Tag: corruption

Going Clear and the Ridiculousness of Tax Exemption for Religious Organizations

Seth Anderson0 comment

Ideas and Not Battles…
Ideas and Not Battles…

I hope you’ve seen, or plan to see, the documentary by Alex Gibney called Going Clear: Scientology and the Prison of Belief. Besides the whole insanity of Xenu, and thetans and Suppressive Persons, a big question raised is why exactly did the IRS classify L. Ron Hubbard’s science fiction stories as a religion, entitled to evade taxes? Was it a result of Operation Snow White? Or some other reason?

The latter half of Going Clear delineates how David Miscavige uses the above dogma to create a financial empire built on celebrity outreach, with the organization’s Celebrity Centre being a major landmark, and Hubbard’s directive of “fair game” (i.e., harassment and threats to enemies labeled “suppressive persons”). The result is extensive research and testimony based on the experiences of former church members, some of them former senior members, with allegations of torture, labor camps, re-education camps, human trafficking, and a non-profit religion that has at least $1.5 billion in the bank. If you or I paid someone who worked for us 40 cents an hour or forced someone to mop a bathroom with their tongue, we would probably be looking at spending some time in a courtroom.

However, because Scientology has tax-exempt status as a religion, these practices are protected by the First Amendment as “self-inflicted” punishments by adherents of a religion.

That tax-exempt status was also important in saving Scientology from bankruptcy. Going Clear asserts the church was looking at a $1 billion tax bill in 1993 after fighting the IRS for decades. Not only was the tax debt forgiven, but the classification of Scientology as a religion also means sales of Dianetics and other Hubbard books are not taxed either, since they’re considered “religious texts.” And all of this is supposed to be given a happy face by trotting out celebrities like Tom Cruise, John Travolta, and others so they can peddle Scientology in other countries and attempt religious recognition in Europe and elsewhere. However, Cruise is shown to be the equivalent of manipulated royalty within the church. Church insiders paint a picture of him as pampered and coddled to be Scientology’s ambassador to the world, with his every whim attended to, but Miscavige dictates who can be close to Cruise and is jealously protective of his own relationship with the star. And Travolta is implied to be either indifferent to the religion’s abuses or a “captive” who stays in his place because of the threat of blackmail.

(click here to continue reading ‘Going Clear’ offers a devastating exposé of greed and abuse.)

Truthfully, I don’t understand why any mega-rich church gets to be tax exempt. My taxes partially go to support schools, I don’t object to that despite me having no children of my own. I understand the idea of the public good – a well educated society is better for all of us. I pay for the park district, and I don’t object to that. I use the parks, I am happy to see others using the parks, families, dogs, whatever. But what good to society is Scientology doing? or any of us who aren’t Tom Cruise or John Travolta?

I don’t think the Catholic Church should be tax-exempt either, but at least they seem to do a small amount of good for the public – soup kitchens, outreach, etc. What is Scientology doing for the community? Other than separating rubes from their money? 

The Nonprofit Risk Management Center reports that more than 100 501(c)(3) organizations are stripped of their tax-exempt status each year. The reasons can vary, covering the violation of laws that govern private benefits, lobbying, political campaign activity, unrelated business income, the obligation to report annually and maintaining operation in accord with stated exempt purpose.…

According to the film, Church of Scientology Chairman David Miscavige ordered the organization’s members to file individual lawsuits against the IRS for its failure to recognize it as a church. Overwhelmed by 2,400 individual suits and the prospect of defending itself against all of them, the IRS agreed to grant Scientology tax-exempt status in exchange for the withdrawal of the cases.

A 2011 tax filing reveals that the three organizations comprising Scientology claim a combined value of $1.5 billion, a sum that has allegedly been built on the backs of members who pay thousands of dollars to rise within the organization, are paid 40 cents an hour for labor and have been tortured for dissent, combined with the organization’s vast international property portfolio. “This issue is not about whether Scientology is a religion,” Gibney told TheWrap. “The issue is whether or not Scientology is pursuing policies that are not in the public interest.” The government simply needs to determine whether there’s a “fundamental overriding interest” in declassifying an organization involved in the above activities as exempt from taxation.

According to the IRS website, to be tax-exempt, an “organization’s purposes and activities may not be illegal or violate fundamental public policy.” An IRS representative told TheWrap he’s unable to comment on whether there’s currently an investigation into any organizations or individual cases.

(click here to continue reading HBO’s ‘Going Clear’ Triggers New Scrutiny of Scientology’s Tax-Exempt Status.)

Church of Scientology London
Church of Scientology London

So how exactly did the Scientologists get the IRS to reverse itself? There are many still unanswered questions:

For 25 years, I.R.S. agents had branded Scientology a commercial enterprise and refused to give it the tax exemption granted to churches. The refusals had been upheld in every court. But that night the crowd learned of an astonishing turnaround. The I.R.S. had granted tax exemptions to every Scientology entity in the United States.…The landmark reversal shocked tax experts and saved the church tens of millions of dollars in taxes. More significantly, the decision was an invaluable public relations tool in Scientology’s worldwide campaign for acceptance as a mainstream religion. On the basis of the I.R.S. ruling, the State Department formally criticized Germany for discriminating against Scientologists. The German Government regards the organization as a business, not a tax-exempt religion, the very position maintained for 25 years by the American Government.

The full story of the turnabout by the I.R.S. has remained hidden behind taxpayer privacy laws for nearly four years. But an examination by The New York Times found that the exemption followed a series of unusual internal I.R.S. actions that came after an extraordinary campaign orchestrated by Scientology against the agency and people who work there. Among the findings of the review by The Times, based on more than 30 interviews and thousands of pages of public and internal church records, were these:

*Scientology’s lawyers hired private investigators to dig into the private lives of I.R.S. officials and to conduct surveillance operations to uncover potential vulnerabilities, according to interviews and documents. One investigator said he had interviewed tenants in buildings owned by three I.R.S. officials, looking for housing code violations. He also said he had taken documents from an I.R.S. conference and sent them to church officials and created a phony news bureau in Washington to gather information on church critics. The church also financed an organization of I.R.S. whistle-blowers that attacked the agency publicly.

*The decision to negotiate with the church came after Fred T. Goldberg Jr., the Commissioner of the Internal Revenue Service at the time, had an unusual meeting with Mr. Miscavige in 1991. Scientology’s own version of what occurred offers a remarkable account of how the church leader walked into I.R.S. headquarters without an appointment and got in to see Mr. Goldberg, the nation’s top tax official. Mr. Miscavige offered to call a halt to Scientology’s suits against the I.R.S. in exchange for tax exemptions.

After that meeting, Mr. Goldberg created a special committee to negotiate a settlement with Scientology outside normal agency procedures. When the committee determined that all Scientology entities should be exempt from taxes, I.R.S. tax analysts were ordered to ignore the substantive issues in reviewing the decision, according to I.R.S. memorandums and court files.

The I.R.S. refused to disclose any terms of the agreement, including whether the church was required to pay back taxes, contending that it was confidential taxpayer information. The agency has maintained that position in a lengthy court fight, and in rejecting a request for access by The Times under the Freedom of Information Act. But the position is in stark contrast to the agency’s handling of some other church organizations. Both the Jimmy Swaggart Ministries and an affiliate of the Rev. Jerry Falwell were required by the I.R.S. to disclose that they had paid back taxes in settling disputes in recent years.

(click here to continue reading Scientology’s Puzzling Journey From Tax Rebel to Tax Exempt – NYTimes.com.)

Xenu dot Net
Xenu dot Net

From the IRS manual, your organization only needs to check these boxes off to be classified as a religion, and not even check all the boxes:

The Service considers all the facts and circumstances in determining whether an organization is a church, including whether the organization has the following characteristics:

  • a distinct legal existence
  • a recognized creed and form of worship
  • a definite and distinct ecclesiastical government
  • a formal code of doctrine and discipline
  • a distinct religious history
  • a membership not associated with any other church or denomination
  • a complete organization of ordained ministers ministering to their congregations
  • ordained ministers selected after completing prescribed courses of study
  • a literature of its own
  • established places of worship
  • regular congregations
  • regular religious services
  • Sunday schools for religious instruction of the young
  • schools for the preparation of its ministers

The above list of 14 church characteristics (first published by the Service in 1978 as a news release, IR–1930) is not exclusive—any other facts and circumstances that may bear upon the organization’s claim for church status must also be considered.

