefit in stock trades or aid another in such fraud.

SEC spokesman John Nester said each company decides when to impose blackout periods to protect their employees from violating securities law.

In Frist's public comment Monday about why he waited 10 years into his Senate service to divest his HCA stock, he said it was due partly to "continuing questions" by outsiders reviewing his legislative work.

"And looking ahead at my final years in the Senate and what might come next, I have for some time wanted to eliminate even the possibility of an appearance of a conflict" by selling remaining HCA stock, he said. He has been considering running for president in 2008.

Formal Investigation into Frist matter

2005-09-29T17:01:00.000-04:00

SEC Opens Full Probe Into Frist Stock Sale

Securities Exchange Commission Opens Formal Probe Into Sen. Bill Frist's Sale of HCA Stock

By JONATHAN M. KATZ Associated Press Writer

The Associated Press

Sep. 29, 2005 - While insiders at HCA Inc. were selling millions of dollars of their own stock this year, they were also painting a sunny picture of the company's outlook for investors. Federal prosecutors and the Securities and Exchange Commission are investigating the sale of HCA stock by Senate Majority Leader Bill Frist, R-Tenn., whose family founded the company that grew into the nation's largest for-profit health care chain.

The SEC turned its initial inquiry into a formal investigation of the company, HCA announced Thursday. The company said it is cooperating with investigators.

Frist's office said Wednesday that he had gotten notice of a formal investigation, which grants subpoena powers to investigators to obtain information and documents.

On June 14, the day after Frist ordered his shares sold, HCA officers at a Goldman Sachs health care conference in Laguna Niguel, Calif., spoke optimistically about the company's prospects.

Victor Campbell, HCA's senior vice president of corporate communications and government relations, soothed investor concerns about unpaid patient debts and worries about patient volumes. He also advocated for a still-pending Senate bill that would limit the establishment of physician-owned specialty hospitals and called Washington "my favorite place ... where I spend at least a day or two a week."

In the month before the speech, Campbell sold about $12 million worth of stock. It was part of a massive insider sell-off at HCA that totaled some $112 million between January and June 2005.

Those sales were disclosed publicly through filings with the SEC.

HCA shares peaked about a week later, closing at $58.40 on June 22. On July 13, they tumbled 9 percent following the company's announcement that it would not meet earnings expectations.

Citigroup said the drop was "a clear disappointment versus recently heightened investor expectations."

In his remarks, Campbell did not speculate about the company's earnings, but spoke of a number of positive trends for the company. The only expense line the company didn't like, he told investors, was the issue of money lost from treating uninsured patients who never paid. But he said that was improving: "We've had a couple of quarters now ... where the trend lines have looked better. We hope that will continue. We're not predicting." He did forecast that outpatient volumes would continue to grow.

Campbell highlighted HCA's buyback of stock in late 2004 but did not mention the insider sell-off then nearing completion. The company had borrowed the full amount it needed for a $2.5 billion buyback, which spurred credit-rating agency Standard & Poor's to downgrade its debt rating to junk, a move which coincided with the start of the stock's ascent to its June 22 peak.

"We look smarter than we probably really are, but it was good timing," Campbell told investors.

The speech helped feed optimism surrounding HCA stock, said Oksanna Butler, a senior health care industry analyst with Citigroup Investment Research.

"I talked to investors that had been at that conference and what I hear was that they were coming away with a positive view," Butler said.

In April, analysts with Oppenheimer & Co. cited the increasing volume and improving prospects of unpaid patient debt and rated the stock a "buy," calling its raised earnings expectations "conservative." Analysts at Morgan Stanley and Jeffries & Co. Inc. gave similar advice the next day. On May 5, Morgan Stanley analysts reported that HCA executives led an "upbeat" and confident discussion of the hospital company's prospects at a conference on health care issues.

Campbell did not respond to a request for comment Wednesday. HCA spokesman Jeff Prescott declined comment, saying, "I'll let what he said at the conference speak for itself."

"The mere fact that someone says, 'we're optimistic' and then a month later the stock price goes down doesn't mean that people have tried to mislead anybody else," said David Becker, a former general counsel at the SEC. "If you purport to tell people what you know about the future but you mislead them by leaving important things out, that can well be the sin of omission. But you have to look at what, precisely, people say and what, precisely, is left out."

