The Daily Parker

Facebook co-founder Chris Hughes thinks so:

America was built on the idea that power should not be concentrated in any one person, because we are all fallible. That’s why the founders created a system of checks and balances. They didn’t need to foresee the rise of Facebook to understand the threat that gargantuan companies would pose to democracy. Jefferson and Madison were voracious readers of Adam Smith, who believed that monopolies prevent the competition that spurs innovation and leads to economic growth.

A century later, in response to the rise of the oil, railroad and banking trusts of the Gilded Age, the Ohio Republican John Sherman said on the floor of Congress: “If we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessities of life. If we would not submit to an emperor, we should not submit to an autocrat of trade with power to prevent competition and to fix the price of any commodity.” The Sherman Antitrust Act of 1890 outlawed monopolies. More legislation followed in the 20th century, creating legal and regulatory structures to promote competition and hold the biggest companies accountable. The Department of Justice broke up monopolies like Standard Oil and AT&T.

For many people today, it’s hard to imagine government doing much of anything right, let alone breaking up a company like Facebook. This isn’t by coincidence.

Starting in the 1970s, a small but dedicated group of economists, lawyers and policymakers sowed the seeds of our cynicism. Over the next 40 years, they financed a network of think tanks, journals, social clubs, academic centers and media outlets to teach an emerging generation that private interests should take precedence over public ones. Their gospel was simple: “Free” markets are dynamic and productive, while government is bureaucratic and ineffective. By the mid-1980s, they had largely managed to relegate energetic antitrust enforcement to the history books.

This shift, combined with business-friendly tax and regulatory policy, ushered in a period of mergers and acquisitions that created megacorporations. In the past 20 years, more than 75 percent of American industries, from airlines to pharmaceuticals, have experienced increased concentration, and the average size of public companies has tripled. The results are a decline in entrepreneurship, stalled productivity growth, and higher prices and fewer choices for consumers.

The same thing is happening in social media and digital communications. Because Facebook so dominates social networking, it faces no market-based accountability. This means that every time Facebook messes up, we repeat an exhausting pattern: first outrage, then disappointment and, finally, resignation.

Hughes makes excellent points. Just because the industries look different than those in the 1890s doesn't mean they haven't consolidated too much. History doesn't repeat itself, but it does rhyme.

Everyone knew that Donald Trump lost millions on bad business deals and bad management in the 1980s and 1990s. But we never knew how badly he dealt and managed until now. The New York Times obtained official IRS data on Trump's tax returns from the years 1985 to 1994, showing he lost a staggering $1.17 billion during that period—equivalent to more than $2 billion today:

Mr. Trump appears to have lost more money than nearly any other individual American taxpayer, The Times found when it compared his results with detailed information the I.R.S. compiles on an annual sampling of high-income earners. His core business losses in 1990 and 1991 — more than $250 million each year — were more than double those of the nearest taxpayers in the I.R.S. information for those years.

Over all, Mr. Trump lost so much money that he was able to avoid paying income taxes for eight of the 10 years. It is not known whether the I.R.S. later required changes after audits.

The new information also suggests that Mr. Trump’s 1990 collapse might have struck several years earlier if not for his brief side career posing as a corporate raider. From 1986 through 1988, while his core businesses languished under increasingly unsupportable debt, Mr. Trump made millions of dollars in the stock market by suggesting that he was about to take over companies. But the figures show that he lost most, if not all, of those gains after investors stopped taking his takeover talk seriously.

Jennifer Rubin finds five takeaways from the report, and Trump's non-denial of it. Her final point is spot-on:

Finally, do not expect the revelations to dim the Trump cult’s reverence for its leader. If he isn’t really as rich as he said, they will commend him for pulling a fast one (even on voters). If the story is false, it’s one more bit of evidence for their media paranoia. Sadly, the Fox News and talk-radio crowd long ago jettisoned any concerns that they’ve invested their hopes in a con man, someone who has lied and finagled his way through life and into the White House. To admit that would be to recognize they were dupes, victims of another Trump scam. That, they will never do.

The Trump cultists have gone this far and they will go farther. As Matt Ford says, we have not even begun to approach "peak Trump." It's going to be a very long 18 months until the next election.

Yet another Chicago-based medical marijuana company has merged with an out-of-state company ahead of an expected legalization of recreational pot this summer:

Chicago’s Cresco Labs on Monday unveiled a $120 million merger that allows it to expand into Florida, where analysts predict demand for medical marijuana will significantly grow in the coming years. By 2022, the market for medical pot could reach a whopping $1.7 billion, according to analysts’  projections.