An organization need not have all of the characteristics (few churches do, and newly-created churches cannot be expected to); thus, no single characteristic is controlling.

Some of the characteristics may be given more weight than others in a given case.

(click here to continue reading Internal Revenue Manual – 7.26.2 Private Foundations Defined – IRC 509(a)(1) Exlcusions (Other Than IRC 170(b)(1)(A)(vi)) and IRC 509(a)(4) Exclusion.)

Church of Scientology
Church of Scientology

Energy Firms in Secretive Alliance With Republican Attorneys General

Seth Anderson0 comment

The Dark Doesn't Hide It
The Dark Doesn’t Hide It.

Here are real world consequences of removing all vestiges of restraint of corporate purchase of elected officials, only partially hidden corruption. We are getting the best politicians money can buy, in other words, with the obvious point being it isn’t our money, but corporate dollars that have all the buying power.

The letter to the Environmental Protection Agency from Attorney General Scott Pruitt of Oklahoma carried a blunt accusation: Federal regulators were grossly overestimating the amount of air pollution caused by energy companies drilling new natural gas wells in his state.

But Mr. Pruitt left out one critical point. The three-page letter was written by lawyers for Devon Energy, one of Oklahoma’s biggest oil and gas companies, and was delivered to him by Devon’s chief of lobbying.

…

The email exchange from October 2011, obtained through an open-records request, offers a hint of the unprecedented, secretive alliance that Mr. Pruitt and other Republican attorneys general have formed with some of the nation’s top energy producers to push back against the Obama regulatory agenda, an investigation by The New York Times has found.

Attorneys general in at least a dozen states are working with energy companies and other corporate interests, which in turn are providing them with record amounts of money for their political campaigns, including at least $16 million this year.

(click here to continue reading Energy Firms in Secretive Alliance With Attorneys General – NYTimes.com.)

Cheap for corporations, $16,000,000 isn’t very much when gutting environmental law is the end result. Remember your high school history books and how indignant the outrage was when discussing the Teapot Dome Scandal? Well, this is a gazillion or two times worse…

Unconventional Solutions
Unconventional Solutions…

Here’s a brief refresher of the Teapot Dome Scandal via Wikipedia:

In the early 20th century, the U.S. Navy largely converted from coal to oil fuel. To ensure the Navy would always have enough fuel available, several oil-producing areas were designated as Naval Oil Reserves by President Taft. In 1921, President Harding issued an executive order that transferred control of Teapot Dome Oil Field in Natrona County, Wyoming, and the Elk Hills and Buena Vista Oil Fields in Kern County, California from the Navy Department to the Department of the Interior. This was not implemented until 1922, when Interior Secretary Fall persuaded Navy Secretary Edwin C. Denby to transfer control.

Later in 1922, Albert Fall leased the oil production rights at Teapot Dome to Harry F. Sinclair of Mammoth Oil, a subsidiary of Sinclair Oil Corporation. He also leased the Elk Hills reserve to Edward L. Doheny of Pan American Petroleum and Transport Company. Both leases were issued without competitive bidding. This manner of leasing was legal under the Mineral Leasing Act of 1920.

The lease terms were very favorable to the oil companies, which secretly made Fall a rich man. Fall had received a no-interest loan from Doheny of $100,000 (about $1.32 million today) in November 1921. He received other gifts from Doheny and Sinclair totaling about $404,000 (about $5.34 million today). It was this money changing hands that was illegal, not the leases. Fall attempted to keep his actions secret, but the sudden improvement in his standard of living prompted speculation.

(click here to continue reading Teapot Dome scandal – Wikipedia, the free encyclopedia.)

Discarded Cautions
Discarded Cautions.

Sound familiar? Except in this case, the public isn’t outraged, or even well informed that elected officials are getting paid off in such a brazen manner. 

Out of public view, corporate representatives and attorneys general are coordinating legal strategy and other efforts to fight federal regulations, according to a review of thousands of emails and court documents and dozens of interviews.

“When you use a public office, pretty shamelessly, to vouch for a private party with substantial financial interest without the disclosure of the true authorship, that is a dangerous practice,” said David B. Frohnmayer, a Republican who served a decade as attorney general in Oregon. “The puppeteer behind the stage is pulling strings, and you can’t see. I don’t like that. And when it is exposed, it makes you feel used.”

For Mr. Pruitt, the benefits have been clear. Lobbyists and company officials have been notably solicitous, helping him raise his profile as president for two years of the Republican Attorneys General Association, a post he used to help start what he and allies called the Rule of Law campaign, which was intended to push back against Washington.

(click here to continue reading Energy Firms in Secretive Alliance With Attorneys General – NYTimes.com.)

Rosemont passes law to prevent release of Garth Brooks contract

Seth Anderson0 comment

Rich Play - Poor Pay - Chicago Tribune
Rich Play – Poor Pay – Chicago Tribune.

There aren’t many times when we align unequivocally with the Chicago Tribune, but this is one such time. What the hell is the Village of Rosemont doing?1 Corporate welfare at its most transparent, and then trying to cover up their tracks? They are spending taxpayer money, right? So why shouldn’t the taxpayers know the details?

Whatever Rosemont had to do, it doesn’t want the public to know about it.

The village recently passed an ordinance to keep secret the financial details related to Brooks’ record-breaking concert run — an unusual move that came after the Chicago Tribune filed a Freedom of Information Act request for documents related to his September shows at Allstate Arena.

The ordinance gives the mayor and other officials the power to withhold documents if they believe the release would put village-owned entertainment venues at a competitive disadvantage. In addition to the arena, the town owns and operates the Rosemont Theatre and the Donald E. Stephens Convention Center.

Village officials declined comment on the new law this week, citing the ongoing dispute with the Tribune over the Brooks documents.

The Tribune requested the records on Sept. 11, while Brooks was in the middle of his 11-concert run at Allstate Arena. Brooks, who had not toured in 16 years, sold 183,535 tickets for his Rosemont shows and broke the North American ticket sales record for a single city with an estimated gross of $12 million.

…

None of those entities, however, rely upon concert and convention revenues as much as Rosemont, which owes more than $400 million on taxpayer-backed loans taken out primarily to build an entertainment district. In 2013, the arena, theater and convention center together generated nearly $38 million in operating revenue and attracted more than 1.9 million visitors, according to village officials.

(click here to continue reading Rosemont passes law to prevent release of Garth Brooks contract – Chicago Tribune.)

To be clear, we are befuddled why such a profitable touring artist would need financial incentives from the public: the government isn’t getting a percentage of the gate. In fact, just the opposite – Rosemont gave a share of concessions, parking, and the like to the promoter. Wacky, just wacky. Smells like corruption to me.

Footnotes:
  1. a suburb of Chicago, five minutes from O’Hare Airport [↩]

JPMorgan Chase Seeks Corporate Welfare to Build New HQ in Manhattan

Seth Anderson0 comment

Where all hopes sank
Where all hopes sank

I’ve heard of food deserts, perhaps New York City has a bank desert here? Why else would taxpayers fund real estate for one of the biggest, wealthiest banks on the planet? Well, other than the obvious reason, corruption. Sweet, sweet corporate welfare, it’s what makes the business world go ‘round…

City and state officials are negotiating with JPMorgan Chase over a potential deal in which the nation’s largest bank would build a vast $6.5 billion corporate campus with two high-rise towers in the new commercial district on the Far West Side of Manhattan.

The talks, which involve one of the largest real estate complexes for a single company in New York City history and a large package of incentives for Chase, have reached a feverish state after nearly falling apart this week.

The negotiations are so delicate that few people are willing to discuss them publicly for fear of alienating one side or another.

But a deal with the bank poses political risks for both the state and the city. Chase had initially sought, by one account, more than $1 billion in concessions from the city and the state while it continues to pare its payroll in the city. According to executives and officials, Chase wants to build the two towers — whose total space would be the equivalent of about two Empire State Buildings — at Hudson Yards on the north side of 33rd Street, between 10th and 11th Avenues. They would become home to 16,000 employees.

