Monday, March 31, 2003
THE APPLECART
The Pause is over. If it ever existed.
Today, oilfield firefighting Boots & Coots will face yet another moment of truth. Not in the Iraqi oilfields – but on the Spindletop of a jittery wartime Wall Street.
What's more, it looks like the New York Times may have gotten suckered into priming WEL’s pump -- and unwittingly set someone up for a gusher.
War fever has been igniting volatile Boots & Coots stock. Frantic speculators are hitting this site all over again, thanks to an improbable set of circumstances that may have led to the gulling of our nation’s paper of record.
In fact, for the purposes of this story, the Times' business desk might as well have sleepwalked from Friday evening until the Sunday bulldog edition hit the streets.
After the stock market closed on Friday, a surprise decision by the board of Boots & Coots suddenly resolved a mysterious loan that "a shadowy group of Texas oilmen" had threatened to use to take the company away from the stockholders!
And the stock price high-jumped in “after hours trading.”
Hold the presses? Dream on.
The Sunday national edition I’m holding in my hands right now – the same one countless thousands of everyday Janes and Joes scour for stock market information – features a story that smudges the line between fact and fancy. In a piece about the looming risk to Boots & Coots from creditors – specifically, the shadowy group that threatened to take the company away from the shareholders – here’s the money quote: “…the company will not provide further details until the board makes a decision, Mr. Winchester said.” [Emphasis added.]
Mr. Jerry Winchester, a former long-time Halliburton man and the interim CEO, apparently didn’t bother to tell the Times that the board was just about to make that decision. And the Times doesn't seem to have bothered to ask.
So the Sunday paper, knowingly or no, glossed over the decision the board announced Friday afternoon.
It doesn’t look good.
To the untrained eye, the big plays surrounding Boots & Coots International Well Control in recent weeks bear the appearance of stock price manipulation – of inside information being exploited – and of unsuspecting American investors being taken for Mr. Toad’s Wild Ride.
And it apparently hasn't stopped. If you’re an everyday American wanting to invest in the market – and you have the misfortune of clutching the Sunday New York Times Business Section just a tad too tightly – well, you might just wake up today, Monday, with a whole load of nonsense in your head about Boots and Coots.
Caveat emptor?
That’s just not good enough for the paper of record.
* * *
When deconstructing reporter J. Alex Tarquinio’s story, “Fighting Oil Fires, and Creditors,” some of the errors of fact and omission seem alarming.
Take, for example, the first sentence:
“The war in Iraq might just determine the fate of a little-known Houston company, Boots & Coots International Well Control, which put out about a third of the oil-well fires set in Kuwait in 1991 and earned perhaps as much as $100 million in the process.”
What’s the problem? Well, it’s not the $100 million. Why quibble with a company’s alleged income, or the alleged fraction of well fires it extinguished, when the company didn’t even exist in 1991! That’s right: “Boots & Coots International Well Control” wasn’t formed until 1997 – when Boots & Coots teamed up with International Well Control. Hence the name. It's the only stand-alone publicly traded oil well firefighting company, created by a reverse triangular merger that summer.
This is not a minor error. One of the chief advantages of such a merger is to allow a brand new, hand-picked board of directors to elect their very own chairman – and CEO – without any pesky stockholders to answer to. (Correct me if I'm wrong, readers, on any of this stuff!.)
Who did these directors – mostly the same guys who voted on Friday night – elect? Who was their specially chosen, reverse-triangulated chairman of the board and CEO – who ran the company up until resigning abruptly a few months ago?
Never mind. The New York Times didn’t bother to provide the information. Too bad, because this man – Larry Ramming – has made his business career about the very thing the story aimed to shed light on: debt and credit. In fact, I can't find any indication that Mr. Ramming was ever a hellfighter himself. He's a businessman, right?
You want to talk about Boots & coots' debt, you should see The Man. He might have had a good quote or two.
What about his successor? That’s Jed DiPaolo, a man who had enjoyed his promotion to Sr. VP of Halliburton under Dick Cheney right up until the good ol’ board at Boots & Coots suddenly elected him chairman. He might have given up a good quote or two -- especially since the board elected his replacement on or about the very day that the risky loan was signed with that shadowy group of Texas oilmen.
And as this blog has shown, a whole lot of shadowy stuff is linked to this company’s origins.
But forget about that stuff.
Forget about original company exec Reed Slatkin, the admitted fraudster who allegedly ran the biggest Ponzi scheme in history: His stock “warrants” had nothing to do with the story about the company’s creditors.
As background to a story about creditors, The Times decided you don't really need to know that -- in 1997 -- doing business with Reed Slatkin might have seemed very smart to someone like Dick Cheney: Slatkin, one of the founding partners of Earthlink, was enjoying the ride of his financial life as that dial-up internet company exploded to become the number two provider in the country.
It wasn’t until a year or so ago that Slatkin began to be unmasked. And there’s still a lot of money missing. Tens of millions, if not hundreds of millions, of dollars.
For a story about creditors, this context didn't seem relevant to The Times: What seemed like an asset in 1997 could now be considered a very hot political liability. Slatkin is allegedly a fraud of epic dimension. Dick Cheney’s company arguably should have had the snap to uncover, with a spot of due diligence, what Slatkin has admitted: "that his investment empire was a scam from its beginning in 1986."
