Welcoming Carl Icahn to the Securities Mosaic Blogwatch

We are honored to welcome Carl Icahn to the Securities Mosaic Blogwatch. As most of our readers will know, Mr. Icahn is one of the most prominent, influential, and outspoken investors in the world.

We will let Mr. Icahn's introduce himself below, in the wonderful autobiographical sketch written for the Icahn Report website. For myself, I am thrilled to add his trenchant intelligence, biting wit, and fearless voice to the Blogwatch. You can read his inaugural post - 100 Million Reasons Why We Need Governance Changes Now: Join USA - in today's issue.

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About Carl Icahn

I was born in Brooklyn and grew up in Far Rockaway, Queens. My father was a frustrated opera singer and settled on being a cantor in Cedarhurst, Long Island. The fact that he was a dogmatic atheist did not exactly help him to get ahead in this profession and after a number of years he became a substitute teacher. My mother also worked as a schoolteacher. I attended the local public school, Far Rockaway High, later heading to Princeton University. My mother wanted me to be a doctor, so after earning an A.B. in Philosophy in 1957, I went to medical school. I quickly realized the medical field was not for me. After two years, I joined the army and soon after eagerly returned to New York to start a career on Wall Street.

My career began in 1961, as a Registered Representative with Dreyfus & Company. I learned options and convertible arbitrage and built up a large business. By 1968 I bought a seat on the New York Stock Exchange and started Icahn & Co. Inc., a brokerage firm.

In 1978, I began taking control positions in individual companies. Over the years, I have taken positions in various corporations including: RJR Nabisco, Texaco, Phillips Petroleum, Western Union, Gulf & Western, Viacom, American Can, USX, Marvel, Imclone, Federal-Mogul, Kerr-McGee, Medimmune, BEA Systems and Time Warner. I became Chairman of Bayswater Realty & Capital Corp. in 1979; and Chairman of ACF Industries, Inc. in 1984 among others.

Today, I am Chairman of Icahn Enterprises, a diversified holding company engaged in a variety of businesses, including investment management, metals, real estate, and consumer goods. I have been the Chairman of American Railcar Industries since 1994 and a Director of Blockbuster since May 2005. I became Chairman of ImClone Systems in 2006. In January 2008, I became the Chairman of Federal-Mogul.

My wife Gail and I serve on the boards of my foundations. They include Icahn Charitable Foundation, Foundation for a Greater Opportunity, and Children’s Rescue Fund. Working with the Foundation for a Greater Opportunity, I founded three charter schools located in the South Bronx. The 2007 New York State English Language and Arts Exams show 80% of the kids at the Carl C. Icahn charter school passing the exam testing 36.7% higher than the neighborhood average and 97% passing the exam 37.5% higher in Math. In addition, we sponsor the Icahn Scholars Program at Choate Rosemary Hall. The Children’s Rescue Fund started the Icahn House in The Bronx, a 65-unit complex for homeless families housing single pregnant women and single women with children, and operates Icahn House East, a homeless shelter located in New York City.

Hey Old White Guy, Get out of the Way

Hegel famously remarked that the owl of Minerva flies at dusk. As the presidential campaign nears its end, we finally see clearly what it is about. Not race. Not gender. But youth.

We be one tired country. And what the debates brought home was that a tired old man cannot revitalize us.

In his youth, John McCain was special. Watch the footage from his hospital in Vietnam in 1967, and visualize the torment that awaited him, knowing what he endured. Visualize also, the many passes he has subsequently received for "erratic behavior" (for infidelity, emotional coldness, a sharp temper), from his first wife and others, as a result of what he endured.

It is October 2008, though, and McCain is now old and what we have learned is that the only thing for which there may be no pass is age.