(click here to continue reading JPMorgan Chase Seeks Incentives to Build New Headquarters in Manhattan – NYTimes.com.)

JP Morgan Chase Blues
JP Morgan Chase Blues

and additional evidence that Chase must have explicit photos of Governor Andrew Cuomo and NYC Mayor Bill de Blasio in compromising positions, possibly with each other,  on a bed of lobbyist dollars while Jamie Dimon watches:

As is often the case in these kinds of deals, the bank drew up a lengthy list of possible concessions. Chase wanted to cut the mortgage recording tax, the transfer tax and sales taxes on construction materials. It also sought job-training grants, low-cost power from the state, an underground passageway between the two buildings that would require alterations to the newly built No. 7 subway station and financial help with reinforcing the foundation.

The neighborhood, formerly part of Hell’s Kitchen, was rezoned eight years ago for high-rise development by then-Mayor Michael R. Bloomberg. The rezoning included tax breaks and other incentives intended to encourage new construction.

City officials, who estimated that there are already $600 million in tax breaks and other incentives associated with the two sites, have been reluctant to sweeten the deal for Chase.

The Bloomberg administration issued $3 billion in bonds to pay for parks, a new tree-lined boulevard and an extension of the No. 7 subway line from Times Square to the spot where Chase wants to build the new towers.

Officials at the time had assured skeptics that development fees and payments in lieu of taxes from new towers would cover the debt payments. But development has been slower than anticipated, prompting the city to take more than $130 million from the city budget to make the annual debt payments.

…

Chase has been eager to reduce its costs in New York and move technical and operational employees to lower-cost locations in Delaware, New Jersey and elsewhere.

Austerity for thee, not for me…

How about instead of giving JPMorgan Chase the $600,000,000 -$1,000,000,000 it is asking for, instead New York gives Chase employees an equal amount in tax credits? Sales tax relief, income tax relief, whatever, but only for the employees who make less than $100,000 a year? Sure they’d all have to file 1040 returns, but seems like a better boost to New York’s economy than doling out government cheese to a filthy rich bank.

Boeing falls most since April After Cantor loss

Seth Anderson0 comment

Double Rainbow Over Boeing
Double Rainbow Over Boeing

The most amusing headline we read the day after Eric Cantor (Smug R) lost his primary to the Tea Bagger, and Ayn Randian acolyte, David Brat, was this one. Poor, poor Boeing, lost one of their sugar daddies…

Boeing Co. (BA) fell the most in two months as U.S. House Majority Leader Eric Cantor’s defeat in a primary election threatens congressional reauthorization of low-cost lending that benefits the world’s largest planemaker.

Keeping alive the Export-Import Bank will be an “even more high-profile/challenging fight,” Chris Krueger, a senior policy analyst for Guggenheim Securities LLC, said today by e-mail. Boeing was the “biggest loser” besides Cantor in the Virginia Republican’s surprise loss yesterday, Krueger wrote.

Ex-Im arranges financing that helps foreign airlines buy jets, a service that Boeing said last month would support $10 billion of 2014 sales. As Congress debates reauthorization, House Financial Services Committee Chairman Jeb Hensarling of Texas is being promoted as a possible Cantor successor. He has said the U.S. should “exit the Ex-Im.”

(click here to continue reading Boeing Tumbles as Cantor Loss Clouds Ex-Im Bank’s Future – Bloomberg.)

Boeing - El Segundo
Boeing – El Segundo

So what exactly is the Export-Import Bank? The Wikipedia entry:

The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States federal government. It was established in 1934 by an executive order, and made an independent agency in the Executive branch by Congress in 1945, for the purposes of financing and insuring foreign purchases of United States goods for customers unable or unwilling to accept credit risk. The mission of the Bank is to create and sustain U.S. jobs by financing sales of U.S. exports to international buyers. The Bank is chartered as a government corporation by the Congress of the United States; it was last chartered for a three-year term in 2012 which will expire in September 2014. Its Charter spells out the Bank’s authorities and limitations. Among them is the principle that Ex-Im Bank does not compete with private sector lenders, but rather provides financing for transactions that would otherwise not take place because commercial lenders are either unable or unwilling to accept the political or commercial risks inherent in the deal.

(click here to continue reading Export-Import Bank of the United States – Wikipedia, the free encyclopedia.)

Golden Plowshares
Golden Plowshares

Corporate welfare, in other words. Propping up the bottom line of the military-industrial complex, and other crony capital chores. Sure, after World War 2, the bank was perhaps justifiable, the Marshall Plan and all that. But in today’s economy? Why does Boeing, GE, Halliburton or ExxonMobil need special low-interest loans subsidized by US taxpayers, loans that are not available to the rest of the business world? Especially when so much of what the bank subsidizes is bad for the planet. 

Like:

The bank’s environmental policy is a disappointment because it would allow an increase in spending on coal and other technologies harmful to the environment, said Steve Kretzmann, who runs Washington-based Oil Change International, which seeks to curb government aid to fossil-fuel companies.

“It makes a mockery of the Obama administration’s supposed commitment to phase out fossil-fuel subsidies,” Kretzmann said in an interview.

The project in Papua New Guinea led by Irving, Texas-based Exxon has become a particular point of contention.

The pipeline’s construction will destroy pristine tropical forests, PacificEnvironment’s Norlen said in a submission to the lender in September.

Exxon “is the most profitable corporation on the planet,” Kretzmann said. “This is the last place that taxpayer support should be going.”

(click here to continue reading Obama’s Trade Goal Fights His Clean-Energy Plan (Update4) – Bloomberg.)

and:

President Barack Obama’s goals of boosting U.S. exports and combating climate change are colliding as the U.S. Export-Import Bank expands financing for oil, gas, mining and power-plant projects.

Bank-supported ventures approved in the year ended Sept. 30 will emit an estimated 17.9 million metric tons of carbon annually, more than triple the previous year and the most since the lender started releasing data in 2001, according to its annual reports. Among companies aided were General Electric Co. and Petroleos Mexicanos, Mexico’s state-owned oil business.

“Ex-Im is on a fossil-fuel binge,” said Doug Norlen, policy director at PacificEnvironment, an environmental advocacy group in San Francisco.

You Can't Bribe No one
You Can’t Bribe No one

We’re not alone in wondering why in our current economic climate, this corporate welfare bank continues to exist.

For instance, from those hippies at Forbes:

Nothing brings out the well-tailored lobbyists in Washington quite like a threat to corporate welfare.  With the Export-Import Bank’s legal authorization set to run out this year, the Chamber of Commerce recently led a Big Business march on Capitol Hill to protect what is known as Boeing’s Bank.  Over the last eight decades ExIm has provided over a half trillion dollars in credit, mostly to corporate titans.  Congress should close the Bank.

ExIm was created in 1934 to underwrite trade with the Soviet Union.  The agency piously claims not to provide subsidies since it charges fees and interest, but it exists only to offer business a better credit deal than is available in the marketplace.  The Bank uses its ability to borrow at government rates to provide loans, loan guarantees, working capital guarantees, and loan insurance.

The result is a bad deal for the rest of us.  For instance, ExIm is not free, as claimed.  Recently made self-financing, the agency has returned $1.6 billion to the Treasury since 2008.  However, economists Jason Delisle and Christopher Papagianis warned that the Bank’s “profits are almost surely an accounting illusion” because “the government’s official accounting rules effectively force budget analysts to understate the cost of loan programs like those managed by the Ex-Im Bank.”

In particular, the price of market risk is not included, even though doing so, explained the Congressional Budget Office, would provide “a more comprehensive measure of federal costs.”  Delisle and Papagianis figured ExIm’s real price to exceed $200 million annually.  Indeed, both the Government Accountability Office and ExIm Inspector General raised questions about the accuracy of the agency’s risk modeling.

