Sanford exclaims interest in hockey, salmon

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Wagering between elected officials from different states on the outcome of sporting events has a bread-and-circuses mentality to it, but given the media’s increasing addiction to the superficial, one might as well accept it as part of our political landscape.

However, a recent bet between South Carolina Governor Mark Sanford and Alaska Governor Sarah Palin seems to be even more contrived than usual.

The two Republican leaders have placed a friendly wager on the finals of the Kelly Cup. For the uninitiated, the Kelly Cup goes to the champion of the ECHL, which used to be called the East Coast Hockey League. This year, the South Carolina Stingrays and the Alaska Aces are in the Kelly Cup Finals.

The East Coast Hockey League is roughly equivalent to Double-A minor league baseball, except that it probably gets even less media attention than Double-A minor league baseball.

One can speculate as to why Sanford and Palin decided to place a wager on minor league hockey, for while Palin is a known hockey aficionado, Sanford doesn’t exactly have a reputation as a sports fan and it’s not certain how many minor league hockey games he’s actually been to.

However, one thing appears almost certain: Sanford did not come up with the quotes that appeared in a recent story on the bet.

In a piece on Columbia, SC, television station WIS’s website, Sanford was quoted as saying: “We’re awfully proud of how well the Stingrays have done this year, and we’re excited not only for the opportunity to show off a first-class sports franchise, but for the opportunity to show off the Charleston area as well. But personally, I’m most excited about the king salmon that Sarah is going to be sending my way when the Kelly Cup is decided!”

The last sentence is a dead giveaway that someone other than Sanford crafted the comment, for it’s hard to imagine the SC governor ever using an exclamation point.

State publisher tries to avoid Chapter 11

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Standard & Poor’s on Friday cut its rating on McClatchy Co.  further into junk territory, saying its debt exchange is tantamount to a default because of the newspaper publisher’s distressed financial condition, Reuters reported.

McClatchy, publisher of The State, Charlotte Observer and five other newspapers in the Carolinas, on Thursday proposed exchanging $1.15 billion of outstanding debt for cash and new debt in a bid to stay afloat.

The plan offered some hope that McClatchy will be able to ride out the worst recession since World War II without resorting to Chapter 11 bankruptcy protection – a refuge already sought by at least seven U.S. newspaper publishers since December, according to The Associated Press.

If the exchange is successful, “McClatchy would have greater capacity to weather the current downturn over the next several quarters,” S&P said in a statement.

Still, the investors participating in the exchange will take a “substantial discount” in comparison to the original value of their debt, S&P said.

The move by S&P comes a day after Fitch Ratings and Moody’s Investors Service downgraded McClatchy, saying they considered the exchange offer a default.

S&P cut McClatchy’s rating to CC from CCC-plus. The rating will be cut to SD, or selective default, when the exchange is completed, S&P said.

S&P considers debt exchanges as “distressed” and counts them as defaults when bondholders receive less than the original value of their debt and the company would likely face a conventional default without the exchange, according to Reuters.

McClatchy shares were trading for around 82 cents a share early Friday afternoon. The company’s 52-week high is $9.31.

Breaking news: Trees are good

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In one of the more gutsier opinion pieces in recent memory, Greenville News columnist Jeanne Brooks takes a brave stand for … trees.

Her Pulitzer Prize contender, titled “Trees do lots of work,” comes in response to the Bi-Lo Center in Greenville removing 14 oaks trees from its parking lot recently to give folks attending last weekend’s outdoor Crawfish Boil audiences an unobstructed view of a stage.

In prose that would put Hemingway to shame, she takes the Bi-Lo Center to task for their actions by highlighting the unseen good trees do. From her piece:

“What we don’t see is the leaves of trees remove pollutants and particulates from the air.

“That work is invisible to us.

“But also absolutely vital, teetering as we are in the Upstate on the edge of violating the Clean Air Act.

“Particulates are the tiny particles of soot from vehicle exhaust and other sources that you breathe in, and they aggravate your lungs and breathing passages.

“Among other things, breathing particulates can provoke episodes of asthma in some people.

“The tiniest particulates have been linked to heart attacks and other cardiac problems by a number of studies.”

Trees are good for cleaning the air? Who would have thunk it?

