Are You Ready for Some...College Football Playoff?

Head-Coach-Elect Barack Obama wants a college football playoff system. This Saturday he (and the rest of the country) will get a preview of what such a system would look like in the SEC Championship Game.

#1 (AP/BCS) Alabama plays #2(AP)/#4(BCS) Florida. The winner advances to the BCS title game.

Since a late September loss to surprising Ole Miss, Florida has been -- with all due respect to Oklahoma -- the hottest team in the country, winners of eight in a row.

Florida has rolled to a combined score of 414-97, although Coach Urban Meyer's team did roll up scores on Arkansas (5-7), Kentucky (6-6), Vandy (6-6), and The Citadel (4-8 in I-AA).

But if you just look at the four ranked teams in that eight game streak -- #4 (at the time) LSU, #6 Georgia, #25 South Carolina, and #20 Florida State, the Gators still rolled by a combined 201-52.

That's an average score -- against ranked opponents -- of 50-13.

Wonder if Coach Meyer ever regrets not taking the Notre Dame job?

Thanks for the Memories

A year ago, LSU Coach John Brady was coming off a Final Four appearance, and was returning Glen (Big Baby) Davis, a pre-season All-American.

Last year LSU fell back to a disappointing 17-15 (5-11 SEC) record; Davis meanwhile, became a cautionary tale, falling from a possible lottery pick in 2006 to the second round (#35 overall) last June.

Brady, meanwhile, has apparently been fired as head coach of LSU; he will coach his final game tomorrow against #7 Tennessee.

Patience is not apparently a virtue, at least in Baton Rouge.

The SEC Focuses on Brocade

Although some had questioned -- especially prior to the conviction of CEO Gregory Reyes -- whether the Brocade backdating case was truly 'serious', it is clear that the Securities and Exchange Commission considers it to be so.

News reports indicate that the SEC has sued former Brocade CFO Michael Byrd, for, among other alleged violations, failing to re-state past filings once he learned of the backdating issue (it is unclear whether Byrd knew about the backdating at the time it occurred.)

The conviction of Reyes was groundbreaking; he was the first major figure convicted in the backdating scandals; the expansion of inquiry to those who -- in case of Byrd's alleged conduct -- failed to go back and 'correct the record' even though they had nothing to with the original violation should put a chill in the heart of any current corporate official who has suspicions of prior backdating at his/her company.

Brocade and Backdating

After a quiet summer, the backdating scandal appears to be ready to re-emerge front and center in the business community; Brocade's former CEO Gregory Reyes was apparently found guilty of 10 counts of backdating and related securities infractions today. As the markets have slowed (perhaps signaling a finale to the private equity/debt bubble), the last vestiges of the previous bubble (the tech one that popped in 2000-01) are being litigated.

Apple's Steve Jobs remains the highest-profile CEO to be implicated in the backdating scandal, although no SEC charges have been brought against him.

Dow's Down...and Down...and...

It will undoubtedly take some time to sort all out, but it appears that today's near meltdown in the DJIA was a function of a computer glitch, as reported by the WSJ:

There was a temporary lag in calculation of the 30 large-stock average due to a surge in order flows as the market continued to tumble in afternoon trading, much like a clogged pipe. Just before 3 p.m., Dow Jones Indexes switched over to a backup system to calculate the average, which nearly instantly registered the huge move.

Jim Cramer blames ETFs. Perhaps this is just the new code word for "program trading", the alleged cause of the (in)famous 1987 meltdown.

Comments from the Public

The public comments on the SEC's proposed new rules for hedge funds (covered in this post: SEC Proposes New Rules) are being reported.

Here's one of the best, as reported by the Los Angeles Times:

"This has got to be unconstitutional if not communistic," wrote M. Joan Conrad, of Naples, Fla.

It's not clear which possibility Ms. Conrad deems to be worse.

Mr. Jobs and Stock Options, continued

Reuters is reporting that Apple's Steve Jobs has been 'questioned' by the SEC and the Justice Department in connection with the backdating of Apple's options during the 1998-2006 period. (See previous posts.)

Even if Apple's story holds up (which is that a few individuals, former CFO Fred Anderson and former General Counsel Nancy Heinen, and perhaps Wendy Howell, a lawyer who reported to Heinan) were responsible for all of the bad actions, it is still not surprising that the "Feds" want to talk to everyone who was involved.

Today's story also noted that:

Chris Steskal, the lead attorney in the Justice Department's investigation, left in January to join law firm Fenwick & West LLP as a partner, according to the firm's Web site.

The Fenwick & West site states that

Prior to joining Fenwick & West, Chris [Steskal] was an Assistant U.S. Attorney, working as part of the Securities Fraud Section and Stock Option Task Force of the U.S. Attorney’s Office in San Francisco.

In a coincidence, TPM's Muckraker site also reports that San Francisco U.S. Attorney Keven Ryan also recently left his post; there are rumors about a recent series of U.S. Attorneys who have left their posts in the past few months under cloudy circumstances. The renewal last fall of the USA Patriot Act apparently gave the Bush Administration wide(r) latitude to replace U.S. Attorneys.

Friendly's on the Front Page

Stephen Syre's Globe business column today noted the corporate battle between Friendly's founder Press Blake and San Antonio hedge fund manager Sardar Bilgari, on one side, and current Friendly's Ice Cream management on the other. (Ed. note: as a long-time resident of Wilbraham, I am perhaps more cognizant of the story than others might be.) Blake is 92 and Bilgari is 29. Talk about strange bedfellows!

SEC Proposes New Rules

The Securies and Exchange Commission voted yesterday to propose new rules, that would in effect, apparently create a new definition of "accredited investor" for those investing in hedge funds and certain other pooled investment vehicles. The current definition of "accredited investor" is a person with over $1 million in net worth, or $200,000 in income ($300,000 for a couple). The new proposed standard would apparently be $2.5 million in 'investment assets', which (currently) excludes the value of the primary residence.

The WSJ reports that the net effect of the proposed rule would to reduce the percentage of American households that would qualify as 'accredited investors' from 8.5% to 1.29%. The percentage of households that qualified as 'accredited' in 1982, when the $1M/$200K standard was adopted, was 1.87%.

The rules, which still need to be published for comment, and then formally adopted, could have a definite effect on certain hedge fund vehicles. What also could be interesting is whether the SEC looks to apply this proposed standard to private offerings (Reg D), such as angel round financings for small companies. While there's no indication that the SEC is interested in regulating anything other than hedge funds with these new rules, there will be potentially different definitions of "accredited investors" in different contexts (i.e., private companies vs. 'pooled investment vehicles') and therefore an individual could be 'accredited' in one type of investment but not in another.

The proposed rule itself is not available yet on the SEC website. More information may be forthcoming.