John C. Cox, a Palo Alto based Labor attorney for the Los Angeles based law firm Manatt Phelps and Phillips LLP was retained as an 'expert supporting declaration' by the Detroit Pension funds who have filed the shareholder lawsuit against Yahoo related to the 'Change in Control Severance Plan' (background).

Excerpts from John Cox's Declaration in Delaware Chancery Court regarding the merits (or lack thereof) of Yahoo's poison pill - The number of months of benefits to be paid is "eye popping" by Silicon valley standards and far exceeds the length of time most Yahoos! wouls need to find alternative gainful employment. ... The at-issue Yahoo! Severance Plans are broader than California law in that they permit Yahoo! emplyees to recover severance benefits even if they are not involuntarily terminated or "constructively" involuntarily terminated.... A Yahoo! could take under the Plans, if involuntarily terminated or in the alternative, if s/he suffered only an "substantial adverse alteration" of his/her job.

He goes on to give concrete examples of how easily a Yahoo! employee could manage to get the severance benefits even under relatively normal and unchanged job duties and circumstances, Plus, the plan calls for individualized review for each employee who seeks recompense under the plan, so that involves a massive allocation of human and legal resources even to deny the severance request. And here's the killer - Microsoft had advised Yahoo that it was earmarking $1.5 billion for retention incentives, but this little piece of information was never made known to the Yahoo! rank and file. See link under refereces for complete docs and court filings related to the shareholder lawsuit.

What's more, I was just browsing through what appeared to be a routine SEC filing from Yahoo (see link below in references), when something caught my eye - Anti-takeover provisions could make it more difficult for a third-party to acquire us - Basically, each share of common stock is associated with a right to buy a Series A Junior Participating Preferred Stock for $250 per unit. And should a person or group acquire 15% or more of common stock and try to take over control of the Board, and provided certain other conditions are fulfilled, then everyone else gets to buy common stock worth $500 in excahange for the $250 exercise price.

And it gets even better. In addition, our Board of Directors has the authority to issue up to 10 million shares of Preferred Stock (of which 2 million shares have been designated as Series A Junior Participating Preferred Stock) and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders. The issuance of Preferred Stock may have the effect of delaying, deterring or preventing a change in control of Yahoo! without further action by the stockholders...

In a nutshell, if someone takes over Yahoo, then as per all these provisions, the new group or person(s) in charge would (could) find themselves in control of a company which suddenly is valued at less than half of what it was before they gained control. Oh, and if you're thinking of gaining something concrete and forward looking from all this blather, Yahoo states that its possible that the stock could remain volatile in the near future regardless of operating performance. If you're a Yahoo! stockholder or employee with stock options, I pity you - The only way you're going to benefit is if someone takes over the company - And your benefit is exactly the reason why no one wants to take it over. Have fun.

References:
http://www.blbglaw.com/cases/yahoo_takeover.html
http://www.blbglaw.com/casedox/Yahoo-Declaration-JohnFox06-09-08.PDF
http://yhoo.client.shareholder.com/secfiling.cfm?filingid=891618-08-399

Seems the BAC-Countrywide dashing duo are holding a subpoena-fest, with an open invitation to all federal and state regulatory agencies. For starters, Bank of America Corp. (NYSE: BAC) said it received subpoenas and requests for information with regards to auction-rate securities from multiple federal and state government agencies. And four class-action lawsuits have been filed against BAC, on behalf of purchasers of auction-rate securities in-between May 2003 and Feb 2008.

Secondly, Connecticut Attorney General Richard Blumenthal filed suit against Countrywide Financial Corp., accusing Countrywide of "pushing consumers into deceptive, unaffordable loans and workouts, and charging homeowners in default unjustified and excessive legal fees". To make matters worse, Countrywide has responded to a subpoena from the SEC, according to a regulatory filing by BAC (see link under references), and now faces a criminal SEC investigation.

Worse yet, the Director of the Washington State Department of Financial Institutions has initiated administrative proceedings against a Countrywide wholly-owned subsidiary, alleging, among other things, that the loan products made available to Washington borrowers of protected races or ethnicities were less favorable than those made to others situated in the same area.

And its not like either BAC or Countrywide didn't already have legal troubles. Last month, California, Illinois and Florida filed suit against Countrywide (background) with allegations similar to those made by Connecticut. And in June 2008, Washington Gov. Chris Gregoire announced plans by the state to fine Countrywide Home Loans $1 million for discriminatory lending. In addition, she said that the company will be required to pay more than $5 million in back assessments the company failed to pay. Gregoire also announced that the state is seeking to revoke Countrywide’s license to do business in Washington for its alleged illegal activity.