Fortunately, we have the sophisticated analysis of Brooks to both illuminate us and berate the Bi-Lo Center for their selfishness.

The only thing missing from her piece was how many humans will ultimately die because Bi-Lo choose to cut down those 14 trees.

Sarcasm aside, columnists are certainly free to write about whatever topic they choose, no matter how inane.

But in this period of declining newspaper readership, publications such as The Greenville News might do well to focus their scribes’ attention on matters of slightly more significance than the fact that “trees do lots of work.”

South Financial settlement questioned

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A group of shareholders of The South Financial Group has challenged the proposed settlement of lawsuits between two shareholders, the company, the board of directors and former chief executive Mack Whittle, The Journal Watchdog is reporting.

In a filing May 7 in the Court of Common Pleas in Greenville, the objecting shareholders said they were prevented from being heard in the case because of the lack of timely notice, the publication reported.

“They said the settlement, if approved, would prevent them from ‘bringing an action of a similar nature in the future,’ would negate checks and balances on the board and enrich attorneys at their expense in depleting the value of their shares,” according to The Journal Watchdog.

“They allege that the deal to settle the case ‘is highly suggestive of overcompensation, self-dealing and excessive executive and board benefits, all to the detriment of these stockholders, and all shareholders of the company …'” the publication adds. 

Asking to be heard in objection to the settlement are family members and shareholders who received or inherited stock in TSFG as a consequence of the sale of First National Bank of Pickens County of Easley to TSFG in 1998.They represent more than 800,000 shares, according to The Journal Watchdog.

Representing the most stock from the Easley bank are Richard Jones and his family and James (Jim) and Patricia Grantham of Greenville, it added.

In March, South Financial announced it had reached an agreement in principle to settle suits filed Nov. 7, 2008, by Vernon A. Mercier, and Nov. 26, 2008, by John S. McMullen.

The suits were filed in the weeks after Whittle “stepped down” from South Financial, the company he began in 1986, but not before taking a golden parachute estimated to be worth at least $18 million.

The suits alleged that South Financial’s board “improperly accelerated the retirement of and approved excessive compensation” for Whittle.

Whittle had originally been scheduled to retire by year-end, but that date was moved up to October 27, in order that South Financial might get $347 million in federal bailout money and Whittle would still be able to retain his lucrative buyout. Whittle’s payout would have been in excess of federal guidelines if he’d not left the company before South Financial received the government money.

South Financial lost $569 million in 2008 and saw its stock price fall from $15.67 a share to $4.31 by year end. It closed Thursday at $2.03 a share.

Tort law: common sense need not apply

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Overlawyered has a sobering post about the state of tort law in Mississippi. Not surprisingly, it’s anything but pretty:

“19-year-old Sidney Odom happily went along when 20-year-old Travis Kirby and 18-year-old Riley Strickland asked “Who wants to go to the Beacon?”—a bar in Terry, Mississippi. A long night of drinking and driving came to an end at about 3 am when Kirby’s Camaro hit a tree at about 90 mph. As none of the three were wearing seatbelts, all were ejected from the vehicle. Kirby, whose blood-alcohol level was three times the legal limit at 0.25%, died at the scene; the other two were injured.”

The Coyote Blog adds some cogent commentary:

“Think for a moment about who you reasonably believe to be at fault for the accident.  Now, here is who actually was forced to accept liability:

  • The dealer who sold them the car
  • The shop that installed their tires
  • Goodyear tire company

“All you can say is, huh?  When looking at modern tort outcomes, a much better predictor of legally assigned liability than trying to decide who was truly at fault is to look at the net worth of everyone who had any relation to the victims, and assuming those with the highest net worth will end up being held ‘liable.'”

According to Overlawyered, “The car seller settled for about half a million dollars; a Copiah County jury found the other defendants liable for an additional $2.1 million. Goodyear appealed, complaining about various prejudicial statements made by the plaintiffs’ attorneys, such as introducing evidence from other lawsuits about other types of tires, but the Mississippi state appellate court affirmed.”

Somehow, one images that, say, five years from now the plaintiffs will have long since blown through whatever money they received as their part of the settlement (after deducting for attorney’s fees, of course), while the lawyers involved will have long since moved on to other similarly outlandish cases and will be continuing to line their pockets while making a mockery of common sense and responsibility.