Frist's staff discussed selling all remaining HCA stock in April, as well as that of his wife and children, Frist said. The sales, ordered on June 13, were completed by July 1.

Frist said he sold the shares to eliminate the appearance of a conflict of interest, using only information that was publicly available.

HCA shares were down 40 cents to $47.55 in early trading Thursday on the New York Stock Exchange.

On the Net:

Hospital Corp. of America Inc.: http://www.hcahealthcare.com/

Bureaucrats Gone Wild

2005-09-25T21:56:00.000-04:00

Bureaucrats Gone Wild.

You see stories about how China’s economy is growing while America’s is not.

I have never been to China but will bet they don’t have as many bureaucratic rules as we do.

Especially in the school systems.

I’m embarrassed that an example of bureaucrats gone wild occurred in my native county, Kenton County, Kentucky.

The Cincinnati Enquirer told the story of a brilliant pre school student. The schools gave her a test to skip kindergarten. She passed it.

Since she didn’t need kindergarten, he parents sent her directly to the first grade.

The Kenton County public school system sent her parents a bill for $3000.

The bureaucrats want her parents to pay for the grade that she skipped.

There are several things wrong with this story.

The first is that she is going to a PUBLIC school. When did PUBLIC schools start charging tuition? If they are trying to make a profit, will they give me some of my tax money back?

It is not just about the money.

The bigger issue is that bureaucrats could be screwing up this girl’s life. Children need to be challenged, especially brilliant children.

Dumping the student in a class beneath her abilities will bore her and could turn her off to school forever.

We might waste a talent that could someday cure cancer or be President.

The fire she is showing in childhood could be doused by idiots following a stupid rule.

The paper pushers are not only enforcing a terrible rule, they don’t understand the rule they are trying to enforce.

State Representative Harry Moberly, who wrote the law the bureaucrats are citing, said the school board interpretation was wrong and told the Enquirer that the parents should hire a lawyer.

I hope they do.

I know most of the good trial lawyers in Kentucky. If the parents call me at 1-800 Mr. McNay, I will put them on to several lawyers who would take the case.

I might even chip in on the legal fee. I won’t chip in for the tuition. The PUBLIC school system should not have charged it and I hope the parents don’t pay it.

I don’t know the parents but they live in a nice neighborhood. They can probably afford $3000.

What would have happened if the bureaucrats pulled the stunt on a poor child that lived in a housing project? What would have happened if the child did not have parents with enough savvy to contact their legislators and the media?

A brilliant mind could be wasted. The bureaucrats would have won.

Moberly said he might fix this problem in the next legislature session and I am sure he will. He understands that education is about pushing forward and not holding back.

I am angry that it got this far. Every person at the school board and in the school system should be working to get the child the best education she can possibly get.

I thought that was what school was all about.

If I were running the school system, I would have put her in the first grade at all cost. Even if I had to tear up the rule book.

If some paper pusher told me I was violating an idiotic rule, I would tell them to get a lawyer and sue me.

I think the jury would see it my way.

I am afraid that the incident in Kenton County is a symptom of a nationwide problem.

Paper pushers and bureaucrats forget that they are molding the lives of young people and enforce rules that have no meaning, purpose or logical sense.

Other countries aren’t doing that. That is why they are eating our lunch on the economic front.

I hope the American school system gets it together. If they don’t, they need to make sure American students learn a new skill:

How to eat with chopsticks. Their future employers will require it.

Don McNay is President of McNay Settlement Group in Richmond Kentucky where we fight any rule that hurts people. You can write to him at don@mcnay.com or read other things he has written at www.donmcnay.com

Parents of Smart Kids Told to Pay Up

2005-09-25T19:43:00.000-04:00

aturday, September 24, 2005

Parents of smart kid told to pay
Kenton County charges tuition for advancing a grade

By William Croyle
Enquirer staff writer

CRESCENT SPRINGS - The parents of a 5-year-old girl and the Kenton County School District are battling over a $3,000 tuition bill.