The new SEC subpoena and investigation is probably related to former CEO Angelo Mozilo exercising stock options and making millions (background) while at the same time Countrywide stock was tanking.

The one bright spot in this legal barrage is that BAC as yet remains clear of Countrywide's problems. But at the end of the day, any settlements made with shareholders and the states and/or fines levied by the SEC and/or other regulatory organizations will come out of BAC's pocket, considering that they now own Countrywide. Best bet for them would be to work out some kind of one-time settlement with all 50 states. Otherwise, the subpoena festival will have to be kept open year round.

But then, BAC has its own set of legal problems. These new subpoenas and queries faced by BAC related to auction-rate securities is a part of an expanding investigation and legal fallout over whether banks misled investors about the auction-rate debt risk.

Yesterday, CitiGroup reached an agreement with federal and state regulators to buy back about $7.5 billion in securities from its brokerage clients. Immediately after Citi's agreement was announced, Merrill Lynch & Co. said it would offer to buyback $10 billion in auction-rate securities from retail clients. This is no doubt where BAC, and all other banks faced with legal blowback over auction-rate securities, are headed for.

And if that's not enough to make the subpoena party hot enough for you, BAC also is 'co-operating' with a criminal anti-trust investigation by the DOJ which is looking into whether banks conspired to rig auctions in collusion with advisors to municipalities. Oh, and BAC could still face civil charges in this matter from the SEC.

References:
http://www.ct.gov/ag/cwp/view.asp?Q=420722&A=2795
http://investor.bankofamerica.com/seccapsule/seccapsule.asp?m=f&c=71595&vid=5816363&dc=
http://www.governor.wa.gov/news/news-view.asp?pressRelease=933&newsType=1
http://www.bloomberg.com/apps/news?pid=20601087&sid=ady1qyweQDYo
http://www.reuters.com/article/ousiv/idUSWEN737720080808

The Counterparty Risk Management Policy Group III has released its report entitled "Containing Systemic Risk: The Road to Reform." Here's the link (pdf) to the full report, which should end this post right here. :) But since you asked, here's the highlights.

The Report is a forward-looking, integrated framework of private initiatives that will complement official oversight to help contain systemic risk. The Policy Group focused on four key areas including a reconsideration of the standards for consolidation under US GAAP of entities currently off-balance sheet coming on-balance sheet; measures to better understand and manage high-risk financial instruments; significant enhancements to risk monitoring and management; and, a series of sweeping measures to enhance the resiliency of financial markets generally and the credit markets in particular, with a special emphasis on OTC derivatives and credit default swaps.

In a press statement, Gerald E. Corrigan, Managing Director, Goldman Sachs & Co., and co-Chairman of the CRMPG III said: "The achievement of the Policy Group and its Working Groups in completing such a vast and complex undertaking in three and one-half months is nothing short of remarkable. It is both necessary and urgent that the private sector, in collaboration with the official sector, begin immediately to implement these reforms, some of which will take well over a year to be fully accomplished."

The report has a certain amount of importance, considering the report is a response to the President's Working Group on Financial Markets. And because of the Who's Who list that makes up this advisory group - Other than Corrigan, who is a former Head of the New York federal Reserve, and the other Co-Chair Douglas J. Flint, Group Finance Director Deputy Head of Global Markets HSBC Holdings plc, the group members are:
Madelyn Antoncic - Managing Director Global Head of Financial Market Policy Relations Lehman Brothers
Gary G. Lynch - Executive Vice President Chief Legal Officer Morgan Stanley
Craig W. Broderick - Managing Director Chief Risk Officer Goldman, Sachs & Co.
J. Chandler Martin - Executive Vice President Bank of America
Ken deRegt - Managing Director Chief Risk Officer Morgan Stanley
Edmond Moriarty - Senior Vice President Co-Chief Risk Officer Merrill Lynch & Co.
Andrew Feldstein - Chief Executive Officer Chief Investment Officer Blue Mountain Capital Management
Gavin G. O’Connor - Managing Director Goldman, Sachs & Co.
Peter Fisher - Managing Director Co-head of Fixed Income BlackRock, Inc.
Edward J. Rosen, Esq. - Partner Cleary Gottlieb Steen & Hamilton LLP
Adam Gilbert - Managing Director JPMorgan Chase & Co.
Zion Shohet - Treasurer Head of Corporate Finance Citigroup
Christian Lajoie - Head of Group Supervision Issues BNP Paribas
Barry L. Zubrow - Chief Risk Officer JPMorgan Chase & Co.