Federal Reserve economist John H. Boyd took another approach, explaining:  “For an economic profit—that is, a real benefit to taxpayers—Eximbank’s income must exceed its recorded expenses plus its owners’ opportunity cost, a payment to taxpayers for investing their funds in this agency rather than somewhere else.”  If ExIm was private, he added, “one must suspect that its owners would have pulled out long ago in favor of a truly profitable enterprise.”  He figured the Bank’s real cost averaged around $200 million a year in the late 1970s but had increased to between $521 million and $653 million by 1980.  Given the recent explosion in Bank lending the corresponding expense today could be much higher.

(click here to continue reading Close the Export-Import Bank: Cut Federal Liabilities, Kill Corporate Welfare, Promote Free Trade – Forbes.)

Scientists Condemn New FDA Study Saying BPA Is Safe

Seth Anderson0 comment

The Pope gets bagged
The Pope gets bagged

The Food and Drug Organization is still beholden to the industries it is supposed to regulate, putting us, the non-corporations, needlessly at risk in order to protect profits of industry. If we had a liberal, socialist president, perhaps this could change. However…

In February, a group of Food and Drug Administration scientists published a study finding that low-level exposure to the common plastic additive bisphenol A (BPA) is safe. The media, the chemical industry, and FDA officials touted this as evidence that long-standing concerns about the health effects of BPA were unfounded. (“BPA Is A-Okay, Says FDA,” read one Forbes headline.) But, behind the scenes, a dozen leading academic scientists who had been working with the FDA on a related project were fuming over the study’s release—partly because they believed the agency had bungled the experiment.

On a conference call the previous summer, officials from the FDA and the National Institutes of Health (NIH) had informed these researchers that the lab where the study was housed was contaminated. As a result, all of the animals—including the supposedly unexposed control group—had been exposed to BPA. The FDA made the case that this didn’t affect the outcome, but their academic counterparts believed it cast serious doubt on the study’s findings. “It’s basic science,” says Gail S. Prins, a professor of physiology at the University of Illinois at Chicago, who was on the call. “If your controls are contaminated, you’ve got a failed experiment and the data should be discarded. I’m baffled that any journal would even publish this.”

Yet the FDA study glossed over this detail, which was buried near the end of the paper. Prins and her colleagues also complain that the paper omitted key information—including the fact that some of them had found dramatic effects in the same group of animals. “The way the FDA presented its findings is so disingenuous,” says one scientist, who works closely with the agency. “It borders on scientific misconduct.”

(click here to continue reading Scientists Condemn New FDA Study Saying BPA Is Safe: “It Borders on Scientific Misconduct” | Mother Jones.)

A fan of Peapod

A fan of Peapod 

reminds me of the climate change debate, and not in a positive light:

In contrast to the FDA’s recent paper, roughly 1,000 published studies have found that low-level exposure to BPA—a synthetic estrogen that is also used in cash register receipts and the lining of tin cans—can lead to serious health problems, from cancer and insulin-resistant diabetes to obesity and attention-deficit disorder. In some cases, the effects appear to be handed down, with the chemical reprogramming an individual’s genes and causing disease in future generations.

But the agencies that regulate BPA and other chemicals have largely ignored this research in favor of industry data showing BPA is safe. A 2008 investigation by the Milwaukee Journal Sentinel revealed that the FDA had relied on industry lobbyists to track and evaluate research on BPA. It also found that the agency’s assessment of BPA’s safety was based largely on two industry-funded studies—one of which turned out to have “fatal flaws,” according to leading researchers in the field. Both studies also relied on a breed of rat, known as the Charles River Sprague Dawley, that is all but immune to the effects of synthetic estrogens like BPA.

On one hand, nearly 1,000 studies saying at the minimum, there could be potential health problems associated with the usage of this plastic; and on the other finger, 2 studies, flawed in methodology, and funded by the plastic and chemical industry that claim everything is fine as it is. In a rational world, these two studies would be marginalized. Instead, the FDA uses them as a fig leaf to protect the industry from regulation. Pathetic, and troubling.

Hmm, maybe if I started a religion that said ingesting BPA was against my core beliefs, we could take this to the Supreme Court…

Why The US Congress Is So Dysfunctional

Seth Anderson0 comment

Your Radiant Squares
Your Radiant Squares

If you were told you needed to spend 5 hours of every day in office doing a certain activity, wouldn’t you assume that activity was the biggest reason you were hired for the job? The US Congress is dysfunctional for a lot of reasons, but this is a large one.

After the elections in November, Democratic Party leaders gave a PowerPoint presentation urging their freshman members to spend as much as four hours a day making fund-raising calls while in Washington, and an additional hour of “strategic outreach” holding breakfasts or “meet and greets” with possible financial supporters. That adds up to more time than these first-term lawmakers were advised to spend on Congressional business.

(click here to continue reading For Freshmen in the House, Seats of Plenty – NYTimes.com.)

Of course it buys happiness
Of course it buys happiness

Five hours a day fundraising, on average, probably some days more. How is this even considered serving the citizens? How does this advance the national interest? It only advances the moneyed interests…

The amount of time that members of Congress in both parties spend fundraising is widely known to take up an obscene portion of a typical day — whether it’s “call time” spent on the phone with potential donors, or in person at fundraisers in Washington or back home. Seeing it spelled out in black and white, however, can be a jarring experience for a new member, as related by some who attended the November orientation.

…

Former Rep. Tom Perriello (D-Va.), now a top official at the Center for American Progress, said that the four hours allocated to fundraising may even be “low-balling the figure so as not to scare the new Members too much.”

Congress members make the dreaded calls from a room in the office of the Democratic Congressional Campaign Committee, or a similar one at the headquarters of the National Republican Congressional Committee. After votes in the House, a stream of congressmen and women can be seen filing out of the Capitol and, rather than returning to their offices, heading to rowhouses nearby on First Street for call time, or directly to the parties’ headquarters. The rowhouses, where Larson said he prefers to make calls, are typically owned by lobbyists, fundraisers or members themselves, and are used for call time because it’s illegal to solicit campaign cash from the official congressional office. Former Rep. Walt Minnick’s (D-Idaho) career in finance enabled him to buy a Capitol Hill rowhouse that he allows Democrats to use for call time. “There’s less turmoil and background noise” in the rowhouses compared with the DCCC call center, said Rep. Brad Miller (D-N.C.), who retired from office this year.

 

(click here to continue reading Call Time For Congress Shows How Fundraising Dominates Bleak Work Life.)

Investor Group Sues Richmond, CA Over Eminent Domain Plan

Seth Anderson0 comment

plus ça change…
plus ça change…

Complications. This had sounded like an interesting way out of the national home owner crisis, but the banks are worried they will lose their paper money value. Of the 624 properties in discussion, 444 are still current in their payments, just that their houses assessed valuation is significantly less than the mortgaged value. Is eminent domain allowable in this sort of circumstance? The legal precedent is unclear, so presumedly, this lawsuit and similar is going to take a while to be settled.

Banks representing some of the nation’s largest bond investors filed suit against the city of Richmond, Calif., on Wednesday to block plans by city officials to seize and buy mortgages using their powers of eminent domain.

The lawsuit, filed in federal court in San Francisco, could serve as a key test for whether a city can move forward with such a strategy, which would allow it to forcibly buy mortgages from investors at a price potentially below the property’s current market value. The city would then reduce the loan balance and refinance the mortgage to help struggling homeowners avoid foreclosure.

The legal challenge could serve as a key test for whether cities from Newark, N.J., to Seattle are able to follow Richmond’s lead.

…

City leaders in Richmond, a working-class suburb of around 100,000 on the San Francisco Bay, began sending letters last week to mortgage companies seeking to purchase loans on 624 properties and threatening to force sales via eminent domain if investors resisted. The city is partnering with Mortgage Resolution Partners, a private investment firm based in San Francisco, which was also named a defendant in the lawsuit.

 

(click here to continue reading Investor Group Sues Richmond, Calif., Over Eminent Domain Plan – WSJ.com.)

Back in Feburary, 2013, The New Yorker’s Tad Friend wrote an interesting overview about Steven Gluckstern’s plan1

LETTER FROM CALIFORNIA about Steven Gluckstern’s solution for the foreclosure crisis. At sixty-one, Steven Gluckstern has extensive experience handicapping risk propositions on Wall Street. This past fall, Gluckstern, the chairman of a San Francisco-based group called Mortgage Resolution Partners, was in the midst of a tour of Southern California. In between hasty meals, he raced his rented Mercedes to meetings with mayors and activists and real-estate agents and developers, trying to interest them in his company’s sole product: a plan for cities battered by the foreclosure crisis to keep their citizens in their homes.