It's a situation caught up in bureaucracy that has left the gifted child's academic future in doubt.

John and Shauna Bomkamp's daughter, Alison, is in first grade at River Ridge Elementary School in Villa Hills.

After she was tested twice last winter at a second-grade level by an independent psychologist and River Ridge, Alison's parents decided to have her skip the school's half-day kindergarten this year and start first grade.

She was tested once more during the summer by the district, which told the Bomkamps if Alison qualified to skip kindergarten, there would be a $3,000 tuition bill to place her in a higher grade. Alison passed the test.

"We agreed to have her tested, but we did not agree on the tuition," John Bomkamp said.

Why a $3,000 tuition bill for a public school?

That's about half of what it costs to educate a child in Kenton County for a year, according to Superintendent Susan Cook. But the state only funds districts for half-day kindergarten.

And a 20-year-old attorney general's opinion of the state's primary school program law says if a child "would not be 6 years old until after Oct. 1 (as is Alison's case), the child would be eligible to enroll only in a public school's kindergarten program rather than first grade."

So Alison is attending first grade for a full day, but only half of her education is paid by the state.

"The district is following state statute," said Lisa Gross, spokeswoman for the Kentucky Department of Education. "The law does not give a district flexibility on how a child tests. It's age-specific."

The district appealed to the state board of education, asking for a waiver for Alison. State Sen. Jack Westwood also fought on the family's behalf, but the board denied the request in August.

"One reason the waiver was refused was because it's state law," Gross said. "And because they didn't want to set a precedent."

Westwood said he's not buying the precedent argument.

"I don't think that many kids will test at a higher level each year," Westwood said. "There has to be thinking of what can we do to help this child get the best education."

The Bomkamps say the district has already set a precedent by offering free full-day kindergarten at two of its schools - Piner and Ryland. Cook said it does that because of the location of the schools and because many of the students are classified as at-risk.

State Rep. Harry Moberly, D-Richmond, wrote amendments to the primary school program law in the 1990s and said the attorney general's interpretation was wrong.

He said the Bomkamps should not pay the bill and should hire a lawyer if necessary.

"I don't think they need a waiver," Moberly said. "The tuition is absolutely ridiculous. The law says kids have to be continually evaluated and regrouped in their best interest. The issue is, once enrolled, what are her needs?"

Cook said the district could meet Alison's needs by differentiating her instruction. For example, she could take second-grade reading while in kindergarten. The Bomkamps and Westwood say the district cannot meet all her needs in a half-day.

The family got the bill Sept. 17, about a month after Alison settled into her first-grade class.

Cook said it will probably take a change in the law for the district not to charge the Bomkamps. Moberly said he may look at doing that at the 2006 General Assembly.

But what happens now?

The first tuition installment is due Friday. Cook said she has a paper signed by the Bomkamps before the district tested Alison that says they agreed to the payment.

The Bomkamps say they questioned the legality of the tuition at that time and made a notation on that paper that the tuition issue was still being discussed.

"I'm going to protect my daughter no matter what," Shauna Bomkamp said. "We will fight it tooth and nail."

Will the district remove Alison from first grade if the bill is not paid?

"I would hope that we could work with the family to come to some agreement," Cook said.

E-mail wcroyle@enquirer.com

Houston Cronicicle Story about Frist

2005-09-25T18:27:00.000-04:00

Sept. 24, 2005, 10:29PM

Frist inquiries may raise the stakes

Democrats gain an opportunity to extend claims about GOP ethics into the Senate

By CHARLES BABINGTON and JEFFREY H. BIRNBAUM
Washington Post

WASHINGTON - Two federal inquiries into Senate Majority Leader Bill Frist's stock sales have handed Democrats a chance to broaden their long-stated claim that Republicans push ethical boundaries and focus on laws that help the rich, political analysts say.

Until now, such accusations have centered on the House and White House. House Majority Leader Tom DeLay, R-Sugar Land, has been chastised three times by the chamber's ethics committee, and a Texas grand jury recently indicted a political action committee he had organized. The Bush administration's top federal procurement official, David Safavian, was arrested last week on charges of obstructing a criminal investigation into lobbyist Jack Abramoff, who has close ties to DeLay and other prominent GOP lawmakers.