Earlier this summer, Jesse Jackson (67 years old) told the world that he wanted to cut off Barack Obama's nuts for "talking down to black people" about personal responsibility

Rapper Nas (35 years old) replied as follows: "I think Jesse Jackson, he's the biggest player hater. His time is up. All you old n---as, time is up. We heard your voice, we saw your marching, we heard your sermons. We don't wanna hear that sh-- no more. It's a new day. It's a new voice. I'm here now. We don't need Jesse; I'm here. I got this. We got Barack, we got David Banners and Young Jeezys. We're the voice now. It's no more Jesse. Sorry. Goodbye. You ain't helping nobody in the 'hood. That's the bottom line. Goodbye, Jesse. Bye!"

And that says it all. Young people are the voice now. As Colin Powell forcefully stated last weekend, generational change inexorably sweeps away all in its path. Sixteen years ago, we had a president - George H.W. Bush - who fought in World War II. We shortly may elect a president who can barely remember the Vietnam War.

And thank God for that, because Barack Obama is paired against a candidate whose defining experience was the five years he spent in a POW camp in Vietnam. Do you think someone can walk away from that prison? It's like the freaking Hotel California. John McCain carries that prison with him everywhere, and he will carry it into the White House.

What the past six weeks have made clear is that the United States - and the entire world - is sweeping Barack Obama up in their arms because they yearn - desperately - for a fresh start. The generation in power - the Baby Boomers - is not the Greatest Generation that fought World War II. It is a small-minded, unreflective, selfish generation - epitomized by our Commander in Chief - that has failed this nation.

The Neoconservative fixation on Vietnam, on the projection of American power overseas (try counting our bases in other countries - there are too many), on a paranoid grasp for military influence - all of this reflects nothing so much as the reality of true power slipping away in a multilateral world.

This worldview means nothing to younger Americans. Vietnam holds no lessons for them. What they know is 9/11. What they have seen in its aftermath is a nation that almost immediately used lies and subterfuge, torture and terror, to squander the good will and aching love of people around the world for Americans who had suffered grievously at the hands of Al-Qaeda. We had the world in the palm of our hands. Imagine the good that might have come from that influence.

We might have chosen love. Instead, we chose hate. We might have chosen principled action on behalf of reconstructed, unified alliances of nations. Instead we chose scandalous, scurrilous, cynical unilateralism. Within six months, we had turned most of the world against us.

Young Americans witnessed this. The Iraq war is the foundation of their political awakening. They still trust. They just don't trust the old white guys. The Bushes and Cheneys and Rumsfelds and McCains.

The enthusiasm of young people for Obama is beyond calculation. Estimates indicate that three-quarters of first time voters may cast their ballot for Barack. Race doesn't matter here. Young Americans have grown up in a post-racial world. They know that there is no black or white. Barack is half-black and half-white. Tiger Woods, Tony Gonzalez, Derek Jeter, Alicia Keys, and countless other well-known American defy racial categorization.

Nas doesn't just speak for young blacks in the hood. He speaks for all young Americans.

So race does not drive this election. Barack is our first 21st-century candidate. In a post-racial world, other barriers that are cognitive rather than real will also tumble down, including the barriers between nations. McCain will be a soldier-president. Obama will be a diplomat-president. McCain will falsely take us into wars on behalf of fabricated national interests and use fear and terror to justify military action. Obama will build alliances that will sustain us and marginalize those who truly wish to harm us.

Will the election of Barack Obama infuriate the ignorant rabble on the right, the "good people growing in small towns" who listen to Rush Limbaugh? Perhaps. But as the recent reports from Wasilla from the Daily Show show us, there is nothing special about small-town life. It can be tawdry, impoverished, and depressing. Relatively few people will live in small towns in America in the future. They are not relevant to the realities of America in the 21st century America. Young people, who flee small towns at their first opportunity, understand this.

For these reasons, John McCain cannot win. It is a law of nature. His tide is going out. He has nothing new to offer the United States but flotsam and jetsam. There is some evidence from the way he has managed his campaign that he understands this, that he truly does not want to be president, and that by some divine irony, his contribution is actually to usher in a new generation of leaders with a perspective on the world radically different from his own.

To reprise Nas, " We don't wanna hear that sh-- no more. It's a new day. It's a new voice."