It’s a tool so ingenious that Wall Street treats it as the gravest threat to civilization since the breakfast burrito. Even as America’s home prices have risen for six of the past seven months, twenty per cent of homeowners remain “underwater,” owing more in principal than the house is worth. It’s a national problem that’s concentrated in a few locales, most notably California. Mentions Salinas councilwoman Jyl Lutes.

In places like Salinas, a large part of the problem is not the loans that are held by banks. It’s the ones that were pooled in “private-label securitizations.” Under Gluckstern’s plan, a city would use its powers of eminent domain to seize a homeowner’s mortgage in court, pay off the bondholders, then arrange a new mortgage for the homeowner at a price much closer to what the home is actually worth. M.R.P. started its campaign in San Bernardino County. In June, the county and the cities of Fontana and Ontario established a “joint powers authority” to examine M.R.P.’s plan. The foes of eminent domain rose up almost instantly and assailed the plan. A coalition of twenty-six financial-service and real-estate groups sent a letter threatening lawsuits.

The opposition often invoked what’s known as the “moral-hazard argument”: if you reward people for risky behavior they’ll just do it more. By the time Gluckstern visited the San Bernardino area, last fall, he was a marked man. When Gluckstern dropped by county C.E.O. Greg Devereaux’s office, Devereaux ruefully acknowledged that the opposition had gummed up M.R.P.’s plans. Without quite conceding in San Bernardino, Gluckstern began stealthier campaigns, in Michigan, Maryland, and southern Florida. He hopes to convince the opposition that his campaign will continue.

(click here to continue reading Tad Friend: Can Steven Gluckstern Solve the Mortgage Mess? : The New Yorker.)

Mini Bank In Fine Style
Mini Bank In Fine Style

and from what I recall, it turns out the mortgages are often held by multiple entities because of the mortgage derivative market.

and it is unclear if these particular legal challenges are going to stand up in court:

Legal advocates of the eminent domain plan have said that constitutional challenges aren’t likely to hold up in court. The loan strategy wouldn’t burden interstate commerce “because it doesn’t prevent credit from flowing in any particular way,” said Robert Hockett, the Cornell University law professor who was an early advocate of using eminent domain to seize underwater mortgages.

“This is a bluff,” said Mr. Hockett. “It’s meant to scare city officials into saying, ‘Oh, who are we to argue with the big guns.”

Supporters say their plan would help not only specific homeowners but also the broader community by reducing foreclosures that are hurting property values and eroding the tax base. “It’s the responsibility of banks to fix this, and they haven’t, so we’re taking it into our hands,” said Richmond Mayor Gayle McLaughlin in a call with reporters last week.

 

Footnotes:
  1. not available for non-subscribers [↩]

Don’t buy the right-wing myth about Detroit

Seth Anderson0 comment

Money Won't Change You
Money Won’t Change You

David Sirota has an excellent point about the conservative narrative about Detroit. Notice how many times pensions get mentioned in coverage of Detroit’s bankruptcy and how many times corporate welfare does. 50 times to once? Something like that kind of ratio. Basically ignored, in other words. Corporate welfare is sacrosanct; pensions, not so much.

That brings us to how this all plays into the right’s push to enact ever more regressive tax cuts, protect endless corporate welfare and legislate new reductions in workers’ guaranteed pensions.

These latter objectives may seem unrelated, but they all complement each other when presented in the most politically opportunistic way. It’s a straightforward conservative formula: the right blames state and municipal budget problems exclusively on public employees’ retirement benefits, often underfunding those public pensions for years. The money raided by those pension funds is then used to enact expensive tax cuts and corporate welfare programs. After years of robbing those pension funds to pay for such giveaways, a crisis inevitably hits, and workers’ pension benefits are blamed — and then slashed. Meanwhile, the massive tax cuts and corporate subsidies are preserved, because we are led to believe they had nothing to do with the crisis. Ultimately, the extra monies taken from retirees are then often plowed into even more tax cuts and more corporate subsidies.

We’ve seen this trick in states all over America lately. In Rhode Island, for instance, the state underfunded its public pensions for years, while giving away $356 million in a year in corporate subsidies (including an epically embarrassing $75 million to Curt Schilling). It then converted the pension system into a Wall Street boondoggle), all while preserving the subsidies.

Similarly, in Kentucky, the state raided its public pension funds to finance $1.4 billion a year in tax subsidies, and then when the crisis hit, lawmakers there slashed pension benefits — not the corporate subsidies.

The list of states and cities following this path goes on — but you get the point. In the conservative narrative about budgets in general, the focus is on the aggregate annual $333 million worth of state and local pension shortfalls — and left out of the story is the fact that, according to the New York Times, “states, counties and cities are giving up more than $80 billion each year to companies” in the form of tax loopholes and subsidies.”

The mythology around Detroit, then, is just another version of this propaganda.

(click here to continue reading Don’t buy the right-wing myth about Detroit – Salon.com.)

Stilton with candied lemon peel
Stilton with candied lemon peel

and those evil, greedy workers are always the problem. How dare they depend upon $19,000 a year pensions – that they paid with their work for 20 years or longer – when corporations need free cheese! $80,000,000,000 a year in free cheese – cheese that could be spread elsewhere…

So, for instance, from the administration of right-wing Gov. Rick Snyder, we are hearing a lot of carping about the $3.5 billion in pension obligations that are part of the city’s overall $18 billion in debt. The focus leads casual onlookers to believe that — even though they on average get a pension of just $19,000 a year — municipal workers’ supposed greed single-handedly bankrupted the city. What we aren’t hearing about, though, is the city and state’s long history of underfunding its pensions, and using the raided money to spend billions of dollars on corporate welfare.

For a good sense of some of the most expensive, absurd and utterly wasteful boondoggles in the Detroit area over the last few decades, read this piece from Crain’s Detroit or see this 2011 article entitled “Detroit’s Corporate Welfare Binge” by Detroit News columnist Bill Johnson. Alternately, recall this is in the heart of a region that infamously spent $55.4 million in 1975 (or a whopping $180 million in inflation-adjusted dollars) on a football stadium and then sold it off for $583,000. Or, just note that Detroit is the largest city in a state that, according to the New York Times, spends more per capita on corporate subsidies — $672 (per capita) or $6.6 billion a year — than most other states.

It Pays to Play
It Pays to Play

There’s more to the myth of course, NAFTA, taxes and the like.

In the conservative telling of this particular parable, Detroit faces a fiscal emergency because high taxes supposedly drove a mass exodus from the city, and the supposedly unbridled greed of unions forced city leaders to make fiscally irresponsible pension promises to municipal employees. Written out of the tale is any serious analysis of macroeconomic shifts, international economic policy failures, the geography of recent recessions and unsustainable corporate welfare spending.

This is classic right-wing dogma — the kind that employs selective storytelling to use a tragic event as a means to radical ends. In this case, the ends are — big shocker! — three of the conservative movement’s larger long-term economic priorities: 1) preservation of job-killing trade policies 2) immunity for corporations and 3) justification for budget policies that continue to profligately subsidize the rich.

Read David Sirota’s entire indictment yourself, and remember it when you next hear a bloviator discuss Detroit pensions, or austerity…

Bank of America CEO must face mortgage disclosures lawsuit

Seth Anderson1 Comment

Bank of America - Kodachrome
Bank of America – Kodachrome

Continuing the story of a country and its corrupt institutions…

[U.S. District Judge William Pauley] has revived a securities fraud lawsuit accusing Bank of America Corp Chief Executive Brian Moynihan, his predecessor Kenneth Lewis, and others of misleading shareholders about the risk the bank might have to buy back large amounts of soured mortgages.…

…

But Pauley said the new allegations in an amended lawsuit “plausibly establish fraudulent conduct and a culpable state of mind as to all executive defendants” for allegedly concealing the buyback potential when certifying the bank’s financials.