With the revelation that federal prosecutors and the Securities and Exchange Commission are looking into Frist's sale of hospital stocks shortly before their value fell, Democrats are expanding their ethics accusations into the Senate's GOP leadership ranks.

Activists in both parties agree it is too early to say whether Frist, of Tennessee, engaged in insider trading. But the mere launch of inquiries allows Democrats to claim that Republican leaders operate under ethical clouds.

"It is a drip drip drip," said former House Majority Leader Tony Coelho, a California Democrat who resigned in 1989 following accusations about a loan deal. ''With (President) Bush's numbers down, this could be a very negative thing for the Republicans."

In carefully worded statements, Frist's office has said the senator instructed managers of his "qualified blind trust" in June to sell his family's shares in HCA Inc., the nation's largest hospital chain, founded by Frist's father and brother. A month later, the stock's price dropped 9 percent after the company predicted weakening earnings. It is illegal to trade stocks based on inside information. Frist "had no information about the company or its performance that was not available to the public when he directed the trustees to sell the HCA stock," his office said.

The senator's spokesmen say he sold the stock to avoid conflicts of interest as Congress deals with health care legislation. But for years, Frist rejected arguments that his stock holdings could cause a conflict.

In January 2003, Frist said in a televised interview that his assets were in a blind trust and "as far as I know, I own no HCA stock."

Financial disclosure documents filed with the secretary of the Senate by the trustees show that two weeks before the interview, a trustee notified Frist that HCA stock had been contributed to his trust. Spokesman Bob Stevenson said Saturday that Frist was truthful in the TV interview because the trustee can sell assets at any time without notifying the senator, and therefore on any given day the trust's contents are unknown to him.

Some nonpartisan analysts said the Frist case could fizzle, in legal and political terms, if anything short of insider trading is proved. For one thing, they say, the story has broken at a time when hurricanes are dominating the national news. Moreover, they say, questions of blind trusts and stock transactions may prove too arcane to captivate the average voter.

Don McNay
don@mcnay.com

Good Tennessean Column on Frist

2005-09-25T18:26:00.000-04:00

ow can this happen in a place of such wealth?

By TIM CHAVEZ

One thought turned public sympathy into outrage over the abandoning of New Orleans' most vulnerable residents during Hurricane Katrina:

How could this Third World-like tragedy be happening in the most powerful and affluent nation on the globe? And anger was further fueled by the realization that America has spent more than $200 billion and almost 2,000 lives to ensure better lives in Iraq.

Now consider the same scenario here, set against the great wealth that abounds in the health-care industry. Yet our state is denying our most vulnerable citizens help to afford medicines to prolong lives while forcing others to emergency rooms for care that will bankrupt families.

Many working poor Tennesseans are part of the 200,000 TennCare recipients being cut from the program. And several hundred thousand more Tennesseans — including those described by the governor as the sickest — have had the number of prescriptions covered by TennCare reduced to five.

How can our state government expect diabetics to play Russian Roulette with their health, choosing between insulin and assorted medicines to address heart, stroke and kidney conditions besides ulcers on their feet? Skip one, and you're headed to hospital or morgue. Meanwhile:

• Favorite son Dr. Bill Frist is being investigated by the Securities and Exchange Commission for selling his HCA stock before its value plummeted, possibly saving him millions. Yet Frist as Senate majority leader won't bother to intervene in the TennCare crisis.

• BlueCross BlueShield of Tennessee, despite skyrocketing health-care costs, has racked up more than $1 billion in profits to put into its reserves.

• Profits for Nashville-based Caremark rose 57% in the second quarter. Caremark provides drugs to health-care programs and individuals.

• Gov. Phil Bredesen made his fortune in health care, then sold his company. Owners later took it into bankruptcy. Yet with that record, he convinced enough voters he had the expertise to fix TennCare. Now we know the terrible truth. He didn't.

Ultimately, we're being fooled by these health-care profiteers. They tell us costs for drugs and treatment are too high to help working poor Tennesseans. But the same experts — as CEOs and elected officials — still find plenty of cash to make themselves millionaires and their corporations Wall Street darlings.