Andrew Lahde's Farewell Letter

Andrew Lahde, the (briefly) storied hedge fund manager who returned 870 percent to investors last year by betting against the credit markets, has retired. His farewell letter below communicates no fondness for his trading brethren, the markets that enriched him, and the government that enabled the craziness from which he profited. The missive ends with a plea for George Soros to convene a convention of Wise Men and Women, for an Open-Source Government, and, finally, for the legalization of hemp as a low-tech, low-cost alternative source of raw material for products that are petroleum-dependent.
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Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would been entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say good-bye.

Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, “What I have learned about the hedge fund business is that I hate it.” I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG,Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

There are far too many people for me to sincerely thank for my success. However, I do not want to sound like a Hollywood actor accepting an award. The money was reward enough. Furthermore, the endless list of those deserving thanks know who they are.

I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile,their lives suck. Appointments back to back, booked solid for the next three months, they look forward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.

So this is it. With all due respect, I am dropping out. Please do not expect any type of reply to emails or voicemails within normal time frames or at all. Andy Springer and his company will be handling the dissolution of the fund. And don’t worry about my employees, they were always employed by Mr. Springer’s company and only one (who has been well-rewarded) will lose his job.

I have no interest in any deals in which anyone would like me to participate. I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle. I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life – where I had to compete for spaces in universities and graduate schools, jobs and assets under management – with those who had all the advantages (rich parents) that I did not. May meritocracy be part of a new form of government, which needs to be established.

On the issue of the U.S. Government, I would like to make a modest proposal. First, I point out the obvious flaws, whereby legislation was repeatedly brought forth to Congress over the past eigh tyears, which would have reigned in the predatory lending practices of now mostly defunct institutions.These institutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage, yet no one seems to know or care about it. Since Thomas Jefferson and Adam Smith passed, I would argue that there has been a dearth of worthy philosophers in this country, at least ones focused on improving government.Capitalism worked for two hundred years, but times change, and systems become corrupt. George Soros, a man of staggering wealth, has stated that he would like to be remembered as a philosopher.My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles. This forum could be similar to the one used to create the operating system, Linux, which competes with Microsoft’s near monopoly. I believe there is an answer, but for now the system is clearly broken.

Lastly, while I still have an audience, I would like to bring attention to an alternative food and energy source. You won’t see it included in BP’s, “Feel good. We are working on sustainable solutions,” television commercials, nor is it mentioned in ADM’s similar commercials. But hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products. Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country? Ah, the female. The evil female plant – marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So,why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. My only conclusion as to why it is illegal, is that Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other addictive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers. This policy is ludicrous. It has surely contributed to our dependency on foreign energy sources. Our policies have other countries literally laughing at our stupidity, most notably Canada, as well as several European nations (both Eastern and Western). You would not know this by paying attention to U.S. media sources though, as they tend not to elaborate on who is laughing at the United States this week. Please people, let’s stop the rhetoric and start thinking about how we can truly become self-sufficient.

With that I say good-bye and good luck.

All the best,
Andrew Lahde

The Path Forward: Changes to Securities Mosaic are a Harbinger of Changes for the Financial Industry

Today, we launched a major new release of Securities Mosaic, which now includes all of the databases formerly constituting the Securities Mosaic Litigator website. So the site has a new Enforcement and Litigation tab that folds in search pages with breathtakingly detailed (if I do say so myself) data culled from a variety of sources: SEC and CFTC Enforcement Releases, SEC Investigation Disclosures, SEC Investors Claims Funds, and PCAOB Inspection Reports. We also now include a complete archive of securities-related Appellate Court decisions since the beginning of 2007 and have added several thousand new law firm memos focusing on securities enforcement and litigation to the Law Firms search page.

It is very slick data, and not available anywhere else because it is mostly hand-tagged to optimize targeted searching. For example, users can filter their search within enforcement actions to include a particular type of violation, or the dollar range of an imposed penalty.

Want to know how many CEOs have received financial penalties in excess of $10 million in actions involving the SEC since 2000? We can tell you that in about 10 seconds. The answer is 19 CEOs, and the largest penalty was imposed on Patrick C. Quinlan in 2005, in the amount of $256 million. He also went to prison for ten years.