(Hat tip: The Coyote Blog)

SCBT repays TARP money

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SCBT Financial Corp. has become the first South Carolina bank company to repay bailout funds borrowed from the federal government.

The Columbia-based parent of South Carolina Bank & Trust repaid a $64.8 million loan by completing the repurchase of nearly 64,779 shares of preferred stock from the US Treasury Department.

SCBT paid $810,000 in dividends to the government May 15, and an additional $261,000 in February, shortly after receiving the TARP money, according to The State newspaper.

SCBT plans to record a charge of $3.3 million in the second quarter “in the form of an accelerated dividend.” The charge would cover the difference between the original price for the preferred stock and the redemption price, according to a news release.

The company also has to decide what it wants to do about warrants the Treasury Department holds on 303,083 shares of common stock, which were put up to obtain the TARP loan, the paper reported.

The bank said it has 15 days to decide whether to buy back the warrant or let the government sell the stock.

Last week, SCBT Chief Executive Robert Hill said the company accepted the money “only in an abundance of caution and always had the liquidity and capital to repay the funds.”

SCBT is one of 18 South Carolina banks that have participated in the TARP program.

Congaree Bancshares posts $557K loss

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Congaree Bancshares reported a $557,028 loss during the first three months of 2009.

The Cayce, SC-based parent of Congaree State Bank, which opened in 2006, lost $610,829 during the same period in 2008.

The company charged off $264,252 in loans during first quarter 2009, up sharply from $7,215 during the first three months of the previous year, according to information filed with the US Securities and Exchange Commission. Non-accural loans rose to $810,794 from $294,596 during the period.

In March, Congaree Bancshares announced it would have to correct financial statements issued in the company’s 2007 annual report and quarterly reports for the first three quarters of 2008.

“After discussion with the SEC staff between January and March 2009 and discussion among our management, accountants and audit committee, we determined it was appropriate to correct the financial statements included in the Original Periodic Reports,” according to a SEC filing. “We had failed to include a valuation allowance that would offset our deferred tax assets recorded during the year ended December 31, 2007, and the three quarters ended March 31, 2008, June 30, 2008 and September 30, 2008.”

Specifically, Congaree concluded that it should restate its financial statements to reflect that the company likely would not have realized all its net deferred tax assets within a reasonable period of time for the year ended Dec. 31, 2007, and the three quarters ended March 31, 2008, June 30, 2008 and Sept. 30, 2008.

Earlier this year, the bank received $3.3 million in federal bailout money. Shares of company stock have barely traded since early February.

Hydrogen Highway part of bad tradition

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One of the more disturbing aspects of South Carolina’s investment of tens of millions in tax dollars into hydrogen research is that state leaders apparently have taken little notice of the fact that American history is littered with failed examples of government trying to drive economic development.

Jim Powell, a senior fellow at the Cato Institute, identifies several:

“During the 19th century, Illinois, Indiana, Maryland, New York, Ohio, Pennsylvania and Virginia built canals with taxpayers’ money. Almost all were losers. State governments lost money in railroads. Economic historian Clifford Thies noted that ‘turnpikes were also money-losers.’ Economic historians Ernest L. Bogart and Donald L. Kemmerer observed that ‘Most of the enterprises were extravagantly, if not corruptly, managed.’

“Desperate to pay their debts, states raised taxes and unloaded assets as fast as they could. Altogether, nine state governments – a third of all states – that had spent large sums on all sorts of business ventures defaulted on their debts during the 1840s. Many state constitutions were amended to make sure such disasters didn’t happen again.

“A couple decades later, Washington politicians tried their hand at business by subsidizing construction of the transcontinental railroad. In 1872, this exploded into the biggest American financial scandal of the 19th century. Principals of Crédit Mobilier pocketed millions of dollars of subsidies, bribed congressmen, and brought on the collapse of the Union Pacific Railroad.

“During the late 19th century, a number of western states tried to increase their populations and political clout by attracting people willing to farm in the desert – the most costly kind of farming imaginable. States issued bonds to finance dams and reservoirs for irrigation. Result: lots of corruption and waste.” 

Yet, South Carolina pumps state money into such ill-conceived and wasteful programs such as the “Hydrogen Highway.”