The shareholders alleged they had been misled into buying shares of Charlotte, North Carolina-based Bank of America in 2009 and 2010.

They claimed that Bank of America knew at the time it faced capital shortfalls and large mortgage buybacks, and that recordkeeping in Merscorp Inc’s private Mortgage Electronic Registration Systems registry was so poor that it would not be able to legally foreclose on thousands of delinquent mortgages.

Mortgage finance giants Fannie Mae and Freddie Mac and several large banks had established MERS in 1995 to circumvent the often unwieldy process of transferring ownership of mortgages and recording changes with county clerks.

(click here to continue reading Bank of America CEO, ex-CEO must face mortgage disclosures lawsuit – chicagotribune.com.)

So you’ve probably never heard of the Mortgage Electronic Registration Systems. Or if you have, you wish you hadn’t. 

 

Of course it buys happiness
Of course it buys happiness

You’ve heard the name Mortgage Electronic Registration Systems or “MERS” mentioned in relation to the foreclosure problems in the residential real estate market.

But what is MERS?

It is the company created and owned by all of the big banks to process title to property in the U.S. Approximately 60% of the nation’s residential mortgages are recorded in the name of MERS.

MERS is a shell corporation with no employees, but thousands of officers.

(click here to continue reading What Is MERS and What Role Does It Have in the Foreclosure Mess? (Hint: It Holds 60% of All Mortgages, But Has ZERO Employees) | Washington’s Blog.)

Think Twice About Becoming a Landlord
Think Twice About Becoming a Landlord

Matt Taibbi adds, in his customary style:

The idea behind MERS was to wipe away centuries of legal tradition that mandated the physical transfer of loan notes and ownership information. Whereas lenders once were required to physically register with county clerk offices every time a mortgage loan was extended or re-sold, MERS provided an “electronic registry” of mortgage notes where all such transfers were recorded in the wiry brain of a giant computer instead of on paper.

Instead of the individual banks or lenders registering with the counties each time a loan was sold or re-sold, MERS would handle the initial registration and then become the “nominal” note-holder. Then, each time the note was passed on, MERS would record the transaction in its computer — but no matter who the actual owner of the note was, MERS would remain the legally registered assignee of the note.

Imagine, say, a family of twelve, two elderly parents in Iowa and ten adult children scattered in different states all over the country. Mom and Dad on the farm own one Ford F-150 that they owe $300 a month on. Every month, the truck gets passed to a different family member, who in turn becomes responsible for the monthly payment. But no matter who has the car and whose turn it is to come up with the $300, the truck stays in Dad’s name and the money, in the end, comes to Ford Finance via Dad’s checking account.

Looking at this as an individual and unique case, you wouldn’t think there was much that was inherently wrong with this setup. Obviously the family arrangement violates the spirit of many laws and procedures — vehicle registration (from month to month, the true owner of the car is hidden from the state), credit application (Pops technically committed credit fraud if he got the car loan in his own name knowing the children would actually be paying), and taxes/fees (the state misses out on its registration fees every month, when the car is informally “sold” from child to child without the nominal paperwork fees being paid to the DMV of the state in question). But again, looking at this as an individual case, not many people would say any of these “violations” were major moral transgressions, if they were really moral transgressions at all. After all, this is family!

But once you take this setup and institutionalize it, and employ it everywhere on a vast scale, it becomes seriously problematic. This is particularly true if, say, Pop begins allowing his kids to “rent” the car out to non-family members, so long as they kick a small fee upstairs. Say it’s March and Pop gives the truck to son Jimmy in Toledo; in April Jimmy gives the truck to his buddy Rick in Akron, charging the $300 payment plus a $20 convenience fee. May: Jimmy gives the car to his girlfriend Trudy in Phoenix, telling her to wire $300 plus another $20 back to Pops in Iowa; she in turn lends the car to her occasional lesbian love interest Madison, who begins renting the car on a day-to-day basis in Tuba City as part of her family’s Painted Desert Resort and Tourism business, etc. etc. And she’s now kicking the fees back to Iowa.

Within a year Pop is buying fifty vehicles an hour and shuttling cars to new customers all over the country, collecting millions in fees every day; he becomes a billion-dollar corporate fixture, hiring the entire local Elks club to come with him to work as support staff.

So now, to take this already absurdly overwrought metaphor one final painful step further, there is a string of grisly homicides being committed on highways across America. Witnesses spot that original F-150 truck and the license plates at each of the murder scenes, but when cops come looking for the truck owner, they find old Pop in a wheelchair in Iowa, alibied on the night of every crime by forty-five fellow members of the Dubuque Elks. They drag Pop into the station to question him, but he won’t give up which of his boys did the crimes — hell, he doesn’t know, anyway.  

This, roughly, is what MERS is. The functional effect of MERS is to create an obfuscatory wall between the homeowner and the actual owner of his mortgage loan. The problem with MERS is a paradox at the heart of the “ownership” question. On the one hand, MERS is the legal assignee of a lot of these mortgage notes. On the other hand, it’s not the “real” owner of the notes, in any way that could ever help you, or the state, or the investors in mortgage-backed securities.

(click here to continue reading An Extremely Long Metaphor to Explain Mortgage Chaos | Matt Taibbi | Rolling Stone.)

Sounds pretty fucked up to me. But then I’m not an expert. 

Never-Ending Condo Construction
Never-Ending Condo Construction

and from Shah Gilani:

In order to easily buy and sell mortgages between themselves so that these loans might be repackaged, securitized and then sold to investors as mortgage-backed securities, banks and other lenders needed a quick way to “trade” individual mortgages. They created a company called Mortgage Electronic Registration Systems (MERS). This group includes Bank of America Corp. (NYSE: BAC), GMAC LLC (NYSE: GMA), Wells Fargo & Co. (NYSE: WFC), Washington Mutual (now owned by JPMorgan Chase), the United Guaranty Corp. unit of American International Group Inc. (NYSE: AIG), Fannie Mae (OTC: FNMA), Freddie Mac (OTC: FMCC), mortgage-servicing companies and other similarly interested members.

You may not realize it, but at your home-purchase “closing,” you sign a document that appoints MERS as the “nominee” for the lender that granted you a mortgage. That gives the nominee the right to flip your mortgage to any other bank or lender it chooses. That’s how banks move mortgages around to package them into different securities.

But that brings us to the crux of the controversy: Every time there’s change on the title (a change occurs when the nominee switches the lender on your title out for another), local governments require that a new title be recorded. Of course, those governments – the county or municipality that you live in – also charge a “recording fee.” MERS also charges a fee, but it’s a lot less than government recording fees.

Here’s the problem. In creating MERS, these institutions actually changed the land-title system that this country – for much of its history – has relied upon to determine legal ownership status of land titleholders.

Not only did the lenders sidestep (read that to mean avoid) paying billions of dollars in fees to local governments, they paid themselves from the fees that MERS collected.

MERS is facing class-action lawsuits and civil racketeering suits around the country and their members are being individually named in all these suits. One suit alleges that MERS owes California a potential $60 billion to $120 billion in unpaid land-recording fees.

If suits against MERS and all its members are successful, unpaid recording fees and fines (that can be as much as $10,000 per incident) would make every one of them insolvent.

And you wonder what the Federal Reserve meant when it warned of “potential negative shocks?”

The bottom line for investors is that until all these issues are cleaned up (which might take years, or even decades) – or until there’s perhaps some sort of legislative clarity that eases uncertainty – investors face the threat of a severe “correction” in any or all of the markets that have risen on the hope that the long-hoped-for U.S. recovery is finally taking hold.

(click here to continue reading What You Don’t Know about “Mortgagegate” Could Crush the U.S. Banking System – Money Morning.)

S.E.C. Accuses Illinois of Securities Fraud

eggplant0 comment
Groves Tasteless Chill Tonic

Groves Tasteless Chill Tonic – Makes Children and Adults As Fat As Pigs.

Earlier today…

For the second time in history, federal regulators have accused an American state of securities fraud, finding that Illinois misled investors about the condition of its public pension system from 2005 to 2009. In announcing a settlement with the state on Monday, the Securities and Exchange Commission accused Illinois of claiming that it had been properly funding public workers’ retirement plans when it had not. In particular, it cited the period from 2005 to 2009, when Illinois also issued $2.2 billion in bonds.