Against how many attorneys has the SEC taken action for violating conspiracy laws? The answer is 4, and one of them - Stephen Ziegler - was ordered to pay restitution of more than $800 million! Along with five years in a federal penitentiary. His offense was his participation, as "regulatory counsel" in a scheme that resulted in the fleecing of more than $1 billion from 30,000 investors.

What does the addition of this kind of enforcement and litigation information to Securities Mosaic mean? Two things.

First, I am struck by how these data sets fill out the Securities Mosaic website, and how much more robust it seems. Our goal is to create a seamless environment for conducting any kind of securities-related research, and this addition of the litigation and enforcement information takes a long step in that direction. With this data, one can quickly perform due diligence on individuals, track enforcement trends, and model enforcement scenarios for clients in ways that are simply not possible right now.

With the integration of this data on Securities Mosaic, one can also now more easily map enforcement and litigation trends to disclosure requirements, regulatory rulemaking, and guidance conventions. The view of the securities regulation landscape simply becomes richer and more nuanced.

The second point is that this is the most ambitious new release of Securities Mosaic we've ever undertaken, at least from a customer standpoint, and it bears pointing out that it is occurring in the face of the hurricane-force winds reshaping the business and financial industry landscapes.

The timing is not an accident. Recent events on Wall Street have underscored the need for, and urgency, of an accelerated effort to server industry professionals' ongoing need to know.

Change is afoot, and it will almost certainly include massive reorganization of federal regulatory oversight and control. We understand that. What we at Knowledge Mosaic are betting is that legal and financial industry professionals will need an information portal that reflects a regulation universe that is broader, more integrated, and more demanding.

Our latest upgrade to Securities Mosaic is therefore only the first part of a two-part plan to offer a vastly more broad and complete set of financial and business regulatory materials. We will be covering the full spectrum of federal agency (and deputized SRO) regulations (and legislation) covering both listed companies and financial institutions.

Moreover, we will be topping this broad data platform with a thick layer of current awareness and reporting materials, with the goal of giving our customers an "always on" view of the most recent developments and trends in financial and business law and regulation.

So it is exciting stuff for perilous times. Please check out the new Enforcement and Litigation section of Securities Mosaic and feel free to send on any ideas you have for financial and business data and tools that would most benefit you.

Water

Evidence mounts that Wall Street's troubles are rapidly filtering down to Main Street and to College Avenue. We are not immune at Knowledge Mosaic. We have lost major accounts to companies that have gone out of business or been acquired. Budgets are everywhere tight. However, I am optimistic about our future. Even as Death and Mayhem stalk the land, I think we will be okay. And this is why.

In this new century, business success will require that companies flow like water around obstacles that stand in their way. Water finds its own path and gradually erodes obstacles and creates new channels that represent its "will".

Business that flow like water are flexible and nimble. They are incredibly attuned to what is going on it their environment - with their customers, their competitors, their vendors, their employees, their finances. They respond in real time.

Watery businesses know their ultimate destination, but are not locked into specific paths to arrive at this destination. They will consider any and all options for solving problems or advancing goals, but will not waste time on belabored decision-making. Few decisions are so critical or risky that they require endless deliberation or certainty. Rather than make a few big decisions, make many little decisions. Respond in real time. Adjust in real time.

Finally, a business that flows like water has no ego. Its being derives from its essence and its journey, not its roles or attributes.

This is abstract. Let me give a concrete example of what I mean. The premise for gargantuan executive pay packages is that a business cannot survive without its leaders. This perspective promotes an egocentric view of leadership, in which the leader provides a center of gravity for the organization that justifies the material attributes of his (or her) role - the large salary and bonus, the stock grants, the private aircraft, etc. The energy of the employees and the board members of these companies flows inward, toward the leader.

This is a failed model of leadership for the 21st century. Successful leaders in watery enterprises exist to serve others. They wash the feet of their employees, their investors, and their customers. Their identity has nothing to do with compensation and status, and is instead bound up directly with the mission of the business, with its essence and its journey, with nurturing and supporting and honoring those whose commitment and growth and energy sustain the business. In watery businesses, energy flows from the center to the periphery, to where the business is moving next.