Under the agreement, Cresco will acquire Florida marijuana grower and retailer VidaCann, a move that will allow Cresco to operate 30 medical dispensaries in the nation’s third most populous state. The company aims to significantly expand its operations by the end of the year, in part by doubling the size of its medical marijuana cultivation center. It also plans to have 20 dispensaries open by year’s end.

Last week, a Phoenix company announced one of the largest pot deals in U.S. corporate history by taking over Chicago-based Verano Holdings for $850 million.

If Cresco’s ownership of VidaCann is approved, Cresco could surpass another major marijuana player based in Chicago — Green Thumb Industries, which currently has 11 cultivation centers.

A vote on legalizing recreational cannabis could come as early as July, and is expected to pass.

Author Garrett M. Graff, writing for the Times, suggests that Rudy Giuliani's approach to prosecuting cases under the Racketeering-Influenced and Corrupt Organizations Act (RICO) could provide the model for dismantling the Trump Organization:

Fighting the Mafia posed a uniquely hard challenge for investigators. Mafia families were involved in numerous distinct crimes and schemes, over yearslong periods, all for the clear benefit of its leadership, but those very leaders were tough to prosecute because they were rarely involved in the day-to-day crime. They spoke in their own code, rarely directly ordering a lieutenant to do something illegal, but instead offering oblique instructions or expressing general wishes that their lieutenants simply knew how to translate into action.

Those explosive — and arresting — hearings led to the 1970 passage of the Racketeer Influenced and Corrupt Organizations Act, better known as RICO, a law designed to allow prosecutors to go after enterprises that engaged in extended, organized criminality. RICO laid out certain “predicate” crimes — those that prosecutors could use to stitch together evidence of a corrupt organization and then go after everyone involved in the organization as part of an organized conspiracy. While the headline-grabbing RICO “predicates” were violent crimes like murder, kidnapping, arson and robbery, the statute also focused on crimes like fraud, obstruction of justice, money laundering and even aiding or abetting illegal immigration.

The sheer number and breadth of the investigations into Mr. Trump’s orbit these days indicates how vulnerable the president’s family business would be to just this type of prosecution. In December, I counted 17, and since then, investigators have started an inquiry into undocumented workers at Mr. Trump’s New Jersey golf course, another crime that could be a RICO predicate; Mr. Cohen’s public testimony itself, where he certainly laid out enough evidence and bread crumbs for prosecutors to verify his allegations, mentioned enough criminal activity to build a racketeering case. Moreover, RICO allows prosecutors to wrap 10 years of racketeering activity into a single set of charges, which is to say, almost precisely the length of time — a decade — that Michael Cohen would have unparalleled insight into Mr. Trump’s operations. Similarly, many Mafia cases end up being built on wiretaps — just like, for instance, the perhaps 100 recordings Mr. Cohen says he made of people during his tenure working for Mr. Trump, recordings that federal investigators are surely poring over as part of the 290,000 documents and files they seized in their April raid last year.

Indicting the whole Trump Organization as a “corrupt enterprise” could also help prosecutors address the thorny question of whether the president can be indicted in office; they could lay out a whole pattern of criminal activity, indict numerous players — including perhaps Trump family members — and leave the president himself as a named, unindicted co-conspirator.

Of course, the President could try to pardon everyone but himself, even if that leaves himself open to state charges in New York and elsewhere. But for the time being, the Southern District of New York and other bodies seem to be laying out the larger RICO case just fine. Can't wait to see it.

The company announced today that it has given up on building out its new headquarters in Queens:

[T]he agreement to lure Amazon stirred an intense debate about the use of government incentives to entice wealthy companies, the rising cost of living in rapidly gentrifying neighborhoods, and the city’s very identity.

Amazon’s decision is a major blow for Gov. Andrew M. Cuomo and Mayor Bill de Blasio, who had set aside their differences to bring the company to New York.

But it was a remarkable win for insurgent progressive politicians led by Representative Alexandria Ocasio-Cortez, whose upset victory last year happened to occur in the district where Amazon had planned its site. Her win galvanized the party’s left flank, which mobilized against the deal.

State Sen. Michael Gianaris, a vocal critic who was chosen for a state board with the power to veto the deal, said the decision revealed Amazon’s unwillingness to work with the Queens community it had wanted to join.