Like canaries in mines, Tennesseans suffering from TennCare cuts are offering a warning to the rest of us. We're going to get it, too, as more profits are squeezed out for the few at the expense of the many.

Socialized medicine in Canada is not the answer. But the CEO view that the profiteers are trying to sell us like snake oil also is wrong. The corporate view sees nothing wrong in the state hiring 120 lawyers to sit around and do crossword puzzles. They're supposed to be hearing appeals from disenrolled TennCare recipients. So that's $51,000 an attorney annually in taxpayer money for a five-letter word on 54 Down for a "Luau welcome."

Meanwhile, James Bryant of Rutledge died earlier than expected because he couldn't afford $700 for his medicines.

Bredesen imposed a five-prescription limit on people such as Bryant because he believed they were costing the state too much money. But the attorneys are not.

Though of different parties, Bredesen and Frist are part of the same ilk. We must look to new leaders. We'll find them in a special legislative session to address TennCare.

Legislators are the only people left with clout. I've counted 32 so far — 10 senators and 22 representatives — who want a special session. That includes Reps. Sherry Jones and Edith Langster, who called to add their names. I'm told there are more than the 32. There are at least enough to worry the governor. His underlings called every legislator last week about his or her position on a special session.

You must call, too. Ask your lawmakers to support a special session. The TennCare outrage must be stopped now before the cancer of profits ahead of people hits your health plan, too.

Don McNay
don@mcnay.com

SEC, Justice Investigate Frist's Sale of Stock

2005-09-25T11:14:00.000-04:00

SEC, Justice Investigate Frist's Sale of Stock

By Jeffrey H. Birnbaum and R. Jeffrey Smith

Senate Majority Leader Bill Frist is facing questions from the Justice
Department and the Securities and Exchange Commission about his sale of
stock in his family's hospital company one month before its price fell
sharply.

The Tennessee lawmaker, who is the Senate's top Republican and a likely
candidate for president in 2008, ordered his portfolio managers in June
to sell his family's shares in HCA Inc., the nation's largest hospital
chain, which was founded by Frist's father and brother.

A month later, the stock's price dropped 9 percent in a single day
because of a warning from the company about weakening earnings.
Stockholders are not permitted to trade stock based on inside
information; whether Frist possessed any appears to be at the heart of
the probes.

A spokesman said Frist's office has been contacted by both the SEC and
the U.S. attorney's office in Manhattan about his divestiture of the
stock. HCA disclosed separately that it was subpoenaed by the same U.S.
attorney's office for documents that were related to Frist's sale. Frist
and HCA said they are cooperating.

Historians said they cannot recall any other congressional leaders who
have faced federal inquiries into stock sales. Frist has denied any
wrongdoing.

On Thursday, a Frist spokeswoman said the senator had not discussed the
stock sale in advance with any HCA executives. On Friday, in a statement
from Frist's office, the issue was couched a little differently. It said
the senator "had no information about the company or its performance
that was not available to the public when he directed the trustees to
sell the HCA stock. His only objective in selling the stock was to
eliminate the appearance of a conflict of interest."

According to Frist's office, the senator decided to sell all his HCA
stock -- held in blind trusts managed by two companies for him, his wife
and his children -- on June 13. Under the rules of the trusteeships,
Frist had no control over the timing of the sale, Frist spokeswoman Amy
Call said.

When the company disclosed that its second-quarter earnings would fall
short of Wall Street expectations a month later, the stock price slid
steeply. By that time, Frist's shares had been divested. The managers of
one of the trusts told the senator on July 1 that his holdings had all
been sold; the other trust managers said the shares were gone on July 8.

Frist's financial disclosure statement earlier this year placed the
value of his blind trusts at between $7 million and $25 million.

Separately, documents unearthed yesterday by the Associated Press
showed that Frist was told about stock trades in his blind trust. In
documents filed with the Senate, trustee M. Kirk Scobey Jr. told Frist
in 2002 that HCA stock had been transferred to his trust. Scobey,
reached by phone last night, declined to comment.