Via:
S.E.C. Accuses Illinois of Securities Fraud
[automated]

Chicago Style Politics is Ancient History

Seth Anderson1 Comment

The Written Word A Lie
The Written Word A Lie

Whenever I hear a bloviator utter the phrase, “Chicago-style politics”, I stop listening to what they are trying to say. Richard J Daley died in 1976, and so did his “style” of politics. Richard M Daley’s style did  not depend upon the same ruthlessness, nor does Barack Obama demonstrate any of the same traits. Seriously, read a book about him, like “Boss” or something by Mike Royko.

Not that facts get in the way of political campaigns…

With Chicagoan Barack Obama in the White House and his hometown famed for cutthroat politics, it was perhaps inevitable that rivals would seize on guilt by geography to try to discredit him.

The city’s latest star turn as villain to Republicans began in recent days as Mitt Romney, Obama’s all-but-certain challenger in November, fumed while Democrats intensified attacks on his finances, tax returns and record as a private equity manager.

“Chicago-style politics at its worst,” the former Massachusetts governor and Bain Capital founder declared in a refrain quickly picked up by his campaign surrogates.

Ed Gillespie, a former Republican National Committee chairman, accused the Obama campaign of using “classic Chicago-style politics” to try to splatter mud over Romney’s credentials.

To Rove, the attacks on Romney were “gutter politics of the worst Chicago sort.”

Former New Hampshire Gov. John H. Sununu took it further: “Can you imagine coming out of Chicago politics, where ‘politician’ and ‘felon’ are synonymous? You’ve got two governors in prison today,” he told CNBC, conflating the misdeeds of Chicago Democrat Rod R. Blagojevich with those of downstate Republican George Ryan.

…

Dennis Goldford, an expert on presidential politics at Drake University in Des Moines, said the Republican imagery was an attempt to insinuate that Obama is a disciple of a throwback big-city political organization built on muscle and seediness.

“It strikes me as odd, because Obama was really not part of that old-style Chicago machine,” Goldford said, adding that the strategy seems geared toward swaying older voters who remember lore about the Richard J. Daley era in Chicago.

“But for college students, history is yesterday,” he said.

Politically, there’s less risk for Republicans in ripping Chicago than virtually anywhere else in the country. The city votes reliably Democratic, and Chicagoans have been known to take a perverse pride in their city’s tough-guy political reputation.

Even Obama has played it up in the past. During his 2008 run for president, he quoted from the movie “The Untouchables,” in which Sean Connery describes the “Chicago Way”: “He pulls a knife, you pull a gun.”

And without question, Chicago has seen a goodly share of high- and low-profile officials and operatives shipped off to prison over the decades, and Republicans would like to prod voters into thinking that some of that dirt surely must have rubbed off on Obama.

But political wrongdoing knows few geographic bounds. On a per-capita basis, North Dakota endured more than twice as many federal corruption convictions as Illinois over the last decade, according to Justice Department data. And politicians don’t complain about North Dakota-style corruption.

Chicago may be in the cross hairs of conservative political stereotyping because of Obama, but the city has company.

San Francisco, home of House Democratic leader Nancy Pelosi and a hotbed of liberal causes, is often referred to in sneering tones on the campaign trail. Boston and its environs get picked on as a nest of effete intellectuals, even by Romney — who holds two Harvard degrees, served as Massachusetts governor and maintains his official voting address there. The spin is that if Romney can govern successfully in Massachusetts, he can do so anywhere.

Still, bashing Chicago has developed into something of a reflex among partisan finger-pointers. Some hail from parts of the country with less than pristine political reputations themselves.

In Louisiana, a City Council candidate from suburban New Orleans in March accused a rival of stealing a political consultant, and said that such “Chicago-style tactics will backfire,” according to media reports.

(click here to continue reading On campaign trail, Chicago’s a popular villain – latimes.com.)

Blago Jogging on May Street
Blago Jogging on May Street

We’ve discussed1 which state is the most corrupt, and by most measures, Illinois isn’t even in the top2 ten, despite what is frequently shouted on television. And yes, even though Illinois has had several governors sent to prison, Illinois still isn’t the worst.

For instance:

The stories go on and on. Open records laws with hundreds of exemptions.  Crucial budgeting decisions made behind closed doors by a handful of power brokers. “Citizen” lawmakers voting on bills that would benefit them directly. Scores of legislators turning into lobbyists seemingly overnight. Disclosure laws without much disclosure. Ethics panels that haven’t met in years. 

State officials make lofty promises when it comes to ethics in government. They tout the transparency of legislative processes, accessibility of records, and the openness of public meetings. But these efforts often fall short of providing any real transparency or legitimate hope of rooting out corruption. 

That’s the depressing bottom line that emerges from the State Integrity Investigation, a first-of-its-kind, data-driven assessment of transparency, accountability and anti-corruption mechanisms in all 50 states. Not a single state — not one — earned an A grade from the months-long probe.  Only five states earned  a B grade: New Jersey, Connecticut, Washington, California, and Nebraska. Nineteen states got C’s and 18 received D’s. Eight states earned failing grades of 59 or below from the project, which is a collaboration of the Center for Public Integrity, Global Integrity, and Public Radio International. 

The F’s went to Michigan, North Dakota, South Carolina, Maine, Virginia, Wyoming, South Dakota, and Georgia.  

(click here to continue reading State Integrity Investigation overview: 50 states and no winners – State Integrity Investigation.)

Footnotes:
  1. but I’m too lazy to look through my vast archives at the moment [↩]
  2. bottom?? [↩]

Firms That Bribed Are Behind US Chamber of Commerce Attempt To Weaken Anti-Bribery Law

Seth Anderson0 comment

San Fran Legs

Yet another bit of evidence that the U.S. Chamber of Commerce is a corrupt organization to its core. Most responsible corporations have nothing to do with the USCC, even Exelon dropped them.

Dan Froomkin reports:

Two Democratic congressmen are investigating whether the U.S. Chamber of Commerce’s tenacious attack on a key anti-bribery statute has less to do with high-minded economic principles and more to do with the fact that nearly one in four board members of the Chamber’s “legal reform” arm represents a company that has been caught up in a bribery investigation itself.

Top Walmart executives sit on the board of the Chamber’s well-funded Institute for Legal Reform — a connection that became considerably more newsworthy after The New York Times reported last month that a vast bribery inquiry involving Walmart’s Mexico subsidiary had been hushed up by top executives in the company’s Arkansas headquarters.

The Institute for Legal Reform has been leading a powerful and unprecedented lobbying campaign to persuade Congress to rewrite key provisions of the Foreign Corrupt Practices Act, a 35-year-old statute that criminalizes bribes to foreign officials, on the grounds that prosecutors have been enforcing it too aggressively.

In a letter (PDF) to the Chamber released Tuesday, Reps. Henry Waxman (D-Calif.) and Elijah Cummings (D-Md.) — the ranking Democrats on the House Oversight and Government Reform Committee and the House Energy and Commerce Committee, respectively — describe how committee staff looked through the institute’s tax filings and found that 14 of the group’s 55 board members between 2007 and 2010 “were affiliated with companies that were reportedly under investigation for violations or had settled allegations that they violated the Foreign Corrupt Practices Act.”

Among those companies: Pfizer and Johnson & Johnson.

That 14-out-of-55 figure may even be an understatement, the lawmakers write, as privately held companies aren’t required to report potential violations or investigations. For instance, Koch Industries has had a representative on the institute’s board since 2007, the congressmen note, and has reportedly engaged in bribery abroad.

(click here to continue reading Dems Ask U.S. Chamber If Firms That Bribed Are Behind Its Push To Weaken Anti-Bribery Law.)

Elegy of the Big Lie
Elegy of the Big Lie

Bloomberg adds:

In May 2008, a unit of Koch Industries Inc., one of the world’s largest privately held companies, sent Ludmila Egorova-Farines, its newly hired compliance officer and ethics manager, to investigate the management of a subsidiary in Arles in southern France. In less than a week, she discovered that the company had paid bribes to win contracts. “I uncovered the practices within a few days,” Egorova- Farines says. “They were not hidden at all.”