Why would Dick Cheney want his company doing any kind of business with Reed Slatkin -- when lots of wheezing companies could have been used for the hocus pocus of that reverse triangular merger? Oh, yeah. Reed Slatkin had a different shine in 1997, animatronic Indian theme park or no.
And would anyone care to cover that up, crime or no crime -- to, say, scrub an EDGAR index, or make a call to Yahoo to downplay the volume of a certain hyperactive penny stock?
But forget about that, or any conceivable role that may have had in motivating this shadowy business. It's not the crime, it's not the cover-up. It's the creditors, remember?
That’s some serious forgetting.
Why should a New York Times reporter, when writing an article about a company’s creditors, seem to forget the company’s original CEO and chairman of the board, and the obscure circumstances surrounding his ouster? After all, Larry Ramming had been “actively involved in mortgage banking and the packaging and resale of mortgage notes, consumer loans and other debt instruments for over fifteen years” before Boots & Coots IWC was even formed. He knows a little something about creditors. In fact, Ramming brought the company back from near insolvency to a profitable 2001 mere months before he was unceremoniously replaced -- by the same guys who anointed him chairman and CEO to begin with.
Should a writer forget to mention that the company has three times used the story that it's "refocusing its efforts on maximizing opportunities in its well control and risk management divisions” to deal with its credit crunch, in a feast-or-famine business?
Even little ol’ Axcess Business News made room in the copy for that much background about “creditors.” Not the Times.
Likewise, the Times didn’t provide this context: that from 1995-2000 Dick Cheney was the Halliburton CEO responsible for its contractual “alliance for total well control” with Boots & Coots. Or that this “alliance” marked a bold new direction for Halliburton – and that it was announced only days after Cheney was named CEO. In fact, during Dick Cheney’s tenure at Halliburton, the "alliance" tied up more and more of the limited talent pool of hellfighters with contracts. Cheney’s Halliburton touted that alliance for “total well control on a global basis” in one of the very first press releases the company issued under his leadership.
Forget all that. The New York Times deemed it sufficient to say the companies had an “agreement to subcontract oilwell firefighting.”
How's this for sufficient? Mr. Tarquinio cited three primary sources for his supposedly up-to-the-minute quotes about the shadowy creditor situation -- and all three have a financial stake in the company.
Take note of Mr. Tarquinio’s “buyer beware”: When quoting “Michael E. Shonstrom, the president of Shonstrom Research Associates, an institutional analysis firm in Denver,” the article uses dashes to set off the phrase “said Mr. Shonstrom – who owns warrants in Boots & Coots--...”
That’s it.
Caveat!
For all you readers out there who may be a tad less sophisticated than Mr. Tarquinio, this kind of a warrant isn’t what a sheriff uses to go after bad guys. It’s a virtual claim check for stock in the company.
In other words, Mr. Shonstrom has a financial stake in the company he’s analyzing. Did you catch that little caveat, fellows? That's all the warning small investors -- Americans of modest means without insider information or access to "institutional analysis" -- deserve, decided the Times.
A bigger warning could have pointed out the bias in the sum of this article’s sources: Every spoken quote in this story was uttered by insiders with money to make and bills to pay and good reason to believe that Boots & Coots' fortunes are intertwined with theirs.
Balance? The New York Times didn’t deem it necessary to quote skeptical -- or even disinterested -- outsiders.
Didn’t want to upset the applecart?
* * *
So here's the big picture:
In this article about “Fighting Oil Fires, and Creditors,” the background information was largely accurate – but suspiciously incomplete. (Use that modest Axcess article as a baseline.)
Other key information – about the state of the board’s business with that shadowy group of Texas oilmen – was stale, at best. Recall that this very loan was one of the company’s biggest wild cards: The creditors’ identities are shielded by Panamanian law, and the uncertainty about their peremptory claims of default has dogged the stock for weeks, if not months. The board suddenly settled it on Friday, after the market closed.
The paper might as well have hurled itself into the bottom of the catbox by ignoring that kind of update.
Other writing in the piece – about the company’s origins and business “in Kuwait in 1991” – was inaccurate.
Further, there was room in the article to mention the John Wayne movie, “Hellfighters,” but not a word about the company’s founding CEO and chairman of the board – an expert in “creditors” who was replaced under unusual circumstances.
And the quotes were all from insiders with a financial stake in spinning the company's problems.
Want more? Well, there's no mention that Coots is dead, and Boots – long since retired – is on the record saying, “It just hurts my feelings every time I hear people talk about it, because it, it’s my name.”
The last three grafs were moony grace notes: Mr. Danny Clayton, “operations manager,” speculates on the money to be made per burning oil well. Mr. Shonstrom opines that the stock “could rise as high as $5.” The “guys at Boots & Coots,” he gushes, “are a little more gun-slingy than the other guys.”
Cowboy movies and moonbeams is what it sounds like to me. We’re left to wonder: Who’s in cahoots with Boots & Coots?
Thank you, Times, for this mackerel by moonlight. It shines.
And it stinks.
Now go out and make your stock plays, small investors. Let your conscience -- and the Sunday New York Times Business Section -- be your guide.
posted by Major Barbara | 12:28 AM
majorbarbara.blogspot.com |