The AP said that the documents disclosed that HCA stock worth hundreds
of thousands of dollars was placed into Frist's blind trusts several
other times in 2002 as well. Frist maintained in a television interview
in 2003 that he did not know how much HCA stock he owned, if any.
Spokesmen for Frist did not return phone messages last night.

HCA was founded in 1968 by Frist's father, Thomas Frist, his brother,
Thomas Frist Jr., and Jack Massey, the former owner of Kentucky Fried
Chicken. Frist's brother Thomas is a director and a former HCA chairman.
The senator himself is a surgeon.

Democrats were quick to pounce on Frist's problem. Democratic National
Committee Chairman Howard Dean urged the agencies involved to "fully and
vigorously investigate Frist's suspicious stock trade." He added:
"Republicans in Washington have made their culture of corruption the
norm."

"Bill Frist has this all upside down," said Rep. Rahm Emanuel (D-Ill.),
chairman of the House Democrats' campaign committee. "He thought Terri
Schiavo could see and his trust was blind."

Watchdog groups also lashed the lawmaker. Melanie Sloan, executive
director of Citizens for Responsibility and Ethics in Washington, said
she intends to petition the Senate Select Committee on Ethics to look
into Frist's actions and determine whether he ran afoul of ethics rules
involving blind trusts. A spokesman for the committee said the panel
does not disclose whether it is investigating a senator.

In addition, the Foundation for Taxpayer and Consumer Rights urged
congressional leaders to appoint an independent observer "to ensure a
thorough, transparent investigation."

Analysts said that Frist's White House hopes might be harmed by the
probe and that Republicans in general might be penalized politically.
Because few voters know Frist well, learning about him through an
investigation "would not be a good way to be introduced to the American
public," said Stuart Rothenberg of the nonpartisan Rothenberg Political
Report.

In addition, Rothenberg said the Republicans that Frist leads could
also be tarnished. The probe "adds to the general Democratic
ammunition," Rothenberg said.

"I do think this hurts his future ambitions, even if he's exonerated,"
agreed Jennifer E. Duffy of the Cook Political Report.

Congressional critics questioned the reason Frist gave for selling the
stock. Senate rules allow lawmakers to divest all of their shares in a
company from a blind trust, but only if they assume new duties and find
that their ownership presents the appearance of a conflict of interest.

Frist has held HCA shares in a blind trust since he came to the Senate
in 1995. He was promoted to majority leader in 2002. Frist regularly
deflected concerns about owning the shares while leading health care
debates by saying he kept them in a blind trust.

"I don't know what new duties he would point to above and beyond
becoming majority leader, and that was three years ago," said Fred
Wertheimer, president of Democracy 21, an ethics advocate.

Call, Frist's spokeswoman, said the stock sale was motivated solely by
the senator's desire to avoid an appearance of conflict, but she could
not cite any published criticism of his HCA holdings after April 2004.

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The Not So Blind Trust

2005-09-25T01:48:00.000-04:00

The Not So Blind Trust

“It’s always been a matter of trust”

-Billy Joel

One of the most important positions in the world is the Majority Leader in the United States Senate.

It’s only a few steps from Majority Leader to President. Lyndon Johnson made it. Bob Dole and others tried.

Current Majority Leader Bill Frist has his eye on the White House. He may be looking at a stay in the big house instead.

Frist is from an incredibly rich family. His father and brother founded Hospital Corporation of America (HCA), the nation’s largest hospital chain. Senator Frist disclosed that he is worth somewhere between $7 million and $35 million.

You won’t find him in the line to get a payday loan.

Like many rich people, he owns stock that can make or lose money because of decisions the government makes.

Most wealthy senators, including Frist, put their money in something called a “blind trust.” They turn their money over to someone else and not supposed to know how it is invested.

I know a lot about blind trusts. One of my friends ran for Governor of Kentucky several year ago and asked me to manage his blind trust if he won.

If I ran through the money, he wouldn’t find out until he got out of office.

I was honored but stressed. I would have been responsible for him and his family. If I screwed up, his kids did not go to college.

He lost the election but his children will be well educated.

Jimmy Carter did a really stupid thing with his blind trust. He put Billy Carter, his beer swilling, red neck brother, in charge.