Heck, if this bunch took back the recommendations in the report to their own companies and started pushing for implementation, it would be as good as a done deal.

Another factor which bodes well for the implementation of at least some parts of the report is that it virtually mirrors the reforms recently sought out by the NY Fed's Timothy Geithner with regards to derivatives trading reform, when he hosted a meeting of 17 major financial institutions who represent 90% of trading in credit derivatives.

And here's what the Policy Group report says (Reuters excerpt) - Corrigan offered detailed recommendations for reducing the risks that have been made bare by the credit crunch. These included wider adoption of electronic platforms for derivatives trades, and more frequent revisions of financial firms' exposure to risky assets. Firms should also take steps clarifying the closing out of credit default swaps contracts after a default and set up a central clearinghouse for over-the-counter derivatives, particularly for the CDS sector, the group said.

Jerry Yang must be ferevently wishing for this roller coaster nightmare to be over once and for all. After all the drama since January, when it finally looked like it was all over and done with, comes news that a major Yahoo shareholder has asked Broadridge Financial Solutions, which trasmitted the votes to Yahoo, to take a closer look at Yahoo's recent shareholder vote and examine it for mistakes.

Wall Street Journal report says that Capital Research, which owns at least 6% of Yahoo, and Capital World Investors, a separately managed but related fund which controls around 10% of the Sunnyvale, Calif., Internet company, had advised its funds to withhold votes for Mr. Yang to renew his position on the company's board...

That makes 16% which Yang would not be getting. And then there must have a lot of other dissappointed Yahoo shareholders who withheld theeir vote for Yang. Only problem is that according to Yahoo's official tally, 14.6% of the vote for Yang was withheld, while Bostock was denied 20.5 of the vote. Which means that either the voting process was compromised, probably accidently.

Yahoo, in a statement, entirely washed its hands off the matter. "Yahoo did not participate in the execution of the votes and was not a party to any errors which may have been made either by a voting institution or a proxy processing intermediary acting on behalf of banks, brokers and institutions."

(Update 1 - August 6 2008 - Press statement released by Yahoo! Inc. acknowledges tabulation error by Broadridge. When Broadridge reported voting results for "withholds", a truncation error occurred in reporting share numbers that exceeded eight digits. So withheld votes for Jerry Yang were actually 33.7%, and not 14.6%. And Bostock had 39.6% votes withheld, not 20.5%)

This may not ultimately have any impact on Yang's continued tenure as Yahoo CEO, but it does keep alive the issue until such time as the voting irregularity is resolved. And if the mistake ends up being Yahoo's responsibility (doesn't seem likely), then that's another few days of negative media coverage for Yahoo.

And then there remains the little matter of the lawsuits by the Detroit pension funds alleging breach of fiduciary duty, among other things. Plus, Icahn is now sitting on the inside, and he'll be rooting for Yang to stumble in the effort to turn Yahoo around. I'd say that Yang gets until the next quarter before people start piling on him. Shareholders will respond by selling out on Yahoo, and making the price drop sharply. Plus, the same investors who kept out of the ring this time, will be cheering Icahn on in the next round. The AOL merger is still stirring in the pot, and Microsoft still wants Yahoo's search business. And it'll be easy to sell off Yahoo's Asia stake, which is basically a sound investment.

Point of all this is that the bits and pieces of Yahoo are still eminently 'sellable', while Yahoo as a whole is still headed for the rocks. And the only thing holding it all together is Yang. If you pore over all the predictions and analysis for Round 1, you won't find a single prediction which said that Yahoo would cut a deal with Icahn and leave Microsoft twisting in the wind. That has made me realize two things - First, that Yang is a survivor and he won't quit. Second, that it would be a waste trying to predict another attempted mutiny in Sunnyvale.

So the summary of it is that Yang's hold over Yahoo is much less secure than it seems on the surface, and Yahoo is very much ripe for a takeover. But given the recent history, no one will really trigger a war with Yang unless they're sure they can win it.

WSJ report says that Time Warner has wrapped up the spade work necessary for seperating AOL's dial-up business from the content and advertising side, and they're now seriously following up on talks to sell off AOL in bits and pieces. Article goes on to add that discussions with Yahoo are 'ongoing' for the ad-based business and Earthlink is a solid contender for the dial-up side.