She immediately notified her supervisors in the U.S. A week later, Wichita, Kansas-based Koch Industries dispatched an investigative team to look into her findings, Bloomberg Markets magazine reports in its November issue. By September of that year, the researchers had found evidence of improper payments to secure contracts in six countries dating back to 2002, authorized by the business director of the company’s Koch-Glitsch affiliate in France. “Those activities constitute violations of criminal law,” Koch Industries wrote in a Dec. 8, 2008, letter giving details of its findings. The letter was made public in a civil court ruling in France in September 2010; the document has never before been reported by the media.

Egorova-Farines wasn’t rewarded for bringing the illicit payments to the company’s attention. Her superiors removed her from the inquiry in August 2008 and fired her in June 2009, calling her incompetent, even after Koch’s investigators substantiated her findings. She sued Koch-Glitsch in France for wrongful termination.

(click here to continue reading Koch Brothers Flout Law Getting Richer With Secret Iran Sales – Bloomberg.)

Walmart Neighborhood Market
Walmart Neighborhood Market

and from FireDogLake:

After reading the New York Time’s excellent reporting on Wal-Mart’s pervasive bribery of foreign officials (Mexico in this case, but it’s hardly isolated to them), I remembered reading stories last year, including this excellent piece by Dan Froomkin, about how the Chamber of Commerce and major corporations were quietly but persistently lobbying Congress to water down the Foreign Corrupt Practices Act (FCPA).

The FCPA, passed in cooperation with over 30 countries concerned about corruption of their own officials, as well as foreign corporations, made it a crime for US corporations to launder money and bride foreign officials.  But earlier this year the Chamber and it’s mega-corporate lobbyists complained the Act was too stringent, too broad, and too vague.  The underlying message, however, was that everybody does it and it’s just not fair to hamstring American companies trying to compete in a global market.  And besides, enforcing it used up too many resources that our Justice Department and FBI should be using on more egregious conduct, . . . like prosecuting banks and mortgage services for massive fraud.

…

Given the egregiously corrupt practices reportedly carried out by senior and/or the highest officials at Wal-Mart, I assume the Chamber of Commerce and other representatives of America’s corporate elite will now publicly shame the corporate heads of Wal-Mart, demand they be purged to protect the good name of the business community, and devise some means to rebate ill-gotten profits to the Mexican people.

With equal probability, I’m also expecting the United States Attorney General to announce a real, comprehensive investigation of Wal-Mart — because they just read about this — and all other reports of corporate bribery in violation of the Corrupt Foreign Practices Act. Because if they don’t, they’re just part of the coverup and they, too, should be purged. And I want a pony, too.

(click here to continue reading Will Chamber of Commerce Call for Wal-Mart Corrupters to Be Purged? | FDL News Desk.)

Mayor Daley’s Legacy

Seth Anderson0 comment

Picasso on The Cross
Picasso on The Cross

Eric Zorn lists a few of the problems Richard Daley left for his successor. There are others that could be added, such as the Silver Shovel investigations, or even the continued abuse of TIF monies for real estate developers, but that’s a post for another time, as these ten are pretty devastating when you consider the bad place the City of Chicago is in because of Daley.

Wednesday marks the anniversary of Mayor Rahm Emanuel tagging in for Daley, yet even at this chronological distance, the former mayor continues to be a looming baleful presence in the news, more a subject for fury than nostalgia.

Consider, in no particular order, these 10 things:  

1. Recent revelations that Daley took advantage of obscure provisions in the law not only to avoid more than $400,000 in pension contributions but also to boost his retirement pay to $183,778 a year.

2. News that the dreaded privatization of parking meters in 2008 was worse than we thought: Chicago Parking Meters LLC, which has been cheerfully jacking up rates since buying 75-year rights to meter revenue for $1.15 billion, is billing the city $14 million for the offense of taking meters out of service for repairs and other street closings, and pursuing an additional $13.5 million claim related to parking for the disabled.

3. Headlines announcing that Daley, who quickly burned through most of that $1.15 billion parking-meter payout in an effort to conceal a structural deficit in city finances, was hired by Katten Muchin Rosenman LLP, the law firm that — wait for it! — billed the city $663,000 for helping negotiate the parking-meter deal.

(click here to continue reading Change of Subject: Daley, a year later— No thanks for the memories.)

Mayor Emanuel
Mayor Emanuel

and this might be the worst:

5. The ever-growing realization that toward the end of his 22 years in office, Daley was frantically moving money around and playing budget tricks instead of taking on the painful job of resetting priorities to restore the city to fiscal health. “That set of choices has been avoided over the past decade,” said Emanuel one year ago of the $636 million budget shortfall he inherited.

“We cannot ignore these problems a day longer,” he said.

“Because of the appalling lack of stewardship by you-know-who,” he did not say.

Mayor Daley did some good things for the city, I won’t deny it, but at what cost? Is having a sparkling downtown worth all the corruption and crony capitalism?

The Cozy Compliance of the News Corp. Board

Seth Anderson0 comment

I Was Doing Foul Shit Very Young
I Was Doing Foul Shit Very Young

If there were justice in this world, Rupert Murdoch would have long ago been stripped of his media empire, and forced to rot in a dungeon. But since money and power trump justice 99 times out of a 100, Rupert Murdoch can continue smiling, and thumbing his nose at the law.

David Carr writes, in part:

There are many reasons Rupert Murdoch has avoided any serious consequences from the scandal despite hundreds of British citizens having had their phones hacked, dozens or more being bribed in law enforcement and several dozen more of his employees having been arrested.

…Mr. Murdoch also remains mostly unscathed because much of News Corporation’s business and most of its profits lie here in the United States, where the scandal is viewed as something happening on a distant island.

There have been reports of corporate misdeeds in America, including computer hacking at its News America Marketing division, but other than some faint rumbles in Washington about further investigations, it’s been mostly smoke, no fire.

…But the primary reason Mr. Murdoch has not been held to account is that the board of News Corporation has no independence, little influence and no stomach for confronting its chairman.

Like many media companies (including the one I work for), News Corporation has a two-tiered stock setup that gives the family control of the voting shares. The current board includes family members and several senior executives; the independent slots are filled by a host of familiars.

Viet Dinh, a former Bush administration official, is godfather to Lachlan K. Murdoch’s son. Roderick Eddington was deputy chairman of a division of the company in the late 1990s. Andrew S. B. Knight and Arthur M. Siskind are both former senior executives, and John L. Thornton, the former Goldman Sachs president, served as an adviser to News Corporation on several major deals.

The board also includes Natalie Bancroft, a trained opera singer who made a great deal of money when her family sold Dow Jones, which included The Wall Street Journal, to Mr. Murdoch in 2007, and José Maria Aznar, a former prime minister of Spain, who is a friend of Mr. Murdoch’s.

Being a board member of News Corporation is not a bad gig; it pays over $200,000 a year and requires lifting nothing heavier than a rubber stamp. The directors apparently haven’t asked why the company maintained its “rogue reporter” defense after it became clear that “rogue enterprise” was a more apt description. They appeared to sit silently by while Mr. Murdoch and his son James waited for law enforcement officials to finally ferret out employees of the company’s British newspaper division who were accused of engaging in criminal conduct.

Still, the board may regret being quite so quick to throw its full support behind Mr. Murdoch and the current management. The parliamentary report, as scathing as it was, is only the first of many dominoes expected to fall in the next few weeks and months. Ofcom, the British broadcasting regulator, is assessing whether News Corporation should be allowed to continue to hold its stake in British Sky Broadcasting. For its part, BSkyB was quick to get out the 10-foot pole, reminding everyone that the two companies are separate even though News Corporation owns a 39 percent stake.

(click here to continue reading The Cozy Compliance of the News Corp. Board – NYTimes.com.)

A public company in name only, in other words. A true public company would have to do what was best for shareholders, and a public company’s Board of Directors is supposed to lead a corporation down the Straight and Narrow. Instead, News Corporation smiles at corruption, blinks at lawlessness, and counts profit.