“Like a petulant child, Amazon insists on getting its way or takes its ball and leaves,” said Mr. Gianaris, a Democrat, whose district includes Long Island City. “The only thing that happened here is that a community that was going to be profoundly affected by their presence started asking questions.”

In its statement, Amazon said it has no plans to re-open the search for a second campus.

I'm actually glad they pulled out, as I expect so are many people in New York. The concessions Amazon secretly extracted from the state and city were worth more than $3 billion, with only the company's promises guaranteeing 25,000 new jobs in Queens. (Ask Wisconsin what a company's promises are worth.)

On Thursday, a court accepted Eddie Lampert's $5.2 bn bid to keep Sears running and himself as its head:

Lampert’s purchase, made through his hedge fund, ESL Investments, is intended to keep 425 Sears and Kmart stores open, preserving some 45,000 jobs. It was the only bid submitted in an auction that would have kept the once-mighty department store giant in business and avoid liquidation.

Lampert’s plan was opposed by a committee of unsecured creditors skeptical that Hoffman Estates-based Sears will be any more successful after exiting bankruptcy. The committee pushed for a liquidation, arguing that shutting down the company and selling its assets could recover more of what Sears owes.

Still unresolved is a dispute between Sears and ESL over which is responsible for paying $166 million for inventory received after Sears filed for Chapter 11 bankruptcy on Oct. 15. Although Drain did not have jurisdiction to decide the issue, he gave an advisory opinion in favor of Sears’ claim that ESL is responsible for those liabilities.

The judge’s decision saves Sears from liquidation, but still unanswered is whether Lampert can reinvigorate a retail chain that many consumers have fond memories of, but no current relationship with. Lampert has said he wants to invest in smaller stores and those that are profitable, with a focus on popular categories like appliances and repair services.

I'm not a bankruptcy attorney, so I don't know whether this is a good ruling. I, personally, would have preferred that Sears stay open and Lampert stay far away from it. But at least it's not dead yet.

The Pension Benefit Guaranty Corporation—read: the government—read: us, as we live in a frickin' REPUBLIC—has taken over the Sears Holdings pension fund because, basically, Eddie Lampert has driven it into the ground:

The agency covers individuals’ pensions, up to certain limits, if an insured pension plan shuts down without enough money to pay all benefits. It estimates Sears’ two pension plans are underfunded by about $1.4 billion. As a creditor, the agency could attempt to recover some of that money through the bankruptcy.

Ron Olbrysh, chairman of the National Association of Retired Sears Employees, said the guarantee means retirees aren’t worried about losing pensions, but they do have concerns about other benefits.

“The pensions are secure through Sears or through the Pension Benefit Guaranty Corp.,” he said. “The big impact if Sears does liquidate is that retirees will lose life insurance.”

The Daily Parker has followed the destruction of America's iconic retailer for years, watching the incompetence and self-dealing of Eddie Lampert the whole time. And here we are. Lampert will slide away from Sears with tens, or even hundreds, of millions of dollars, while the people who actually showed up every day to keep the stores open go bankrupt. Ironically, Lampert gets to do this by declaring bankruptcy. And the banks and investors he's stiffing have known this would happen for years. But they'll still show up in Federal court to argue that their claims to Sears' assets trump (no irony there) the employees'.

There seems to me a simple solution to the problem that Lampert's destruction of Sears epitomizes. Let's just change the law slightly to make officers of corporations liable in civil and criminal actions for the behavior of the corporations they represent. It's not a radical idea: corporations already have the right to act as people under the law. This is a simple balancing.

I don't think it's controversial to say that Eddie Lampert should experience all the consequences of his horrible management of Sears, including going down with the sinking ship. Especially because his management of the company was to drill a hole in the keel and then let his managers fight over how to keep the ship afloat.

When the revolution comes, I hope Lampert—and by extension, his adolescent worship of Ayn Rand—will be first against the wall.

Via Bruce Schneier, a report on how third-party Amazon sellers use Amazon's own policies to attack their rivals:

When you buy something on Amazon, the odds are, you aren’t buying it from Amazon at all. Plansky is one of 6 million sellers on Amazon Marketplace, the company’s third-party platform. They are largely hidden from customers, but behind any item for sale, there could be dozens of sellers, all competing for your click. This year, Marketplace sales were almost double those of Amazon retail itself, according to Marketplace Pulse, making the seller platform alone the largest e-commerce business in the world.