Discussions with Yahoo, the more advanced of the two, envision Yahoo's folding in AOL, with Time Warner getting a minority stake in the combination, the people said. The Yahoo discussions have valued AOL at around $10 billion, excluding the dial-up business. In contrast, Time Warner's current stock price -- around $14 -- suggests a value of no more than $3 billion to $4 billion for the ad-sales and content businesses, some analysts say. - Time Warner Is Ready To Deal AOL Components, Merissa Marr, Wall Street Journal, August 4 2008; Page B4

And it gets even more complicated. Time Warner on Friday blocked the nomination of Jonathan Miller, the former chairman and chief executive of its AOL Internet unit, to the Yahoo Board. Miller was not one of the board nominees on the Icahn slate, but his name was supposedly suggested by Yang, and he was considered a shoo-in for one of the two Board seats agreed upon between Icahn and Yahoo.

New York Times report says that Time Warner said Mr. Miller had signed an agreement with Time Warner not to work for any of its competitors, including Yahoo, until March 2009. Mr. Miller, who is a partner at Velocity Interactive Group, an investment company, was pushed out of AOL in 2006, and his relationship with some AOL executives has been strained since then.

So if his relationship with AOL was strained, and if he had been appointed to the Yahoo board, then he would have found himself at the negotiating table across from Time Warner. Which would have been problematic and unhelpful for finalising the deal, and for working with AOL after/if the deal actually happens. So blocking his nomination to the Yahoo Board would be a smart move, and an indicator that Time Warner and Jeffrey Bewkes are serious about bringing Yahoo into talks for AOL.

Good pipedream for Time Warner, but how about looking at it from Yahoo's viewpoint? More correctly, let's look at it from the viewpoint of a Yahoo shareholder. What happens if it doesn't work out, and the investment goes down the tube? What will it do to Yahoo's value? And is Yahoo in any condition to pull off something like this? They can't even handle their own house. What makes them think they can manage the combined Yahoo-AOL behemoth? Does anyone even remember how much hoopla there was when Time Warner came together with AOL? It was billed as one of the greatest mergers in history. And then the dot com bubble burst...

And the inflated $10 billion price previously bandied by Yahoo was actually a desperate attempt to come up with an alternative. Looking at it objectively now, with Microsoft vanquished, even a deluded control freak CEO like Jerry Yang will have to admit that diluting Yahoo's value with $10 billion worth of AOL's business minus the dial-up side is way too much. So maybe he could make a new offer, with a much reduced stake for Time Warner in the new entity. This is getting too friggin ironic, actually. I mean, it was just the other day that Yang was at the receiving end of successive offers which kept going down instead of up.

And worse yet - Microsoft is also a contender to buy AOL. Do we really want to go down this road again, with Yang and Ballmer on opposite sides of a takeover deal?

The economy is like a boat taking water faster than it can be pumped out. Congress, the Bush Administration and the Fed and Treasury keep pumping out the stuff - First it was a string of rate cuts, then an SWF bailing out CitiGroup, then the Bear bailout by JPM and the Fed, along with the emergency lending window, then the stimulus package, and now the Housing bill. Somebody please add up the total of all these handouts (minus the SWF investment in Citi), so we can gawk at how much has been thrown at the economy so far, with little to show, except that its still a toss-up on whether or not this counts as a recession.

Do you remember the excitement and the bubbly each time one of these made the news? One would be forgiven for thinking that this was the ultimate weapon which would win the war and that the 'mental recession' should be over any minute, and the DOW would be tripping past 15000.

And yet, after the euphoria of being able to spend a new bag of free dough dies out, the dark water keeps rising - the foreclosures and the writedowns keep coming. More banks keep failing (8 and counting, with 90 banks on the FDIC's bank deathwatch list). Bottomlines keep falling out (GM $15.5 billion loss, CitiGroup expected markdowns $8 billion).

And now there's talk of another round of stimulus. Lets call it Stimulus II. Main promoter talking it up is Speaker Nancy Pelosi. She's been hammering at it since May and the Democrats in Congress were seriously working on it in July. Their proposal was upstaged on August 1 by the Dem Presidential candidate - Which most likely puts paid to any chances for passage before the November elections, especially since Republicans in Congress aren't so keen on another stimulus. And neither is the Bush Administration, which says it is still studying the benefits from the first Stimulus, and that its 'premature' to talk of another round.

Which basically means that while the parents are having a tiff, the baby will be screaming to be fed. This black hole of an economy is not going to wait around for the elections to be over. It needs to be fed tens of billions at least once a month. Fine, but who gets the money?

The Fed has already played most of its cards for helping out Financials with rate cuts and emergency lending and bailouts. So Wall Street better pray hard that no major player goes belly-up in the next few months.

Housing has just been handed $300 billion to help with foreclosures, which isn't even going to be implemented any time soon, so the question of more help for housing just doesn't arise.

Both the gas-tax holiday and Stimulus II are stuck in partisan bickering (I'm not recommending either. Just stating the facts ...). So help for lowering energy costs is not on the table until 2009.