Jimmy lost re-election and found that Billy’s shrewd money management caused Jimmy to be broke and heavily in debt. Jimmy had to start writing books to get out of hock.

Frist does not have Carter’s problem. His family knows how to handle money. The question is whether they know tricks that hurt the public.

Two possible scandals have erupted for Senator Frist. The first is that the Senator and HCA are being investigated by the Securities and Exchange Commission and the Justice Department for possible insider trading.

Senator Frist was able to sell its HCA stock right before it dropped 15%. The Senator was either tipped off or incredibly lucky.

Insider trading is the same thing that Martha Stewart went to jail for. She went for chump change. If found guilty, Frist would be looking at a serious sentence.

Company executives have to sit tight when they have information that the public doesn’t know about. People will not buy stocks if they think the market is rigged.

Friends of Frist say he would not have done something illegal because he is rich. He does not need the money.

ANYONE accused of insider trading is rich. It is a crime committed by wealthy stockholders and their friends at the country club.

You don’t see people on food stamps being accused of insider trading.

When the Justice Department stops by HCA to drop off a subpoena, things are very serious.

Especially since the leaders at Justice were appointed by Frist’s close friend George W. Bush.

Insider traders have to be stupid as technology makes it easy to catch them. If HCA did wrong, we will know.

A bigger concern is that Frist’s blind trust had a seeing eye dog, Senator Frist himself.

Numerous documents show that Frist kept a close eye on his money. He was actively involved in many of the “blind” trust decisions, including the one to dump the HCA.

The blind trust seemed to have 20/20 vision.

Along with being greedy, Frist might be a liar.

In a 2003 television interview, he said that “as far as I know, I own no HCA stock.” Two weeks before that interview, the trustee had given Frist an update on the HCA stock he owned.

Frist is in a position that effects every American. Forget the fact that he is dying to be President, he has a huge amount of power right now.

He can use it to help us or use it to line his pocket. If he is going to stay a United States Senator, he needs to show that he is obeying the law.

It is a matter of trust.

Don McNay is President of McNay Settlement Group where insider traders need not apply. You can write to him at don@mcnay.com or read other things he has written at www.donmcnay.com

Guns and Butter (final version)

2005-09-18T15:51:00.000-04:00

Guns and Butter

“You can taste the bright lights
But you won't get them for free”

- Guns and Roses (Welcome to the Jungle)

If you look at inflation and interest rates, you will see they stayed low from World War II until the mid 1960’s.

President Lyndon Johnson increased government spending by pushing the “Great Society” program and the Vietnam War at the same time. Inflation got out of control and it took decades to recover.

Economists say he was buying “guns and butter” at the same time. We could not afford to do both.

I thought that government leaders learned the lesson and we would never see high inflation again. The lesson has apparently been forgotten.

We are fighting a war and will be financing a domestic relief effort at the same time.

It is economic history repeating itself. Unless we change our course, we will soon be dealing with the same runaway inflation that followed the Johnson administration.

President Bush came into office with a budget surplus. It insulated him from making hard choices and hard decisions.

It is like starting life with a big inheritance.

Many people have to juggle their finances to make it. Someone with inherited wealth doesn’t know how to juggle and can’t make the adjustment when they need to.

All of us face the same budgeting decisions at some level.

If I want to buy a new car or a bigger house, I need to earn more money or cut expenses.

The third option is to run up my credit card and pray I can pay it off someday.

By trying to finance “guns and butter” at the same time, President Bush is putting Americans on a government version of a credit card. We will run up a big debt and start paying interest on the debt right away.

Government debt does not come with teaser rates or a cash back offer.

The problems will start about the time that President Bush goes back to the ranch in 2009. Some future President will have to deal with them.

Bush can do what other Americans do. Tear up the credit card. He can raise revenues or cut other expenses.

Bush says he will cut expenses but his two biggest are the relief effort and the war.

The last war the United States actually won was World War II. America put all of its resources into achieving an unconditional surrender.

We have not done that in Iraq. There is no draft, no rationing and no special tax to support the war.

Like many Americans, I’m not personally invested in the war. None of my family is in Iraq and only a few of my friends. I have not been forced to sacrifice.