What makes this leadership model work in troubled times is that watery businesses can operate without fear. Existentially, all of us fear loss and, ultimately, physical death, which is loss multiplied by Google. In a business, fear addresses the loss of privilege, status, and position - either within an organization or in relation to competition or in absolute financial terms. When Lehman went under, for example, it experienced absolute financial death, loss multiplied by Google.

But water does not have fear. It exists only in relation to its motion, which by definition is incessant, and so has nothing to lose. A rock slamming into another rock might shatter. That is loss, or death. That is what egos experience. Water encountering a rock will divide and flow around it and rejoin itself. Water, lacking an ego, cannot be split, and so it has nothing to fear.

In practical terms, this means that a watery business and watery leadership will adapt to whatever environment it faces, no matter how outwardly troubled. Without an ego, the business will simply enfold itself within the circumstances of the moment and locate opportunity. With opportunity, there is a destination, and with a destination, there is motion, and with motion there is life and hope. For a remarkable example of this kind opportunism, read this fascinating history of the Torrington Company, now a $1.2 billion subsidiary of Ingersoll-Rand that reinvented itself during the Depression.

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Fair warning. Next week, I will publish a longish (multi-day) essay on law firm cost recovery, a practice that shows us the beating heart of the legal research industry in the past 30 years. It is a practice whose days are numbered.

How I Learned to Love Wal-Mart. Sort of.

I am not a Wal-Mart Dad.

In fact, I hate Wal-Mart. With some modest qualifications.

I admire their selection of "over-under shotguns" and their environmentally sound support of low-energy light bulbs. I respect the recent success of their PR machine in neutralizing the flood of negative publicity they received for locking their workers in their stores at night. I also cannot deny it - there is no moment quite so heart-warming as the sight of a Wal-Mart Greeter. Be that as it may, we all know that Wal-Mart epitomizes the evisceration of the American soul.

However, Wal-Mart and my company do have one thing in common besides the incredible vastness of our revenues. We both retain law firms that meet our "diversity standards", and we both have moved "millions of dollars" away from law firms that do not meet those standards.

While our global headquarters is in Seattle, we have retained Folger Levin & Kahn, a California law firm, as our outside counsel. In a recent issue, Working Mother Magazine named FLK one of the top-50 law firms for female attorneys, based on "workforce profile, family-friendly benefits and policies, flexibility, leadership, compensation, advancement of women and retention of women." (Fact Sheet here)

The selection process occurs by application, so of course it is possible that only 52 law firms applied. Nonetheless. We are proud that FLK represents us because they have committed themselves as a firm to values of respect, equality, and fairness that also are important to Knowledge Mosaic.

Much smaller than the average firm on this "female-friendly" list, FLK employs about 60 attorneys, half of whom are women (the average firm size on this list is closer to 600). And while only 16 percent of the partners in firms nationwide are female - only 19 percent even on this female-friendly list - at FLK, nearly 50 percent of the partners are women! I do believe this is far and away the highest percentage of any of the law firms on the Working Woman list.

Here are some other fun facts. More than 85 percent of attorneys promoted to equity partner in the past five years at FLK were women. Two of the four practice heads are women. So is the managing partner. FLK also offers an astounding 24 weeks of maternity leave, no minimum floor for billable hours, and the option to work reduced hours. Pretty good stuff.

Folger Levin & Kahn offers proof that the traditional law firm mantra of "Bill, Baby, Bill" may properly belong to a different century. Perhaps now, we just might hear law firms chanting, "Jill, Baby, Jill!"

And what of Wal-Mart? Dare we don a blue vest to mark our solidarity with them in this commitment to gender equality in the legal community? Perhaps we should. Wal-Mart's commitment appears to be real. Of the 52 Wal-Mart attorneys listed on Martindale.com, 25 are women. Soulless and eviscerated though it may be, one cannot deny the equality.