So no more help for Financials, Housing, or Energy/Consumers. Which leaves what? The one thing Congress can, and should do, is help out Detroit. If Detroit gets some wind up its tail, that will set the ball rolling, and the good cheer will ripple across the economy. End of the day, you can talk about Apple, Microsoft, CISCO and Google till the cows come home, but its the manufacturing giants which hold the key to the economy, and unless they start moving, this train ain't going nowhere.

Not that I've suddenly become a Hillary Clinton disciple, but if Congress were to decide to do a partial implementation of Universal Healthcare by taking over the burden in a sector like Automobiles, it would lift Detroit and boost the economy, and that would be much more effective than sending out stimulus checks, or bailing out failing banks and mortgage lenders. And if it works, that's a step closer to solving the health care problem, which would be a big plus. I mean, we're throwing money anyway at this recession storm. The least we can do is throw it in the right direction, and hope it helps out in the long run.

There's lots of illogical things printed by the New York Times, which bloggers love to hate, but the most irritating and unsensible thing about the Grey Lady is that every quarter, the same thing happens - The stock (NYSE: NYT) gets pegged down a little more, more cost cuts are announced, maybe some layoffs, reduction in coverage areas, disposal of an asset or two, etc.. - And then everybody just gets on with it, assuming that nothing's going to happen to an iconic Institution like the New York Times.

Also, considering the brand and partisan value, it would be a bit foolish to put a price on the New York Times. Which makes it a bit difficult to judge how well (or how badly) the NYT is doing.
So let's look at the figures from its parent company, the New York Times Co.

Jay Yarow and Jon Fine from BusinessWeek (July 25, 2008) show off their excellent math skills by toting up the Times Co.'s enterprise value ($2.85 billion) and subtracting it from the total value of all of their other assets ($2.1 billion), which leaves about $750 million for the New York Times, the International Herald Tribune, and the company's New York City radio station. This figure is way off-base. Why? Because it doesn't take into account reality.

Reality is that a lot of deep pocketed liberals would go to any length, and any price, to make sure that the coverage at the NYT remains.. well.. Fair and Balanced (with all due respect to Fox, and no infringement intended). Add to that the fact that the New York Times readership is more of a fanatically loyal cult than simply a brand. So its basically a question of liberal pride that the NYT remain as it is.

But for Wall Street's private equity groups and takeover barons, the NYT represents ripe and low-hanging fruit, and everytime the NYT dips down some more, it arouses intense schadenfreude on Wall Street, since the company remains immune to any blowback. As 2 hedge funds - Harbinger Capital Partners and Firebrand Partners - have found to their dismay, buying up 19% of NYT and threatening to wage a proxy fight has got them nowhere. Best they have managed to get is 2 seats on the Board, with no real influence to reshape the company's operations. The Sulzberger family trust owns almost 90 percent of the company’s Class B stock and retains control over the Board. In 2006, 30 percent of Class A shareholders withheld their votes for directors, and last year, 42 percent did so. A major investor, Morgan Stanley Investment Management, gave up on efforts to shake up the company, and sold its stake.

Put simply, the company is immune to Wall Street pressure. Since May 2007, NYT has lost over 50% of its value, dropping from $24.79 on May 29th 2007, to its current value of just over $12. Inspite of this, everybody simply assumes that this sustained slump is because of industry wide problems for the print media, as opposed to management issues specific to the NYT. What all this means is that the stock can continue dropping right till the edge, and no one will bat an eyelid.

But this also gives the paper time to clean up its act and make its web presence as profitable as the print edition. Not an easy task, but out of all the struggling print media companies, its the NYT which has the best chance to do this. Which also brings us to Google. Because Google is flush with cash, and is the leader in grabbing the market share for online news advertisers. And the NYT badly needs a revamp, but is still the print media's unquestioned leader. Most importantly, both have a reputation for having a 'liberal' partisan bent.

They're made for each other, with Google having access to all the online advertisers and so much cash, and the NYT with such a massive audience, but with dropping revenues and a lack of advertisers. If Google buys off the NYT, it will happily pay a heavy premium over and above the 'share' value, and will maintain the 'liberal' coverage. So theoretically speaking, no one should have an objection to the deal. All that remains is for Google and the Sulzberger family to agree to the deal, and what is a moribund concern on life-support could be turned around using Google's web savvy managers and advertising network. And it could serve as an example for other newspapers.

Reference:
http://www.businessweek.com/investor/content/jul2008/pi20080725_458084.htm
http://www.nytimes.com/2008/03/17/business/media/17cnd-times.html