For sellers, Amazon is a quasi-state. They rely on its infrastructure — its warehouses, shipping network, financial systems, and portal to millions of customers — and pay taxes in the form of fees. They also live in terror of its rules, which often change and are harshly enforced. A cryptic email like the one Plansky received can send a seller’s business into bankruptcy, with few avenues for appeal.

Sellers are more worried about a case being opened on Amazon than in actual court, says Dave Bryant, an Amazon seller and blogger. Amazon’s judgment is swifter and less predictable, and now that the company controls nearly halfof the online retail market in the US, its rulings can instantly determine the success or failure of your business, he says. “Amazon is the judge, the jury, and the executioner.”

An algorithm flags sellers based on a range of metrics — customer complaints, number of returns, certain keywords used in reviews, and other, more mysterious variables — and passes them to Performance workers based in India, Costa Rica, and other locations. These workers choose between several prewritten blurbs to send to sellers. They may see what the actual problem is or the key item missing from an appeal, but they can’t be more specific than the forms allow, according to Rachel Greer, who worked as a fraud investigator at Amazon before becoming a seller consultant. “It feels like it’s a bot, but it’s actually a human who is very frustrated about the fact that they have to work like that,” she says.

The Performance workers’ incentives favor rejection. They must process approximately one claim every four minutes, and reinstating someone who later gets suspended again counts against them.... When they fall behind...they’ll often “punt” by sending requests for more information....

Scary. And an example of why monopolies are bad. As Schenier says, "Amazon is basically its own government—with its own rules that its suppliers have no choice but to follow. And, of course, increasingly there is no option but to sell your stuff on Amazon."

Note that I say this while watching an old TV show on Amazon Prime, waiting for Amazon to deliver a replacement Fitbit band, and on and on.

Given the American tradition of publicly saying one thing and privately doing the opposite, even staunchly-Republican businesses learn to behave as if climate change is real. After the company experienced higher-than-expected losses following California wildfires this year, Allstate's CEO put out a press release urging action on climate change:

In a release, CEO Tom Wilson minced no words on his views of the cause of the devastation, which resulted in dozens of deaths and hundreds missing, as well as staggering property loss.

"It's time to address the impact that more severe weather is having on Americans instead of fighting about climate change," Wilson said. "This year there have been approximately 7,500 wildfires in California, Hurricanes Florence and Michael, and a swath of severe weather across the United States, putting our customers in danger and at risk of losing their homes and hard-earned money.”

The financial blow would have been significantly worse had Allstate not shrunk substantially in California. The company said it has cut its California homeowners policies by about half over the past decade.

The catastrophe losses, combined with $60 million in unanticipated pension costs that Allstate also reported last night, will have a dramatic effect on 2018 earnings. Sandler O’Neill & Partners today reduced its 2018 earnings estimate by 15 percent to $7.67 per share from $9.03 per share.

I've predicted this for two decades now, that insurance companies would always be the first to promote climate-change remediation and greenhouse-gas reductions, because they get hurt the most by climate change. Good on Tom Wilson; now maybe he can lobby some sense into the Republican Party.

You can stop laughing now. But eventually, we're going to get there. Just not with the current government.

Crain's has some good reporting on why local grocery chain Treasure Island went out of business this month:

After Christ Kamberos' death, Maria Kamberos became president and CEO and appointed her son, Christ Kamberos Jr., vice president of development. (Frank Kamberos, who is in his 90s, ceased playing an active role in the chain long ago. Whether he remains an owner in Treasure Island could not be determined, but public records show he does retain ownership, along with Maria Kamberos, of the real estate affiliated with the stores.) They renovated the Gold Coast store in 2013 and the Lake Shore Drive location last year, though some shoppers were underwhelmed by the efforts in comparison to the new Whole Foods and Mariano's stores that cropped up after the demise of Dominick's. As recently as October 2017—a decade after opening in Hyde Park, its newest location—Christ Kamberos Jr. said publicly that the company would open an eighth location in a new luxury apartment development in Uptown. (The store never materialized.)

But inside the stores and the corporate office, employees say, operations notably deteriorated at the beginning of 2018.

Inventory deliveries were intermittent for most of 2018, according to six employees, all of whom asked not to be named. Photos provided to Crain's by a senior employee show a loaf of Treasure Island bakery bread with a July 24, 2018, sell-by sticker placed on top of an original July 4 sticker. Moreover, store-level employees say paychecks not deposited immediately would sometimes take days to clear or would bounce.

Personal squabbles; corner-cutting that backfired; treating employees badly; and the rise of Whole Foods and Mariano's. Those things killed Treasure Island.