Unveiled in March, the Hydrogen Highway is the 59-mile stretch of road between Columbia and Aiken bookended with hydrogen fueling stations built almost completely with tax money. The Columbia station alone cost most than $1.5 million.

As the South Carolina Policy Council reported, those two fueling stations are double the number of hydrogen-powered cars currently operating in South Carolina.

And it’s not likely we’re going to see an influx of hydrogen-powered cars on the hydrogen highway anytime soon, either, the Policy Council reported:

“The high cost of hydrogen fuel cells pushes vehicle prices from $100,000 to more than $1 million, and that doesn’t even include the cost of the fuel. Hydrogen at the Columbia site costs $9.50-$10 per gallon. Hydrogen fuel also has to be shipped from out of state because none is produced in South Carolina. That makes the cost even higher and makes it increasingly unlikely citizens will ever see many hydrogen vehicles on state roads.”

As evidenced by the examples Powell points out above, it’s somehow not surprising that South Carolina’s Hydrogen Highway appears to be a complete boondoggle.

Unlike private enterprise, government has a much lower threshold in terms of return on investment when it gets involved in economic development.

Political leaders know they’re using other people’s money and understand there will always be billions more in tax dollars available the following year, no matter how poorly this year’s “investments” perform.

It’s small wonder government-backed economic development has such a poor track record.

Collexis says it won’t meet filing deadline

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Collexis Holdings Inc., the Columbia technology company struggling to stay afloat financially, has notified the US Securities and Exchange Commission that it won’t be filing its results from the first quarter of the year in a timely fashion.

According to the SEC filing, “The Registrant is unable to file, without unreasonable effort and expense, its Quarterly Report on Form 10-Q for the quarter ending March 31, 2009 because the Registrant has not yet completed its analysis of subsequent events impacting the Registrant’s financial statements for the quarter ending March 31, 2009.  The Registrant anticipates that the Form 10-Q will be filed on or before the fifth calendar day following the prescribed due date of the Form 10-Q.”

It’s not surprising that Collexis is having difficulty meeting its financial reporting deadlines. The company hired a consulting firm less than two years ago to review its internal controls and the results weren’t pretty. 

“Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements,” the company stated in its 2008 annual report. “Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.”
 
The following specific deficiencies were identified in the company’s annual report:

  •  Entity-Level Controls. We did not maintain an effective control environment and certain entity-level controls included in the information and communications and monitoring components of internal control were not designed or operating effectively.
  • Segregation of Duties. We did not provide for adequate segregation of duties in our accounting and finance functions, specifically with respect to access to and control of our cash flow without any secondary review.
  • Financial Reporting and Period Closings. We did not maintain adequate policies and procedures to ensure that timely, accurate and reliable consolidated financial statements were prepared and reviewed.

Collexis appears to be on the ropes financially. The company lost more than $11 million during the fiscal year ended June 30, 2008, and another $4 million-plus over the last six months of 2008.

The company’s independent accounting firm included an explanatory paragraph in Collexis’s annual report last October that expressed substantial doubt about Collexis’s ability to continue as a going concern.

Over the past few weeks, Collexis has diluted its stock by issuing nearly 40 million shares at 7 cents a share in an effort to raise money to meet operating costs.

Collexis’s stock is currently trading at around 11 cents a share.

Cotton prices starting upward

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Cotton prices have been moving over the past few weeks, thanks to the weather worries and world events.

Cotton futures prices have jumped from less than 50 cents a pound into the low 60-cent range, according to Southeast Farm Press

December cotton futures have the upside potential to reach 65 to 68 cents per pound over the next few trading sessions, but could also fall back to the 52- to 54-cent area, Southeast Farm Press added.

“Growers in almost every region of the Cotton Belt except the Far West have had plenty to worry about besides the markets in the last few weeks,” the publication reported. “Too much rain has delayed the planting of the crop in the Delta region while most of Texas has received too little moisture.

“Planting delays, drought in Texas and the decision by the governments of China and India to not dip into their reserves of cotton have helped prices rise 15 cents per pound in the last two months,” it added.

US farmers are expected to plant 8.8 million acres of cotton in 2009, down from 9.47 million last year, the US Department of Agriculture said earlier this year.