If we are going to stay in Iraq, we need to approach war like we did in World War II.

All able bodied Americans should be eligible for the draft. Gasoline, food and oil should be rationed and we should add at least 10% to everyone’s taxes. That money should only be used for troops, equipment and body armor.

If we are going to be at war, we need to back the war completely. No limited actions or half measures.

Universal sacrifice would give us the resources to win the war quickly or have all Americans invested in the decision to keep fighting.

With a quick end to the war, the troops can help rebuild the gulf region and the guns segment of “guns and butter” budgeting would be eliminated.

It would keep the long term budget under control.

People say that government debt is dumping the problems on our children and grandchildren. I’ve never liked that argument as many people don’t have children or don’t really care about the future.

Most people don’t admit they are self-centered on opinion polls.

They will understand if they see that the “guns and butter” strategy will hurt them personally.

Unless they plan on dying really soon, they will feel the pain of inflation and high interest rates.

Government debt is like watching someone do a night on the town and pay for it by credit card.

They can taste the bright lights but they won’t get them for free.

Don McNay is President of McNay Settlement Group in Richmond Kentucky where we want people to make good long term decisions. Don’s a member of National Society of Newspaper Columnists. You can write Don at don@mcnay.com or read other things he has written at www.donmcnay.com

Don McNay
don@mcnay.com

New Kentucky Based column by Don McNay

2005-09-12T19:04:00.000-04:00

Don McNay will be publishing a bi-weekly column about Kentucky politics and government. It will run on the editorial page of the Richmond Register and several other publications.

Don will continue his popular business column, which will continue to run each Sunday in the Register and a growing list of publications.

Unbridled Super Cop

For several weeks, the Kentucky state police ran a television advertisement encouraging people not to drink and drive.

The ad ended with Lt. Governor Steve Pence surrounded by policemen.

Pence should not have been in the ad. Taxpayers should not pay for politicians to promote themselves.

I don’t think any elected official should have been in the commercial, but if you absolutely had to pick one, Pence was a good choice.

Along with being Lt. Governor, Pence is the head of the Kentucky Justice Cabinet. He is a former federal prosecutor and serves as a Military Judge. His life has been devoted to law enforcement.

The ad ran again recently but Pence was gone. Governor Ernie Fletcher took his place.

Mr. Law and Order was replaced by a guy who recently told a Grand Jury that he refused to answer questions on the grounds he may incriminate himself.

It’s like the television show “Law and Order” replacing one of their actors with O.J. Simpson.

If the commercial’s goal is to scare people out of driving drunk, you need real law enforcement personalities encouraging people, not politicians.

Even though Pence is an elected official, he looks like someone you don’t want to mess with. The commercial makes him look tough, like Buford Pusser in a business suit.

The commercial makes Fletcher look like Barney Fife.

A drunk might be scared of Pence. No one is going to be scared of Fletcher.

Inebriated Kentuckians will see Fletcher and figure that driving drunk is not any worse than noodling. Fletcher lumps all misdemeanors into the same category as catching fish with your hands.

Republican drinkers will believe if they get into trouble, Ernie will let them off with a pardon.

Or help hard drinking relatives get a state job.

Pence was dumped from the advertisement about the same time Fletcher handed out pardons to his indicted cronies.

It is well known that Pence did not agree with Fletcher’s pardons. I wonder if Fletcher yanked Pence from the ads as a way to punish him.

It is obvious that Fletcher was added to the commercial with hasty editing. The latest commercial reminds me of when they dub characters into to a really bad Kung Fu movie.

Mothers Against Drunk Driving (MADD) has been one of the most effective organizations founded in my lifetime. They have made a real change in the way society treats drunk drivers.

Politicians like Fletcher want to be associated with a popular cause.

I don’t know how much the state spent for the commercials with Fletcher but they were on almost every time I turned on the television.

The state spent over $645,000 for its “Unbridled Spirit” logo.

I hope we paid less for Fletcher to play “Unbridled Super Cop.”

Don McNay is President of McNay Settlement Group where no one tries to act like a law enforcement officer. You can write to him at don@mcnay.com or read other things he has written at www.donmcnay.com